The Step by Step Guide to Successful Fleet Procurement 04/05/2020
Originally published on May 04, 2020
When it comes to successful fleet procurement, there are three areas where strategy and methodical planning must be implemented in order to manage the department effectively. In order to achieve this, procurement solutions need to be implemented within:
- Initial procurement planning
- Department efficiency
- Management of relationships internally and externally
Each of these key areas are instrumental when it comes to developing a system within a fleet procurement team. Whether you have a large or small fleet within your company, the stages in this guide remain the same. It’s also important to remember that these areas can easily be scaled on a large corporate level, or work within a team of two.
And, just like anything else worth having, successful fleet procurement and fleet management takes time. By following this step to step guide, you can hit the ground running to make fleet management operations be as cost-effective as possible.
Effective Fleet Procurement Planning
The first stage of any procurement process is planning, and this is the first place you need to implement an effective strategy. Planning is important so you can organise and guide your team for the coming year, or time you wish to plan for. The planning process is essential for deciding what is to be purchased, at what time and where from.
Developing a procurement plan can sometimes be a long process, depending on how large your fleet procurement department and the number of different products you require. Procurement plans are also subject to change, depending on finance adjustments and if any changes should occur within the business during the time period planned for. Nevertheless, if an effective plan is created at the start it is the best way to lead the direction of the team, even if a few extra products or measures are added or taken away during that period.
So, what needs to be considered during the procurement planning process?
Without a clear outline of the budget that is needed for fleet management operations to run successfully, including every stage within the procurement process, your fleet procurement plan can't be successful. Locking down your budget across the whole department is arguably the most important part of the planning process, as it dictates every other step along the way.
An accurate representation of time across your plan is an important consideration to ensure items are secured at the current time. For example, if your fleet is involved in the distribution of fire logs and wood, your busiest period is likely to be winter which is when you may take on more fleet drivers. Therefore that is the time that you will need to order more fuel cards to accommodate the extra members of staff. By ordering them at the correct time, it ensures all fuel is still able to be purchased at a lower rate.
No procurement plan would be complete without identifying the products that you need to buy. Sourcing and determining a supplier for these products is a completely different process in itself and depending on when you need these products, could be something that is an ongoing search. You will be able to make a decision on this based on your own fleet, and it's specific requirements. However, the fact you have secured a budget and highlighted when demand is for particular products, gives you a clear indication of the supplier you need for each product. Having established budget and time alongside this, you will be able to know whether you can have multiple requirements fulfilled under one contract, or whether to split them across different suppliers.
Sometimes new projects require extra resource, and by planning your budget, time and what products are needed, you can decide whether you can cope with the requirements of the plan based on the resources you already have. Or, whether extra help is needed and when, if you only need help during peak periods.
Strategic Sourcing for Procurement and Fleet Management
Strategic sourcing is able to happen as a result of the planning process and can be extremely effective when procuring items within your desired budget. The strategic sourcing process is usually a full 7 step process which is seen as an essential layer of effective planning, particularly for a regularly changing price market such as fuel.
What does strategic sourcing involve? Overall, it's the way the information gathered on your own business, and the proposed supplier is utilised to see if your company requirements and the suppliers are in sync. When this is done across multiple suppliers, you are then able to see what the best value is across the marketplace, aligning your purchasing strategy and budget with the business' short and long term goals across the board.
Even if you are happy with your current suppliers, or previous suppliers used by your predecessor, sourcing needs to be reviewed to ensure that you are not missing other opportunities you may not be aware of. If a new strategy is to be implemented as a result of planning and strategic sourcing undertaken, change management should be considered so that everyone is up to speed and understands these changes and their benefits.
Improving Department Efficiency
In order to ensure efficient fleet management operations, the procurement department needs to be running and strategising as efficiently as possible. With any business or fleet, the first thing to be reviewed when it comes to efficiency is cost and expenses.
A cost reduction process can be beneficial even if you feel your department is running efficiently, increasing profitability and remaining competitive is never a bad thing after all. There's a simple formula to see whether your department is negotiating and securing the best deals. In order to calculate your procurement saving overall:
1. Calculate the average price of all the quotes you received for your items.
2. Minus the negotiated contract price.
3. Then, multiple this by the real number of items bought in a specific time-frame.
This will give you a good idea of the procurement saving you have achieved and can be used to measure against future purchases or new suppliers.
