Australasian Fleet Experts on Key Issues Facing Fleet Managers

The Aus­tralian Finan­cial Review invit­ed some lead­ing fleet man­age­ment orga­ni­za­tions and the Aus­tralasian Fleet Man­age­ment Asso­ci­a­tion (AfMA) to answer ques­tions on key issues fac­ing fleet man­agers in 2014 and into the future.

What do you see as the top three emerg­ing trends that will have an impact on fleet man­agers in the 2014/15 finan­cial year?

Spiro Har­alam­bopou­los, man­ag­ing direc­tor at Lease­Plan Aus­tralia, sug­gests tech­nol­o­gy will dri­ve emerg­ing trends and iden­ti­fies inte­grat­ed telem­at­ics, mobile tech­nol­o­gy and car shar­ing. He believes each of these areas will allow fleet man­agers to increase the pro­duc­tiv­i­ty of their fleets through effi­cient use and enable a reduc­tion in run­ning costs.

Ed Stanistreet, gen­er­al man­ag­er at Toy­ota Fleet Man­age­ment, also nom­i­nates tech­nol­o­gy such as con­nect mobil­i­ty and mobile apps. “Until recent­ly, mobil­i­ty has been cost-pro­hib­i­tive for fleet man­agers and fleet man­age­ment orga­ni­za­tions. How­ev­er most man­u­fac­tur­ers will start rolling out cost-effec­tive hard­ware solu­tions,” says Stanistreet. Both Lease­Plan and Toy­ota Fleet Man­age­ment see car shar­ing as some­thing that will become more pop­u­lar with smart fleet oper­a­tors. Car shar­ing has become pop­u­lar for pri­vate motorists in high-den­si­ty areas but has been man­aged poor­ly by most fleets for years. Tech­nol­o­gy will allow fleets to do it bet­ter.

Scott Tay­lor, CEO at Fleet­Plus, sees the adop­tion of tech­nolo­gies to save costs as a key goal in 2014/15. “There has been a con­tin­u­al ratio­nal­iza­tion of fleets in the pur­suit of strip­ping OPEX out of busi­ness­es glob­al­ly. Tech­nol­o­gy like mobile FBT appli­ca­tions will help achieve this.”

Matthew Lani­gan, gen­er­al man­ag­er at Cus­tom Fleet, sees struc­tur­al changes to local man­u­fac­tur­ing, tar­iff reduc­tions and gov­ern­ment reg­u­la­tions as key things to watch in 2014/15. “We are antic­i­pat­ing chal­lenges as a result of the removal of tar­iffs and excis­es for lux­u­ry and import­ed vehi­cles. The reduc­tion in price will have a neg­a­tive impact on resid­ual val­ues, cre­at­ing bal­ance sheet risks for the lessor and orga­ni­za­tions which own their fleet,” Lani­gan says.

Pro­found Impact

Ken Thomp­son, direc­tor research and com­mu­ni­ca­tion at AfMA, sees fun­da­men­tal changes loom­ing as a result of the clo­sure of local man­u­fac­tur­ing. “We see this as hav­ing a pro­found impact. We expect there will be a struc­tur­al down­ward shift in new vehi­cle pric­ing as the indus­try adjusts and vehi­cle importers wres­tle for mar­ket share,” Thomp­son claims.

“Any reduc­tion in new vehi­cle pric­ing will have a cor­re­spond­ing fall in the resid­ual val­ue.”

Fleet man­age­ment is a mature indus­try that has seen many changes over the last 20 years.

What changes to you expect in the next 10 years and how will the indus­try adapt with new prod­ucts and ser­vices?

Trans­paren­cy in report­ing and cost struc­tures was a theme in respons­es to this ques­tion. Stanistreet says the mar­ket is dri­ving the need for more trans­paren­cy. “Cus­tomers want full dis­clo­sure of finance con­tracts , includ­ing man­age­ment fees, and resid­ual val­ues, includ­ing a break­down of main­te­nance, tires and reg­is­tra­tion costs. They are demand­ing details of their con­tract and want to be active­ly involved in shar­ing costs – pos­i­tive and neg­a­tive.” Har­alam­bopou­los sees trans­paren­cy as a grow­ing require­ment in rela­tion to the grow­ing num­ber of leg­isla­tive, reg­u­la­to­ry and indus­try-spe­cif­ic require­ments. “Gen­uine­ly trans­par­ent report­ing will be demand­ed, and fleet providers and their sys­tems must be able to report on all aspects of fleet per­for­mance.”

AfMA and Cus­tom Fleet antic­i­pate a greater focus on telem­at­ics. This is an area pas­sen­ger fleets have been slow to adopt because of high ini­tial cost and lit­tle per­ceived ben­e­fits. Thomp­son acknowl­edges there is great expec­ta­tion about ben­e­fits this tech­nol­o­gy can pro­vide, but believes the intro­duc­tion will be much slow­er than antic­i­pat­ed. Lani­gan says: “The con­ver­gence of devel­op­ments in telecom­mu­ni­ca­tions, vehic­u­lar tech­nolo­gies and elec­tri­cal engi­neer­ing is mak­ing vehi­cles smarter, and more con­nect­ed. As part of the rise in machine-to-machine com­mu­ni­ca­tion and con­nect­ed tech­nolo­gies, we will see more vehi­cles col­lect­ing data which can be ana­lyzed to improve effi­cien­cy.”

