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How to Prepare Your Car Fleet for External Factors such as WLTP

How to Prepare Your Car Fleet for External Factors such as WLTP

WLTP is firmly on the horizon and looming large. As of 1st September 2018, all new car registrations will need to issue CO2 emission based on WLTP (Worldwide Harmonised Light Vehicle Test Procedure) rather than the previously applied NEDCA.

A few months ago we talked here about the impact WLTP will have on company car fleets, suggesting the following three challenges:

CO2 Impact

The movement of official CO2 emissions data for a car fleet will impact a company’s carefully constructed fleet CO2 emissions target

Capital allowance claims

It will impact capital allowance claims as cars will move above the new threshold for claiming the standard rate of 18% which, as of the introduction, will be 110 g/km.

BiK Impact

In many cases, NEDC2 will effectively move the BiK of a car two brackets higher.

Unless a company has very tight control on their car fleet structure and understands the impact of these changes to a granular level, it is likely that they attempting to manage these impacts by currently observing two possible directives on company car orders:

  1. as only a selected few manufacturers have released their completed WLTP emissions figures, issue a restricted company car order list, covering only those that are WLTP compliant; severely limiting employee choice.
  2. allow older models of cars which haven’t been tested for WLTP, whilst anticipating the possibility of a negative impact on BiK tax and employers NI contributions when the actual WLTP figures are released. This could result in a hike in personal taxation and/or a request to cancel the order.

Whilst the above two solutions allow a business to navigate the uncertainty of WLTP, they are not ideal and could cause confusion, employee resentment and cost issues.

To be better placed to deal with the impact of WLTP many businesses employ the services of a Fleet category partner. A fleet category partner operates as client-side support, managing the supply chain and ensuring a helicopter-view of the whole fleet dynamic and the supply chain.

Having a completely transparent overview of the car fleet, with a firm grip on costs, compliance and replacement cycles, means the business can understand the sensitivities of the fleet to external factors such as WLTP, resulting in quick and informed decisions.

So rather than taking a compromised approach to managing WLTP, like the scenarios above, having a detailed understanding of the fleet means strategic decisions can be made that will result in the best possible outcome.

A number of our clients who are dealing with WLTP are using their transparent view of its impact to manage their order procedures accordingly, putting directives in place that enhance the medium and long-term benefit to the employee and the business.

Ultimately, having a fleet category partner allows a faster, better informed and more controlled policy procedure that can react accordingly to extraneous factors such a compliance, taxation and cost increases.

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Imminent IFRS16 Accounting Standards Will Impact Car Fleets: Make Them Work to Your Advantage

Imminent IFRS16 Accounting Standards Will Impact Car Fleets: Make Them Work to Your Advantage

The new IFRS16 accounting standard is effective from 1Jan 2019 and will affect publicly listed companies that operate a leased company car fleet. It is broad reaching legislation that fundamentally changes the way organisations report their leases, forcing them to be recognised under an on balance sheet accounting model.

Currently such leases are classified as Operating leases and are kept off balance sheet. These Operating leases’ will now only apply to leases which are 12 months or less or where there is a ‘low value’, which is generally accepted as less than $5k.

Consequently, companies who use a lease funding model to procure their car fleet are now obliged to report this information in a different, more sophisticated manner. Currently the leasing contracts can be reported on the P&L account, meaning there is no need to have such a detailed insight into the data held within each contract.

And here is the rub.

By moving the reporting to the balance sheet, companies must now have a far more robust leasing information system.

Many of our clients are working with their accountancy partners to establish a robust means of recording data on all leases throughout their business.

Our clients have the substantial challenge of understanding what specific values they need to capture in the first instance and thereafter what may change, all proving fundamental to the design and build of their ‘lease information systems’.

Discipline issues

What has taken many by surprise, is the huge variation of lease structures and reporting practices around EMEA, limiting the granularity of reporting in some cases to the lowest common denominator. It is not unusual in some less developed markets just to receive a single monthly rental figure which includes all services whereas, in others, finance and services are itemised to a granular level.

Also, what is evident, is that most businesses up to this point, have lacked discipline and structure when it comes to recording their vehicle lease contract arrangements with their suppliers.

At best, these are dispersed across the region and, at worst, contract documentation cannot be located at all.

