best Practices G u i d e b o o k

Best Practices G u i d e b o o k

Table of Contents Introduction 1 The Role of Fleet Policy 2 3 Driver Behavior Tools 4 5 Vehicle Safety Equipment 6 7 Acquisitions 8 9 License and Title 10 11 Fuel 12 14 Replacement Strategies 15 Vehicle Maintenance 16 17 Vehicle Remarketing 18 Telematics 19 Depreciation 20 Benchmarking 21 Fleet managers: for more information on Best Practices, contact your ARI representative or call 1-800-477-4715. ARI Best Practices Guidebook 2012

Today s business fleet. An asset. A liability. An invaluable tool. A necessary expense. It s all of these things and more. To make matters even more complicated, the fleet world is constantly changing, with new regulations, trends, opportunities and obstacles emerging every day. Managing a fleet is inherently challenging, and an extremely complex process. Many factors must be addressed to ensure operational efficiency. Dealing with all of the variables while maintaining control takes first priority. Implementing standard policies and procedures across your fleet is the first step. The following pages illustrate some of the areas to consider in managing your fleet. ARI Best Practices Guidebook 2012 1

The Role of Fleet Policy Fleet Policies Driver behavior dramatically affects fleet costs. Fleet policies clearly outline what is expected from drivers when operating a company vehicle, so it s easy to understand the importance of corporate fleet policies toward successful fleet operation. However, without the support of corporate officials, no policy will create the desired effect and compliance accountability will be lost. Policy compliance must be monitored and enforced. A policy that isn t enforced, is the same as having no policy. Best Practice Issuing Company Vehicles: For non-executive and non-revenue generating activities, a vehicle is typically assigned when a driver accumulates 12,000 work-related miles annually or when less than 20% of the usage is personal. Personal Use: Mileage Reporting Reporting should be completed monthly to determine the percentage of personal mileage for reconciliation at year-end using the Annual Lease Value (ALV) calculation method. Acknowledgement of Policy Receipt: Require annually, at a minimum, drivers sign to acknowledge his/her receipt and understanding of the corporate fleet policy. Vehicle Use: Prohibit use of a vehicle for non-company commercial purposes. Non-Compliance If a driver fails to comply with reporting requirements, default to 100% personal use for the missing period and charge the driver a penalty equal to that month s ALV. Driver Charges Companies should charge drivers a flat monthly fee to offset the company s expense for the driver s personal use of the vehicle. The Role of Fleet Policy ARI Best Practices Guidebook 2012 2

Best Practice The Role of Fleet Policy Drug Testing: Truck fleets with vehicles falling under DOT regulations require drug and alcohol testing within 24 hours following an accident. Otherwise, company discretion should dictate substance testing policies. Towing: Prohibit non-work-related towing with a company vehicle. Security of Contents: Employees should be responsible for properly securing the contents of their company vehicle, e.g. laptop computers, samples and equipment. Prohibited Items: List the prohibited items for company vehicles, such as firearms. Fuel Usage Policy: Include a section on company fuel use and efficient driving tips. Communication: A standard practice for communicating information is through a driver-based website. The Role of Fleet Policy ARI Best Practices Guidebook 2012 3

Driver Behavior Tools There is nothing more important than employee safety. From a purely business perspective, the financial impact due to lost productivity, medical expenses, and liability exposure is considerable. Fleet vehicles are tools. Any industry that uses tools to conduct business, should require that operator qualification be made a priority to ensure smooth operation and minimize liability risks. Goals and motivations a driver brings to the task are important determinants in driver behavior. Recommended and commonly used quality assurance tools to facilitate safety and reduce liability exposure include:» A vehicle safety policy» Motor vehicle record (MVR) checks» Driver training Driver Behavior Tools ARI Best Practices Guidebook 2012 4

