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  • COMPANY CAR DRIVERS POTENTIALLY FACE BACK TAX DEMAND CAUSED BY NEW OpRA RULES, FIAG WORKSHOP TOLD

    • Courts “get tough” on companies and individuals guilty of health and safety breaches
    • Employers urged to relieve driver stress to improve road safety performance
    • Businesses “nowhere near” maximising the potential of telematics technology

    Company car-driving employees have been warned that they could be subjected to demands for back tax from HM Revenue and Customs following this year’s introduction of complex Optional Remuneration Arrangements (OpRA) rules.

    The Fleet Industry Advisory Group’s (FIAG) autumn workshop, ‘Fleet Policy – Challenges and Influences’ heard Activa Contracts’ sales and marketing director Lisa Temperton highlight that understanding and correctly interpreting OpRA regulations was one of the “major challenges” currently facing businesses.

    Essentially the new rules were introduced by government to mean employees opting for a salary sacrifice arrangement or taking a company car in lieu of a cash alternative paid tax on the higher of the existing company car benefit value and the salary sacrificed or cash allowance given up. However, car arrangements in place before April 6, 2017 are protected until April 2021 and ultra-low emission vehicles (ULEVs) – currently those with CO2 emissions of 75g/km or less – are exempt from the regulation.

    OpRA rules were rapidly introduced on April 6, following confirmation in last year’s autumn Budget and subsequent Finance Bill, but the impact of the changes are still coming to light. For example, it was recently revealed that the new OpRA rules should only take into account the amount of salary sacrificed for the car itself thereby excluding vehicle maintenance, insurance, new tyres and roadside breakdown and recovery for example. That means that the finance rental for a car and all other costs should be separated out making so-called “proportionality” now an issue for employers in respect of OpRA.

    Ms Temperton told delegates at the workshop, which was sponsored by driver risk management specialist Automotional and held at the company’s Training Centre located within the Formula E Paddock at Donington Park Race Circuit, that when P46 (Car) forms were sent to HMRC by employers at the end of the 2017/18 tax year they could be incorrect.

    “Some employees will have underpaid tax and that will cause pain as HMRC looks to recoup the tax they believe due,” said Ms Temperton, who highlighted that underpayment was likely to be caused because company payroll departments were not yet set up to handle the impact of OpRA rules on tax.

    Ms Temperton took delegates on a whistle-stop tour through “50 years of political meddling with the company car” and concluded that other “current challenges” facing fleet decision-makers included:

    • The introduction of the new vehicle emissions and MPG test procedure, known as the Worldwide harmonised Light vehicles Test Procedure (WLTP)
    • “Anti-diesel” vehicle legislation including the introduction of Clean Air Zones in towns and cities nationwide
    • The impact of the new lease accounting standard, known as IFRS 16, effective from January 1, 2019, which in the fleet operating and vehicle leasing sector is mainly focused on its requirement for assets financed via operating lease – contract hire – to be brought on-balance sheet
    • Increasing demand for personal contract hire affinity schemes
    • Getting to grips with a raft of issues surrounding ‘connected cars’ and autonomous vehicles
    • The fall-out from negotiations relating to the UK’s exit from the European Union.

    However, Ms Temperton concluded: “Reports of the death of the company car are greatly exaggerated. The more it changes, the more it stays the same.”

    That presentation introduced a roundtable debate among delegates on the future of the company car and fleet decision-makers agreed that there was perhaps “more uncertainty” than in living memory.

    Some delegates concluded that growing company car benefit-in-kind tax complexity added to demands by employees “not to be dictated to in terms of vehicle choice” could prompt a move away from ‘perk’ company cars.

    However, amid such a scenario some delegates warned that could trigger the increased use of privately-owned cars – the so-called ‘grey fleet’ – being driven on business journeys, which, in many cases, was already proving to be a corporate challenge in terms of managing vehicle documentation and driver licence validation to ensure duty of care compliance. An alternative, to growing ‘grey fleet’ use, it was suggested, was a greater use of hire cars and even pool vehicles.

