From TCO to TCM – it’s all about total cost of mobility

Fleet mobility is changing the face of fleet management.

The most common method for analysing fleet cost is Total Cost of Ownership (TCO). This is a robust and known method for calculating the ‘real costs’ of fleet. However, fleets are now switching to TCM, Total Cost of Mobility.

Lets do a quick recap of TCO and the direct and indirect costs of a vehicle:

Direct Costs

Typical cost include depreciation, interest, vehicle repair and maintenance, tyres, fuel consumption, insurance, tax and fleet management fees. The same car in a different country will have different costs due to local taxation.

Indirect Costs

These are harder to quantify but also have an impact on fleet costs. These are typically, fleet management admin/process cost and driver behaviour which can significantly increase fuel cost for example.

So what is Total Cost of Mobility? (TCM)

With TCO, measurement is only based on a car and its usage. There are clear gaps in this method. TCO is quite generic. With Total cost of Mobility, the focus is now on the mobility user and encompasses everything from a car and its related services, to travel management. Essentially how people move from one point to another. TCM is bespoke.

From TCO to TCM – driver mobility is the added question

TCM looks at the various options drivers have and the costs associated with those. Typically these include: hire cars, taxis, flights, trains, car sharing and parking costs. When considering TCM, you need to consider:

  • Usage – driver mobility patterns
  • The business case – with incudes the taxation impact of TCM
  • Implementation – where car policy adjustment may be needed

Total cost of Mobility – your new metric

Before any fleet or driver mobility policy is considered, it is essential to map your current sityaution.

  • Knowing the TCM provides you with greater transparency of mobility expenditure
  • This ultimately shows where the money is flowing and how business travel costs are changing over time
  • Users have the greatest influence on your company’s mobility costs
  • Every element of mobility has its own tax treatment ie. taxes should be take into account to compare the cost of the different mobility elements
  • Taxes can be used to subsidise/incentivise the switch

As your fleet gains more efficient vehicles are your drivers becoming more efficient?

There are many questions surrounding fleet mobility.

Q. What is the most efficient way for employees to travel?
Q. Can your current leasing supplier provide truly transparent strategy advice?
Q. What is the impact on recruitment and retention?
Q. Is a switch really needed in your company?

the mobility decision tree
The mobility decision tree – it all starts with the journey.

The 10 steps to a successful fleet mobility policy.

More and more companies are now looking at how their staff make business journeys. Companies who focus on company cars and vans need to now consider how fleet mobility is the new default position.

This can mean embracing solutions for car sharing, car clubs, bike schemes, public transport, taxis, car hire and planes and even hotels and car parking.

Are you ready to switch?

1. Truly understand your business objectives

What does your company want to achieve? How much is it looking to reduce travel costs and carbon emissions by and over what time period? Your company ethos will certainly come into play. First class travel may not be appropriate.

2. Understand your employee requirements

Launch a mobility survey to help analyse how employees travel to work. Uncover interest in a new policy that initially may not prove popular.

Consider the practical facilities you will need to introduce if you were to introduce a cycle scheme for example. Secure cycle racks, showers and lockers will clearly be a requirement.

3. Consider office location v access to public transport

If your office is located in a city, a car sharing scheme may not work. Employees may find public transport is more convenient. However, a location outside of a city may have more car park space, allowing a car club to operate more successfully.

4. Question the need to travel

Uncovering the reason for travel and how employees travel is key to cost reduction. Many companies have video conference facilities but are often under utilised. Who can use these facilities? Do they sit unused in the boardroom for 95% of the time? What if anyone could use the technology?

5. Decide how employees should book travel

Do your employees book their own travel? Not a major focus of fleet strategy, but you should also consider a dedicated booking system that all employees have to use. This will help you understand at company or group level how your employees travel. This data will clearly highlight any exceptions that can then be acted upon.

Booking systems will also allow you to build in preferred suppliers and generate considerable discounting over individual use.

traffic congestion

Suggested reading: Traffic congestion data highlights need for mobility solutions

6. Determine travel policy restrictions

Advance booking can bring savings but it is balancing act. Your policy should stipulate minimum booking periods clearly exceptions to the rule have to be accounted for. Last minute meetings always happen, but as the culture changes, planning ahead becomes standard.

7. Communicate the fleet policy

Effective communication is essential throughout business, but it is often overlooked and sent out without too much thought. Travel is an emotive topic.

It is essential that employees know what options are available to them and the benefits of doing so.

Regular internal campaigns can help educate and inform employees about new forms of transport technology. For example, electric bikes are becoming increasingly popular in congested cities across Europe.

8. Consider offering incentives and dis-incentives

Sometimes, you need to provide incentives for people to make change in their habits. Travel credits can be awarded when selecting the best travel method. These can be used for personal travel at the weekend for example.

Alternatively, a dis-incentive of lower mileage rate reimbursement can be adopted when employees use their own car for business travel. Reducing grey-fleet use has other benefits.

Companies need to be clear with employees as to the benefits for introducing fleet mobility changes.

9. Don’t forget duty of care

Any policy needs some flex and a sensible approach. Hours of travel still need to be considered and total meeting costs including hotel should considered. For example, it may be better to exceed the hotel allowance if that saves on taxi cost.

10. Get feedback and analyse data

Again, an often overlooked aspect of any new project. Feedback is essential to understand the adoption rates of new travel options. Data is then available to challenge user choices outside what it expected. Analysis of data is essential to ensure that any fleet mobility plan is sustainable and accepted. Only then will driver culture start to positively change.

Get in touch and we’ll guide you through some case studies and demonstrate how our strategy can work for you.

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