Outsourcing your fleet: is it right for you?

Simon Cotton, general manager at fleet management specialist CLM, takes an in-depth look at the issue of fleet outsourcing.

Outsourcing is the ‘contracting out’ of a business function, such as the management of the vehicle fleet, to a third party specialist without your business losing the overall control. The appointed third-party organisation takes control of the function and becomes responsible for its success.

Outsourcing allows you to concentrate on your core business activities and, at the same time, save money, be more flexible and manage growth effectively. It also allows your business to gain access to outside management expertise and technologies.

If managed successfully, outsourcing can help your business reduce its costs and make effective use of the knowledge and technical resources of another organisation. The process should be properly managed and monitored internally, and should be seen as a replacement of a function rather than a replacement for internal staff.

Why should I outsource?
The benefits of outsourcing can be substantial. There are potentially significant gains for your business, and you need to consider the following points.

Outsourcing can free up your business to focus on its core strengths and allow the redirection of internal overheads.This might benefit your business by allowing your staff to concentrate on their main tasks and on future strategy.

The lowering of the overall cost of the service to the business can save you money. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. It can also give your business the edge when adapting to changing market conditions.

Achieve a step change and improve quality through contracting out the function aligned to a new service level agreement. Wider knowledge can also be gained as outsourcing can provide access to the intellectual property, wider experience and greater specialist knowledge of your outsource partner.

Outsourcing also delivers contract security as services will be provided to a legally‑binding contract with financial penalties and legal redress. This is not the case with internal services. You can also enjoy access to operational best practice that would be too difficult or time consuming to develop in-house. The outsourcing company you choose should be a specialist in the process or service you ask them to carry out for you.

Staffing issues can be addressed, too, as access to a larger talent pool can be gained through outsourcing as well as a sustainable source of skills. An improved method of capacity management of services and technology is also available, where the risk in providing the excess fleet management capacity is borne by the supplier. An improved approach to risk management for some types of risks can also be gleaned, thanks to partnering up with an outsourcer who is better able to provide the mitigation.

Consider your options
It may be tempting to rush into outsourcing, but take the time to think through what you need, set the terms and find the right service provider. You should consider the following questions: Which are my core strengths and which are secondary? Which processes am I thinking of outsourcing and why? Have I calculated what the total costs are of doing it in-house? Answering the latter, include hidden costs such as office space and staff costs.

Check the return on investment (ROI), too – ask your potential service provider for help, as many offer an ROI calculator. Ask yourself what are the costs of not outsourcing? Will your business suffer because it cannot afford to invest in the expertise, technology or the facilities that an outsourcing partner might provide? Finally, check whether any potential supplier is capable of limiting your cost and not interested solely in gaining your business and then massaging up your costs over time. Also weigh up the risks of outsourcing against those of keeping the processes in-house.

Activities you can outsource
Many businesses now outsource some of their non-strategic activities or more complex tasks in order to access industry best practice and cutting-edge technology. This enables the business to benefit from the outsourcing company’s economies of scale and investment in highly trained staff while it concentrates on core business activities. Processes companies consider outsourcing include vehicle fleet management, IT functions, business processes and HR, finance (including payroll), sales and marketing, as well as health and safety

In terms of the vehicle fleet, there are many fleet-related functions that you can successfully outsource to a specialist provider, including the whole fleet management function. Other stand-alone services may include vehicle sourcing and purchasing, funding management, maintenance, fleet administration, fuel and accident management, duty of care (including risk management and driver training), driver contact, and vehicle disposal.

The benefits of employing a specialist
One factor to consider is that, however experienced an ‘in-house’ department is, managing the fleet is a departure from the organisation’s core business, whereas with a specialist provider it is their total and absolute focus. The old adage of ‘let someone else’s front room be your back room’ is still completely relevant today. This means that any changes in the market place, new developments or innovative ideas can be used to gain an advantage and increase the benefits to the business.

Remember that the only reason you have a fleet in the first place is to mobilise or reward your employees, so it should be your fleet management specialist’s job to ensure they are happy and comfortable, taken care of when they need help, given the right tools to do their jobs and to be the best asset possible to your organisation.

Somebody within your organisation will be needed to work with your chosen fleet management provider at a strategic level, to ensure that there is a match in terms of the personalities involved, that they have ease‑of‑use systems that are easy to interrogate, and can provide you with meaningful, easily accessible management information that enhances your ability to make good decisions.

The new provider also needs to demonstrate transparency in everything they do: If you’re going to outsource a part of your business, you have to know you can completely trust that partner.

Further Information
www.clm.co.uk