OPERATIONS OF FLEET MANAGEMENT

In the highly competitive business environment, quality and timeliness of business information, for an organization, it is not a choice between profit or loss, but can be a matter of survival or bankruptcy.

Therefore, tools for visualization of information, assisting in decision-making becomes increasingly essential for business owners, directors and managers. However, it is necessary that the leaders become aware of this information, being aware of how to use them in managing their operations.

If management is based on stable processes and their metrics, then the information will work as indicators of efficiency or inefficiency of the operations, facilitating the decision-making.

In a car rental company, there are several operations, which must work in synchronization with each other, so a system for business management, specializing in rental cars, must integrate and automate all complex operations, taking care of a all information required for a good management, facilitating decisions which should be taken almost instantly when operations is running.

Almost all people in car rental agree that "Fleet Management" is usually complex, because it involves many operations which must be managed with efficiency: purchase; car wash; availability control; distribution between locations; control of parking lot; pricing; maintenances - preventive and repairs; overbooking; blackout; due vehicles; miles/kilometers lost; depreciation; deactivation based on odometer or future date; revenue analysis per vehicle; maximization of incomes based on a mix of vehicles; vehicle performance; location of each vehicle; vehicle history records; vehicle's characteristics; fuel charges; rotation of wheels; tire tread depth; status of each vehicle; damages; vehicles being used by employees; then sales. Much information to manage, right?

Well, fleet management will be easier if your system is smart enough, warning you about "what to do", and "when do it". Recalling that a fleet management in a car rental depends on many other operations interconnected, either predictable or unexpected, as: bookings; vehicles exchanges; renters approaching the counter to rent a car; insurance replacements; fleet renewal; etc. Actually, a smart system should provide all what were outlined above (healing your headache), saving your time on decision-making, being effective.

BUSINESS SUCCESS

Uncommon success comes with uncommon approaches to business. Your product or service must be genuinely unique. Gives attention to service and product, delivering a high quality.

Have a strong belief, from the very top, that taking care of customers and employees must be the number one. Empower workers as entrepreneurs and pay them on the bottom line, will make them to act like owners, taking care to avoid the risks, but working hard for the same rewards as entrepreneurs, reaching a superior service.

Agility is fundamental to delivery soon the right product or service, that customers are looking for. However, if you are NOT being faster than your competitors, then something must be changed quickly.

Do not assume what your customers want, but do a survey to find out what they really want as soon as possible.

Do you want some benchmark? Well, learn about the world best companies, not only those in your industry, but also from other markets.

DEPRECIATION OF ASSETS

Many business owners and managers are aware that is very important to correctly price their products and services, CRM, process-based operations, standardization, PDCA, quality assurance etc., but are negligent when the subject is the depreciation of assets, noting too late, that the renewal of its fleet will be costly.

Certainly, other factors can, or should, be considered for fleet renewal, but one of the most important, in determining the right time to do it, is the calculation of the depreciation, rarely considered in strategic planning.

In fact, in another article of this blog, I described how to calculate a selling price, and avoid wasting your money. The depreciation value represents cost, and should be considered. But what is the depreciation?

Depreciation is the loss of values ​​of the assets. This devaluation occurs because the wear on these assets, or loss of utility due by their use, action of nature, or obsolescence, which occur over the years. If these assets are the main sources of revenue, as are the vehicles for a car rental company, then the depreciation should be computed and treated carefully by entrepreneurs and managers.

There are several methods to calculate the amount of depreciation, such as: 

• Linear
• By use 
• Accelerated

The linear method is the most widely used, especially in accounting. However, the "Accelerated Method"  and "By Use" are recommended when there are factors or characteristics that will accelerate the process of devaluation, being more common in productive processes, but they should be seriously considered by all car rental companies for their strategic decisions.

Let's calculate the depreciation of a vehicle, using the Linear method. We must determine the  Depreciation Rate, a constant, on the Capital Cost, which is computed considering the lifetime of the asset.