Best Practice Driver Behavior Tools MVR Checks: Perform during the employment screening process and at least once a year for every driver in the fleet, including eligible non-employee drivers if applicable. Managing Medium- and High-Risk Drivers: Identify medium- and high-risk drivers and modify their behavior through supplemental means to reduce the likelihood of potential accidents and litigation. DUI Offense: Inform Human Resources immediately upon a summons being issued. A conviction should result in the loss of a company vehicle for three years from conviction date or possible termination. Safety and Compliance Ensure drivers are compliant with the DOT regulations for safety and fuel tax reporting. A formal DOT program should be in place with an appropriate manager responsible for compliance. Driver Training: Conduct formal driver training upon employment and supplemental safety awareness regularly to increase safe driving and to reduce litigation exposure. Hazard Perception Evaluation: Testing drivers on their ability to anticipate events via simulation will reduce exposure to preventable collisions. Cell Phone Use: Prohibit talking, texting, emailing, and any other type of cell phone use in a moving vehicle. While some states allow the use of hands-free devices, we recommend disallowing the use of any electronics while operating a company vehicle. Driver Behavior Tools ARI Best Practices Guidebook 2012 5

Vehicle Safety Equipment Vehicle design has evolved, with safety equipment now playing a more significant role. Historically, safety improvements have generally focused on structural crashworthiness, occupant protection devices, vehicle control and crash avoidance systems. Advancements in design and component materials have vastly improved certain areas. For example: As vehicle design has evolved, so have vehicle standards. Structural crashworthiness is defined as the ability of a vehicle to absorb the energy of impact rather than transfer that energy to occupants. The crashworthiness rating of a vehicle is very important when choosing a model for fleet usage. While some safety features and equipment help avoid collisions in the first place, crashworthiness deals specifically with those situations in which a collision is unavoidable. Many agencies measure and publish vehicle crash worthiness ratings, The National Highway Traffic Safety Administration (NHTSA) being the most well known. NHTSA rates vehicles using stars, with five stars as the highest rating. Vehicles with a high rating minimize the potential for serious injury. Ratings for MY2010 (Model Year) and older are given for frontal and side crash and vehicle rollover ratings. The NHTSA has revised the safety standards for MY2011 and newer vehicles. In addition to including crash and rollover ratings, the new standards include testing related to side pole impacts and different sized crash test dummies. Vehicles will also be compared against each other within the model class to determine safety ratings. Ratings continue to utilize the familiar stars as the measure of safety. Vehicle The Role Safety of Fleet Equipment Policy ARI Best Practices Guidebook 2012 6

Vehicle Safety Equipment Occupant protection devices have evolved during the past twenty years to help reduce the number of injuries and deaths associated with accidents. They include:» Restraint system/seat belts» Driver/passenger front air bags» Side-impact air bags» Side-curtain air bags» Head restraints» Knee bolsters Vehicle control systems give drivers greater ability to safely maneuver a vehicle and avoid potential accidents. Control systems are: Crash avoidance systems are newer tools designed to alert drivers and avoid accidents. When developing specifications, at a minimum, the following devices should be included (when available):» Lane departure warning system» Back-up alarms and cameras» Adaptive cruise control A synergy between the driver and vehicle safety components typically results in better vehicle safety.» Anti-lock brakes (ABS)» Traction control systems (TCS)» Electronic stability control (ESC)» Dynamic steering response (DSR) Best Practice Seat belt use: Seat belt use must be mandated at all times, regardless of local laws. ABS/Air Bags: All vehicles should be equipped with proven safety options when available. Back-up Warning Device: Vehicles can be equipped with audible back-up warning devices that activate when reverse gear is engaged. Vehicle Safety Equipment ARI Best Practices Guidebook 2012 7

Acquisitions Choosing a vehicle that is fit for purpose is the first step in successful specification development. Fleet applications vary immensely, so all aspects of intended use, corporate image and driver safety must be evaluated during the acquisition process. Choice of manufacturers, along with volume contract agreements, can influence what types of vehicles are considered for acquisition. Form follows function is another way to describe successful specification. Some factors to consider: Intended vehicle use» Sales» Service/Repair» Public Sector Intended payload» Number of passengers» Cargo» Weight» Volume» Service equipment» Type of equipment» Towing requirements Upfitting» Vehicle upfitting is directly related to the intended job application of the vehicle.» Some of the same factors used for vehicle selection can be applied to the actual upfit. Type of driving» City/highway» Flat/mountainous» On/off road» Geographic weather conditions and climate (snow belt) Powertrain» Engine size» Gasoline, diesel, hybrid, or alternative fuel» Manual or automatic transmission» 2-wheel, 4-wheel, or all-wheel drive Safety» Dual front- and side-impact air bags» Anti-lock brakes» Traction and stability control Acquisitions ARI Best Practices Guidebook 2012 8

