Automotive Fleet, October 2018

L E T T E R S T O T H E E D I T O R My experience as a fleet manager within our functional procurement team could not be further from the situations described in the Market Trends editorial entitled The Disconnect between Procurement and Fleet I was empowered with training and negotiation skills to go out and obtain the best deal for the company based on the total lifecycle cost vehicle requirements safety and fit for purpose needs What fleet manager wouldnt want the skills and trainings provided by a procurement team to make them more effective within the marketplace This is more of a having my cake and eating it too situation but I appear to be in the minority based on the letters to the editor feedback you received Nonetheless the editorial was an interesting read Thanks for publishing it Decisions Made on Price Since procurement often doesnt understand operational problems I do not believe procurement can identify the right supplier or products for a solution I normally find my own solution either through the FMCs or colleagues in the industry who have already vetted the same problem and developed their own solution I look to procurement to help me with widgets everything else is strategic Take the selection of an FMC partner for instance If procurement is deciding which FMC to use instead of the fleet manager and they base their decision on price and service offerings thats a problem They are not the ones who will be working with the FMC on a daily basis They do not know if the FMCs service level is in line with what the fleet manager expects Procurements decision is typically made on price not service expectations and unless they understand all the complex needs of managing a fleet and the critical partnership between the fleet manager and FMC they wouldnt understand why I would want to work with one FMC over another despite the pricing or what looks good on paper There is a variance between FMCs they are not all equal Author wished to remain anonymous Supplier Goodies I agree with the Market Trends editorial entitled Procurements Fixation on Hard Costs Misses Larger Soft Costs Savings AUTOMOTIVE FLEET I MONTH YR 4 M A R K E T T R E N D S Very few procurement managers realize that the goodies that suppliers throw in to get the order or to maximize the value directly or indirectly comes out of the pocket of procuring organization Everything in procurement has a cost direct indirect and hidden Nikhil Aggarwal Senior Manager Supply Chain Operations Accurate Engineering Jodhpur India Mutually Beneficial Public and private sector procurement best practices include category management for all areas of the business including HR and finance Professional practitioners leverage the experience of subject matter experts and partner with key stakeholders to make good long term decisions vilifying procurement is not going to make it go away Some of the comments in the Market Trends editorial about the relationship between fleet managers and procurement outlines areas where the function can grow but some of the wild generalities are more perception than reality In my experience when procurement engages in a cooperative manner with subject matter experts such as fleet managers it can be a mutually beneficial learning experience resulting in improved quality value and customer experience Procurements role should be to help identify the right supplier and products in collaboration with functional and technical experts not to OCTOBER 2018 Adam Tollifson Procurement Manager Ecolab St Paul Minn Empowered by Procurement O ne way to illustrate the disconnect between fleet managers and procurement fleet category managers is to ask two questions Do you believe fleet spend is best controlled as a procurement category utilizing procurement and negotiation expertise or is deep knowledge of fleet operational requirements an under utilized element in category management when making asset acquisition choices and supplier selection Second are fleet vehicles best acquired using an aggressive commodity pricing strategy or should work vehicles be viewed as specialized assets requiring minimum equipment specifications that predefine expense parameters both from a fixed and operating cost perspective How you answer these two questions gets to the heart of the disconnect between in house fleet managers and procurement fleet category managers Most in procurement take the position that fleets primary responsibility is to buy assets and services which annually can range from millions to tens of millions of dollars in expenditures This amount of corporate spend requires it be managed by someone with superb negotiation skills and proven procurement acumen But why isnt this true for all spend categories There are other corporate functions that do not have procurement category managers For instance HR buys or outsources many services but typically there is no HR procurement category manager Similarly the finance department purchases accounting and auditing services but these expenditures are not delegated to a procurement category manager Likewise many corporations have a financial relationship with lets say a Merrill Lynch type of company that manages its 401 k accounts or with a company like PwC that provides tax services auditing and consulting There is no procurement category manager managing these expenditures How are these business relationships different than a relationship with an FMC or OEM Why does fleet merit the creation of procurement category manager position while the others do not Or why does fleet trigger an