In industries that rely heavily on transportation (like trucking, food delivery, and more), the cost of running and maintaining a fleet of vehicles is a significant portion of your total operating cost.
A single truck tractor in a shipping fleet, for instance, cost an average of $166,632 in 2019.
And that’s only for for-hire fleets. Company-owned fleets were up to 60% more expensive because of additional operating expenses.
How can you reduce the costs for every vehicle at scale?
The answer is fleet management.
Fleet management is a discipline (and occupation), dedicated to operating fleets more efficiently and lowering your business’ yearly costs without negatively impacting performance and client relationships.
In this article, we’ll cover exactly what fleet management is, its benefits, and how fleet management software can help your business.
What we’ll cover:
- What is fleet management?
- What is involved in fleet management?
- FMS vs. Route Planning
- The One-Two Punch of Fleet Management + Route Optimization
- Final Thoughts
What Is Fleet Management?
Fleet management is a discipline that focuses on optimizing the whole lifecycle of your fleet, from financing and leasing to maintenance, compliance, vehicle tracking, driver management, and more.
Fleet management helps you reduce costs across the board, lowers the chances of accidents and breakdowns, helps you to buy and sell commercial vehicles at the optimal times, and more.
Fleet management systems (FMS)
Fleet management systems (FMS) are used for asset tracking and maintaining vehicle fleets in a company. They also help companies monitor driver safety and uphold legal regulations such as the ELD (Electronic Logging Device) Mandate.
They use GPS tracking and sensors to monitor how vehicles are being driven. That includes tracking the real-time location of the trucks, monitoring their fuel levels, speeds, sudden breakage, engine fault codes, and more.
For some fleets, an ELD-compliant hardware tracking system that integrates with the engine to track hours of service (HOS) is required by law.
What Is Involved in Fleet Management?
Fleet management starts with the financing of and purchase of a vehicle and ends with remarketing or reselling. It includes everything in between as well, from fleet maintenance and compliance to tracking vehicle and driver performance.
To truly understand what it involves, a surface-level view is not enough. Let’s take a closer look at the different elements of fleet management.
A fleet manager must not only locate suitable vehicles (based on capacity, refrigeration, mobility, etc.), but negotiate the right price and finance the purchases or leases in line with the company’s budget.
Likewise, a manager should leverage the company’s position (having a large number of cars, trucks, or vans), to negotiate beneficial maintenance deals. They must also develop a maintenance plan or program to ensure that there is minimal downtime or accidents.
Monitoring data on vehicle usage like sudden breakage and engine fault codes can help guide maintenance decisions. Keeping a roadworthy fleet is essential.
Driver safety and compliance
Maintaining fleet safety is a crucial responsibility for trucking companies. They must ensure that their drivers follow the regulations, and drive safely, through implementing an ELD, dashcam systems, or other measures.
Fleet tracking and monitoring
Most FMS providers use dedicated telematics devices to track location by GPS and monitor the condition of each vehicle — checking RPM, fuel consumption, and engine fault codes.
With smartphones and mobile apps for fleet management, it’s possible to implement GPS-tracking of all your drivers and vehicles at scale without extra hardware.
Keeping your drivers employed for the long term is more important than ever. There was a truck driver deficit of over 60,800 in 2018, and it’s expected to double over the next ten years.
Meeting increasing cost pressure
With new freight and trucking platforms and marketplaces like UberFreight, there’s more pressure than ever to keep costs down. If you can’t match the prices on these new apps, it’s easier than ever for existing clients to replace you.
This extra cost pressure creates a unique challenge, as you need to pay drivers enough to keep them, offer competitive prices, while also keeping your profit margins intact.
Fuel management, reducing mileage with more efficient routes, and cutting fuel costs through optimizing fuel stops is another critical responsibility of a fleet manager.