Best Practice Acquisitions Number of Specifications: Minimize the variety of specifications to maximize incentives and promote vehicle interchangeability. The same principle can also apply to the upfit specification process. Specification Reviews: Review specifications in pace with changes by manufacturers and upfitters. Additionally, strive for constant refinement in terms of vehicle weight, payload, fuel economy, job function and territory. Special Paint Usage: Using special paint increases cost, production delays and difficulty in obtaining emergency replacement vehicles. Use standard paints whenever possible, such as white or gray. Truck Specification Development: Involve multiple end-users in the development process to ensure utility while emphasizing lowest cost, driver safety and maximizing standardization. CAP Agreements: Consolidate vehicle purchase by manufacturer when possible and negotiate agreements prior to upcoming model year to allow for appropriate discounting of early order vehicles. Vehicle Order Placement: Place orders electronically and in batches when possible to ensure timeliness, tracking and accuracy. Stagger build schedules in conjunction with upfitter throughput capabilities. Vehicle Manufacturer Build-Out: Be cognizant of build-out dates and plan order placement accordingly to avoid price increases and costly delays. Dealer Stock Purchases: Due to higher costs, vehicles purchased from dealer stock should not exceed 5% to 10% of total vehicle orders. Eliminating stock purchases will ensure maximum cost savings. Decaling: Whenever possible use block decal layouts for ease of removal and less shadowing compared to individual shapes and letters. Up-fitting via Ship Thru: The ship-thru process can also offer more consistent build quality, volume pricing and lower transportation costs. Up-fitter Selection: Require all upfit companies to meet FMVSS standards and utilize vendors with multiple locations to minimize shipping costs. New Vehicle Delivery: Accept delivery of new vehicles in a timely manner and communicate negative delivery dealer experiences to your fleet management service provider to ensure that corrective measures are taken. Alternative Fuel: There are many types of alternative fuel vehicles and conversion kits available. Involving ARI before making any alternative fuel vehicle purchases will help ensure that the vehicle or kit is certified by governing bodies and that the fuel choice will work in your business application. Acquisitions ARI Best Practices Guidebook 2012 9

License and Title License and title services are often associated with long lines of unhappy people at the Division of Motor Vehicles (DMV). However, license and title services encompass a wide range of important activities in fleet operation. Vehicles with expired, lost or incorrect titles and/or registrations make a significant impact on daily fleet activity. State fines, legal ramifications, lost productivity and revenue are just some of the difficulties corporations face. Staying up to date helps you stay up and running. Corporations should implement a program or procedure to monitor and track the license and titling process to protect the financial well-being of both the corporation and the driver. A license and title program provided by a fleet management company should provide the following support:» Initial licensing» Registration renewals» Title storage» Violation processing» Address changes» State transfers» Replacement of lost credentials Best Practice IRP (Apportion) and Trip Permits: If the majority of a vehicle s miles are obtained from interstate travel, they should utilize IRP (apportion) plates. When a vehicle makes 3 to 5 interstate trips per year, a cost analysis should be performed to determine if IRP plating is more financially advisable than the cost of individual trip permits. DOT Requirements: Strictly adhere to all DOT registration requirements. Any commercial or combined vehicle and trailer weighing over 10,000 pounds must register with the DOT. License and Title ARI Best Practices Guidebook 2012 10

