A growing number of fleet managers are deploying vehicle-sharing programs, also known as motor pools, to squeeze more savings from their operations without diminishing service to customers, while creating flexibility in their budgets to purchase more fuel-efficient or even alternative-fuel vehicles to reduce overall fuel costs and harmful emissions.
What exactly is vehicle sharing? How does it work? What are strategies to successfully roll out a vehicle-sharing program to maximize vehicle utilization rates — and overall cost savings?
“Vehicle sharing is a fleet management strategy to reduce costs and rightsize a fleet by facilitating the use of a single vehicle by more than one person,” explained Ed Smith, president of Agile Access Control. Based in Chantilly, Va., Agile is the developer of FleetCommander, a Web-based technology for fleet and motor pool management.
“It’s nothing more than having a ratio of vehicles-to-personnel of greater than one-to-one,” Smith continued. “And, by increasing the ratio of cars to people without adversely impacting the ability to perform a job, you’re generally reducing costs.”
According to Smith, each vehicle taken out of service can save a fleet from $3,000 to $5,000 annually in maintenance, insurance, depreciation, and administrative costs, as well as income generated by the sale of those vehicles.
How is vehicle sharing (or motor pools) different from car-sharing services offered by companies such as Zipcar, Car2go, WeCar, and Enterprise CarShare?
The technical distinction lies in who the customer is and who owns and manages the vehicles, said Suzanne Wilson, market research manager for ARI, a full-service fleet management firm, accounting for 2 million vehicles worldwide.
Car sharing refers to a short-term rental service (usually less than 24 hours, in some cases by-the-minute) geared to consumers in densely populated metropolitan areas with cars owned and operated by third-party rental companies. In contrast, vehicle sharing in fleet refers to vehicles, which are owned and managed by that fleet and made available primarily for internal use by qualified personnel.
Yet, the processes for reserving, dispatching, and managing each vehicle are often comparable. “The software for managing a motor pool is similar to the software you would use to manage reservations in the car-sharing model,” Wilson said. “A fleet can set it up so that employees can go on-line and reserve the vehicle, just like they would with a car-share service.”
There are several vehicle-sharing opportunities fleet managers can take advantage of.
“Take a look out in the parking lot; there are cars sitting idle at any given time,” Smith said. “If you analyze when vehicles are needed by individuals or departments, there are peaks and valleys in demand. Statistics will clearly show that peak demand does not occur at the same time for all vehicles.”
Smith offered this example: “If three disparate departments have an occasional need for a pickup truck, it wouldn’t make sense for those departments to each own one. But, if you pool their needs, it might make sense for one truck to be purchased and shared across the three departments.”
According to Paul Lauria, president of Mercury Associates Inc., a fleet management consulting firm headquartered in Gaithersburg, Md., the best opportunities for vehicle sharing exist where there is a high concentration of personnel and equipment at a given location.
“The vehicles must be domiciled in close proximity of one another. Also, vehicle users must be working at locations with high staff numbers, so that it’s practical to think about the possibility of sharing vehicles,” Lauria said. “If the vehicles are remotely domiciled, the opportunities for pooling with other employees usually are much more limited.”
A helpful metric for fleet managers to consider when evaluating potential vehicle-sharing opportunities is utilization rate, which is defined as a ratio (or percentage) of time a vehicle is used versus the total amount of time a vehicle is available. If the vehicle mileage is only 40, 50, or 60 percent of its target usage, find out why. Could that vehicle be shared with another employee to improve its utilization rate, allowing another vehicle to be removed from the fleet?
Another approach is to take a closer look at employee mileage reimbursement reports. “You may have a situation where there are three people going to the same meeting and they’re each getting mileage reimbursement. If they’re going to the same meeting and leaving from the same office, they could all go in the same vehicle,” Wilson suggested.
As with any cost-reduction strategy, however, vehicle sharing isn’t suited for all fleets or applications. “A plumber or other tradesman that has hundreds of pounds of tools to perform his or her job could potentially share trucks if the tools were moved from vehicle-to-vehicle each day, but this isn’t practical,” Smith said.
Lauria with Mercury Associates agreed. “One of the things that can make it difficult to share vehicles is business applications that involve vehicles transporting heavy materials or equipment. If someone else is going to use that vehicle, you have to be able to remove those materials from the truck bed, car trunk, back seat, or front seat and store them somewhere. That can be a real impediment to shared use of vehicles,” he said.
Also, Lauria cautioned to keep in mind that “low mileage” doesn’t necessarily mean a vehicle is underused.
