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Flashcards in Asset Management Deck (163):

What is the definition of strategic sourcing?

organizational procurement and supply management process use to locate, develop, qualify and employ suppliers that add maximum value to the buyer's products or services


What is the main objective of strategic sourcing?

locate and form relationships with hose suppliers that best promote the strategic and operational goals of your organization.


How can strategic sourcing be sued as an approach to supply chain management?

it formalizes the way information is gathered and used so that an organization can leverage its consolidate purchasing power to find the best values in the marketplace.


Why might you want to limit the amount of suppliers to your fleet?

allows you to gain leverage and purchasing power for the procurement of quality vehicles at the best price.


Describe the differences between traditional sourcing and strategic sourcing.

Traditional: care about upfront short term costs, vendor turnover, strategic is global and builds relationships. Also, looks at entire lifecycle of vehicles.


What are the benefits of strategic sourcing?

limited number of suppliers, benefits vendors due to longer lasting relationships and larger volume purchases. Also, looks at life cycle cost of vehicles.


How can strategic sourcing generate benefits to the Fleet Department?

Limited number of suppliers to manage, leads to long term savings as well as cost effectiveness by leading to fewer defects and mistakes by suppliers.


Why is it important to supplier performance?

can lead to better decisions when it is time to decide between acquiring a new supplier or staying with the current one.


How does strategic sourcing benefit suppliers?

They get larger purchases, benefit from improved communication and not having to juggle multiple small contracts.


What risks are involved with strategic sourcing?

overpaying initial costs, takes longer, supplier requirements can be too strict, potential change of suppliers.


Describe some of the costs involved with strategic sourcing

lifecycle costs or total cost of ownership


Why is strategic sourcing time consuming?

more complicated, requires more knowledgeable and skilled staff


What are the four steps in the strategic sourcing process?

Understand the spend category, access potential suppliers, create a strategy, select a supplier, cultivate relationships.


What should your purchasing team do during the first phase of the strategic sourcing process?

identify purchasing and pricing constraints, time and money it takes for the supplier to acquire the assets as well as the historic purchase in the asset categories.


What do you want in your strategic sourcing partner?

competent, trustworthy, communicative and those that offer deals that valuable and fairly priced.


How can you create a strategy for strategic sourcing?

start by identifying how competitive the supplier marketplace is. ensure that other departments are on board with your supplier choices.


What tool can be used to select the right supplier?

Use a balanced scorecard to objectively measure and compare each supplier's offers.


What are Performance Improvement Requirements and how are they used?

crucial to keeping the buying and selling processes a positive experience. Ways to do this are improving cycle time, cost, quality and delivery performance.


What type of team can be created in order to help select suppliers?

team of subject matter experts that will organize, evaluate, select, develop and manage suppliers.


What systems should be developed and how can they help the organization?

develop purchasing systems which will be lead a notable increase in the emphasis of links between external systems along with networking between purchasing sites with suppliers.


What are the team member purchasing responsibilities?

team members must be points of contact with specific suppliers and to research new potential suppliers.


What is a cross functional sourcing team?

comprised of a group of individuals who are maintaining relationships with fleet suppliers and identifying the sourcing needs of the fleet.


What is the Fleet Manager's Role in the cross functional sourcing team?

oversee the cross functional team in thoroughly examining fleet purchasing activities and supplier selection.


What is the focus of many purchasing groups and what are the fleet manager's responsibilities?

finding the lowest cost and this provides many benefits, but fleet managers are responsible for voicing concerns when non-fleet members of the forcing team focus only on low cost suppliers without taking other fleet related concerns into mind.


What is rightsizing the fleet?

Determining the correct customer service levels for internal service and rental fleets as well as understanding the vehicle-task suitability (vehicles that are appropriate for staff).


What is the advertising cost on a vehicle invoice?

percent of MSRP (typically 1 percent) or a flat dollar amount set by the factor.


Define the term Bid assistance.

Additional negotiated rebates that may replace or be in addition to the national fleet rebates.


What is the dealer invoice and how is it calculated?

The amount the dealer pays the manufacture for a vehicle (not the actual cost). Actual cost can only be calculated by deducting holdbacks, allowances, incentive, rebates, bonuses and other discounts from dealer invoice.


What are factory to dealer incentives?

money paid to the dealer by the manufacture to sell specific models (they come and go).


