Asset Management Flashcards
(216 cards)
1
Q
According to experts, what is the definition of strategic sourcing?
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
What is the main objective of Strategic Sourcing?
A
To locate and form relationships with those suppliers that best promote the strategic and operational goals of your organization.
3
Q
How can Strategic Sourcing be used as an approach to supply chain management?
A
It 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
Why might you want to limit the amount of suppliers to your Fleet?
A
You become a more desirable customer by making larger purchases and dealing repeatedly with the same buyer.
5
Q
Describe the differences between traditional sourcing and strategic sourcing.
A
Traditional sourcing focus is cost. Strategic sourcing focus is competence. TS approach is Ad Hoc (on demand) with suppliers, SS is to Network. TS playing field is National, SS is Global. TS buyer’s motives is short term (initial cost), SS is long term (total cost of ownership).
TS supplier’s motives is turnover, SS is customer. TS has numerous suppliers, SS has few. TS relationship is contract, SS is trust. TS risk is individual, SS is shared. TS activities are standard, SS is specific.
6
Q
What are the benefits of Strategic Sourcing?
A
Limited number of suppliers, lower prices for paying in bulk,
7
Q
How can Strategic Sourcing generate benefits to the Fleet department?
A
Warranty, 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.
8
Q
Why is it important to measure Supplier Performance?
A
Can lead to better decisions when deciding between acquiring a new supplier or staying with the current one. Decision-making transparency is positively affected when objective reasons are supported by data.
9
Q
How does Strategic Sourcing benefit Suppliers?
A
Larger purchases & more orders
Improved communication,
Not having multiple small contracts with a vast array of customers
Communication in real time eliminating over/underproduction, & late shipments
Improved ability to order materials timely
10
Q
What Risks are involved with Strategic Sourcing?
A
Overpaying the initial costs
Supplier requirements are too strict or narrow
Potential change of suppliers
11
Q
Describe some of the costs involved with Strategic Sourcing
A
Paying a higher price with a new supplier
Fees for breaking a contract
12
Q
Why is Strategic Sourcing time consuming?
A
It is more complicated
It requires more knowledgeable and skilled personnel
13
Q
What are the four steps in the Strategic Sourcing process?
A
Understand the spend category
Assess Potential Suppliers
Create a Strategy
Select a supplier
Cultivate relationships
14
Q
What should your purchasing team do during the first phase of the Strategic Sourcing Process?
A
Identify purchasing and price constraints
Time & money it takes supplier to acquire the assets
Identify historic purchases in asset categories
15
Q
What do you want in a Strategic Sourcing partner?
A
Competent
Trustworthy
Communicative
Offer deals that are valuable & fairly priced
16
Q
How can you create a strategy for Strategic Sourcing?
A
Identify how competitive the supplier marketplace is
Ensure other departments are on board with supplier choices
17
Q
What tool is discussed in order to help select Suppliers?
A
A balanced scorecard to objectively measure & compare each supplier’s offers
18
Q
What are Performance Improvement Requirements and how are they used?
A
Improving cycle time
Cost
Quality
Delivery Performance
To keep the buying & selling processes a positive experience
19
Q
What type of teams should be created in order to help select suppliers?
A
Teams that will organize, evaluate, select, develop, and manage suppliers.
20
Q
What systems should be developed & how can they help the organization?
A
Purchasing systems - lead to an increase in useful technology & information systems.
21
Q
What are team member purchasing responsibilities?
A
Points of contact with specific suppliers
Research new potential suppliers
22
Q
What is a cross functional sourcing team?
A
A group that is maintaining relationships with the fleet suppliers & identifying the sourcing needs of the fleet
23
Q
What is the Fleet Manager’s role in the cross functional sourcing team?
A
Thoroughly examining fleet purchasing activities & supplier selection
24
Q
What is the focus of many purchasing groups & what are the the fleet managers’ responsibilities?
A
Finding the lowest cost
Voicing concerns when the focus is on low cost suppliers without taking other fleet-related concerns into mind
25
What is rightsizing the Fleet?
Determining the correct customer service levels for internal service & rental fleets
Understanding the vehicle-task suitability
26
What is the Advertising cost on a vehicle invoice?
A percent of MSRP (typically 1%) or a flat dollar amount set by the factory
27
Define the term Bid Assistance
Additional negotiated rebates that may replace or be in addition to the national fleet rebates
28
What is the Dealer Invoice price and how is it calculated?
