Release date: 2/18/2020
The Truce: Fleet and Procurement in Partnership
By Donald W. Dunphy
Change is baked into the DNA of smart business practices. In the spirit of letting go, the once-tense relationship between key operational departments has finally thawed in the past three years, but this change has not yet spread across the industry. What are forward-thinking fleet managers doing to break down barriers between fleet and procurement?
It wasn’t all that long ago that fears of procurement departments making fleet management obsolete were very real and very destabilizing. But things change, and in many organizations, the category management working model redefined procurement to ensure it is more collaborative.
David T. Hayward of Deloitte Management Consulting says, “The old school of procurement treated everything it supplied like widgets with no distinction beyond price. The new school of category management typically relies on a procurement manager who has invested the time and effort to learn about the industry and can speak to the fleet department as a partner.” Collaborative problem-solving is what defines forward-moving organizations. The alignment of procurement and fleet provide a means to an end: enabling great results for mobility management.
“I’ve been doing a panel discussion of this topic for close to five years at NAFA’s Institute & Expo, and the first couple of years were very adversarial,” says Jack I. Leffler, Assistant Vice President, Client Relations for Wheels Inc., a fleet management company boasting a portfolio of 325,000 vehicles under their management across North America. “Over the past couple of years, it really seems like things have changed.”
We took a deeper dive into what’s trending in the fleet/procurement debate. What’s so different now after over a decade, and what can organizations still waging this fight learn from the experts?
Exorcising the ghosts of 2008
Ongoing collateral damage from the Great Recession of 2008 is the continuing unease between fleet and procurement. Organizations were tasked with finding redundancies across departments and then eliminating them for cost savings. In the tension of economic challenges, fleet managers were often pitted against procurement managers, creating cost-center competitions that created workplace tensions. Fleet managers saw many key aspects of their job being removed from them, with one question from on high provoking an existential crisis: Do we need the fleet department at all?
As the economy rebounded, so did interdepartmental relationships in proactive organizations. “There can still be animosity across the organization depending on the maturity of the business,” says Hayward. He explains that, while category management has greatly improved the fleet/procurement dynamic, it is by no means an established best practice yet. There are many operations still feeling the effects of this as if it were still 2008.
Leffler said of the former antagonistic relationship, “Pushback often found operations saying, ‘The company’s always been satisfied with our work, so why are you changing it? Why change the deal negotiation aspects, shifting requests for proposals (RFPs) away from fleet and over to procurement?’ Nobody likes change, right? But fleet saw what procurement was bringing to the table and saw the results they were able to gain for the organization.”
Alex May is Senior Manager of Fleet for pest control firm Rollins Inc. With over 700 locations and over 2 million customers, having the necessary vehicles ready to roll is imperative, as is the collaborative relationship between procurement and fleet. “The problem is that their goals are different. Procurement is focused on reducing costs with that purchase and bumping up savings. Fleet tends to be about the total cost of ownership over time, not that lowest initial cost.”
Hayward and May agree that cross communication is the most important step toward having good interdepartmental relationships. Break out of the departmental silos and solve problems systemically with the wisdom of a cross-disciplinary team. While fleet and procurement have two different approaches, they can better benefit the organization by collaborating.
Hayward says that one of the best ways to achieve clear communications is to first determine the roles individuals play in decision-making. A RACI (responsible, accountable, consulted and informed) matrix is designed to be fluid so that, depending on the specifics of the task, an individual can play nearly any role, from initiation and completion to approval of the work.
So, for example, the matrix ensures “procurement will be responsible because they are doing the work. It may be that the head of fleet will be the accountable individual leading the task. Fleet will be the consulted party as well. The users of the vehicles ultimately need to be informed because, while they will not provide direct input into this decision, they will be the most affected and need to know. What the RACI matrix does is clarify these assignments so you can be rid of many of these arguments before they happen,” says Hayward.
Hayward says that in an organization using category management practices, procurement (provided that the individual is expert in fleet) should be responsible for writing RFPs, not the fleet rep. An exception to this is when procurement does not have expertise in such specialization, in which case, fleet should write the RFP. “Fleet needs to be consulted in developing the specs,” Hayward says. “Having mapped all this out up front, you effectively preempt future arguments.”
A unified front
Alex May reiterates that, above all else, employees across all departments must embrace the realization they are all working toward the same goal, backing away from the “us vs. them” mentality that has long plagued the fleet/procurement relationship.
“My organization went through an RFP for a fleet management company (FMC) contract this year, and many FMCs are big on writing signing bonuses,” May says. “These bonuses tend to appeal to immediate gratification, and it looks like a big win for the procurement side, but the FMC tends to get that money back and more over the course of the working relationship. Our goal was to focus on whether the vehicles out in the field would see savings over the long-haul.
“We know that, in this business, the price of vehicles is not coming down anytime soon. Our department does not make the company money...we’re pure overhead. Anything we can do to bolster savings in the field, where the vehicles directly impact them, is going to be positive for the whole company.”
Leffler adds, “I always remind fleet professionals that procurement’s there to help them get a better deal. They are trained and certified to negotiate on your behalf, and they likely have a good strategic head on their shoulders and are looking at total cost of ownership, telematics data, and the new technology coming from the OEMs. But at the same time, procurement has a vehicle expert who has been doing fleet for a long time. They know the ins and outs of the industry, and they have those long-standing relationships. It would be a big mistake to source this category without getting all you can from them.”
The power of the whole
It all comes down to a single existential question: How are we doing this? Fleet and procurement may both be elbow-deep in the acquisition process, but it is only a means to an end to provide the assets the organization needs.
May believes that when all is said and done, all departments must grasp that realization that working together — the power of the whole — will yield better results. That’s when everyone can move as a cohesive unit in the right direction. “If we — fleet, procurement, financial, whatever — are making sure that the folks in the field have the assets, are getting the full benefit from them, and are generating revenue, then we’re doing our job. If they have their vehicles to make all required service stops, it’s a good day.”
“Be open and honest with each other, and share as much information as possible,” says Leffler. “We know this from any relationship, be it operations or anyone who works together in this world, if you don’t trust one another, no one wins.”
Donald W. Dunphy is NAFA Communications Manager/Editor.