Finance Directors Eye Fleet Telematics for Fuel Cost Savings

As reported by Financial Director:  When capital expenditure demands increased productivity from corporations by implementing new technology or processes such as improving existing machinery or updating back office functionality; investing in a vehicle tracking system probably doesn't sit at the top of most finance directors’ lists of priorities.

But telematics systems have evolved into much more than simple vehicle recovery tools – it is now a service that provides detailed information on fuel consumption, driver performance, travel times and routes, all delivered in real time.

With fuel prices continuing to dominate the news – fuel has risen by, on average, more than 50% over the past five years – helping drivers to reduce fuel consumption should be at the top of the fleet agenda of any business. Indeed, a survey of about 1,000 business drivers across the UK by ALD Automotive found that 70% of fleet drivers believed they could cut their fuel consumption if they were financially incentivised to do so.

Based on a typical fleet of 50 vehicles averaging 25,000 miles a year on average fuel consumption of 40mpg, the survey suggests cost savings of £10,000 ($15.5K USD) could easily be achieved by incentivising drivers to reduce their fuel spending by 5%.

“By using data collected from systems, businesses can set up monthly performance tables for their drivers, promoting more efficient driving and making it easier to implement any fuel saving incentive schemes,” says Mel Dawson, managing director at ALD.

It is eye-opening to see how detailed this information can be. According to Steve Evans, chief executive at In-Car Cleverness, part of the Accident Exchange Group, telematics systems now use algorithms that can tell you what makes a driver good or bad.

“You can see their speed relative to time of day, relative to location,” Evans says. Not only does this allow the business to pinpoint inefficient drivers that need training, it also provides data on the performance of the car versus the routes it has taken, stopping unnecessary journeys.

“You might find the car is wholly inappropriate for the type of journey the driver is choosing,” Evans adds.

Cut fuel costs
For instance, one security company using a remote management telematics system was able to cut its fuel spending by 37% by being able to monitor vehicle movement, identify unnecessary journeys and erratic driving behavior, and incentivise drivers with monthly and annual awards.

Morelli Group, the largest automotive refinish distributor in the UK, uses the same system across all of its commercial vehicles. “The system has helped us to reduce fuel consumption and, with fuel prices still high, any measure we can introduce to drive more economically is good for our business,” says Rob Cohen, finance director at Morelli.

In addition, telematics can help highlight to drivers the need to monitor their driving style, resulting in better driver safety and consequently having a positive impact on their accident levels.

Company vehicle incidents take a lot of shine off the bottom line. Average bodywork repair bills, according to benchmark data from the body shop industry, are now nearly £1,300 ($2,000 USD) per car.

Writing for Financial Director last year, Albert Vissers, chief financial officer of fleet management and funding company Alphabet, said hidden incident costs typically come in at twice the cost of physical repairs.

“They include disruption to business and potential lost sales while vehicles are off the road. Then there are uninsured losses such as drivers’ out-of-pocket expenses, vehicle hire and insurance excesses,” he wrote.

According to Evans at In-Car Cleverness, this can help reduce insurance premiums by “demonstrating you have a measurable strategy to reduce claims”.

Though the key interest for finance directors is cost reduction, telematics can actually improve customer service levels. “If a driver is on route, we can input the customer's address and give the customer an estimated time of arrival,” says Evans.

The experience at Morelli has been the same, with Cohen claiming the business has been able to reassure its customers that their needs were being met in the fastest and most efficient way.

“[The system] helped save us time and provide a better level of customer service through accurately locating technicians and assigning jobs that are closest to them, as well as advising drivers of the most direct route to a particular job,” Cohen says.