{"id":6488,"date":"2020-07-09T22:56:36","date_gmt":"2020-07-09T20:56:36","guid":{"rendered":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/?p=6488"},"modified":"2020-07-09T22:56:36","modified_gmt":"2020-07-09T20:56:36","slug":"telematics-9","status":"publish","type":"post","link":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/2020\/07\/09\/telematics-9\/","title":{"rendered":"Building the business case for telematics"},"content":{"rendered":"
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Many fleets are interested in implementing telematics, but can face opposition in the boardroom. Andrew Ryan looks at how fleet managers can win the argument<\/em><\/span><\/p>\n

Used correctly, telematics technology can have a transformational effect on many fleets. The potential impact of its data is far-reaching: businesses which use it often report significant savings in areas such as fuel and insurance, while others talk about the positive reduction in risk and increased productivity.<\/span><\/p>\n

But some company directors remain reluctant to introduce the technology, sometimes through a fear of drivers rebelling against \u2018big brother spy in the cabs\u2019, sometimes over concerns about how unions will react, and sometimes through a suspicion that finding the money will fail to deliver a sufficient return on investment (ROI).<\/span><\/p>\n

While benefits such as fuel savings may be an easy sell as it can be simple to demonstrate how it will impact the company\u2019s bottom line, others, such as the potential improvement in duty of care to drivers, are harder to put a figure to.<\/span><\/p>\n

So how can a fleet manager best make a compelling case to win the necessary investment? The starting point should be to understand fully why they want the technology.<\/span><\/p>\n

\u201cFor most fleets, telematics will typically deliver 15 to 20 different areas of benefit, but it will be three or four that deliver around 90% of the value,\u201d says Steve Thomas, sales director at Ctrack.<\/span><\/p>\n

\u201cThe challenge for fleet managers is to understand the biggest opportunities that should be focused on immediately and possess the flexibility to adapt priorities along the way.<\/span><\/p>\n

\u201cFor example, a fleet we have been working with initially wanted to target a reduction in vehicle idling, but analysis of the early data showed that any savings were nominal.<\/span><\/p>\n

\u201cHowever, it instead found that drivers were making excessive mileage claims by an average of 28%, which represented a much more significant cost to the business.\u201d<\/span><\/p>\n

The RAC Telematics Report 2016 found that businesses which use telematics cite benefits such as lower fuel costs (55%), fewer collisions (43%) and a reduction in maintenance costs among the top reasons for introducing the technology to their fleets.<\/span><\/p>\n

\u201cFuel is an obvious area to focus on, but it will vary by business,\u201d says Stewart Lightbody, head of fleet services at Anglian Water which has saved \u00a3650,000 in fuel after installing telematics in its fleet of 1,640 vans.<\/span><\/p>\n

The organisation\u2019s programme was carried out in three phases: the first saw the technology fitted to 750 vans in 2014, the second to 500 in 2015, with the remaining vehicles last year as the savings justified the investment.<\/span><\/p>\n

\u201cOur original business case was based around making a 10% saving on fuel; we also knew it was going to have an effect on health and safety, but that was difficult to quantify,\u201d Lightbody says.<\/span><\/p>\n

\u201cFor me, it was kind of disappointing that fuel was the sole objective because I know telematics can do so much more, but the fuel savings grabbed the attention and since then we\u2019ve been able to demonstrate significantly more benefits than that.\u201d<\/span><\/p>\n

As well as a typical 10-13% increase in fuel economy across the fleet, telematics has also enabled Anglian Water to reduce its insurance premium by \u00a360,000 a year and tyre costs by \u00a310,000 a month.<\/span><\/p>\n

\u201cIf there\u2019s enough opportunity on fuel alone to cover the cost of telematics, keep it simple and go for the low hanging fruit that is fuel, but know that you\u2019ll also have a positive impact on other areas,\u201d adds Lightbody.<\/span><\/p>\n

\u201cIf you think making the case on fuel alone sounds borderline, add that if you drive up fuel efficiency then you will absolutely reduce wear and tear costs and accident costs: think about all of the opportunities.\u201d<\/span><\/p>\n

As fleet manager at Bristow & Sutor, Andrew Wearing introduced telematics in June last year after making the business case on health and safety grounds, as well as fuel savings.<\/span><\/p>\n

\u201cWe\u2019ve all got a duty of care to drivers,\u201d says Wearing. \u201cYou\u2019ve got to make sure they drive safely, so that was a key element of our process, but that doesn\u2019t give you obvious financial savings and sometimes management may not want to spend money unless they can see some tangible benefits in their pocket.<\/span><\/p>\n

