1. Asset Management Flashcards
(267 cards)
1
Q
1.1.1 According to the experts what is the definition of strategic sourcing? (p.1)
A
Strategic sourcing is an organizational procurement and supply management process used to locate, develop, qualify, and employ suppliers that add maximum value to the buyer’s products or services.
2
Q
1.1.2 What is the main objective of Strategic Sourcing? (p.1)
A
To locate and form relationships with those suppliers that best promote the strategic and operational goals of your organization.
3
Q
1.1.3 How can Strategic Sourcing be used as an approach to supply chain
management? (p.1)
A
This approach identifies the best partners, strategic sourcing also seeks continuous improvement and reevaluation of the purchasing activities of a company. In a sense it creates a cost effective and efficient strategy to optimize the process of acquiring new assets through supplier and buyer relations.
Strategic sourcing is also an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best values in the marketplace.
4
Q
1.1.4 Why might you want to limit the amount of suppliers to your Fleet? (p.2)
A
limit the number of suppliers for your fleet if this al- lows you to gain leverage and purchasing power for the procurement of quality vehicles at the best price.
5
Q
1.1.5 Describe the differences between traditional sourcing and strategic sourcing.
(p.2)
A
The focus of traditional sourcing is cost whereas the focus of stra- tegic sourcing is competence.
6
Q
1.2 Benefits of Strategic Sourcing (p.2)
A
Many benefits that come from strategic sourcing flow from the relation- ship that is built between fleet and the supplier.
7
Q
1.2.1 What are the benefits of Strategic Sourcing? (p.2)
A
The first potential benefit of strategic sourcing is the limited number
of suppliers.
8
Q
1.2.2 How can Strategic Sourcing generate benefits to the Fleet department? (p.3)
A
On-Time Delivery
Speedy Delivery
Order Accuracy
Service/Product Defects
Location
Employee Diversity
Long-term Goals
Sustainability Practices
Supplier Market Position
Financial Risk Profile
Supplier Ownership
9
Q
1.2.3 Why is it important to measure Supplier Performance? (p.3)
A
Having a system to measure supplier performance in these areas can lead to better decisions when it is time to decide between acquiring a new supplier or staying with the current one. Transparency in decision-making is also positively affected when you have objective reasons that are sup- ported by data.
10
Q
1.2.4 How does Strategic Sourcing benefit Suppliers? (p.3)
A
As mentioned, suppliers also benefit from strategic sourcing. Not only are they getting larger purchases and more orders from you, they also benefit from improved communication and not having to juggle multiple small contracts with a vast array of customers. This allows for communication in real time which can help eliminate costly errors such as overproduc- tion, underproduction and late shipments, and improve the ability for the supplier to order materials in a timely manner. Suppliers may then be able to pass on these savings to you and your firm.
11
Q
1.3 Risk of Strategic Sourcing (p.3)
A
12
Q
1.3.1 What Risks are involved with Strategic Sourcing? (p.3)
A
One of the risks that you might encounter as a buyer is overpaying the initial costs.
Strategic sourcing takes much more time to execute than traditional sourcing activities because it is more complicated, and requires more knowledgeable and skilled personnel.
Another potential risk occurs when supplier requirements are too strict
or narrow. In this case, it is possible to lock out potentially great suppliers from consideration or to restrict vendors from becoming suppliers.
A final risk that comes with strategic sourcing is the potential change of suppliers.
13
Q
1.3.2 Describe some of the costs involved with Strategic Sourcing. (p.4)
A
14
Q
1.3.3 Why is Strategic Sourcing time consuming? (p.4)
A
Strategic sourcing takes much more time to execute than traditional sourcing activities because it is more complicated, and requires more knowledgeable and skilled personnel. Also, your organization’s sourcing and purchasing work flows may need to be restructured. Ensure that your organization properly performs all strategic sourcing components by starting early enough to meet deadlines and having the right staff available.
15
Q
1.4 Methodology (p.4)
A
Most literature suggests a five step process as the method for strategic sourcing.
16
Q
1.4.1 What are the four steps in the Strategic Sourcing Process? (p.4-5)
A
- Understand the spend category
- Assess Potential Suppliers
- Create a Strategy
- Select a supplier
- Cultivate relationships
17
Q
1.4.2 What should your purchasing team do during the first phase of the Strategic
Sourcing Process? (p.4)
A
In this phase the purchasing or sourcing team will identify their purchas- ing and price constraints, the time and money it takes for the supplier to acquire the assets, as well as the historic purchases in asset categories.
For example, if you are adding ten new vans to your fleet you will need to consider the prices previously paid for similar vans, how long the dealer will take to acquire the vans, bulk order discounts, and which dealership will fit within your company’s budget.
18
Q
1.4.3 What do you want in a Strategic Sourcing partner? (p.5)
A
With an understanding of budget limitations it is time to find the right suppliers for your fleet. There are multiple approaches to doing so, and a starting point can be found in Table 1. With strategic sourcing you rely on suppliers that are competent, trustworthy, communicative, and those that offer deals that are valuable and fairly priced. Instead of finding the cheapest deals like traditional sourcing, strategic sourcing takes into ac- count other factors when selecting suppliers.
19
Q
1.4.4 How can you create a strategy for Strategic Sourcing? (p.5)
A
After assessing your budget and potential suppliers, the next step is to develop a sourcing strategy. To create this strategy:
* Start by identifying how competitive the supplier marketplace is. In the marketplace different suppliers may become incumbents in try- ing to obtain a contract to supply your fleet. By showing suppliers the value in your business, new deals can be made and incumbent suppli- ers will know the importance of sourcing your fleet.
* Ensure that other departments are on board with your supplier choices. Management and financial officers will be relying on you to find the best price for quality goods. Other managers and employees may be focused on finding suppliers that they can build relationships with or maintaining positive relationships with current suppliers. In making your sourcing decision both of these factors should come into play.
20
Q
1.4.5 What tool is discussed in order to help select Suppliers? (p.5)
A
the sourcing committee develop a balanced scorecard to objectively measure and compare each supplier’s offers.
21
Q
1.5 Necessary Components (p.5)
A
NECESSARY COMPONENTS
The following is a list of components necessary to strategic sourcing:
* Performance improvement requirements. Performance improve- ments are crucial to keeping the buying and selling processes a posi- tive experience. Some ways to accomplish this are by improving the cycle time, cost, quality, and delivery performance. This can be done both internally with your fleet and by the suppliers.
* Supplier, purchasing and sourcing importance. Management of an organization should have a balanced perception of the value of procurement and the subject matter experts and include purchasing and sourcing activities when putting together strategic goals.
* Organization. It is important to develop teams that will organize, evaluate, select, develop, and manage suppliers. Creating cross-func- tional sourcing teams to complete different supply chain management tasks will ensure positive collaboration as well as the ability to select suppliers most suitable for the organization’s needs.
* Systems development. By developing purchasing systems there
will be a notable increase in the emphasis of links between external systems along with networking between purchasing sites with suppli- ers. Developing systems will also lead to an increase in useful tech- nology and information systems. Some systems, like electronic data interchange systems allow companies to communicate in real time with suppliers as well as manage a centralized location for data to be accessed.
* Performance measurement. Performance measurement is an im- portant component for gauging the effectiveness of functional team based strategies. In the area of procurement, managers should de- velop measurement systems that identify supplier performance and improvement opportunities, the best suppliers to select for routine and long-term purchases, and the overall effectiveness of supply chain management improvement efforts.
* Supply base management. It is crucial to find and manage suppliers who work best for your specific needs. Having the right number of suppliers supplying the right products and services that fits your strat- egy is a necessity. Reward suppliers who perform well with continued business or recognition. Act on consequences toward suppliers who perform poorly.
* Purchasing responsibilities and activities. With a managerial empha- sis on procurement as well as a developed sourcing team already in place, the next logical step is to define the purchasing responsibilities and activities. Assign members of the team to be points of contact with specific suppliers and to research new potential suppliers. By clearly identifying the responsibilities involved in the purchasing pro- cess you will be sure to see positive results.
