24 Nov 23

Fleet managers explain how net zero is changing procurement

The electrification of vehicles is forcing fleet procurement executives to change strategies, establish new spend categories and find new suppliers, according to experts at the International Fleet Managers Institute meeting in Lisbon, Portugal.

Fleet managers and key suppliers emphasised how the pursuit of decarbonisation goals is not simply a case of finding vehicle manufacturers capable of supplying cost-effective vehicles, but also of building a complete ecosystem to ensure vehicles can fulfil their operational business requirements.

Amplifying the challenge is the sheer pace of change.

Xylem opens car choice list

Water solutions company Xylem provides a prime example, accelerating its fleet electrification goals from grass roots initiatives in 2020 to a company-wide ban on ICE passenger cars by 2022.

“From a sourcing perspective we found that we had to completely open up our OEM choice list,” said Andrea Montuori, procurement category manager at Xylem (pictured above).

By the end of this year more than 60% of the company’s European fleet will be electrified, and 99% of vehicles on order have a plug. These include both battery electric and plug-in hybrids, although the company is reviewing the TCO and CO2 performance of PHEVs.

PHEVs under threat

“If the EV TCO and charging infrastructure are there, we are thinking of banning PHEVs, and going full electric,” said Montuori.

She added that Xylem is also exploring the opportunity to electrify its light commercial vehicles, although this remains “a challenge.”

Xylem holds quarterly discussions with the company’s fleet community to discuss electrification issues and problems, as well as round tables with drivers to better understand their feelings towards zero emission vehicles.

The TCO of electrified vehicles has been a constant subject of discussion, and while costs have increased Montuori said the company had achieved “amazing savings on fuel,” and “managed to keep our depreciation in check by continuously reworking our car list by country every six months, and do calculations on our car lease by term and mileage every 12 months at least, and we have two leasing companies that we work with and we continuously challenge the choice of vehicle and lease price of the monthly rental.”

AbbVie to cut CO2 by 42%

Healthcare company AbbVie is another business with a steep decarbonisation trajectory to reduce its corporate CO2 emissions. Fleet will play a key role in achieving this target, said Wojciech Regucki, EMEA fleet manager, AbbVie (pictured above).

He said CO2 emissions are a key selection criterion for AbbVie when choosing OEMs, alongside TCO, safety, innovation and meeting driver needs.

Since 2015 AbbVie has rationalised its fleet from nine leasing companies and 29 manufacturer brands to two leasing companies and five OEMs today. Regucki said AbbVie had relaxed its company car choice list a little, with local operations able to add a ‘tier 2’ supplier.

“Each affiliate can select one Tier 2 manufacturer in addition to Tier 1, when coverage or service network are not sufficient or they offer a better TCO,” said Regucki.

Charging ecosystem

In this fast-changing world, IFMI delegates heard how solutions for home, workplace and public charging are vitally important to the successful transition to EVs.

In an ideal world, fleets could rely on one supplier to oversee home and workplace charge point installations, provide access to public charging networks and consolidate all charging data into meaningful management information, said Fabio Carello, senior international consultant, Ayvens (pictured below).

In the real world, however, while fleets can establish an electrification strategy at a global level, the operational implementation is likely to be at a local level, said Carello.

He outlined a series of service level agreements that fleets should consider when appointing a charging infrastructure supplier, such as the ability to on-board third party hardware, provide round-the-clock driver support, deliver back office integration and consolidated reporting, and potentially lay the foundations for rebates and discounts on charging infrastructure as national and international volumes rise.

These SLAs should be underpinned by key performance indicators, added Carello, covering areas such as on-time and first-time-right installations, as well as driver satisfaction.

Sourcing strategy

While fleet electrification might involve new products, services and suppliers, in essence it demands the same disciplined approach to sourcing as other procurement categories said Rory Mackinnon, sales and marketing director of Holman (pictured above).

He identified five key areas to master in order to ensure a seamless transition from contract to implementation.

  1. Clearly defined objectives

“Without the defined and agreed objectives, both parties have the opportunity to ‘creep’ or enhance/devalue the offer,” said Mackinnon.

  1. Change management

Assembling an implementation team, allocating the appropriate resources and devising a delivery plan are critical to success.

  1. Team and stakeholder management

All relevant parties, from board level to drivers have to be engaged in the project; the greater the buy-in, the smoother the implementation. “Change management is about minimising resistance,” said Mackinnon.

  1. Communication

Clear, regular communication is central to securing buy-in from all levels of the organisation.

  1. Continuous monitoring and evaluation

“Regularly reviewing, making adjustments and evaluating will ensure you hit the finishing line,” said Mackinnon.

Authored by: Jonathan Manning