Fleet operation and management costs in Singapore can shoot through the roof if you don't get them under control.
Cost management is an utmost concern for fleet companies in Singapore. Most owners of these businesses recognise that profitability is all about generating sales and cutting down expenses. Unfortunately, the knowledge precedes the practice since many companies continue to bleed money because of unnecessary spending.
So here we’ve written EIGHT proven steps that you can reduce your fleet’s expenses in Singapore:
1. Minimise Cost of Repair and Maintenance
Hundreds of dollars go to waste every time a vehicle breaks down, and this is especially painful if a vehicle breaks down at the roadside in Singapore. According to this report, fleet trucks should only break down after 16,093 km, but it has been happening a lot sooner.
The cost for repairs and maintenance of vehicles and their parts depends largely on the age of the fleet. Price can range from S$500-S$2,000 per truck per month. There are also additional costs for the maintenance of trailers, which vary from S$300-S$500 per trailer per month.
Operating a healthy fleet is cheaper in Singapore. Preventive maintenance remains the most effective way of reducing unexpected roadside breakdowns, and the emergence of fleet management technologies has made it easier than ever. For example, drivers can promptly report any possible issues with their vehicles to the maintenance team or the fleet manager through Shell Telematics or IFTA Plus.
Need more tips? We've written about how fleet managers can reduce repairs and maintenance costs here.
2. Optimise Fuel Consumption
Fuel remains one of the biggest takers from the operational budget of a fleet company. Managing fuel consumption has always been a challenge for many companies here in Singapore. According to a recent survey, 53% of fleet companies spend more on fuel than budgeted allotments for their annual budget due to factors like road work, inefficient route planning, traffic congestion, fuel theft, accounting errors, and poor driver behaviour.
Data is also an essential tool for your fleet to reduce fuel costs, especially those associated with poor driver behaviour. For example, a truck may spend 1,800 hours of idle time annually--which translates to S$4,200 of wasted money, considering that the United States diesel price was $2.98 per gallon in 2019.
Without any idea of how much your drivers are idling or which ones are idling the most, fleet managers won't be equipped with the necessary information to take bold steps and cut fuel costs. Tracking tools installed in fleet vehicles allow fleet managers to account for idle hours and other factors contributing to fuel overconsumption, such as load planning inefficiencies and route planning.
3. Get the Best Insurance Premium Rates
The insurance premiums for your company are determined by the external factors beyond your control and the internal factors you can manage. One thing that impacts the high insurance premium that you can control is your fleet's safety record.
In Singapore, all your assets must be insured to be deployed on the roads. The costs payable for prime movers and trailers are determined by the assets' age and increase over the age of the assets. Example: Prime movers can cost S$3,000-S$5,000 per year and between S$130-S$350 per trailer per year.
The premium rates for commercial vehicles are mostly higher than private vehicles because several factors influence it, such as type of coverage required, nature of business, commercial vehicle type, and NCD entitlement and claim history in the last three years.
When going through your fleet's accident records, insurance providers differentiate between avoidable and unavoidable incidents. Therefore, the management should continuously monitor and assess safety-related driving behaviours to ensure that drivers make safety their priority on the road. Dash cams that upload videos to a web platform can help fleet safety officers observe driver behaviour on the road and continuously coach them. These steps all contribute to maintaining a good safety track record for your fleet and keep insurance premiums down.
4. Avoid Road Traffic Violations and Fines
Committing Land Transport Authority's (LTA) and Road Traffic Act violations can damage your company's reputation. You can be slapped with hefty fines that can impact your company's budget negatively.
According to a local article, the penalties resulting from three common traffic violations range from $100 to $2,000 with demerit points for regular vehicles; heavy vehicles may incur higher fines. In this article, a driver was caught using his mobile phone while on the road, which amounted to a possible fine of S$500 and 12 demerit points.