22
Q
1.5.1 What are Performance Improvement Requirements and how are they used? (p.5)
A
Performance improvement requirements. Performance improve- ments are crucial to keeping the buying and selling processes a posi- tive experience. Some ways to accomplish this are by improving the cycle time, cost, quality, and delivery performance. This can be done both internally with your fleet and by the suppliers.
23
Q
1.5.2 What type of teams should be created in order to help select suppliers? (p.6)
A
It is important to develop teams that will organize, evaluate, select, develop, and manage suppliers. Creating cross-func- tional sourcing teams to complete different supply chain management tasks will ensure positive collaboration as well as the ability to select suppliers most suitable for the organization’s needs.
24
Q
1.5.3 What systems should be developed and how can they help the organization? (p.6)
A
By developing purchasing systems there
will be a notable increase in the emphasis of links between external systems along with networking between purchasing sites with suppli- ers. Developing systems will also lead to an increase in useful tech- nology and information systems. Some systems, like electronic data interchange systems allow companies to communicate in real time with suppliers as well as manage a centralized location for data to be accessed.
25
1.5.4 What are team member purchasing responsibilities? (p.6)
With a managerial empha- sis on procurement as well as a developed sourcing team already in place, the next logical step is to define the purchasing responsibilities and activities. Assign members of the team to be points of contact with specific suppliers and to research new potential suppliers. By clearly identifying the responsibilities involved in the purchasing pro- cess you will be sure to see positive results.
26
1.6 Application to Fleet Management (p.6)
When a company, in this case a fleet, decides to switch their sourcing practices to strategic sourcing, the fleet manager often finds themselves leading a cross functional sourcing team. This sourcing team is comprised of a group of individuals who are maintaining relationships with the fleet suppliers and identifying the sourcing needs of the fleet.
27
1.6.1 What is a cross functional sourcing team? (p.7)
28
1.6.2 What is the Fleet Managers role in the cross functional sourcing team? (p.7)
Fleet managers are the individuals responsible for making the final say in finding new sources and developing those lasting relationships between vehicle supplier and buyer.
29
1.6.3 What is the focus of many purchasing groups and what are the fleet managers’
responsibilities? (p.7)
The focus of many buying groups in any industry is finding the lowest cost and this provides many benefits, but fleet managers are responsible for voicing concerns when non-fleet members of the sourcing team focus only on low cost suppliers without taking other fleet-related concerns into mind. On the other side of things however non-fleet members often bring new and fresh ideas to the table that fleet employees may not have considered. Both of these factors contribute to the benefits and disad- vantages of assembling cross functional teams.
30
1.6.4 What is rightsizing the Fleet? (p.7)
Another important aspect that fleet managers need to consider is right- sizing the fleet. This can be determining the correct customer service levels for internal service and rental fleets as well as understanding the vehicle-task suitability (sourcing vehicles that are appropriate for specific tasks.)
31
AM 2: Vehicle Invoices and Pricing 2.1 Pricing Terminology (p.12)
Fleet vehicle pricing is very different from retail pricing. Fleet managers should understand how to read a dealer invoice as well as know the differences between ordering from the factory and selecting from dealer
stock. Strategies for negotiating discounts from the OEM, fleet manage- ment company, or dealer also impact the ultimate vehicle cost.
32
2.1.1 What is the Advertising cost on a vehicle invoice? (p.12)
A percent of MSRP (typically 1%) or a flat dollar amount set by the factory
33
2.1.2 Define the term Bid Assistance. (p.12)
Additional negotiated rebates that may replace or be in addition to the national fleet rebates.
34
2.1.3 What is the Dealer Invoice price and how is it calculated? (p.12)
The invoice amount the dealer pays the manufacturer for a specific vehicle. Not be confused with the dealer’s “actual” cost for the vehicle. “Actual” dealer invoice cost can only be determined by de- ducting manufacturer-provided holdback allowances, incentives, rebates, bonuses and other discounts from dealer invoice.
35
2.1.4 What are Factory to Dealer incentives? (p.12)
This is money paid to the dealer by the manufacturer to sell specific models. These incentives can come and go, according to market conditions. (e.g., a hot selling model most likely would have no incentives; a slow selling model may have a large incentive).
36
2.1.5 What is meant by the term financing on a Dealer invoice? (p. 12)
Flat dollar amount that is included in the factory invoice.
37
2.1.6 What are Fleet incentives and who funds them? (p.13)
This is money given by a vehicle manu- facturer to a fleet as an added incentive for buying their product. Usually funded 100% by the factory.
38
2.1.7 What is Factory Holdback? (p.13)
An amount paid by the factory to the dealer after the car has been sold, usually on a quarterly basis. Most manufacturers will pay dealers an amount equal to between 2% and 3% of either the invoice cost or the MSRP. The holdback is one of the reasons that “invoice cost” is not net cost to the dealer. The other reason is “factory to dealer incentives.”
39
2.1.8 Define the term MSRP. (p.13)
The retail selling price of the vehicle as determined by the manufacturer, printed on the label (the Monroney Label) on the window.
40
2.1.9 What is triple net invoice? (p.13)
Manufacturer-to-dealer invoice price less holdback less advertising & financing
41
2.2 Reading an Invoice (p.13)
42
2.2.1 What is the most important document in a vehicle purchase? (p.13)
The most important document in a vehicle purchase is the factory invoice.
43
2.2.2 What information do you need to know in order to get the lowest possible price
for a vehicle? (p.13)
To do this, you need to know what the dealer has actually paid for the vehicle or “dealer cost.” The manufacturer’s suggested retail price (MSRP) is of far less concern to you as this is not what you will eventually pay for the vehicle. You have to be able to identify and understand all available re- bates and incentives to assist in determining the price you should pay.
44
2.2.3 What is a good starting price to use for negotiating with a vehicle supplier? (p.13)
The most important price for a fleet manager to identify is the “invoice price” as this amount is usually the basis for starting negotiations on the purchase of a vehicle.
45
2.2.4 What type of information is contained on a standard factory invoice? (p.13)
A standard factory invoice will contain the price, features and details regarding the purchase and delivery of the vehicle. Two distinct columns are typically used to compare the suggested retail price and the factory invoice price.
46
2.2.5 What is the most important strategy to use when considering multiple vehicles?
(p.14)
The most important strategy when considering multiple vehicles is to be consistent in how you evaluate each invoice, and to use the same starting point for each negotiation.
47
2.2.6 What is the Formulae for Triple Net? (p.14)
Manufacturer-to-dealer invoice price less holdback, less adver- tising & financing.
48
2.3 Fleet Incentives (p.22)
49
2.3.1 How can Fleet sales benefit a car dealer? (p.22)
If the dealer sells vehicles to a fleet, the potential also exists that the dealer will be able to sell the organization a contract to service the fleet, which brings in more income for the dealer.
50
2.3.2 What are some of the vehicle manufacturer’s requirements for Fleet pricing?
(p.22)
For some manufacturers, a requirement for fleet pricing is to purchase five or more vehicles; for others the requirement may be larger, such as a minimum of 10 vehicles. It is possible that the requirement is specified on a term basis such as leasing 15 vehicles one year as well as purchasing/leasing 5 new vehicles each year.
51
2.3.3 What are some of the advantages of purchasing vehicles in bulk? (p.24)
Because organizations can purchase vehicles in bulk through fleet pricing, they are able to save significant amounts compared to what they might pay for the retail price of the vehicle. Additionally, organizations can generally negotiate good deals through the dealership on servicing their new fleet of vehicles, as well as getting top price on a trade-in when the organization decides to replace the old fleet with a new fleet.