And the retrieval of this data from across the EMEA region is perhaps the most challenging aspect of all. Communicating with sometimes more than 80 suppliers from 30 plus countries, and attempting to extract the required data in a standardised format, is no mean feat.

The idiosyncracies of vehicle leasing also add complexity to the recording and reporting process. Unlike equipment or building leases, where the rental and term remains static, vehicle rentals and end dates can change due to mileage variations. So, not only do the supply chain need to be engaged once to collect the initial data, they also need to be kept engaged so changes in rental or terms can be accurately reported.

Collecting lease data accurately and timely will be critical to the successful adoption of IFRS16 reporting. The challenge however, as we have found, is that a complex supply structure creates a complex array of data formats. And where corporates often have centralised structures with scant resource, it is very difficult to maintain dozens of supplier relationships at the right level to retrieve and manipulate the information to the right standard.

This ability to accurately collate and manage lease data is where Fleetworx clients have a substantial head start on their peers. As part of our “Fleet Category” management services, Fleetworx holds relationships with all the fleet supply chain on ours clients’ behalf. Which means we remove the pain of collecting critical contractual data and monitoring any contractual changes due to mileage variations or otherwise. Crucially, this data is also validated, cleansed if necessary and stored in Fleetworx Centrax database.

The value for our clients comes from the single report we produce which consolidates their lease data from across the EMEA region: helping them manage their “lease information systems” more closely, more accurately and less painfully.

We consider the introduction of IFRS16 an ideal opportunity for fleet owners to align their reporting systems, develop closer relationships with the fleet supply chain and gain a more thorough understanding of the fleet category cost. By its nature this then provides an excellent opportunity to deliver best practice and savings.

With support from a professional category management partner like Fleetworx, the task of developing a birds-eye view of the fleet category can be hugely simplified, whilst the rewards can be significant.

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How Structured Company Car Schemes Can Improve Employee Wellbeing

How Structured Company Car Schemes Can Improve Employee Wellbeing

The recent REBA crafted report on wellbeing clearly demonstrates the growing strategic importance of wellbeing strategies and services. There is strong evidence of the high profile that wellbeing now enjoys at board level, and the subsequent clear recognition of the link between employee wellbeing and recruitment and retention, employee engagement and productivity.

It is the firm belief of many REBA members, and report contributors, that a strategic and properly measured wellbeing programme can make a powerful impact. REBA expect the growth of such programmes to soar in the short to medium term, with 45% of companies researched already having a defined wellbeing strategy, and 49% of those without planning to introduce one this year.

Stressful working environments (73% of respondents said a high-pressure work environment is the biggest threat to staff wellbeing) and personal money concerns are widely acknowledged as key wellbeing challenges. As such, companies are keen to explore mental health and financial wellbeing campaigns that can alleviate these pressures and contribute positively to their wellbeing efforts.

Employee mobility and the provision of mobility solutions is one such area that can have a big impact on workplace stress and financial anxiety. Company cars remain a popular benefit perk for many employees, however the industry is seeing a small but growing shift toward cash alternatives, relieving the employer of much responsibility and shifting it to the employee. And in the confusing and predatory world of car retailing, this is not a recipe conducive to employee wellbeing.

Most fleet owners manage their car selection design quite tightly so they can exert some control over their fleet and the type of vehicles driven by their employees. A well organised and correctly specified car fleet provides a more controlled environment for both the employer and the employee; assisting safety, comfort, and productivity.

Company Car Support Network

As the fleet supply chain exists to manage the vehicle, and support the driver, it also removes the personal burden of responsibility for the upkeep of the vehicle, allowing the employee to be free from the distractions and compromises of personal car ownership. However, once this support network is removed and the requirement to source, maintain and eventually dispose of a personal car, albeit with employer financial support, becomes the responsibility of the employee, then the convenience of a company car compared with a cash allowance is drawn into sharp contrast.

