Calculating Fleet Automation ROI: It’s Easier Than You May Think
In order to secure management approval for purchasing fleet management and vehicle sharing technology, it's important to clearly articulate the reduction in fleet operating costs expected. Quantitatively showing how you can save money by right-sizing your fleet and/or sharing vehicles can be a huge help in getting management’s buy-in. Imagine these two very different conversations with your procurement team:
Approach #1: I seek $27K to purchase a fleet management system to help us share vehicles better.
Approach #2: I seek $27K to purchase fleet management software to optimize the use of fleet vehicles and staff. After analyzing our fleet usage and by sharing vehicles, we estimate we will reduce the size of the fleet by 10 vehicles. We anticipate a return on our investment as follows:
- Maintenance, depreciation, and other cost savings by reducing these vehicles are conservatively estimated at $4,500 per vehicle.
- Factoring in the cost of the system, the ROI on the $27K investment in fleet management information system is conservatively expected to be $17K the first year and $307K in 5 years.
- One-time vehicle disposal income will net us approximately an additional $75K.
- Further cost reductions will be achieved by reallocating one full-time staff to other duties.
Being able to communicate the value of the technology to your organization is often key to gaining approval. It’s important to quantify the return on investment you anticipate and communicate that confidence to stakeholders. There are dozens of factors that can contribute to cost savings and efficiencies. But by looking at some high-level areas, you can identify significant savings. Let’s take a look at where you can save.
- Reducing (or eliminating) Assigned Vehicles. Let’s start with eliminating assigned vehicles. When vehicles are shared efficiently, they no longer need to be dedicated to individuals or departments. Let’s get one thing clear – Not all vehicles can be shared because of some degree of specialization, an existing fleet use policy, etc. However, of the vehicles that are assigned, there is often a significant amount that could feasibly be shared. A conservative benchmark of an anticipated reduction is 20% of the vehicles eligible to be shared based on Agile Fleet’s experience. This is the starting point for calculating the anticipated reduction for your fleet. Of the vehicles to be eliminated, not all vehicles will be eliminated starting at the onset of the project. A good cost-savings model will help you estimate the vehicle reduction over a 5-year period.
- Optimizing Shared Vehicles. Optimizing the use of fleet vehicles through efficient scheduling, the quick turn-around between vehicle uses, and around-the-clock automated dispatching helps reduce fleet size. When manual processes are not involved, vehicles are often available much more often. The artificial barriers that limit vehicle use to once per day or that required large gaps in between vehicle use are removed. When vehicle sharing can be fully automated, a realistic fleet reduction of 15% can be achieved through optimized sharing.
- Reduced Labor Costs. As fleet functions are automated, the amount of staff time required to coordinate scheduling, dispatching, and reporting of vehicles is diminished. Savings can be realized even from vehicles that are not shared through the optimization of tasks such as mileage reporting or billing. Centralized management of shared vehicles, even vehicles located at dispersed locations, can drastically reduce the total number of hours required to manage vehicles at disparate sites. While the number of staff required to manage vehicles after a right-sizing initiative is highly dependent upon factors such as the number of locations, the requirement to manually interact with drivers, reporting requirements, billing requirements, and more can be reduced in nearly all fleets. Quite often a small amount of overhead of staff is needed regardless of the size of the existing fleet staff team. However, it is very typical to see the amount of staff hours needed to manage vehicle sharing, reporting, and billing reduced considerably, which allows them to focus on other important business of the organization.
Wondering exactly what your ROI numbers could be? Agile Fleet can calculate it for you. Through our proprietary Fleet Savings Assessment tool, we can identify tens of thousands to hundreds of thousands of dollars in potential savings for your fleet.
Organizations may begin the process by completing a brief, 7-point questionnaire that collects key data points that are analyzed by Agile Fleet experts. An easy-to-understand in-depth report is prepared for you based on the data provided at no cost. Each Fleet Savings Assessment report identifies savings specifically for your fleet. Our experts are always available to continue a dialogue, tweak the model inputs, and help communicate the changes to internal stakeholders. Request your free report below.