Exploring the great outsource
With the credit crunch, rising fuel prices, vehicle availability and legislation changes, 2008 is shaping up to be a challenging year for water industry fleet managers. Is outsourcing a viable option? Chris Sharp investigates.Tasked with overseeing hundreds of vehicles - ranging from cars to tractor units - fleet managers in the water industry are aware of issues affecting their vehicle portfolio. But in today's economic climate, reassessing fleet management could unlock vital capital, as well as a host of other benefits.
Burnt Tree Vehicle Solutions has a number of customers in the water sector. The feedback it gets is that outsourcing is a good option for this sector, especially suppliers to the utilities. With the three-to-four-year lifespan of framework agreements, fleet managers can negotiate a price for the term.
The benefits are two-fold - it obviously helps with financial control through the framework period, but also allows companies to have a real handle on financial outlay at tender stage.
Because the water industry is a vital part of the UK's infrastructure, customers also demand a high level of reliability and, again, outsourcing gives peace of mind here. There are a number of reasons for this, the churn rate of vehicles is much higher in the rental sector.
For example, Burnt Tree has invested more than £130M in the past two years on upgrading and updating its fleet to give it one of the youngest fleets in the sector. Vans are usually no older than 14-18 months, which means maintenance issues are avoided.
Outsourcing means you remove the day-to-day management of the fleet and the time-consuming tasks this brings, such as driver calls and service management. But outsourcing is not for everyone - you need to do your homework.
Duty of care
Firstly, do you need to outsource? What benefits and cost savings will it bring? Well, it depends on the size of a business, and its internal resource and expertise.
Remember, a third party may be taking over the day-to-day running of your fleet - but you never give up the overall responsibility in areas such as duty of care.
Certainly choose a member of the British Vehicle and Rental Leasing Association, as they are bound by a code of conduct. It is important to choose wisely, because you will be working closely with them.
Make sure they have a clear understanding of the services you want. Put in place a rigorous tender process and make sure service-level agreements are a cornerstone of the tender.
But it is not just those considering outsourcing that could benefit from a fresh look at their fleet arrangements. The fleet rental sector is now taking a much more flexible approach, with its customers having really listened to what customers want.
Flexible fleet arrangements are increasing in popularity and it is an option that could be relevant to the water industry.
Rental companies, such as Burnt Tree, are now offering customers a more flexible approach with choices like split fleet management. This is where some elements of the fleet can be contracted on a long-term basis, while other vehicles are on much shorter, fluid terms.
Flexible vehicle rental is good for businesses that require different or extra vehicles to meet peaks in demand. Why tie capital up in non-core, depreciating assets - and take up your staff's time in vehicle maintenance and administration - when you can simply hire in?
It is also a great idea if you are thinking of outsourcing for the first time, or changing supplier, but have different lengths of contract with different customers.
A wide view
For example, you may have just secured a framework agreement for the next three years - in which case a long-term arrangement would be the most appropriate. But you may also have a contract that is down to its last six months and you are unsure whether that business will remain with the company, so a fixed-term hire contract would be undesirable.Fleet arrangements offered by rental companies also mean you can react quicker to market conditions.
With fuel prices continuing to rise, Burnt Tree has seen an increase in customers looking for smaller, or more fuel-efficient, vehicles.
But it is the ability of fleet managers to take a wide view, rather than micro-manage, that makes outsourcing attractive. Instead of taking numerous calls a week about minor issues, or servicing schedules, they are able to concentrate on their fleet strategy. They look at how the fleet can be improved, not only in terms of cost and efficiency, but also in terms of the driver experience.
This year Burnt Tree has considerably increased the number of urban vans.
This is undoubtedly the most popular size of van used by businesses - including those in the water sector. It is the type of van - they are fitted with air conditioning - that acts as a mobile workplace and office for many delivery drivers and service engineers.
While a safe and reliable vehicle is a necessity, a comfortable working environment is also essential if you want your employees to perform well.
Even if you already outsource, it is worth taking a fresh look at your fleet arrangement and the whole-life cost of a vehicle.
It is also important to look at the age of your fleet. The older the vehicle, the more likely it is to be burning more fuel - not good for the environment, or your budget.
Most of us fall into the trap of looking at the top-line price - for instance, the rental cost on a vehicle - and go for the cheapest.
Companies such as Burnt Tree have more to offer than daily car rental or contract hire. With water companies and their suppliers owning and hiring a diverse spread of vehicles, it is good to look at your portfolio as a whole.
See what is costing you most, and whether savings can be made in that department, or others, to offset the current increases being felt.
The fact that hire companies have a range of vehicles - from cars to tractor units - means fleet managers can have all their needs satisfied in one place. Outsourcing to one company means it is a one-stop shop for fleet managers.
In summary, outsourcing your fleet management may not be the best option for all companies - it is important to do your calculations both in terms of cost- and time-saving before you take the decision.
But if you do decide it is right for your business, there could be a number of advantages. These include the release of capital, a greener and more efficient fleet, a better working environment for drivers, and less time and resources needed internally. Also, with new flexible fleet arrangements, there is the ability to adapt quicker to market and internal business conditions.
Chris Sharp is operations and sales director at Burnt Tree Vehicle Solutions.
T: 01743 457652