Wellbeing implications

If a company decides that a cash allowance is how they wish to mobilise their workforce then there will be a number of implications that could impact employee wellbeing:

Unfamiliar responsibilities
Switching people into a cash allowance scheme will expose them to a number of situations with which they may not have been familiar for many years, such as financing, insurance, maintenance, all of which can cause anxiety, become huge distractions and create financial challenges

Financing arrangement
A personal vehicle needs to be sourced and, unless the employee has the luxury of being able to afford to buy a car outright, it is likely it will need to be financed. (this also raises the issue of exerting some control over the quality and age of the vehicle being used) Car purchases could be private or most likely Personal Contract Plan (PCP) or Personal Contract Hire (PCH) schemes, for which there is usually a deposit required. A cash allowance will provide a monthly fixed sum which can be used to cover the financing payments,  but it will not cover the deposit; something that will need to be covered by the employee.

Minimum term commitment
If the car is to be financed there will be a minimum term to which the employee will need to commit. If their employment circumstances change then they will be committed to the term or likely face early termination penalties.

Insurance
Insurance will need to be arranged by the employee and as most employees may be coming off the back of a company car (it is often difficult to prove no-claims from a company policy) they may struggle to negotiate cost-effective and appropriate levels of cover. And in the event of a claim the typical excesses of £300-£500 need to be paid by the employee.

Maintenance
Company car drivers have the luxury of a centrally applied maintenance arrangement. MOT’s are covered, servicing is just an email away, tyres replaced at the drop of a hat. Dealing with these without the support network of the employer can lead to many hours of sourcing, negotiating and appointment making, as well as creating a serious concern over its financing.

Roadside assistance
Company-wide roadside cover is universally applied to a company car fleet, whilst cash allowance drivers fend for themselves. It is not a particular onerous task to appointment a roadside recovery partner, but it still requires effort and expense.

In-Life and End-of-Contract Damage
If indeed the employee arranges their vehicle on a PCP or PCH, unforeseen operating costs such as damaged tyres and wheels, minor scratches and non-routine maintenance costs are typically not covered under either the maintenance or insurance programmes. Employees will be liable to a recharge if their vehicle is returned with what is classed as unfair wear and tear, a set of tyres for a typical fleet car can cost between £800-£1000.

Excess Mileage
When the employee negotiates their vehicle financing they can be easily lured into an attractive deal with relatively low contract mileage, often overlooking the punitive penalties that are imposed if they exceed the contracted amount on vehicle return.

And even the offer of a cash allowance can have consequences for company car drivers. If a company car driver has deliberately chosen a more energy efficient car with a lower BiK tax point, and their employer offers a cash alternative, then the employee will be charged at the higher of the cash or car benefit value. A consequence that the driver may not even be aware of, and ill-prepared for, until they get their tax bill.

The positive impact on employee wellbeing of a well-designed and carefully administered company car programme compared to a cash allowance scheme should not be underestimated. Personal car ownership brings with it a whole host of challenges that employees need to manage, adding anxieties and pressures that can be hugely distracting and stressful.

Fleetworx can design and implement a range of company mobility solutions that will deliver long-term savings and provide a structured framework of employee mobility that can deal with the ever-changing demands of modern business.

To understand more visit www.fleetworx.com.

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New Real-World CO2 Emissions Testing Set To Affect Company Car Taxation

New Real-World CO2 Emissions Testing Set To Affect Company Car Taxation

Have you heard about the new emissions testing regulations that will ultimately affect car tax?

No? Can’t say I blame you.

Without much of a fanfare, the launch date for the new testing regulations has been and gone. As of 1st September, the new vehicle type approval emissions tests have switched from the 80’s throwback NEDC (New European Driving Cycle) to the ultra-modern WLTP (Worldwide Harmonised Light Vehicle Test Procedure).

And frankly, it is probably about time.

Although the test remains lab-based, they will better replicate the actual real-world driving conditions and provide a more accurate indication of fuel consumption and emissions.

With more powerful vehicles, the introduction of speed cameras and road furniture, the year on year increases in traffic numbers and the inevitable stop/start motorway routines that this has instilled, the dynamics of driving are now very different to 35 years ago. And until now this has not been accurately reflected in CO2 values.

Enter stage left … the WLTP.

To create more realistic driving conditions the new test will have, among others:

  • higher average & maximum speeds
  • longer test distances
  • more dynamic & representative accelerations and decelerations
  • greater range of driving situations

Although the tests are now more reflective of what happens on our roads, there will, in fact, be an impact on the recorded CO2 emissions. Quite expectedly, the CO2 emissions will be higher than under the NEDC, with some reports suggesting an increase of over 10%. This will have a threefold impact on car fleet management.

