Opportunities to cut costs and drive efficiencies
Published: 05 January, 2012
Rising costs, shrinking budgets and the pressure for constant improvement in quality and service makes it a tough time to run a fleet. But it's not all doom and gloom says Simon Cassidy, Sales Director of Xcess-A-Bus.
The first thing to say, and it's a defining principle that drives everything we do at Xcess-A-Bus, is that everyone should have quick, easy and affordable access to community transport. It's not just about vehicles â€“ it's freedom and access to a better quality of life.
Managing a fleet of vehicles can throw up an almost endless number of challenges, so rather than listing every issue I've come up against in the last 12 months this article will look at the key challenges and opportunities for cost cutting over the life of a vehicle. It starts with the sourcing of fleet.
Assuming that we discount the option of trying to maintain an ageing fleet â€“ because with the cost of maintenance sky rocketing and new legislation coming into play, it absolutely doesn't make financial sense â€“ there are four viable choices for today's community fleet manager.
The first is to purchase new vehicles. It's expensive because thevehicles sit on the balance sheet, all of the cost is borne up front and there's the added worry of depreciation but for those with deep pockets (and it's a rapidly shrinking bunch) there are advantages. You won't have to worry about compliance and legislation due to the introduction of ECWTVA (more on that later) because new vehicles will meet or exceed the latest legislation and emissions targets.
You would also expect the breakdown costs for the donor vehicle to be covered by the main manufacturers' warranty for the first three years and if you have got good relationships with your converters you may also be able to achieve extended warranties on key ancillary equipment such as tail lifts etc. At Xcess-A-Bus we have a policy of constant renewal whereby we replace most vehicles within three years of purchase. It means we always have the very latest technological and efficiency enhancements available and it reduces the number of out of warranty claims that we receive therefore making things more cost efficient.
Although the cost of new vehicles continues to rise we have been able to maintain our renewal programme thanks to a combination of purchasing directly from manufacturers, keeping our operations as flexible and agile as possible so that we can adapt our approach to the changing characteristics of the market and maintaining a constant line of communication with manufacturers and convertors alike. We also have the advantage of being part of a much bigger group that purchases vehicles with fleet terms. All of this, together with strong residual values allows us to manage these costs (although it is getting harder).
Option two is to look at purchasing used vehicles. In the medium term this is an approach that a lot of Councils are considering. We can see from the demand for vehicles from our own fleet that the second hand market is thriving (another reason why residual values in are holding firm) and provided you're purchasing from a reputable supplier with robust maintenance and repair policies the risk shouldn't be too great. That said, there will be increased maintenance issues and those issues will come with a substantial price tag because parts will no longer be covered by the manufacturers' warranty.
Option three is contract hire and for many Councils which are struggling with budget cuts this is a quick win because the fleet is moved off balance sheet. The long-term commitment means that rental costs are kept to a minimum, you can dictate exactly what equipment and specification is included and the package can cover all standard repair, maintenance and servicing costs. The risk of depreciation is borne by the rental company and because all of the administration related to running a fleet is handled by the rental company there is an opportunity to make significant cost reductions in transport management personnel.
Finally option four is flexible rental. It comes with the same benefits as contract hire in terms of service levels and support but there's no long-term commitment giving you greater flexibility, rates are higher and you don't get the level of control over vehicle specification. (Having said that I would like to point out that all new Xcess-A-Bus vehicles come with M1/M2 tested floor and seats, minimum of a 3-point lap and diagonal seat belt, speed limiter, high visibility hand rails, head rests and seat belts, cant rail tracking, reverse camera, climate control, internal or external tail lift and lowered side step entry as standard.) The advantage of flexible rental is that you are not tied in to a long-term agreement
The big advantage of rental over ownership is on the maintenance of the vehicle. In line with PSV regulations most operators run an inspection programme every 6 â€“ 12 weeks on all vehicles with more than eight passenger seats (we currently operate on an eight week cycle). As well as the periodic inspections we also put the vehicles through an annual Class 5 and 6 MOT test. On top of that there's the standard manufacturers' service requirements, legislative tail lift LOLER and load test which are carried out sixmonthly and annually respectively. All of this is carried out under strict guidelines to ensure the safety of our customers, our staff and to meet our legal requirements. All vehicles must come with a Certificate of Initial Fitness (COIF) or Single Vehicle Approval (SVA) certificate where applicable. It represents a huge amount of the work (and rightly so) that we do and not having to worry about it is a big selling point for our customers!
So far we've touched on legislation, compliance and funding but it's worth looking into in more detail given the significant changes our sector faces. Some of the changes are driven by safety and quality, ;for example the European Community Whole Vehicle Type Approval (ECWVTA) â€“ in my opinion great news for the sector (although it will come at a cost) â€“ and some of it is driven by cost cutting, for example removing the mobility component of the DLA for people living in residential care. This is an incomprehensible change that could make thousands of elderly disabled people housebound.
Councils and community groups may well struggle with the constant demands for new vehicles that the DDA compliance system puts on them. What we can say with some certainty is that it will have a big impact on funds which are already stretched to breaking point.
Within our sector the ECWTA applies to both commercially and privately operated vehicles â€“with 9 â€“ 17 seatsâ€“ it comes into force on the 29th October 2011. It will change the way converters operate and has been implemented to improve the safety standards of vehicles that have been converted from vans to mini-buses. With so many different interpretations of a specification, convertors and customers will need to adjust the specification to meet the requirements of Type Approval. There is potential for a lot of “friction” but working closely with the converter (who ultimately has responsibility for achieving the correct type) will ensure that the dealer registers the vehicle in the correct manner. I believe that whilst these changes may limit the number of options available they are good for the consumer and the industry as a whole but it will come at a cost â€“ and it's likely to be thousands rather than hundreds of pounds.
The Low Emission Zone kicks off in London on the 3rd January 2012. It's going to have a major impact on vehicle fleets that don't meet the Euro 3 emissions standards and best estimates are that it's going to mean at least 1,800 vehicles in our sector alone that are currently in operation will be unusable in London. Any vehicles registered as new on or after the 1st January 2002 will meet the standards but there will be a hefty fine for anyone (commercial or private) who fails to meet the particulate matter (PM) standard. The LEZ will only be in force in London but we believe it's only a matter of time before similar schemes are announced in other major cities around the UK.
And whilst it's not always the most popular topic with fleet managers we have to bring up the subject of Health and Safety.
With manual handling being a major issue for many people we are starting to introduce internal, fully automatic tail lifts. This has been well received with many of our customers and is a step forward in the reduction of this problem. Another issue that seems to be on the increase is the safe and correct way to remove, move and refit the seats in the back of vehicles. To try to counteract any problems we have recently introduced a number of training and demonstration days in partnership with the manufacturers which are designed to ensure seats are fitted correctly and our customers know exactly how to operate all of the equipment on the vehicles.
Manufacturers are continually improving the standards of seats but there is always a trade off between strength and weight. Obviously they have to be strong enough to pass the relevant tests but light enough to be easily and safely removed. One solution has been the introduction of mini-wheels fitted to the seats so you can wheel rather than carry them. This also extends to tail lifts and the safe use of them.