Amount the dealer pays the manufacturer for a specific vehicle
29
What are Factory to Dealer incentives?
Money paid to the dealer by the manufacturer to sell specific models
30
What is meant by the term financing on a Dealer invoice?
Flat dollar amount that is included in the factory invoice
31
What are Fleet incentives and who funds them?
Money given by a manufacturer as an added incentive for buying a vehicle.
Usually funded 100% by the factory
32
What is a Factory Holdback?
Amount paid by the factory to dealer after the vehicle has been sold
33
Define the term MSRP
Manufacturer Suggested Retail Price - retail selling price of the vehicle
34
What is triple net invoice?
Manufacturer-to-dealer invoice price less holdback less advertising & financing
35
What is the most important document in a vehicle purchase?
The Factory invoice
36
What information do you need to know in order to get the lowest possible price for a vehicle?
The dealer cost - what the dealer has actually paid
37
What is a good starting price to use for negotiating with a vehicle supplier?
The invoice price - before any holdback & incentives
38
What type of information is contained on a standard factory invoice?
Price, features and details regarding the purchase & delivery. Holdback, incentive programs and cost categories. VIN, destination and delivery charge.
39
What is the most important strategy to use when considering multiple vehicles?
Be consistent in how you evaluate each invoice. Use the same starting point for each negotiation.
40
What is the Formulae for Triple Net?
Invoice - Holdback - Advertising - Financing = Triple Net Cost
41
How can Fleet sales benefit a car dealer?
They can sell a large quantity of vehicles in a short time. The potential exists to sell a service contract to the fleet.
42
What are some of the vehicle manufacturer's requirements for Fleet pricing?
Purchase 5 or more vehicles
Minimum of 10
Term basis - leasing 15 one year as well as purchasing/leasing 5 new vehicles each year
43
What are some of the advantages of purchasing vehicles in bulk?
Price
Servicing deals
Top price on trade-in
44
Why would an organization want standard vehicle specifications?
Achieve cost-saving benefits
45
What are the best practices for lowering costs using standard vehicle specifications?
Centralize Fleet Management
Distinguish "needs" from "wants"
Conduct annual specification reviews
Develop standards based on vehicle role and location
46
Why is it important to centralize Fleet Management?
Allows one person to be the decision maker when making purchases
Considers the "whole" not just the "one"
47
What are potential areas to save costs when identifying needs and wants?
Cloth or vinyl vs leather
Bench vs bucket
Two wheel vs Four wheel
Gasoline vs diesel
Four cylinder vs 6 or 8
Standard length vs extended
48
Describe the two categories of pricing incentives
National Fleet - own 10-15 vehicles, has a Fleet Identification Number - automatic manufacturer discout
Competitive Pricing Assistance (CPA) - negotiate individual incentive dependent on vehicle volume commitment
49
What is a good indicator of the true vehicle cost?
Total Cost of Ownership
50
What warranty considerations does the Fleet Manager have to keep in mind during the purchasing process?
Most warranties are not negotiable
If it is considered, have a prediction of expected life & how it adds up to the warranty
51
Who can a Fleet Manager contact at the dealership for information on the manufacturers Fleet programs?
Commercial or Government sales person
52
What does a Fleet Manager need in order to receive Fleet discounts?
Fleet Identification Number
53
What is a volume rebate and how can the Fleet manager obtain it?
Discount for purchasing multiple units at once
Ask for it
54
List the advantages of ordering vehicles from the factory
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
55
What are some of the disadvantages of ordering vehicles from the factory?
Longer wait time
Lost incentives
Production windows may close
Some options or models not available for Fleet orders
56
Why might ordering from the factory be cheaper than ordering from stock?
Limits exposure to finance charges
57
What might make ordering from the dealership cheaper?
Dealer incentives
Long factory delivery times
58
What is the basic rule for negotiating vehicle price?
Use the same terms and same starting point as dealer
59
What should the Fleet Manager do in order to get the best price?
Know the difference between dealer and triple net invoice
Purchase in volume
Order early
60
What are the two approaches to negotiating?
Start at Dealer invoice and work down
Start at Triple Net invoice and work up
61
What is an alternative to negotiating vehicle prices?
Bidding
62
What is a vehicle selector list?
A predetermined list of vehicles that drivers or others can choose from to meet their vehicle requirements
63
What are some questions that manager should address in order to help them in the vehicle selection process?
How many choices exist?
What is important to management?
How much input do drivers have?