Best Practice License and Title Merger and Acquisitions: Outsource due diligence and re-licensing of vehicles. Title Storage: Titles should be centrally and securely stored with tracking mechanisms, periodic audits and separate image storage. Vehicle Transportation: Service provider should be bonded and insured. License Plate Turn-in: When a vehicle comes out of service, the plates or equivalent documentation must be submitted to the appropriate government entity to end liability exposure. Violations: Expenses incurred through violations not caused by company negligence should be the driver s responsibility. Toll Management Program: Register vehicles with toll authorities in your driving areas so that all tolls are charged to a corporate house account. Transponder management services that include the purchase, fulfillment and replacement of transponders relieve administrative burdens. Licensing Service Provider: Outsourcing registration renewals and state transfers to a single source licensing services provider enable consolidation of data from acquisition to liquidation. Vehicle Registration: The vehicle s registered address should be compliant with all state and local regulations. Registered weight should be based on usage without exceeding manufacturer s weight rating. Initial Licensing: Complete licensing prior to delivery through supply chain management processes. IRP Structuring: Consolidate accounts or regionalize where possible to ease administration and costs. Mileage and Fuel Tax Reporting: Using a telematics system for data capture is the easiest and most accurate method to collect on- and off-road mileage. Driver Trip Sheets: Strictly enforce compliance and monitor through exception reporting. License and Title ARI Best Practices Guidebook 2012 11

Fuel These days, fuel expense is a major focus for fleets. For a typical fleet, fuel is the second highest expense. For some fleets, it is the largest. In the past, vehicle selectors did not focus primarily on fuel economy. Fuel economy must now be considered a key factor when developing or updating a vehicle specification. Factors Affecting Fuel Consumption As previously noted, choosing the proper vehicle for the intended application is the first step toward controlling fuel consumption. These standards will establish a foundation for maximum fuel efficiency and minimize greenhouse gas (GHG) emission for the intended job application. It is important to note, even with a properly specified vehicle, fuel consumption does vary among drivers. Vehicle Selection & Power Train Configuration Evaluate the power train choices for your vehicles. Consider a smaller engine if it will complete your core tasks. Vehicles with smaller engines consume less fuel and emit lower levels of GHG (greenhouse gases). The chart on the right provides a comparison. A single light-duty truck may fill its fuel tank an estimated 104 times a year, consume 2,600 gallons annually, and, at $3.80 PG will incur a spend of $9,880. Multiplied for a fleet of 500 units, this amounts to 1,300,000 gallons and more than $4,940,000 in annual fuel spend.* CYL 4 6 8 MPG 24 22 15 *Based on 15,000 miles per year. **1 truck, 25-gallon tank, 2 tanks per week, 104 tanks per year. Annual GHG Emissions** 6.1 tons 6.6 tons 9.7 tons If trucks are used in your fleet, consider the applications. More stop-and-go traffic and less highway driving may suggest increasing the gear ratio in the rear differential to reduce engine load and save on fuel consumption. In some situations, such as city driving, hybrid applications may be better suited. Alternative-fueled vehicles offer a lower carbon footprint, and depending upon several factors, can yield fuel savings. However, higher acquisition costs are a factor for consideration when selecting powertrain options. Upfit There are many new green upfit options available today that operate from sources other than the vehicle s engine. The utilization of these alternative options may help reduce idling, emissions and engine wear. Fuel ARI Best Practices Guidebook 2012 12

Fuel Route Planning Plan efficient routes to minimize miles driven and fuel burned. Avoid high traffic, construction and congested areas. Idling Unnecessary idling will waste fuel and increase wear on your vehicles engine ultimately making it less fuelefficient. Idling hours should be tracked and monitored. Excessive engine idling can burn as much as one gallon of fuel per hour depending on engine size and application. Driving Habits Quick starts and stops reduce fuel economy and increase wear and tear on the vehicle. Counsel your drivers to stay within posted speed limits; the faster the vehicle is driven, the more fuel used. For example, driving at 65 mph, rather than 55 mph, increases fuel consumption by 20 percent. Driving at 75 mph, rather than 65 mph, increases fuel consumption by another 25 percent. Avoid Overloading Your Vehicle Overloading your vehicle increases fuel consumption and wear, resulting in less fuelefficient operation. Even the well-maintained and carefully driven vehicles will increase fuel consumption when overloaded. Overloading a vehicle not only increases fuel consumption, but it increases mechanical failure rates and puts driver safety and corporate liability at risk. Controlling Fuel Expenses The first step toward controlling fuel expenditures is managing the process by properly measuring the trends. The standard for managing fuel spend is a fuel management program. Fuel management programs enable a fleet to control a variety of functions as well as track and monitor usage. Fraud controls» Who makes the purchase» When is fuel purchased» Velocity controls (number of daily transactions and amount of daily allowable gallons)» Annual fuel card credential audits Card restrictions» Restrict non-fuel items» Restrict services» Exception reports» Other reporting Reported data can be analyzed to review where, when, and what type of fuel is purchased. This data can also be used to create a corporate fuel policy. Fuel ARI Best Practices Guidebook 2012 13