Supplying and Buying Reduction
Depending on how your fleet and business model works, your department may be responsible for buying and supplying. If this is the case, efficiency and cost reduction needs to be achieved in both areas. When supplying, the company mustn't generate a host of unnecessary extra costs that cut into the profits. For example, if you are spending an excessive amount on fuel when going to meet with buyers or on the delivery of the goods, you need to look at reducing those travel costs by reducing travel or by purchasing company fuel cards.
Lead Time Reduction
Lead time reduction is an important factor which should be taken into consideration when reviewing and increasing department efficiency. Although physical pricing is important, the lead time is an important factor when reviewing all aspects of the department.
Lead time is in reference to the time it takes to process and prepare your ordered products, including the time it takes to be packaged, transported and delivered to you. This term is particularly significant in supplying, so ensuring your fleet is packed and on the road to delivery in a reasonable time is important to keep buyers or clients you are transferring goods for, happy.
Even if you're not the supplier, it's an important factor to take into consideration when picking your own supplier. Even if you are making a physical saving, if their lead time is great or your products are not delivered to you on time, it could be at a much greater cost to the company and to the department's projected procurement planning timeline.
Managing Working Relationships
Once you are on top of your procurement solutions and your planning and strategy for improving efficiency are in place, it's important to work on managing relationships both with customers and suppliers. Also, developing relationships in your department and with colleagues in other departments of the business can prove very beneficial.
Relationships Within Your Department
In order to have successful fleet procurement, the department needs to work harmoniously, which involves those at the top taking an interest in the members of the procurement team. It's important for members of the team to feel valued and happy at work. As a manager or senior member of staff, taking an interest and engaging in a friendly conversation that isn't always work related can greatly help boost your working relationship. When team members are great at their jobs, and you enjoy working with them, having them stay in the department and progress within it can be invaluable for long term efficiency within the procurement team.
As well as taking an interest, it's important to manage the team if you are head of the department or senior management. These roles normally involve appraisals and offering constructive feedback from time to time; these can be difficult and should also be handled with sensitivity and positivity wherever you can. You want to be respected within the department and not feared, to ensure employees want to work with you and be a part of your team alongside yourself.
There are a few ways to create and build on this positive team mentality:
- Organising team building days
- Introducing monetary incentives
- Rewarding performance-based bonuses
- Ask the team for their input on any additions they would like to the office
Whichever you decide, be sure it's suited to your team and something everyone feels comfortable and happy with to be effective. Also, ensure you are able to cover the cost within the department budget, so you don't get caught short and have to answer for it later.
Managing Colleague Relationships
It's also a good idea to befriend colleagues in other departments, such as HR and finance departments, as well as other operations directors and fleet managers. These colleagues can help give your department helpful insights into other areas of the business that could benefit your team. For example, fleet procurement and fleet management go hand in hand so learning the operational requirements, and how the day to day running of the fleet works could prove essential when it comes to calculating lead times, and where you can reduce costs for the business.
Furthermore, these relationships can sometimes prove very handy when it comes to negotiating bonus schemes or pay rises in your team. Having a colleague you have built a good relationship with, in the department signing off on such requests, may just help you get things processed and in motion much quicker.
Getting to Know Suppliers and Buyers
The last working relationship you should take an interest in is the one you have with your suppliers and buyers. Ensuring you have a good line of communication is important in order to achieve successful running of the department; these relationships take time to build and require a level of balance so that a good result is achieved for all parties involved.
Trust is key when it comes to growing and nurturing these relationships, which will involve a lot of communication over telephone, email and in-person. Hence, they feel like you are really listening and understanding what it is they need. To build this level of trust and mutually beneficial relationship, questions about things outside of work need to be asked so you can become more friendly with them. This may feel time-consuming and without immediate benefits at times, however, if you are able to build a trusting and friendly working relationship with suppliers and buyers, the long term effects can be extremely advantageous for you, your department and the business overall.
Beginning with a strategic and well-developed plan can get you hitting the ground running towards successful fleet procurement, and is an effective tool for keeping everyone in check across the whole department.
Improving department efficiency and managing relationships with your suppliers, buyers, team, and other colleagues is something that takes time. Depending on the current situation within your department, there could be some immediate changes you can propose to improve efficiency, and you can start building positive or improve on working relationships. However, both these processes will take time, and you need to be patient as successful fleet procurement is a long-term goal that should be strived for over time. If the key areas we have highlighted are developed and nurtured correctly, we know your fleet procurement department will grow to be a great success.