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Asset Management: Automatic TCO

Greg Mattes (L) and B.J. Adams from Fleetio Photo: NAFA

Boost efficiencies by automating your analysis of the total cost of ownership.

Calculating the total cost of ownership (TCO) of vehicles in your fleet is a daunting task for many in management. The idea of pouring over spreadsheets and plugging in countless formulas is enough to fill many fleet managers with dread.

That said, there is an easier way, as discussed at this year’s virtual I&E. NAFA invited Greg Mattes, Director of Product Strategy, Fleetio; and B.J. Adams, Senior Product Analyst, Data Science, Fleetio to present the topic: A Better Way: Automation and Predictive Analysis Applied to TCO.

Manual TCO

Mattes explained the advantages of automating the process of calculating the TCO of the vehicles in your fleet. “If you’re doing manual TCO calculations today, you’re most likely doing it once a year, probably not more often than that, just because of the time it takes,” he said.

The conventional approach to TCO calculations includes a lot of spreadsheet work—something Mattes said could be an issue. “There are a lot of challenges that come along with spreadsheets,” he noted. “First of all, it’s very time-consuming. It’s also really prone to errors, with formulas and calculation mistakes and changing things around and trying to move things.”

He added that TCO is not a static number. Rather, it’s always changing based on what’s happening with the fleet in question. So using a spreadsheet and calculating TCO once a year gives you a static number, he argued, and that’s something fleet managers would want to get away from.

Automated TCO

With the shortcomings of calculating TCO manually (and perhaps only once a year) in mind, Mattes then explained how automating the TCO process could benefit fleet managers.

The key to automation, he explained, is software integration, which means that data from telematics providers, fuel providers, repair and maintenance providers, and other systems that may have expenses in them, is all imported into the software you use to calculate TCO.

This type of automation will give fleet managers key information about their vehicles in real-time. “This will help you establish and track the most important KPIs,” Mattes added.

He further explained that automation is not a quick fix and that the process still requires work, just not as much work as calculating TCO manually. “There are still some shortcomings,” he admitted. “If you don’t have integrations or you have some integrations, but not all, you still have to manually import the data.”

However, by automating the entire process, or most of the process, fleet managers can save valuable time and energy, while gaining the ability to analyze data in real-time. “So you’ll be able to answer questions in real-time like what’s the optimal replacement window for my vehicles? What vehicles are being underutilized or over-utilized? Where are my costs coming from? How can I improve the cost?” Mattes added.

The more real-time data you have, the better your analysis will be, even when facing questions that perhaps have never been part of your fleet’s overall TCO calculation. “Everybody’s going to have to make some decisions down the road about whether electric vehicles will fit in their fleets,” Mattes explained. “But if you don’t have a good handle on your fleet’s TCO today, and then the opportunity to introduce one or two electric vehicles to your fleet comes around, are you going to make decisions based on data? Or are you just kind of going to be making a gut decision, or using some industry data that may not be perfect for your fleet?”

Tough questions

The COVID crisis has put many fleet managers in the uncomfortable position of having to answer TCO questions on the spot. Those who are still relying on the annual spreadsheet approach to crunching the numbers may not be as well prepared to answer these questions as those fleet managers who have migrated over to automation.

“A fleet manager I know was approached in early March by his company’s leadership and was asked for numbers about the fleet budget,” Adams recalled. “One of the questions was very direct: How much fleet expense would stop if we parked 100% of our vehicles today?”

That’s a tough question to answer, Adams said, if you haven’t automated your TCO process and you have to go back to your office to start from scratch, or look at numbers you crunched a year ago. “Imagine how much better you would feel if your response was, ‘Well, we know that our fixed costs run at approximately 50% of our expenses. I can easily pull something together that is a little more concrete,’” Adams added.

Moving the TCO calculation process from a traditional spreadsheet approach to a more automated process takes a bit of time and effort, but once the software is in place and the data is automatically fed into the system, automation provides fleet managers with the tools they need to analyze the status quo and make decisions on the fly—and that’s a big plus in these challenging times.

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