What is meant by the term financing on a dealer invoice?

flat dollar amount that is included in the factory invoice.


What are fleet incentives and who funds them?

money given by a vehicle manufacture to a fleet as an added incentive for buying their product. Usually funded 100 percent by the factory.


What is factory holdback?

an amount paid by the factor to the dealer after the car has been sold, usually on a quarterly basis. Most manufactures will pay dealers an amount equal to between 2 and 3 percent of either invoice cost of the MSRP.


Define the term MSRP

retail selling price of the vehicle as determined by the manufacture and printed on the label


What is triple net invoice?

manufacturer to dealer invoice price less holdback, less advertising and financing.


What is the most important document in a vehicle purchase?

factory invoice


What information do you need to know in order to get the lowest possible price for a vehicle?

what the dealer has actually paid for the vehicle or "dealer cost."


What is a good stating price to use for negotiating with a vehicle supplier

invoice price. true cost or triple net price.


What type of information is contained on a standard factory invoice?

price, features and details regarding the purchase and delivery of the vehicle.


What is the most important strategy to use when considering multiple vehicles?

being consistent in how you evaluate each invoice and to use the same starting point for each negotiation.


What is the formula for Triple Net?

Invoice-Holdback-Advertising-Financing=Triple Net Cost


How can Fleet sales benefit a car dealer?

higher volume of vehicle sales. It typically take much longer to sell a small number of vehicles. Also, they can sell the fleet a service contract.


What are some of the vehicle manufacturer's requirements for fleet pricing?

can vary. Sometimes minimum of five to ten vehicles. Sometimes can be negotiated one year lease of vehicles.


What are some of the advantages of purchasing vehicles in bulk?

save money, negotiate good deals on servicing and top price on trade-in.


Why would an organization want standard vehicle specifications?

achieves cost-savings benefits


What are the best practices for lowering costs using standard vehicle specifications?

centralize fleet management, Distinguish needs from wants, conduct annual spec reviews, develop standards based on vehicle role and location


Why is it important to centralize fleet management?

To ensure a leader makes the final decision on a vehicle purchase. They need to think globally rather then locally (programs should not make their own decisions).


What are potential areas to save costs when identifying needs and wants?

cloth or vinyl instead of leather, bench seats instead of bucket, 2wd vs 4wd


Describe the two categories of pricing incentives

National fleet incentives: 10-15 vehicles it can receive a fleet ID number and be entitled to a fleet discount through the manufacture.
Competitive pricing assistance: work with manufacture and negotiate an individual incentive instead of national fleet incentive (often lower price)


What is a good indicator of the true value cost?

Total cost of ownership


What warranty considerations does the fleet manager have to keep in mind during the purchasing process?

have a prediction of a vehicle's expected life and how it adds to the warranty you will be paying for.


Who can a fleet manager contact at the dealership for information on the manufacturers fleet programs?

government or commercial sales person at the dealership


What does a fleet manager need in order to receive fleet discounts?

fleet identification number


What is a volume rebate and how can the fleet manager obtain it?

discount on purchasing multiple vehicles at once, even in some cases where you may not be taking delivery of all vehicles at one.


List the advantages of ordering vehicles from the factory

personalized customization, can specific vehicle to meet specific needs, better pricing, opportunities to add or delete options,


What are some of the disadvantages of ordering vehicles from the factory?

longer wait time, incentives may lost during the wait period, production windows may close, some options or popular models may not be available


Why might order from the factory be cheaper than ordering from stock?

factories do not have to worry about vehicles sitting on lot (no finance charges)


What might make ordering from the dealership cheaper?

dealer incentives may expire while a vehicle is still being built in factory.


What is the basic rue for negotiating vehicle price?

ensuring you use the same terms and the same starting point as the dealer.


What is the vehicle selector list?

predetermined list of vehicles that drivers or others can choose from to meet their vehicle requirements.


What are some questions that managers should address in order to help them in the vehicle selection process?

how many choices of vehicles exist, what is important to management, how much input do drivers have, can drivers purchase additional options, is this work or a perk?


Why can offering too many choice be a disadvantage?

greater administrative burden as well as prevent bulk discounts.


List some of the factors a Fleet manager may consider in the vehicle selection process?

