Fleet managers know what they are doing. They are masters of doing more with less and still providing good service for their customer departments. So I would never pretend to tell anyone how to run a fleet operation…for goodness sake, my first car was a Gremlin! That tells you how much I know about cars. However, I do know government procurement, and there are ways to work with purchasing to drive savings that may go back to help fund balances or even better, back into fleet operations.
Fleet is one of your organization’s biggest operational expenses…and a few small changes can drive savings exponentially. Unfortunately, fleet and purchasing are so busy with their daily activities or “fighting fires”, either literally or figuratively. It is a rare occasion when they can take a look on the horizon and spend time on strategic initiatives. However, focusing on a few crucial activities can make all the difference to generate savings. Here are 4 ideas to help you in the upcoming fiscal year.
1) Maintenance – this daily expense takes up a good part of the operations, and includes mechanics, warehouses and parts. If your parts are still being ordered and stacked in inventory, there are better ways to spend your time. Most large organizations have anywhere from $100K to $1M in inventory which sits on the budget books. And that doesn’t take into account the obsolete products…you know, those old fuel filters from vehicles your organization doesn’t use anymore. Get that inventory off your books, let the vendors do the work, and focus on your core role – taking care of the vehicles. Many cities, such as the award winning City of Sacramento, are trying a new way to doing business, with increased savings in time and money for fleets. Contracting with a vendor to run their parts inventory, paying for products when they are actually pulled from the shelf, having only 1 PO to process per month, and still using products from multiple vendors. It is the way of the future.
2) Fuel – with diesel, un-leaded and alternative fuels, this is one of the biggest fluctuating expenses within fleet. With recent volatile pricing, if your fuel contract is more than 2 years old, it’s time to possibly bid again. Across the country, municipalities are combining their spend and bidding together to leverage better pricing based on greater volume. In addition, reverse auctions are a great way to have vendors bid lower and lower to win the contract. Even if you have a good contract now, wouldn’t it make sense to see if a new bid might get a few cents cheaper, adding up to real dollar savings across the year?
3) End of Life Vehicles – in other words, getting rid of the old beat up equipment. Most everyone loves when the new stuff arrives – shiny red firetruck, new BMW police motorcycle, non-dented F-150 trucks. And the old stuff gets very little attention. If your auction service is still old school…working from a local auction block, then you need to explore other options. Selling on the internet and having a firm who markets your equipment to a buyers market who is looking specifically for your products is the strategic way to go. Your neighboring government might be selling the same stuff that you are selling, but getting higher prices, just by strategically selecting and using their vendors. In fact, you might initially have two vendors sell your stuff…and have them compete against each other to see who brings in the better pricing and service.
4) Cooperative Contracts – obtain the pricing of a large government, even if you are a “little guy.” Cooperative contracts are available at both the regional and national level, and use the cumulative spend from multiple agencies to bring in competitive pricing. Essentially, the bid process is already done for you…you just “piggyback” on the contract and purchase what you need. This is where your procurement team can be helpful in making that happen. There are many choices in cooperatives, but don’t let it overwhelm you. Just think ice cream! Then tackle it like you would in choosing your favorite cone of cold delight. Pick your favorite standard (Vanilla) and then another back up contract (maybe Rocky Road?)
Fleet serves many departments – water, sewer, police, fire, and general services. Purchasing serves all of these departments PLUS the Fleet Department. Working together can create a strategic partnership that benefits the entire organization. For more information, contact me.