Paul LauriaPaul Lauria

Automotive Fleet & Leasing Automotive Fleet & Leasing AssociationAssociation

2008 Annual Meeting and 2008 Annual Meeting and ConferenceConference

Scottsdale, AZScottsdale, AZ

Developing a Strategic Developing a Strategic Road Map for Your Road Map for Your

Fleet OperationFleet Operation

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Chinese ProverbChinese Proverb

If you don’t know where you’re going...

any path will take you there.

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Key DefinitionsKey Definitions

Strategy:Strategy: The science of planning and maneuvering into the most advantageous position prior to actual engagement.

Tactics:Tactics: The science of arranging and maneuvering to attain short-range objectives.

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Why develop a strategic plan?Why develop a strategic plan?

To To identifyidentify opportunities to improve opportunities to improve performanceperformance♦ VehicleVehicle♦ Fleet managementFleet management♦ Fleet operationFleet operation

To To prioritize prioritize improvements improvements To To guideguide activities aimed at improving activities aimed at improving

performance performance To To achieveachieve improvements in performance improvements in performance

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Why do opportunities to improve Why do opportunities to improve performance exist?performance exist?

The fleet operation usually is a cost, not a revenue or The fleet operation usually is a cost, not a revenue or profit, producerprofit, producer

Fleet management usually is an internal support function Fleet management usually is an internal support function whose immediate beneficiaries are employees, not whose immediate beneficiaries are employees, not external customersexternal customers

The contribution of the fleet to the fulfillment of The contribution of the fleet to the fulfillment of enterprise-wide mission(s) is not always clear or well enterprise-wide mission(s) is not always clear or well understoodunderstood

Fleet costs are often small in relative, enterprise-wide Fleet costs are often small in relative, enterprise-wide terms, even if large in absolute terms terms, even if large in absolute terms

Information on, the visibility of, and hence an Information on, the visibility of, and hence an appreciation of the magnitude of fleet costs often is appreciation of the magnitude of fleet costs often is lackinglacking

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Why do opportunities to improve Why do opportunities to improve performance exist?performance exist? Fleet operation and fleet management responsibilities and Fleet operation and fleet management responsibilities and

authority often are decentralizedauthority often are decentralized Outsourcing fleet asset management functions is sometimes Outsourcing fleet asset management functions is sometimes

confused with managing the fleetconfused with managing the fleet Fleet management and operation are inherently complex Fleet management and operation are inherently complex

activities, requiring proficiency in many different activities, requiring proficiency in many different areas/disciplinesareas/disciplines

Many fleet management activities are affected by policies, Many fleet management activities are affected by policies, procedures, and decisions promulgated by non fleet procedures, and decisions promulgated by non fleet professionalsprofessionals

Fleet user needs and fleet operating conditions changeFleet user needs and fleet operating conditions change Fleet-related technology (vehicle, information, Fleet-related technology (vehicle, information,

telecommunications, etc.) changestelecommunications, etc.) changes Most organizations are fundamentally myopicMost organizations are fundamentally myopic

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Overview of a Strategic Business Overview of a Strategic Business Plan Development ProcessPlan Development Process

4. Define 4. Define Improvement Improvement

StrategiesStrategies

1. 1. Define the Define the BusinessBusiness

2. Identify 2. Identify Improvement Improvement OpportunitiesOpportunities

3. Set Priorities3. Set Priorities

5. Develop Action 5. Develop Action PlansPlans

6. Reengineer and 6. Reengineer and ImplementImplement

7. Measure Results7. Measure Results

8. Refine/Define 8. Refine/Define New StrategiesNew Strategies

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Step 1. Defining the Business of Step 1. Defining the Business of Fleet ManagementFleet Management

Management Management activitiesactivities Management Management rolesroles Management Management responsibilitiesresponsibilities Management Management authorityauthority

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Fleet Management ActivitiesFleet Management Activities

Fleet Fleet asset managementasset management activities activities♦ Vehicle specification, selection, acquisitionVehicle specification, selection, acquisition♦ Vehicle utilization and operation managementVehicle utilization and operation management♦ Vehicle maintenance and repairVehicle maintenance and repair♦ Vehicle fuelingVehicle fueling♦ Vehicle replacement and remarketingVehicle replacement and remarketing

