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52840791 La Fabrika Pixel S l Dreamstime
52840791 La Fabrika Pixel S l Dreamstime
52840791 La Fabrika Pixel S l Dreamstime
52840791 La Fabrika Pixel S l Dreamstime
52840791 La Fabrika Pixel S l Dreamstime

Optimizing Fleet Acquisition Strategies in Supply Chain Management

Dec. 1, 2023
An optimized fleet acquisition strategy aligns the appropriate vehicles with a business’ budget, vision, goals and values. How effectively does the current fleet procurement strategy of your organization align with its objectives?

An effective supply chain depends heavily on developing an appropriate strategy for acquiring vehicles for your operations. A thorough and well-optimized fleet acquisition strategy will give you just the fleet you need to meet your operating needs affordably and in line with your larger objectives and core values.

The right fleet acquisition strategy for your business must be holistic. You must consider the type of vehicles you need, your budget and financing, as well as whether the strategy is aligned with and reinforces your brand, mission and identity of your organization.

Choosing the Right Vehicles: Key Considerations

Understanding Your Cargo Needs

Of course, choosing the right vehicles is essential to any fleet acquisition strategy. One of the key factors when choosing your vehicles is the cargo they’ll carry.

  • Size and volume of the cargo have a direct impact when deciding to choose the right-sized trucks or vehicles.
  • The same goes for the cargo’s weight. The heavier it is, the larger the vehicles you’ll need.
  • Consider specific goods. Some might be hazardous and require specialized vehicles such as tanker trucks. Others could be perishable and therefore need refrigerated trucks.

Assessing Trip Requirements

Next, you must consider the trips your fleet will undertake:

  • If the trip is within a city, smaller vehicles that can more easily maneuver through traffic and narrow streets are a better choice.
  • Longer trips require vehicles with higher fuel capacity. This is when fuel efficiency becomes even more relevant, so look for vehicles offering good miles per gallon characteristics. Another option is to choose hybrid or electric vehicles.
  • Rough terrain calls for vehicles with robust suspension, higher ground clearance or even four-wheel drive capability.

Branding and Identity in Fleet Selection

A fleet acquisition plan must align with your brand’s values and perception to be optimized.

  • To cut carbon emissions, green businesses will search for electric or hybrid vehicles.
  • Similarly, companies in small communities should choose quieter fleets with lower emissions.
  • Companies that place a high value on social responsibility will select manufacturers that are known for their ethical production methods and respect for workers’ rights.

Driver and Vehicle Features

Other important factors to have in mind when choosing vehicles include:

  • Driver comfort. A happy driver is a productive driver. Therefore, it’s nice to invest in fleets with air conditioning, comfortable seats, good cabin ergonomics and other such features.
  • Safety features. Stability control, anti-lock brakes, advanced driver assistance systems, etc., all reduce the risk of accidents.
  • Regulatory considerations. Check for restrictions in the relevant jurisdictions for the maximum allowable weight and dimensions for commercial vehicles on public roads. There might also be emission standards you’ll need to comply with.

Budgeting for Fleet Acquisition

Initial Purchase Budget

You will need to determine the appropriate budget for acquiring your fleet, based on the required number and types of vehicles.

  • Research current market prices and compare quotes from several dealers or suppliers to get the best deals.
  • As unforeseen costs or changing requirements may arise, setting a slightly flexible purchase budget is always a good idea.
  • The purchase budget mustn’t provide liquidity issues, so consider any other planned capital expenditures.
  • Consider buying used trucks and vehicles; however, be careful when assessing the state that they’re in so that you don’t need to pay a fortune for repairs later.

Operational Budget Considerations

You must consider your long-term operating budget in addition to the original purchase budget. This includes:

  • Fuel prices. Based on your fleet’s fuel efficiency and the fuel you consume, you may calculate your monthly and yearly fuel costs.
  • Costs of maintenance. Along with routine maintenance, you should also budget for conceivable repairs. You may prepare for maintenance costs by considering the warranty coverage and the historical reliability of the vehicle.
  • Insurance. Research the price of insuring your fleet.
  • Additional recurrent costs. These include the taxes you must pay as well as the licensing and registration of your vehicles.

Financing Your Fleet—Buy vs. Lease

If you have the necessary capital, you can buy the vehicles outright. If not, you can take out a bank loan and then make monthly payments to cover the principal amount and interest.

Another option is leasing. You can opt for an operational lease, basically a long-term rental term or a finance/capital lease, which gives you the option to buy the vehicles at the end of the lease term.

Should you buy or lease? The answer is nuanced. Here are some advantages of buying the fleet:

  • A vehicle becomes a tangible asset if you possess it. The benefits of owning assets include increasing equity, offering security for upcoming loans or credit lines, and portraying a feeling of financial stability that can attract clients, partners and investors.
  • Unlike leasing, there are no mileage restrictions. Similarly, you can improve or alter the vehicles as necessary.
  • You may always sell or trade in your vehicles to take advantage of rising resale values or adjust to changing market conditions.
  • In many jurisdictions, you might be allowed to deduct some taxable expenses for your privately held fleet. Examples include loan interest, car depreciation, maintenance, repairs and fuel costs.

On the other hand, leasing provides the following benefits:

  • Leasing might be necessary due to a company’s limited initial capital.
  • Leasing allows your fleet to expand more easily, due to a lesser cost of acquiring new vehicles.
  • Leases, especially shorter-term ones, allow you to replace older vehicles with newer models more frequently. Aside from boosting performance, this can also be suitable for companies with a more luxury brand image.
  • Depending on the leasing agreement, you may get maintenance packages or warranties, thereby reducing operational expenses.
  • Some jurisdictions allow for tax deductions based on lease payments.

Planning for Future Growth

Some companies might develop a short-term fleet procurement strategy, while others might have scaling the business in mind. To account for the growth of the company, consider the following:

  • Fleet standardization. Using standardized models, within each vehicle category that your business requires, allows for consistent maintenance practices, eliminates the need for varied spare parts and makes driver training more streamlined.
  • Expandable infrastructure. You’ll be grateful for scalable infrastructure like storage areas, maintenance facilities or refueling/charging stations.
  • Strong business relationships. This includes vehicle suppliers, maintenance partners and insurance providers—healthy, long-term relationships with such businesses will often lead to discounts, preferential terms and faster response times.

Conclusion

In summary, having an optimized fleet acquisition strategy means different things for different companies. Regardless, you must choose the appropriate vehicles and correctly assess your budget and financing options. Once you do so, the result of thorough planning and a successful fleet acquisition strategy will be the strategy aligned with your company’s vision, goals and values.

Keep in mind that when you begin to refine your fleet purchasing plan, market conditions and your organizational needs may change. How effectively does the current fleet procurement strategy of your organization align with its objectives? Perhaps it’s time for a review.

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