Vehicle remarketing (selling used fleet vehicles)
A fleet manager must pick the ideal time to sell the used trucks or cars. They have to consider complicated factors such as vehicle condition, current shipping demands, sales channels, and more.
FMS vs. Route Planning
Fleet management solutions focus on control, compliance, driver safety, and vehicle maintenance. Essentially, these tools streamline your business’ internal management processes for fleet operations.
Route planning systems, on the other hand, help companies efficiently plan and schedule delivery routes. They consider complex business constraints and objectives during route planning and can drastically improve the efficiency of your entire fleet.
FMS software can offer limited route planning tools
FMS solutions sometimes have limited route planning capabilities. For example, some offer your business the ability to sequence stops for a single vehicle or driver at a time. But they don’t consider unique requirements such as time windows, vehicle load capacities, driver hours, breaks, and more.
Even when this functionality is on the table from an FMS, it’s a limited solution that does little to optimize your route planning processes.
Route planners track driver location but don’t have vehicle telematics systems
Route planning systems often have a mobile application used to track drivers and vehicle location. You can use the real-time data to evaluate driver performance and assign last-minute orders efficiently based on your fleet’s live location.
However, route planners don’t include telematics, so they don’t track vehicle data points in the same way as FMS. An FMS system tracks data from the vehicle control unit (such as fuel consumption) and external sensors (such as dash cams or temperature sensors).
Vehicle telematics is excellent for monitoring the fuel usage and maintenance status of an enterprise fleet. But it’s not a prerequisite for all companies that handle deliveries internally.
FMS vs. route optimization use cases
For larger organizations, it can often make sense to have both FMS and a route planning system in place to address different business needs. In fact, that’s exactly what many of our clients do.
For instance, Hardie’s Fresh Foods is a food distribution company in Texas with a fleet of 160 trucks making thousands of deliveries every day.
Hardie’s uses an FMS to manage its vehicles and ensure that its trucks are inspected and maintained to perfect condition and that drivers comply with all regulations.
They also use route optimization and planning software to help them plan routes and driver schedules.
This combination has enabled Hardie’s to plan eight times more efficiently while lowering mileage and increasing delivery capacity.
Because Hardie’s has a large fleet of refrigerated trucks that are subject to regulations like the ELD mandate, an FMS system is necessary.
The crux is this: large enterprise or government fleets might need FMS tools, but they also need an efficient route planner to maximize deliveries and revenue.
But enterprise fleet management isn’t relevant to a small field service company or food delivery service. For example, if your drivers have their own vehicles, you don’t need an FMS solution, but you still need route optimization to manage your drivers efficiently.
Route planning/optimization will help your dispatchers plan efficient routes and schedules while respecting different constraints and ensure better last mile delivery, with GPS tracking features for better managing your workforce.
The One-Two Punch of Fleet Management + Route Optimization
When used alone, FMS tools help you manage and maintain your fleet of vehicles, ensure compliance, and optimize fuel stops for recurring routes.
But that’s it.
That’s why it’s best to combine FMS with a route optimization tool so that you can improve the efficiency of your planning, loading, and delivery routes as well. A combination of both will give you the best of both worlds.
Here are the leading benefits of using FMS and route optimization in combination:
1. Reduce operational costs and increase profitability per vehicle
An FMS system will help you purchase and sell vehicles for the right price at the right time. It will help you optimize fuel stops, improve driver safety, and lower maintenance costs and liability. As a result, you can reduce your fleet’s operating costs significantly.
Route optimization will help you increase revenue and profitability by optimizing the number of orders and deliveries completed by your existing fleet. It will also help with efficient load planning, address the last mile problem, provide your drivers with the most efficient routes, and help your team quickly and efficiently create weekly schedules that will increase productivity across the board.
The example we mentioned above, Hardie’s Fresh Foods, used a route optimization software to reduce mileage by 20% with 12% lower driver cost for the same deliveries.
On top of this, their delivery capacity increased by 14%, leading to 330 extra deliveries each day from its existing fleet of trucks and drivers.