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Fleet Management ActivitiesFleet Management Activities

Enterprise managementEnterprise management activities that activities that affect the management of fleet assetsaffect the management of fleet assets♦ Financial managementFinancial management♦ Sourcing and supplier management Sourcing and supplier management ♦ Risk managementRisk management♦ Human resources managementHuman resources management♦ Information managementInformation management♦ Facility managementFacility management

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Sample Definitions of Objectives Sample Definitions of Objectives and Scope of Management and Scope of Management

ActivitiesActivities Vehicle Specifications DevelopmentVehicle Specifications Development

♦ Ensure that vehicles meet user needs (functionality and Ensure that vehicles meet user needs (functionality and timing) cost effectively, take advantage of technological timing) cost effectively, take advantage of technological advances, promote corporate sustainability initiatives, advances, promote corporate sustainability initiatives, comply with applicable (e.g., environmental, safety) comply with applicable (e.g., environmental, safety) rules and regulations, and facilitate standardization of rules and regulations, and facilitate standardization of fleet compositionfleet composition

Employee Performance DevelopmentEmployee Performance Development♦ Promote continuous improvement in employee Promote continuous improvement in employee

performance by providing regular, structured feedback performance by providing regular, structured feedback on the quality of fulfillment of job responsibilities and on the quality of fulfillment of job responsibilities and rate of progress toward attainment of specific rate of progress toward attainment of specific performance improvement goals and objectivesperformance improvement goals and objectives

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Human Resources Management Human Resources Management ActivitiesActivities

Organization structure definitionOrganization structure definition Definition of job responsibilitiesDefinition of job responsibilities Staff assignment and utilization Staff assignment and utilization

managementmanagement Employee classification and compensationEmployee classification and compensation Employee recruitingEmployee recruiting Employee training and professional Employee training and professional

developmentdevelopment Employee performance managementEmployee performance management

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Fleet Management RolesFleet Management Roles

Ongoing execution/oversight of Ongoing execution/oversight of management activitiesmanagement activities

Policy and procedure developmentPolicy and procedure development Best practices and technology monitoring Best practices and technology monitoring

and educatingand educating Goal setting and performance reportingGoal setting and performance reporting Fleet user advocacyFleet user advocacy Executive management supportExecutive management support

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Fleet Management Fleet Management Responsibilities and AuthorityResponsibilities and Authority

Fleet management organizationFleet management organization SuppliersSuppliers Fleet user organizationsFleet user organizations Finance/AccountingFinance/Accounting Human ResourcesHuman Resources Risk ManagementRisk Management Information TechnologyInformation Technology Purchasing/SourcingPurchasing/Sourcing

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Step 2. Identifying Improvement Step 2. Identifying Improvement OpportunitiesOpportunities

Review and assess the current quality of Review and assess the current quality of allall direct and indirect fleet management direct and indirect fleet management activitiesactivities

There are as many as 100 distinct There are as many as 100 distinct management activities involved in management activities involved in managing a fleetmanaging a fleet

Use a simple scale for rating the current Use a simple scale for rating the current quality of performance of each activity quality of performance of each activity (e.g., “Excellent, Good, Fair, Poor” quality) (e.g., “Excellent, Good, Fair, Poor” quality)

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Step 3. Setting Priorities Step 3. Setting Priorities

Establish criteria for prioritizing improvements to Establish criteria for prioritizing improvements to specific management activitiesspecific management activities♦ Impact on vehicle performanceImpact on vehicle performance♦ Impact on fleet management organization performanceImpact on fleet management organization performance♦ Impact on supplier performanceImpact on supplier performance♦ ReengineerabilityReengineerability♦ Compatibility with enterprise-wide priorities (e.g., Compatibility with enterprise-wide priorities (e.g.,

sustainability)sustainability)♦ Opportunity for innovationOpportunity for innovation

Establish weights and rating scales for each Establish weights and rating scales for each criterioncriterion

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Sample Management Activities Sample Management Activities Improvement Prioritization Improvement Prioritization

