In most category management scenarios, applying the same rigorous best practice is sufficient to ensure the best outcome. But there are exceptions to this rule – categories which require a greater depth of understanding of the specific trends and challenges in the market in order to ensure success.
One of these categories is fleet; ever-changing and complex legislation in the sector is the route of unique challenges facing procurement category managers. Of course, cost control is the underlying goal, but successful fleet category management also requires significant management of risk and compliance issues if the final solution is to meet organisational goals.
In fact, fleet legislation has become intensely wide-ranging and full of complexity. Much of this relates to the need for an employer to provide an adequate duty of care, not only to its employees but also to other road users.
And there’s a critical grey area to all of this, which is the ‘grey fleet’ market – for example where an employee receives a car allowance within his or her salary but then uses their own car to travel to work and to meetings. Is this part of the company fleet? In the eyes of most fleet managers is isn’t, but in the eyes of the law it is.
An accident involving grey fleet could easily count as corporate manslaughter, resulting in, at best, a large fine but even jail sentences for company directors, when the law considers that there has been a catastrophic failure to provide duty of care. For the procurement professional it’s a case of weighing up the risks and understanding what products and services it needs to source to manage grey fleet with the same scrutiny as it would a traditional fleet.
An article in the Australian Financial Review (AFR) on the subject demonstrates the impact of vehicle related accidents in the workplace. It cites Safe Work Australia’s Notifiable Fatalities Monthly Report, saying that in 2013, there were 218 work-related deaths with the highest by incident type – at 32 per cent – being vehicle incidents and public road crashes. Overall vehicle-related deaths accounted for 51 per cent of all notifiable fatalities in 2013.
Whether dealing with heavy duty vehicles, light commercials and cars or both, procurement managers should ensure that they are fully conversant with all of the legislation surrounding the duty of care for operating fleets. Despite perhaps fleet managers not seeing grey fleet in the same light, the responsibilities from an organisation to its employees are the same.
Certainly the legal community sees it that way. From the same AFR article, Michael Tooma, head of occupational health and safety practice at ¬Norton Rose Fulbright, made the point that legally a vehicle used for work counts as a workplace, so the responsibility for safety rests with the employer as it would in an office, factory or other working location. “The law says you must be doing everything reasonably practical to ensure the health and safety of your workers,” he said, “so letting someone drive a vehicle for work without knowing the maintenance history or registration status is a very large gamble.”
With pressure on to reduce costs it’s likely that more and more organisations will move to the grey fleet model in the future. It’s therefore imperative that category managers act and get their organisation out of a risk position and ensure they are compliant. Rather than being solely preoccupied by the purchasing of the fleet they must also focus on the management of it. This could involve a services contract to check vehicle roadworthiness, aiming to establish and maintain full audit checks.
Systems must also be in place to ensure that employees have suitable cover for business travel and that their health is regularly checked to reduce risk.
Any business operating any form of fleet, including grey fleet, must take heed of the fact that ultimately the duty of care to employee and public is the same in the eyes of the law. Procurement, operational and fleet professionals should work together to ensure that they have a sustainable and compliant fleet solution that will survive in the long term.
This blog originally appeared on Spend Matters.
You can read more about from Gerard Chick is his new book, The Procurement Value Proposition, co-authored by Prof Robert Handfield.