North American fleet market looks for value
In a recent article in North America’s Automotive Fleet magazine, “Procurement Ascendency” topped the list of global fleet mega-trends. The once-feared, but ultimately beneficial, transition from fleet managers to corporate buyers can now be declared over. Even if the fleet manager title still exists, the role is inextricably tied to procurement.
But, procurement “best practices” have changed too during this changeover, and the evolution shows some fits and starts…
In the early 1990s, outsourcing fleet administration became part of a corporate outsourcing trend. Within 10 years, the first fleet-related reverse auction kicked off an e-procurement revolution.
However, the early promises of e-procurement — lower procurement administration costs, increased the use of preferred suppliers, shortened acquisition cycles, lower requisition costs, and improved ability to monitor demand – were overstated and undelivered. While purchase order automation reduced costs, obtaining the lowest cost from suppliers fell short due the complex supply chain.
The fleet department was left to pick up the pieces when the inevitable service problems developed. The biggest problem? Hidden costs! Given the complexity of vehicle ordering, an apples-to-apples comparison of vehicle acquisition costs is a challenge.
Even worse than a comparison of vehicles is a comparison of fleet services! Hidden costs are bound to arise in a comparison of accident services, administration, driver mileage, fuel, information services, Maintenance, outsourced administration, registration, and safety. No two vendor programs are the same, and in most cases, even identical types of fees have different bases.
Electronic procurement may have faltered, but by the mid-2000s, corporate procurement took hold of fleet management as "strategic sourcing" became a business best practice. This migration became a powerful change agent for traditional fleet managers.
The strategic sourcing fleet group, led by a procurement representative, included the fleet manager, who brought real-world experience with fleet requirements, and other stakeholders. However, like the earlier e-procurement attempts, the focus remained cost cutting only at the start of the relationship. Contractual price savings or the tremendous signing bonuses defined success. Once again, the fleet manager was left to deal with costly fleet complexities that never revealed themselves on the procurement vendor scorecard.
Successful companies adapt, however, and today, procurement has become more sophisticated. The role of procurement is no longer just that of a sourcing manager. It has evolved into full-time contract fulfilment. Just as importantly, advanced procurement strategy has moved beyond cost savings, too.
Because corporate fleets exist to serve business goals, contributing to productivity, customer service, operations, and more, they bring quantitative value along with cost. The new, full-time role gives procurement managers access to the company’s stakeholders for a better understanding of the fleet’s true business value and its impact on corporate return on investment.
Many astute fleet managers recognised and kept up with this three-decade-long transition, and many procurement people have become full-time fleet experts. No matter what the title, however, the transition is complete. This shift from sourcing-driven transactional relationships to continuous strategic partnerships promises to deliver measurable and sustainable business value.