• Depreciation Rate (%):
• Period of wear / obsolescence: 5 years, which corresponds to 60 months (5 x 12)
• Rate of wear / obsolescence total: 100%
• Rate = 100% / 60 months = 1.6667%
• Monthly Depreciation:
• Capital cost of the vehicle: $30,000
• Value = $ 30,000 x 1.6667% = $501.01    

The monthly amount of depreciation calculated above, $500.01, must be added to other vehicle costs, so you can calculate the sales price/rent per day or hour. Example: 

1. Cost per day: $ 500.01 / 30 days = $16.67/day
2. Cost per productive hour: $ 500.01 / 30 days / 8 hours = $2.08/hour

Theoretically such a vehicle should be replaced within a maximum of 60 months. Otherwise, if we consider that in a rental car operation, customers lose interest in older cars, we could determine, using statistical analysis, the accelerating rate of devaluation, which may be used in one of the above methods. Example:

• Depreciation Rate (%):
• Period of wear / obsolescence: 5 years, which corresponds to 60 months (5 x 12)
• Rate of wear / obsolescence total: 100%
• Index of accelerated wear: 2.5 (life will be reduced to 24 months) 
• Rate: 100% / 60 months = 1.6667%
• Accelerated rate:  1.6667 x 2.5 = 4.1668%                          
• Monthly Depreciation:
• Capital cost of the vehicle: $30,000
• Value = $ 30,000 x 4.1668% = $1,250.04

Therefore, the value of the monthly depreciation accelerated, $1,250.04, should be added to vehicle costs, so: 

1. Cost per day: $ 1,250.04 / 30 days = $41.67/day
2. Cost per productive hour: $ 1,250.04 / 30 days / 8 hours = $5.21/hour

Do you want to look more closely at the depreciation calculation for your vehicles? If so, CARS+, the leading management system for car rentals for global brands and independents, will help you!

INFORMATION TECHNOLOGY FOR BUSINESSMAN

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If you're not a computer expert, but a businessman, maybe you felt like an illiterate at some moment, hearing many jargons, acronyms and titles used in computing. Well, it should not happen in this way.

I'll try to share with you what I have been learning in more than 25 years working as an specialist in the Information Technology (IT), because it is time for you know how to choose and discuss IT solutions for your business, rather than delegate by omission, or stay 100% depending on ​​IT people. An IT decision can boost or destroy your company. 

Even being an IT specialist, my knowledge, experience and interests include business, engineerings, administration, entrepreneurship, quality assurance, best practices, operations and processes. Although I had began early with the electronics, computer science, and math, I never limited myself to these knowledges, always looking for practical applications of these sciences in the companies I've been working, as: electrical engineering, construction, financial, industrial, car rentals, IT and software. 

I've learned with clients and leadership of teams, how important is to emphasize on the IT applications, rather than treat it as a core activity, making the complexities of IT imperceptible to customers.

Currently, I feel comfortable and prepared to discuss any matter of the business environment, whether in the strategic or operational level, be about the administrative, financial, Human Resource (HR), accounting, costing, production, logistics, fleet, CRM, TQC, etc. Also, the interest in people, their cultures and contexts, makes customers more engaged and interested in contributing and working together, making it easier to eliminate their problems, find solutions and/or make improvements.

As in the fashion industry, there is the "fashion technology", which are not always what's the best in IT, but will make many professionals go in their search and advocacy. They will try to deploy these technologies in your company, because those will keep them updated to the labor market. Therefore, entrepreneurs, directors and managers should be alert to this. So what do about it? 

Being the IT so strategic to your business, such as Marketing, HR, Logistics, Financial, Costing, Production, Manufacturing, etc., then you should devote all attention to the IT as you do for the others. Remember that an IT decision can leverage or destroy your company. 

Here are some tips:

1. Require simplicity, eliminating the use of jargons, acronyms and/or titles specific of the IT area, substituting them by synonyms or analogies of common sense, or normally used in your industry.
2. Develop your knowledge in the IT, as you have done for other strategic areas. There are good magazines that can help you with this.
3. Prioritize the requirements of your business, Total Cost of Ownership (TCO) and Return On Investment (ROI), instead of the characteristics of IT solutions, avoiding decisions based on technological requirements.
4. Consider the measurable benefits, including TCO and ROI, quality, productivity, and impacts on customer satisfaction.
5. Avoid reinventing the wheel, try to benchmark and adopt best international practices, therefore it will cost cheaper and will yield better results.
6. Focus on core business of your company, then consider outsourcing of what are common sense, or another company can do better for you.

