When considering a company car fleet supply process, fleet stakeholders are often in conflict over the type of process with which to engage.
Some departments are often in favour of a single supply agreement so they can build relationships with one supplier, whilst other departments encourage a dual or multi-supply so they can “horse-trade” the leasing cost and “bank” a saving.
Choosing between single supply or dual/multi-supply is central to a company’s fleet model, and making the correct choice at the beginning of a supply term is essential; as the wrong choice could have a significant impact on the overall fleet cost.
But what are the relative merits of the two supply choices and which will be better for your business? Read on or download our simple infographic outlining the differences.
SINGLE SUPPLY – PRO’S
- Contact Leverage
The leverage generated by putting all the business with one supplier can provide the following benefits:
- It develops a strong negotiating position which can help eliminate contract re-writes;
- It can help remove any profiteering by the lessor on end-of-contract charges for damages, and restricts the charges to the actual costs to the lessor and no more;
- It can help protect against high 2nd tier supplier costs with large lessor rebates;
- The client will be able to negotiate greater transparency.
- Budget Accuracy
As legacy suppliers disappear, only one PO will be required per supplier. This will inevitably produce more accurate budgeting.
- Relationship Management
Relationships only need to be maintained with one supplier, resulting in slicker processes that reduce the administrative burden of managing multiple suppliers.
- Realistic Pricing
Although still needing to be competitive, the headline lease pricing of a single supplier will tend to be more realistic and more reflective of total cost than that of a dual or multi-supply arrangement.
SINGLE SUPPLY – CON’S
- Complex Savings Calculations
True savings gained form commercially advantageous terms are more complex to determine than those from directly competing lessors.
Very often, the final savings cannot be determined until individual contacts have matured.
- Detailed Contract Component Knowledge
A detailed knowledge of the contract components is required to understand the competitiveness of the supplier. This detailed knowledge is also important when managing the pricing structure and avoiding cost creep.
- Governance Need
Resource needs to be applied to governance processes within the client, as the single lessor cannot be expected to “sign off” their own invoices.
DUAL/MULTI SUPPLY – PRO’S
- Savings Transparency
Competitive bidding for each individual car can demonstrate accountable savings.
Although it should be noted that these are theoretical savings and may not reflect the whole life cost of the vehicle.
- Reduced Governance Burden
Some of the administrative burden of running multi-supply can be allocated to fee-charging external multi-bidder intermediaries. These are also ideally placed to conduct local governance tasks.
DUAL/MULTI SUPPLY CON’S
- Cost/Resource Burden
The client may need to pay fees to an intermediary company to transact the multi-bidding or resource it internally.
- Risk of Contract Deviation
The competitive nature of the rental is only maintained so long as the contract runs to the original deal. As contract parameters can change, the headline price can be theoretical, which means the contract may not produce the cheapest option.
- Supplier Selection
Suppliers must be churned regularly to exploit the opportunities of multi-bid, otherwise savings may only be theoretical as the suppliers may be the most expensive on the market.
For a simple infographic of supply options click here. This article is one in a mini-series featuring the complexities and challenges of managing fleet supply contracts. Visit www.fleetworx.com for other resources such as our ebook explaining how to Avoid Fleet Commercial Contract Trapdoors