Can drivers purchase options?
Philosophy - work or perk?
64
Why can offering too many choices be a disadvantage?
Prevents bulk discounts
Administrative burden
65
List some of the factors a Fleet Manager may consider in the vehicle selection process
Upfront cost vs TCO
Driver input
Driver Purchase Options
Work or Perk?
66
How can a Fleet Manager get driver input and what information should they ask for?
Annual Survey, Fleet Steering Committee
Color - Model - Options
67
What are some considerations to be made when deciding whether the vehicle should be work or perk oriented?
Which features will or will not be paid by the organization
68
Why is it important to select the right vehicle?
The upfront cost is significant
Suboptimal vehicles will wait to be replaced
69
What are some important vehicle selection considerations for both Government and Private Fleets?
Select a vehicle that fits your needs
Determine vehicle function
70
Why is it important to select vehicles that meet company needs?
Cost
Perception/Image
71
What vehicle selection input should be solicited from management?
Organizational priorities
Cost considerations
work vs perk criteria
exterior graphic designs
Environmental concerns
72
What are some concerns of stakeholders in the organization when developing selection criteria?
Cost
Relation
Safety
Reliability
73
List the four steps in the selector development process
Identify selection criteria
Rank the criteria
Assign a weight to the criteria
Conduct a trial vehicle selection
74
What stakeholders should the Fleet manager seek feedback from?
Drivers and staff
Customers
Organization leadership
75
List some factors that might impact the vehicle selection criteria
Terrain
Duty cycle
Environmental factors
Cost of purchase
Life cycle costs
Safety
76
What are quantifiable and non-quantifiable factors?
Quantifiable can be measured and tested in non-subjective ways
Non-quantifiable are measured through subjective methods
77
What should the Fleet Manager keep in mind while ranking selection criteria?
The big picture - know what is important to the organization & which criteria will return the most value
78
What should the Fleet Manager consider while assigning a weight to the selection criteria?
The criteria & quantify how much more important each successive factor is
79
How does the Fleet Manager test vehicle options against the selection criteria?
Research each target vehicle
Evaluate a minimum of 2-3 vehicles
Score the vehicles
Review results
80
How does the Fleet Manager determine a points total in the selection process?
Score each vehicle from 1- (how many evaluating) in selection criteria
Multiply that by applicable weight
81
How can the Fleet Manager manipulate the results of a selection matrix?
By changing the weight and ranking of the criteria
82
Who should be included in a user input group and what are the responsibilities of the group?
Drivers
Managers
Supervisors
Maintenance workers
Evaluate & keep clear records of their notes
Collect information from various avenues
83
How should the Fleet Manager treat the input provided by several input groups?
It should be taken seriously and considered
84
Who makes the final decision on which vehicle to purchase?
Fleet Manager
85
What should be done once the final decision on vehicle selection has been made?
Reconnect with the group that provided input. Explain final decision and that group's input was considered
86
What is Lifecycle Cost Analysis?
A technique used primarily to evaluate bids on a basis other than low purchase cost
87
How is Lifecycle Cost calculated?
Initial Cost + Operating & Maintenance Costs - Salvage Value = Lifecycle Cost
88
What is the major advantage of Lifecycle Cost Analysis?
It accounts for the operating costs of ownership & salvage values , giving a better picture of the true costs of ownership.
89
How are contracts awarded in the public and private sectors?
A competitive bidding process
90
What is an organization legally bound to do when beginning the competitive procurement process?
Fully disclose all known information
Treat all bidders fairly and equally
Award a contract substantially similar to what was originally sought
Avoid all undisclosed preferences & potential conflicts of interest
Act in good faith to all bidders
Reject any bid that is substantially non-compliant
Negotiate no changes without offering to all bidders
91
What is the FASB and what do they do?
Financial Accounting Standards Board.
Regulates the financial accounting and reporting aspects of a transaction
Provide standards that investors & financial report users rely upon to help in decision making
Publishes rules relating to how vehicle purchases & leases are reported on financial statements
92
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
93
What is the critical first step in the selection process?
Determining what is needed
94
What two objectives must be balanced during the selection process?
Equipment that meets operational costs at the lowest life cycle cost
95
What questions should the Fleet Manager ask in order to help determine vehicle requirements?
What kind of tasks will they need to perform?
Will the vehicle be carrying backseat passengers?
What kind of cargo will be carried?
What distances will the vehicle drive?
96
What tools can the Fleet Manager use in order to save time in identifying vehicle requirements?
