News - Company
Outsourcing - what's the problem?
Greg Taylor, commercial director of ING Car Lease, argues that with the increased burden of legislation, the time could be right for smaller fleets to consider the option to outsource their fleet management.
“For some years, one of the frustrations facing the leasing industry has been the apparent stubbornness of smaller companies to embrace outsourcing when it comes to the management of car and van fleets. Preferring to buy their vehicles outright, many owner-managed businesses have stuck with the simple approach of putting their metal on the balance sheet, writing it off over the life of the asset.
“While there are the tried and tested arguments in favour of outsourcing – the proven cashflow benefit and efficiencies of using fleet experts to source, manage and dispose of company vehicles, we could now be at a watershed moment. Despite all of the genuine intentions to change to an outsourced option, it seems that all too often businesses are victims of same fate as many of us that wish we had a better service from our bank; the problem of inertia. In reality, most businesses know that they could improve the efficiency of their fleets, but end up carrying on with the status quo, which keeps the wheels of industry moving, albeit at significant cost.
“However, recent legislation concerning corporate manslaughter, an ever - changing tax regime and the delicate calculation of maximising the residual value of fleet vehicles, may turn the tables and force more businesses to come looking for help.
“We have certainly noticed that fleets are increasingly being managed by not just one person within a business, but by a team that is usually made up of financial, HR and general management. We have found that working in this way with businesses maximises efficiencies and minimises the risks in terms of health and safety and fiscal exposure.
“Like it or not, businesses – both large and small – are faced with a myriad of issues that are no longer inconsequential enough to sweep under the boardroom carpet. If the new laws on corporate manslaughter, requiring auditable systems to be in place to prove responsible fleet management, are not adhered to, they could bring very significant fines to businesses that are based on a percentage of turnover, not just an arbitrary slap on the corporate wrist.
"A recent survey from ING found that while only 20 per cent of fleet took steps to manage and monitor their ‘grey fleet’ (those opting for cash to run their own cars for work), only 18 per cent of businesses questioned admitted to having a risk management policy in place. In light of the new corporate manslaughter act introduced earlier this year, these findings are cause for concern.
“An estimated 1000 people per year die in commerce-related road accidents, including both employed drivers and third parties. In the past, the human tragedy has often been compounded by unattributed blame while, the criminal negligence of senior management has been palpably at fault. The new act therefore aims to give the common law added sinew, and the investigating agencies, the Police and HSE, a clearer route map to justice, extensive powers and unlimited fines for those convicted.
“Certainly, the added burden on businesses of managing the risk of not only their ‘in-house’ but additional ‘grey’ fleet may be the tipping point that finally prompts the medium sized businesses to seriously look at the outsourcing option.
With the growing number of model variants and the increasing use of both OEM and retro-fitted technologies to cars such as sat-nav, it’s easy to see how the complex art of model specification, maintenance and disposal is no longer a pastime for the faint – hearted.
Add to this the growing concerns regarding the cost of fuel and the complex area of company car taxation and its increasingly close connection to choice of fuel and it is easy to see why more companies are baulking at the prospect of adding ‘fleet management’ to their to do list.
“Many smaller businesses don’t consider using a fleet management specialist, believing that the leasing sector is only interested in major blue chip brands. Not so. Many leasing specialists have established dedicated teams to focus on the needs of smaller businesses, ensuring that they don’t suffer from the ‘small fish in a big pond’ syndrome.
“We have over 500 smaller fleets on our books, which accounts for about 10 per cent of our total fleet of nearly 50,000, so clearly, there is a sizeable – and growing – group of smaller businesses that see a benefit in outsourcing its fleet.
“In the end, the biggest issues currently facing smaller businesses are risk, in terms of financial exposure and the safety of its people, and cash management. Increasingly, companies are asking themselves, why they are spending so much money on depreciating vehicles, using up so much of their people’s time on organising costly maintenance programmes and investing so much time implementing health and safety strategies that they don’t really understand”.