ADM Fleet Strategy
Table of Contents 2. Approach and Methodology 4 3. Strategic Framework 6 4. Situational Analysis Key Findings - Assets 8 4.. 4.2. 4.3. 4.4. Findings 8 Size and Shape of the Assessed Fleet 8 Fleet Condition 0 Recommendations 5. Organisation 4 5.. 5.2. Findings 4 Recommendations 5 6. Managing Vehicle Abuse 7 6.. 6.2. Findings 7 Recommendations 7 7. Managing Vehicle Mis-use and Utilisation 9 7.. 7.2. Findings 9 Recommendations 9 8. Managing Fleet Cost 20 8.. 8.2. 8.3. 8.4. 8.5. 8.6. Introduction 20 Venus Fleet Transactions 20 Wesbank Monthly Schedules 2 Cost per Vehicle Type 24 Findings 29 Recommendations 29 9. Fleet Utilisation 3 9.. 9.2. 9.3. Vehicle Utilisation 3 Key Findings Vehicle Utilisation 3 Key Recommendations Vehicle Utilisation 3 0. Fleet Administration 32 0.. Findings 32 0.2. Recommendations 32. Fleet Management Business Process Maturity Assessment 33 2. Operations Control Processes 38 2.. Findings 38 3. Fleet Systems and Technology 39 3.. Findings 39 3.2. Recommendations 39 3.3. Recommendation - Centralised Fleet Control 40 4. Business Processes and Practices Management Interviews 4 4.. Findings of Management Interviews 4 4.2. Findings for Head Office Interviews 4 5. Essential Vehicle User Scheme (EVUS) 46 5.. Background and Description of the EVUS 46 Page 2
5.2. EVUS Cost Levels Post Implementation 47 ANNEXURE A: Implementation Plan ANNEXURE B List of Assessed vehicle with condition ANNEXURE C Vehicles with Wesbank Transactions not Assessed ANNEXURE D CPK Repairs & Maintenance per Vehicle ANNEXURE E Fuel litre per 00km per vehicle 48 49 50 5 52 Page 3
. Approach and Methodology The following key elements were considered: ADM fleet related financial and operational source information; The ADM fleet was physically inspected and the overall condition established; Structured workshops and interviews were conducted with the ADM fleet management department. Structured interviews were conducted with the key role players and a formalised view of the current ADM fleet management situation and practices were established and considered; All relevant and available documentation was reviewed within the allocated timeframe; Project Steering Committee Meetings were conducted and input was obtained from management; and The following diagram outlines the fleet improvement methodology that was applied: The diagram above outlines action steps during Phase : Project mobilisation; Page 4
Assessment and measurement of the fleet function; An optimised solution was envisioned and agreed upon; and Strategy design and planning. This report is the final deliverable of Phase. Phase 2 will deal with strategy implementation and does not form part of this project phase. The key activities during this phase includes: Assistance with implementation; and Progress review and assistance with implementation. Page 5
2. Strategic Framework The following diagram outlines the recommended ADM Strategic Fleet Management Framework (SFMF). This diagram centres the ADM on four key elements: Driver Management; Fleet Operations Management; Fleet Financial Management; Asset Management. These key elements and focus areas should work together in harmony to produce the following desired outcomes: An available and reliable fleet; An economically run and cost effective fleet operation. The fleet should support ADM management strategy together with the service delivery mandate of the municipality. Page 6
This report outlines the key findings of the ADM situational analysis, the fleet management integrated approach, as well as the strategic recommendations. Page 7
3. Situational Analysis Key Findings - Assets 3.. Findings The current ADM fleet size and shape is adequate for purposes of service delivery. The fleet is in a good condition, but fleet availability is a problem. A total of 297 ADM vehicles were assessed out of an expected fleet size of 330 vehicles as stated in the tender requirement document. A small portion (0%) of the fleet was not available for assessment due to operational demands. This assessment could be regarded as a representative sample (90%) of the overall ADM fleet condition. Mobile technology was applied whilst conducting the fleet assessments. The overall condition of the ADM fleet was assessed. 3.2. Size and Shape of the Assessed Fleet The pie graph below outlines the fleet configuration of the assessed vehicles: Page 8
The following table provides a breakdown by vehicle type: Vehicle Type Quantity LDV > TON 94 SEDAN < 2L 30 TRUCK 30 LDV DOUBLE CAB 7 FIRE TRUCK 7 TRUCK - TANKER 6 EQUIPMENT - TRACTOR 5 LDV < TON 5 TRAILER 3 PANELVAN / BUS 6 SEATER 3 EQUIPMENT - TLB 3 SEDAN > 2L 2 EQUIPMENT - PUMP 2 Grand Total 297 From the table it is clear that the bulk of the ADM fleet consists of Ton LDV (94) vehicles, followed by sedans (30) and trucks (30). The remainder of the fleet consist of various small categories. Fleet Size Key Findings There is a discrepancy in the ADM Fleet Size reported the following table indicates the various data sources and number of fleet units reported: ADM Tender Document 8/2/20/204-205C = 330 fleet units; ADM Venus Financial Systems = 409 fleet units; and Wesbank System (Maintenance reporting & fuel) = 388 fleet units. Concluding the situational analysis business review process and considering the various interactions with key role players, the following key aspects regarding the fleet size and shape became clear: There is no formal documented business process at ADM to determine the size and shape of the fleet; and The relevance of the current fleet size, shape and utilization is being questioned. Fleet Size Key Recommendations It is recommended that: The Venus financial systems be updated with the actual ADM fleet master and that it be used as the master data file for vehicles, plant and equipment; The Wesbank and Netstar Vehicle tracking system be updated with the Venus vehicle master data; Business process be implemented to ensure synchronisation of the various vehicle databases; Page 9
The vehicle classification codes be standardised and that all vehicle related descriptive information be updated between the various systems; A formal fleet size and shape review process be introduced and that this process be synchronised with a fleet budgeting process that needs to be introduced; and The fleet utilization management process be aligned with the fleet size and shape review process. 3.3. Fleet Condition The table outlines the overall fleet condition of the assessed vehicles: Condition Percentage of Fleet =Very Poor 2% 2=Poor 3% 3=Average 9% 4=Good 60% 5=Very Good 7% Grand Total 00% The bulk of the ADM fleet is in a Good to Very Good condition (77%) whilst 9% is in an Average condition. Only 5% is in a Poor to Very Poor condition. The following bar graph illustrates the overall fleet condition: From the fleet assessments it is clear that the ADM fleet is in a good technical condition with 95% above Average condition. This condition compares favourably to other municipalities in South Africa. Page 0