    Meanwhile, other workshop delegates suggested that company cars continued to deliver “value for money” to employees and there would be no shrinkage in demand.

    Delegates also suggested that job-need cars remained business-critical and, against a background of year-on-year increases in company car benefit-in-kind tax, required “more government support”.

    Courts “get tough” on companies and individuals guilty of health and safety breaches

    Company directors and senior managers inside businesses with fleet responsibility are increasingly likely to be prosecuted with organisations potentially facing fines running into millions of pounds in the event of fatal and non-fatal crashes.

    FIAG workshop delegates heard specialist health and safety lawyer Michael Appleby, partner at London-based Fisher Scoggins Waters LLP, highlight the impact that the 2016 sentencing guidelines for health and safety and corporate manslaughter offences were having on organisations, directors and senior managers.

    The guidelines were introduced by the Sentencing Council last year and provide for a sliding scale of financial penalties linked to the turnover of a business and level of culpability.

    For health and safety offences the scale of penalties is: large organisation with £50 million-plus turnover £3,000-£10 million; medium size organisations with £10-£50 million turnover £1,000-£4 million; small organisations with £2-10 million turnover £100-£1.6 million; micro companies with not more than £2 million turnover £50-£450,000. Convicted individuals face a maximum sentence of up to two years jail and an unlimited fine.

    For companies convicted of corporate manslaughter the maximum penalty is an unlimited fine although the guidelines state a range of £180,000-£20 million depending on the size of the company.

    Mr Appleby revealed that in 2015 just three companies were hit with fines of more than £1 million for breaching health and safety regulations, but that had risen to 19 in 2016 following introduction of the guidelines with two-thirds of cases being non-fatal. Historically, he highlighted, that fines above £1 million were reserved for companies prosecuted following fatalities.

    He also highlighted a dramatic increase in the number of directors and senior managers being prosecuted – up from 15 in 2015 to 46 last year. What’s more, following introduction of the new guidelines, those found guilty were now likely to receive, as a minimum, a suspended prison sentence with directors also disqualified from holding office.

    Mr Appleby told delegates: “There is an increasing interest by the Health and Safety Executive (HSE) in all area of occupational health including work-related road safety. Businesses should focus on reducing potential areas of harm across the workplace, which includes managing vehicle and driver safety. Inside many organisations there is scant attention being paid to fleet safety, which is a huge area of concern. Policies and procedures must be in place to reduce the risk of exposure to prosecution of directors and senior managers as well as organisations if a crash results in a fatality.”

    Employers urged to relieve driver stress to improve road safety performance

    Employees suffering from stress were 50% more likely to drive dangerously and thus be involved in crashes, according to John Sunderland Wright, training director at Performance on Demand.

    Drivers’ health and well-being was critical to their behaviour on the road, Mr Sunderland Wright told FIAG workshop delegates highlighting that the heart and brain were the two key areas of the body “massively effected” by stress.

    “Stress can inhibit personal performance,” said Mr Sunderland Wright. “High levels of stress causes the brain to do far too much and that causes problems, which for drivers manifests itself in road crashes.”

    Employee surveys frequently highlighted that stress and tiredness were issues for them but, said Mr Sunderland Wright, sleeping for eight to nine hours per night was a solution. He also advised that continually hydrating the body with water was vital as dehydration reduced concentration and reaction levels by 20%.

    With driver stress being a significant contributory factor to road crashes, Mr Appleby reminded delegates that it was a major focus for the HSE in improving work-related road safety.

    He told delegates: “Are drivers so stressed that they cannot do their job properly? Employers must look at their work-related road safety policies and ensure that employees that drive on businesses have the opportunity to have their views on such issues heard.”

    The FIAG workshop debate on the health and well-being of drivers concluded that it was “a hot topic” and it was important that “a massive knowledge gap” across employers was filled.

    Delegates suggested that many employers were “reactive” and not “proactive” in managing employees and only reacted with new policies and procedures following an “incident”.

