26/08/2003 - 22:00

Business fleets a mixed bag

26/08/2003 - 22:00


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SEALANES, Western Power and Brightwater are three very different organisations with highly varied approaches to fleet management.

Business fleets a mixed bag

SEALANES, Western Power and Brightwater are three very different organisations with highly varied approaches to fleet management.

The strategies employed by these companies illustrate the need to tailor fleet management strategies to the circumstances of individual companies.

Brightwater, a not-for-profit provider of aged care services, is in the process of implementing a new fleet strategy following a major review.

Director corporate services Kenny Annand said Brightwater was moving away from fleet leasing towards direct ownership of its vehicles. As a not for profit business, Brightwater does not pay tax and therefore does not obtain the tax benefits flowing from leasing.

More significantly, it is entitled to State government purchasing discounts that can reduce the price of new passenger vehicles by nearly one third.

Mr Annand said Brightwater planned to trade in its vehicles after 15,000 kilometres or nine months, at which point the residual value of the trade-in vehicles would cover the cost of buying new vehicles.

“We will have to be fairly smart to watch the residual values of the cars to turn them over at the right time,” he said.

“There is a bit of risk management for us but at the moment there is a financial benefit.”

Sealanes, a privately owned food wholesaler, has a fleet of approximately 30 cars and 25 trucks.

Chief executive Brian Pozzi said the company chose to lease its fleet purely because of the cash flow benefits. If it purchased the fleet, the group’s debt would increase substantially.

Western Power’s fleet management is on a much larger scale.

The State-owned energy utility has about 1,550 vehicles in its fleet.

With access to State government funds, Western Power has very competitive borrowing costs.

“People keep on trying to sell us leasing on a cost basis, but it just can’t stack up on that basis,” fleet asset manager Shaun Crook said.

He is on the lookout for external service providers who focus on adding value rather than simply trying to reduce costs.

To achieve this, service providers would need to have a good understanding of Western Power’s fleet structure and business needs.

For instance, heavy vehicles such as trucks with ‘cherrypickers’ and bulldozers are outnumbered by other vehicles but they account for most of the capital cost.

In addition, Western Power’s vehicle fleet comprises a very small portion of the company’s total assets, which amount to $3.7 billion.

Mr Crook said Western Power’s old fleet group is divided into three distinct sections.

Fleet management is seen as a pure administration function, covering areas such as vehicle registration, fuel contracts and processing insurance claims.

Fleet maintenance is a separate unit that not only services the Western Power fleet, but generates substantial revenue by performing work for external clients.

Asset management is a relatively new area that focuses on managing pure financial costs.

“This separation of accountabilities ensures that the decision making of whether to outsource any part of the business is without bias,” Mr Crook said.

“It also ensures transparency of the costs to administer and maintain the fleet.”

In conjunction with this management model, Western Power reviewed the utilisation of its fleet, leading to a reduction in fleet size.

This was made possible partly because the company introduced a heavy vehicle pool, for business units that could not achieve target utilisation rates.

Mr Crook said external service providers, such as leasing companies, may be able to extend this concept by pooling of heavy vehicles among local councils.


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