52
2.3.4 Why would an organization want standard vehicle specifications? (p.25)
Organizations can further achieve cost-saving benefits through fleet pric- ing by utilizing standard vehicle specifications. Specification standardiza- tion is a strategy that identifies the fewest number of vehicle configura- tions that can meet the requirements of the widest range of business divisions and branches within an organization. The idea is to develop core specs for vehicles while still allowing for slight variations for factors such as geographical location, terrain, etc....
53
2.3.5 What are the best practices for lowering costs using standard vehicle
specifications? (p.25)
1-Centralize fleet management.
2-Distinguish “needs” from “wants”.
3-Conduct annual specification reviews.
4-Develop standards based on vehicle role and location
54
2.3.6 Why is it important to centralize Fleet Management? (p.25)
Organizations need to allow only the leader of the organization to be the decision maker when purchasing vehicles, instead of allowing each division of an organization to order ve- hicles for their own purposes.
55
2.3.7 What are potential areas to save costs when identifying needs and wants? (p.25)
Potential areas to save costs are:
• Cloth or vinyl seats instead of leather • Bench seats instead of buckets
• Two-wheel instead of four-wheel drive • Gasoline instead of diesel
• Four-cylinder engine instead of six or eight cylinders • Standard length pickup box instead of extended
56
2.3.8 Describe the two categories of pricing incentives. (p.25)
Pricing incentives are divided into two categories: National Fleet Incen- tives and Competitive Pricing Assistance (CPAs). If a company owns 10-15 vehicles it can receive a Fleet Identification Number and be entitled to a fleet discount from the manufacturer. However, if a Fleet Manager works with the manufacturer and negotiates an individual incentive instead of the national fleet incentive, often they can find a lower price through CPA. Keep in mind that CPAs often can depend on the vehicle volume commitment, and whatever is agreed upon will be noted on the factory invoice.
57
2.3.9 What is a good indicator of the true vehicle cost? (p.26)
Total Cost of Ownership (TCO) is a better indicator of the true vehicle cost.
58
2.3.10 What warranty considerations does the Fleet manager have to keep in mind
during the purchasing process? (p.26)
There is often no consistency and the formatting and offerings will change based on the vehicle model, year, and manufacturer. Typically this is not nego- tiable unless stated in the CPA agreement, but it is not main criteria for making a final purchase decision unless all other terms are equal. If you do find yourself in a situation to consider the warranty, it’s important to have a prediction of that vehicle’s expected life and how it adds up to the warranty you will be paying for.
59
2.4 Incentive Structures (p.26)
60
2.4.1 Who can a Fleet manager contact at the dealership for information on the manufacturers Fleet programs? (p.26)
When ordering vehicles for a fleet, the fleet manager should identify the commercial or government sales person at the dealership.
61
2.4.2 What does a Fleet manager need in order to receive Fleet discounts? (p.26)
A fleet manager should have a Fleet identification number once they purchase, register, or lease five new vehicles; this fleet ID number entitles the owner to fleet discounts
62
2.4.3 What is a volume rebate and how can the Fleet manager obtain it? (p.26)
If you are buying more than one vehicle, ask if there is a volume rebate available. The factory may give you a discount for purchasing multiple units at once, even, in some cases, if you are not taking delivery of all
of the vehicles at once.
63
2.5 Factory vs. Stock (p.27)
64
2.5.1 List the advantages of ordering vehicles from the factory. (p.27)
• Personalized customization
• Can specify the vehicle to
fit specific needs
• Better pricing offered by the dealer
• Opportunities to add or delete options that are not available in a retail sale
65
2.5.2 What are some of the disadvantages of ordering vehicles from the factory? (p.27)
• Longer wait time
• Incentives may be lost dur-
ing the wait period
• Production windows may close unexpectedly and the factory may reject the order
• Some options or popular models may not be avail- able for fleet orders
66
2.5.3 Why might ordering from the factory be cheaper than ordering from stock? (p.28)
Ordering directly from the factory may be cheaper than ordering from stock. When a dealer places a fleet order to the factory, the dealer does not have to worry about the vehicle sitting on the lot or trying to find a buyer. Instead the buyer is already setup and ready to go as soon as the vehicle is delivered. This helps the dealer cash flow and limits exposure to finance charges
67
2.5.4 What might make ordering from the dealership cheaper? (p.28)
Dealer incentives such as limited time warranties may also expire while your vehicle is being built in the factory. The expiration of these short- term incentives is another way that ordering directly from the factory may be more expensive.
68
2.6 Negotiating Fleet Prices (p.28)
69
2.6.1 What is the basic rue for negotiating vehicle price? (p.28)
The basic rule for negotiating vehicle price is ensuring you use the same terms and the same starting point as the dealer. Knowing the difference between dealer invoice and triple net invoice can help with negotiations.
70
2.6.2 What should the Fleet manager do in order to get the best price? (p.28)
To get the best price you should consolidate volume whenever possible – prices are often tiered based on order volume – and order early.
71
2.6.3 What are the two approaches to negotiating? (p.28)
a. Start at Dealer Invoice and work down b. Start at Triple Net Invoice and work up
72
2.6.4 What is an alternative to negotiating vehicle prices? (p.28)
Note that some fleet managers, particularly those in government agencies, may be prohibited from negotiating and may instead rely on bidding or some other process.
73
AM 3: Vehicle Selection 3.1 Introduction (p.31)
74
3.1.1 What is a Vehicle selector list? (p.31)
Vehicle Selector List, which is a predetermined list of vehicles that drivers or others can choose from to meet their vehicle requirements.
75
3.1.2 What are some questions that managers should address in order to help them in
the vehicle selection process? (p.31)
• How many choices of vehicles exist? • What is important to management? • How much input do drivers have?
• Can drivers purchase options?
• Philosophy – work or perk?
76
3.1.3 Why can offering too many choices be a disadvantage? (p.31)
More choice offerings when selecting vehicles can cause a greater admin- istrative burden as well as prevent bulk discounts.
77
3.1.4 List some of the factors a Fleet Manager may consider in the vehicle selection
process. (p.32)
1-Importance to Management
2-Driver InputDriver
3-Purchase Options
78
3.1.5 How can a Fleet manager get driver input and what information should they ask
for? (p.32)
Fleet managers may allow their drivers to have input in the vehicle selec- tion process. When asking for input from drivers, managers should collect driver preferences on color, vehicle model, and options for the vehicle including entertainment features, style upgrades, GPS and towing capa- bilities.
79
3.1.6 What are some considerations to be made when deciding whether the vehicle
should be work or perk oriented? (p. 32)
a manager needs to decide which features will or will not be paid for by the organization.
80
3.2 Importance of Vehicle Selection (p.33)
81
3.2.1 Why is it important to select the right vehicle? (p.33)
The importance of selecting the correct vehicle cannot be overstated. The upfront cost is significant and a suboptimal vehicle will probably have to wait until the next time the vehicle is replaced.
82
3.2.2 What are some important vehicle selection considerations for both Government
and Private Fleets? (p.33)
Government fleets are typically more cost conscious due to the use of tax- payer dollars to acquire vehicles and public perceptions about spending. Additionally, government agencies are more likely to purchase vehicles at lower trim levels, with fewer options than a corporate entity. Corporate fleets are more concerned with the image projected by the company and are more likely to use a vehicle as an incentive to retain staff.
83
3.2.3 Why is it important to select vehicles that meet company needs? (p.33)
When making vehicle selection it is crucial to determine vehicle function to determine which vehicles will be most appropriate for a specific task.
84
3.2.4 What vehicle selection input should be solicited from management? (p.33)
Organizational leadership will make the ultimate decision on vehicle se- lection but they will rely upon the fleet manager’s knowledge and exper- tise. As a part of the fleet manager’s data collection process the input of management must be solicited.
Leadership should also provide insight into organizational priorities, cost considerations, “work” vs “perk” criteria, exterior graphic designs, and environmental concerns.