    As a result, Geoffrey Bray, chairman of FIAG, which was launched four years ago to enable fleet decision-makers to share fleet industry best practice and knowledge, said: “It is vital that employees that drive on business are given advice and information on how to relieve stress and be less tired. Information should not just be written into a company car policy, but there should be conversations and drivers should be empowered to speak up. Drivers are part of the solution and not simply the problem.”

    Businesses “nowhere near” maximising the potential of telematics technology

    Nine in ten businesses that fit telematics to vehicles were “nowhere near” maximising the potential of the technology to obtain a full return on investment, Phil Powell, sales director at Matrix Telematics told the FIAG workshop.

    However, companies that used telematics derived data to effectively manage driver behaviour and vehicle performance reaped significant financial benefits notably in terms of reduced fuel bills, lower maintenance costs due to employees’ adopting a smoother driving style, fewer road traffic crashes and reduced insurance premiums, he explained.

    Highlighting that in-vehicle technology and ‘big data’ was the future, Mr Powell said: “Employers must harvest data from vehicles and use the information gathered to analyse both driver and vehicle performance.”

    During a roundtable discussion, FIAG delegates agreed that telematic systems provided a wealth of data, but flagged up concerns that with the 25 May, 2018 introduction of the General Data Protection Regulation (GDPR) information collected must be used responsibly with drivers informed the use to which it was being put.

    Delegates also agreed that fleet decision-makers could be swamped with the volume of data emerging from telematics system. As a result, it was critical to both centralise and compartmentalise information and focus on highlighted “errors and weaknesses” measured against established key performance indicators so drivers and vehicles were “managed by exception”.

  • FINAL CALL FOR FLEET DECISION-MAKERS TO LOOK TO THE FUTURE AT FIAG’S 2017 AUTUMN WORKSHOP

    The final fleet decision-maker places are available to attend the autumn 2017 workshop hosted by the Fleet Industry Advisory Group (FIAG), which, during round table discussions, will investigate the future composition and fuel of choice of Britain’s company car fleets as well as how to more effectively manage drivers and journeys.

    The debate at the event on Thursday, October 19, 2017 sponsored by driver risk management specialist Automotional is being held at the company’s Training Centre located within the Formula E Paddock at Donington Park Race Circuit close to the M1 in Derbyshire, will focus on:

    • How fleet managers can future proof their vehicle company choice lists with pressure from government to operate plug-in vehicles; diesel, the long-established fleet fuel of choice being ‘demonised’ in the national media amid air quality concerns; and the 2019 introduction of London’s Ultra-Low Emission Zone and the potential launch of Clean Air Zones across towns and cities nationwide.
    • Tactics that fleets can introduce to stamp out driver abuse of vehicles – thereby better manage service, maintenance and repair costs – and ensure work-related road safety compliance.
    • Improving journey management with government figures revealing traffic volume on the increase, new research suggesting ‘nightmare’ commutes could soon be the norm around the country with average driving speeds falling; and trials of lorry platoons set to start.

    Round table debates among seminar delegates discussing each topic will be preceded by short presentations from industry experts:

    • Geoffrey Bray, FIAG founding chairman and executive chairman of Fleet Service Great Britain, will focus on the future composition of company car choice lists.
    • John Sunderland Wright, training director, Performance on Demand, will highlight how employers can better manage drivers and improve their performance by boosting their well-being and alleviating driver fatigue and stress thus making them ‘part of the solution’ to improved vehicle management.
    • Phil Powell, sales director, Matrix Telematics, will discuss, with telematics and ‘connected’ cars now prevalent, how vehicle and driver-related data is critical to improving overall business performance and how employers can meet the data protection requirements of the General Data Protection Regulation (GDPR), which takes effect from May 25, 2018.

    Annual FIAG membership costs £100 per person, which includes attendance at the organisation’s workshops. Members are encouraged to introduce FIAG to fellow fleet decision-makers with guests able to attend workshops at a cost of £25 per person per event.