Violations under the Road Traffic Act Part 1 Section 5, Prohibition of vehicles not complying with rules as to construction, etc.,
(5) A person who alters (whether in the course of repair or otherwise) a vehicle or trailer so as to render its condition such that the use of the vehicle or trailer in that condition would be unlawful by virtue of this section, shall be guilty of an offence.
(5A) It is presumed, until the contrary is proved, that a person alters (whether in the course of repair or otherwise) a vehicle or trailer as to render its condition such that the use of the vehicle or trailer in that condition would be unlawful by virtue of this section (called in this section non‑compliant) if it is proved —
that the accused had possession of the vehicle or trailer;
that the vehicle or trailer was not non‑compliant when the accused acquired possession of it; and
that at that time or soon after the vehicle or trailer (as the case may be) ceased to be in the accused's possession, the vehicle or trailer is non‑compliant.
The offender will face a fine not exceeding $5,000 or imprisonment of up to six months or both and a repeated offence with a fine of $10,000 or/and imprisonment of up to six months.
The costs of fines due to violations can add up in no time if you ignore them. Before you know it, it can bring severe consequences to your company's budget. Hence, Compliance with LTA rules and regulations gives you some peace of mind and reduces unnecessary fleet expenses.
5. Managing Parts Inventory
Cost savings are achievable if a fleet company adopts effective parts inventory management practices in its maintenance program. When they have the right parts and have them delivered where needed, technicians can service and repair the fleet vehicles more efficiently and lower labour costs in the process. Conversely, if the required parts are not available, then the prices of those parts will rise.
Efficiently managing parts inventory is cost-saving, and it's what every fleet company should do. The right inventory will ensure that the fleet's vehicles spend less time at the workshop. One way to do that is by ensuring that the regularly used parts are available will reduce the scheduled maintenance costs by cutting down the unnecessary vehicle downtime. However, if you stock rarely used or obsolete parts, they will gather dust on the shelves and raise your inventory costs significantly. Therefore, it's usually advisable to stock up on regularly used parts.
6. Consider Fleet Leasing and Management
Another hack of lowering fleet expenses is partnering with a trustworthy independent fleet management company. For some companies, leasing vehicles is more cost-effective than buying their cars from the dealer.
There are several financial advantages of leasing vehicles. One advantage is that you pay lower monthly payments as well as fixed economic rates. Rather than investing your money in a new car, you can allocate this amount as working capital to support other aspects of your fleet business.
Leasing a vehicle may also help your company grow faster and scale easier when it does not have to wait to have enough money to buy a vehicle.
7. Reduce Lifecycle Costs
Senior-level executives may suggest that frequent vehicle replacement is unnecessary due to the costs and impact on the overall fleet budget. They might even encourage fleet managers to retain the current vehicles until they attain a certain older asset age.
But according to Mercury's studies, many fleet organisations retain and operate their vehicles even after they reach their optimum economic life. Unfortunately, this increases fuel costs and high maintenance costs as the cars become less fuel-efficient and reduce utility. Utilising an ageing fleet is only possible if your company lacks capital funding or if the responsible team fails to communicate the costs and benefits of fleet replacements promptly.
To reduce vehicle lifecycle costs, you need to optimise replacement cycles and conform to the correct replacement cycles. Most top-class fleet organisations have adopted replacement planning tools with an economic sense to determine the proper lifecycle to replace a vehicle.
After considering all relevant factors, such as the initial new vehicle cost, fuel MPG, reasonable projected resale value, personal use payments, and planned maintenance and repair, the fleet manager can develop short and long-term replacement plans.
8. Improve Communication between Stakeholders
Open communication channels are crucial to every successful business. When it comes to fleet management and maintenance operations, the interaction should include all the essential departments, shop supervisors, technicians, drivers, and outside service providers.
Regular communication between all the involved parties in an asset's service creates a cost-effective fleet maintenance program. In addition, timely insights into the vehicles provide an opportunity to spend less by gaining the ability to observe asset use and address maintenance issues on time.