No resources in Information Technology is so complex that it can not be explained simply and practice using the language of your business.

THE IMPORTANCE OF STANDARDIZATION

In consulting to various clients I've been watching some shortcomings, which are not related to software or hardware, but the lack of and standardization: Processes, Service Instructions, and Trainings.

The consequences of this are usually the loss of efficiency, higher operating costs, and the difficulty in developing a corporate image more homogeneous, which could be observed by their customers as a factor that differentiates the company from their competitors.

I do not want to lecture here on how to define and document a Process, Service Instruction, or Training, but to draw attention to the importance of each one, because there are rules and procedures detailing them, as are the Quality Assurance principles, outlined by the ISO 9000 family of standards (which the ISO 10000 series is an integral part) emphasize the importance of managing human resources and the need for adequate training, so look carefully at the ISO 9001:2008 and ISO 10015, to name some of them.

It is recommended that all people of all levels of the organization are trained to meet the organization's commitment to provide products according to the quality required by a changing market, where requirements and customer expectations are increasing continuously. However it will be effective only if your company already has their Processes, Service Instructions, and Trainings, standardized, documented and easily accessible to everyone. This, therefore, will be the beginning of a process of continuous improvement towards Total Quality, exceeding expectations of your customers.

VISION STATEMENT

In the previous article about Leadership, was mentioned that a Leader must have a Vision, which must be shared with the team. In this article let's talk about the Vision Statement, which will help you apply in your organisation, in case you don't have one yet.

Where your organisation is headed? The answer for this question will be the Vision Statement, however let's talk how to define it.

What are the characteristics of a Vision Statement?

1.  Future casting
• Using a gerund verb to define your future casting.
2. Clear and Visible
• Metaphoric speaking, if you can actually see yourself in top of that mountain, your team will see either.
3. Audacious
• Thinks big, being audacious, thinking in what you want to accomplish for your organisation.
4. Descriptive
• Use a single sentence, which is the vision description.
5. Time bound of 5 years (3 up to 10 also works, however I recommend 5 years)

Looking at a diagram representing where your organisation is right now, point 'A', and where you wanna be in 5 years, point 'B'. If you think on how you're going to get there in point 'B' and the gap in between 'A' and 'B', then it drives you to the Mission statement, which answer "why your organisation exist"; but 'B' is your Vision statement, "where your organisation is headed".Why it is important? Will be a big problem if your Vision is out of the context of your Mission.

The purpose of the vision statement is to inspire, energize, motivate, and stimulate your creativity, not to serve as a measuring stick for success; that is the job of your objectives and goals, so following the rules, let's create Vision Statement for a car rental company, named "Super Rental":

1. Future casting
• We will be creating loyalty customers.
2. Clear and Visible
• We serve customers anywhere and quickly.
3. Audacious
• Our clients consider us the best company to rent, and our employees the best company to work.
4. Descriptive
• Be the most innovative car rental company in the world, delivering safe vehicles anywhere and quickly, for customer enjoyment, rewarding their loyalty, as well as the employees' accomplishments.
5. Time bound of 5 years
• 2011: In 5 years be the most innovative car rental company in the world, delivering safe vehicles anywhere and quickly for customer enjoyment, rewarding their loyalty, as well as the employees' accomplishments.

So, the Vision Statement for Super Rental company will be:

Vision

"2011: In 5 years be the most innovative car rental company in the world, delivering safe vehicles anywhere and quickly for customer enjoyment, rewarding their loyalty as well as the employees' accomplishments".

LEADERSHIP

Leadership must be shared because it is impossible for the leader to take care of everything and everyone, so he needs to delegate, allowing his followers to analyze the details, make choices, take decisions and actions.

As customer contact is essential to the business of a company, which will determine whether the customer will purchase and will become a loyal customer, the leader in his side, who is often away from these direct contacts, must be a server and coach of his followers, for they be able to perform this role very well. So, yes, this attitude will inspire and share the leadership with their followers.

Also, the leader must be visible and have ethical attitudes, as a leader does what he says, becoming an example to be followed, and this visibility is expected, and without this there will be no leadership.

