Procurement decisions move up corporate ladder (FT.com)

Procurement decisions move up corporate ladder
By Ken Rogers

Published: May 6 2008 03:00 | Last updated: May 6 2008 03:00

Rumours that the fleet manager is dead are an exaggeration. But fleet decisionmakers are now increasingly found either at board level or in senior management roles in the finance or human resources departments.

While the significance of some changes to tax rules affecting company cars might not be apparent to the traditional fleet manager, they certainly will be to the finance director.

Recent research suggests that the sharing of responsibility for procurement now stretches from chief executive to human resources and financial directors.

"Risk and the environment are two regulatory issues that were simply not on the radar a decade ago," says Nick Brownrigg, Masterlease chief executive.

"Cost is a fixed concern - so one would expect the finance director to have an involvement - but driver behaviour linked to risk or CO 2 emissions has meant that human resources takes more of a role."

Masterlease questioned 2,600 fleet decision-makers across 13 of the 17 countries where it operates and found that with 33 per cent of companies it was the managing director or chief executive who made the ultimate fleet procurement decision.

At an average of 15 per cent, the fleet director or manager came higher on the decision-making hierarchy than the finance director, who was at 12 per cent. The human resources director or manager came in at 10 per cent, ahead of his or her opposite number in procurement.

In the UK at least, human resources departments are taking a role in fleet decisions because of the risk issues - not least the recent introduction of corporate manslaughter legislation.

Geoffrey Bray, chairman of Fleet Support Group, says that many fleet managers became dinosaurs when they refused to accept their role was changing and failed to embrace the changes.

"There have been some excellent fleet managers who stay one step ahead in terms of operating and compliance procedures. But there were many attracted by the peripheral aspects - such as car launches - rather than the detail.

"These were not fleet managers - they were weak managers, and they eventually lost their jobs. Those who moved into a wider brief, and embraced a broader corporate travel and mobility remit as well as procurement, are thriving."

Roger Grainger, sales director of Avis, the car rental company, says that in recent years the fleet manager has been joined by other key people within the organisation as part of a "fleet board".

"Fleet is now treated like buying in any other service. It hasn't meant the fleet manager's role is any less important, but colleagues from human resources, finance and purchasing combine to ensure that every aspect of the fleet operation is covered - from managing tax, national insurance and costs to employee benefits, fleet administration and softer issues such as the environment.

It's then normally up to fleet managers to make everything happen on a daily basis in association with their supplier network."

Stewart Whyte, director of ACFO, an organisation for fleet operators, says that businesses generally underestimate the financial and operational importance of the fleet and the negative impact that can come from failure to manage it properly.

"Companies should look very carefully at the whole management structure within which the fleet operates," he says. "Where outsourced solutions are in place, these need to be reviewed on a regular basis. Outsourcing agencies should never be judge, jury and executioner. Top management must realise that ultimately it carries the can for the whole risk-management profile, including the overall cost risk."

Keith Allen, managing director of fleet manager ALD Automotive, says there is a growing short-termism in the marketplace, where procurement teams and external consultancies are playing a much bigger role in fleet reviews.

"There is pressure on margins and productivity, and the focus on cost is as strong as ever. Consequently, the whole procurement process has been tightened and best practice from other markets taken on board to eke out savings in every department.

"Procurement has become a very hard-nosed profession, where service expectations can be out of all proportion to the price customers are prepared to pay.

This creates a customer-base that demands more for less and, combined with a harsh new business environment, newer customers are often only won by leasing companies desperate to give everything away, just to make it to the shortlist.

"Today's price is the overriding influence in tendering decisions rather than tomorrow's value. This will, ultimately, not only fail to deliver long-term expectations but could also give our industry a poor name."
Copyright The Financial Times Limited 2008