Reduce Fleet Costs: How Telematics Can Help You Save Money

reduce fleet costs

Fleet companies are in an endless struggle to improve efficiency and reduce fleet costs. But we’re in a period of rapid inflation. In fact, by one measure, inflation is at its highest level since January 1982. This of course means everything now costs more for fleets: fuel, maintenance, insurance, and new vehicles.

Before we can determine how best to reduce fleet costs, we must first understand all the factors that contribute to the cost of running a fleet.

According to Geotab, you can calculate fleet costs by adding your total cost of ownership (TCO) for your vehicles to your cost of operations for your fleet. To calculate TCO for any vehicle, Geotab recommends you add acquisition cost, interest and financing costs, and vehicle running costs, and then subtract your resale cost for the vehicle. Once you have that number, divide it by your total mileage or engine hours for the life of the vehicle.

Simple enough. Next, we must find our operational costs for the fleet. You’ll have some fixed costs, such as licensing, labor, and lease payments. You’ll also have variable costs, such as fuel costs, maintenance, repairs due to accidents, and tolls.

Though telematics may not help you reduce your acquisition costs or interest payments, you can use telematics to analyze your variable costs, identify the root causes of cost increases, and take proactive steps to reduce them.

Let’s drill down on a few aspects of your operational costs and explore how telematics can help you save money.

Reduce mileage costs

One of the largest cost areas for any fleet is mileage costs. Every mile your drivers stray from the route plan represents a drag on your bottom line. Fortunately, last mile metrics, delivered by your telematics system, can expose your route execution issues and highlight areas where you can reduce fleet costs by optimizing your delivery operations. A good telematics system will let you perform a plan vs. actual analysis to pinpoint your variances. These variances may result from:

  • Improper stop sequences. This is when drivers change up their routes on the fly because they think they can make their stops faster than what the plan dictates. In the process, they often add unnecessary miles.
  • Unplanned stops. Ever had a customer call for an extra unscheduled delivery because they’re low on stock? Every time you save the day for a customer, you also add miles. Then again, sometimes drivers make extra stops just because they want to. Telematics makes it easy to spot these variances.
  • Route time. A driver stuck in traffic on the shortest possible route may opt to take an alternate route that gets him there faster but eats up more miles. These routes, too, will add expenses to your bottom line.

With plan vs. actual analysis, you can quickly identify and determine the impact of mileage variances on actual delivery costs on a cost per mile basis. From there, you can make decisions that balance efficiency with good customer service.

Spend less on air filter replacement

Every fleet owner who wants to reduce fleet costs has probably been tempted to try to squeeze more life out of air filters. They wear out so quickly and make a surprising impact on the bottom line. But if you push filters beyond their recommended replacement interval, you may end up damaging your trucks’ fuel systems and adding larger maintenance expenses to the ledger.

The good news is that you’re probably replacing your fleet’s filters too often. Gridline partners with Donaldson Filtration Solutions to help fleets get the most out of their filters.

Donaldson’s Filter Minder products connect to air intake, fuel filtration, and engine lube oil systems to monitor their performance and lifespan. These products then communicate filter status for all your vehicles visually, electronically, and remotely.

Imagine what this information could do for your fleet. Like many fleet professionals, you may be simply following the recommended replacement interval for all your filters. But these intervals may or may not be appropriate for your fleet. Are your fleets mainly logging miles on interstate highways and surface streets? Then you may be wasting a lot of money by changing filters every 3,000 miles. On the other hand, what if your vehicles are doing a lot of driving in dusty environments? Changing every 3,000 miles may not be often enough—and changing more often could actually save you money in terms of reduced maintenance costs.

Of course, you can’t make these decisions based on one-size-fits-all recommendations or gut feelings. That’s why Donaldson provides an indicator that gives you assurance you’re changing your oil and air filters on exactly the interval that’s most appropriate for each individual truck. This information helps you find that ideal “middle lane” between changing your filters too often and damaging your trucks’ fuel systems.

Reduce fleet insurance costs

You’ve no doubt read the headlines about “nuclear verdicts” against commercial fleets—judgments of more than $1 million against transportation companies deemed to be at fault in major accidents. Massive rulings against a few companies have resulted in higher fleet insurance premiums for all of us.

You might think there’s nothing you can do but pay—but believe it or not, telematics can help you reduce fleet insurance costs, too. According to a recent American Transportation Research Institute study, running a safe fleet can save you money:

“While all fleets now pay more, premiums definitively scale based on safety records. One respondent specified that ‘low risk’ motor carriers are experiencing eight to ten percent increases in insurance costs, while new ventures and average-to-marginal carriers are experiencing a 35 percent to 40 percent annual increase—a trend that has occurred for three consecutive years.”

If you really want to reduce fleet costs, be sure to install road-facing and driver-facing cameras that can record exactly what happened on the road and exactly what your driver was doing at the time of an incident. When you integrate your dash cams with GPS data, it will dramatically increase their effectiveness. While the video evidence can show that your driver didn’t cause the crash and wasn’t texting or eating, the telematics can help you prove that he was also traveling at a reasonable speed, following the route, and reacting within acceptable norms. This is why video telematics alone will often be enough to exonerate your drivers of wrongdoing.

Choosing a telematics platform to help reduce fleet costs

Now that you know how telematics can help you control your expenses, what kind of telematics platform should you look for? Here are some thoughts:

  • Choose an open platform that you can easily integrate with a wide variety of hardware and software across your organization. The last thing you want is to get locked into technology that doesn’t give you a complete picture of your fleet’s health and profitability.
  • Look for a secure platform. There are too many cybercriminals out there for you to take risks. Find a vendor that has achieved SOC 2 Type 2 certification.
  • Find a vendor that’s a true partner. Work only with experts in the transportation and telematics industry. They should be as invested in your success as you are.

Gridline would appreciate having the chance to show you how we can help you reduce fleet costs. Please schedule your free consultation.