How Does a Fleet Management System Work? A Quick Guide

February 6, 2020

Managing a fleet of vehicles can be extremely challenging from a cost and operational perspective. Vehicles, after all, are expensive due to the high costs of maintenance and fuel. And making matters worse, businesses often lack visibility into daily shipping operations. In fact, it’s estimated that fleets waste between 5 to 10 percent of their annual budgeted dollars.

At the same time, fleet management is very important to the overall success of a company. To reduce transportation costs and complexities, many organizations are turning to advanced fleet management systems.

The fleet management market is growing at a compound annual growth rate (CAGR) of 24.5 percent due to obligatory electronic device (ELD) usage in vehicles, wireless adoption, and international trade expansion.

In this post, we'll cover how fleet management systems work, the benefits of such a system, and some of the components of fleet management that help make it a useful tool. So how does a fleet management system work? Let's find out!

What is a Fleet Management System?

A fleet management system is a digital platform for monitoring and managing vehicles and technicians.

Think of a fleet management system like a centralized dashboard that managers can use to oversee key performance metrics, gain real-time insights and analytics, and leverage tools to help make critical business decisions.

For example, a fleet management system will let you see where drivers are located on the road in real time. You can use this system to check if your drivers are doing their jobs or spending more time than they should on break at rest stops, for example. Fleet management systems also provide insight about daily or hourly vehicle availability, delivery updates, accumulated on-road hours, weather alerts, and strategic route changes, among other things.

At the same time, a fleet management system can provide instant access to a variety of historical reports like ongoing maintenance costs, technician and driver productivity summaries, and weekly fuel or mileage logs. Of course, this data that would be very time consuming to pull together manually, but the fleet management system makes it easy.

This is a big deal because quick access to that kind of information can make a big difference in a fleet’s overall effectiveness.

How Does a Fleet Management System Work?

A fleet management system is the sum of multiple components.

1. Software

Software is an integral part of the fleet management process. A variety of solutions are available that can be easily managed and deployed through the cloud. You can use a fleet management platform to create and share reports, communicate with drivers, and create shipping schedules.

Communication, it should be noted, is one area where many fleet managers struggle. Oftentimes, maintenance notifications get overlooked when they blend in with a mountain of other notifications.

However, a fleet management system can be used to easily distribute preventative maintenance notifications to team members. These notifications can be customized with read receipts to ensure that all parties receive them and take action.

2. Telematics

Fleet management systems also use telematics, which combine GPS navigation with on-board diagnostic sensors. By using telematics, it’s possible to record exactly where a vehicle is and how fast it’s traveling down the road at any given time. Some telematics systems can provide advanced insights like braking and turn metrics—and even tailgating alerts.

All of this information can be shared with drivers to let them know how they are performing on the road and how they could make changes to improve safety and prolong the lifespan of the company's vehicles.

3. Maintenance Planning

Vehicles need regular maintenance in order to remain operationally sound. Yet it’s very easy for vehicles to miss safety checks.

Sometimes checks do not happen because of negligence. Other times, they are postponed to ship goods faster. Either way, this can lead to a whole lot of safety and compliance issues.

Good news: Fleet management systems can automate vehicle maintenance, alerting drivers, technicians, and managers when cars and trucks are due for service—providing peace of mind for administrators and executives alike.

By automating maintenance, businesses can also schedule shipments and deliveries months in advance without having to worry about vehicle availability.

4. Parts Management and Warranty Tracking

Tracking replacement parts and warranties can be laborious and time-intensive. However, it’s critical for success—especially for a business with hundreds or thousands of vehicles.

Fleet management systems can be used to track inventory and warranties, providing an automated and streamlined approach to maintenance and repairs.

5. Security Systems

In some cases, businesses will go a step beyond telematics and install on-board security devices that enable centralized control and security management.

For example, a company may install a device that will allow headquarters to seize control over a stolen vehicle and reduce its speed. GPS coordinates can also be shared with law enforcement to let them know where a stolen vehicle is located.

What Are The Benefits of a Fleet Management System?

Here are some of the top reasons why your business should be using a fleet management system.

1. Reduced Costs

Businesses that forego using a fleet management system have to track expenses manually, which is highly inefficient. A fleet management system, however, can drastically reduce vehicle OPEX. It can improve everything from driving habits to route optimization, reducing money that would otherwise be lost due to inefficiency.

For example, a fleet management system can help drivers identify more effective routes to cut down on gas usage and reduce time that would otherwise be spent idling in traffic.

In addition, automating maintenance can prolong the life of a fleet—especially one with aging vehicles that require extra care and attention. Using a fleet management system can stretch out the lifespan of a vehicle, maximizing output and reducing unnecessary upgrades along the way.

2. Streamlined Regulatory Compliance

Shipping companies need to follow many rules in order to comply with state, local, and federal laws.

For example, the Federal Motor Carrier Safety Administration (FMSCA) has strict limitations governing when drivers can be on the road to reduce drowsiness and crashes. In addition, federal law now mandates that some drivers use ELDs to digitally log on-road hours. ELDs eliminate paper logs in order to reduce fraud and enforce compliance.  

A fleet management system can keep your company up to date with the changing regulatory landscape, preventing noncompliance issues that could lead to fines or other penalties.

3. Improved Output

Vehicles are the backbone of any shipping company. The more efficiently a company’s fleet performs, the better the company operates.

By tracking key metrics like vehicle maintenance, route optimization, and driver performance on a daily basis companies can ship goods faster, more efficiently, and with reduced downtime.

As a result, benefits can extend across the entire supply chain. Partners, suppliers, and customers will all benefit from a fleet management system.

Outsourcing Fleet Management

Businesses have the option to install their own fleet management software or obtain it through a third-party fleet management provider.

It’s important to remember that fleet management software can only do so much to improve operations. Fleet management still requires a dedicated team to follow through with daily tasks.

When working with a third-party fleet management provider, fleet management software becomes one component in a much larger managed service offering.

The company can carry on with its business. And they don't have to worry about the daily nuances of managing a fleet and a team of drivers. It’s cost-effective—and far less risky than managing the operation on your own.

This post was written by Justin Reynolds. Justin is a freelance writer who enjoys telling stories about how technology, science, and creativity can help workers be more productive. In his spare time, he likes seeing or playing live music, hiking, and traveling.

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