Fleet ROI: Successful fleet management goes beyond the numbers. Yet that’s often the only leg we have to stand on as fleet managers.
Corporate and upper-level management want to know the return on investment – the ROI – for all of the time, money, and energy the company is pouring into the department.
So you need to be clear about the central question: Are you maximizing it?
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Measuring Your Fleet ROI
Given the substantial capital investment tied up in a fleet, achieving a solid ROI is critical. This relates not just to management of expenses, but optimizing usage and proactively addressing various factors that can have an impact on ROI over time.
Before we look at specific strategies to improve your fleet’s ROI, let’s make sure you understand how to calculate it. Fleet ROI is basically the net benefit of your fleet operation’s return to the company based on the resources invested.
It’s calculated by dividing the net gain by the fleet operation costs. As you calculate fleet ROI, make you consider several key factors:
- Operational costs: This category includes items like insurance, fuel, administrative overhead, etc.
- Fuel consumption: Depending on the kinds of vehicles in your fleet, yours may get only a few miles per gallon. In high-cost gasoline markets, this can pose an extreme drain on your balance sheet.
- Maintenance: Regular maintenance is necessary to keep your vehicles in top shape. The more maintenance that’s required, the more it costs to keep your fleet running.
- Depreciation: This is the rate at which your vehicles lose value. It can lower your ROI, especially if your plan is to sell them in order to recoup costs and reinvest in other vehicles.
You also have to take into account the cost of drivers, training, and the other taxes and benefits associated with hiring and managing drivers.
Strategies for Improving Your Fleet ROI
Boosting ROI isn’t as easy as some outside of the industry might assume. There are hundreds of moving parts that must be tackled on a daily basis.
Trying to get everything properly aligned isn’t as simple as some believe. That being said, here are a few suggestions.
1. Improve Vehicle Utilization
How are you doing with your vehicle utilization rate? Is that something you’re actively tracking?
“Utilization is generally expressed as a measure of actual performance compared to required performance,” Washington State DES explains. “For example: If we have a target utilization rate of 10,000 miles per year and a vehicle only travels 5,000 miles then our utilization is 50%.”
The primary goal of utilization is to make sure you employ your vehicles and other resources as efficiently as possible to reduce costs and maximize profits. You can improve utilization by relocating underutilized vehicles to other business areas or selling the ones no longer need.
2. Improve Fuel Efficiency
Fuel is typically one of the major expenses for most fleets. Improving fuel efficiency by even a small margin can create exponential savings. This can be done through proper fuel-efficient driver training, as well as the purchase of more fuel-efficient vehicles and parts.
3. Use the Latest Technology
Stop trying to do things manually if they can be automated with technology. Fleet maintenance software and telematics can render valuable data and arm you with systems that automate functions like PM schedules, documentation, shift scheduling, work order tracking, warranty reimbursement, and plenty more.
4. Conduct Preventive Maintenance
Ongoing preventive maintenance should enable your firm to avoid costly repairs and unexpected downtime, both of which can eat into ROI. Implementing a strict maintenance schedule and ensuring it is adhered to can prevent small issues from becoming expensive problems. Also, well-maintained vehicles are more fuel-efficient and have a longer lifespan, which contributes further toward enhanced ROI.
5. Train and Manage Drivers With Purpose
Driver behavior has a significant impact on fleet ROI. If you implement driver training programs you can promote safe, efficient driving habits and reduce the risk of accidents and damage to vehicles.
Regularly monitor driver performance and consider applying incentives for good driving behavior. Remember that well-trained, satisfied drivers are more likely to take care of fleet vehicles, which can lead to lower maintenance and repair costs.
Give Your Fleet a Boost
Just because you’ve been stuck at a particular level of ROI for years, that doesn’t mean you can’t give that figure a boost, generate more revenue, and impress your superiors. By taking a few strategic maneuvers, you can create a little positive momentum for the operation (and yourself).