Return on Investment Series: Manage Driver Behavior

Fleet Savings Summary

Driver behavior is tough to manage without the right tools. The Fleet Savings Summary Report highlights your fleets top five most valuable drivers and bottom 5 which are your top five coaching opportunities. These drivers represent the fleet’s most costly drivers, and therefore represent the best bang for your buck driver coaching opportunities. Driver behavior is critical to the safe operation of your vehicles and is a key area where risk is managable.

Proactive management is key. Aberdeen Group reports that top performing organizations are 96% more likely than their peers to utilize technology that alerts management, and the driver, of exceptions being made (i.e., speeding, harsh cornering, etc).

 

Driver Behavior & Telematics Data

Today’s fleet managers are under extreme pressure to manage their fleet costs despite deteriorating economic conditions. These costs include the procurement and disposal of the vehicles, fixed and variable operating costs, labor costs, as well as collision and insurance claims.

Using telematics data, fleet managers can discover new cost savings opportunities across their entire fleet. By pursuing these savings opportunities, a fleet manager can reduce their COI, improve their fleets operating efficiency, and grow their bottom line. Conversely, managing a fleet without a telematics platform is likely to result in higher costs and poor visibility for improvement.

Telematics and the Fleet Savings Summary are valuable tools that fleet managers should use to better understand and proactively manage their vehicles and drivers, and ultimately run a more profitable fleet.

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Return on Investment Series: Identifying Key Opportunities for Cost Savings

Identify Key Opportunities for Cost Savings

In this fourth part of our ROI/COI blog, we will discuss specific telematics related cost savings categories that compile our Fleet Savings Summary Report.

#1 Safety: Reducing costly vehicle collisions

The U.S. Occupational Health & Safety Administration (OSHA) reports the following figures:

Cost Savings

 

Collisions, speeding, and aggressive driving behaviors were found to be a contributing factor in 31% of all fatal crashes, while seat belt use was found to decrease the risk of a fatality by between 45-60%. With this knowledge and the use of our telematics program, fleet managers can improve profitability by monitoring driver behaviors and proactively coaching drivers.

Other in-cab driver feedback tools such as GO TALK and real-time audible alerts can drastically reduce the likelihood of an on-duty accident. This can also be quantified in a reduction to insurance costs. To quantify these savings, the Fleet Savings Summary Report uses a proprietary safety-scoring algorithm to determine the existing and potential savings for a fleet.

 

#2 Fuel: Controlling Runaway Fuel Cost Savings

Managing fuel costs can be complicated and involve a number of variable, including fluctuating gas prices and inconsistent driver behavior. For many fleets, fuel is one for the largest expenses.

Fact: The U.S. Department of Energy reports that rapid acceleration and heavy braking can reduce fuel economy by up to 33% for highway driving and 5% on city roads. Idling and speeding can also have drastic impacts on MPG.

Market research has shown that the effective use of telematics has an effect on fuel cost savings by as much as 14%. Driver coaching is instrumental in achieving these cost reductions. For every 5 mph over 50 mph, a driver can reduce their MPG by approximately 7-14%. Therefore, getting drivers to slow down and observe the speed limit translates into saved money.

The Fleet Savings Summary Reports uses a proprietary fuel-scoring algorithm to determine a fleets existing and potential fuel-related savings. In doing so, driver speeding incidents and idle time were found to be the largest contributor to fuel waste, which resulted in fuel-related savings.

 

#3 Maintenance: Reducing Planned and Unplanned Repair and Maintenance

We all know that preventative maintenance is a regular part of owning a vehicle, but additional repairs due to aggressive driving and vehicle misuses are an unnecessary cost to a fleet. Particularly, harsh accelerations, harsh cornering, and harsh braking cause harmful wear and tear on critical vehicle components. This drastically increases a vehicles variable CpM.

The results materialize as reduced tire life, reduced brake life, more frequent scheduled maintenance and more frequent non- scheduled maintenance and repair. In fact, these non-scheduled maintenance interruptions can result in lost profits of between $400 to $700 per day, in addition to the cost of repairs.

The Organization for Economic Co-operation and Development (OECD) reports that telematics technology can help a company reduce maintenance and repair cost by as much as 14%. Because much of these savings are tied to driver behavior, using real-time driver management tools and in-cab alerts are the best way to minimize unnecessary wear and tear on your fleet vehicles.

By managing the aggressive driving behaviors, fleet managers can minimize their maintenance repair costs, in in turn generate savings reflected in the Fleet Savings Summary Report in the Maintenance section.