Plus, with real-time order tracking and automated email and SMS notifications, you can minimize failed deliveries and improve your shipping accuracy.
2. Keep track of your drivers and their performance
With real-time GPS-tracking, you can keep track of all your drivers and cargo loads, as well as the individual performance of your drivers.
Positively reinforce good driving habits/driver behavior and reduce fuel consumption by creating individual driver fuel efficiency ratings.
Harsh braking and acceleration can be tracked by most FMSs, letting fleet managers identify the drivers at fault and prevent any wear and tear in the future.
3. Ensure better driver safety and eliminate potential liability issues
With more accurate forecasting, you can schedule driver breaks ahead of time and use driver ELD apps to ensure they are taking enough breaks.
You can also use dash cams and other measures to ensure drivers focus on the road at all times. Trucking liability lawsuits are getting more and more expensive for trucking companies, with a record-breaking $280 million dollar fine ordered in 2019.
4. Catch issues early with real-time vehicle diagnostics
Proactively spot problems such as failing batteries and engine fault codes through the telematics system installed in each vehicle.
Avoid road breakdowns and quickly identify vehicles in need of service to protect vehicle health and extend vehicle lifetime.
5. Keep drivers for longer with healthier workloads
With workload management tools, you can help your drivers maintain a healthier work-life balance and lower overtime costs at the same time. There is a real drought of commercial drivers, so lowering turnover is key to growing your business and keeping your capacity high enough to deal with demand.
A good route optimization software uses a feature that evenly spreads out deliveries and orders across drivers based on parameters that a fleet manager or dispatcher can quickly select using a slider.
Driver qualifications, break times, workdays, days off, any specific time windows that the driver cannot work are all factored in, and all are handled automatically by your software.
You can also set the schedule and break settings for individual drivers to ensure that you uphold regulations and that the order distribution matches their real work hours.
According to several state laws, drivers must receive at least one paid 10-minute rest period or longer break for every 4 hours worked or major fraction thereof; as practicable, in the middle of each work period. However, this is not required for employees whose total daily work time is less than 3 and ½ hours.
In the EU, drivers must get a break or breaks totaling at least 45 minutes after no more than 4 hours and 30 minutes of driving.
6. Ensure driver and vehicle compliance
With an FMS system, you can make sure that your drivers comply by using ELD time tracking to monitor their schedules and breaks.
You can also use the management software to schedule checkups and maintenance, and measure essential fleet data to ensure your vehicles are roadworthy at all times. That includes regular checks at the DMV.
7. Automate complex workflows
Many industries have complex restrictions and regulations that impact individual orders and deliveries.
With route optimization software, you can account for these restrictions by setting time windows, vehicle requirements, equipment, skill and qualification requirements, and more at the order level. Your software will help you efficiently manage complex orders at scale, easily handling over 100 daily deliveries per driver in a few minutes.
GPS-tracking and geofencing ensure that your drivers don’t deviate from designated territories, and makes it possible to automatically redistribute deliveries based on the live locations of your drivers — for example, when a driver calls in sick, or a batch of last-minute orders come in.
8. More efficient planning and increased scalability
With a manual approach, your dispatchers and managers will spend too much time on menial planning tasks. That will make it difficult, if not impossible, to scale your business without improving your systems and processes or expanding your team.
With a route optimization software, fire safety provider Telgian was able to spend 82% less time on planning, cut its operational staff by 66%, and increase its order volume by 70% at the same time.
As a result, Telgian has recorded an impressive YoY growth of 19% over the past three years.
If your business relies on managers that keep track of different drivers, loads, and routes by using a mix of outdated software and spreadsheets, you won’t be able to get the best results.
Route optimization can improve the efficiency of your fleet, with or without an FMS in place. By itself, it will help you reduce planning time and fuel consumption, save you money on overtime costs and driver wages, and much more.