Send out a survey to users
Interview the primary user
Vehicle test drive
97
What is the role of the Fleet Manager in the decision on vehicle specifications?
The Fleet Manager has the ultimate decision in deciding what specifications each vehicle must have
98
What are some common errors that are made while purchasing specialty vehicles?
Working out of order (start with the body)
Duplicating old units (power, efficiency)
Guessing (horsepower, engine torque
99
What are the common terms for solicitation styles used by organizations in order to procure goods and services from vendors?
RFQ - Request for Quotation
RFP - Request for Proposal
RFI - Request for Information
100
What is an RFQ and when should it be used?
Request for Quotation.
When minimum requirements are clear and vendor innovation is not desired. Focused on pricing
101
What information is required on an RFQ?
Detailed Specifications or requirements
Evaluated criteria
Required delivery schedule
payment terms
quality level
contract length
102
What is an RFP and when should it be used?
Request for Proposal
When relative qualitative requirements will be evaluated and vendor innovation is desired
103
List the typical components of an RFP
Statement & scope of work
specifications
schedules or timelines
contract type
data requirements
terms and conditions
description of goods and/or services to be procured
general criteria used in evaluation procedure
special contractual requirements
technical goals
instructions for preparation of technical, management, and/or cost proposals
104
What are some of the criteria used to evaluate a response to an RFP?
Suitability
Function
Design aesthetics
105
What is an RFI and when should it be used?
To develop a pre-qualified vendor list when there are many potential bidders
106
What is an RFT and when should it be used?
Request for Tenders
When an organization is expected to conform to a legally standardized structure designed to ensure impartiality
107
What are Cooperative Purchasing Contracts?
Established by an RFI, RFP, RFQ. It allows other organization to buy from it without a re-bid.
108
What are the three types of specifications and what do they have in common?
Performance
Design
Proprietary (name brand)
They describe the minimum acceptable characteristics of the vehicle or equipment
109
What do good specifications need?
To be comprehensive in accurately describing all the essential characteristics and capabilities for a vehicle to meet organizational needs.
110
What are performance specifications? List some examples.
They 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
Minimum grade it must negotiate
Passenger/weight/volume carrying capacity
Fuel economy
Emissions levels
Axle loads and distribution
Compliance with industrial or governmental standards and/or statutes such as SAE, OSHA, or DOT
111
What is the advantage to using performance specifications?
Vendors are free to select and configure the product able to meet the minimum operation requirements at the lowest cost of those criteria to be used for the evaluation.
112
What are design specifications? Give some examples.
They tell vendors how the unit is to be configured to be able to accomplish what is needed.
A description of a vehicle's physical dimensions
Structural properties
Performance
Exact size, placement and mounting method for ancillary equipment
113
When are design specifications used?
For specialty/custom vehicles
Vehicles built in multiple stages where a body and ancillary equipment are mounted on a cab and chassis
114
What are proprietary specifications? List some examples.
A description of a vehicle's required equipment that is specific to a particular manufacturer.
Used when previous competitive bidding has established a fleet standard.
Used to establish a known commodity but allows comparable products to be bid
115
What are some advantages and disadvantages of proprietary specifications?
Easiest to write
Most difficult to evaluate for bid if "or equal" provision is included
116
What is the Hybrid approach to specification writing?
Combine features of performance, design, and proprietary specifications
117
What role does lifecycle cost play in the decision making process?
Obtaining value for money spent through clearly established objective criteria
118
What is the ABA model procurement code?
Recommended wording which is widely adopted particularly by states and local government jurisdictions. Promotes transparency, fairness and competitiveness through adoption of best practices
119
What are Fleet Standardization provisions?
Creating standards on one make of chassis, body, equipment and major components
120
What benefits can be achieved by standardizing your fleet procurement specifications?
Improved Maintenance Efficiency
Fewer Diagnostic and Specialty tools
Smaller Parts & Bulk Fluid Inventory
Increased Operational Efficiency & Safety
Closer Vendor Relations
Proven Reliability
Potentially Less Time Spent on Specifications & Bid Evaluations
Fewer Contracts & Invoices to Process
121
What are the disadvantages of standardizing procurement?
Potential loss of competition
Potential missed innovation
Risk of "lemons"
Appearance of Collusion
122
What are some considerations for standardizing the "right way"
Hold a formal pre-bid conference
Standardize one segment of the fleet at a time
Standardization should be based on a demonstrable savings in the life cycle cost
123
What is a multi-year procurement agreement and why should your organization establish one?