\u201cI\u2019d been amassing data from fuel cards over a period of time and that gave me the economy of every vehicle on the fleet.<\/span><\/p>\n

\u201cI could see that we\u2019d improved fuel economy up to a point, but found we couldn\u2019t go any further.<\/span><\/p>\n

\u201cFor example, I had some Peugeot 2008s on the fleet and some were doing 40mpg and others were doing 65mpg, so clearly the difference was down to the way the vehicles were being driven.<\/span><\/p>\n

Wearing says driver coaching and encouragement can often deliver an improvement, but this may only be short-lived before drivers revert to their old habits.<\/span><\/p>\n

\u201cIf you go for the right telematics system you can get a step change in your fuel consumption. We introduced the technology last June and by July we\u2019d seen a 10% improvement in fuel consumption data \u2013 it was almost instantaneous.\u201d<\/span><\/p>\n

Wearing says this saving alone more than paid for the cost of the technology, as the company\u2019s annual fuel bill for its 157 cars and light vans has fallen by \u00a3100,000, with the telematics system costing \u00a328,000 a year.<\/span><\/p>\n

However, while both Bristow & Sutor\u2019s and Anglian Water\u2019s business cases focused largely on fuel savings to win boardroom investment, fleet managers need to have a clear understanding of their own objectives, according to Sam Footer, head of international business and strategic development at Intelligent Telematics.<\/span><\/p>\n

\u201cThis will enable them to establish what return on investment is achievable and how best to use the technology within their own business environment,\u201d he says.<\/span><\/p>\n

Peter Millichap, director of marketing at Teletrac Navman, adds: \u201cIt\u2019s important companies identify where they believe telematics can add value before building a business case. Some indicators are easy to identify and report on in terms of ROI, such as reducing fuel usage, increasing business capacity and improving business efficiency.<\/span><\/p>\n

\u201cHowever, fleet managers should also consider how their company is evolving \u2013 will some technological advancements in telematics provide greater business benefits a few years down the line?\u201d<\/span><\/p>\n

For some fleets, improving productivity may be a high priority. Potential gains may be difficult for a fleet manager to quantify in a business case, but Quartix uses the example that if an extra job is charged at \u00a3300 and the marginal cost for materials is just \u00a350, then with a telematics solution costing \u00a315 per unit per month or 75p per day, the company has made profit.<\/span><\/p>\n

Wearing says one concern Bristow & Sutor\u2019s directors had over installing telematics was that drivers may not be able to do as many jobs in a day if they had to drive more slowly.<\/span><\/p>\n

\u201cThey were concerned that one lost call per day would more than wipe out any savings we would make on fuel and that while I was saying we would make savings, they were worried telematics would cost them more money,\u201d he says.<\/span><\/p>\n

\u201cI said that was not the way it was going to work out because people will be doing what they should be doing, when they should be doing it and not be sitting in McDonald\u2019s for an hour because we would be tracking them.<\/span><\/p>\n

\u201cThat\u2019s certainly the way it transpired. We haven\u2019t lost any productivity whatsoever, and people are driving much more sensibly than they were before because we\u2019ve seen the difference in the fuel spend.<\/span><\/p>\n

\u201cNot only that, then you get the benefit of less tyre wear and fewer brake disc and pad changes on the vehicle.<\/span><\/p>\n

\u201cThe mechanics of the vehicle are getting less stressed, so there are a lot of plus points as well as the health and safety issue where guys are actually safer on the road.\u201d<\/span><\/p>\n

While putting together a business case for telematics, it is critical to engage and consult other departments in the business as some of the data may help their daily activities as well.<\/span><\/p>\n

\u201cFor instance, telematics can be highly beneficial to the financial department in terms of providing feedback and reporting on mileage or producing invoices and quotes for customers,\u201d says Millichap.<\/span><\/p>\n

\u201cThe HR department and mechanics would also benefit from the vehicle analytics and performance reports, showing how much time drivers are spending behind the wheel and monitoring both the health of the driver and the vehicle.\u201d<\/span><\/p>\n

Masternaut has conducted studies on more than 10,000 commercial vehicles to benchmark average reductions in cost.<\/span><\/p>\n

Mike Hemming, its UK professional services director, says these studies showed that businesses save \u00a355 per vehicle per month in fuel, personal, vehicle and asset costs, and incident and insurance costs.<\/span><\/p>\n

\u201cTelematics system prices vary widely, dependent on system quality and a customer\u2019s specific requirements,\u201d he says. \u201cRegardless of price, however, returns are very high: based on in-depth studies across hundreds of deployments, our customers typically earn an ROI of three to five times the amount invested, though some achieve much more.\u201d<\/span><\/p>\n

