Risk mitigation in focus for fleet industry, says Standard Bank
With more than 700 000 fleet cards in circulation, the South African fleet management industry is already a major force in offering fleet management solutions. The use of pioneering technology is also seeing the industry evolve to being better able to better control risk for customers, says Standard Bank.
Briefing media at a Standard Bank media event in Johannesburg, Dr. David Molapo, head of Fleet Management within the Vehicle and Asset finance division at Standard Bank, said that the application of technology was increasingly placing control of vital elements of a fleet’s operations in the hands of fleet managers and controllers.
“Presentation by Dr David Molapo Standard Bank “
He noted that some of the factors currently driving risks and challenges in the fleet industry include the impact of rising fuel prices, the ability to efficiently manage vehicle maintenance costs, and the fleet ownership versus leasing debate.
“The steady fuel price increases over the past few years have brought increased risk for fleet managers,” he says. “The average transaction for Standard Bank Fleet customers has risen from R515 in January 2010 to R833 in December 2012 for fuel purchases.
“Vehicle maintenance costs on average have also increased by approximately 17% from 2010 to 2012.”
He says that the challenge for the industry in managing the increased costs is to ensure an accurate view of any inefficiencies in the operation of the fleet. “This can translate into better monitoring of driver behavior, and optimising the reporting of fuel efficiency and other costs against national averages.”
In contrast with many European companies, many South African companies still own their vehicle fleets and therefore assume full responsibility for the costs of acquiring, running, maintaining and disposing of fleet vehicles.
“This means that if vehicles are purchased for cash, it impacts on their cash flow,” Dr Molapo says. “Any unexpected vehicle maintenance and repair costs also have to be met by the company. And once vehicles need to be sold, any loss in value is borne by the company.”
In contrast, leasing offers several options, including full maintenance leasing, that remove these risks from the company. Managing fuel costs and maintenance also becomes easier.
The evolution of technology in the industry means that fleet managers can access customised, in-depth information on a regular, and in certain instances, real-time basis, via online platforms. These include daily, weekly, and monthly reports on fuel cost data, and the ability to use predictive modelling for the outcome of variances to their own fleet and operational data.
“This allows for an accurate comparison of a fleet’s performance against set parameters, or even against national averages for fuel consumption and efficiencies,” Dr Molapo says.
He notes that these reporting tools can also allow a manager to see if business rules are being transgressed by drivers. Standard Bank has seen significant success with its transaction authorisation tool, which declines transactions at point of sale if they are outside pre-set parameters.
“Our statistics show that only a small percentage of these declined transactions are due to actual fraud. The remainder is due to the improper use of fleet cards, which would have in most cases gone unnoticed by fleet managers, and resulted in leakages of revenue,” he says.
In March 2013 alone, a total R14.9 million in transactions were declined. Of this, transactions totaling only R2.8 million were approved after liaising with the fleet managers and controllers on the validity of the transactions. Only 2.44% of the declined transactions were actually fraudulent, where lost, cloned or stolen cards were used.
With the increased focus globally on carbon emissions – and the increasing need to factor carbon taxes into costs – solutions are already being developed by the industry to address this new reporting need.
“Standard Bank is able to provide a unique carbon footprint analysis for a fleet,” Dr Molapo says. “Not only will it assist with corporate reporting requirements as they evolve, it also helps to identify vehicles or divisions within a company that cause increased carbon emissions. Appropriate solutions can then be developed.”
An emerging trend in the industry, especially globally, is the move to mobile solutions to fleet management needs. “This is certainly a field that Standard Bank will explore as we refine our offerings to match new technologies,” Dr Molapo says.
Dr Molapo says that there is increasing awareness in the industry that fleet management principles must address all facets of risk mitigation, both current and emerging. “The test of a fleet that is well managed is that it assists in delivering compelling results. This is only possible when appropriate management tools are used.”