An agreement to have multiple years off of one bid
It simplifies the standardization process
124
What are pre-bid meetings and what steps should be taken to ensure that they are successful?
To cover the different specifications
Come to a consensus between the buying and selling parties
Include clarifications, charges, and scope of purchase
Take written notes to ensure proper documentation & recording of all necessary information
Set up a time and place for the bid opening
Create an attendance record
125
Why is it beneficial to visit a vendor before purchasing the vehicle?
An opportunity to understand the source of the purchase
Get a real feel for the vehicle
Able to inspect if the vendor will be able to meet future needs
Opportunity to test drive the vehicle
126
Describe the post-bid evaluation process
Prepare a Bid Evaluation Report
Spell out reasons for rejecting a bid
Evaluate commercial responsiveness in terms of delivery, completion date, payment terms and warranty
Include qualifications, alternatives, technical comparisons, and responsive bid comparison
127
What items are included in most specifications?
Cab
Engine & Transmission
Electrical
Fuel
Brake System
Axles
Tires & Wheels
Body Dimensions
Body Construction
Hopper
Packing/Ejecting Mechanism
Lifting Arms
Controls
Hydraulics
Paint
Mounting
Warranty
Optional Equipment
128
What are two different types of plans for employee reimbursement?
Accountable and Non-Accountable
129
Why is an Accountable reimbursement plan beneficial to both the employer and employee?
Excluded from gross income and are not reported on W-2
130
What three rules must be followed in order to have an accountable reimbursement plan?
The expenses must have a business connection
The driver must provide adequate accounting for their expenses within a reasonable period of time
Excess payments must be returned
131
List three examples of accountable plans
Flat rate
Cents per mile
Qualifying Fixed and Variable Rate Plans
132
What are non-accountable reimbursement plans? Give an example
Plans that don't meet one or more of the criteria required to be a tax-free reimbursement.
Flat rate
133
What are the pros and cons of a cents-per-mile reimbursement program?
Pros are:
Easy to administer
Tax-free
A government approved rate
Cons are:
Not geographically sensitive
Does not properly account for mileage
Under-pays low mileage drivers
Over-pays high mileage drivers
Provides an incentive to report miles
Lags the marketplace by a year
Not intended as an accurate reimbursement for business use of a personal vehicle
134
What is the IRS rate and why do many organizations use it?
Optional Standard Mileage Rate for Business
Because the government publishes the rate
135
Under which circumstances is it preferable to have employees provide their own vehicles?
Temporary or intermittent requirements
Low-mileage drivers
Lack of infrastructure to support an employer provided pool
Strong employee preference
136
In what situations should employee provided vehicles not be considered?
The type of vehicle required is other than those normally owned by employees
Take home vehicles would negatively impact public perception and the image of the organization
137
How can temporary or intermittent vehicle requirements be met?
Rental vehicle
Pool vehicle
Driver reimbursement
138
Under what circumstances can employee reimbursement be preferred even when employer provided vehicles are less expensive?
Limited funds available for purchase
Employer does not want to lease vehicles
Public perception may not allow take home vehicles
Parking space or overnight security restrictions
139
When might a Fleet Manager consider renting a vehicle?
May not have the number of vehicles or the right vehicles required to fulfill certain tasks
140
What are some of the requirements of vehicle purchasing?
Considerable capital outlay
Initial licensing and renewal
Personal property tax payments
Title retention
Remarketing of vehicles
141
What are some advantages of vehicle ownership?
Tax relief on depreciation
Pricing leverage with dealers
Maximization of resale proceeds
142
When might it be preferable to order vehicles from the dealers stock?
Timing issues
143
What are some advantages and disadvantages to purchasing from dealer stock?
Advantage - Timing
Can be more expensive due to dealer markup
More unwanted "perks"
144
What capital considerations should the Fleet Manager make?
Better invested in other assets such as hiring staff, advertising, or paying down debt
145
How does Return on Investment affect the purchase decision for both public and private fleets?
If the profit margin is greater than the cost of capital, use internal funds to generate additional revenue and borrow the money.
For a government agency, compare the Internal Rate of Return and the cost of capital. If the IRR is greater, borrow.
146
What is the true cost of capital?
The cost of funds used for financing a business or function of business
147
What are the Sales Tax implications of both purchasing and leasing vehicles?