Telematics suppliers are usually keen to share case studies of customer success stories to strengthen a business case, as many may feature organisations similar to those the fleet manager works for.<\/span><\/p>\n

However, while these examples can help form a persuasive argument which the board cannot ignore, Lightbody warns that the hard work doesn\u2019t end with winning the investment.<\/span><\/p>\n

\u201cThe danger is when it comes down to the culture of the business looking to employ telematics. If you are not prepared to look at the data or challenge driving style, any improvement will drop off over time,\u201d he says.<\/span><\/p>\n

\u201cDrivers will invariably revert to type and go back to their old driving habits, and then it will cost you money because you\u2019ve invested in the units and nothing has changed.<\/span><\/p>\n

\u201cIf a company is not brave enough or doesn\u2019t know how to act on the information created by the telematics, then effectively they are going to waste money because the technology (by itself) will deliver nothing.\u201d<\/span><\/p>\n

Case study: Greentomatocars<\/strong><\/span><\/h5>\n

A desire to significantly reduce its annual accident costs of \u00a31.2 million through better driver behaviour was the focus of the Greentomatocars business case for telematics.<\/span><\/p>\n

The West London-based private hire company took the decision to fit a GreenRoad telematics system across 300 vehicles following a period in which it had a high number of collisions.<\/span><\/p>\n

This resulted in a saving of \u00a3600,000 last year following an annual spend on the technology of between \u00a335,000 and \u00a340,000.<\/span><\/p>\n

\u201cThe saving was not only due to the telematics. It was also due to performance management of the drivers following an internal reorganisation, but it did have a huge impact on us,\u201d says Sophie Jacobsen, head of service delivery at Greentomatocars.<\/span><\/p>\n

The company self-insures, so accident spend was the obvious area to target for savings, she says, particularly as its drivers are self-employed so are responsible for fuel.<\/span><\/p>\n

\u201cThe system we use has a traffic light display on the dashboard, so if it is green everything is okay, if it flashes yellow then please be careful, and if it flashes red, then the driver is doing something wrong,\u201d adds Jacobsen.<\/span><\/p>\n

\u201cWe trialled it with eight drivers for three months as we found that when you sat with a driver or we had driver trainers coming out, they performed very well, but then could go back to bad behaviour when there was not a trainer with them.<\/span><\/p>\n

\u201cThe telematics was able to show us how the drivers were driving when they were alone, what we had issues with and then we could start tackling them.\u201d<\/span><\/p>\n

To incentivise drivers to improve, Greentomatocars also introduced a bonus system, which gives the drivers an extra \u00a325 a week if they have a telematics score of less than seven events in 10 hours of driving and an average rating of more than 4.75 out of five from customers.<\/span><\/p>\n

This could total \u00a31,300 a year \u2013 an amount which the cost-saving has paid for several times over, says Jacobsen.<\/span><\/p>\n

Putting telematics on trial<\/strong><\/span><\/h5>\n

One potential way to strengthen a business case for telematics could be to trial the technology in a limited number of vehicles for a set period.<\/span><\/p>\n

\u201cPiloting telematics today is becoming less of a necessity as the evidence and information from existing users is often enough to convince a new customer that telematics will work for them,\u201d says Mike Hemming, of Masternaut.<\/span><\/p>\n

\u201cHowever, if potential customers are expecting resistance or still have concerns, a pilot phase to a complete rollout is often an excellent way to gather momentum.<\/span><\/p>\n

\u201cThe initial pilot will often focus on the driver behaviour and fuel savings aspect of telematics, as these areas give the quickest win to any business.<\/span><\/p>\n

\u201cIf you can prove that the system is self-sustaining on fuel savings alone, then customers often find that resistance to the system diminishes.<\/span><\/p>\n

\u201cThis then allows a customer to focus on the larger opportunities of improving safety, optimising the fleet and proving they are a sustainable business.\u201d<\/span><\/p>\n

However, not all telematics suppliers agree that a trial is useful in producing meaningful data.<\/span><\/p>\n

\u201cThe greatest challenge to running a trial for driver behaviour is the lead time involved in gradually changing behaviour,\u201d says Harvey Stead, commercial director at FMG.<\/span><\/p>\n

\u201cIn addition, the most successful trials require a large number of vehicles, covering a full cross-spectrum of a particular fleet, as opposed to the small number of vehicles often volunteered for a trial.\u201d<\/span><\/p>\n<\/div>\n

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