A matter of cost

A matter of cost

Eqstra Fleet Management’s 2014 annual travel benchmark survey illustrates that, while some are getting there, most South African corporates still have a way to go in managing their fleets and controlling costs.

The concept of running a fleet of vehicles that allows a company’s staff to do their jobs is sometimes mystifying and can end up costing a company far more than it should.

For the past two years, Eqstra Fleet Management has published its annual travel benchmark survey, telling companies running fleets what the key market issues are, and how to address them. This year’s survey attracted 107 respondents representing 36 000 vehicles and 243 000 employees.

“This is the biggest (and probably only) study of its kind in South Africa,” says Hein du Plessis, head of Eqstra Fleet Solutions. The study points out that the cost of finance is no longer the biggest deciding factor; maintenance, fuel and driver management are more important than ever.

How are companies financing their fleets?

In its 2013 survey, Eqstra found that 60 percent of respondents outsourced finance to procure vehicles. This year, the figure dropped to 47 percent, which, it would seem, indicates a move away from outsourcing finance.

“It’s not that companies have more money to spend,” explains Du Plessis, “with the sample growing I don’t think there’s a statistic shift towards a different funding methodology.” To illustrate his point, Du Plessis indicates that the more mature the market (like Europe), the more there’s a shift towards outsourcing.  

Encouragingly, 68 percent of companies review their funding options on an annual basis. “Companies are getting far more astute. Ninety-two percent are willing to change if their funding exercises show there’s value in doing things differently. Warning bells should sound for the 26 percent that don’t have a detailed funding analysis.”

How are companies managing their fleets?

There is a shift from pure finance to a fleet management overview using outsourced providers. “Globally, corporates are moving to view all economies in the whole basket. Finance is not the biggest element of cost anymore, it’s all the other elements driving it that they want to consolidate in order to address their costs,” says Du Plessis.

Further, he notes that vehicles are not core to the business of many companies – they’re coincidental and, therefore, a heavy cost. Thirty percent of the sample said they outsource
finance and maintenance, 17 percent outsource only the finance and a mere six percent
outsource all fleet-related services. Du Plessis is confident that number will rise as fleet management suppliers become even more mature.

Is an allowance a better alternative?

Whatever options are taken, it must be affordable to the company and cost-neutral to employees. “More than 60 percent of companies put staff, whose business is essential, in vehicles that represent the corporate image and allow control of maintenance. But a lot of companies aren’t doing the calculations,” he cautions.

The cost of travel allowances is also not fully understood: 61 percent of companies have allowance policies, but 39 percent have no formal process in place to calculate cost.

Fuel, driver behaviour and other factors

Fuel now equates to around 44 percent of total fleet costs – the single biggest cost, having increased 570 percent in the last 15 years. “Some companies don’t realise what it can cost to give an allowance – 21 percent give a fuel card as well, nine percent also pay for vehicle maintenance. These are massive costs that they are giving away for free!”

To control this, 43 percent of companies restrict private mileages on allowances and company cars and, while it is in fact law,
69 percent of companies offering allowances are now making log books mandatory.

“Corporates in South Africa are becoming more socially responsible, but 70 percent still have no formal fleet policy. Bringing more control to fleets will help control costs and also flow back to the economy,” concludes
Du Plessis.

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