Changes to account­ing stan­dards are one thing with­in the next decade that will force FMOs to devel­op new prod­ucts. “While an agreed date looks to be beyond 2018, fleets are already con­sid­er­ing changes to how they finance. Some will choose to move to novat­ed [leas­es] as this will con­tin­ue to be off the bal­ance sheet,” Stanistreet says.

Trans-Tas­man Uni­ver­sal Agree­ment

Many fleet man­age­ment orga­ni­za­tions oper­ate in Aus­tralia and New Zealand. What do you see as the key dif­fer­ences between the two coun­tries for a fleet man­ag­er? And can com­pa­nies suc­cess­ful­ly imple­ment a trans-Tas­man fleet pol­i­cy?

“If you are an Aus­tralian or New Zealand busi­ness, and cost con­trols and sav­ings are impor­tant, then trans-Tas­man fleet poli­cies should be a pri­or­i­ty,” Har­alam­bopou­los says.

“There are great ben­e­fits in a uni­ver­sal agree­ment, a sin­gle sys­tem and shared back-office space with con­sis­tent ser­vice lev­els.”

Accord­ing to Lani­gan, the dif­fer­ences between the Aus­tralian and NZ mar­kets are min­i­mal. “Cus­tomers are increas­ing­ly demand­ing trans-Tas­man solu­tions because it not only saves admin­is­tra­tion time, but also has the ben­e­fit of con­sol­i­dat­ing report­ing and a har­mo­niza­tion of buy­ing poli­cies and dis­pos­al strate­gies.”

Thomp­son says: “It’s inter­est­ing to note that the issues fac­ing fleet man­agers around the world are of the same nature. The defin­ing dif­fer­ences are that they are for the most part embed­ded in dif­fer­ent legal and tax­a­tion sys­tems. As Aus­tralia and New Zealand are very sim­i­lar, there should not be any great oper­a­tional dif­fer­ences.”

The last 18 months have seen the three local man­u­fac­tur­ers announce they will be clos­ing their doors by the end of the decade. Do you think deci­sions made by fleet man­agers have con­tributed to the demise of Aus­tralian vehi­cle man­u­fac­tur­ing?

Every­one saw the end of local man­u­fac­tur­ing as a result of deci­sions made by mul­ti­ple stake­hold­ers includ­ing gov­ern­ments, man­u­fac­tur­ers, fleet and pri­vate buy­ers. Thomp­son says. “The main out­come was a sig­nif­i­cant shift in vehi­cle pref­er­ence from six to four cylin­ders. The prin­ci­ple rea­sons were that the small­er vehi­cle eas­i­ly met the required oper­a­tional char­ac­ter­is­tics and most impor­tant­ly, it was con­sid­er­ably more cost-effec­tive.” Stanistreet thinks there is a case for and against the influ­ence of fleet man­agers.

As fleet man­agers have become more pro­fes­sion­al, they have made more informed deci­sions about whole-of-life costs and vehi­cles that are bet­ter suit­ed to their busi­ness needs. This process has intro­duced them to a wider range of import­ed mod­els that have entered the mar­ket because of tar­iff reduc­tions and com­pet­i­tive exchange rates.

Mobile Employ­ees

Safe­ty is some­thing all orga­ni­za­tions are con­cerned about and motor vehi­cles are a work­place for so many peo­ple. Do com­pa­nies give enough atten­tion to safe­ty for mobile employ­ees like sales­peo­ple, ser­vice tech­ni­cians and truck dri­vers?

What needs to be done to ensure they are treat­ed like an office or fac­to­ry work­er?

“AfMA’s expe­ri­ence sug­gests that many orga­ni­za­tions are not ful­ly aware of what is required of them under cur­rent OH&S leg­is­la­tion. The law clear­ly states that the organ­i­sa­tion is required to ensure that it pro­vides a safe work­place,” Thomp­son says. “There is no dif­fer­ence between a fac­to­ry work­er and a vehi­cle used for busi­ness pur­pos­es. It does not mat­ter who owns the vehi­cle. If it is being used on behalf of an orga­ni­za­tion, that is if the orga­ni­za­tion owns the task, then it is not only respon­si­ble for pro­vid­ing a safe work­place but also has to ensure that oth­ers are not adverse­ly impact­ed by the activ­i­ty.”

Toy­ota Fleet Man­age­ment are see­ing a change in cus­tomer atti­tudes with a broad­er recog­ni­tion of safe­ty issues when an employ­ee dri­ves a com­pa­ny sup­plied or per­son­al motor vehi­cle for busi­ness pur­pos­es. “This is par­tic­u­lar­ly evi­dent in com­pa­nies with over­seas head­quar­ters, as there are tighter reg­u­la­tions in coun­tries like the USA and UK,” Stanistreet says.

“Most cus­tomers grap­ple with how to man­age the respon­si­bil­i­ty of a vehi­cle being con­sid­ered part of the work­place. We have noticed two mod­els being adopt­ed: a prag­mat­ic approach with poli­cies to guide dri­vers, or using a stick with penal­ties for non-con­for­mance. In the UK, employ­ers are required to have poli­cies in place, and mea­sures to enforce them. This is not the case [yet] in Aus­tralia.”

The Aus­tralian Finan­cial Review: ‘Road to future suc­cess lies in smart changes’

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