When purchasing, sales tax must be paid at the time of the sale
When leasing, sales tax is charged on the monthly lease payment so you are only paying tax on the value of the lease payment
148
What are some of the more common funding sources?
Internal funds
Borrowing
Leasing
Grants
149
How can the Fleet Manager get funding from Federal Agencies?
Monitor federal agency websites for grants
Network with State Clean Cities Coalitions
Listen to vendors
150
How can the Fleet Manager secure funding from the state?
National Association of State Energy Officials releases a directory of State Energy Offices for clarity with grants
151
How can liens affect Fleet Managers who finance their vehicles?
The vehicle may not be sold until the lender is paid off and the lien released
152
What are some administrative issues that arise from unpaid tickets?
The vehicles may not be able to be registered, therefore driven
The longer the fines are not paid, the higher the interest and administrative costs
153
Define the term Lease
A lease is a rental that, by contract, is clearly defined as to length, cost, and stipulations
154
What is the difference in cost between leasing and purchasing vehicles?
Purchasing is typically less expensive in the long-term
Leasing can provide many services that would otherwise need to be performed in-house
Leasing can perform services less expensively than hiring someone
Staff at leasing companies become experts in their function
155
What are the four questions to ask in order to classify a lease?
Capital or operating leases
Does the ownership (title) transfer at the end of the lease?
Does the lease contain an option to purchase the asset at a bargain price?
Is the term of the lease at least 75% of the estimated economic life of the asset?
Is the present value of the future minimum lease payments at least 90% of the fair market value of the asset?
156
What is an operating lease? List some of the benefits it provides
Return the equipment at lease end
Lowest payment of any financing alternative
Excellent strategy for bypassing capital budgeting restraints
Include a cancellation clause
May or may not include vehicle maintenance
Lessee records the asset as an operating EXPENSE
157
Who bears the risk in open-end and closed-end operating leases?
The borrower (Lessee) bears the risk of the residual value in an open-end lease
The owner (Lessor) bears the risk in a closed-end lease
158
What is a Capital lease?
Classified and accounted for by the lessee as a purchase
Does not include maintenance
Cannot be cancelled
Must be capitalized and shown on the lessee's balance sheet
Also known as a finance or direct lease
Lessee is responsible for vehicle maintenance and insurance
159
Define the two types of Capital leases
Finance Lease - full pay-out, non-cancellable agreements
Lessee is responsible for vehicle maintenance, taxes, and insurance
Referred to as "lease-purchase"
Direct Financing Lease - A non-leveraged lease that meets the defined criteria of a capital lease, plus certain additional criteria.
A financial arrangement and contract which the lessor agrees to furnish, and the lessee agrees to hold assets for a set period of time, at an agreed upon price, in accordance with specified terms and conditions.
160
What is a closed-end lease?
Based on the concept that number of miles driven annually is fairly predictable and its value at the end of the lease (the residual) is therefore somewhat predictable.
Written for a fixed term
Flat monthly payment
Predetermined mileage limit
Set penalties for exceeding mileage limit and excessive wear and tear
161
Describe and open-end lease
A financing method in which the amount owed at the end of the lease is based on the difference between the leased unit's residual value (resale value) and its realized value (depreciation)
Short minimum term, then month-to-month until terminated
162
What is a Terminal Rental Adjustment Clause (TRAC)?
Included in most open-end leases
Ties the lessee to whatever difference may exist between the book and selling values of the unit upon remarketing
163
How can the Fleet Manager determine the mileage criterion to be used in the leasing agreement?
Based off the mileage of similar vehicles doing similar jobs
Discuss with the user and management to try and be as accurate as possible
164
What are the differences between a floating and fixed financing rate?
Floating has base rates that are set each billing cycle, based on prevailing rates. As interest rates fluctuate, so do monthly lease payments.
Fixed sets the interest rate at time of lease inception and do not vary
Lessee is protected against future interest rate increases
Lease payments remain constant
165
What is the difference between on and off the balance sheet accounting?
How assets are treated
Considered an asset and financially depreciated or considered an operating expense
166
List some of the Leasing fees that the Fleet Manager should be aware of
Administrative fee
Interest Markup
Issuance Fees
Interest rounding
Interim Interest
Interim Rent - Front end of lease
Interim Rent - Back end of lease
Fully depreciated lease admin fee
Variable Interest rates based on conditions that may have nothing to do with leasing
167
What is vehicle commissioning?