85
3.3 Selector Development Process (p.33)
86
3.3.1 What are some concerns of stakeholders in the organization when developing selection criteria? (p.33)
When selecting fleet vehicles, a fleet manager must think of the entire or- ganization as a whole. Consider that leadership may have cost concerns, HR may have relation concerns, the driver may have concerns about safety, and sales management may have concerns about reliability.
87
3.3.2 List the four steps in the selector development process. (p.34)
1. Identify the selection criteria
2.Rank the criteria
3.assign weight to the criteria
4 . Conduct a trail vehicle selection
88
3.3.3 What stakeholders should the Fleet manager seek feedback from? (p.34)
he manager should consider all of the feedback and input from the stakeholders involved, such as the drivers and often staff, customers, and organization leader- ship.
89
3.3.4 List some factors that might impact the vehicle selection criteria. (p.34)
Additionally, the manager will need to consider all of the factors that will impact the vehicles including the terrain the vehicle will typically travel upon, vehicle duty cycle (8, 10, 12 hour days), environmental fac- tors (snow, heat, dust, etc), cost of purchase, vehicle life cycle costs, and safety.
90
3.3.5 What are quantifiable and non-quantifiable factors? (p.34)
Managers need to distinguish between quantifiable and non-quantifi- able factors. Quantifiable factors, such as cost, warranty, maintenance, and environment, can be measured and tested in non-subjective ways. Non-quantifiable factors are measured through subjective methods and include safety, image, and morale. Both quantifiable and non-quantifiable factors need to be considered by the selecting manager, with weight placed on what is most important to the organization for their fleet ve- hicles.
91
3.3.6 What should the Fleet Manager keep in mind while ranking selection criteria?
(p.35)
Managers should aim to keep the big picture of the organization in mind when ranking the criteria by knowing what is impor- tant to the organization and which criteria will return the most value to the organization.
92
3.3.7 What should the Fleet Manager consider while assigning a weight to the selection criteria? (p.35)
When assigning weights to the criteria, the fleet manager will need to consider the criteria and quantify how much more important each succes- sive factor is to the fleet. The manager will not only determine the differ- ence in weight, but also quantify which criteria have the same relative im- portance and assign weights accordingly. Where all identified criteria are equally important to an organization, there is no need to weight them.
93
3.3.8 How does the Fleet Manager test vehicle options against the selection criteria? (p.36)
The last step of the selection process is to conduct a trial comparison for the potential vehicles. The fleet manager will need to gather the neces- sary information by researching each target fleet vehicle. The manager will then need to evaluate a minimum of 2-3 vehicles, score the vehicles and review the results.
94
3.3.9 How does the Fleet Manager determine a points total in the selection process? (p.37)
The fleet manager then scores each vehicle from 1 to 3 in each of the selection criteria and multiplies that score by the applicable weight to de- termine a point total. The vehicle with the highest point total, in this case vehicle A is selected
95
3.3.10 How can the Fleet Manager manipulate the results of a selection matrix? (p.38)
changing the weight and ranking of the criteria changed the vehicle that should be selected.process is structured and provides some rigueur to the vehicle selector process, the result is subjective and heavily dependent on the selector criteria and weightings selected.
96
3.4 Importance of User Input (p.38)
97
3.4.1 Who should be included in a user input group and what are the responsibilities of the group? (p.38)
fleet managers can find value in forming a user in- put group consisting of drivers, managers, supervisors, and maintenance workers that have the authority to make recommendations. It is impor- tant that the user input group has diverse responsibilities throughout the organization to allow for a greater range of input.
98
3.4.2 How should the Fleet Manager treat the input provided by several input groups? (p.26-38)
The input given by the user input group should be taken seriously and considered by the fleet manager when going through the selection pro- cess.
99
3.4.3 Who makes the final decision on which vehicle to purchase? (p.38)
In the end it is the fleet manager who makes the final recommendation on which vehicles to order and what crucial business steps to take. Though input groups may lobby for various causes that benefit themselves or the environment, the first focus of a fleet manager should be to make decisions that will benefit and optimize the fleet.
100
3.4.4 What should be done once the final decision on vehicle selection has been made?
(p.38)
Once the final decision is made the fleet manager needs to reconnect with the group that provided input. The final decision needs to be ex- plained to ensure that the user group understands their input was con- sidered. Future participation relies upon the group understanding their input was considered and valuable even if the input did not result in a decision they were hoping for.
101
3.5 Life Cycle Cost Analysis (p.40)
102
3.5.1 What is Lifecycle Cost Analysis? (p.40)
Lifecycle, or total cost of ownership, is a technique used primarily to evaluate bids on a basis other than low purchase cost. Lifecycle cost calculations typically will incorporate evaluation categories for initial cost, operating and maintenance cost (over a specified life) and salvage value (at life end).
103
3.5.2 How is Lifecycle Cost Calculated? (p.40)
Initial Cost + Operating & Maintenance Costs – Salvage Value = LIFE CYCLE COST
104
3.5.3 What is the major advantage of Lifecycle Cost Analysis? (p.40)
The major advantage of lifecycle analysis is that it accounts for the operating costs of ownership and salvage values, yielding a better picture of the true costs of owning the equipment.
105
3.6 Regulations (p.43)
106
3.6.1 How are contracts awarded in the public and private sectors? (p.43)
In public and private organizations alike, contracts are awarded based on a competitive bidding process. Competition ensures that the organization gets the best value for their investment and the best product for their requirement. In public organizations, the competitive bidding process is often strictly legislated to ensure the best use of taxpayer’s dollars.
107
3.6.2 What is an organization legally bound to do when beginning the competitive
procurement process? (p.43)
When a public (or private) organization chooses some form of competi- tive procurement, Whether it is an Invitation to Tender, Request for Pro- posal or Request For Quotation, they become legally bound to:
• Fully disclose all known information which would potentially influ- ence a Bidder in deciding whether to bid and what price to bid
• Treat all Bidders fairly and equally throughout the process, from qualification through evaluation to final award
• Award a contract which is substantially similar to what was originally sought in the Invitation / Request
• Avoid all undisclosed preferences and potential conflicts of interest between Bidders and evaluators
• Act in good faith to all bidders throughout the competitive bid pro- cess
• Reject any bid (no matter how attractive) which is substantially non- compliant ; and
• Negotiate no changes to scope of work, price, or any other major component with any bidder without offering every other bidder the same opportunity.
108
3.6.3 What is the FASB and what do they do? (p.44)
The FASB is an organization that regulates the financial accounting and reporting aspects of a transaction. They provide standards that investors and financial report users rely upon to help in decision-making. The FASB publishes rules relating to how vehicle purchases and leases are reported on financial statements.
109
3.6.4 What do lease accounting standards require the leaser to do? (p.44)
Currently lease accounting standards require leasers to classify the lease as a sales type lease, direct financing lease, leveraged lease, or operating lease. Lease payments are an expense, and depreciation is split between a finance charge and reduction of outstanding liability. Critics of these standards, including the US Securities and Exchange Commission (SEC), claim that these complex rules give assets capitalization on a financial statement and create forecasting confusion. Proposals have been made to modify these standards, and it is important for a fleet manager to be aware if changes are put into action.
110
AM 4: Specification Types and Development 4.1 Introduction (p.45)
111
4.1.1 What is the critical first step in the selection process? (p.45)
The first step in doing so is to identify the requirement for the vehicle. This all starts with asking questions to the current and potential users of vehicles in the fleet. What sorts of tasks will they need to perform? Will the vehicle often be carrying backseat passengers? What sorts of cargo will be carried? What distances will this vehicle drive?
Knowing the requirement is quite crucial before making a purchase and asking each user individually about their requirements can be time con- suming. To save time and be more efficient there are a few alternatives. You could first send out a survey to users to identify what they will be do- ing with the new vehicles you order. You could also sit down and person- ally interview the primary user of the vehicle.
112
4.1.2 What two objectives must be balanced during the selection process? (p.45)
The goal of this team is to acquire vehicles and equipment that meet operational needs at the lowest life cycle cost. Actually acquiring the best vehicle or equipment balancing these two objectives if it doesn’t happen to have the lowest net acquisition cost requires establishing purchasing policy groundwork well in advance of bids to be done correctly.
