Paul Lauria

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Developing a Strategic Road Map for Your Fleet
Operation
Automotive Fleet Leasing Association 2008
Annual Meeting and Conference Scottsdale, AZ

• Paul Lauria

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Chinese Proverb

• If you dont know where youre going...

any path will take you there.
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Key Definitions
Strategy The science of planning and maneuvering
into the most advantageous position prior to
actual engagement.
Tactics The science of arranging and maneuvering
to attain short-range objectives.
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Why develop a strategic plan?

• To identify opportunities to improve performance
• Vehicle
• Fleet management
• Fleet operation
• To prioritize improvements
• To guide activities aimed at improving
  performance
• To achieve improvements in performance

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Why do opportunities to improve performance exist?

• The fleet operation usually is a cost, not a
  revenue or profit, producer
• Fleet management usually is an internal support
  function whose immediate beneficiaries are
  employees, not external customers
• The contribution of the fleet to the fulfillment
  of enterprise-wide mission(s) is not always clear
  or well understood
• Fleet costs are often small in relative,
  enterprise-wide terms, even if large in absolute
  terms
• Information on, the visibility of, and hence an
  appreciation of the magnitude of fleet costs
  often is lacking

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Why do opportunities to improve performance exist?

• Fleet operation and fleet management
  responsibilities and authority often are
  decentralized
• Outsourcing fleet asset management functions is
  sometimes confused with managing the fleet
• Fleet management and operation are inherently
  complex activities, requiring proficiency in many
  different areas/disciplines
• Many fleet management activities are affected by
  policies, procedures, and decisions promulgated
  by non fleet professionals
• Fleet user needs and fleet operating conditions
  change
• Fleet-related technology (vehicle, information,
  telecommunications, etc.) changes
• Most organizations are fundamentally myopic

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Overview of a Strategic Business Plan Development
Process
1. Define the Business
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Step 1. Defining the Business of Fleet Management

• Management activities
• Management roles
• Management responsibilities
• Management authority

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Fleet Management Activities

• Fleet asset management activities
• Vehicle specification, selection, acquisition
• Vehicle utilization and operation management
• Vehicle maintenance and repair
• Vehicle fueling
• Vehicle replacement and remarketing

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Fleet Management Activities

• Enterprise management activities that affect the
  management of fleet assets
• Financial management
• Sourcing and supplier management
• Risk management
• Human resources management
• Information management
• Facility management

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Sample Definitions of Objectives and Scope of
Management Activities

• Vehicle Specifications Development
• Ensure that vehicles meet user needs
  (functionality and timing) cost effectively, take
  advantage of technological advances, promote
  corporate sustainability initiatives, comply with
  applicable (e.g., environmental, safety) rules
  and regulations, and facilitate standardization
  of fleet composition
• Employee Performance Development
• Promote continuous improvement in employee
  performance by providing regular, structured
  feedback on the quality of fulfillment of job
  responsibilities and rate of progress toward
  attainment of specific performance improvement
  goals and objectives

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Human Resources Management Activities

• Organization structure definition
• Definition of job responsibilities
• Staff assignment and utilization management
• Employee classification and compensation
• Employee recruiting
• Employee training and professional development
• Employee performance management

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Fleet Management Roles

• Ongoing execution/oversight of management
  activities
• Policy and procedure development
• Best practices and technology monitoring and
  educating
• Goal setting and performance reporting
• Fleet user advocacy
• Executive management support

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Fleet Management Responsibilities and Authority

• Fleet management organization
• Suppliers
• Fleet user organizations
• Finance/Accounting
• Human Resources
• Risk Management
• Information Technology
• Purchasing/Sourcing

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Step 2. Identifying Improvement Opportunities

• Review and assess the current quality of all
  direct and indirect fleet management activities
• There are as many as 100 distinct management
  activities involved in managing a fleet
• Use a simple scale for rating the current quality
  of performance of each activity (e.g.,
  Excellent, Good, Fair, Poor quality)

