One concern about fleet telematics is whether it is worth the investment. What is the return on investment (ROI)? Early, real-world results indicate that investment in telematics can produce a rapid ROI. In speaking with various fleets, the ROI of telematics is high and usually pays for itself.
Telematics is the integration of wireless communications, vehicle monitoring systems, and location devices. Among early adopters of telematics are fleets such as ServiceMaster, GEICO, Ryder, KinderCare, Wal-Mart, UPS, and long-haul trucking fleets. Currently, there are more than 2.5 million telematics units in service, managing fleet vehicles, mobile workers, trailers, heavy equipment, and other assets. According to a study by C.J. Driscoll and Associates, the market is expected to expand to 5.8 million units by 2009, with revenue growing to more than $2 billion. Companies can see 2-10 times ROI, and one fleet realized 30-percent cost savings.
These fleets are using telematics devices to continuously measure fuel consumption and fleet utilization, plus monitor vehicles and performance. However, the question for many fleets is whether the benefits of telematics are worth the expense. Consider these recent examples: OmniSource had an ROI of about 10 months after installing and implementing a telematics system. Aqua America Inc. experienced a 187-percent ROI on their telematics pilot, while Cox Enterprises found its ROI to be less than one year. These fleets are using telematics devices to measure fuel savings, fleet utilization, and monitor vehicle performance, and are documenting fleet cost reductions.
Cox Sees ROI in One Year
Utilizing @Road, Cox Enterprises, Inc. has outfitted 2,500 of its 15,500 vehicles with telematics. According to Patsy Brownson, fleet manager, the units are deployed in the Cox Communications Division of Cox Enterprises.
Cox has been utilizing telematics in its fleet for one year and is still deploying the devices. With telematics benefitting automatic vehicle location and engine diagnostics, the company has found the ROI to be less than one year.
"Through the utilization of the system, we are seeing reductions in fuel consumption and vehicle wear and tear," Brownson said. "In addition, we have experienced significant operational efficiency improvements in several areas of our business."
In support of Cox’s commitment to the environment, the telematics devices have also reduced carbon emissions through reductions in vehicle idle time as well as more efficient routing.
Aqua America Inc. Earns 187%
Aqua America Inc. utilizes telematics on 325 of its 1,120 vehicles, including large trucks and heavy-duty tanker trucks with compressors. According to Larry Finnicum, supervisor of analytics and logistics, Aqua America, "We have tried to isolate a portion of our fleet to do a case study, to see what the benefits are of the program. We isolated four of our states to see what we could gain."
Devices were deployed on 12 vehicles from January through April 2007, with the remaining 313 vehicles receiving devices in May 2007.
"We use telematics for an overview of where our fleet vehicles are, diagnostics, miles driven, idling percentages — all the little indicators that tell us how we are using our fleet," said Finnicum.
Regulatory compliance issues in the water product industry prompted Aqua America to take telematics a step further. Working with GE Capital Solutions Fleet Services, Aqua America determined how many times a unit went to a specific location, such as a well or building.
"Because we are governed by regulatory bodies that tell us how many times we need to go to the different plants and wells to test chemicals and pressure, we can actually show if we are hitting those marks or not. It helps with our regulatory compliance and labor efficiency, and helps with route optimization," said Finnicum.
During the telematics pilot, Aqua America realized an ROI of 187 percent. "My gut feeling is that the system is paying for itself," Finnicum said. "It has been a very worthwhile investment. We have seen a reduction in miles driven, reduced wear and tear, and more. Very positive things are coming out of the program. Seeing it from my level, it has been a success."
OmniSource ROI in 10 Months
In late 2005, OmniSource Transport finished installing telematics devices on its 212 vehicles. Working with NetworkCar, the company wanted to monitor driver activity and reduce idle time, out-of-route stops, unjustified lost-time pay requests, improper transmission shifting, and speeding violations.