The 5% of the fleet which is below average could impact on fleet availability and service delivery. In the absence of good fleet practice, the 5% poor fleet condition could increase over time. Below is a further breakdown of condition by Vehicle Type: Vehicle Type =Very Poor 2=Poor EQUIPMENT - PUMP EQUIPMENT - TLB EQUIPMENT - TRACTOR FIRE TRUCK LDV < TON LDV > TON 3 6 LDV DOUBLE CAB PANELVAN / BUS 6 SEATER SEDAN < 2L SEDAN > 2L TRAILER TRUCK TRUCK - TANKER Grand Total 5 9 3=Average 3 3 2 2 6 4 55 4=Good 2 6 3 9 3 2 8 9 2 77 5=Very Good Grand Total 2 3 2 5 7 5 35 94 7 3 8 30 2 3 4 30 6 5 297 The current ADM fleet management approach is fragmented and not integrated with the satellite offices. Systems are not integrated with the ADM Venus financial systems which results in a lack of management information, data integrity and integrated fleet operation and financial reporting. Maintenance management systems are lacking and vehicle repair and maintenance scheduling is absent in the municipality. This impacts negatively on service delivery due to the fact that vehicle availability is not managed. 3.4. Recommendations The following recommendations should be taken into consideration when compiling the 205/6 fleet operational budget together with the fleet replacement programme: Vehicles which are in a Very Poor to Poor condition should be rehabilitated or considered for replacement. It is recommend that the Venus Fleet Master be verified and updated accordingly. It then needs to be reconciled as part of a potential phase 2 of the project. A business processes need to be adjusted to ensure that the Venus Fleet Master is accurate at all times and correct asset detail is always available. Preferably this needs to be reported on a monthly basis and the Financial and Fleet Department need to co-ordinate this effort. The Venus Fleet Master needs to be synchronised with the Wesbank fuel and maintenance transaction records. A business process needs to be introduced to ensure that ONLY authorised vehicles in Venus are maintained. Currently it is clear that there is a disconnection between Venus and Wesbank transactions. Service Scheduling All service intervals of vehicles needs to be recorded in a fleet management system. All trip sheets must to be captured in Venus to keep track of vehicle Page
odometer readings. This will enable ADM to predict vehicle service intervals and manage fleet availability. Regular vehicle audits must be introduced at a Satellite Office level to ensure that vehicle abuse is managed and the known vehicle defects are recorded. The mobile technology used during the analysis could be deployed within the ADM fleet function which will enable ADM to continue with this business process. This should serve as a building block for future fleet audits. Maintenance best practice needs to be introduced in order to preserve and extend the useful asset life of the ADM fleet. The current lack of an integrated maintenance management and fleet management systems could be regarded as a strategic impairment. It is strongly recommended that an integrated fleet maintenance management system be introduced as a matter of urgency. Proposed ADM Fleet Management Integrated Approach The diagram below outlines the proposed ADM Integrated Fleet Management Approach : The proposed fleet management integrated approach highlights the four key elements which should be managed in an integrated manner: People Fleet users and drivers of ADM; Asset Management Scheduling vehicle services, maintenance and repairs using a reliable system. The management of this process is imperative to ensure optimal fleet availability and Fleet Operations Scheduling fleet operations and comparing the actual use of the vehicle / fleet unit against a scheduled operation on a daily, weekly and monthly basis; Page 2
preserving the useful fleet asset life cycle for as long as possible. Fleet financial management Ensuring that the ADM Venus financial management systems and finance management processes are integrated with the fleet management processes. The effective and integrated fleet financial management process should ensure accountability by the User Department for vehicle abuse and misuse. These four key elements should be supported by: Fleet Management Systems; A Fleet Management Staff Structure; and Fleet Management processes, procedures and policies. The fleet management systems currently deployed by ADM are: Fuel Management Wesbank fuel card system; Fleet maintenance management system Wesbank authorisation services and electronic card payment system; Fleet operation control systems Altech Netstar vehicle tracking supported with route optimisation; and Vehicle tracking and driver behaviour monitoring Altech Netstar vehicle tracking system; maintenance transaction The fleet management systems currently deployed by ADM should be integrated with the ADM fleet management business processes. There is also a requirement for continuous vehicle auditing, scheduled inspections and defect recording with monitored repairs being conducted; Fleet user training is also lacking. It can be concluded that an integrated fleet management approach should be adopted and instilled within ADM. Page 3
4. Organisation 4.. Findings The current fleet structure is centred around a Head Office fleet function with its main focus being that of the management of the Car-Pool operation. Currently the ADM fleet is managed by a team of Manager, Assistant Manager, 2 Officers and 2 Admin Clerks and supported by a Car Wash Supervisor, 3 Car Wash Assistants and a Driver. This fleet staff structure is inadequate to manage 330 vehicles across all Satellite Offices due to the following reasons: The ADM fleet is operated across 7 satellite offices and the day-to-day fleet management processes are not managed across these regions due to a lack of structure; ADM fleet structure does not support the fleet management business processes required to manage the fleet on a day-to-day basis at a satellite office; The following organogram outlines the current ADM fleet structure: Fleet Unit Manager Fleet Utilisation & Maintenance Manager Fleet Compliance Officer General Assistant Fleet Admin Officer Carwash Supervisor Fleet Admin Clerk General Assistant General Assistant Fleet Admin Clerk Driver The key functions currently managed by the fleet management structure are: Management of the ADM vehicle pool; Coordination of all vehicle maintenance activities; Page 4
Payment of suppliers for maintenance activities; Procurement of new vehicles; Disposal of old vehicles; Hiring in of replacement vehicles; Licencing of vehicle; Payment of traffic fines; Contract Management; Vehicle tracking supplier management and contract meetings; Managing Cost and Performance; and Driver behaviour Management. 4.2. Recommendations With regards to Fleet Staff Structure, the following is recommended: The ADM fleet structure requires the deployment of Fleet Control Officers at the Satellite offices within the regions; The revised fleet structure should also support the execution of fleet management business processes at the Satellite Offices; The fleet structure should be supported by a 24/7 Fleet Risk Control Centre at the ADM Head Office; Fleet Control Offices should be trained and developed to support the fleet control function at the Satellite Offices within the region. Page 5
