Savings: 5 tips for when you’re asked to do the impossible
Entering what is expected to be a prolonged period of inflation and downwards adjustment of global economic growth, procurement is facing an impossible task: generate savings while buying more vehicles (and other products) that have increased in price. In this context, dramatic measures are inevitable. Either the company accepts increasing OPEX, due to sustainability and the overall price surges, or declines and implements policy-related savings. That being the case, here are a few suggestions.
Smart-pause puts the brakes on electrification, unless it’s significantly cheaper over one life cycle or mandated by regulation or when it does not make sense from a sustainability perspective (i.e., in countries with a poor electricity efficiency factor).This may not be an easy sell, especially as the TCO of EVs continues to evolve in the right direction, but the bottom line remains that electrification can be expensive and tough on the P&L. The additional cost of home and office chargers, the mark-ups of fast charging networks versus regular chargers, higher catalogue prices and lack of affordable (smaller) EVs all lead to an OPEX increase.
Today’s cars and lease contracts are more expensive than the cars and contracts they replace. Additionally, it’s likely that employees will be driving a smaller car, or one with less equipment. Extensions of the current lease to 72 months or even 84 months, of low mileage vehicles, is a technique that could create budget space for vehicles that need to be replaced.
Standardising on model and specifications, and treating company cars as you would laptops, for example, as a commodity, is a potential strategy for cost cutting. In this way, vehicles should be based on a “fit-for-purpose analysis”. Policy adjustment is required for this, but it’s impossible to deliver savings without policy changes at this point in time anyway.
From Car to Car+
Most (European) countries are promoting one or more mobility alternatives with tax incentives. As lease contracts are becoming more expensive, you could consider replacing part of the expenditure with an alternative that offers more tax benefits. This could be a car plus a public transport subscription or an e-bike.
Corporate car sharing
Often discussed, rarely implemented, corporate car sharing still offers employees access to a company car, but not a dedicated company car. Corporate car sharing allows for heavy commoditisation, utilisation-based replacement cycles and accelerated electrification. It’s a major policy shift but inevitable in the long-term.
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These recommendations are tough to implement across a multi-country fleet with different legislations, employment contracts and local practises. Nonetheless, there’s little hope for today’s fleet model to survive. Therefore, test some initiatives, learn from them and combine them into a solid and futureproofed procurement strategy.
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