113
4.2 Specification Process (p.45)
114
4.2.1 What questions should the Fleet Manager ask in order to help determine vehicle requirements? (p.45)
When specifying a vehicle there are a multitude of factors to consider. The first step in doing so is to identify the requirement for the vehicle. This all starts with asking questions to the current and potential users of vehicles in the fleet. What sorts of tasks will they need to perform? Will the vehicle often be carrying backseat passengers? What sorts of cargo will be carried? What distances will this vehicle drive?
Knowing the requirement is quite crucial before making a purchase and asking each user individually about their requirements can be time con- suming.
115
4.2.2 What tools can the Fleet Manager use in order to save time in identifying vehicle requirements? (p.45)
To save time and be more efficient there are a few alternatives. You could first send out a survey to users to identify what they will be do- ing with the new vehicles you order. You could also sit down and person- ally interview the primary user of the vehicle
116
4.2.3 What is the role of the Fleet Manager in the decision on vehicle specifications? (p.46)
As the fleet manager it is your ultimate decision when deciding what specifications each vehicle entering the fleet must have. This takes time and careful consideration and is not a decision that should be made alone. Input is required from others in the organization to find out what would work best for them. Maintenance staff will also be able to assist in the development of quality specifications. Ultimately the final analysis is made by you, the fleet manager, but it is crucial to receive suggestions and hear out the needs from those who will be working with the new vehicles.
117
4.2.4 What are some common errors that are made while purchasing specialty vehicles? (p.46)
When purchasing some specialty vehicles, most notably trucks, some common errors and mistakes can often occur. The following are three common mistakes and how to avoid them.
• Working out of order
When starting to write a specification for a work truck it is often better to start with the body rather than the chassis, or framework. The body defines the jobs a work truck will be doing as well as the loads it is able to carry. After deciding on a body design that works for your needs, the chassis can be specified to work with the chosen truck body to allow for the most efficient payload, center of gravity, and weight distribution. Finally, find a powertrain that will meet your needs.
• Duplicating old units
Often it is easiest to simply order the same vehicle that has been used in the past; however, this is not always effective. The current work trucks might not have the power or efficiency to do certain tasks. Rather than taking the easy route and ordering a replication of the current vehicle it is often necessary to design a new one to optimize work performance, especially if you can remember a recent job that was limited due to a truck’s power and size. Duplicating old specifica- tions also may result in not acquiring the latest safety or emissions technology.
• Guessing
After a body and chassis are selected a detailed weight distribution analysis is necessary to determine the loadings the individual axles.can take. Sometimes optional axles and other suspension compo- nents might be required.
118
4.2.5 What are the common terms for solicitation styles used by organizations in order to procure goods and services from vendors? (p.47)
There are many common terms for solicitation types or styles used by organizations to procure goods and services from vendors. These solicita- tions for bids can be grouped into two basic types: A request for quota- tions (RFQ) and a request for proposals (RFP). The RFQ is most appropri- ate when the goods or services being procured are clearly defined and information desired from potential vendors is primarily the cost. The
RFP is most appropriate when the need fulfilled by the goods or services being procured can be defined but the organization would like to collect creative solutions and price quotes from potential vendors.
119
4.2.6 What is an RFQ and when should it be used? (p.47)
The RFQ is most appropri- ate when the goods or services being procured are clearly defined and information desired from potential vendors is primarily the cost.
120
4.2.7 What information is required in an RFQ? (p.47)
Request for quotation (RFQ) is similar to an invitation for bid (IFB) or invitation to bid (ITB) and may be called such. It is a business process used to solicit quotes to provide a product or service through a com- petitive bidding process. The focus of this type of solicitation is on pricing rather than ideas or concepts.
The purchasing organization tells potential vendors what is needed. Vendors note compliance or take exception to provisions of the specifications or requirements in quoting a price and other evaluated criteria such as those discussed under life cycle costing described in this chapter. It typically also includes information like required deliv- ery schedule, payment terms, quality level, and contract length.
Specifications establish the minimum standards making sure all po- tential vendors are bidding on the same product or service, and more detailed specifications will yield accurate quotes that are more com- parable to other suppliers. Another reason for using detail in an RFQ isthat the specifications could be used as legally binding documentation for the vendors.
Vendors typically have to return their bid by a set date and time to be considered for an award. This may be a sealed bid, and multiple rounds of bidding or even a reverse auction may follow to generate the best market price.
121
4.2.8 What is an RFP and when should it be used? (p.48)
The
RFP is most appropriate when the need fulfilled by the goods or services being procured can be defined but the organization would like to collect creative solutions and price quotes from potential vendors.
122
4.2.9 List the typical components of an RFP. (p.48)
The components of an RFP typically include: a. statement and scope of work
b. specifications
c. schedules or timelines
d. contract type
e. data requirements
f. terms and conditions
g. description of goods and/or services to be procured
h. general criteria used in evaluation procedure
i. special contractual requirements
j. technical goals
k. instructions for preparation of technical, management, and/or cost proposals
123
4.2.10 What are some of the criteria used to evaluate a response to an RFP? (p.48)
An RFP often requires proposals to include information about the financial solvency, technical expertise, basic corporate history, stockavailability, references and other information upon which to base an evaluation of the vendor itself and its likelihood of successfully provid- ing the service or goods required.
124
4.2.11 What is an RFI and when should it be used? (p.49)
Request for Information (RFI)
Should be used to develop a pre-qualified vendor list when there are many potential bidders.
125
4.2.12 What is an RFT and when should it be used? (p.49)
the government, infrastructure and utility sectors may be required by law to use a similarly structured process called a Request for Tenders (RFT). An RFT is usually expected to conform to some le- gally standardized structure designed to ensure impartiality. Because the RFT process is specific to the organization required to use it and typical fleet procurements and insufficient in size and scope to require their use, they will not be discussed further in this publication.
126
4.2.13 What are cooperative purchasing contracts? (p.49)
Cooperative Purchasing Contracts
A Cooperative Purchasing Contract is established by one of the pro- cesses above and allows other organizations to buy from it without a re-bid (e.g., County buying off a State contract). These agreements are not limited to governmental entities although smaller local govern- ments often benefit greatly from partnering with a larger entity that has resources dedicated to verifying and researching product purchas- ing to make the best buying decision. Unit costs and shipping cost decreases are often a result of these joint purchasing agreements.
127
4.3 Types of Specifications (p.49)
128
4.3.1 What are the three types of specifications and what do they have in common? (p.49)
Solicitations for quotes or proposals involving vehicles or equipment typically contain specifications that describe what is needed. Perfor- mance, design, and proprietary (or name brand) are the three basic types of vehicle specifications. Specifications may be primarily of one typehybrids that encompass elements of two or even all three of these. These specification types are described below and illustrated in the examples at the end of this chapter.
or
129
4.3.2 What do good specifications need? (p.50)
Because specification compliance serves as the gatekeeper for further quote or proposal consideration, it is imperative that they be comprehen- sive in accurately describing all the essential characteristics and capabili- ties for a vehicle to meet organizational needs. Generally speaking, the lowest quoted life cycle cost or the highest life cycle value proposal of a qualified, responsive bidder is awarded the bid.
130
4.3.3 What are performance specifications? List some examples. (p.50)
Tell vendors what the unit must be able to accomplish and they determine the product and configuration to meet those requirements.
A description of a vehicle's minimum operating requirements can include gross weight, speed, acceleration, minimum grade it must negotiate, pas- senger/weight/volume carrying capacity, fuel economy, emissions levels, axle loads and distribution, and compliance with industrial or governmen- tal standards and/or statutes such as SAE, OSHA, or DOT.