To put in working order
What must be done when new vehicles are acquired
168
Describe some of the common activities involved with commissioning a vehicle
Licensing
Titling
Decaling
Information system input
Asset tagging
Inspection
Warranty Registration
169
What are some of the unique requirements that are common to government fleets?
Environmental testing
Licensing
170
What are some of the unique requirements that are common to leased private sector vehicles?
Driver assignment
Up Front Fees - in some areas, property taxes are paid upfront
Inspections - leasing company inspects before delivery to driver
Customized invoices
Fuel Management
171
What additional activities are required when commissioning a utility fleet?
Permits
Regulatory compliance
172
What are some of the unique requirements that are common to law enforcement fleets?
Life Cycle specific law enforcement vehicle equipment - each piece of equipment mounted in or on a law enforcement vehicle has its own life cycle
Upfitting
Specific Department needs
Vehicle Codes
License plates
173
What is vehicle upfitting?
The process of optimizing vehicle design for the most effective overall productivity and cost
174
How can the Fleet Manager determine what upfitting is required on a certain vehicle?
Ask the end user
Upfit decision and analysis need to be completed
Research the specifics and metrics for the requirements
175
What resale considerations should be made before the vehicle is upfitted?
Drilling holes in body parts
Passenger area installation of equipment should be performed in a manner to minimize visible damage
176
What are some common errors that are made in the upfitting process?
A chassis arrives to the upfitter with the wrong specs
A cargo van is delivered without proper shelving
A liftgate is installed with a platform too small
177
What should the Fleet Manager do after purchasing upfitted vehicles?
Set up an "early alert" system to recognize problems
An inspector needs to ensure the upfit items specified have been installed - installed correctly - they operate
Verify the quality of the installation
178
What are the two aspects of Fleet rightsizing?
Utilization
Sizing
Rightsizing means upfitting enough of the vehicle to do the job and no more
179
What are utilization thresholds and how are they used?
Determine if a vehicle is needed
Designed around a vehicle's mission
Understanding of the organization objectives
Miles/month or year
Days of use
Number of rental vehicles needed over a time point
Keep productivity in mind
180
What are the effects of over-utilizing and under-utilizing assets?
Over-utilizing can indicate the fleet size needs increased
Some vehicles are over-utilized and others under-utilized
Under-utilized vehicles can't do the job and staff don't want to use
Over-utilized may require early replacement
Under-utilized can be reassigned or remarketed
181
Under what circumstances might the Fleet Manager consider pooling resources?
A vehicle is needed for a specific job
A vehicle is needed a few times a year
182
What is an alternative to acquisition for a temporary need or low frequency job?
Create an employee pool/sharing program
183
How can a Fleet Manager control access to a fleet pool?
Create a schedule for usage
Put controls in place to establish guidelines for maintenance and inspection
184
How can the Fleet Manager monitor the usage of the fleet pool?
Mileage logs
Online reporting
GPS
WiFi data loggers
Fuel records
Maintenance records
185
What should the Fleet Manager consider while designing the layout of the fleets facilities?
Ability to handle alternative fuels
Exterior location
Ventilation
Spacing
Fire codes and other regulations
186
What should the Fleet Manager consider while deciding the location of fleet facilities?
Large enough
Not too far removed from commonly used roads and cities
Contemplate the future of the facility
Leave room for improvement
Utilize the space with the most efficient energy source currently available given the budget
187
What is the Fleet Manager's role in managing equipment?
Owning the correct equipment
Uphold safety plans and training
Proper employee training on the use of cleaning supplies, signage, and personal protective equipment
188
What checks should the Fleet Manager do when hiring new drivers?
Motor Vehicle Records (MVR) check
189
What can the Fleet Manager do to help manage risk?
Hiring qualified and defensive drivers
Proper and complete driver training
Ensure drivers have the appropriate license
190
What responsibilities in the Fleet department fall under HR?
Proper staffing
Recruitment
Rewards systems and incentives
191
Describe the steps involved in proper fleet staffing
Having the right employees
Advertise the positions truly and effectively
Be honest about the work the employee will be doing
Emphasize to current employees a referral system
Employee retention
192
What are the considerations when evaluating extending a vehicle lifecycle?
Depreciation
Keeping older vehicles but expect higher maintenance and downtime
Takes longer to switch over to new technologies
Morale and organizational image
Depreciation will decline faster than maintenance costs increase
193
What 6 activities are common when decommissioning a vehicle from the fleet?