“Take, for example, a social services worker who is visiting clients, traveling from private home to private home to meet with people,” Lauria said. “That vehicle is in use all day long, five days a week; however, the intensity of use may not be reflected in the miles accumulated each year, because the vehicle spends a lot of time parked. There could be a similar case with building inspectors or highway engineers who are basically parking a vehicle at a jobsite to inspect or oversee and supervise the work of a contractor. There are several fleet applications where the vehicle is in use but is not necessarily accumulating miles all the time it’s in use.”
‘Sharing is Caring’
How do fleet managers successfully roll out a vehicle-sharing program?
“The answer to this is to craft a good vehicle-sharing policy and be able to enforce it,” Smith advised. “What’s your policy on late returns of vehicles? You have to have the technology tools to efficiently capture usage data to be able to tell the user, ‘You’re consistently late using a vehicle. That’s impacting people downstream from you and it’s raising the cost of providing service to you. So, return your vehicles on time.’ If they continue to turn in vehicles late, then you have all the metrics and reports to alert their supervisor.”
Lauria concurred. “It’s about having a set of policies, procedures, and controls in place to permit end users to determine the availability of the vehicle or piece of equipment. What is the acceptable procedure for employees to make arrangements to reserve a vehicle? And, there have to be business processes in place for the allocation of the cost of that use,” he said. “For example, if the Parks and Recreation department is going to share a truck, how is the owning department going to be compensated for that use? What happens if the Parks and Recreation department borrows the loader and wrecks it? How does the owner get compensated?”
Also, what happens if an employee attempts to reserve a vehicle, but it’s not available?
“That’s not necessarily a bad thing,” Lauria said. “What that means is that the [motor] pool is properly sized. If you can get a vehicle 100 percent of the time you ask for one, that’s an indication that the pool is larger than it needs to be. In a larger city, if an in-house motor pool has to turn away customers, they may have a contract with a commercial car rental company — such as Enterprise, Avis, or Hertz — to serve as a backup source of supply of vehicles. On days or periods of peak demand, a customer can be sent down to Enterprise and they can get a vehicle that way.”
Said Smith: “One of the most important metrics in car sharing is this: How many times did I turn someone down or send them to an outside rental agency because I did not have a vehicle available for them? Then assess: At what point is it more cost effective to either purchase another vehicle or maybe get rid of vehicles? If a fleet continuously has more than, say, eight outside rental requests that have to be fulfilled each month because there aren’t enough vehicles, what’s the break-even point to buy a new vehicle? If fleet is turning down fewer than eight requests per month in sedans, then maybe there is still room to reduce the size of the fleet.”
Dealing with Skepticism
When it comes to vehicle sharing, not all employees will be happy about giving up their assigned vehicles. That’s what Smith with Agile Access Control encountered first hand when he was brought in by a county government in North Carolina to demonstrate the capabilities of his firm’s vehicle-sharing technology to the agency’s employees.
“The County’s goal was to reduce fleet costs by creating four motor pools and reducing the number of assigned vehicles,” Smith recalled. “This meant employees or departments that may have historically had an assigned vehicle would now be asked to go to a nearby motor pool location to get their vehicle. When I walked into their large meeting room, there were between 20 and 30 County employees ready to hear about this ‘great system’ that would result in them losing their assigned vehicles. There was a lot of skepticism, and the audience was not happy to hear about the change.”
About 10 minutes into Smith’s presentation, one of the County’s decision makers, who was sitting in the back of the room and listening to the employees grumble, interjected.
“He stood up and said, ‘I see you have concerns over this solution. I will ask Mr. Smith to leave the room for 10 minutes. If you can all work together and write down the names of 16 of your colleagues that you are willing to see get laid off in lieu of using a vehicle-sharing system, we’ll ask Mr. Smith to pack his bags and leave. Otherwise, let’s give him a chance to finish.’ ”
Smith said the room instantly went silent. He finished the demonstration. And, the County eventually implemented the vehicle-sharing system, which saved it $300,000 in the first year.
The moral of Smith’s story: In an era of seemingly incessant budget cuts, vehicle sharing is one more strategy for savvy fleet managers to consider to rightsize their fleets — to lower costs, while preserving service levels, and jobs.
And, with each underutilized vehicle eliminated, organizations can reallocate more resources toward refreshing their remaining fleet with more fuel efficient and/or alternative-fuel vehicles, reducing their overall fuel spend and carbon footprint.