The following diagram outlines the proposed Fleet Management structure: ADM PROPOSED FLEET MANAGEMENT STRUCTURE, Senior Manager (7) Fleet Unit Manager Fleet Utilisation& Maintenance Manager Satellite Fleet Officer(7) Fleet Compliance Officer Fleet Financial Officer Admin Clerk(7) Fleet Risk Control Centre Financial Clerk General Assistants Fleet Admin Officer Carwash Supervisor Fleet Admin Clerk General Assistants General Assistants Fleet Admin Clerk Driver Page Summary of staff structure related recommendations: The introduction of 7 Satellite Fleet Officers (RFO); A Fleet Financial Officer needs to be introduced and should assume overall control for the production of daily, weekly and monthly fleet management reports; The RFO s need to be supported by Fleet Administration Clerks; A Fleet Risk Control Officer (RCO) needs to be introduced at Head Office and needs to report to the current Fleet Compliance Officer; Fleet management processes, procedures and policy administration should be standardised and integrated with the revised fleet management structure; Job descriptions and performance management systems should be developed for each position. This needs to be translated into Win-Win performance management agreements. A training strategy must be developed and implemented to ensure that the ADM fleet function is adequately skilled and operating at high levels of efficiency. Page 6
5. Managing Vehicle Abuse 5.. Findings The current ADM Vehicle Abuse Management could be improved and should be integrated with the other ADM business processes. The Netstar tracking vehicle technology deployed at ADM has the capability to report and deal with vehicle abuse. The system has the capability to report driver behaviour on the following driving aspects: o Harsh Braking o Harsh Acceleration o Speeding o Over-revving The process to manage driver behaviour is fragmented. The Legal Department from the Office of the Municipal Manager informs the ADM fleet department to conduct driver misconduct investigations. Abuse management mechanisms and processes that have been identified as lacking: o No monthly consolidated reporting on vehicle abuse; o Vehicle abuse management information is available but reporting is lacking; o ADM Netstar tracking system is not optimally configured and utilised in this regard; and o Actual vehicle abuse not measured against pre-set norms and drivers scoring. 5.2. Recommendations The corrective actions are recommended to minimise vehicle abuse: The tracking system should be integrated into the ADM fleet management processes; Vehicle abuse management mechanisms and processes to be introduced; Current ADM Netstar tracking system to be reconfigured and optimally utilized in this regard; Driver behaviour monitoring should be incorporated into the ADM Fleet Department which, in turn, must be managed by the proposed ADM Fleet Risk Control Centre. Monthly consolidated reporting on vehicle abuse; Vehicle abuse management processes to be introduced; Vehicle abuse management information to be extracted and integrated with management processes; Reports per driver to be produced; Preset norms and drivers scoring mechanisms to be introduced; and Driver of the month and Driver of the year recognition systems to be introduced. Page 7
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6. Managing Vehicle Mis-use and Utilisation 6.. Findings The assessment of the current ADM vehicle utilisation and misappropriation of business practices highlighted the following: Current utilization management mechanisms and processes are not being optimally utilised: No monthly consolidated reporting on vehicle utilisation is done; Operating budget process are not linked to utilisation; Trip authorization process is not being followed through; Utilization management information is not being communicated effectively; Current ADM Venus Financial System is not optimally integrated and utilized; Actual utilization is not measured against scheduled utilization; and Vehicle misuse is not currently detected and reported. 6.2. Recommendations Mis-use management mechanisms and processes are to be introduced: Monthly consolidated reporting on vehicle utilization to be introduced; Utilization management reporting systems to be implemented; Business process to be introduced to measure actual utilisation against scheduled utilization; and A centralised forum to be introduced to deal with vehicle mis-use issues. Operating budget process to be linked to utilization and business processed to be introduced; Trip authorization processes to be revised and implemented; Post-trip printouts of trip tracking information to be signed off by the driver, RFO and departmental head. ADM Venus Financial System to be utilized for trip sheet capturing and should be configured for vehicle utilization management; Page 9
7. Managing Fleet Cost 7.. Introduction A fleet cost assessment was performed using the following two data sources which were provided by ADM:. 2. Wesbank monthly schedules containing a total of expenditure per vehicle for the month. Venus Fleet Transactions. The cost analysis for this project was performed on fleet costs and transactions for the 6 month period from April 204 to September 204. 7.2. Venus Fleet Transactions For the 6 month period, a total fleet spend of R4.9m (excluding Consultancy Fees). This is 7.5% above the Wesbank total for the same period. Upon investigation it was found that the Venus fleet transactions are not consistent with large variances between the monthly periods. The table above illustrates the Venus Fleet Transactions for the period April 204 to August 204. From the table it is clear that there is a large monthly variance in fleet cost ranging from R 4.2 million to R 65,000. It is possible that the fleet costs are not accurately allocated to the appropriate monthly periods. The graph below illustrates the monthly variance in fleet cost based on the Venus data: Page 20
7.3. Wesbank Monthly Schedules The Wesbank monthly cost report schedules for the period April 205 to September 204 indicate a total fleet cost of R2.7 million. The following key aspects were observed: There is a smaller variance in total monthly fleet cost if compared to the Venus fleet information; and The Wesbank information, although not at transaction level, is representative for purposes of cost analysis. Page 2
The graph below depicts the monthly fleet costs: It must be noted that no vehicle fixed costs such as amortisation, licences, insurance are included in the Wesbank cost information and therefore not analysed. Page 22
The following table outlines the actual monthly Wesbank fleet cost per Cost Centre: Engineering is the largest consumer of fleet variable cost (50%) followed by Budget & Treasury (6%) and Generators (5%) and then Health & Protection Services (2%); The following graph illustrates the distribution of fleet cost per ADM function: Page 23
7.4. Cost per Vehicle Type The table below outlines the ADM fleet cost per vehicle type for the period April 204 to September 204, based on the Wesbank transaction data. The fleet cost comprises Fuel & Oil, Repairs & Maintenance. From the table above the following is clear that: LDV > Ton represents the majority of the fleet cost R 5,6 mil for the 6 months; Truck and Tanker cost R 3 mil; Generators R,7 mil Sedans R 0,6 mil TLB s - R 0,5 mil Fire trucks R 0,78 Page 24