RFP process every three years regardless of the metrics while other functions may require an RFP only if metrics decline One reason for the regularity of fleet RFPs is it keeps pricing market competitive but there also is a concern among some that an in house fleet manager can become biased toward a vendor if a close working relationship evolves especially if the metrics used to measure a suppliers performance are based on intangibles such as service levels The Value of Operational Expertise Cynics sometimes view fleet as a subjective management style while category management is viewed as more objective and analytical But to put the two disciples in perspective fleet management is the more mature profession that has been honed into a science over the past 80 years Category management is a relatively new disciple developed in the late 1980s by Brian F Harris a former university professor at the University of Southern California USC The concept of category management originated in dictate We all need to better understand language roles and responsibility in order to effectively meet our organizations needs AUTOMOTIVE FLEET I AUGUST 2018 6 grocery retailing and expanded to other retail sectors In the past several decades category management migrated into indirect procurement areas such as fleet management Category management examines the range of products and services purchased by an organization and categorizes them into groups of similar or related products known as product categories In the world of fleet management this encompasses vehicle acquisition and fleet supplier selection such as FMCs fuel management vendors and accident management safety companies Procurement proponents say that by assigning responsibility for this category of spend to a specific manager it will allow them to gain an expertise and in depth market focus to fully leverage their procurement skills Procurement often erroneously views fleet managers as being primarily tactical in their orientation and better suited to focus on operational excellence In reality fleet managers have both a tactical and strategic skillset that they practice 365 days a year As a result a fleet manager has a deep understanding of the fleet category which minimizes the risk of acquiring assets that cost less but are not optimal to fulfilling the fleet application This is especially critical at companies that operate complex fleets with assets that are upfitted with specialized auxiliary equipment By not fully understanding the operational intricacies of fleet vehicles it increases the potential of acquiring assets or equipment that are not optimal for a work application or conversely which are over speced based on want vs need input from field employees Or another risk is acquiring assets solely on upfront costs and not taking into consideration residual values whose savings may not be realized until years later Procurement is often driven by achieving short term goals but when making fleet procurements a longer perspective must be taken Typically the assessment of the job performance of most procurement specialists is based on the attainment of upfront savings but as lifecycle costing analytics can attest this is not always the best acquisition strategy Another disconnect is that procurement sometimes has difficulty quantifying service capability and does not give it sufficient weight because it is viewed as an intangible While a procurement group is very good at buying it sometimes doesnt appreciate the importance and subtleties involved in service relationships which are difficult to quantify and benchmark To minimize the disconnect between the two groups procurement goals must align to support fleets strategic goals which in turn will align with the overall corporate mission Procurement should not solely fixate on upfront cost reduction avoidance but expand its perspective to support Scott Bailey the wider strategic goals of fleet and look to long term ROI This will require tapping into the fleet industry market expertise and institutional knowledge that resides with the resident in house fleet manager Both fleet and procurement need to expand their collaboration to ensure the company is making the best asset acquisition choices and supplier selection Let me know what you think AF VP Sourcing and Strategic Alliances Element Fleet Management Sparks Md mike antich@ bobit com BY MIKE ANTICH The Disconnect Between Fleet Managers Procurement Fleet Category Managers Everything is True Everything is very true as written in the Market Trends editorial Procurements Fixation on Hard Costs Misses Larger Soft Cost Savings However toward the end of my career I noticed a disturbing trend that did nothing to help the issue Many FMCs have moved to a model where the only time you see a sales rep is when there is an RFP They know little of your fleet or the specific challenges of your organization They get some input from those on the front line with us but if they are only working with procurement AF0818trends indd 6 7 20 18 9 17 AM much is being lost Procurement knows about as much about their fleet as the sales rep does The first time I was put on the periphery of an RFP I saw a lot of opportunity left on the table that was not negotiated but should have been Julie Bromley Retired Fleet Manager More is Better The Market Trends editorial Strong USA Economy to Drive 2019 MY Fleet Orders provided some great information I encourage fleet buyers to speed up purchases and shorten the cycle to take advantage of improved vehicle content such as more safety items low maintenance costs and