GPS navigation is a transformative technology
for both consumer and business users. It
definitely fits the statement that “Any
sufficiently advanced technology is
indistinguishable from magic.”
And why not? - GPS
knows where you are and takes you where you’re
going…just like magic.
But the real magic
is in the return on investment it can bring to
fleet operators. What follows are some quick and
powerful ways you can quantify the ROI magic and
sell it to your customers. And keep reading, the
real ROI magic may not be what you think it is.
How to quantify the
ROI of Turn-by-Turn GPS Navigation
There are two main
areas where a fleet can benefit from deploying
GPS navigation solutions (such as Electric
Compass’s Enterprise Navigator). These are:
using less fuel and reclaiming unproductive
driving time. Here, we’ll look at how you can
show these savings as concrete numbers and then
combine them to make a very persuasive case for
GPS.
[Editor's Note: We
are using miles/gallons/dollars in the examples
below, but these can be easily translated into
KMs/liters/Euros or other currencies.]
Saving Fuel
Ask
a customer how much fuel they think they’ll save
by using GPS navigation and they’ll be hard pressed
to provide an answer. Odds are, they’ll agree
there will be savings but have little idea of how
much. Here is an approach you can use to determine
what level of fuel savings a fleet customer will
see:
-
Benchmark: 12% Fuel Savings for mix of
routine and non-routine travel.
Research from a large
digital map supplier showed that users of
GPS saved an average of 12% on fuel*. If the fleet
operator can provide a number of miles
traveled per vehicle per week and an average
miles per gallon rating for fleet vehicles,
this is a pretty easy calculation. For this
example, we’ll use a figure of 400
miles a week and 12 miles per gallon per
vehicle.
GPS Fuel Savings Example: 250 vehicle
fleet
|
Miles Traveled per
week: |
400 |
|
Miles
Per Gallon per vehicle |
12 |
|
Fuel
Used per vehicle |
33.33 |
|
(Miles Traveled divided by
Miles per Gallon) |
|
|
Fuel
Cost per gallon
(US
Diesel Price as of 9/17/09) |
$2.66 |
|
Weekly
Fuel Cost per vehicle |
$88.66 |
|
(Fuel Used multiplied by Fuel
Cost) |
|
|
Weekly
Fuel Cost Savings per vehicle |
$10.64 |
|
(Weekly Fuel Cost multiplied by
.12) |
|
|
Yearly
Fuel Cost Savings per vehicle |
$532 |
|
(Weekly Fuel Cost Savings
multiplied by 50 weeks) |
|
|
Yearly
Fuel Cost Savings for 250 vehicle
fleet |
$133,000 |
|
(Yearly Fuel Cost Savings
multiplied by 250) |
|
Saving Time
With enough ROI from
fuel savings alone to justify
GPS navigation, the real magic of GPS actually
kicks in when you look at the field worker labor
time you can save. Here’s a way to determine
what the labor savings per driver will be:
-
Benchmark: 54 Minutes Saved per day by
using GPS. In
research by a major mobile computer maker,
fleet operators reported an average savings
of 54 minutes a day per field worker for a
total labor savings of $5,484 per year.
That works out to an hourly labor rate
of about $26 an hour. (If
the fleet operator you are working with has a different hourly
rate for its drivers/technicians, you can
plug in that number instead). If you round
the minutes down to 45 per day, you can show
savings of $19.50 per day. How does this
play out for a fleet:
GPS Labor
Savings Example: 250 vehicle fleet
|
Hourly
Labor Rate |
$26.00 |
|
Daily
Labor Savings per driver (45
minutes) |
$19.50 |
|
(Hourly Labor Rate multiplied by
.75) |
|
|
Weekly
Labor Savings per driver
|
$97.50 |
|
(Daily Labor Savings multiplied
by 5 days) |
|
|
Yearly
Labor Savings per driver
|
$4,875.00 |
|
(Weekly Labor Savings multiplied
by 50 weeks) |
|
|
Yearly
Labor Savings for 250 vehicle fleet |
$1,218,750.00 |
|
(Yearly Labor Savings multiplied
by 250) |
|
Yes, that’s over a
million dollars a year for 250 drivers or
technicians.
Think you can't save
45 minutes a day?. Even if the savings
is only 45 minutes a week, the yearly savings are still
$975 per worker and over $240,000 for a 250 vehicle fleet,
representing a payback time of a matter a
months.
And while time
savings can translate into lower labor costs these savings could also allow
fleets to schedule more stops per driver per day.
For example, if an average stop takes 20
minutes, based on the 54 minutes of time
reclaimed, an additional stop could be added to
each driver’s schedule. This translates into
significant savings as a
leaner fleet can service the same number of
stops or the current fleet can add more stops.
Add
It Up
Now,
let’s look at the total savings from using GPS
navigation on a per-vehicle and total fleet
basis:
Per
Vehicle/Driver Savings
|
Yearly
Fuel Cost Savings per vehicle |
$532 |
|
Yearly
Labor Savings per worker |
$4,875 |
|
Combined
Yearly Savings |
$5,407 |
Yearly
Savings by Fleet Size
|
25
Vehicles |
$135,175 |
|
100
Vehicles |
$540,700 |
|
250
Vehicles |
$1,351,750 |
No tricks, nothing
up my sleeve, just crystal clear ROI. So, if you’ve ever had
any questions about how to present the value of
GPS to customers, just let the numbers speak for
themselves…they’re magic.
If you have any
questions on how this would work for your
customers, please feel free to contact me and I
can help you work out the details.
Best Regards,
Mike Forbes
Managing Director
Electric Compass
* Contact
info@electriccompass.com if
you’d like more info on the original research.