Fuel and Oil costs per month per vehicles type are between R,3 mil and R,6 mil. Almost 50% of fuel costs were incurred by vehicle type LDV >Ton. TOTAL FUEL AND OIL Month Cost Centre 204-04-20 204-05-20 204-06-20 204-07-20 204-08-20 204-09-20 Grand Total EQUIPMENT - FORKLIFT R 709 R 599 R 05 R 370 R 3 730 EQUIPMENT - GENERATOR R 233 307 R 320 40 R 342 756 R 305 686 R 230 004 R 266 323 R 698 25 EQUIPMENT - LAWNMOWER R 643 R 748 R 77 R 628 R 842 R 886 R 6 58 EQUIPMENT - PUMP R 8 573 R 3 00 R 0 83 R 38 407 R 60 435 R 39 727 R 60 956 EQUIPMENT - TLB R 4 623 R 7 27 R 32 203 R 24 86 R 29 64 R 33 450 R 78 383 EQUIPMENT - TRACTOR R 703 R 2 393 R 2 249 R 3 973 R 3 922 R 955 R 6 95 FIRE TRUCK R 7 685 R 9 645 R 8 742 R 29 384 R 39 859 R 37 306 R 62 620 LDV < TON R 7 779 R 4 53 R 7 950 R 6 9 R 6 870 R 6 674 R 40 75 LDV > TON R 658 827 R 594 37 R 674 079 R 688 344 R 679 230 R 778 2 R 4 072 908 LDV DOUBLE CAB R 9 372 R 9 385 R 27 32 R 24 203 R 24 97 R 26 50 R 40 629 PANELVAN / BUS 6 SEATER R 8 3 R 9 77 R 8 488 R 6 296 R 4 445 R 4 377 R 50 896 SEDAN < 2L R 62 764 R 43 37 R 69 93 R 65 068 R 64 83 R 77 360 R 382 622 SEDAN > 2L R 9 54 R 24 874 R 6 297 R 7 488 R 8 097 R 7 647 R 3 96 TRUCK R 92 035 R 29 93 R 244 56 R 276 77 R 276 855 R 260 236 R 380 327 TRUCK - TANKER R 57 452 R 52 458 R 56 724 R 46 85 R 35 702 R 42 48 R 290 669 Grand Total R 330 390 R 24 734 R 55 439 R 535 23 R 474 73 R 602 350 R 8 699 298 Vehicle repairs and maintenance spend ranges monthly between R440,000 and R930,000. The table below depicts the maintenance and repairs costs for the 6 months under assessment: TOTAL MAINTENANCE Month Cost Centre 204-04-20 204-05-20 204-06-20 204-07-20 204-08-20 204-09-20 Grand Total EQUIPMENT - FORKLIFT EQUIPMENT - GENERATOR R 2 377 R 2 377 EQUIPMENT - LAWNMOWER EQUIPMENT - PUMP R 45 R 45 R 73 06 R 73 35 EQUIPMENT - TLB R 7 727 R 4 90 R 2 77 R 6 856 R 8 854 R 52 043 R 34 6 EQUIPMENT - TRACTOR R 4 425 R 395 R 5 820 FIRE TRUCK R 2 4 R 8 364 R 40 53 R 87 638 R 2 24 R 48 436 R 308 26 LDV < TON R 2 05 R 449 R 0 50 R 4 747 R 8 45 LDV > TON R 206 808 R 20 689 R 224 804 R 239 2 R 242 062 R 324 93 R 439 398 LDV DOUBLE CAB R 3 884 R 4 222 R 5 03 R 7 385 R 0 569 R 7 40 R 58 50 PANELVAN / BUS 6 SEATER R 8 058 R 20 608 R 2 279 R 2 673 R 43 67 SEDAN < 2L R 7 809 R 7 525 R 20 92 R 26 2 R 2 739 R 29 646 R 04 742 SEDAN > 2L R 26 02 R 769 R 8 353 R 56 43 TRUCK R 76 497 R 9 739 R 57 86 R 80 93 R 263 052 R 45 899 R 95 286 TRUCK - TANKER R 545 R 26 95 R 25 053 R 35 372 R 247 3 R 74 38 R 40 62 Grand Total R 44 433 R 44 923 R 50 032 R 703 546 R 926 44 R 763 209 R 3 750 584 Page 25
TLB and generator utilisation are measured in terms of Operating Hours. A total of R2, mil was spent between these two categories of fleet units whilst the hour utilisation is not recorded accurately on either of the Wesbank and Venus systems. This cost represents 6.5% of the total fleet cost for the period assessed. Costs per Cost Category The following table outlines the cost per category per ADM department: 68% of the fleet cost is spent on Fuel & Oil; followed by 29% spent on Maintenance & Services and 2% relates to card administration. Cost by Vehicle Condition The table below outlines the cost per vehicle condition classification. This analysis was executed with the aim to determine how much fleet cost is allocated to vehicles which are in a very poor and poor condition. From the table above the following is clear: The bulk of fleet costs are spent on vehicles which are in an average to very good condition; Only % of the fleet cost was spent on vehicles which are in a very poor to poor condition; No fleet cost was spent of vehicles which are in a very poor condition; Vehicles not assessed incurred 20% of the fleet cost; Page 26
Vehicle Running Cost A cost per kilometre reasonability assessment was performed based on the Wesbank fleet data for the period April 204 to Sept 204. The following table outlines the running cost per kilometre per ADM vehicle category. Hourly based equipment have been excluded. Vehicle Category Fire Truck LDV < Ton LDV > Ton Double Cab Minibus Sedan < 2L Sedan > 2L Truck Tanker Total Estimated 6 Months 6 Months Industry cost Potential R&M and Utilization Cost /Km norm Above / Annual Loss / Overall Fuel (KM) ( Rand) (Rand/Km ) (Under ) Gain Percentage Loss 478,269 37652 2.70 2.70 0.00 0% 63,54 29663 2.3.93 0.20,809 9% 5,68,795 2542559 2.23 2.42 (0.9) (942,396) -8% 205,348 92920 2.2 2.42 (0.2) (39,037) -0% 96,853 26908 3.60 2.42.8 63,47 33% 508,582 330466.54.54 (0.00) (67) 0% 73,7 66024 2.62 2.80 (0.8) (23,392) -7% 2,33,523 26599 0.76 7.54 3.22,396,733 30% 70,26 59567.92 0.58.34 60,084 % 0,248,956 3402348 3.0 626,60 3% From the table above the following can be derived: The average running cost per vehicle which includes fuel, R&M and tyres is R3.0 per kilometre. It is our professional opinion that this cost is reasonable considering the size, shape, operation environment and distances of the ADM fleet. Truck running cost is out of the norm with R,3 mil per year whilst LDV running cost is well within the norm. The overall estimated annual loss is R626,60 which represents 3% of the annual fleet running cost. Fire trucks are the most expensive to run per kilometre at R 2.70 whilst sedans <2L are the most cost effective at R.45 per km. Fuel Consumption The fuel consumption was assessed for the ADM fleet based on the April to September 204 figures. Page 27
The below table outlines the average fuel consumption per vehicle category for the period under analysis: Vehicle Type FIRE TRUCK LDV < TON LDV > TON LDV DOUBLE CAB PANELVAN / BUS 6 SEATER SEDAN < 2L SEDAN > 2L TRUCK TRUCK - TANKER Grand Total KMs Litres 37 080 29 653 2 539 476 90 59 26 908 330 466 66 024 26 599 59 567 3396364 Litre/00km 826.5 3.9 2 858.4 9.6 292 82.7.5 9 835. 0.9 3 67. 3.6 27 503.7 8.3 8 202.3 2.4 99 907.4 46. 20 688.2 34.7 477305.3 4. From the above table it is clear that the average fuel consumption of the fleet is well under the control expected for the Truck Category. ADM can benefit from more focus on fuel consumption in this vehicle category. Repairs & Maintenance Expenditure The table below indicates the R&M spend per vehicle category, expressed in Cent per Kilometre (CPK). From the table above it is clear that: R&M is well within the limit for all vehicle categories except for the 6 seater minibuses, trucks and tanker trucks. More detailed investigations should be applied in order to determine the cause of the problem. A detailed fleet transaction analysis will determine the extent and reasonability of the fleet maintenance transactions; The introduction of a fleet management system will enable ADM to make informed decisions on the reasonability of fleet transactions; Page 28
