Optimising your budget to ensure the smooth running of your fleet lifecycle
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Transcript of Optimising your budget to ensure the smooth running of your fleet lifecycle
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Annual Fleet Management Conference 2016
OPTIMISING YOUR BUDGET TO ENSURE THE SMOOTH
RUNNING OF YOUR FLEET LIFECYCLE
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Developing & Controlling a Fleet Budget
Fleet Managers have to possess knowledge of Financial management
What is Financial management?
Knowledge of the financial issues that affect a manager’s fleets – possibly
including:
financial analysis of various acquisition options,
ability to conduct
a lifecycle analysis,
benchmarking,
outsourcing decisions, and
preparing and implementing a fleet budget.
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Annual Fleet Management Conference 2016
WHAT IS A FLEET BUDGET?
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Developing & Controlling a Fleet Budget
Develop cost assumptions.
Determine line item expenses.
Correct the variances between budgeted and actual costs
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Annual Fleet Management Conference 2016
DEVELOP COST ASSUMPTIONS
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Annual Fleet Management Conference 2016
Recognize factors over which you may or may not have any control, but will
impact your budget, i.e.
What factors are present today that may impact the budget you are
currently working on? i.e. Economic Factors,
What factors influenced last year's budget?
What future developments may affect your upcoming budget?
Most companies work on annually escalated budgets based on inflation – Not Ideal!
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Economic Trends: Currency
-19%
Exchange rates have direct influence on vehicle & parts prices
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Economic Trends: Interest Rates
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Economic Trends: PPI
Depreciation costs will remain a major concern
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Economic Trends: Vehicle Sales
Less vehicle sales means higher production costs
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Economic Trends: Fuel Cost
Where is the Price of fuel going???
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Annual Fleet Management Conference 2016
DETERMINE LINE ITEM EXPENSES
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Key line items in a fleet budget
a. Capital for new vehicles (owned option)
b. Vehicle depreciation.
c. Interest expense .
d. Leasing and fleet management fees (if the fleet is leased).
e. Personal use chargebacks.
f. Fuel expense.
g. Vehicle maintenance (services, repairs, tyres, etc).
h. Accident/collision expense.
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Key line items in a fleet budget
j. Resale or disposal adjustment.
k. Insurance
l. Licence renewal costs
m. COF cost (where applicable)
n. Direct per vehicle cost (such as tracking, monitoring, recovery fees, etc.)
o. Overheads to manage the fleet (staff, systems, premises rental, municipal
services, other, etc.)
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Annual Fleet Management Conference 2016
CORRECT THE VARIANCES BETWEEN BUDGETED AND
ACTUAL COSTS
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Annual Fleet Management Conference 2016
Controlling the Budget
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Correcting budget variances
Identify the expense factors that caused the variance & Implement the
necessary changes to prevent the variance from recurring in subsequent
months.
Once variances have been corrected, document why they occurred as they
can be referenced as "past forces" when preparing the following year's
budget.
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Correcting budget variances
Identify the expense factors that caused the variance &
correcting them
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Annual Fleet Management Conference 2016
MANAGING OWNERSHIP COSTS
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Identifying expense factors that causes the variance
• Variable Ownership Expenses:
– Acquisition Fit for Purpose procurement
– Interest rates Negotiate a fixed rate over contract duration
– Administration Trained Staff & simple efficient systems
– Disposal Quickly, multiple channels, small batches at a time,
outsource
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Cost of Ownership
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Correcting budget variances
Implement the changes necessary to prevent the variance
from recurring in subsequent months.
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Replacement Cycle: Amort Curve
Contract term
Rand
Value
Amortization curve
Market value curve
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Replacement Cycle: Maintenance fund??
Contract term
Rand
Value Revenue
into fund
Expenditure over time
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Replacement Cycle
Best Practices:
– Develop a defensible replacement criteria
– Project long term replacement funding requirements
– Understand alternative financing options
– Develop a defensible procedure to select actual units to be replaced
– Don’t replace underutilised vehicles
– Buy the right vehicle
– Maximise resale value
– Disposal the program
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Disposals & Factors Influencing RV (Ownership)
• Age
• Kilometers
• Make and Model – market demand/perception
• Market flooding
• Inflation
• Substitute Products – Cheap importations
• Over/Under supply from OEM’s
• Load Factors
– Location
– Usage
– Configuration/Equipment
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Annual Fleet Management Conference 2016
MANAGING OPERATING COSTS
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Identifying expense factors that causes the variance
• Variable Operating Expenses:
– Maintenance, Services and repairs Selection, Std, SLAs & negotiations
– Fuel fuel management systems
– Tyres Supplier SLA, tyre mgnt system
– Usage Abuse policy, enforcement & technology
– Accidents policy, enforcement & technology
– Downtime policy, enforcement & technology
– Unauthorised Use policy, enforcement & technology
– Theft/Pilferage policy, enforcement & technology
OR
Outsourcing & A Well Negotiated CONTRACT
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Correcting budget variances
Strategic Outsourcing (properly negotiated contract)
Use of Technology (fit for purpose)
Telematics
Fuel
Downtime
Suppliers & User SLA Management
Dynamic Fleet Policies with Enforcement
Continuously Assess
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Correcting budget variances
What is Fleet Management?
• It is not a bank card!
• It is not software or fleet management system!
• It is not a vehicle tracking system!
• It is not a lease!
Fleet management is:
Cost Containment, Vehicle Availability and Risk Mitigation
…by continually monitoring the cost effectiveness of individual vehicles
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Fleet Cost Components
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Variance Documentation
Document what happened, and
How it was corrected
This will assist in building better, educated cost assumptions in the future
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Thank you
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Discussion Points
Questions & Discussion