Function, warranties, safety, costs, image


How can a fleet manager get driver input and what information should they ask for?

collect preferences on color, vehicle model and options for the vehicle (usually survey process)


What are some considerations to be made when deciding whether the vehicle should be work or perk oriented?

the organization's philosophy, the driver's responsibilities, human resource factor and organizations may place more or less emphasis on perks when making vehicle selections.


Why is it important to select the right vehicle?

upfront cost is significant and a suboptimal vehicle will probably have to wait until the next time the vehicle is replaced.


What are some important vehicle selection considerations for both government and private fleets?

government fleets more cost conscious because of tax payer dollars and private fleets are more concerned about image so they can retain staff.


Why is it important to select vehicles that meet company needs?

crucial to determine vehicle function do determine which vehicles will best fit your needs.


What vehicle selection input should be solicited from management?

cost concerns, HR concerns, safety, reliability


List the four steps in the selector development process?

identify selection criteria, rank the criteria, assign weight to criteria, conduct trial vehicle selection


What stakeholders should the fleet manager seek feedback from?

drivers, staff, customers and leadership.


List some factors that might impact the vehicle selection criteria

terrain, vehicle duty cycle, weather conditions (environmental factors), cost, vehicle lifecycle costs and safety


What are quantifiable and non-quantifiable factors?

quantifiable: cost, warranty, maintenance and environment. Non-quantifiable: safety, image and morale.


What should the fleet manager keep in mind while ranking selection criteria?

big picture of the organization (what's important to the organization)


What should the fleet manager consider while assigning a weight to the selection criteria?

criteria and quantify how much more important each successive factor is to the fleet.


How does the fleet manager test vehicle options against the selection criteria?

Compare three vehicles with a 1-3 weight ranking based on items like safety, mpg, country built in, cost etc.


How does the fleet manager determine a points total in the selection process?

applies a weight total to each category


Who should be included in a user input group and what are the responsibilities of the group?

drivers ,managers, supervisors and maintenance workers. Evaluate new products and options while keeping clear records of their notes in order to summarize and present for consideration.


Who makes the final decision on what type of vehicle to purchase?

fleet manager


what should be done once the final decision on vehicle selection has been made?

reconnect with the group that provided input. Decision needs to be explained so the group knows their input was considered.


What is lifecycle cost analysis?

technique used primarily to evaluate bids on a basis other than low purchase cost.


How do you calculate lifecycle costs?

initial cost+operating and maintenance costs-salvage value = lifecycle cost.


What is the major advantage of lifecycle cost analysis?

accounts for the operating costs of ownership and salvage value, yielding a better picture of the true costs of owning the equipment.


How are contracts awarded in the public and private sectors?

based on a competitive bidding process.


What is an organization legally bound to do when beginning the competitive procurement process?

fully disclose all info that would influence a bidder, treat all bidders fairly, act in good faith, negotiate no changes to scope of work


What is the FASB and what do they do?

Financial accounting standards board. regulates the financial accounting and reporting aspects of a transaction.


What do lease accounting standards require the leaser to do?

Classify the lease as a sales type lease, direct financing lease, leveraged lease or operating lease.


What is the critical first step in the selection process?

determining what is needed


What two objectives must be balanced during the selection process?

acquiring vehicles that meet operational needs and at lowest lifecycle costs.


What questions should the fleet manager ask in order to help determine vehicle requirements?

tasks that will be performed? backseat passengers? cargo that will be carried? distance it will travel?


What tools can the fleet manager use in order to save time in identifying vehicle requirements?

surveys, face to face interviews with drivers, vehicle test drives


What is the role of the fleet manager in the decision on vehicle specifications?

ultimate decision when deciding what specification each vehicle entering the fleet must have (after seeking input)


What are some common errors that are made while purchasing specialty vehicles?

working out of order (starting with body rather then chassis), duplicating old units (not finding out if old units met needs), guessing,


What are the common terms for solicitation styles used by organizations in order to procure goods and services from vendors?

request for quotation (RFQ), request for proposal (RFP), request for information (RFI), cooperative purchasing contracts.


What is an RFQ and when should it be used?

request for quotation. Should be used when minimum requirements are clear and vendor innovation is not desired.


What information is required in an RFQ?

delivery schedule, life cycle cost, payment terms, quality level and contract length.


What is an RFP and when should it be used?

