Fleet Management Strategies for Success in 2023

The transportation and fleet management industry has faced multiple challenges in recent years because of global lockdowns generating demand and supply shocks. As we look toward next year, economic uncertainty will continue as the markets adjust to the ongoing global repercussions of the pandemic and general uncertainty related to growth prospects. 

Furthermore, inflation rates are increasing worldwide, which in turn impacts manufacturing costs. The 300 percent increase in the price of aluminum over the last three  years — as well as the fact that freight costs have gone through the roof — means that new vehicle prices have increased by 10-15 percent annually since 2020, as opposed to 4-7 percent before the pandemic.

In this challenging environment, planning ahead and ensuring that fleet costs are kept to a minimum is more important than ever. Devising cost-saving opportunities has become a real challenge. Partnering with your clients, thinking out of the box, and using data to analyze how you can reduce costs is more vital than ever to maintain an optimal and productive fleet. 

Fleet managers should focus on acquisition and maintenance plans to ensure success. Via Element Fleet Management’s consulting services, we help our clients identify where they need to act to avoid larger financial outlays by staying ahead of minor fleet repairs. In addition, we have access to vehicle inventories as well as historical data that we use to create models that help guide the acquisition decisions of our clients and how this will impact costs for their upcoming operations.

Maintenance control becomes the key to balancing costs to effectively navigate new unit shortages. A successful maintenance and acquisition strategy requires planning for and scheduling preventive maintenance to avoid major failures.

By addressing day-to-day wear and tear issues, you can often avoid greater corrective repair expenses down the line. According to our data, nearly half of the maintenance performed in 2022 was corrective, with the average costs per ticket 90 percent higher than preventive maintenance. Timely maintenance will ensure that you keep fleet costs to a minimum.

A factor that directly impacts fleet management is the chip shortage for vehicle production, and thus the availability of new vehicles. We expect that inventory shortages will continue into 2023 and 2024, which means that being flexible when it comes to make, models and trims can reduce the impact from a lack of availability. In this context of new vehicles scarcity, we proactively suggest our clients to focus on the following:

• Be agile in your orders: Anticipate your renewal plan by at least four months in advance of the usual ordering schedule. We have observed that delivery delays can extend up to eight months after the order is placed, depending on the vehicle's make and model.

• Be open to options: On-hand inventory is volatile and understanding this impact makes all the difference in having a unit renewed. Consider options for other OEMs and models.

• Review the TCO: The total cost of ownership analysis can be an eye-opener when deciding among different options in the market.

• Extend leasing term: Until inventory supplies return to normal, we recommend extending your lease terms. Consider this when your mileage is under control and maintenance costs are being managed correctly. Doing so can result in cost savings of up to 20 percent in your leasing spending while reducing the incremental maintenance cost of an aging fleet.

By way of example, one of our clients in the retail industry had the opportunity to increase its fleet by adding 240 units. When the original car model selected was discontinued from the market in 2021, our consultants performed a TCO analysis with the desired features and comparable models were presented. We conducted operational tests, considering the current load, volume, and working conditions required for the client to ensure the continuation of operations.

By negotiating with OEMs, our sourcing and purchasing teams closed a deal that took into consideration volume, delivery, and timing, with quantifiable savings of over MX$15 million a year. This also implied significant improvements in the vehicle's characteristics in terms of safety and carbon footprint. In 2023, the company has planned an extension in the acquisition of more than 150 units. 

As we prepare for a new year, we need to ensure that we use the technological and financial tools at our disposal to optimize our operational performance. A challenging environment can be successfully navigated with the proper strategy and tools. 

Today, Element manages more than 110,000 vehicles in Mexico, more than any other fleet management company in the country. This provides scale that we use as an advantage for our clients in terms of access to vehicles and know-how arising from ongoing data collection. Our goal for 2023 will be to continue providing our clients with services based on international best practices, ensuring that they meet their business targets and contributing to their company’s overall competitiveness.