According to Mike Moran, corporate transportation manager for OmniSource, "We originally projected a ROI of about 18 months. However, after installation and implementation, we found so many ways to use the system for improving operations, our actual ROI was about 10 months."
University Fleet Increases Safety
Fleet Manager Patrick Barrett, CFM, manages 870 vehicles for the University of Nebraska-Lincoln campus, with 110 units equipped with telematics.
The vehicles utilize car chip recorders in all large passenger vans (12- and 15-passenger) and daily rental vans. The University has been using this technology since June 2005.
Telematics helps the University monitor the speed of the large passenger vans (maximum speed of 65 mph) and hours of operation (no more than 4 hours between 10 p.m. and 7 a.m.), validate speeding vehicle complaints (more often uncover erroneous speeding complaints), and track the start and end time for daily rental vehicles.
"We can’t put a price on safety. Having drivers know we check their driving history helps promote compliance with our safety policy," said Barrett. "The car chip has been well worth the investment. The per-unit cost is low, it can be moved between vehicles, and it is very accurate. Each driver signs a form indicating the vehicle ‘may’ be equipped with a data recorder, which increases our vehicle coverage, even though not all vehicles are equipped."
Large passenger vans not based at the university’s home location, are equipped with real-time GPS tracking units. While these units do not provide the detail received from the car chip, they do allow monitoring speed and hours of operation, Barrett said.
Fleet Management's Point of View
The term “telematics” can mean different things to different people. Some would state that telematics is location monitoring; while others would contend that it is vehicle condition monitoring.
Quite simply, “telematics” is presenting information via a telecommunication medium. This type of solution falls in the technology category of mobile resource management.
“The impact of telematics solutions on mobile resource management is often underappreciated. While the term “telematics” is most often used in the context of vehicles, it really should be synonymous with the management of all mobile resources,” said Amit Jain, telematics product manager for GE Capital Solutions Fleet Services.
According to Jain, a former telematics industry analyst, recent industry reports have revealed that companies that leverage telematics solutions have, on average, realized such gains as 25 percent improvement in number of daily jobs completed, 27 percent higher fleet utilization, and 13 percent reduction in fuel and maintenance costs. GE customers have not only shown similar productivity improvements and operational costs savings, but consistently reported ROI of 2 to 15 times based on the modules adopted.
“Telematics solutions not only provide actionable intelligence on the location of a vehicle, but also the condition and the use of a vehicle. Such information enables a critical view into the operator behavior and business processes,” adds Jain. “Fleet-related operational costs savings alone justify the adoption of a telematics solution. However, once one starts taking into account the productivity and efficiency gains as a result of telematics, it makes adoption a much easier decision.”
Lisa Askin, vice president, telematics for PHH Arval, believes telematics provides a unique insight into the performance and use of the vehicle and field personnel behavior. It answers questions that are not possible with telematics such as:
- Is the proper amount of time being spent with the right customers?
- Are vehicles being used to their fullest capacity?
- Are they being used inappropriately?
- How does actual data compare to sales and service metrics and how can better results be achieved?
“The best telematics services provide much more than automotive vehicle location technology,” according to Randy Read, VP Sales, Telargo, a telematics service provider. Fleet telematics services are often described as mobile asset management solutions. Such solutions enable customers to streamline operations and maximize the performance of field assets, including vehicles, machinery, trailers, and the drivers/operators assigned to them.”
The ROI of telematics is currently a hot topic in the fleet industry. As more fleets utilize the technology for extended periods of time, data is becoming available as to the actual dollar benefit of the programs.
“Most companies will realize an ROI with telematics in six months to a year,” Askin said. “However, it varies greatly depending on the type of application a company chooses to focus on.”
Most companies today use telematics for measurement and visibility. However, the day is not far when this technology will enable intelligent decisions, according to Jain.
Telematics is worth the expense. Initial pilot programs among fleets say so. If you are finding it difficult to generate year-over-year incremental cost savings, then perhaps telematics is something worth investigating.
Originally posted on Work Truck Online