Another important factor is to share a clear vision to reach the target with his followers, once is easier to achieve what we can see or predict. So, remain focused on his vision, correct the direction, think broadly and openly, overcome obstacles, lead and motivate, coaching periodically his followers are some of the leader's roles.

You have heard that no one leads a group of people to remain in place, unchallenged, unmotivated? Leadership involves a sense of change, where all are engaged to perform, for the action that leads to the realization of this change: a greater market share, consolidation of market leadership, a change in corporate structure, etc. 

Here six rules to help you improve your leadership:

• LEADER is the bearer of legitimate authority, the one in whom followers acknowledge their claim to be heard, respected and followed.
• LEAD is to connect your employees to your business.
• LEAD is getting and keeping employees who work and act like owners.
• LEADERSHIP is the art of getting desired results, agreed and expected by employees engaged.
• LEADERSHIP is the art of making others feel like doing something you are convinced that should be done.
• LEADERSHIP is the art of mobilizing others to struggle for shared aspirations.

"The only definition of a leader is someone who has followers. Some people are thinkers. Other prophets. The two roles are very important and necessary. But without followers, there can be no leaders" (Peter Drucker)

Also, know how to avoid common mistakes of a leader is crucial:

• Inability to interpersonal relationships
• A leader is primarily a manager of people, before being a manager of processes and operations. A leader who does not listen to his followers, does not communicate and think he is never wrong, certainly affect his relationship with his team, superiors and peers, also missing the opportunity to learn and innovate. So a leader with these characteristics will have difficulties in building a high performance team.
• Not open to new ideas, or different ones
• A big mistake is when a leader does not accept the ideas of others, since the idea does not belong to him. This suggests there is uncertainty, because the leader does not know everything.
• Not focused on results, nor take reponsibility
• The leader who is not focused on accomplishments will remain in a danger position, because it will reflect negatively on the goals, and worse, if the leader does not assume responsibilities that are inherent to his activity, the chaos is installed.
• Failure to take the initiative
• If the leader does not take any initiative, then someone will take it. In an increasingly competitive world, an initiative was not taken in time, will mean loss of market share to competitors.
• Inability to practice self-development and learning from their mistakes
• A leader who can not learn from their mistakes, will also have difficulties in having a high performance team as the team is a "mirror" of the leader, offering resistance to change and improvement.

So do not let your company go without a leadership, drive it as recommended in this article, working with your team, getting better results going forward.

Books recommendations:

Strategic Planning For Success: Aligning People, Performance, and Payoffs

Leadership: Theory and Practice

The People CMM: A Framework for Human Capital Management (2nd Edition)

COMPETITIVE ADVANTAGES

Your company don't need to be the best of the world, but must know their Competitive Advantages, so if you never dedicated time thinking on them, it's time to start, putting them in your Strategic Planning. However it can take months or years until you figure out what are your core advantages.

Begin looking for the "Competitive Advantages" asking:

1. On what, my company is the best? 
2. Why customers rent, or buy, from us?

Do this constantly until you have clearly identified the core advantages. Involve your team to help you find out the right answers, listing them as below:

On what, we are the best?	Why Customers rent, or buy, from us?
Making customers happy	They love our 100% dedication to understand and meet all their needs
Providing the best vehicles for safe driving	They know that our vehicles are in the fleet until 9 months or 100000 km of use, receiving periodical maintenance
Retaining the best professionals	They have experts and dedicated professionals, who understand the industry and their needs, always ready to help them
Controlling costs and calculating sales prices	They know that we offer the best prices, getting the best services and products
(...)	(...)

Maybe your list will be larger than this above, however after months or even years, you will reduce the items, getting focus actually on your Competitive Advantages.

THE MACRO-ENVIRONMENT (PEST ANALYSIS)

We have here another acronym of a useful tool, and framework, to understand either the growth or downturn of a market, doing a scan of the external macro-environment of your company. The PEST Analysis stands for:

• Political
• Economic
• Social
• Technological

Whereas SWOT Analysis will help to measure a business unit, idea or project; PEST Analysis will help you measure a market or a contextual environment.

