Goodbye total cost of ownership. Hello total cost of mobility. The arrival of big data is giving companies an unprecendented opportunity to investigate their cost bases, and analyse not simply the price of a journey but also its value in terms of return on investment.
The result is an emerging scenario that challenges the business case for maintaining a company car fleet, with its associated high fixed costs. The alternative is a pay-on-use policy for business travel that selects either the cheapest or most time efficient or most productive mode of transport for every journey.
“These days there’s a much more holistic view when you look at the overall efficiency of the way a company and its teams work, and how they put their people in front of customers,” said Paul Tilstone, managing partner of Festive Road, the travel management company.
The true value of travel
“There’s a greater use of data to try and analyse what the return on investment in travel brings to an organisation and to determine whether travel directly contributes to top line revenue and conversely to understand what the impacts of cutting travel is on the top line.”
This type of analysis enables companies to identify which customers merit a visit, and which are more cost effectively served via telesales or online channels. More importantly, it createsan environment where the costs of a company car are directly compared with those of alternative modes of travel, and aligns the fleet department more closely with the business travel department.
“If you take a holistic view of your business, your culture and the reasons why people travel, and look at the modernisation of ground transportation and all the different options, from hire car to Uber to taxi to long-term fleet and grey fleet, there are definitely options to combine that perspective with business travel and create a policy and processes and procurement procedures that benefit the organisation,” said Mr Tilstone.
But, he warned, you can’t just merge fleet and travel functions together and automatically expect lots of benefits; success requires a long term perspective, even if the trend is clear.
Fleet and travel are merging
Vinzenz Pflanz, senior vice president corporate sales, Sixt, said corporate fleet and travel departments are definitely growing closer together.
“While fleet has been mainly with a high involvement of HR in the past and travel was more related to procurement we saw that the allocation of the fleet department moved a lot to procurement,” he said. “And with that move, starting years ago, travel and fleet came under one roof. The logical next step is that you have a kind of mobility manager, where you have fleet and travel under one person. We see a big trend towards merging both commodities into one.”
As big data reveals the bottom line costs per mile of both fleet and business travel, there’s no escaping the threat it poses to traditional company cars. In their place, employees could be offered a mobility budget which they use to pay for their business trips, undermining the default ‘car first’ decision that prevails in many companies.
Total cost of mobility
High quality and meaningful information is vital for John Pryor, fleet and travel manager at Arcadia Group, and chairman of ACFO, the association of UK fleet managers, as he focuses on the total cost of a journey, not simply the headline cost of a rail ticket, flight or a car’s pence per mile figure.
“We have policies and processes in place, but true mobility management comes down to collecting data relating to fleet and ground transportation, air, rail and hotel bookings and expenses payments – parking, tolls, subsistence plus individual items. All of that added together gives the business the total cost of a journey,” he said at an ACFO webinar last autumn.
Mr Pryor believes the transition from fleet to travel will be demand-led by employees, and the role of the company is to make this transition seamless.
“Ultimately, as a business, we do not mind how people get to their destination as long as we know the total cost of a journey and we believe the journey is undertaken safely and in the most cost-effective way,” he said.
Younger employees want new solutions
Speaking at the same event, David Oliver, procurement manager, Red Bull UK, said the propensity of the company’s younger city-based employees to question ‘the need and cost of company cars’ and their enthusiasm for companies like Uber and Airbnb, was helping to shape the services that Red Bull will offer to its staff.
The company already uses data to undertake “end-to-end trip analysis” on key business routes with the support of its travel company, “to see what we are doing; how much it is costing us: and then it is up to us to see if it fits our policies.”
Red Bull is a big advocate of public transport, which when used correctly, “affords a safe and cost-effective service,” said Oliver.
The key is to “empower employees to make the right decision about how they travel from A to B. Most organisations would be mad to keep fleet and travel expenditure apart.”