7.5. Findings In summary, the following has been established: Fleet cost could be considered as reasonable with an estimated 3% overall running cost above the norm. When the ADM Venus financial system and the Wesbank systems are compared, the Venus system reports R2,7 mil more fleet costs for the period April to Sept 204. This needs further investigation; Venus fleet cost information on a month-to-month basis cannot be used for analysis purposes. There are more consistency in the cost information provided by the Wesbank system; The Wesbank system reports on odometer readings per transaction whilst the Venus system does not; The Wesbank system does not report on operating hours per machine unit for plant and generators which represent 5% of the total fleet cost. No analysis on costs of these fleet types could be performed; In addition, plant and generator fuel consumption could not be analysed due to hour meters readings not being recorded in the system; Engineering, Budget & Treasury, Generators, Health and Protection Services makes up 93% of the total fleet cost; Currently there is no formal documented system and process for reporting fleet cost; The fleet transactions in Venus do not incorporate any odometer or hour meter readings to facilitated vehicle utilisation analysis. 7.6. Recommendations Vehicle fixed and variable costs should be recorded in one system at the vehicle registration / fleet number level; Monthly fleet cost analysis reporting should be developed and introduced; A fleet management systems should be introduced in order to assist with the accurate recording and reporting on fleet and related cost together with fleet utilisation information (Operating Hours and Kilometres ); Vehicle life cycle cost recording and reports should be introduced through a fleet management system in order to guide the ADM vehicle replacement and disposal decisions; A formal fleet budgeting process should be introduced. based on planned fleet unit utilisation; Fleet utilisation budget plans should be driven by the demand for fleet in the annual service delivery plans; The fleet budget should be based on planned kilometres travelled for sedans, LDV s and Trucks Truck running cost should be investigated as it is estimated as 30% above the industry norm; Fleet cost should be allocated to the correct period in the Venus financial system; Fleet cost in the Venus financial system should be reconciled with the Wesbank fleet cost and a business process should be introduced in this regard; This budgeting process should be Page 29
and in the case of the Yellow plant it should be based on operating hours; The anticipated vehicle maintenance services should be scheduled, costed and incorporated into the fleet budget; Ad Hoc vehicle repairs should be budgeted for separately; Fleet Cost and Utilisation budgets should be signed off by the user departments to ensure responsibility and accountability for fleet utilisation, vehicle mis-use, vehicle abuse and fleet costs; Accurate fleet cost performance reports should be circulated on a monthly basis be user department per region. These mentioned reports should include a minimum of total variable and fixed cost per kilometre or operating hours per fleet units per month; and Vehicles which is in a Very Poor conditions incurred no fleet cost and should be disposed as soon as possible. Fleet budgets should be compiled per functional user group; Venus should be configured to incorporated fleet budgets per user department; Monthly expenditure reports reflecting actual performance against budgeted performance should be produced and distributed to the ADM fleet department, functional departmental heads and Satellite senior management structures; Page 30
8. Fleet Utilisation 8.. Vehicle Utilisation The following section outlines the ADM fleet Utilisation. Utilisation of vehicle and equipment was assessed using the latest odometer readings on the Wesbank vehicle cost data. This table depicts total kilometres driven by vehicle category per month. This excludes all types of equipment for which utilisation is measured by operating hour. From the table the following observations could be made: A total of 3,4 mil kilometres were driven by all vehicles for a period of 6 months; and The estimated annual distance travelled for the ADM is 6.8 million kms. 8.2. Key Findings Vehicle Utilisation The following key observations could be made: Vehicle utilization should be evaluated against pre-budgeted kilometres and operating hours; and Service delivery plans by user departments should inform fleet utilisation in terms of kilometres and operating hours. 8.3. Key Recommendations Vehicle Utilisation Business processes should be introduced to manage vehicle utilisation; Vehicle utilisation should be the responsibility of the functional user departments; and Functional heads of user departments should be evaluated against conformance to fleet budgets. Page 3
9. Fleet Administration 9.. Findings No files per vehicle is kept. Only spare keys and vehicle papers are kept by the Fleet Department. 9.2. Recommendations Fleet administration should be centralised and information shared and generated by the RFO. A fleet management system needs to be introduced which should serve as a centralised data base of all fleet and related administration. The following functional aspects needs to be recorded on this system: Fleet register Vehicle audit information Known vehicle defects Fuel consumption norm and actual fuel consumption Accidents, which includes formal investigation, report and corrective action taken Insurance claims Traffic fines Incidents Vehicle technical specifications Vehicle utilisations Planned / scheduled services Driver licence details and renewal dates Driver permit details and renewal dates, i.e. PODs, medicals where applicable Vehicle licence details and renewal dates Special permits and requirements, e.g. access permits Authorised suppliers Warranties on vehicles and maintenance work done Supplier invoices for maintenance done Tyre brand numbers Tyre replacement per vehicle per position on vehicle Technical details of an auxiliary equipment fitted to the vehicle and inspection dates, i.e. fire extinguishers, PTOs, etc. Page 32
0. Fleet Management Business Process Maturity Assessment The following section summarises the evaluation performed of the maturity of the ADM fleet management business processes. For each standard fleet management process the table below indicates whether it is applicable to ADM, the current maturity level of the execution thereof and comments. Note that execution level is rated between and 0, where is very poor and 0 is excellent. Process Applicable Execution Level (-0) Comments Fleet Asset Procurement & Capital Budgeting Process 2 It is our opinion that the current process is driven from a historical and financial management perspective only. Fleet Asset Take-on Process The fleet registers in Venus, Wesbank and Netstar systems are not synchronised. There is no current business management process to ensure data integrity in this regard. Asset Disposal Process 7 There are assets on the ADM fleet which needs to be disposed of. The condition of these fleet assets are poor, and no fuel or maintenance transactions are visible for these vehicles. Annual Licensing Process 8 All vehicles which were assessed had valid licences. Vehicle licence renewal should be controlled from a central point. A fleet management system should enable early warning on licence expiry dates. FML/Hire Management There are no systems in place to manage the hiring in of vehicles. The ADM fleet department does not have oversight in this regard. Fleet Asset Management Contract Page 33
