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An ROI Checklist: Your Fleet Management Solution

By Kevin AriesJune 1, 2020

GPS and fleet management systems continue to gain traction across all fleet-dependent industries based on the many benefits the technology can afford organizations and their vehicles. From helping to improve customer service, to increasing driver productivity and enabling better routing, fleet management software can play an integral role in streamlining operations and enhancing connectivity. It can also significantly contribute to measurable ROI, both in terms of the technology investment itself, and in relation to impacting cost savings across a number of critical business areas.

But to recognize true Return on Investment (ROI), it’s important to first define what it means in relation to the utilization of a GPS management system, and then identify the key areas to measure within the organization.

What is Return on Investment? 

Return on investment is a ratio between net profit and cost of of an investment. A high ROI means the benefits of a solution compares well to its cost. In fleet management, this is usually a calculation of the savings that a fleet tracking solution realise divided by the cost of implementing the solution - software, hardware installation and training costs.

How does a Fleet Management Solution impact ROI?

In our 2018 Verizon Connect Fleet Tracking Trends Report, based on a survey sent to those in the Automotive Fleet, Work Truck, Government Fleet, Fleet Financials, Business Fleet, LCT (Luxury Coach and Transportation) and HDT (Heavy Duty Trucking) magazine and online subscriber databases, we found that nearly all (97%) organizations (of 807 responses) using a fleet management solution found it beneficial, and an impressive 38% of those who had rolled out the technology were able to realize a return on their investment in less than one year.

When breaking that down by fleet size or industry, the numbers get even better. 39% of small fleets and 30% of medium-sized fleets were able to see a return on investment within six months or less. Likewise, many organizations across specific industries were able to benefit from a positive ROI within six months:

  • Commercial Work Truck (36%)
  • Government (25%)
  • Ground Transportation (58%)
  • Trucking (33%)

While these figures underscore the value of investing in fleet management technology, there’s more to the telematics-driven ROI story. When it comes to a business’ bottom line, especially in the wake of labor shortages, compliance pressures, and increasing competition, it’s imperative to understand how using GPS tracking can really help companies save money and the specific cost centers where it has the most impact.

Digging deeper into the data showed that GPS fleet management systems help to decrease overall operating costs as well: the bottom line is that 12% of small-sized fleets, 12% of medium-sized fleets and 17% of enterprise fleets cut operating costs post-implementation. And when it came to the biggest areas contributing to operating costs – fuel, accidents, and labor – organizations experienced a cost decrease in all three. 

Fuel Management

By using a fleet tracking system, companies saw a 13% average decrease in fuel costs. This was slightly higher or lower when broken out by industry: Commercial – Work Truck (11%), Government (20%), Ground Transportation/Limo/Shuttle (17%) and Trucking/Transportation (7%).

Accidents

With telematics, organizations reported a 25% average decrease in accident costs. By industry, the decreases achieved were as follows: Commercial – Work Truck (29%), Government (16%), Ground Transportation/Limo/Shuttle (30%) and Trucking/Transportation (16%).

Labor

Post-GPS technology implementation, companies reported experiencing an average decrease of 17% related to labor costs. Similar percentages were seen when broken down by industry: Commercial – Work Truck (17%), Government (13%), Ground Transportation/Limo/Shuttle (25%) and Trucking/Transportation (9%).

Take a look at our 2020 Fleet Tracking Trends Report to know how your peers are using fleet tracking technology to attain positive ROI in this year and beyond. 

Assembling a fleet management ROI checklist

Your organization can realize many of the same benefits we’ve outlined, simply by adopting or upgrading the right GPS tracking technology. And while determining the ROI of a new software purchase like a fleet management solution can involve many factors, the formula for calculating ROI itself is fairly straight forward: ROI = (Gain of Investment) – (Cost of Investment) / (Cost of Investment)1

The key is recognizing what factors apply to your company for both gains of investment and cost of investment. Here’s a checklist we’ve created to help you determine what to consider in your ROI calculation.

ROI Checklist

Potential Gain of Investment

While the some of the potential gains from fleet management can be hard to determine, concrete metrics like average mpg, and increased billable hours can be used to calculate total annual savings per vehicle in your fleet. Here are some of the potential gains you can see from a fleet management solution:

  • Improvements to customer service
  • Improved fleet productivity (help achieve an optimum number of vehicles to serve your customers)
  • Enhanced routing
  • Greater ELD compliance/reduction in fines
  • Improved fleet vehicle maintenance/decrease in maintenance costs
  • Improved fuel savings
  • Help cut in labor costs
  • Help cut in accident costs
  • Help reduce other fleet operational costs and cost contributors (help check poor driver behavior)
  • Streamlined for fleet managers
  • Decreased instances of lost or stolen vehicles or related assets

Cost of Investment

  • Cost of the fleet management system itself
  • Technology installation, maintenance and support
  • Downtime resulting from staff education and training

In terms of potential savings and gain of investment, we tracked many of these factors in our Fleet Tracking report, and here’s how other fleet-dependent organizations netted out in terms of achieving these benefits post-solution implementation:

  • Improved Customer Service (52%)
  • Improved Productivity (49%)
  • Improved Routing (48%)
  • Improved Vehicle Maintenance (40%)
  • ELD/Regulatory Compliance (38%)
  • Decrease in Fuel Consumption (34%)
  • Decrease in Accidents (22%)
  • Decrease in Labor Costs (12%)

Make this year all about your fleet

According to ACT Research, fleet growth is predicted to outpace freight growth in 2019.2 And for the commercial fleet segment in general, 2019 looks to be a strong asset acquisition year, especially in the energy and construction sectors.3

This means, depending on what industry you’re in, using the latest fleet management technology to help gain a competitive edge or leveraging it to help right-size your fleet to adjust to freight variances will be critical this year – and both will contribute to your organization’s overall ROI. In addition, as the economy continues to shift, regulations get tighter and safety and environmental concerns move further into the spotlight, technology will become the deciding factor as to which fleets are able to successfully future-proof, and which are hindered by a lack of connectivity, mobility and flexibility. 

To learn more about how modern fleet management solutions can drive positive ROI for your organization, download the latest Fleet Tracking Trends Report 2020.

Sources 

1https://www.forbes.com/sites/forbestechcouncil/2018/05/31/determining-the-return-on-investment-on-a-new-software-purchase/#33aa07e14054

2https://www.trucknews.com/business-management/fleet-growth-to-outstrip-freight-growth-in-2019-act/1003089183/

3https://www.automotive-fleet.com/312441/strong-usa-economy-to-drive-2019-my-fleet-orders 


Kevin Aries

Kevin Aries leads Global Product Success for Verizon Connect, helping build software solutions that optimize the way people, vehicles and things move through the world.


Tags: Cost control, Revenue & ROI, Customer Service, Dispatching & Scheduling, Fleet utilization, Performance & Coaching, Productivity & Efficiency, Safety, Vehicle Maintenance

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