Firstly, the movement of official CO2 emissions data for a car fleet will impact the carefully constructed fleet CO2 emission targets.

Secondly, it will impact capital allowance claims as cars will move above the new threshold for claiming the standard rate of 18% which, as of 2018, will be 110 g/km.

Thirdly, it will effectively move the BiK of a car two brackets higher.

Although the EU has suggested the scheme should not be used as a tax grab for national governments, there needs to be an alignment of CO2 thresholds with the introduction of the WLTP. It has been announced that the regulations will not impact directly on car tax until at least April 2019. This is the date for which HMRC have suggested the exiting NEDC figures will continue to be used for taxation purposes. And they have also suggested the review of CO2 thresholds to be used beyond that date will be announced in the Nov 2017 budget.

And of course it is not just the potential increased personal taxation forced upon an employee who may be renewing a like-for-like vehicle but with a new WLTP grading, there is also the potential increased employers NI contributions. Using a Fleetworx client as an example, moving a fleet of 389 cars two BiK brackets will impose an additional £35,000 in employers NI contributions.

So, although the introduction of WLTP is universally welcome, it is basically a watching brief between now and the various staging dates to keep track of looming administrative and cost challenges.

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Plug-in hybrids not being plugged in? Real world data supports need for plug-in hybrid fleet strategy.

Plug-in hybrids not being plugged in? Real world data supports need for plug-in hybrid fleet strategy.

We have written recently about the suitability for fleet of EV and plug-in hybrids, and how it is important to develop a deployment strategy considering the following issues:

  • company objectives
  • tax position
  • technology
  • driver behaviour
  • health and safety
  • range
  • image
  • future proofing

One of our main concerns was driver behaviour and how this impacts on real-world fuel consumption.

A plug-in hybrid can only deliver its dual fuel benefits if it is, well, plugged-in.

There are countless stories within the trade of charging cables for plug-ins never having been removed from their plastic wrap and it appears these stories are not just stories, but are being played out in real-life.

TMC have conducted a recent study into the fuel efficiencies of plug-in hybrids and discovered that they are in fact among the highest polluting vehicles in the fleet if not used correctly.

Using the data captured in their Mileage Capture & Audit system, they analysed seven PHEV models, finding the sample vehicles achieved an average of 45mpg, a huge 65% lower than their advertised average consumption of 130mpg.

The subsequent CO2 emissions averaged at 168 g/km, again, in sharp contrast to the advertised CO2 emissions of 55g/km.

And it is the advertised consumption and emissions rates that are leading to claims of “fake hybrids”, allowing such vehicles to sit within the low emission category, attract lower BiK rates and offer conscious-satisfying CO2 savings.

The ”fake” status means that the BiK advantage is of genuine appeal to company car driving employees, whilst the employer is stuck with the challenges of the real-world fuel consumption resulting in higher than expected fuel costs and whole life cost challenges.

Belgium is one European country that has decided to tackle this issue head-on and is removing the friendly tax status of plug-in hybrids. From 2020 the financial benefit will switch to the ratio of the battery capacity to the weight of the car, meaning those cars running on a small battery will become significantly less attractive. UK is also set to follow suit as in 2020 the BiK will be linked to the actual electric-only range.

Plug-in hybrid discipline

In the meantime, as plug-in hybrids remain a popular choice for employees (plug-in hybrids sales for Jan-June 2017 up 14% on same period 2016) it is in the interest of the employer to instill charging disciplines that encourage and increase plug-in usage:

Mileage allowance rates

  • consider utilising sliding mileage allowance rates based on journey length, giving lower mileage rates for shorter journey to encourage the battery to be sufficiently charged

Workplace charging

  • take advantage of voucher scheme offering up to £300 toward the installation of each workplace charging socket
  • place charging point stations in advantageous parking positions to encourage charging
  • reward work place charging by identifying charging vehicles and assigning “charging points”
  • arrange charging etiquette to avoid “charging point congestion”

Homeplace charging

  • support employees in applying for a grant of up to £500 toward the cost of installation of a home charge point
  • encourage the sign-up by explaining the process
  • support the sign up by having clear health and safety guidelines
  • reward the sign-up by offering relevant incentives
  • consider interest-free loans to help with home charge point installation costs
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Electric cars in company car fleets – questions you need to ask.