131
4.3.4 What is the advantage to using performance specifications? (p.50)
Performance specifications will likely result in the most competition of the three basic types as vendors are free to select and configure the product able to meet the minimum operating requirements at the lowest cost of those criteria to be used for the evaluation. For this reason, it is essential that all operating requirements that matter be clearly defined.
It is also essential that any important comparative cost elements be clearly defined. Otherwise, the lowest net acquisition cost for the bid offering meeting the minimum standards would be selected even if lower fuel economy, higher maintenance cost, or more downtime might not make it the best life cycle cost choice.
132
4.3.5 What are Design specifications? Give some examples. (p.51)
Tell vendors how the unit is to be configured to be able to accomplish what is needed.
Design specifications may include a description of a vehicle's physical dimensions, structural properties (e.g., moments of inertia, resistance to bending, tensile or yield strengths) or other engineering parameters and performance (e.g., power or torque). They may also include the exact size, placement and mounting method for ancillary equipment like a lift winch or storage shelving or compartments.
133
4.3.6 When are design specifications used? (p.51)
Design specifications essentially relieve the vendor from the obligation of meeting minimum performance requirements by providing them instead with design criteria which must be met. In so doing, the specification writer assumes responsibility for performance when substituting their engineering prowess for the vendors’.
Design specifications are normally used for specialty/custom vehicles (e.g., fire apparatus) and vehicles built in multiple stages where a body and ancillary equipment are mounted on a cab and chassis (e.g., mass transit bus, dump truck).
134
4.3.7 What are proprietary specifications? List some examples. (p.51)
Tell vendors what make(s) and model(s) of unit or specific components are acceptable.
A description of a vehicle's required equipment that is specific to a par- ticular manufacturer.
Proprietary specifications may be used when previous competitive bid- ding has established a fleet standard. They may also be used to establish a known commodity that works for the fleet application but allows com- parable products to be bid, thereby ensuring competition but keeping the onus on vendors to justify the performance and design of their products against the one known to be acceptable.
Proprietary specifications are the easiest to write but can be the most difficult to evaluate for bid award if the “or equal” provision is included to allow competition against the known commodity.
135
4.3.8 What are some advantages and disadvantages of proprietary specifications?
(p.51)
Proprietary specifications are the easiest to write but can be the most difficult to evaluate for bid award if the “or equal” provision is included to allow competition against the known commodity.
It is a grave error to try to use proprietary specifications and disguise them as legitimate performance or design requirements. Vendors of competing products will almost certainly see through this ruse and the result may well be protests or even litigation of indefensible specifications. Therefore, if proprietary specifications are to be used then do so openly.
136
4.3.9 What is the Hybrid approach to specification writing? (p.52)
Hybrid specifications that combine features of the three distinct types above (performance, design, and proprietary) are common.
Specifications may include a single type but are more commonly a com- bination of two or even all three types. For example, a performance type specification may adequately define the medium-duty truck needed for a given fleet application when any competing make and model will do given its carrying capacity but a design or even proprietary type specification section may be needed to describe special auxiliary equipment needed in the bed of truck and even the location it should be mounted.
Hybrid specifications are least often used for light-duty, retail-type vehi- cles with no modification needed. They are the most prevalent for spe- cialty vehicles built in multiple stages where a body and ancillary equip- ment are mounted on a cab and chassis.
137
4.3.10 What role does lifecycle cost play in the decision making process? (p.52)
Bid quotations are generally awarded to the lowest cost of the responsive offers meeting or exceeding specifications. However, lowest cost doesn’t necessarily mean just the initial purchase prices or net acquisition cost of the vehicle.
138
4.3.11 What is the ABA model procurement code? (p.52)
The American Bar Association (ABA) Model Procurement Code contains recommended wording which is widely adopted particularly by states and local government jurisdictions. The Code and Companion Model Procure- ment Regulations promote transparency, fairness and competitiveness through adoption of best practices.
139
4.3.12 What are Fleet Standardization provisions? (p.53)
Standardization on makes/models may reduce costs for maintenance (e.g., diagnostic software, specialty tools, technician training) and driver training.
140
4.3.13 What benefits can be achieved by standardizing your fleet procurement
specifications? (p.53)
Once a fleet finds something that works it is easier to just require that product year after year. Proprietary specifications are essential if the goal is to standardize on a product line to simplify the fleet and reduce costs. This can be an effective cost control strategy so long as there is competi- tion in bidding the standardized product line. The problem with this strat- egy is that it may discount the impact of innovation and competition
141
4.3.14 What are some of the advantages of standardization? (p.53)
Standardization can produce significant cost savings in several areas. Some are more easily quantified than others. The easy ones include:
• Improved Maintenance Efficiency – The complexity of vehicle sys- tems are steadily increasing with the addition of electronic sensors and controls, multiplexing, new emissions technology, and safety devices. This steep learning curve for fleet maintenance technicians can be reduced by limiting the variety of new systems with which theymust contend. Proficiency in the maintenance garage is largely a func- tion of solid training and experience so a standardized fleet can expect quicker repairs and fewer mistakes all other things being equal.
• Fewer Diagnostic and Specialty Tools – Test equipment and software updates or subscriptions can be an expensive, recurring cost. To a lesser extent so can unique hand tools. Saving a few thousand dollars a year by reducing the variety of drive trains, transmissions, brake sys- tems, etc. in a tight budget can leave room for something else badly needed.
•Smaller Parts and Bulk Fluid Inventory – Obviously, the more variety in a fleet the more spare parts and maybe bulk fluid types will need to be in stock. A bloated parts room takes up valuable shop space that could be better used for another service bay or two. There is also an opportunity cost to the value of parts on the shelves—unless they are on consignment or the parts operation is outsourced. What else could the organization be doing with the cash if it weren’t tied up?
Less obvious savings accrue from:
• Increased Operational Efficiency and Safety – Vehicle operators be- come accustomed to the controls, displays and “feel” of a unit. Stan- dardizing fleet segments allows customers greater flexibility in making driver assignments without the loss of productivity or increased safety risk of bouncing between dissimilar units. They also learn the capa- bilities of a given unit (e.g., how full a dump truck looks when at its maximum rated payload for a given material and how many scoops of what size with the wheel loader it takes to hit that fill point).
• Closer Vendor Relations – Fleet organizations and their vendors can become effective partners in delivering services to customers. Good relationships are fostered by long term association and that is certain- ly more likely if a fleet standardizes.
• Proven Reliability – While there is no guarantee that a particular manufacturer’s line of products will maintain its quality over the years, it appears to be more likely than trying every new product that hits the market and bids low. Your vehicle replacement schedule is built on expectations that a certain life cycle holding period or meter reading can be predicted. Historical experience is a good indicator upon which to base that prediction all other things being equal.
• Potentially Less Time Spent on Specifications and Bid Evaluations - Once segments of a fleet are standardized, the workload for each new purchase is significantly less difficult and time-consuming.
• Fewer Contracts and Invoices to Process - Fewer makes of vehiclesmeans fewer sources of OEM parts, fewer warranty claim processes to qualify for, fewer contracts to award and monitor, and fewer sources of invoices. These seemingly small administrative issues can consume more fleet staff effort than might be expected—large fleets might even be able to eliminate an overhead position.
142
4.3.15 What are the disadvantages of standardizing procurement? (p.55)
Disadvantages
While all of the cons discussed below can be mitigated, the risks are very real and need to be both considered up front and monitored for regularly.
• Potential Loss of Competition - The foundation of purchasing is to have fair, open competition. The conventional wisdom being that this will ensure judicious use of funds. Standardizing a fleet certainly does eliminate some competition in an effort to ensure wise selections based on life cycle costs rather than lowest acquisition cost. This is the primary hurdle to overcome if a fleet should standardize. Certain- ly, if not done properly, standardizing can increase costs.
• Potential Missed Innovation - There is a risk that one vehicle or equipment manufacturer might make a leap forward in technology while you have standardized on another product line. Truly innovative improvements usually level out amongst competitors within a couple of years.