Best Practice Fuel Fuel Policy: Develop a fuel policy stipulating the exact fuel type to be purchased, what is expected from drivers, and consequences associated with policy nonconformance. Functioning Gas Cap: The US Department of Energy estimates that 147,000,000 gallons of fuel evaporates from fuel tanks each year due to missing, loose, or damaged gas caps. Fuel Purchases: Use a fleet fueling program for data capture, consolidated billing, MWBE reporting, tax exempt reporting and fraud prevention. Fuel Card Type: Cards should be issued with fuel-only functionality in order to avoid use for unnecessary purchases. Fuel Card PINs: Assign fuel card personal identification numbers using randomly assigned 6-digit numbers. Fueling Mixed Vehicle Type Fleets: Establish separate account numbers to customize velocity controls by vehicle type. Premium Fuel (Non-Executive): Premium fuel should not exceed 4% of total fuel purchases. Fuel Station Type: Establish separate account numbers to customize velocity controls by vehicle type. Idling: Many states and counties are adopting anti-idling laws that prohibit idling unless it is necessary to operate work-related equipment. Include idling restrictions in the driver policy and track idling with telematics to help reduce unnecessary idling. Obey Speed Limits: Excessive speed can increase fuel consumption up to 15%. Proper Tire Pressure: Underinflated tires cause fuel consumption to increase by 6%. Standard procedure should be to check tire pressure every 30 days. Additionally, most new vehicles come equipped with Tire Pressure Monitoring Sensors (TPMS) that indicate low tire pressure with a dash warning light. Fuel Expense Performance: Establish a fleet-specific fuel trend benchmark to identify exceptions, premium fuel use, erroneous odometer entry, unused cards and fraud. Purchase fuel from the less expensive Tier Two suppliers. Fuel Purchase Alerts: Use fuel benchmark data to identify maximum velocity control points. Set purchase alerts below velocity points to allow monitoring without card interruption. Designate alert recipients to analyze transactions and address items requiring further action. Bulk Fueling: When using bulk fuel systems, consolidate data including odometer readings and gallons used in a centralized repository. Data associated with bulk fueling should be integrated with non-bulk purchase data. Automated tank level gauges and fuel card readers ensure accurate readings for inventory and dispensing. Hedging (Price Risk Management): The main benefit of hedging in most cases is the predictability of expenses. Fuel ARI Best Practices Guidebook 2012 14

Replacement Strategies Budgeting for vehicle replacements can be a challenge; determining when to replace fleet vehicles is based on a careful balance of multiple factors. Some examples include:» Fuel Efficiency and Expense A new vehicle may be more fuel efficient than the old unit it replaces. There are potential savings that can be realized by moving to a newer model.» Resale Value Policy should be put in place to remove vehicles from service and offer them for sale at their peak resale value.» Company Image Older vehicles may not reflect the image your company wants to project.» Maintenance Maintenance costs increase significantly as vehicles age and major failures begin to occur. It is best to cycle vehicles out of service before they begin to experience high maintenance costs.» Downtime and Lost Productivity Driver productivity can be negatively affected when additional maintenance work is required for vehicles that remain in-service longer than typically anticipated.» Product Availability A carefully planned replacement schedule will help ensure desired vehicles are available for order and in service at appropriate times. Developing a policy that is well-suited to your company s goals requires a level of expertise built upon a solid understanding of all factors that can affect your bottom line. Vehicle information, average maintenance costs, fuel efficiency, criticality of the vehicle, order-to-delivery lead times, and other factors will help formulate a replacement strategy. We recommend qualifying vehicles for replacement based on a combination of months in service and mileage. Replacement Stategies ARI Best Practices Guidebook 2012 15