Electric cars in company car fleets – questions you need to ask.

Recent news emerged from Denmark that sales of EV were down 60% against Q1 2016. Denmark is the only EU country that has experienced a drop in EV sales, indeed data from the European Automobile Manufacturers Association (ACEA) shows that sales of electric vehicles rose by 30% across the European Union and by as much as 80% in Germany and Sweden. So, why such a significant drop in Denmark? Well, it appears that Denmark has decided to phase-out the tax-breaks for electric cars and plug-in hybrids, seemingly making electric far less appealing to drivers when faced with the full price tag.

This does bring into sharp focus the actual market appeal of driving an electric vehicle. What is the market saying about the desirability of the product if sales drop so rapidly once a financial incentive is removed? Is the product actually delivering the driving experience that drivers desire, and how does this driving experience translate to the practicalities of driving for work?

The introduction to a car fleet of electric and hybrid cars needs to be a considered strategic choice. To ensure that it is right for your business it is important to consider the following

Company Objectives
It is important to consider how the fleet strategy complements the corporate objectives of the business. If the business has a robust Corporate Social Responsibility program, and a commitment to managing carbon footprint, then clearly the appetite for ultra low emissions vehicles will be strong. If the business is not particularly carbon intense then the benefits of operating a low carbon car fleet may not be as appealing.

Tax Position
Currently, the UK government offers grants of up to £4,500 for pure electric vehicles such as BMW i3, Ford Focus Electric and Mercedes-Benz B-Class Electric Drive, and up to £2,500 for low emitting hybrid vehicles such as BMW225xe, Mitsubishi Outlander and Toyota Prius Plug-in. These are powerful incentives and produce attractive options for fleet drivers, however, how long will these fiscal incentives be in play? Is the Danish example the thin edge of the wedge toward a looser attitude toward the value of electric and/or hybrid vehicles?

Technology
In early adoption markets such as EV, technology changes at a pace. It will be prudent to consider the impact of rapidly advancing technologies and the pace with which early models become obsolete. This uncertainty can have an impact on the re-marketing opportunities, as lack of knowledge in the marketplace and swift technological advances can impact the residual value; which needs to be considered when calculating the TCO.

Driver Behaviour
Like it or not, people can be lazy and will often take the route of least possible resistance (no pun intended!). Unfortunately, this means the frequent charge of an electric/hybrid vehicle will often be considered a resistance and be side-stepped. Although this is not very productive for a pure electric vehicle, a hybrid can run on fossil fuel alone, so side-stepping the charge does not cause the driver any real issues. Indeed, experience tells of charging cables remaining in their plastic wrap for the life-cycle of the car. However, depending on the fuel strategy of the business, the failure to charge the vehicle will have implications. If a driver is less than enthusiastic about recharging the battery of a hybrid vehicle then it will operate the petrol engine on all journies. As is known, this is not as effective as a conventional diesel engine. If a company covers all fuel costs (personal and business) then poor charging discipline will result in increased fuel costs, whilst a company with generous mileage rates of 45p per mile can work in the favour of a committed electric vehicle user who may cover many of their business miles at no cost to them. Introducing electric vehicles to fleet also carry substantial infrastructure investment in work-place charging points, so to generate an ROI on an electric strategy, driver charging discipline is a must.

It may be prudent to consider an electric/plug-in mileage rate that reflects the actual cost of running the vehicle. This will reduce the temptation for drivers to consider the mileage rate as an additional income and can also help offset the capital investment in charging infrastructure.

Health and Safety
Introducing an electric option to the car fleet list will require some planning around charging provision, especially at home. Not all homes are suited to safe and practical charging. If a car has on-street parking then this poses a risk and safe cabling must be considered. The company must also consider the suitability of the charging solution being used to ensure it does not damage their asset.

Range
One of the challenges to all users of electric vehicles is range anxiety. Although great inroads have been made around improving range, the newest EV’s still only provide a real-world range of 125-150 miles, which although is commute-sufficient, does not inspire confidence that a round trip to a client meeting or a day in the field would be completed before the need to sit out for 30 mins or so whilst the battery recharged.  The benefit of a hybrid, however, is the removal of range anxiety and the ability to operate electric for part of a journey which does help drive down emissions down, producing better CO figures.