• Risk of “Lemons” – “Putting all your eggs in one basket” by standard- izing could result in excessive downtime or even premature replace- ment of vehicles if a design flaw creeps into the line of products you have selected.
• Appearance of Collusion – Any measure that appears to stifle com- petition will inevitably raise complaints that the process is unfair. It may even result in personal attacks on those who were involved in the standardization process.
143
4.3.16 What are some considerations for standardizing the “right way”? (p.55)
Consider standardization for one segment of the fleet at a time (e.g.heavy truck chassis, wheel loaders). Standardization should be based on a demonstrable savings in the life cycle cost. The initial selection should, therefore, be based on a competitive bid which incorporates quantifiable fixed and operating life cycle cost elements for a given operational life expectancy (e.g., depreciation = net acquisition cost – net resale revenue; fuel economy; safety rating; maintenance/extended warranty; average delivery time from order; productivity enhancement features). The bid specifications should be performance-based at this stage of the process.
144
4.3.17 What is a multi-year procurement agreement and why should your organization
establish one? (p.56)
Establishing a multi-year procurement agreement based on this competi- tive bid outcome, when permitted, simplifies the standardization pro- cess. A multi-year agreement would include a cost escalation clause, take advantage of all new incentives, and have an easy-out provision for both parties.
145
4.4 Bid Review and Selection (p.56)
146
4.4.1 What are pre-bid meetings and what steps should be taken to ensure that they are successful? (p.56)
Pre-bid Meetings
Pre-bid meetings may be either mandatory or non-mandatory when procuring vehicles. In the case of a non-mandatory meeting often the material is mostly covered in the specification or on paper elsewhere. For mandatory or face-to-face meetings there are a number of steps to take to ensure the meeting goes well.
• Find a member of your team to take written notes during the meet- ing to ensure proper documentation and recording of all necessary information.
• Set up a time and place for the bid opening.
• Create an attendance record for attendees of the meeting.
The purchasing officer will often facilitate the meeting to cover the differ- ent specifications and come to a consensus between the buying party and selling party. All clarifications, charges, and the scope of the purchase are important to include in the discussion.
147
4.4.2 Why is it beneficial to visit a vendor before purchasing the vehicle? (p.57)
Site Visits and Test-drives
Before purchasing a vehicle it is beneficial to visit the site and vendor.
This gives you an opportunity to really understand the source of your purchase as well as getting a real feel for the vehicle. When at the site you will be able to inspect the manufacturing plant or sale lot to identify if
the vendor will be able to meet your future needs for vehicle purchases. It also gives you the opportunity to test drive the vehicles. When test- driving a potential purchase it is important for both the fleet manager and the primary user to get behind the wheel.
Test-drives can be done in a number of fashions. There may be OEM ride and drives where customers can drive new models on a closed course provided by the manufacturer. There is also the option to test drive ve- hicles at different association meetings and industry conferences where a multitude of fleet managers, manufacturers, and other important members of the industry will convene together. There are also situations where vendors will provide a demo vehicle for a select period of time to ensure that multiple users can get a feel for this new vehicle.
148
4.4.3 Describe the post-bid evaluation process. (p.57)
Post-bid Evaluation
After making a decision, prepare a Bid Evaluation Report and spell out reasons for rejecting each bid you did not take. Give a reason for rejec- tion (i.e. “received after bid opening”, “incomplete”, “non-responsive”) and evaluate their commercial responsiveness in terms of delivery, completion date, payment terms and warranty. Additionally, include qualifications, alternatives, technical comparisons, and responsive bid comparison. For further information, reference the NAFA Professional Development Guide or NAFA Fleet Law guide concerning challenges, civil court actions, or ethical considerations.
149
4.4.4 What is a performance bond? (p.57)
Performance Bond
A performance bond is a financial guarantee up-front protecting the buyer from vendor non-compliance. Performance bonds may be short in length or long and complicated. A performance bond typically raises cost by 1-2% of the contract price, so if it is not necessary, avoid the extra cost.
150
4.4.5 What items are included in most specifications? (p.57)
A shorter specification is typically 3-6 pages and includes some of the following items: Evaluators will check “comply” or “exception” for the following sections and parts/systems included in each respective section. Specs may include, but are not limited to: Cab, Engine & Transmission, Electrical, Fuel, Brake System, Axles, Tires and Wheels, General (safety standards, cylinder removal process, vehicle camera), Body Dimensions, Body Construction, Hopper, Packing/Ejecting Mechanism, Lifting Arms, Controls, Hydraulics, Paint, Mounting, Warranty, and Optional Equipment.
A longer specification can range anywhere from 10 to more than 50 pages and is similar to the shorter spec sheets in format.
151
AM 5: Vehicle Procurement
152
5.1 Employee Reimbursement Alternatives (p.65)
153
5.1.1 What are two different types of plans for employee reimbursement? (p.65)
154
5.1.2 Why is an Accountable reimbursement plan beneficial to both the employer and
employee? (p.65)
155
5.1.3 What three rules must be followed in order to have an accountable reimbursement plan? (p.65-66)
156
5.1.4 List three examples of accountable plans. (p.66)
157
5.1.5 What are non-accountable reimbursement plans? Give an example. (p.66)
158
5.1.6 What are the pros and cons of a cents-per-mile reimbursement program? (p.67)
159
5.1.7 What is the IRS rate and why do many organizations use it? (p.67)
160
5.2 Personal Vehicle Reimbursement (p.68)
161
5.2.1 Under which circumstances is it preferable to have employees provide their own vehicles? (p.68-69)
162
5.2.2 In what situations should employee provided vehicles not be considered? (p.69)
163
5.2.3 How can temporary or intermittent vehicle requirements be met? (p.69)
164
5.2.4 Under what circumstances can employee reimbursement be preferred even when
employer provided vehicles are less expensive? (p.69-70)
165
5.2.6 When might a Fleet Manager consider renting a vehicle? (p.71)
166
5.3 Purchase (p.72)
167
5.3.1 What are some of the requirements of vehicle purchasing? (p.72)
168
5.3.2 What are some advantages of vehicle ownership? (p.72)
169
5.3.3 When might it be preferable to order vehicles from the dealers stock? (p.72)
170
5.3.4 What are some advantages and disadvantages to purchasing from dealer stock?
(p.72)
171
5.3.5 What capital considerations should the Fleet Manager make? (p.72)
172
5.3.6 How does Return on Investment affect the purchase decision for both public and
private fleets? (p.73)
173
5.3.7 What is the true cost of capital? (p.73)
174
5.3.8 What are the Sales tax implications of both purchasing and leasing vehicles?
(p.73)
175
5.3.9 What are some of the more common funding sources? (p.73-74)
176
5.3.10 How can the Fleet Manager get funding from Federal Agencies? (p.74)
177
5.3.11 How can the Fleet Manager secure funding from the state? (p.74)
178
5.3.12 How can liens affect Fleet Managers who finance their vehicles? (p.74)
179
5.3.13 What are some administrative issues that arise from unpaid tickets? (p.74)
180
5.4 Lease (p.74)
181
5.4.1 Define the term Lease. (p.74)
182
5.4.2 What is the difference in cost between leasing and purchasing vehicles? (p.75)
183
5.4.3 What are the four questions to ask in order to classify a lease? (p.75)
184
5.4.4 What is an operating lease? List some of the benefits it provides. (p.75
185
5.4.5 Who bears the risk in open-end and closed-end operating leases? (p.76)
186
5.4.6 What is a Capital lease? (p.76)
187
5.4.7 Define the two types of Capital leases. (p.76)
188
5.4.8 What is a closed-end lease? (p.77)
189
5.4.9 Describe an open-end lease. (p.77)
190
5.4.10 What is a Terminal Rental Adjustment Clause (TRAC)? (p.77)
191
5.4.11 How can the Fleet Manager determine the mileage criterion to be used in the
leasing agreement? (p.78)
192
5.4.12 What are the differences between a floating and fixed financing rate? (p.78)
193
5.4.13 What is the difference between on and off the balance sheet accounting? (p.79)
194
5.4.14 List some of the Leasing fees that the Fleet Manager should be aware of. (p.79)
195
AM 6: Active Fleet Management 6.1 Commissioning Vehicles (p.80)