Vehicle Maintenance Scheduled routine maintenance directly improves a company s bottom line. Vehicles that do not follow the proper service interval will likely experience an increase in major repairs and unexpected downtime. Proper servicing enables a qualified service technician to inspect a vehicle for potential failures or wear items. This proactive approach can reduce or eliminate unnecessary and unexpected downtime. As vehicle technology evolves, so may service interval requirements. Routine scheduled maintenance is always the best practice to ensure more efficient operation and longer lifespan. The key to controlling maintenance and repair expenses is active tracking and supervision. The standard is to employ a Maintenance Management Program. Maintenance programs designed to capture detailed repair information are a necessary and valuable tool. They identify trends, pinpoint actual repair costs, and create a benchmark for future comparisons. This information is sorted into three standard groups:» Repairs» Oil changes and other preventive maintenance» Tires Further examine each group to identify specific component failures. Once a failure is isolated, analyze data to determine the root cause. Reduced failure rates will improve associated expenses, vehicle reliability and downtime. As vehicles age, maintenance expenses increase; time and mileage influence how vehicle components wear. Factors that affect the specific type of maintenance and repair needed:» How vehicles are driven» Where vehicles are driven» Annual/monthly mileage» Job application» Length of service» Vehicle model type Vehicle Maintenance ARI Best Practices Guidebook 2012 16

Best Practice Vehicle Maintenance Maintenance Purchases: Use a vehicle maintenance program to capture detailed cost data, identify trends, consolidate billing, and reduce administrative burden and excessive cost. Repair Approval Guidelines: To manage the number of incoming calls placed to the Fleet Administrator, approval limits should be set relatively high. Generally, $1,000 for cars and $1,500 to $2,000 for trucks is appropriate. Preventive Maintenance: PM should be performed per the specific manufacturer s recommended frequency to reduce costly failures. Consistent adherence to proper preventive maintenance schedules also keeps fuel-efficiency at optimal levels. PM Exceptions: Reports should identify vehicles that fail to have preventive maintenance performed. No more than 10% of the fleet should be more than 30 days overdue with stakeholders being held responsible for compliance. Maintenance Expense Capture: Best-in-class fleets capture maintenance expenses on a cost center, make, model, and component level for every vehicle. Maintenance Expense Monitoring: Compile a reporting package to manage maintenance expenses including most expensive vehicles to maintain, average age of fleet, high frequency of repairs, component failure reporting, and cost center-specific per vehicle cost monitoring. Overall expenses should be reviewed by car fleets annually and biannually for medium- and heavy-duty vehicle fleets. Maintenance Cost Avoidance: Use manufacturers warranties when possible, be aware of service bulletins relating to your vehicles, and satisfy recalls in a timely manner. Maintenance Expense Responsibility: When possible, maintenance costs should be driven to the assigned cost center to encourage responsibility and awareness. DOT Inspection Compliance: Designate a responsible party to ensure 100% DOT inspection compliance through exception reporting. Car Washes: Determine number of allowable car washes in a certain time period. Vehicle Maintenance ARI Best Practices Guidebook 2012 17

Vehicle Remarketing Managing the sale of a vehicle can be a daunting and time-consuming task. Fleets with a large number of vehicles can be overwhelmed with paperwork, lack the required remarketing expertise and suffer from poor vehicle exposure. As a result of not leveraging the proper channels and procedures to remarket vehicles, companies can lose hundreds of dollars per vehicle. Outsourced remarketing services are specifically designed to handle all aspects of the sale process. Because of their expertise in this field, remarketing companies determine the best avenue to process a sale. Some examples are:» Auto Auctions» International Channels» Direct to Dealer» Multiple Internet Sites» Specialized Truck» Private Sales and Equipment (employees, family, Channels Salvage friends, vendors) The sale of a vehicle directly impacts the overall lifecycle cost and a corporation s bottom line. The higher the residual value, the lower the lifecycle cost will be. Choosing a vehicle with a higher projected residual value is the first step to establish a solid foundation for maximized lifecycle costs. Best Practice Order Timing: To maximize resale value, order placement strategies should target vehicles coming out of service between the last two weeks of August and the first two weeks of November. Repair Decisions Prior to Sale: Significant mechanical failures should be reviewed by a vehicle remarketing specialist on a case-by-case basis to determine if repair is warranted prior to sale. Remarketing Paperwork: Accurate communication of vehicle condition and location expedites the sale process and assists with the assignment of the most appropriate means of remarketing. Measuring Sale Performance: Establish an index to consistently measure individual and overall vehicle sale performance (days to sale, sale price, net proceeds, etc.). De-identification: All decals and markings should be completely removed from vehicles during the remarketing process. Employee Sales: Driver sales increase proceeds compared to selling in marketplace. Offer turn-in vehicles to driver and employee base (plus friends and family). Employee Sale Pricing: Pricing should be set at market value plus $300. Discounting of employee sale vehicles has not proven to increase sales. Vehicle Remarketing ARI Best Practices Guidebook 2012 18