    Mr Bray said: “Whether a full-time professional fleet manager or a finance, HR or procurement expert with part-time fleet responsibility, the issues raised and topics to be discussed at the workshop are of vital importance to them and their employers.

    “The fleet management world is rapidly changing and those in charge of vehicles and drivers need to react, review all current policies and implement change where deemed necessary. To retain the status quo will not be an option in most fleets.

    “The speakers and round table debates will be thought provoking and will generate new ideas and opportunities that attending fleet decision-makers can learn from and adapt to meet the requirements of their own vehicle operations.”

    FIAG was launched more than three years ago by industry veteran Mr Bray and a team of highly experienced professional fleet managers who collectively have around 200 years’ experience in running vehicle operations.

    Utilising the wealth of knowledge and experience of its founding members – as well as other fleet decision-makers when they join FIAG – the organisation provides fleet advice, consultancy and support through the mentoring of newcomers to the role of fleet manager and less experienced employees with car, van and HGV responsibility.

    The half-day workshop starts at 9.30am and will be followed by a buffet lunch.

    Further information on the autumn workshop including registration is available at: http://www.fiag.co.uk/fiag-workshop-19th-october-2017-book-now/.

  • Whole-life costs: The hard sell

    We’re told that a whole-life cost model is the definitive way to work out and plan a fleet’s operating costs. They account for all expenditure based on known quantities and can even be tailored to include the past, present and likely future costs of a particular business.

    Read the full article here.

  • Highest Accolade for Cancer Charity Hope for Tomorrow

    Winner of Queen’s Award for Enterprise – Innovation

    Hope for Tomorrow Trustees Ted Langston, Pat Barnard, Phil Williams, Christine Mills, MBE (Founder), Lord MacLaurin (Chairman) and Dr Sean Elyan, Consultant Oncologist and Medical Director of Gloucestershire Hospitals NHS Foundation Trust

    Hope for Tomorrow Trustees Ted Langston, Pat Barnard, Phil Williams, Christine Mills, MBE (Founder), Lord MacLaurin (Chairman) and Dr Sean Elyan, Consultant Oncologist and Medical Director of Gloucestershire Hospitals NHS Foundation Trust

    Cancer charity Hope for Tomorrow, which launched the world’s first Mobile  Chemotherapy Unit (MCU) in 2007, has won a prestigious Queen’s Award for Enterprise, in the Innovation category.

    The Award, the UK’s highest accolade for business success, was made in recognition of Hope for Tomorrow’s achievements since its founder, Christine Mills, MBE, set up the charity with a single aim: to bring cancer care closer to patients. Today ten Units have been successfully launched and are in operation in partnership with NHS Trusts around the country. They bring vital cancer treatments to patients, reducing travel, waiting times and the stresses and strains of busy hospitals.

    The Queen’s Awards are made annually by HM The Queen and are only given for the highest levels of excellence demonstrated in each category.

    Christine Mills said: “Without our very special team, including staff, supporters, patrons, trustees, the nursing teams and our partners in the NHS, we wouldn’t be here today. Our simple and innovative business model has enabled the public sector to adopt our Mobile Chemotherapy Units, easing pressure on Oncology Units, staff, and most importantly, patients.

    “Hope for Tomorrow is delighted and honoured to have won the Queen’s Award and to be recognised for our work. We hope the Award will help us achieve our aim of having at least one Unit in every county, bringing cancer care closer to patients.”

    Dr Sean Elyan, Consultant Oncologist and Medical Director of Gloucestershire Hospitals NHS Foundation Trust, was instrumental in helping Hope for Tomorrow set up the first MCU in Cheltenham in 2007. On hearing of the Award, he said: “I’m delighted to hear that Hope for Tomorrow has been recognised with a Queen’s Award for Enterprise, of which it is thoroughly deserving. The charity has achieved a huge amount through its dedication, efficiency and focus on patient centred care, increasing both capacity and flexibility of service for the NHS Trusts it partners. I look forward to seeing more Hope for Tomorrow Units reaching more cancer patients around the country.”

