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24 April 2013 | Paul Snell
Fleet purchasers will face higher, not lower, costs if they concentrate on driving down the price of assets.
According to Andrew Smith, head of procurement – vehicles, assets and logistics at Royal Mail, even if buyers could achieve good savings on vehicles or fuel, it was likely rising inflation would negate their contribution.
“If you focus on the price of asset itself you are going to see some additional costs, rather than reduced costs over time,” he told delegates at the ProcureCon Indirect conference in London last week.
Smith had three tips for the audience, based on the total cost of ownership approach that the organisation – which has a fleet of 39,000 vehicles – pursues in this category. These were:
● Consolidate volume. “The trick is to consolidate the volume and go to market at the right time,” he said. “Drip feeding it is not the best way to get the best value.”
● Reduce specifications. Smith said the company had around 28 specifications for light commercial vehicles that have now been reduced to three.
● Drive competition. “Having a panel of suppliers, or more than one supplier in your fleet can give you significant advantages as well, because the active competition makes it a really competitive industry,” he said. “There is lots of testosterone, lots of men who love nothing better than beating up their competition, and you can get some great deals by establishing that competition.”
He also said the organisation had done a lot of work at the RFI stage of the procurement process, including asking manufacturers for feedback on whether the specification is in line with the market. The frank and open responses received have also helped buyers engage with stakeholders.
“Where it is really useful is internally, where suppliers are telling us we are a bit out of kilter [with the market] or we could be more sensible in the way we approach it. That can be a very powerful message for our internal stakeholders,” Smith said. “Probably more powerful than me telling them that, because the manufacturers have more credibility as there is less of a vested interest because [stakeholders] know procurement sometimes has targets that don’t support their primary motivations.”