Five lessons procurement can learn from fleet management
On these pages, we frequently talk about the extraordinary amount and pace of change that today’s procurement leader has to confront. If we spend too much time looking at ourselves in the procurement mirror, we can lose sight of the fact that our colleagues who run adjacent operational functions are contending with their own set of changes that, like ours, are once in a generation in their scope and significance. This month, we decided to take a deep dive into the transformations that many public fleet managers are leading in cities and states across the country. Interestingly, their challenges and their opportunities came back to our favorite subject—procurement!
The last 12 to 24 months have brought dramatic sea changes in fleet management. First, the pandemic changed how and where we work, including the way that many agencies use their fleets. As work has moved from a state office building to home, the vehicle necessary to go from point A to B has become less necessary. The transportation requirements to move children to and from school are a lot different when schools are closed and kids are at home learning on Zoom.
Second, electric vehicles (EVs) have gone from an edge-use case to mainstream. I remember so vividly when I first started in procurement how we celebrated the first hybrid vehicle in our fleet in Pennsylvania. Our then-Secretary of Environment Protection Katie McGinty drove off in a Ford Escape in the early 2000s and we felt so innovative. Today, hybrid vehicles are everywhere, and EVs will soon dominate most fleets as manufacturers pledge to eliminate gas fueled vehicles from production.
And third, the largest infrastructure bill is poised for passage (at the time of writing), ushering in the largest investment in roads, highways, bridges and mass transit in recent memory. Not only will an infrastructure bill create tens of thousands of jobs, it also will create new opportunities for managers of large fleets—including public sector fleets—to think about modern ways to transport people and products in safe, cost efficient and environmentally sustainable ways.
Against the backdrop of these seismic macro-economic shifts, there are also critical supply issues. Over the last several months in the United States, we’ve seen a shift in the new and used automotive markets due to semiconductor shortages and supply chain issues from overseas, and an offselling of fleet vehicles by many industry leaders during the early stages of the COVID-19 pandemic. So, in this market, how does a fleet manager add dozens of necessary pursuit vehicles or meet sustainability goals to transition to a green fleet?
To answer these questions, we sat down with transportation and fleet experts from the likes of the Tennessee Department of Transportation, the City of Sacramento (Calif.), and more to talk about their initiatives and solutions for solving these problems.
In doing so, we had a realization: they are talking about transportation and fleet, but the lessons they are sharing are applicable to anyone leading an agency division, making hard purchasing decisions and trying to move their organization further into the 21st century. Here are five important learnings that procurement professionals can draw from the experiences of their fleet colleagues.
Lesson 1: Ensure the proper infrastructure is in place to support major purchases
When tasked with a major project like transitioning to a green fleet, it’s easy to get tunnel vision and focus on electric and hybrid vehicles, parts, software and maintenance. The City of Sacramento’s fleet division knew their job was bigger than just vehicles. The proper infrastructure needed to be put in place for the switch to be successful.
“Infrastructure is the key to getting buy-in from your department,” says Program Specialist Alison Kerstetter. “If you release a vehicle and you have nowhere to charge it, complaints will spread like wildfire. Departments won’t have the support they need to operate that vehicle.”
In Sacramento, this infrastructure work would be driven by the Department of Transportation. Fleet Manager Mark Stevens shared advice that would apply to any agency leader driving a cross-agency project: visualize the final product, create a plan to get you there and then bring every stakeholder you need to the table.
In an interview, Stevens and Kerstetter told us this meant creating a plan determining exactly how many vehicles were needed and where they would be going. Once they had this information, it was time to invite the city’s electrical supplier, facilities management, electrical engineers and code enforcement to the table to build an infrastructure plan. Building the infrastructure first took the better part of a year, but it smoothed the city’s transition to a green fleet.
Lesson 2: The best volume pricing can often be found locally
The choice shouldn’t have to be between saving money and buying local. Kerstetter and Stevens have found their sweet spot by purchasing from local vendors on a cooperative contract.
“What we see happening a lot is local vehicle dealers going to their [original equipment manufacturer] and saying, ‘We are bidding on the state contract for X number of vehicles. Can you get me a better price?’” Stevens explained. With multiple dealers using this approach, local governments can provide many competitive options to nearby governments buying multiple vehicles at once.
When all is said and done it’s a win-win. The city has the scale and pricing of a national brand along with the convenience of a local vendor. And the local vendor wins a huge customer in the city.
Public procurement leaders are often pulled between the seemingly conflicting goals of driving savings through volume aggregation and creating opportunities for local, small businesses. While it may not work in every category, these two fleet leaders showed us that sometimes you can have your cake and eat it too.
Lesson 3: Training end users is important and must be emphasized
Whether you are restructuring a fleet division or onboarding a new software, the key to any successful organizational change is user onboarding and adoption. There is only one chance to make an essential and lasting first impression. Training cannot be an afterthought.