Process Applicable Execution Level (-0) Comments Fuel Management Bulk Fuel Purchasing Bulk fuel is procured for generators and plant units. Fuel consumption for these vehicles are not determined accurately. Fuel Dispensing from Bowsers Limited centralised records are available to determine the exact litres of fuel that were dispensed to the plant units. Fuel Stock Control and Reconciliation No system in place. External Fuel Purchases 7 Fuel is procured through the use of Wesbank fuel cards. It is assumed that accurate litres and odometers are recorded by Wesbank. Only monthly summarised reports from the Wesbank system were made available for analysis. Detailed fuel transactions should be available from the Wesbank system as and when required. Monthly Fuel Management Reports 8 Fuel consumption reports for vehicles are available from the Wesbank system. Operating hours are not recorded for plant units and equipment and therefore accurate fuel consumption in litres per hour is not possible. Fuel Management System Requirements - Policy 9 The current fuel management system should be extended to incorporate plant units and equipment e.g. generators. Fuel consumption reports should be generated per user department, and thus making Page 34
Process Applicable Execution Level (-0) Comments functional managers accountable. Vehicle & Driver Operations Driver Code of Practice 0 ADM has a code of driver good practices. Trip Authorisation and Vehicle Inspections Process 7 Trip Authorisation and Vehicle Inspections are executed only for pool vehicles. This process should be extended to all vehicles deployed at ADM and should be inclusive of hired vehicles. Vehicle Utilisation Management Process 4 Vehicle utilisation management process could be improved. Special attention should be applied to authorisation of trip and post trip control. Accident Management Process 0 Process in place. Fines Administration Process 0 Process in place. Monthly Driver Licence Renewal Process 8 Process could be controlled centrally. Driver performance management and training process 5 Driver scoring and performance training processes are not in place. Vehicle Monitoring Process (Vehicle tracking) 5 Netstar tracking system is in place but not utilised for pre and post trip briefing. Limited utilisation of the information which gets generated by the tracking system. Control System Contract Management 5 No visible performance contract management system with system providers in place. Page 35
Process Applicable Execution Level (-0) Comments New Vehicle Tyre Take-on Process Wesbank transaction processing, cost recording and approval system in place. No tyre management process in place. Tyre Inspection Process Pre and post trip inspection by driver. This is, however, not controlled. Workshop Management Process 4 All maintenance work gets preauthorised through Wesbank. Warranty management 6 All warranties on vehicles and related work done on the asset should be managed through a centralised system. Internal Job Process 4 Maintenance work is executed through external maintenance service providers. Processes to manage quality, service turnaround times and price is limited needs to be implemented. Planned Maintenance Service Take-on Process Vehicle services are not centrally scheduled. Weekly Service Planning Process Services are not planned centrally. Maintenance Contracts Management Process needs to be introduced. 4 Tyre Management Although ADM does not have its own maintenance workshops, it is important to manage the maintenance service providers. Page 36
Process Applicable Execution Level (-0) Comments Management, Financial & Budgeting Fleet Operational Budgeting Process Process not in place and should be driven from an operational point of view. Monthly Fleet Cost Analysis Process No fleet cost reports are available expect for Wesbank which reports on fleet variable costs only. No visibility of total cost of ownership costs which is inclusive of fixed and variable costs. Fleet Policy & Procedure Amendment Process A regular fleet policy review and amendment process needs to be introduced. 8 Pool vehicle management agent process is in place. 8 Pool Vehicles 8. Vehicle Pool & External Hiring of Vehicles Page 37
. Operations Control Processes.. Findings Trip Authorities Information required to complete a Trip Authorities is open for operators to manipulate the system. This approach needs to be precise to the area of operation for each foreman and it should be town or location specific. A unique identification system for vehicles should be introduced as per the satellite office they are allocated to e.g. a vehicle allocated to Mbashe satellite office needs to be easily identified as an Mbashe satellite office vehicle and not just as an ADM vehicle. This will assist Senior Managers in the satellite office to control and react timeously when they see their vehicle outside their jurisdiction. Accidents Satellite offices need to be given the mandate to investigate locally occurred accidents and should not have to rely on officials from Head Office to come and do the investigation. The delay in waiting for the Head Office officials may have a negative impact on the investigation as evidence can be lost due the delays. Page 38
2. Fleet Systems and Technology 2.. Findings A high level investigation into the fleet systems currently used by ADM concluded that: Netstar Vehicle Tracking The Netstar vehicle tracking system is currently implemented on the ADM vehicles. Two support technicians are on-site to support the system. The Netstar system is not widely used and training is required to enable the Satellite Office Management to use the system. Wesbank Fleet Card System A Wesbank card system is utilised for all Fuel and Repairs costs. Costs are recorded per unique registration number. Venus Financial System The Venus Fleet Management module is available. The functionality of the module is not extensively utilised. Serious integrity issues with the fleet transactions need to be addressed. Fleet reporting is currently very limited, although the current ADM Venus financial system has the capability to produce fleet reports. 2.2. Recommendations It is highly recommended that ADM develop an integrated fleet management systems approach that will integrate the current Venus financial system with other fleet management systems and technologies to support the fleet management strategy of the ADM. The integrated fleet management system must deliver on the following: o A consolidated fleet master which is visible to all at all times. o Must be real time updated so that everyone can see the latest information. o Must have a service schedule plan for each vehicle. o Must be able to monitor and report on the service schedule on a weekly, monthly and annual basis. o Must have one schedule of all the ADM s vehicle s licenses renewal dates. o Must have a formal accident reporting process in place. o Must have an improved service management strategy. Training is required for all staff members to ensure the uptake of fleet reporting. Page 39