  • COMPANY CAR TO REMAIN KING BUT EMPLOYERS MUST FOCUS ON VALUE AND NOT COST, TAX EXPERT TELLS FIAG WORKSHOP

    FIAG Winter Workshop . . Northampton, UK . . 03.02.2016 The FIAG Winter workshop at Northampton Saints rugby ground. © Paul Marriott Photography

    David Rawlings, director, BCF Wessex

    Company cars will remain one of the most sought after benefits by employees despite rising levels of benefit-in-kind taxation – but employers and drivers must increasingly focus on value rather than cost.

    In a keynote address to the Fleet Industry Advisory Group’s (FIAG) Winter Workshop, tax expert David Rawlings highlighted how employee demand for company cars had proved remarkably resilient despite increases in benefit-in-kind taxation over many years.

    The government has already announced annual rises in company car benefit-in-kind taxation to the end of the 2019/2020 financial year, but Mr Rawlings, director of business vehicle and taxation advisers BCF Wessex, said: “The percentage increases in tax look horrible, but in pound note terms company cars still deliver great value.”

    Addressing the Workshop, entitled ‘Will Tax Kill the Company Car – What’s in Store for 2016’, Mr Rawlings reflected on recent history to look to the future.

    He told delegates to the Workshop held at the home of Northampton Saints, the premiership rugby union side sponsored by Travis Perkins, whose group fleet director Graham Bellman is a FIAG founder: “When emissions-based company car benefit-in-kind tax was introduced in 2002 many pundits forecast the death of the company car.”

    Yet, while there had been a decline in company car popularity since then, latest HM Revenue and Customs’ data shows that the number of recipients has plateaued in recent years at 940,000 yielding £1.29 billion in benefit-in-kind tax and a further £530 million in employer Class 1A National Insurance in 2013/14.

    Mr Rawlings said that despite the switch to a carbon dioxide (CO2)-based company car benefit-in-kind tax regime and regular increases in tax thresholds, the value of company cars remain undiminished.

    Ford example, he cited that prior to the new regime the amount of tax due for a high mileage, higher rate taxpayer per £1,000 of list price on a 2002 Ford Mondeo was £60, which was a similar amount paid by an employee at the wheel of a low emission derivative in 2016.

    Mr Rawlings said: “Company car tax rates have increased, but we are where we were 14 years ago. I don’t buy the arguments that tax has killed the company car, although what we don’t know is where company car tax levels will end up.”

    The government is currently reviewing company car benefit-in-kind tax from 2020/21 and an announcement is expected by Chancellor of the Exchequer George Osborne in the Budget on March 16.

    Mr Rawlings predicted that over the coming years taxes would have to increase with revenue raised used to support the development of alternative fuel technology while the government also looked to tackle air quality issues.

    Nevertheless, he concluded: “Smart employers and company car drivers should focus on value rather than cost. The company car is, and will remain, one of the most sought after benefits over the next 15 or 16 years.”

    Workshop delegates discussed the future of the company car in a number of fundamental areas: creating policies, managing costs and potential alternatives to car journeys.

    Key points raised were then highlighted by round table ‘champions’ Marcus Bray, a FIAG founder and head of sales at Fleet Service Great Britain, Mr Bellman and Kevin Basnett, managing partner at Wiltshire-based Goughs Solicitors.

    During the discussions delegates agreed that employers continued to offer company cars because they remained a key employee recruitment and retention tool. However, it was emphasised that employees appreciated choice flexibility particularly if a perk driver.

    FIAG chairman Geoffrey Bray flanked by Graham Bellman, FIAG founder and group fleet director, Travis Perkins (left), and David Rawlings, director, BCF Wessex (right).

    FIAG chairman Geoffrey Bray flanked by Graham Bellman, FIAG founder and group fleet director, Travis Perkins (left), and David Rawlings, director, BCF Wessex (right).

