Reading the Signs

When the NAFA Fleet Management Association held its annual meeting and exposition this past April in New Orleans, Mark Smith, general manager of strategic consulting with GE Capital Fleet Services, was there to learn from the attendees. During the event, the Eden Prairie, MN-based company conducted an informal survey of NAFA members to see what approaches they're taking to address some of the more pressing fleet operations issues of the day.

Fleet Maintenance: What was it about the attendees at the NAFA meeting made them such a valuable demographic for you to survey?

Mark Smith: NAFA members tend to be the fleet managers and directors that are very interested in staying connected with what's happening within the fleet industry. You can go down there and pretty quickly get the pulse of what people are thinking, how they're responding, what changes they see.

FM: In your survey, did you find that fleet managers are enthusiastic about green initiatives, or are they uncomfortable?

MS: Sixty-six percent of the fleet managers who participated in the survey indicated that their companies already have 'green initiatives' in place, while only about ten percent said that their companies aren't focused on going green yet. Some of the drivers behind that are increasing fuel prices, corporate sustainability initiatives, potential regulations, and taxes; they're all factors leading to an increase in green initiatives.
Another contributing factor is the technology improvements such as hybrids, smaller, stronger engines, cylinder management options, and other innovations that make it easier and more cost-effective to implement green initiatives than it was even five years ago.

FM: How many of the survey respondents were already showing positive results from their green initiatives?

MS: We didn't address this in the survey, however, we know from working with fleet clients over the years that the vast majority of them have been able to significantly reduce their emissions as well as their costs. Often, people tend to go green with hybrids, but there are a great many options available, including telematics, reducing or eliminating the use of SUVs, shifting to smaller vehicles, and selecting vehicles with smaller engines.

Typically, one of the first things we do when we work with customers on green fleet initiatives is to establish emissions and cost baselines, so that we can effectively set targets and track progress as initiatives are implemented. That's really important, because otherwise it's hard to show change. If you're trying to get driver support, manager support, executive support, you need to be able to say, 'Here's where we're at today, and here's where we want to be,' and then on a regular basis--monthly, or quarterly, or semi-annually--to be able to point back to that and say, 'All these things that we're doing are making a difference, both from a cost perspective and an emissions perspective.'”

FM: Were the survey respondents open to using new technologies, such as telematics, as part of their initiatives?

MS: Absolutely. More than 75 percent of those who participated in the survey indicated that the information provided by new technologies such as telematics will be critical to their ability to manage their fleets effectively in the future.

FM: Did the survey respondents indicate that they were taking full advantage of the capabilities of their telematics systems?

MS: Telematics should be integrated into many aspects of fleet management, so maintenance is definitely one benefit that comes out of it. Routing and scheduling is another one, keeping your pulse on driver productivity, in terms of how long it takes to service a particular customer--there are many ways that you can use telematics to change your business.

I believe that eventually telematics will become standard equipment on every vehicle that goes out the door. We're not there yet, but that day is coming, as the costs of the systems and the cost of staying connected continue to decrease. Eventually it will be very difficult for a professional fleet manager to be effective in their role if they don't have some kind of a telematics solution.

FM: How can a telematics system help reduce fuel usage in a fleet?

MS: There are a couple of things. One is trip routing and scheduling, as I just mentioned, but there are also the idling and speeding components. There's an opportunity to reduce non-compliant vehicle usage, meaning someone who may be using a company vehicle after hours.

And then there's the opportunity to look at the broader supply chain, and use analytics to drive savings as well. For example, let's say that you have a service fleet and you notice, using telematics, that your drivers are stopping in to replenish their parts three or four times a day, and they're spending a half-hour to forty-five minutes at your supply vendors. So then you need to think about whether there's a different way to do this. If they're actually having to go to those locations that often, that could be costing you an hour and a half to two hours a day in lost productivity, just while they're at the location, not to mention the time to get to it and back to the job. You could look at that and ask, 'Are we sending our drivers out in the morning with the right inventory on their trucks? What's causing them to have to go back to these vendor supply locations multiple times?' And we actually have the ability to put up a 'geofence' around supply vendors like that and track those types of things, and then work with companies and their own internal supply chain teams to do analysis on how to change that model.

FM: What is the potential ROI for a telematics system?

MS: From an ROI perspective, you would recognize that every fleet is different, so I'll give you some broad, broad numbers. What we've seen is reduction in fuel consumption by about 13 percent, and that would be connected to a reduction in CO2 emissions of 13 percent. Those are pretty closely correlated, as you might imagine. Then, also a reduction in overtime. Coincidentally this one is 13 percent, but there's no correlation between overtime and fuel.

Driver productivity is increased by about 26 percent. Reduction in miles driven is about 19 percent, and increase in service response time is about 24 percent.

Depending on how you implement it, what type of modules do you deploy, and how you're going to use it, you would see an ROI of 5 to 10x.

FM: Are fleet managers becoming more sophisticated in their use of these technologies, and their understanding of fuel and emissions issues?

MS: Absolutely. And, in general, fleet managers are becoming more sophisticated. They have to, and with the technology in every area of their jobs increasing, they have to continue to stay current in that technology to be effective in their roles. So, whether that's telematics, or understanding how hybrids work, or using web-based systems to keep track of where their vehicles are at or how much they're spending, or to go in and approve maintenance transactions in real time, technology is a huge part of a fleet manager's job now, and it's actually one of our key differentiators as a business.

FM: Can a telematics system help a fleet manager extend the life cycles of his or her vehicles?

MS: Telematics can be used effectively to reduce vehicle mileage, which in turn impacts annual depreciation, and fuel and maintenance expenses. A fleet may still choose to cycle their vehicles at 60,000 or 75,000 miles, but it may take them an additional 12 to 18 months to reach their cycling point. There are many factors that have to be considered when evaluating optimal replacement parameters, including OEM incentives, resale values, vehicle upfitting.

FM: Can a telematics system help a fleet manager retrain drivers and change their driving habits?

MS: When it's properly implemented, a telematics solution will assist companies in changing driver behavior, and will lead to significant reduction in speeding, idling, at-fault accidents, and unauthorized vehicle usage.

Progressive fleets are using telematics to change the way their drivers approach their work, through routing and scheduling, point-of-interest analysis and other metrics, to increase driver productivity while simultaneously reducing the company's cost to service their customers.

It really boils down to how a company chooses to implement the solution, and what they wrap around it in terms of policy and compliance to policy. If you just put it out there and do nothing, you're not going to see a change in driver behavior. If you put in place processes that will allow you to follow up with your drivers, and contact those that are not compliant with your policy, behavior will change.