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23 Jan 23

Award-winning fleet managers share their cost saving strategies

Bayer’s Jan-Hendrik Rauhut, and Schindler’s Guillaume de Subercasaux explain how they are dealing with the inflationary crisis.

Inflation is impacting every area of fleet expenditure, driving up costs and bringing pressure to bear on all fleet budgets. Faced with this challenging environment, doing nothing is not an option, and fleet decision makers are exploring every category of spend, as well as their wider business operations, in a bid to keep costs under control in the short-term, and minimise the total cost of ownership of new vehicles that join their fleets.

Responsible for a fleet of 21,000 vehicles, Guillaume de Subercasaux, Head Global Categories, Schindler and Global Fleet Manager of the Year 2022, said: “If we don’t do anything, and continue to buy or lease the same vehicles, there will be a huge cost increase. The price of vehicles is very high, leasing rates are high, and fuel costs are high, so we must take action to limit the cost increases and, in some cases, save money in 2023.”

Downsize vehicles

One of his primary solutions is to downsize new vehicles, both vans and passenger cars, on the grounds that they cost less to lease, have lower insurance premiums, better fuel consumption and reduce tyre costs.

“We win everywhere in the TCO by downsizing,” said Subercasaux.

Operational changes

But with a smaller load space for tools and spare parts, downsizing vehicles has demanded operational changes to Schindler’s business model.

“We can’t change the tools, but we can optimise the logistics, so when we need spare parts for the construction, maintenance or repair of elevators, we have the parts delivered directly to the site, so our technicians do not need to carry everything in the vehicle,” said Subercasaux.

Schindler has also reorganised the racking (shelves) in its vehicles to make it easier for technicians to find the tools and parts they are carrying, a process that has allowed the company to lighten loads.

In many cases drivers have welcomed the changes, added Subercasaux, with smaller vehicles proving easier to park in city centres.

Procurement

One of the biggest price spikes suffered by large fleets has been due to the disappearance of the generous discounts and rebates they used to enjoy in return for the high volumes of vehicles that they ordered. With vehicles in short supply, manufacturers are prioritising higher margin retail sales, and allocating limited volumes to fleets.

Jan-Hendrik Rauhut, Global Head of Mobility, Bayer, and Global Fleet Manager of the Year 2021, said: “The old game of bundling demand to gain leverage is no longer valid. I hope this will change in 2023 and 2024, but at the moment, even if I say I need 500 cars, that no longer puts you at the top of the list with OEMs any more.”

The situation has freed both Bayer and Schindler to add more OEMs to their supplier lists, with the latter doubling the number of its manufacturers from three to six to ensure it secures supply.

Unbundling leases

Given the vastly reduced purchasing terms that large fleets can currently negotiate with OEMs, their next area for investigation is leasing, and all the constituent elements that are bundled into a monthly rental. Leasing companies prefer to bundle costs together, giving themselves the chance to offset higher than anticipated spend in one area with savings in another, but if fleets apply a forensic attention to detail, it can highlight potential cost savings.

“You have to understand your leasing rates from A to Z,” said Rauhut, highlighting the need to analyse the cost of insurance, tyres and replacement car provision.

“Do you need to pay for a replacement car service if you only used it a couple of times last year?” asked Rauhut. “It’s not a gamechanger, but it may save a few euros.”

Solus to dual supply

He has stepped away from his former strategy of one leasing company per country, to a dual-supply approach, and discovered significant differences in lease calculations, opening the opportunity to discuss residual value forecasts, which have a major impact on monthly rentals.

Schindler, too, is exploring unbundled leases – it has removed tyres from contracts in France, and insurance in some other countries – but for the most part has continued with bundled contracts.

“I use leasing companies a lot as support, because they can guide me to alternative vehicles which could meet our needs, as well as to OEMs that offer higher discounts or have better availability,” said Subercasaux. “I rely on them to make sure we have the right vehicles in the right places. The best vehicles in Germany, for example, are not the best vehicles in the US, so we need to adapt market by market.”

The more straightforward area for lease savings is to extend the duration of contracts, a policy that has become almost inevitable due to the long delivery times for new vehicles.

Electrification

Looking ahead, both Schindler and Bayer have embarked on fleet electrification programmes, although these are largely driven by environmental rather than cost saving objectives.

“If you want to shift to fleet electrification you find yourself in a budget discussion in every country,” said Rauhut.

One area where he has managed to drive down costs is in recharging, with Bayer paying for the installation of wallbox chargers at the homes of its managers in Germany, a strategy that has reduced the average cost of charging, because it’s so much cheaper to charge at home. Recent approval to install charge points at Bayer’s premises in Germany should further help to reduce recharging costs, compared to using public chargers.

Meanwhile, downsizing vehicles has allowed Schindler to adopt EVs, using telematics data both to identify cars and vans that could switch to battery power and to optimise routes. In addition, operational changes have seen the company prioritise predictive and pre-emptive maintenance of its customers’ elevators, which means technicians are now replacing parts before they fail, and therefore only having to visit sites once, rather than a first visit to diagnose a problem and a second to fix it.

“By driving fewer kilometres we use less fuel, have fewer accidents and can keep vehicles for longer,” said Subercasaux.

As for the future, both he and Rauhut forecast no reprieve from today’s high costs until the end of this year, and perhaps 2024, when vehicle supply lines return to normal and fleets can start to leverage their purchasing power again.

 

Images: Fleet Europe and Schindler

Authored by: Jonathan Manning