Title transfer
Equipment removal
Fuel system
Certification
Inspecting
Information system
194
What are some considerations that should be made when decommissioning a vehicle from a public fleet?
Public image - decals, license plates, and other markings should be completely removed
Liability
195
What are some considerations that should be made when decommissioning a vehicle from a private fleet?
Vehicles may be dropped off at the dealer delivering the new vehicle
An inspection process by the driver of the vehicle
May be dropped off directly at an auction by the driver
May go through a detailing or complete small repairs
Offered for sale to the driver
196
What are some considerations that should be made when decommissioning a vehicle from utility fleet?
Testing
Maintenance records
Warning labels
197
What are some considerations that should be made when decommissioning a vehicle from a law enforcement fleet?
Equipment life cycles
Stripping
License plates
Preparation for disposal - may require reinstallation of factory equipment. State may call for specific markings to preclude appearance of an active police vehicle
198
What is vehicle reconditioning?
Washing a car to performing major mechanical and body work
199
What rule should be followed when deciding whether or not to invest in reconditioning a vehicle?
For every dollar spent, 3 dollars should be received
200
What should a remarketing policy contain concerning the sale of vehicles to employees?
Address pricing of vehicles sold to employees
Sales to employee's immediate family
Approval of repairs for a certain period prior to the sale
Time to pick up after the sale
Any entity specific consideration
201
What is the Employee remarketing method and what are the benefits of using it?
Selling to employees
One of the least expensive methods
Offers and average of about $500 more than other channels
Lack of needing to move vehicles around or registering through a sales channel
202
What is the Auction remarketing method and what are the benefits of using it?
Auctioning via on-site, off-site, or virtual
Can reach a wider audience
203
What is the trade remarketing method and what are the benefits of using it?
Vehicles can be traded in to the dealer to subsidize the purchase of newer vehicles
Use of space is minimized
Transaction time is very short
204
What is the retail remarketing method and what are the benefits of using it?
Works similar to most dealerships with car lots
Prices can be raised and negotiated
Vehicles are directed to a broad audience
Can bring in higher revenues
205
What is the direct remarketing method and what are the benefits of using it?
Finding a certain target (organization, demographic, or individual)
Develop list of target markets and begin directly selling to these targets
206
What is the third party remarketing method and what are the benefits of using it?
A third party will collect the vehicle, file the paperwork, find buyers
One of the easiest ways of selling a vehicle
Best option when vehicles need to be moved quickly or do not have time to sell them
207
What is the Internet remarketing method and what are the benefits of using it?
Listing vehicles on the fleet's website, separate auction website, or another sales medium
Market is expanded globally
Specialty or customized equipment benefit from internet remarketing
208
What is upstream remarketing and what are the benefits of using it?
Involves selling as a dealer or while still in service
Buyer and seller gain knowledge of each other's business
The Fleet Manager begins to know when the buyer is looking for vehicles and can target the vehicles to this buyer to maximize revenue
May begin to add specs and options the buyer will pay for
209
What is the difference between effective depreciation and book depreciation?
Effective depreciation is the difference between the net acquisition cost and the net resale value
Book depreciation is the estimated residual value of the vehicle at replacement subtracted from the total acquisition cost.
210
What is the goal of a fleet manager when selecting a vehicle?
Buy a vehicle that does the job, has the highest resale value, and the lowest operating cost
211
What are the two factors that dictate effective depreciation?
Expected useful life
Approximate market value of the vehicle at lease-end
212
In general, what are the differences in planned vehicle life between government fleets, private fleets, executive fleets and leased vehicles?
Private and executive fleets a 36 month lease is typical
Government and leased fleets are typically longer to write off vehicle acquisition costs
213
What should be considered when deciding to sell a vehicle in order to minimize effective depreciation?
A vehicle's age
Mileage
Condition
Time of year
Regional differences
214
Know how sale price volatility can affect various vehicle classes
Compact cars have wider seasonal swing than mid-sized
Luxury cars have greatest price stability
Vans and minivan prices represent one of the weakest segments
215
What are some of the advantages of standardization?
Improved Maintenance Efficiency
Fewer Diagnostic and Specialty Tools
Smaller Parts and Bulk Fluid Inventory
Increased Operational Efficiency and Safety
Closer Vendor Relations
Proven Reliability
Potentially Less Time Spent on Specifications and Bid Evaluations
Fewer Contracts and Invoices to Process
216
What is a performance bond?
A financial guarantee up-front protecting the buyer from vendor non-compliance