Request for proposal. Should be used when relative qualitative requirements will be evaluated and vendor innovation is desired.


List the typical components of an RFP

scope of work, specs, schedules, contract type, data requirements, terms and conditions,


What are some of the criteria used to evaluate a response to a RFP?

suitability, function, design aesthetics


What is an RFI and when should it be used?

Request for information. Should be used to develop a pre-qualified vendor list when there are many potential bidders.


What is an RFT and when should it be used?

Request for tenders. Expected to conform to some legally standardized structure designed to ensure impartiality.


What are cooperative purchasing contracts?

established by one of the purchasing processes (RFP etc.) and allows other organizations to buy from it without re-bid.


What are three types of specifications and what do they have in common?

Performance, design and proprietary. they describe the minimum acceptable characteristics of the vehicle or equipment.


What do good specifications need?

need to have enough detail to avoid confusion


What are performance specifications? List some examples

tell vendors what the unit must be able to accomplish and they determine the product and configuration to meet those requirements. Gross weight, speed, acceleration and passenger weight capacity.


What is the advantage to using performance specifications?

will 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.


What are design specifications? Give examples.

Tell the vendor how the unit is to be configured to be able to accomplish what is needed. description of vehicles physical dimensions, power or torque


What are proprietary specifications?

tell vendors what make/models of unit or specific components are acceptable.


What are some advantages and disadvantages of proprietary specifications?

easiest to write but can be most difficult to evaluate for bid award if the "or equal" provision is included to allow competition against the known commodity.


What is the hybrid approach to specification writing?

combine features of three distinct types (performance, design and proprietary)


What role does lifecycle cost play in the decision making process?

lowest cost responsive bidder may include objective measure of lifecycle cost elements not just purchase price.


What is the ABA model procurement code?

American Bar Association. Recommended wording which is widely adopted particularly by states and local government jurisdictions.


What are fleet standardization provisions?

standardization on makes/models may reduce costs of maintenance and driver training.


What benefits can be achieved by standardizing your fleet procurement specifications?

improved maintenance efficiency, fewer diagnostic and specialty tools, smaller parts, increased operational efficiencies.


What are some considerations for standardizing the right way?

all stakeholders need to be included, one segment of the fleet at a time, multi-year procurement agreement,


What is a multi-year procurement agreement and why should your organization establish one?

simplifies the standardization process. Includes a cost escalation clause, takes advantage of new incentives and have an easy-out provision for both parties.


What are pre-bid meetings and what steps should be take to ensure that they are successful?

Review specifications with potential bidders. Make sure to have someone on your team take notes, setup time and date for bid opening, create attendance record for who attended the meeting.


Why is it beneficial to visit a vendor before purchasing a vehicle?

Gives an opportunity to really understand the source of your purchase as well as getting a real feel for the vehicle.


Describe the post-bid evaluation process.

Prepare a bid evaluation report and spell out reasons for rejecting each bid you did not take. Additionally, include qualifications, alternatives, technical comparisons and responsive bid comparison.


What is a performance bond?

financial guarantee up-front protecting the buyer from vendor non-compliance.


What items are included in most specifications?

cab, engine and transmission, fuel, brake system, axles, tires, dimensions etc


What are two different types of plans for employee reimbursement?

monthly allowance and accountable plans (flat rate, cents per mile)


Why is an accountable reimbursement plan beneficial to both the driver and the employer?

excluded from gross income and not reported on W2's


What three rules must be followed in order to have an accountable reimbursement plan?

expenses must have a business connection, driver must provide adequate accounting for expenses within a reasonable amount of time and excess payments must not be returned.


List three examples of accountable plans?

flat rate, cents per mile and qualifying fixed and variable rates


What are non-accountable reimbursement plans? Give an example

don't meet one or more of the criteria required to be a tax free reimbursement. Flat rate or company provides driver a certain amount towards expenses.


What are the pros and cons of a cents-per mile reimbursement program?

east to administer, tax free, cons = not geographically sensitive, does not account for depreciation, under pays low mileage drivers.


What is the IRS rate and why do many organizations use it?