    Mr Bray added: “Employees pay company car tax and have no other costs, notably in terms of service and maintenance. Company cars are hassle free. They remain popular because of their convenience and that aspect is undersold.”

    Below are highlighted a number of other the key points from the areas of discussion.

    Creating company car policies

    A competitive employee market meant benchmarking of company car policies was “absolutely critical” in recruiting and retaining staff, it was suggested.

    Mr Bray said: “Having gathered information employers must then decide whether they want to be above the market, mid-market or below the market.

    “Some employers view cars as a tool of the job and others as a perk. Either way, if struggling to recruit or retain staff it is important to understand where the car policy sits versus competitors.”

    Mr Basnett added: “Benchmarking can be difficult because of the wide choice of vehicles available. Some employers in shaping their company car policies are conscious of the brand image presented of their business.”

    However, it was acknowledged that it could be difficult to collect benchmarking information from other companies within the same sectors of business so ‘casual discussions’ with fleet decision-makers at networking events could be crucial.

    Many companies offered not only company cars but also salary sacrifice and cash allowance schemes and Mr Bellman said: “Employees want the choice and flexibility at a moment’s notice if their lifestyle changes.”

    Managing company car costs

    Ascertaining the true value of a company car is virtually impossible because there is no correlation in the cost of a vehicle to an employer and that of an employee.

    Mr Basnett said: “The motivation for an employer to provide company cars may be to enable staff to move from one location to another or to recruit and retain employees, while for employees there is a financial cost and an emotional element.”

    Although whole life cost figures are widely acknowledged as best practice in terms of being the starting point for compiling company car choice lists, it was suggested they were only part of the decision-making process.

    Mr Basnett added: “It is important to take note of employees’ views in deciding which vehicles to put on the fleet, particularly if a job-need car. Vehicles must be fit for purpose and drivers have practical experience of what they require to do their job.

    “When introducing a policy it is important to be aware of the impact it will have on drivers so consultation with staff is key. In too many companies there is a lack of joined up thinking across finance, HR, procurement and transport departments. The board of directors needs to lead because otherwise there can be conflicts.”

    It was also suggested that it was vital to analyse whole life cost figures on vehicle defleet and not just when deciding which company cars to introduce to a fleet.

    Mr Bellman said: “Whole life costs are an indicator of likely expense, but fleet managers should also reflect back on what the data is telling them. History can be an important indicator of the future and actual service, maintenance and repair costs, remarketing and end-of-lease costs are big influencers in calculating the true cost of a company car.”

    Delegates also suggested that it was important to regularly review company car choice lists with some fleet decision-makers undertaking quarterly checks to ensure policies reflected the very latest manufacturer model changes as well as legislation amendments.

    Company car alternatives

    The company car remains king, but fleet managers are important influencers in the adoption by companies of alternatives such as telephone and video conferencing, car clubs and car sharing, it was claimed.

    As fleet managers increasingly became mobility managers, Mr Bellman said: “Fleet managers have powerful information at their fingertips and it is about acting a catalyst for the business to help influence behaviour.”

    Corporate social responsibility is a major focus for many employers with emission reduction and occupational road risk management to the fore.

    However, it was suggested that in some organisations a two-tier policy may have emerged where tight controls were implemented in respect of company car policies – vehicle age limits, CO2 caps and other measures including driver profiling and assessment – but similar controls in respect of managing employees who drove their own cars on business, the so-called ‘grey fleet’, were missing.

    Mr Bellman said: “Businesses must identify their ‘grey fleet’ and then establish a policy that is proportionate to the risk.”

    Mr Basnett added: “Performance management is vital for organisations. If issues such as emissions and road safety are not managed that reflects in their performance.”

    However, despite the emergence of alternatives and the growing importance of communication, as witnessed by many employees being ‘wedded’ to their smartphones, it was agreed that the company car will remain.

    Mr Bellman said: “Communication is key for today’s young people as witnessed by smartphone technology, but face-to-face meetings are important. Company cars will survive.”