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Step 3. Setting Priorities

• Establish criteria for prioritizing improvements
  to specific management activities
• Impact on vehicle performance
• Impact on fleet management organization
  performance
• Impact on supplier performance
• Reengineerability
• Compatibility with enterprise-wide priorities
  (e.g., sustainability)
• Opportunity for innovation
• Establish weights and rating scales for each
  criterion

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Sample Management Activities Improvement
Prioritization Matrix
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Step 4. Defining Improvement Strategies

• State what about the management activity needs to
  be improved
• Explain why the improvement is needed
• Recognize that some improvement strategies may
  consist of fact finding and business case
  analysis as opposed to outright business process
  change

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Sample Improvement Strategy

• Issues and Opportunities
• The motor pools short-term rental vehicle
  inventory may be larger than necessary to meet
  customer needs.
• Using commercial rental vehicles can be a
  cost-effective means of supplementing an
  inventory of company-owned vehicles to meet peaks
  in customer demand.
• Utilizing rental vehicles as a back-up supply
  source might enable the motor pool to downsize
  the company-owned rental fleet without
  compromising vehicle availability or customer
  service.
• The company currently has a contract in place for
  short-term vehicle rental. However, the motor
  pool does not use this contract as a secondary
  source of vehicle supply for its customers.

Improvement Strategy Confirm 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 Plans

• Define how you will improve the management
  activity
• Specific tasks and subtasks to be performed
• Responsibility assignments
• Timeline and milestones
• Work products, deliverables, outcomes
• Resource requirements
• Internal (personnel hours)
• External (dollars for products/services)

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Sample Action Plan

• Identify and evaluate potential cost savings.
• Analyze historical trip pool rental transaction
  data to determine average daily and peak demands
  for rental vehicles.
• Determine core rental vehicle inventory
  requirement based on analysis of historical usage
  trends.
• Quantify marginal avoidable costs of furnishing
  pool vehicles in excess of core demand.
• Compare avoidable cost per vehicle rental day
  with current contract rental rates.
• Determine if potential cost savings are large
  enough to warrant additional investigation. If
  so, document analysis results and proceed to Task
  2.
• Implement commercial vehicle rental contract.
• Develop service specifications.
• Evaluate existing rental contract terms and
  conditions in consultation with Procurement for
  consistency with new requirements. Identify
  needed changes, if any.
• Renegotiate and/or rebid contract as necessary to
  secure required services.
• Evaluate bid results (if necessary) and award new
  or modified contract.

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Sample Action Plan (cont.)

• Implement new policies and procedures for using
  commercial rental vehicles to supplement trip
  pool.
• Draft policy and procedure statement (PPS).
• Solicit feedback from selected stakeholders and
  finalize.
• Secure management approval for implementation.
• Establish performance measurement process.
• Define key performance indicator(s) (KPI's) for
  measuring motor pool and commercial rental
  company performance in meeting contract
  objectives.
• Identify associated data requirements, data
  sources, analytical procedures, and reporting
  methods.
• Design and implement performance measurement and
  reporting process.

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Key Considerations in Developing a Strategic
Business Plan

• Technical rigor
• Stakeholder involvement
• Publicity
• Recognition of political realities
• Achievable goals
• Implementable strategies
• Concrete action plans
• Measurement of results
• Plan maintenance

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Ancillary Benefits of Developing a Strategic Plan

• Developing an understanding of the complexity of
  the business of fleet management
• Clarifying the mission of the fleet management
  organization
• Developing an understanding of the limits of the
  fleet managers authority and responsibility
• Identifying interdependencies between fleet and
  other enterprise management activities
• Strengthening relationships with fleet users
• Promoting autonomy, self sufficiency, and stature
  of the fleet management organization

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Questions
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For More Information
Paul Lauria Mercury Associates, Inc. 16051
Comprint Circle Gaithersburg, MD 20877 301 519
0535 plauria_at_mercury-assoc.com www.mercury-assoc
.com