Outsourcing Fleet Management: Boon or Bust?

Fortnightly Magazine - May 1 1996
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To an outsourcing company, offering services to utilities to manage their motor vehicle fleets may seem like a simple economic proposition. "We can do it better and cheaper," the outsourcers say.

But it's not that easy. Thorny issues arise (em in economics, quality, administration, and labor relations. And they must be faced head on.

Few utilities today have avoided outsourcing one function or another in the effort to cut costs. Some utilities have been burned. Others learned, went back to working in house, and became more "data driven," like the outsourcers themselves, to track costs.

Many utilities, because of union contracts, can't consider an outsourcing company. In fact, the issue of union/nonunion shops forms a large part of the outsourcing debate. When contacted for their views, several fleet managers showed a reluctance to discuss outsourcing, because of the corollary union issues.

But three of the five fleet managers interviewed by PUBLIC UTILITIES FORTNIGHTLY offered unique perspectives on outsourcing. One, on the East Coast, counts some 2,700 vehicles in his fleet; another, in the Midwest, runs 1,600 vehicles; a third, on the West Coast, operates 6,000 vehicles.

The most evenhanded comments came from the Midwestern fleet manager, who asked to remain anonymous. His fleet employs about 40 workers; his annual budget reaches $20 million.

This manager's fleet recently ran a six-month outsourcing pilot and discovered that outsourcing wasn't paying its way. Outsourcing fees raised expenses. The projected savings of $350,000 weren't reached. The fleet manager told the outsourcer that it would have to pay its way and reduce costs. But a year and a half later, the two parted, on friendly terms.

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