MatrixMatrix

IMPACT ON PERFORMANCE

QUALITY OF CURRENT

FMO PRACTICES

QUALITY OF CURRENT

USER AGENCY

PRACTICES

REENGINEER- ABILITY BY

FMO

REENGINEER- ABILITY BY COMPANY

OPPORTUNITY FOR

INNOVATION YEAR 1 YEAR 2 YEAR 3

VEHICLE ACQUISITION AND DISPOSAL4 VEHICLE SPECIFICATIONS DEVELOPMENT H G F M M M5 CONTRACT ESTABLISHMENT AND MANAGEMENT H G F M M M6 MANAGEMENT OF AD HOC PURCHASES M E F H H L7 VEHICLE ACCEPTANCE, PREPARATION, AND DELIVERY M F P H H H8 COMMERCIAL EQUIPMENT/VEHICLE RENTAL M P P H H M9 VEHICLE DECOMMISSIONING M G P H H M

10 VEHICLE DISPOSAL M F P M H M

VEHICLE OPERATION MANAGEMENT11 DRIVER/OPERATOR CERTIFICATION AND RECORD KEEPING H P P L H M12 DRIVER/OPERATOR TRAINING M F P M H H13 PRE-TRIP INSPECTION AND RECORD KEEPING M P P M M L14 VEHICLE MISUSE/ABUSE MANAGEMENT M F P M H M15 ACCIDENT REPORTING, INVESTIGATION, AND REPAIR MANAGEMENT M F P M H H16 CLAIMS MANAGEMENT AND SUBROGATION L F F L H M

MANAGEMENT FUNCTION

TIMINGPRIORITIZATION FACTORS

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Step 4. Defining Improvement Step 4. Defining Improvement StrategiesStrategies

State State whatwhat about the management activity about the management activity needs to be improvedneeds to be improved

Explain Explain whywhy the improvement is needed the improvement is needed Recognize that some improvement Recognize that some improvement

strategies may consist of fact finding and strategies may consist of fact finding and business case analysis as opposed to business case analysis as opposed to outright business process changeoutright business process change

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Sample Improvement StrategySample Improvement Strategy

Issues and OpportunitiesIssues and Opportunities The motor pool’s short-term rental vehicle inventory may be The motor pool’s short-term rental vehicle inventory may be

larger than necessary to meet customer needs.larger than necessary to meet customer needs. Using commercial rental vehicles can be a cost-effective means of Using commercial rental vehicles can be a cost-effective means of

supplementing an inventory of company-owned vehicles to meet supplementing an inventory of company-owned vehicles to meet peaks in customer demand.peaks in customer demand.

Utilizing rental vehicles as a back-up supply source might enable Utilizing rental vehicles as a back-up supply source might enable the motor pool to downsize the company-owned rental fleet the motor pool to downsize the company-owned rental fleet without compromising vehicle availability or customer service.without compromising vehicle availability or customer service.

The company currently has a contract in place for short-term The company currently has a contract in place for short-term vehicle rental. However, the motor pool does not use this contract vehicle rental. However, the motor pool does not use this contract as a secondary source of vehicle supply for its customers. as a secondary source of vehicle supply for its customers.

Improvement StrategyImprovement StrategyConfirm the economic benefits of using commercial rental vehicles to supplement an optimally-sized inventory of company-owned short-term rental vehicles and, subject to such confirmation, develop an integration strategy and plan under which the motor pool would procure such vehicles on an as-needed basis on behalf of its customers.