Michael Derr, former purchasing officer for the County of Monterey, Calif., who also ran the county’s vehicle fleet, shared with us how he took time to get to know his team’s learning style and technology usage before putting out a bid for a new fleet management software.
“I had a variety of ages in my staff. Some that were really savvy with technology, and they wanted the iPad in their hands as soon as possible. Others were less eager to change,” Derr recalls. “It only takes a few of your team members to have a bad interaction with the system implementation to have your implementation go south quickly. Especially if they are senior staff that carry a lot of weight.”
Derr knew this training period would make or break the implementation. So in the bid, he required that the selected vendor set up a training room with an actual system for his staff to train on live. “Staff could come into a training room and play with every gadget, every button, every tool that they would be using until they got extremely comfortable with it,” he says. “It was more costly upfront of course, but it ensured that the new software was implemented successfully. Absolutely worth it.”
Whether the system you are implementing is a new fleet management system or end-to-end eProcurement software, the return on the time invested in a well-trained staff always exceeds the costs.
Lesson 4: Centralizing procurement has many benefits, but it takes planning, effort and buy-in
Depending on the size of the government or agency that you work for, centralization may or may not be a concern of yours. But for a lot of states that have large budgets or cover vast geographical regions, centralization of procurement for buyers that have similar needs can create tremendous efficiency and cost savings. The only problem is that making the transition from disjointed agencies to a centralized procurement program takes a significant amount of planning, time, and buy-in from the state and the buyers at the agencies.
Chris Yarbrough, the procurement and contracts division director for the Tennessee Department of Transportation (TDOT), made it clear that the decision to centralize has a lot of upside, but is not a one-size-fits-all process.
“We looked at a lot of other agencies within Tennessee, especially those spread throughout the various geographic regions of the state like TDOT, to see how they operate,” Yarbrough recalls. “And we looked at other states’ Departments of Transportation to see what was working well and what could translate to our department here in Tennessee.”
TDOT took what they learned from their research and decided to create three separate branches within the Procurement and Contracts division, including: a Solicitations and Contracts team, a Training and Compliance team, and a Regions and Districts support team. This structure ensures that end users and buyers across the state always have access to information and training from state resources, no matter how big our small their jurisdiction. Tennessee covers a large geographical area from east to west, and has a diverse terrain that includes the Great Smokey Mountains, so the Regions and Districts Support team provides custom assistance to different regions. They are then able to take lessons learned in one part of the state and apply them to other regions, creating open communication and efficiencies that would have been difficult in the past.
Yarbrough and his team understood what other states had already done well, and where they may have missed the mark or had a solution that wasn’t relevant for Tennessee. He was able to use that knowledge to build a custom plan for the state and ensure that the transition was a success, even through the logistical difficulties that arose for everyone in 2020.
Lesson 5: Have a maintenance plan. And have a storage plan
Some fleet managers we talked to conducted their maintenance, repairs and part stocking in-house at government run shops and warehouses, while others outsourced those responsibilities and relied on dealerships to meet warranties and supplies to be shipped with a JIT or “just-in-time” model. Both can be good options, for different reasons and in different circumstances, but as a purchaser you must know what those reasons are and develop an understanding of your current and future situation to be fully prepared.
If you had great local partnerships and suppliers who helped you during the chaotic early days of the initial COVID-19 breakout in spring and summer of 2020, then you are probably fine maintaining that situation. But if you are in an isolated location or experienced serious supply chain issues last year, then it is worth preparing for what you will do if similar circumstances happen again. It may be worth stocking up on supplies or building relationships with multiple suppliers in each essential good and service category so that if one of them has a supply chain issue or goes out of business you are not vulnerable. That goes for anything that could become scarce during a shutdown or supply chain disruption, whether it’s due to a pandemic, spreading wildfires, natural disasters, or other unforeseen circumstances.
Many of you reading this right now may have a specialty, or an expertise in a handful of goods and services that you know better than the rest, but some procurement lessons are nearly universal. Sometimes looking outside of our jurisdiction, our region, our niche purchasing category, allows us to think differently and arrive at creative solutions that may otherwise have been missed. While the worlds of fleet management and procurement may appear to be very different at times, there are untold lessons that we in public procurement can learn from our fleet colleagues, just as they can learn from us.
To hear the full interviews with Alison, Mark, Chris or Mike, subscribe to the “Decisions That Matter Public Procurement” podcast at https://www.procurated.com/resources/132.
David Yarkin, the former chief procurement officer of Pennsylvania, is the president of Government Sourcing Solutions, a consulting firm that works with 34 states and most large cities, counties and schools, helping them save money through cooperative contracts. Email David at [email protected].