In spite of there are variations for the PEST acronym, being very common STEEP, PESTELI, etc, adding  factors like Ethical, Environmental, Ecologic, Legal, International, etc. It is an unnecessary job, because all them can be assigned to one of those PEST factors – Political, Economic, Social or Technological. My preferred is always the use of originals: PEST or STEP. Use whichever is easier to remember, avoiding the variations. See figure below with some important factors that you can consider, as well as others can be added.

• Political
• Environmental regulations and protection
• Legislation to the industry
• Regulatory bodies and processes
• International trades and regulations
• Contract enforcement law
• Government policies:
• Government term and change
• Trading policies
• Funding, grants and initiatives
• Lobbying/pressure groups
• International pressure groups
• Wars and conflict
• Political stability
• Economic
• Economic growth/downturn
• Home economy situation
• Home economy trends
• Overseas economies and trends
• Inflation rates
• Unemployment policies
• Taxation
• General taxation issues
• Taxation specific to product/services
• Seasonality/weather issues
• Market and trade cycles
• Specific industry factors
• Market routes and distribution trends
• Customer/end-user drivers
• Interest and exchange rates: 
• International trade/monetary issues
• Social
• Lifestyle trends
• Income distribution
• Demographics
• Social mobility and labor
• Work/career and leisure attitudes 
• Entrepreneurial spirit
• Consumer attitudes and opinions
• Media views
• Law changes affecting social factors
• Brand, company, technology image
• Consumer buying patterns
• Fashion and role models
• Major events and influences
• Buying access and trends
• Ethnic/religious factors
• Advertising and publicity
• Ethical issues
• Living conditions
• Technological
• Competing technology development
• Research funding:
• Associated/dependent technologies
• Replacement technology/solutions
• Maturity of technology
• Manufacturing maturity and capacity
• Information and communications
• Consumer buying
• Mechanisms/technology
• Technology legislation
• Innovation potential
• Technology access, licensing, patents
• Intellectual property issues
• Global communications
• Energy uses and costs
• Total Cost of Ownership
• Changes in Information Technology
• Changes in Internet
• Changes in Mobile Technology
• Rate of technology transfer

PEST factors are important role, however they are beyond the control of the company, normally must be considered as either threats or opportunities, which can be applied in the SWOT Analysis. They are macro-economic factors, so they usually differ per continent, country or region. They are virtually unlimited. The firm must prioritize and monitor those factors that influence its industry/company. Below an example for a car rental company in a country in the American continent, outside Brazil and USA.

Maybe you figured out that PEST Analysis can vary from business and strategic planning, marketing planning, depending also of the product and service of your portfolio, therefore you can reduce or increase the list of items for each factor.

BEST PRACTICES AND GLOBAL STANDARDS

I'm surprised to see how many entrepreneurs still spend a lot of money and time trying to reinvent the wheel, because they have not realized that there are many best-practices available in the market, which could be adopted in their companies, saving money and disappointments.

Even today, some business owners, directors and managers believe that innovation must necessarily start from an idea of ​​their own, from scratch, creating their own solutions. That's not true! Imagine if the cars makers or computers manufacturers would be thinking in that way... What we would have today? Maybe the same cars and computers built ten years ago.

Pay attention! If the wheel has been invented, why waste time trying to reinvent it again? This is only an analogy, but think twice about this when starting a new project or enhancements. We actually find best-practice processes for almost everything. See some examples below.