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Step 5. Developing Action PlansStep 5. Developing Action Plans

Define Define how how you will improve the you will improve the management activitymanagement activity♦ Specific tasks and subtasks to be performedSpecific tasks and subtasks to be performed♦ Responsibility assignmentsResponsibility assignments♦ Timeline and milestonesTimeline and milestones♦ Work products, deliverables, Work products, deliverables, outcomesoutcomes♦ Resource requirementsResource requirements

Internal (personnel hours)Internal (personnel hours) External (dollars for products/services)External (dollars for products/services)

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Sample Action PlanSample Action Plan

1.1. Identify and evaluate potential cost savings.Identify and evaluate potential cost savings.a.a. Analyze historical trip pool rental transaction data to determine average daily and Analyze historical trip pool rental transaction data to determine average daily and

peak demands for rental vehicles.peak demands for rental vehicles.b.b. Determine core rental vehicle inventory requirement based on analysis of historical Determine core rental vehicle inventory requirement based on analysis of historical

usage trends.usage trends.c.c. Quantify marginal avoidable costs of furnishing pool vehicles in excess of core Quantify marginal avoidable costs of furnishing pool vehicles in excess of core

demand.demand.d.d. Compare avoidable cost per vehicle rental day with current contract rental rates.Compare avoidable cost per vehicle rental day with current contract rental rates.e.e. Determine if potential cost savings are large enough to warrant additional Determine if potential cost savings are large enough to warrant additional

investigation. If so, document analysis results and proceed to Task 2.investigation. If so, document analysis results and proceed to Task 2.

2.2. Implement commercial vehicle rental contract.Implement commercial vehicle rental contract.a.a. Develop service specifications.Develop service specifications.b.b. Evaluate existing rental contract terms and conditions in consultation with Evaluate existing rental contract terms and conditions in consultation with

Procurement for consistency with new requirements. Identify needed changes, if Procurement for consistency with new requirements. Identify needed changes, if any.any.

c.c. Renegotiate and/or rebid contract as necessary to secure required services.Renegotiate and/or rebid contract as necessary to secure required services.d.d. Evaluate bid results (if necessary) and award new or modified contract.Evaluate bid results (if necessary) and award new or modified contract.

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Sample Action Plan (cont.)Sample Action Plan (cont.)

3.3. Implement new policies and procedures for using commercial Implement new policies and procedures for using commercial rental vehicles to supplement trip pool.rental vehicles to supplement trip pool.a.a. Draft policy and procedure statement (PPS).Draft policy and procedure statement (PPS).b.b. Solicit feedback from selected stakeholders and finalize.Solicit feedback from selected stakeholders and finalize.c.c. Secure management approval for implementation.Secure management approval for implementation.

4.4. Establish performance measurement process.Establish performance measurement process.a.a. Define key performance indicator(s) (KPI's) for measuring motor Define key performance indicator(s) (KPI's) for measuring motor

pool and commercial rental company performance in meeting pool and commercial rental company performance in meeting contract objectives.contract objectives.

b.b. Identify associated data requirements, data sources, analytical Identify associated data requirements, data sources, analytical procedures, and reporting methods.procedures, and reporting methods.

c.c. Design and implement performance measurement and reporting Design and implement performance measurement and reporting process.process.

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Key Considerations in Key Considerations in Developing a Strategic Business Developing a Strategic Business

PlanPlan

Technical rigorTechnical rigor Stakeholder involvementStakeholder involvement PublicityPublicity Recognition of political realitiesRecognition of political realities Achievable goalsAchievable goals Implementable strategiesImplementable strategies Concrete action plansConcrete action plans Measurement of resultsMeasurement of results Plan maintenancePlan maintenance

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Ancillary Benefits of Developing Ancillary Benefits of Developing a Strategic Plana Strategic Plan

Developing an understanding of the complexity of Developing an understanding of the complexity of the business of fleet managementthe business of fleet management

Clarifying the mission of the fleet management Clarifying the mission of the fleet management organizationorganization

Developing an understanding of the limits of the Developing an understanding of the limits of the fleet manager’s authority and responsibilityfleet manager’s authority and responsibility

Identifying interdependencies between fleet and Identifying interdependencies between fleet and other enterprise management activitiesother enterprise management activities

Strengthening relationships with fleet usersStrengthening relationships with fleet users Promoting autonomy, self sufficiency, and stature Promoting autonomy, self sufficiency, and stature

of the fleet management organizationof the fleet management organization

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QuestionsQuestions

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For More InformationFor More Information

Paul LauriaMercury Associates, Inc.16051 Comprint Circle

Gaithersburg, MD 20877

301 519 0535

plauria@mercury-assoc.com

www.mercury-assoc.com