2.3. Recommendation - Centralised Fleet Control Fleet Risk Operations Control Centre It is recommended that a Fleet Risk Operations Control Centre to be established for ADM. A fleet risk operations control centre is a physical location which is has 24/7 fleet risk and operations control through centralised fleet management systems which include the following: Vehicle movement monitoring through tracking Maintenance management Asset management Fuel management Etc. The FROCC would typically be depicted as follows. A customised FROCC model needs to be designed for ADM: Page 40
3. Business Processes and Practices Management Interviews 3.. Findings of Management Interviews Background Structured interviews were conducted by a Carrus Tshenolo fleet consultant for each of the seven regions. Four departments were interviewed at Head Office, mainly;. Engineering water services; 2. BOT; 3. Supply Chain Management; and 4. Protection services. Below is a summary of comments from the interviews conducted with personnel at the area offices consisting of Senior Managers, Area Managers - Engineering and Admin Assistants. 3.2. Findings for Head Office Interviews The Engineering Department owns the majority of the fleet of ADM. They have 22 fleet of vehicles and the majority of them are used for technical services. The last batch of vehicles purchased do not meet the end user requirements as the LDV s purchased are single cabs that seat x2 people and as the ADM policy on fleet does not allow municipality officials to be transported on an open vehicle. This leads to multiple trips being done to services one call as a team leader has a minimum of 2 assistants. The other departments have a limited number of vehicles but Protection Services, who is also responsible for the fire department. The Fire Services fleet utilises fire engines. The current technology being used is outdated. In the interview it became clear that that the municipality has to consider the upgrading of the entire fleet of the fire department. The departments also have a challenge of supporting the community with essential needs like water and sanitation. This service is offered by utilising water tankers. These vehicles are currently in short supply to ADM and that leads to the municipality having to hire these vehicles for service providers. The costly hiring-in of water tankers was stated as a matter of concern. This absorbs funds which could have been applied to improve service delivery to the community. It is proposed that the issue of hiring-in water tankers be investigated in more detail and that the root cause be identified, verified and that a strategy be formulated to solve this matter of concern. It is proposed that this investigation be incorporated into Phase 2 of the project. In the BTO Department the individual interviewed did not have much knowledge of fleet management but was very assisting in understanding the financial side of the business. It is proposed that the BTO department be trained in the business processes of fleet operational Page 4
budgeting processes. An extensive fleet management training strategy will have to be developed as part of a Phase 2 of the project. The Supply Chain Management Department is responsible to facilitate the procurement process of vehicles. Summary of Responses from Area Management Questions Summary of Responses. Fleet adequacy for service delivery (size and The size is adequate composition) 2. Fleet availability and reliability what are the The fleet is available but not in good current levels and is it adequate? standing. 3. Current control mechanisms regarding vehicle Only Trip Authority no access to the Netstar abuse and mis-use and is it adequate? system. 4. Do they receive cost fleet reports (daily, No, handled by East London. Regular fleet weekly and monthly)? reports are required to manage the fleet. 5. Could they take informed decisions on the All fleet related issues are handled by Head level of fleet reporting? Office. 6. Is their fleet cost in line with budget and industry norms? Currently all fleet budget issues are still handled by Head Office. 7. Is the fleet management structure adequate Not as yet, a fleet office is required. to address the fleet needs, management and control? 8. How do they measure and manage trip Not measured. sheets? 9. Are the trip sheets recorded and do they Manual filing. receive a monthly report? 0. Are there driver briefing and de-briefing No. procedures?. Are there pre inspections? and post trip vehicle No. 2. Are the vehicles assessed on a regular basis Not done, but planned to be done monthly. and do they receive reports in this regard? 3. Is there a need to discuss fleet management, there is a need. A fleet item is going to and fleet operational issues on a structured be included in the monthly meetings with forum? staff. 4. Do you partake in the fleet budgeting Not participating currently. process? Page 42
Questions Summary of Responses 5. Is their service delivery budgets translated Currently centralised in departments. into fleet budgets? 6. Is the current fleet budget adequate? Currently centralised to departments 7. Licence administration - do you have a record Currently not done, the driver reports on of valid driver licences and expiry dates and a expired vehicle license disk. notification process of when which driver licence is to be revenue (inclusive of PRDP s)? 8. Do they have the same for vehicle licences? Same as above. 9. Are all vehicles scheduled for maintenance Drivers inform the engineering department and do they have a prediction of when which when service is due and they ll send a mail vehicle needs to be serviced? to head office. The driver will take the vehicle to East London for service. 20. Is the vehicle maintenance cost reasonable? Do not see invoice, all invoices are sent to head office. 2. Is the vehicle maintenance cost expressed on No. the CPK basis and do they have it from cradle to grave for the vehicle? 22. How often are the vehicle drivers trained? No driver training program exist (policy to be reviewed and look at health issues). 23. Do they have record per driver of traffic Currently handled by head office. violations? 24. Who pays for traffic violations? Currently not clear as to who pays for the fines. 25. Is drivers disciplined on traffic violations? Do not know, head office handles fines. 26. How accidents are handled who reports and ADM Policy stipulates what action to be is there a formal investigation? taken. 27. Vehicle licence renewal who notifies and Drivers advise Supervisor and head office. renews the licence? 28. Do they have a copy of vehicle insurance schedules and is it up to date? Currently handled by head office. 29. Is fuel consumption measured in L/00 km No. and measured against a norm? 30. Is fuel consumption measured in L/hour for No. equipment and measured against the norm? 3. Are trip sheets filled in and captured on the No. Venus computer systems? 32. Is monthly utilisation actual vehicle utilisation No planning is done. Page 43