1. Desiring a more organized business and better processes, maybe looking for Quality Assurance? Well, 5S and ISO 9001: 2008. They will help you! 
• 5S' book: 5S for Service Organizations and Offices: A Lean Look at Improvements); 
• ISO 9001:2008's book:  (ISO 9001:2008 for Small Businesses, Fourth Edition: With free customisable Quality Management System files!.
2. Are your projects going beyond the due dates, or worse, your company does not set dates for completion? The PMBoK is the best alternative for project management. Agility would be still better? If so, in spite of the Scrum had been designed for software development, it has been working very well for other industries, even for individuals, because it is simple and effective.
• PMBoK's book: A Guide to the Project Management Body of Knowledge: (Pmbok Guide);
• Scrum's books: The Enterprise and Scrum and Agile Project Management: Creating Innovative Products (2nd Edition).
3. People are discouraged? A big problem! To build products and delivery high quality services, you must do a retention of experienced employees, instead of compete for talents or recruit the best, because this is usually expensive. Retain a workforce with the knowledge and skills and willingness to acquire new competencies, team-based, flexible work arrangements, addressing diversity issues, conducting formal mentoring programs, align business and human resources strategies, empower employees to make decisions and award their accomplishments. A good formal framework to drive you on this direction is People Capability Maturity Model (P-CMM). Of course, there are also a couple of good companies doing well with Human Resources, so you can choose one of them for a benchmarking.
• P-CMM's book: The People CMM: A Framework for Human Capital Management (2nd Edition).
4. Does your company have a Customer Service Center (CSC), which is responsible for fulfilling customer requests or resolve problems that are reported by them, whether they are internal or external customers? The quality of services has been below the expected? In this case, ITIL will help you! ITIL is a framework created for Information Technology people,  however it is perfectly applicable to any type of CSC, for example: a customer care department, central of reservations and vehicle maintenance workshop. ISO/IEC 20000 is also a similar approach.
• ITIL's books: Defining IT Success through the Service Catalog (Pink Elephant Guides) and The Visible Ops Handbook: Implementing ITIL in 4 Practical and Auditable Steps;
• ISO/IEC 20000:  - Implementing Service Quality based on ISO/IEC 20000.
5. The strategies are well developed, but are having trouble sharing them with all employees and is difficult to deploy them effectively? If this is the case with your company, then you should know the Balanced Scorecard (BSC).
• BSC's book: The Balanced Scorecard: Translating Strategy into Action.

While all the subjects covered in this blog can be applied to many  companies, the examples are generally directed to the car rental industry. So let's talk a little bit of how to find out existing standards and best-practices of this market.

Many standards and best-practices have been established by global companies such as Enterprise Rent a Car, Hertz, Dollar, Thrifty, Avis, Europcar, National, Alamo, Sixt, etc. So if your company is a franchisee of one of them, you can get such information. However, if your company is an independent brand, or are looking for understand the standards and best-practices, then I recommend:

1. Hire an experienced organizational consulting, specializing in the car rental industry (Thermeon Corporation - http://www.thermeon.com - founded in 1967, specializing exclusively in the car rental industry since 1983).
2. Purchase a software, which has embedded the best-practices and standards of the global car rental industry, even for a local business (Thermeon Corporation - http://www.thermeon.com - CARS+ is the premier software for many global brands).
3. Study about the SIPP codes, which are the industry standard for describing vehicles, usually with 4 characters long, they are used to summarize the key features of a vehicle, for example ECMR:
1. First letter (size of vehicle)
1. M = Mini
2. N = Mini Elite
3. E = Economy
4. H  Economy Elite
5. C = Compact
6. D = Compact Elite
2. Second letter (number of doors)
1. B = 2/3 doors
2. C = 2/4 doors
3. D = 4/6 doors
4. W = Wagon/Estate
5. V = Passanger Van
6. L = Limousine
3. Third letter (transmission and drive)
1. M = Manual drive
2. N = Manual, 4WD
3. C= Manual, AWD
4. A = Autodrive
5. B = Auto, 4WD
6. D = Auto, AWD
4. Fourth letter (fuel, A/C = Air Conditioner)
1. N = Unspecified fuel, no A/C
2. R = Unspecified fuel, A/C
3. D = Diesel, A/C
4. Q = Diesel, no A/C
5. H = Hybrid, A/C
6. I = Hybrid, no A/C
4. Browse through the website of ACRISS on:
1. Sample Car Codes: http://www.acriss.org/car-codes/sample-codes/
2. Pseudo Car Codes: http://www.acriss.org/car-codes/pseudo-car-codes/
3. Expanded Car Code Matrix: http://www.acriss.org/car-codes/new-car-code-matrix/
4. Abbreviations: http://www.acriss.org/reference/abbreviations/
5. Special Equipment: http://www.acriss.org/reference/special-equipment/
5. Know the Enterprise Rent a Car history.
• Book: Exceeding Customer Expectations: What Enterprise, America's #1 car rental company, can teach you about creating lifetime customers (a very good history and benchmark, not only for the car rental industry)

From now on, not reinvent the wheel, but try to find out if there is any best-practice or some company to become your initial reference, maybe a benchmark, then improve and innovate.