A presentation by Tshidiso Seoposengwe, executive: business development & business solutions, Fleet Africa at the 1st annual fleet management conference, held at the Indaba Hotel in Fourways, Johannesburg

1. Annual Fleet Management Conference 2016
OPTIMISING YOUR BUDGET TO ENSURE THE SMOOTH
RUNNING OF YOUR FLEET LIFECYCLE

2. Developing & Controlling a Fleet Budget
Fleet Managers have to possess knowledge of Financial management
What is Financial management?
 Knowledge of the financial issues that affect a manager’s fleets – possibly
including:
 financial analysis of various acquisition options,
 ability to conduct
 a lifecycle analysis,
 benchmarking,
 outsourcing decisions, and
 preparing and implementing a fleet budget.

3. Annual Fleet Management Conference 2016
WHAT IS A FLEET BUDGET?

4. Developing & Controlling a Fleet Budget
 Develop cost assumptions.
 Determine line item expenses.
 Correct the variances between budgeted and actual costs

5. Annual Fleet Management Conference 2016
DEVELOP COST ASSUMPTIONS

6. Annual Fleet Management Conference 2016
 Recognize factors over which you may or may not have any control, but will
impact your budget, i.e.
 What factors are present today that may impact the budget you are
currently working on? i.e. Economic Factors,
 What factors influenced last year's budget?
 What future developments may affect your upcoming budget?
Most companies work on annually escalated budgets based on inflation – Not Ideal!

7. Economic Trends: Currency
-19%
Exchange rates have direct influence on vehicle & parts prices

8. Economic Trends: Interest Rates

9. Economic Trends: PPI
Depreciation costs will remain a major concern

10. Economic Trends: Vehicle Sales
Less vehicle sales means higher production costs

11. Economic Trends: Fuel Cost
Where is the Price of fuel going???

12. Annual Fleet Management Conference 2016
DETERMINE LINE ITEM EXPENSES

13. Key line items in a fleet budget
a. Capital for new vehicles (owned option)
b. Vehicle depreciation.
c. Interest expense .
d. Leasing and fleet management fees (if the fleet is leased).
e. Personal use chargebacks.
f. Fuel expense.
g. Vehicle maintenance (services, repairs, tyres, etc).
h. Accident/collision expense.

14. Key line items in a fleet budget
j. Resale or disposal adjustment.
k. Insurance
l. Licence renewal costs
m. COF cost (where applicable)
n. Direct per vehicle cost (such as tracking, monitoring, recovery fees, etc.)
o. Overheads to manage the fleet (staff, systems, premises rental, municipal
services, other, etc.)

15. Annual Fleet Management Conference 2016
CORRECT THE VARIANCES BETWEEN BUDGETED AND
ACTUAL COSTS

16. Annual Fleet Management Conference 2016
Controlling the Budget

17. Correcting budget variances
 Identify the expense factors that caused the variance & Implement the
necessary changes to prevent the variance from recurring in subsequent
months.
 Once variances have been corrected, document why they occurred as they
can be referenced as "past forces" when preparing the following year's
budget.

18. Correcting budget variances
 Identify the expense factors that caused the variance &
correcting them

19. Annual Fleet Management Conference 2016
MANAGING OWNERSHIP COSTS

20. Identifying expense factors that causes the variance
• Variable Ownership Expenses:
– Acquisition  Fit for Purpose procurement
– Interest rates  Negotiate a fixed rate over contract duration
– Administration  Trained Staff & simple efficient systems
– Disposal  Quickly, multiple channels, small batches at a time,
outsource

21. Cost of Ownership

22. Correcting budget variances
 Implement the changes necessary to prevent the variance
from recurring in subsequent months.

23. Replacement Cycle: Amort Curve
Contract term
Rand
Value
Amortization curve
Market value curve

24. Replacement Cycle: Maintenance fund??
Contract term
Rand
Value Revenue
into fund
Expenditure over time

25. Replacement Cycle
Best Practices:
– Develop a defensible replacement criteria
– Project long term replacement funding requirements
– Understand alternative financing options
– Develop a defensible procedure to select actual units to be replaced
– Don’t replace underutilised vehicles
– Buy the right vehicle
– Maximise resale value
– Disposal the program

26. Disposals & Factors Influencing RV (Ownership)
• Age
• Kilometers
• Make and Model – market demand/perception
• Market flooding
• Inflation
• Substitute Products – Cheap importations
• Over/Under supply from OEM’s
• Load Factors
– Location
– Usage
– Configuration/Equipment

27. Annual Fleet Management Conference 2016
MANAGING OPERATING COSTS

28. Identifying expense factors that causes the variance
• Variable Operating Expenses:
– Maintenance, Services and repairs  Selection, Std, SLAs &
negotiations
– Fuel  fuel management systems
– Tyres  Supplier SLA, tyre mgnt system
– Usage Abuse  policy, enforcement & technology
– Accidents  policy, enforcement & technology
– Downtime policy, enforcement & technology
– Unauthorised Use policy, enforcement & technology
– Theft/Pilferage  policy, enforcement & technology
OR
Outsourcing & A Well Negotiated CONTRACT

29. Correcting budget variances
 Strategic Outsourcing (properly negotiated contract)
 Use of Technology (fit for purpose)
 Telematics
 Fuel
 Downtime
 Suppliers & User SLA Management
 Dynamic Fleet Policies with Enforcement
 Continuously Assess

30. Correcting budget variances
What is Fleet Management?
• It is not a bank card!
• It is not software or fleet management system!
• It is not a vehicle tracking system!
• It is not a lease!
Fleet management is:
Cost Containment, Vehicle Availability and Risk Mitigation
…by continually monitoring the cost effectiveness of individual vehicles

31. Fleet Cost Components

32. Variance Documentation
 Document what happened, and
 How it was corrected
This will assist in building better, educated cost assumptions in the future

33. Thank you

34. Discussion Points
Questions & Discussion