    Mr Basnett commented: “The popularity of the company car will remain and not shrink. Telephone and video conferencing do work at a level, but face to face is often better; and other options including public transport are not always viable. The car is still king.”

    However, Mr Bray said it was important for fleet decision-makers to keep an open mind as to the viability of car clubs, car share and other alternatives.

    He said: “The flexibility of such options should be investigated. As a nation we like our own space and that is provided by the company car plus we have an inherent fear of change. However, the number of car clubs and car share schemes is growing, but for their use to become widespread there must be buy-in by senior management in businesses to drive change.”

    Photograph captions:

     

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    EDITOR’S NOTES

    The Fleet Industry Advisory Group (FIAG) is a not-for-profit organisation created to develop and share best practice in the fleet industry.

    Through the considerable knowledge of its founding members, FIAG will provide fleet advice, consultancy, mentoring and support. FIAG will also assist with benchmarking and analysis of industry developments through the publication of white papers and the organisation of workshops.

    FIAG is also dedicated to supporting Hope for Tomorrow, a national charity which raises funds to support the introduction of mobile chemotherapy units nationwide.

    Further information on FIAG is available at www.fiag.co.uk and on Hope for Tomorrow at www.hopefortomorrow.org.uk

     

  • Whole-life costs should be analysed at the end of a vehicle’s lifetime on the fleet as well as at the start.

    So said delegates at the recent FIAG Winter Workshop entitled ‘Will Tax Kill the Company Car – What’s in Store for 2016’.

    Read the full article here.

  • Company cars will remain a sought after benefit by employees despite rising levels of taxation – but employers and drivers must increasingly focus on value rather than cost, according to a speaker at a recent FIAG workshop.

    Read the full article here.

  • Geoffrey Bray, chairman of the Fleet Industry Advisory Group, explains that company car selection is critical in the public sector focus on cost management.

    Read the whole article here.

  • Year in review: What the industry thinks

    History may tell us that 2015 was the year in which there was a realisation among fleet decision-makers and some businesses that total cost transparency was critical.

    Read the full article here.

  • Taken from an article in Fleet News, December 10th, 2015

    Value for money is key when choosing, managing, reviewing and changing a supplier

    By Sarah Tooze

    Companies must “think beyond price” when choosing their fleet supplier. Instead, they should appreciate value for money and long-term relationships.

    That was the advice from experienced fleet managers and industry suppliers at the Fleet Industry Advisory Group’s IF/AG) workshop on ‘the role of the supplier in supporting the fleet manager’, which was sponsored by Enterprise Rent-A-Car and held at the company’s training centre in Egham, Surrey.

    FIAG founder and chairman Geoffrey Bray warned dele­ gates that “you get what you pay for”.

    “There is no single magic formula to securing the right suppliers, but relationships are key, as is trust,” he said.

    The workshop was based on roundtable discussions, with delegates looking at the role of suppliers in three areas: choosing suppliers, managing suppliers and renewing or changing suppliers. Here, we cover the key points from each.

    CHOOSING THE SUPPLIER

    Fleet managers must work with a number of internal stakeholders in order to choose the right supplier. Peter Weston. Formerly in charge of the Home Retail Group fleet and founding member of FIAG, emphasised the importance of the purchasing department.

    “You need to work in partnership with your procurement team to make sure you get everything you want.” he said.

    The make up of the fleet will also determine which stakeholders play the biggest role. Context will influence decision­making, according to Bray.

    “If it is perk vehicles. you will need HR involved.” he said. “If it is a job-need fleet, it may be different.

    Once the right people are involved in the tender, be clear about what you want to achieve. Tenders that are too general are a waste of time for the both the fleet manager and the supplier. Know what you want to keep in-house and what you want to outsource and what the priorities are, which will generally be led by the broader business objectives.

    “Many businesses frequently do not know what they want and there is often a conflict between saving money and not wanting to upset employees with changes”,·said Weston.

    “The cheapest supplier is almost certainly the one an organisation does not want.”

