Managing pharma auto fleets

ARI’s fleet management systems can reduce the preventive maintenance costs of a vehicle fleet. Credit: ARI

When it comes to the business of pharmaceuticals, it’s the sales team that keeps the ship afloat.

And that, in turn, makes the vehicles that take them out on sales calls to maintain and build client relationships a vital part of any pharmaceutical company’s operation.

If you were to add up all of the pharmaceutical sales fleet vehicles in the world, they would total approximately 300,000—140,000 in North America alone. On average, that’s 700 vehicles per company. But, when you’re only looking at the largest 15 companies, that figure skyrockets to an average of 5,000 vehicles dedicated to ensuring a sales team is on the road doing its job.

Knowing these figures, it’s no wonder that a pharma fleet can rank among a company’s top expenses when you look at the combined cost of the vehicles, maintenance, fuel and repairs. Fuel contributes significantly to the overall cost of running a fleet—as much as 60% of the total operating costs in some cases—but the price of fuel is only part of the equation. Often, the behavior of a fleet’s drivers—things like harsh braking, speeding—contributes to unnecessarily driving up this expense. Another significant expense is depreciation, which can make up as much as 62% of fixed costs (depreciation, lease or financing expense, insurance). This too can be managed, however, if a company adopts a strategic approach to acquisition and the cycling of vehicles.

In pharma, as in most industries, the historical perspective of managing a fleet this large has been that it’s a necessary cost of doing business. A company needs these vehicles to bring in income, so traditionally they were leased or purchased and maintained but not necessarily according to a larger strategic plan designed to maximize ROI.

But this is a mindset that’s changing.

Sales vehicles have become a vital tool in recruiting top talent. And that means older cars in the fleet hold less value to a company, since they won’t help woo an experienced sales rep from another company.

In an analysis of the fleets of its top six pharmaceutical clients, ARI, an international fleet management company based in Mt. Laurel, NJ, revealed that two-thirds of them offered different trim levels or even higher end vehicles to sales managers vs. reps. Half of these companies fill their fleets with a single manufacturer, the most popular of which is Ford (with Escapes, Fusions and Edges as the most prominent models).

When a pharma company recognizes that the costs associated with its fleet can be minimized by tracking the data produced by its vehicles and drivers, the company’s bottom line benefits.

Engage a fleet manager

Though some companies might consider the option of managing their own fleet, hiring an outside fleet management company has its benefits. These experts can support every aspect of a fleet throughout the entire life cycle of a vehicle:

• Supply chain management
• Leasing and acquisition
• Licensing and compliance
• Fuel management
• Maintenance management
• Accident management
• Telematics
• Vehicle remarketing.

These firms can also offer services related to a company’s driver, too, including:

• Safety training
• Personal use reporting
• Compliance
• Violation management.

And in addition to all of these tools and resources, a company like ARI brings to the table real on-the-ground experience and results from businesses all over the world across a wide span of industries. A good fleet management company won’t simply follow orders or crunch data points, but work as a partner and consultant, offering knowledge derived from the real world. An outside partner with a broad database of industry knowledge is able to benchmark a fleet to ensure that it’s working at least as well as or—optimally—better than the industry standard.

ARI’s survey of six key pharma clients to evaluate vehicle ordering trends and develop best practice recommendations based on the data revealed some trends, which supported several universal recommendations:

• Working with a single manufacturer. If it is possible, partnering with a single OEM can streamline the process and uncover efficiencies that are likely to lead to savings.
• Offering multiple selector levels. Distinguishing among trim levels based on a person’s position (i.e. rep versus manager) can help an organization more closely manage costs.
• Managing costs by evaluating geographic needs. Not every driver may need 4WD or snow tires; only those who will be working in the Snow Belt region need those features.
• Allowing for driver-paid options. Companies can make a vehicle more attractive to a driver if they allow certain higher-end options, such as leather or heated seats, or a sunroof to be added at the employee’s expense.

Partnering with a fleet management company like ARI can help companies understand not just their own fleet, but also the larger industry trends that can help your organization drive costs down, and efficiencies and employee satisfaction up.

Modern vehicles generate hundreds of data points that can be analyzed in an effort to uncover inefficient processes and control costs. But just having the data doesn’t mean the fleet will find the answers that will produce efficiencies and savings—or even identify problems before they happen.

It’s important to know which vehicles are costing you the most, but it is just as critical to understand why those vehicles are costing you the most. The insight that a comprehensive Big Data strategy provides enables an organization to perform predictive analysis. This empowers businesses to determine not only which units broke down, but ultimately, which units will breakdown. It also enables them to see which drivers may be adopting poor behaviors behind the wheel, and take action through training and counseling before an accident ever occurs.

As a consultant, ARI can help a company determine the most efficient size of a fleet based on a business’s needs and goals. They can help decide when to replace aging vehicles and identify those that aren’t being used efficiently. They can uncover ways to improve fuel economy. And they can help implement programs that lead to safer drivers and fewer accidents.

So how does all of this play out on the ground?

Take a recent case of a global pharmaceutical company that was faced with a noted increase in accidents caused by distracted driving. In 2013, the company partnered with ARI to map out a comprehensive safety strategy that included a set of six core training programs and additional training for drivers who were subsequently involved in an accident after that training, with the additional training specifically targeted to address the cause of the incident. In 2016, they automated the training program, so every new driver was required to take the core training modules and approve the company to complete a motor vehicle report (MVR) check.

Since the automation of the program, the company has experienced a 22% drop in the total number of accidents and a 22% drop in accident costs as well. What does that mean for their budget? In 2016, the company’s total claim spend was $221,081 with a total of 75 accidents; as of May 2017, its current claims spend is $69,147 with a total of 26 accidents.

More and more pharmaceutical companies are realizing the bottom line benefits of a well-managed fleet to support a sales team, and are looking to outsource this work to companies with the knowledge and experience to maximize the return on investment and reduce the total cost of ownership of every vehicle they own.

ABOUT THE AUTHOR

Braden Pastalaniec is manager, Strategic Accounts, for ARI, an international fleet management company based in New Jersey that works with companies in a variety of industries—including pharmaceuticals—around the world, managing approximately 1.5 million vehicles. Visit ARIfleet.com.