Telematics Telematics technology changes almost daily, consistently evolving and adapting to business needs. Best practices for including telematics in your company s fleet scope include determining if the technology is useful for your business application, to vetting available providers and maintenance of the system. Best Practice Determine: Telematics can be used for compliance applications, as a driver behavior modification tool, and asset tracking mechanism. Setting business goals and ROI points before beginning the search for a telematics provider ensures the purchase of only the needed capabilities and value. Research: With hundreds of telematics providers in the marketplace it can be daunting to search for the options that meet your needs. Involving a discovery partner who has experience working with the vendors will make the vetting process much easier and less time-consuming. Data: Integrate telematics captured data as much as possible with other fleet data. Information gathered from telematics devices can be used in many types of applications, including: benchmarking, fraud resolution, and downtime tracking. Communicate: Ensure your corporate policies support the use of telematics. Policies should ban tampering with devices and allow for data collection. Educate your administrative staff and drivers about the purpose of telematics and related expectations. Understand: Once a telematics solution has been selected, undertake periodic reviews of the business drivers, telematics providers, and the devices to ensure that business needs will continue to be met. It is important to periodically identify new ROI target goals that can be accomplished with a telematics solution. Telematics ARI Best Practices Guidebook 2012 19

Depreciation If a standard rate of depreciation existed, it would be two percent or fifty months. At one time, this practice worked well because vehicles typically remained in service for three years or more and the used vehicle market was strong. Today, standard means variable. Today, fleets operate differently. Vehicles average higher annual miles, models continue to change in resale value, life cycles are shorter, and the initial cost of a vehicle continues to fluctuate. Variable rates of depreciation are the new standard. Key factors to consider when determining a rate of depreciation are:» Initial cost» Annual miles» Model selection» Length of service Balancing these factors maximizes cash flow while reducing excessive lease settlement credits or debits. Depreciation ARI Best Practices Guidebook 2012 20

Benchmarking Measuring key cost and performance factor There are many opinions regarding how and what a fleet should measure. Additionally, the various business segments are likely to operate each fleet differently than the other. Most important in the benchmarking process is a balanced set of metrics which should include: Direct Cost (Hard Costs)» Depreciation» Maintenance» Fuel» Funding Costs» Taxes» Accidents» Insurance Indirect Costs (Soft Costs)» Lost Productivity» Lost Revenue» Driver Turnover» Administration Once the metrics have been defined, use the benchmarking process to identify, understand and adopt practices to help your organization improve its performance. To do this, corporations must establish specific data criteria, time periods and cost structure to create a baseline for future comparisons. Data should then be reviewed year over year. A three-year review of data will establish a corporation s own trends so performance can be measured. Internal benchmarking across geographic regions or business units can provide insight into trends and help isolate outliers. Once internal benchmarking processes are in place, firms may look to compare against other like firms. While external benchmarking can result in useful trend information, there are many factors that can cloud data and results, such as:» Vehicle types» Driving habits» Job application» Annual mileage» Age of fleet Different firms may operate in similar markets, but operations are likely to be dissimilar. For these inherent reasons external benchmarking is rarely a complete comparison, though it is a useful tool for initial investigations. Benchmarking ARI Best Practices Guidebook 2012 21

General Disclaimer While ARI strives to make the information herein available for general consumption, ARI makes no claims, promises, or guarantees about the accuracy, completeness, or adequacy of the contents herein and expressly disclaims liability for real or perceived errors and omissions in the contents. General Disclaimer ARI Best Practices Guidebook 2012 22