    He added: “If businesses are not clear during the tender process then suppliers will also be unclear on what is required and may build in potential costs.

    “As a result, those suppliers may be discounted at the first hurdle of the decision-making process because they were too   expensive when, in reality, they could have provided a good service.” He suggested that “scoring systems are good” but companies “need to find the right weighting”.

    “If you’re not clear during the tender process, suppliers will also be unclear on what’s required and may add costs”

    Peter Weston, FIAG

    To some extent, the criteria will be influenced by the type of company, according to Ian Housley, health, safety, environment and quality director at The Clancy Group and FIAG founding member. “It depends how they use the fleet – whether they make money out of the fleet,” he said.

    For example, many major organisations have an in-house division which is responsible for the purchasing of all vehicle assets. It then hires them out at a commercial rate based on whole life costs across an organisations operations thus functioning as a profit centre in its own right”.·

    The importance of finding an ethical supplier with good business practices and a sound reputation was also high­ lighted at the event. For some, the person representing the company during the tender plays a key role. ·If you like the person, you will do business with them,”· Housley suggested. As one delegate pointed out, “people buy from people”.

    However, fleet managers need to bear in mind that their key account manager at a supplier could change during the course of the contract, so it is important to look at the culture of the business as a whole, not Just individuals.

    “Business cultures are critical when selecting suppliers and expecting it to be the start of a long-term business partnership,” said Housley.”Fleets and their suppliers must have a cultural fit and be able to have open and honest discussions. Communication between the two parties is critical.”

    Fleet managers should also look to the future during their discussions with shortlisted suppliers: find out what is happening in the market place and what new products they might be introducing.

    MANAGING THE SUPPLIER

    Service level agreements and key performance indicators are an important part of managing the relationship with the supplier.

    “Measurements should be established at the outset of the selection process and not half-way through,” Housley said. “But service level agreements and KPls need to be specific to the supplier-fleet relationship.”

    The amount of ‘noise’ from drivers is a good indication of how well the relationship is going. along with how quickly complaints are resolved. Delegates suggested that having a fleet manager – or at least someone with fleet knowledge and expertise – within the organisation is important to keep the supplier in check.

    Companies should make sure they understand any fees being charged by the supplier. However, doubts were raised about whether fleet managers ever get “true transparency” from their suppliers over cost.

    “Leasing companies don’t always want to show all the rebates and margins they make,” one delegate suggested.

    However, there was an understanding that suppliers “are in business to make a profit” and, as long as the supplier was providing what the fleet manager wanted at the price it needed to beat, then that was acceptable – though the issue of transparency remained a concern.

    It is good practice to re-evaluate every supplier regularly, according to Weston. “It helps to make sure you’ve got the right price and the right relationship,” he said.

    He also pointed out that “a tender you put together a few years ago might not match your requirements now”.

    When re-evaluating your suppliers, start with how they are performing against the KPls set and do a cost comparison – but don’t forget your drivers.

    Eric Bristow, business analyst – service division at Hobart, saw them as crucial. “It’s important to take drivers·opinions into account,” he said. “Listen to them and accept their comments if a company is not performing.

    “The suppliers we use survey drivers and publish the results monthly. That would form part of our analysis if we needed to change.”

    A decision to change will need to be justified to the board, so fleet managers need to be clear that the change was made for the right reason.

    One delegate warned that changing suppliers could mean you were “out of the frying pan and into the fire”. Fleet managers also have to bear in mind the cost to change and should agree an exit strategy early on.

    Sometimes the cost of changing can outweigh the saving. For example, if you are switching to a new van manufacturer you may have to redesign your racking.

    Delegates advised trying to rectify the situation with a supplier, rather than changing, and only change if issues cannot be rectified.

    Housley added: “When entering a new relationship. it is important to look long term – 10-15 years –and to allow time for that relationship to develop into a true partnership. Fleet­ supplier partnerships are all about learning from when something goes wrong and understanding that both parties must work together for the collective good.”