Questions Summary of Responses compared to scheduled vehicle utilisation against the norm? 33. Do they have access to tracking information and is it useful? The system is available and is in the process of being implemented. User access is currently in the process of being implemented. 34. Do they have access to driver behaviour No. Same as above. information from the tracking system (Harsh Braking, Harsh Acceleration, Over Speeding, Excessive Idling and Out of Green band driving)? 35. Are drivers scored for their performances on a monthly basis? individual No. 36. Are rogue drivers identified and provided with No corrective training? 37. Is a monthly fleet report compiled and No. submitted to senior management? 38. Is there a need to improve fleet performance and why? Latest vehicle selection for the new buy does not accommodate operational requirements and contradicts ADM Policy. Single cab LDVs were bought instead of double cab LDVs and the ADM Policy does not allow for employees to sit at the back of the LDVs, this leads to multiple trips being done when employees are attending to call outs for repairs. Replacement policy to be reviewed. Access to tracking system, maintenance policy to be reviewed. 39. What are the main pain points from a fleet perspective? Latest vehicle selection for the new buy does not accommodate operational requirements and contradicts ADM Policy. Replacement policy to be reviewed. Access to tracking system, maintenance policy to be reviewed. From the assessment it is clear that: The fleet management function at ADM is not adequately structured and staffed. A system of fleet reporting should be introduced whereby regions are held responsible and accountable for fleet operational and financial performance. Page 44
The Head Office function should take centralised control of maintenance scheduling and license renewal and should be the custodian of a monthly fleet forum and consolidated fleet reporting. The structure should incorporate the introduction of satellite fleet officers and administrative clerks in order to facilitate fleet management activities at a satellite level. The current Venus Financial System should be set up to facilitate satellite fleet budgeting, capturing of trip sheets and enable fleet cost control on a satellite bases. Vehicle maintenance schedule should be centralised and adequate reports should be distributed to the regions. The current tracking system should be centralised at head office with visibility at a satellite level. The current Wesbank maintenance and fuel consumption reports should be set up on a satellite bases and daily reports should be made available to satellite transport officers and senior managers. Driver behaviour should be measured and monitored and rogue drivers should be trained and performance managed. Vehicle misuse should be identified through comparing the tracking system information and the actually vehicle trip sheets. Fleet budgeting should be aligned with services delivery demand and translated into size and shape of the fleet, operating hours and kilometre. Fleet budget should be initiated at a satellite level and consolidated into a centralised fleet budget which should be primarily driven by services delivery demands and not historical trends. Satellite managers should be hold accountable for cost performance against budget. The financial system should be aligned to incorporate these budgets and vehicle cost should be recorded on a per vehicle budget in the Venus financial system. The fleet policy should be adjusted to incorporate the above changes, it is further recommended that the central and satellite fleet management incumbents be trained up in fleet management best practise through a SAQA approved institution. Service level agreements with currents fleet service provides needs to be reviewed. Practises which will enhance fleet availability whist reducing fleet operational cost needs to be introduced, providers of fleet information will need to make fleet information more accurate, relevant and reliable. Page 45
4. Essential Vehicle User Scheme (EVUS) The following section outlines the assessment of the ADM Subsidised Motor Vehicles Scheme for Essential Users, which is commonly referred to as the Essential Vehicle User Scheme (EVUS). 4.. Background and Description of the EVUS It is our understanding that the EVUS was introduced with the aim to supplement the current ADM fleet and reduce the fleet operational risk whilst improving the overall mobility of ADM employees in the execution of their duties. The EVUS has the following key attributes: Mobility of employees should be improved; Travelling should be an integral part of the duties of the participant; The minimum contract period is 32 months and the maximum period 48 months; The intention of the abovementioned is to reimburse the participant for: o Fuel; o Wear and tear; o Maintenance & repair; o Insurance; and o Tracking devices. Vehicle types for non-scarce skills participants: o Sedans with 800 engine capacity; o LDV s a maximum of 2500 engine capacity; Vehicle types for scarce skills category participants : o Sedans with a 2000 engine capacity; o LDV s with a 3000 engine capacity; Fleet operational risk should be minimised; Qualifying EVUS participants takes full financial accountability for the vehicles and the related financial obligations; ADM subsidises the vehicle instalments by 70% and the participant 30%; The vehicle is to be used 70% or more for business purposes and a maximum of 30% for private purposes; The vehicle is contracted for 200 000 kms over the full contract period; Maintenance and insurance is paid by the participant; The participant is reimbursed for actual business mileage travelled on a monthly basis according to a per kilometre rate as determined by the National Department of Transport; Page 46
4.2. EVUS Cost Levels Post Implementation The period from December 203 to November 204 was assessed (2 months). A total of R 5.4m was paid out in claims based on R 3.30 per kilometre. A total of R 967,000 was paid out in fixed cost. Total cost benefit of the scheme if compared to the situation if ADM had to procure the vehicles on an FML basis is R 938 00 to the benefit of ADM. Potential risk and consideration of the EVUS The following table illustrates the relevant risk elements and implications to the ADM EVUS programme: Key Risk Element Risk Consideration Administration Administrative intensive. The ratio private to business kilometres could be open to abuse. Inaccurate odometer readings and travel claims could be submitted and approved. Cost Norms In the policy, mention is made of the DOT cost parameters which is applied. It is unclear as to which cost reimbursements cost reward levels are applicable SARS or DOT. Capping of capital expenditure 70% of the capital instalment is reimbursed to the participants. The capital expenditure is not capped and it is quite possible to buy a very expensive vehicle; This could be aggravated by the fact that the effectiveness of the EVUS is not tested on a monthly basis. Kilometre Control Relevant, accurate and timeous travel kilometres is required. Electronic devices should be able to supply accurate travel information which will enable the participant to report on private and business travel and kilometre expense claim. Accurate distance travelled information should be recorded electronically and classified accordingly. Page 47
ANNEXURE A: Plan Implementation
ANNEXURE B List of Assessed vehicle with condition
ANNEXURE C Vehicles with Wesbank Transactions not Assessed
ANNEXURE D CPK Repairs & Maintenance per Vehicle
ANNEXURE E Fuel litre per 00km per vehicle