 

#4 Productivity: Increasing Work Efficiency

Driver compensation is often a large portion of a fleets operating budget. That being said, labor can be very expensive for fleet managers. Among the many ways to calculate labor productivity, vehicle idle time is an important metric. Even though idle time only captures a component of employee productivity, it is the only metric that the Fleet Savings Summary Report utilizes for its productivity-based scoring algorithm at this time.

Market research suggests that telematics can increase workforce productivity and reduce labor costs by up to 12%.14 This allows companies to make more customer stops and cut out unproductive mileage. The net effect is higher revenues and lower costs.

Using the Fleet Savings Summary Reports proprietary productivity-based scoring algorithm, this increase in workforce productivity translates into productivity-related saving. To maximize these savings, fleet managers must limit their fleets idle labor, which is approximated using vehicle idle hours per trip.

I know we said this was going to be a 4-part series but there is so much great information to offer that we have added a 5th part. In the next series we will discuss how to proactively manage driver behavior. Putting all these steps into place to maximize your ROI and decrease your COI!

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Return on Investment Series: Fleet Savings Summary

What is the Fleet Savings Summary Report?

The Fleet Savings Summary Report is a snapshot of existing versus potential savings for your fleet. These savings were determined through the use of proprietary driver scoring algorithms.

 

Fleet Savings Summary

Report Overview

 

To calculate a fleets existing and potential telematics-related savings, a detailed breakdown of its operating costs are required. Geotab conducted a combination of primary and secondary North American market research to develop fleet-specific Cost-per-Mile (CpM) models, including sub-models for fixed vehicle related costs, variable vehicle related costs, and driver salary related costs. There are two major factors that impact the nature of fleet costs, vehicle class & vehicle mileage.

  • Fleet Savings ReportVehicle Class – The vehicle makeup of a fleet has a big impact on its operating costs. For example, Heavy-Duty (HD) trucks have a very different CpM breakdown than Medium-Duty (MD) and Light-Duty (LD) vehicles. The Fleet Savings Summary Report segregates CpM data into three classifications: HD, MD & LD.
  • Vehicle Mileage – Just as vehicle class impacts CpM, vehicle mileage can have a large impact as well. This is true for two reasons:
    • Fixed vehicle and driver costs will be spread over less total miles.
    • Vehicles that drive fewer miles will likely spend a larger portion of their driving time on city roads rather than highways or freeways, which can increase the vehicles variable CpM.

 

In order to determine a fleets average mileage, the Fleet Savings Summary Report automatically calculates an average monthly mileage for the entire fleet, and multiplies it by 12 to get the estimated annual value.

In the next series we will discuss how we identify key opportunities for cost-savings.

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Return on Investment Series: COI

Telematics & GPS Cost of Ignoring

Simply stated, the cost of ignoring is money left on the table. Cost of ignoring (COI) can be thought of as the amount of lost savings that result when a company fails to undertake a strategic business investment that would otherwise improve operational efficiency. For fleet managers it can be thought of as the incremental operating costs resulting from the improper use of telematics or lack thereof.

 

ROI v. COI

COI has the same strategic goals as ROI, however there are a few fundamental differences as seen in the table below. The primary difference is that COI is focused on minimizing operating costs, whereas ROI is focused on maximizing incremental revenue.

 

ROI v COI

 

Finding Savings

 

Each fleet is unique, and therefore each fleet can have drastically different cost structures. In our research, we found that two variables specifically impacted a fleets operating costs: vehicle class and vehicle mileage.

Here is an example: A long-haul Heavy-Duty (HD) fleet will have a very different cost per mile (CPM) breakdown than a low-mileage Light-Duty (LD) fleet. In general, the HD fleet will likely have larger proportional fuel expenses per mile, but the fleet will have larger collision and claims CPM.

Savings opportunities available to a specific fleet will change based on the fleets operating characteristics. This can make the opportunities difficult to identify and quantify.

In the next series, we will discuss using our Fleet Savings Summary Report to quantify the ROI & COI.

 

View previous Return on Investment Series post here.

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Return on Investment Series: Article 1

Telematics & GPS ROI

return-on-investment

Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment, or to compare different investments. ROI measures the amount of return on an investment relative to the investment. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage.

The telematics industry has come a long way since the days of downloading data when a vehicle returns to home base and providing dots on a map. Today, telematics can provide fleet managers instant reports on location, vehicle driving behavior, maintenance alerts and so much more, thus providing a significant ROI.

 

5 Pillars of Fleet Management for Return on Investment

 

Safety – Speeding, harsh driving behavior, reverse, seatbelt, accident reduction
Productivity – Stop duration, dispatch, route efficiency, sales/service calls, timely service
Optimization – Proactive maintenance, odometer readings, vehicle health, fuel consumption
Compliance – Company policies, State/Federal laws, HOS
Expandability – Integrate with 3rd party software, power of the IOX, marketplace

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