196
6.1.1 What is vehicle commissioning? (p.80)
197
6.1.2 Describe some of the comm0n activities involved with commissioning a vehicle.
(p.80-81)
198
6.1.3 What are some of the unique requirements that are common to government fleets?
(p.81)
199
6.1.4 What are some of the unique requirements that are common to leased private
sector vehicles? (p.82)
200
6.1.5 What additional activities are required when commissioning a utility fleet? (p.83)
201
6.1.6 What are some of the unique requirements that are common to law enforcement
fleets? (p.83)
202
6.2 Upfitting (p.63)
203
6.2.1 What is vehicle upfitting? (p.84)
204
6.2.2 How can the Fleet Manager determine what upfitting is required on a certain
vehicle? (p.84)
205
6.2.3 What resale considerations should be made before the vehicle is upfitted? (p.84-
85)
206
6.2.4 What are some common errors that are made in the upfitting process? (p.85)
207
6.2.5 What should the Fleet Manager do after purchasing upfitted vehicles? (p.85)
208
6.3 Utilization Management (p.85)
209
6.3.1 What are the two aspects of Fleet rightsizing? (p.85)
210
6.3.2 What are utilization thresholds and how are they used? (p.85-86)
211
6.3.3 What are the effects of over-utilizing and under-utilizing assets? (p.86)
212
6.4 Pooling Resources (p.86)
213
6.4.1 Under what circumstances might the Fleet Manager consider pooling resources? (p.86-87)
214
6.4.2 What is an alternative to acquisition for a temporary need or ow frequency job? (p.87)
215
6.4.3 How can a Fleet Manager control access to a fleet pool? (p.87)
216
6.4.4 How can the Fleet Manager monitor the usage of the fleet pool? (p.87)
217
6.5 Facility Considerations (p.88)
218
6.5.1 What should the Fleet Manager consider while designing the layout of the fleets facilities? (p.88)
219
6.5.2 What should the Fleet Manager consider while deciding the location of fleet facilities? (p.88)
220
6.5.3 What is the Fleet Managers role in managing equipment? (p.88)
221
6.6 Operator Considerations (p.88)
222
6.6.1 What checks should the Fleet Manager do when hiring new drivers? (p.88)
223
6.6.2 What can the Fleet Manager do to help manage risk? (p.88)
224
6.7 Human Resources (p. 89)
225
6.7.1 What responsibilities in the Fleet department fall under HR? (p.89)
226
6.7.2 Describe the steps involved in proper fleet staffing. (p.89)
227
AM 7: Vehicle Remarketing
228
7.1 Lifecycle Cost Analysis to determine Optimum Life Cycle (p.90)
229
7.1.1 What are the considerations when evaluating extending a vehicle lifecycle? (p.90)
230
7.2 Decommissioning (p.92)
231
7.2.1 What 6 activities are common when decommissioning a vehicle from the fleet? (p.93)
232
7.2.2 What are some considerations that should be made when decommissioning a vehicle from a public fleet? (p.93)
233
7.2.3 What are some considerations that should be made when decommissioning a vehicle from a private fleet? (p.94)
234
7.2.4 What are some considerations that should be made when decommissioning a vehicle from a utility fleet? (p.94)
235
7.2.5 What are some considerations that should be made when decommissioning a vehicle from a law enforcement fleet? (p.95)
236
7.3 Reconditioning (p.95)
237
7.3.1 What is vehicle reconditioning? (p.95)
238
7.3.2 What rule should be followed when deciding whether or not to invest in
reconditioning a vehicle? (p.95)
239
7.4 Remarketing Policy (p.96)
240
7.4.1 What should a remarketing policy contain concerning the sale of vehicles to employees? (p.96)
241
7.5 Remarketing Methods (p.96)
242
7.5.1 What is the Employee remarketing method and what are the benefits of using it? (p.96)
243
7.5.2 What is the Auction remarketing method and what are the benefits of using it? (p.97)
244
7.5.3 What is the trade remarketing method and what are the benefits of using it? (p.97)
245
7.5.4 What is the retail remarketing method and what are the benefits of using it? (p.97)
246
7.5.5 What is the direct remarketing method and what are the benefits of using it?
(p.98)
247
7.5.6 What is the third party remarketing method and what are the benefits of using it?
(p.98)
248
7.5.7 What is the Internet remarketing method and what are the benefits of using it?
(p.98)
249
7.5.8 What is upstream remarketing and what are the benefits of using it? (p.98)
250
7.6 Managing Depreciation (p. 100)
251
7.6.1 What is the difference between effective depreciation and book depreciation? (p.101)
252
7.7 Implementing Depreciation Control Strategies (p. 100)
253
7.7.1 What is the goal of a fleet manager when selecting a vehicle? (p.102)
254
7.7.2 What are the two factors that dictate effective depreciation? (p.102)
255
7.7.3 In general, what are the differences in planned vehicle life between government
fleets, private fleets, executive fleets and leased fleets? (p.102)
256
7.7.4 What should be considered when deciding to sell a vehicle in order to minimize
effective depreciation? (p.103)
257
7.7.5 Know how sale price volatility can affect various vehicle classes. (p.103)
258
Which method of sales is considered the first choice in any used vehicle marketing plan?
sales to employees
259
Fleet A is remarketing vehicles directly to the public. What approach should the Fleet Manager take regarding reconditioning?
compare reconditioning costs to the vehicle value before and after
260
A Fleet Manager is adding ten new vans to the fleet and is at the point where they have reviewed prices previously paid for similar vans, how long the dealer will take to acquire the vans, bulk order discounts, and which dealership will fit within the company’s budget. What step in strategic sourcing is this?
a. Understand the spend category
261
Criteria Veh A (Weight)
Rank Safety (5) 1
Score
Veh B Rank 3
Score
Veh C
Rank Score 2
Environment (3)
6
1
9
Lifecycle costs (2)
3
6
1
4. A ranking of 3 represents the best in the category and no two vehicles have the same score.
With this selector matrix, the organization would likely come to the following conclusion:
a. Select Vehicle B with a total 24 points
262
Criteria Veh A (Weight)
Rank Safety (1) 1
Score
Veh B Rank 3
Score
Veh C
Rank Score 2
Environment (2)
2
3
Lifecycle costs (3)
3
1
5. If the weighting changes to safety (1), Environment (2) and lifecycle costs (3), which vehicle would you select?
Vehicle B with 14 points
263
Criteria Veh A (Weight)
Rank Safety (1) 1
Score
Veh B Rank 3
Score
Veh C
Rank Score 2
Environment (2)
2
3
Lifecycle costs (3)
3
1
6. Your spec contains the following criteria:
-Vehicle must be capable of towing a 1500 lb trailer up a 15 degree incline
-Vehicle must be capable of transporting a load of 1500 lb in a separate area for eight hour periods.
This spec would be classified as which type?
Performance
264
7. Which fleet type would be most likely to use a Fleet Management Company for vehicle commissioning?
Corporate fleet
265
8. A fleet manager is preparing to make a purchase decision for a publicly owned fleet. The community the fleet serves believes (in priority) in buying American, supporting safety and is opposed to excessive public spending. The city manager has tasked the fleet manager to develop a selector list that will appease the constituents, and markedly improve the overall condition of the fleet while lowering the operating budget.
What policy would best serve the fleet in selecting replacement vehicles?
Select US-built vehicles with 5-star safety ratings as long as capital cost is low.
266
9. A Fleet Manager has decided to use some non-quantifiable criteria when developing the company selector list. How are these measured?
Using advice from subject matter experts
267
10. What is the basic rule when negotiating the price of a vehicle?
Use same terms and starting point as the vendor