Image
One characteristic is the positive halo effect the use of electric vehicles emits to the business brand. If the business is known for its green credentials and has strong market messages based on this position, then the inclusion to a fleet of electric vehicles has obvious positive connotations.

Future proofing
We recently wrote about the impact of recent diesel regulations on fleet. Noting particularly how shorter inner-city journeys may be compromised should the diesel regs be extended to inner-city bans, as is the case in 4 major global cities. Manufacturers have responded to this by introducing electric light commercial vehicles as alternatives for inner-city driving; this tactic of moving to electric also has obvious benefits for car fleets with exposure to inner-city driving.

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Career Opportunities at Fleetworx

Career Opportunities at Fleetworx

Do you know your multi-contract from your single-supply? Do you think strategically whilst still having the tactical drive to assess the detail? Does working across multi-territories and dealing with indigenous teams excite you?

If you answer yes to any of these then we would like to talk with you. We are looking to strengthen our operational and account-management teams in our growing business, so if you would like to discuss the options and hear about our plans then click here or call us on 01926 353 300.

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Company Car Fleet Analysis: 5 Numbers You Must Study Closely

Company Car Fleet Analysis: 5 Numbers You Must Study Closely

A couple of weeks ago I wrote about the importance of knowing your numbers. Well, it seems this topic has touched a nerve. We had lots of feedback on the significance of good data flow and its interpretation, but we also had a lot of questions about what numbers matter. It is great to have systems that draw your numbers together and produce insight, but which numbers should be your focus, and which numbers matter for overseers of a company car fleet supply chain.

These are the top 5 numbers that matter when managing your company car fleet supply chain.

a. Unplanned, in-life spend.

If it remains unchecked, in-life spend can drastically increase the overall cost of a company car benefit program. A company car programme can expect to incur 5% of the annual driver cost in unplanned in-life costs. Consequently a company running 1500 cars at an average driver cost of £9,000 pa can expect to be faced with an additional £675,000 per year. Unplanned spend can come from accident costs, repair and maintenance costs and end-of-contract charges and can add significantly to the total cost of ownership. The supply chain should have systems to monitor these areas of spend and offer advice on how to reduce their impact. Experience shows that drivers who take the risk on damage liability show a reduction of low-speed impact incidents of up to 70%, subsequently reducing the amount of insurance and repair costs

b. Supplier Margins

If you are employing an outsourced fleet provider you may be surprised to learn that about only 20% of their revenue is from the management fee they charge you. The rest consists of opaque margins and rebates. These revenues are broad and varied and consist of, among others, interest margin, contract adjustment margin, maintenance network rebates, repair network rebates. If your contract has been written with transparency in mind, these revenues will be visible and accountable. As the client you have every right to challenge and negotiate the value of these margins and decide who takes the benefit.

c. Manufacturer Discounts

Suppliers who take a partnership approach to your relationship should be willing to share information about manufacturer discounts. Manufacturer discounts can be substantial and they should be made transparent to all stakeholders. Suppliers should be asked how the discounts are awarded and how they are distributed between themselves and their clients.

d. Maintenance Spend

Understanding this number is vital for setting and managing accurate budgets. Suppliers should have the ability to report on different spend categories, highlighting overspends and re-allocating any savings.

e. End-of-contract charges

End of contract charges is a spend category which will often go unobserved. Charges are frequently applied without being challenged and can lead to unplanned costs in tens of thousands of pounds. End-of-contract charges are made up of excess mileage claims, damage costs and late-hire charges. Close interrogation of all invoices related to these charges should be a standard and your supplier should have systems in place to deal with and report on these costs.

We know that getting to grips with these numbers can be very challenging. Mostly because extracting these numbers from an external fleet supply chain is very difficult and cumbersome, just one of the unintended consequences of outsourcing a company car fleet.

CentraxTM , our management information system, has been developed to deal with this frustration. We use CentraxTM to reach into the supply chain and draw out the data for our interpretation. We take data analytics very seriously at Fleetworx, and we use tecnology and expertise so that we not only know your numbers, we know the right numbers.

A copy of our whitepaper “The Unintended Consequences of Outsourcing Company Car Fleets: And How to Avoid Them” is available here. To understand more about CentraxTM and how it can help your company car fleet contact me on grees@fleetworx.com.

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