Analyses
20 avr 22

The big question: to bundle or unbundle?

What would be a good move for vehicle fleet management amid the new challenges and trends piling in front of fleet managers? 

Following the pandemic and disruption in supply chains, fleet managers are facing volatile prices while trying to incorporate electrification and new technologies into their fleets. Especially for large and international fleets, efficiency in fleet management becomes an even greater challenge while trying to cope with different geographies. 

All these factors push the idea of bundling into view of fleet strategy, which may offer many advantages but also disadvantages if not chosen as the right option for a fleet. 

Why would fleets choose to bundle? 

Jaap van Daalen, Commercial Director of Fleet Support, defines bundling as: the sourcing strategy to combine all (or as much as possible) related services and equipment in the lease contract, with the leasing company, like a “One Stop Shop”. The bundling may include a wide variety of services and equipment like fuel and energy, charging stations, insurance, rental cars and roadside assistance.

“Companies decide on this strategy because it offers administrative, managerial and sometimes financial benefits.” says van Daalen. “Additionally, the leasing company becomes the single point of contact, and all employees will have the same service package; therefore, it also makes communication easier for both employee and employer. Combined with a single vendor strategy, the positive effects are the biggest because the leasing company can then also take over many operational fleet management activities.”

What are the bonuses and negatives of bundling? 

According to TraXall International, a global fleet and mobility management and administration company, there are critical advantages of applying a one-supplier strategy in the fleet sector. At the same time, disadvantages come with the dependence of one supplier. TraXall lists the advantages and disadvantages of bundling as follows: 

Advantages: 

  • It is easier to build a relationship with a single supplier than multiple suppliers.
  • The partnership approach can help build trust and define and pursue common goals
  • Integration of systems can be easier with a single supplier.

Disadvantages: 

  • Lack of or no flexibility in case of shortages or market changes.
  • Higher costs due to lack of competition: The supposed economies of scale that otherwise come into play with larger purchases do not apply in the financial sector (leasing) (max. at the initial price).
  • No comparison possibilities.
  • Lack of market visibility and innovations.
  • Cost of change if the supplier is nonperforming (economically or qualitatively).

Focusing on the core

Bundling may help fleets integrate software and telematics solutions and gain the chance to focus on driver training and increasing efficiency at the core. Benefits include: 

  • Bundling all electronic logging and telematics can enhance transparency in a fleet by collecting all vehicle and driver data on a single platform. 
  • Scalability would also improve by gaining control over big data by getting insights through analysis.
  • Reducing costs: improved driver behaviour and vehicle performance would lower downtime, accidents and fuel usage.
  • Increased efficiency: using a single platform simplifies fleet managers’ work and makes reporting easier for drivers. 
  • Accessibility: fleet managers can track and monitor all fleet operations from a mobile device, regardless of the location.
  • Better reporting: bundled telematics solutions allow drivers to report through a hand-held device. 

What about unbundling?

In unbundling, fleets work with several suppliers for their requirements regarding services and equipment, including finances, maintenance, services and tyres. 

Unbundling gives more control over suppliers, and lets fleets choose the leasing companies through bidding. This strategy gives fleet managers a comprehensive view of suppliers to spot the negatively impacting efficiency while increasing transparency over costs. Nonetheless, unbundling may become a dilemma, especially for smaller fleets because it requires more resources for fleet management, having an eye on each supplier and catching up with all the changes in the market. 

How shall fleets apply bundling to gain efficiency? 

Whether the priority is reducing costs or achieving better supply chain management, bundling or unbundling may cause inefficiency if the pre-decision-making process is not handled thoroughly. 

Van Daalen says becoming increasingly dependent on a leasing company may not offer the best service package and prices. Therefore, he offers two important steps before making a decision: 

  • Analyse all effects (both in service and in the total cost of ownership) and consider the best sourcing strategy for your company.  
  • In the case of choosing bundling and a single vendor, fleets must be aware that negotiating and implementing an independent price guarantee system with the leasing company is necessary. Thus, fleets can prevent lease prices from increasing more than necessary. Otherwise, the cost of bundling can easily outweigh the benefits.

Focus on efficiency

TraXall advises ensuring efficiency and considering finances diligently to benefit from bundling: Bundling individual services provides more resources and efficiency through one central point of contact for all services, one point of contact and one supplier invoice. 

Fleets can also negotiate for better conditions when bundling services together because a leasing company has additional income from additional services. However, if a leasing company doesn’t provide a servicing and maintenance charge, the financing costs may be higher, according to TraXall. 

Fleets must ensure the effective utilisation of the actual use of bundled services and keep this as the most important factor for their bundling strategy.

Image: Shutterstock

Authored by: Mufit Yilmaz Gokmen