Optional Standard Mileage rate for Business. It is often used because the government publishes this rate each year


Under which circumstances is it preferable to have employees provide their own vehicles?

temporary or intermittent requirements, low mileage drivers, strong employee preference


In what situations should employee provided vehicles not be considered?

type of vehicle needed is not the type typically owned by employees, vehicles going home at night may impact public perception


How can temporary or intermittent vehicle requirements be met?

rental vehicles, loaner from pool or driver reimbursement


Under what circumstances can employee reimbursement be preferred even when employer provided vehicles are less expensive?

organization has limited funds and does not want to lease vehicles, public perception


What are some of the requirements of vehicle purchasing?

considerable capital outlay, extra focus on managing the acquisition, initial licensing and renewals, personal property tax payments, title retention and remarketing of vehicles.


What are some of the advantages of vehicle ownership?

tax relief on depreciation, pricing leverage and maximization on resale proceeds.


What capital considerations should the fleet manager make?

return on investment, true cost, sales tax implications for purchasing vs leasing,


How does the return on investment affect the purchase decision for bother public and private fleets?

decision to use internal funds for vehicle acquisition depends on the organization's profit margin.


What is the true cost of capital?

dependent on how the organization finances its assets. Does it finance using retained earnings or finance using debt (borrowing or leasing).


what are the sales tax implications for both leasing and purchasing vehicles?

sales tax must be paid at time of sale. tax is paid on monthly payment during lease and not at time of purchase.


How can liens affect fleet managers who finance their vehicles?

vehicle may not be sold until the lender is paid off and the lien released.


What are some administrative issues that arise form unpaid tickets?

vehicle may not be able to registered and driven


Define the term lease

rental, that by contract, is clearly defined as to length, cost and stipulations.


What is the difference in cost between leasing and purchasing vehicles

purchasing is typically less expensive.


What are the four questions to ask in order to classify a lease?

does ownership transfer at end of lease, does lease contain option to purchase at bargain price, is the term of lease at least 75 percent of estimated economic life of asset, is present value of future minimum lease payment at least 90 percent of fair market value of asset.


Who bears risk in open ended and closed ended leases?

Owner assumes risk with close ended lease and borrower bears risk with open ended lease.


what is a capital lease?

classified and accounted for by the lease as a purchase and by the lessor as a sale or financing transaction.


define the two types of capital leases

finance lease - full payout in which lessee is responsible for vehicle maintenance, taxes and insurance. Direct financing - non leveraged lease by a lessor in which the lease meets any of the defined criteria of a capital lease, plus certain additional criteria.


What is a terminal rental adjustment clause?

ties the lessee to whatever difference may exist between the book and selling values of the unit upon remarketing.


What are the differences between floating and fixed financing rates?

floating rates adjust monthly based on current interest rates.


What is the difference between on and off the balance sheet accounting?

how assets are treated. Are they considered an asset and financially depreciated or are they considered and operating expense?


List some of the leasing fees a fleet manager should be aware of

admin fee, interest markup, insurance fees, interim interest


What is vehicle commissioning?

Receiving, licensing, decaling and entering into fleet management system


What are some of unique requirements unique to government fleets?

environmental testing and special licensing (exempt plates)


What are some of the requirements for private sector fleets?

pre determined driver assignment, up front fees, inspections


What are some of the unique requirements of utility fleets?

permits and regulatory compliance


what are some of the unique requirements of law enforcement fleets?

life cycle of law enforcement equipment, upfitting


what are two aspects of fleet rightsizing?

utilization and sizing a vehicle appropriately.


What should the fleet manager consider while designing the layout of the fleets facilities?

consider the layouts ability to handle alternative fuels, pay attention to exterior location, ventilation, spacing and fire codes other regulations before building.


What should the fleet manager consider while deciding the location of fleet facilities?

the facility is large enough but not to far removed from commonly used roads or cities.


What is the fleet managers role in managing equipment?

uphold safety plans and training


What checks should the fleet manager do when hiring new drivers?

motor vehicle record checks


What can fleet managers do to help manage risk?

providing proper and complete driver training


What responsibilities of the fleet manager fall under HR?

proper staffing, recruitment and reward systems and incentives


What is vehicle reconditioning?

anything from simply washing a vehicle to performing major mechanical or body work


What is the difference between effective and book depreciation?

effective -actual value of vehicle consumed in use, is the difference between the net acquisition cost and the net resale value. Book - estimate residual value of the vehicle at replacement subtracted from the total acquisition cost.