Nov 2002

For novices harbouring notions of careers in fleet management – as well as for the greybeards in the game – in this article, a spokesman for SAVRALA puts fleet management (FM) in perspective and describes the market forces impacting on the industry.

When talking fleet management, outsourcing is top of mind. Whether it’s IT, HR, logistics – or fleet management for that matter – increasingly, companies are realising the benefits to be derived from selectively apportioning facets of their non-core business to specialist enterprises.

Specialist FM companies provide a gamut of professional services. With the key elements being cost control, administrative efficiency and risk management, they are able to oversee and control the life cycle management of a single vehicle or fleet of vehicles from cradle to grave.

The services on offer may range from the design of a company’s car or car allowance policy, to the sourcing and buying of motor vehicles, maintenance, management of fuel, tyres, insurance and accidents, right through to the eventual disposal of the vehicle/s at the end of the agreed lease period.

Fleet management is a somewhat loosely used term and clients are sometimes confused by the spread of services available from banking institutions compared to specialist companies. In broad terms, a key objective of banks is to lend money and grow their asset book. To that, is added an enhanced range of sophisticated fleet services such as fuel management.

The key objective of specialist FM companies is to manage costs and risk on their client’s behalf. Financing is a consequence of their being in business, not a cause. In fact, current statistics reveal that in the corporate FM sector – which totals just under 100 000 vehicles managed by both banks and specialist companies – the split between financed and non-financed vehicle management contracts is about equal.

In recent times, the corporate sector FM business has not experienced exceptional growth. In part, this is a reflection of the general state of the economy, clearly indicated in NAAMSA’s new vehicle sales figures.

In the medium-term, several factors will continue to influence the industry’s shape and size. These include:

• The continued growth in government outsourcing its fleet management. Tenders using different precedents have been implemented with varying degrees of success. While not all FM companies are operating in this sector, government business is a reality and here to stay. In time, more FM companies will undoubtedly develop the right solution for government and parastatals,
• The continued impact of car allowance schemes. The buying and management of cars has been removed from corporate hands and placed in private buyers’ hands. This continues to negatively impact on fleet opportunities,
• The trend by motor manufacturers to incorporate maintenance plans on new vehicles at point-of-sale is increasing. Undoubtedly, in the next year or two, more motor OEMs will build in plans – management and/or service – into their vehicles from scratch which will influence the ability and need to manage fleet costs,
• In the absence of other investment opportunities, some corporates are finding it more effective to avoid debt by paying cash for their cars. The result is more vehicles managed in-house with the potential risk that inexperienced in-house fleet personnel may be inattentive to key issues such as cost controls, risk management and overall fleet efficiency.

  The challenge for the players in the FM industry is to continue to maintain professional standards in the provision of their services and to try to grow the proportion of the national corporate park that they collectively manage above the current 10%. There is certainly plenty of opportunity.

If you have not considered using the services of a specialist fleet manager, why not arrange an appointment with a member of SAVRALA to gain an understanding of the cost, efficiency and risk management benefits that they are able to provide. Please click here for details of all current members.