How Fleet Tracking Can Save You Money
Would you spend $650 to save $2,980? Are you concerned about the rising costs to operate your fleet or that
you are not getting the efficiency you need out of your drivers and vehicles? A reliable and simple to use
vehicle tracking solution can improve your efficiency and reduce your operating costs by knowing where your
vehicles are and where they have been. The improvements you can expect include;
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Fuel savings
Reduction in labor costs
Improve driver safety
Eliminate unauthorized vehicle use
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Increase productivity
Faster response times
Quicker response to customer requests
Many of these improvements result in direct bottom line cost reductions which can justify the investment in a
reliable tracking solution. The following example illustrates how a $650 investment can result in $2,980 in
savings in the first year for a single light duty vehicle. A separate study addresses cost benefits for heavy duty
vehicles such as solid waste services and utility trucks.
While there are many cost saving benefits to fleet tracking, we will focus on the two most significant areas of
savings; reducing vehicle operational costs and reducing labor costs. These two opportunities for
improvements are simple to evaluate and can easily justify the implementation of a fleet tracking solution.
Reduce fuel and vehicle operational costs – A reliable fleet tracking solution can provide immediate
feedback on route efficiency, unauthorized use of vehicles, and excessive idle time.
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Correct inefficient routes by reviewing tracking history
Establish authorized hours of service and geofences to receive automatic alerts and reports
about unauthorized use of vehicles
Idle time reports highlight midday downtime
Monitoring these things with a fleet tracking system results in lower vehicle operational costs,
including fuel, tire replacement, and routing maintenance.
Reduce labor costs – Monitoring drivers’ behavior ensures that their time on the clock is used
efficiently. Driver labor costs can be reduced as a result of more efficient routing, better workload
balancing, and monitoring overtime.
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Drivers will complete the same work in less time and more work on time with optimized routes
Dispatchers can see who is ahead of schedule and who is behind and can reassign work to
balance the load between drivers thereby getting the work done sooner, reducing overtime
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The proof is in the pudding – We will analyze a scenario for a light duty vehicle driven 20,000 miles per year
driven by a person costing $50,000 per year. For those that want to skip the details, the result is a savings of
$2,980 in the first year and $3,330 in the second year. This easily justifies the implementation of a reliable and
easy to adopt fleet tracking solution.
We will first look at reducing vehicle operational costs. There are two simple methods to estimate operational
costs. The first method is calculating the fuel usage and fuel savings. The second method estimates the total
cost of vehicle operation including fuel, tire replacement, routine maintenance and depreciation. The method
described here uses the IRS vehicle usage reimbursement rate to estimate the total cost of vehicle operation
which is currently $0.56/mile. If we used only fuel consumption the analysis results in about half of the total
vehicle operating cost.
First we multiply the miles driven in a year, shown below as 20,000 miles, by the estimated operational cost
resulting in an estimated annual operational cost of $11,300. The next step is to estimate the miles reduced as
a result of monitoring actual vehicle routes, eliminating unauthorized travel, and minimizing idle time. Air-Trak
customers typical see improvement of 10% or more which based on 20,000 miles per year or 80 miles driven per
day, is 8 fewer miles per day. For this analysis we use 10% for a projected savings of $1,130.
Next we estimate the cost of the GPS tracking hardware, installation, and annualized subscription. The amount
used for this analysis is $650, however these costs can vary for each deployment depending on the services
requested by the customer.
The first year savings is calculated at $480 by starting with the savings of $1,130 and subtracting the $650 cost
for the hardware and service. The second year savings is calculated at $830 by subtracting the annualized
subscription of $300 from the annual savings.
Next we will look at reducing wage costs. First we assume the fully loaded annual wage for a driver at $50,000.
Next we estimate the efficiency due to improved routes and better balancing of workloads which results in the
same work done in less time and with the added benefit of reducing overtime. Air-Trak customers see
improvement of 10% or more, however we will assume a 5% reduction for this analysis which,h based on an 8
hour day, is 24 minutes per day. The projected savings is $2,500. To keep this analysis simple we do not
account for the higher hourly rate for overtime which would only improve the return on investment.
If we assume only savings due to a reduction of wage costs and do not include the operating cost reduction
then the first year savings is calculated at $1,850 by starting with the savings of $2,500 and subtracting the
$650 cost for the service. The second year savings is calculated at $2,200.
Operating Costs - Light Duty Vehicle
miles/year
IRS Rate (proxy for operating costs)
annual operting costs
$
20,000
0.565
11,300
reduced miles (projected)
annual savings
$
10%
1,130
driver efficiency
annual savings
$350
$300
$650
Hardware + Installation
annualized subscription ($25/month)
First year AVL service costs
Hardware + Installation
annualized subscription ($25/month)
First year AVL service costs
1st year savings
2nd year savings
$
$
480
830
Wage Savings/Vehicle
Hours/year
average wage/hour
wages/year
1st year savings
2nd year savings
Savings combined
2000
$25
$50,000
$
$
$
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5%
2,500
$
3,630
$350
$300
$650
$
$
$
350
300
650
1,850
2,200
$
$
2,980
3,330
We have analyzed the savings due to vehicle operating costs and wage efficiencies; however these
improvements go hand in hand. Therefore we can add the vehicle operation cost reduction of $1,130 and the
wage reduction of $2,500 which results in a $3,630 annual cost reduction. The result is a first year savings of
$2,980 and the second year savings of $3,330.
Summary
We have analyzed a specific case for a vehicle driven 20,000 miles per year by a driver making $50,000 per
year. By only accounting for the operating cost and driver labor efficiencies, the fleet tracking system can
payback in the first year and net $2,980 in cost reduction and $3,330 in the second year. This easily justifies the
implementation of a reliable and easy to adopt fleet tracking solution. There are many other benefits that can
result from a reliable tracking solution, for example, operating efficiencies on the office side of the business
including dispatch, improved responsiveness to customer requests, and increased revenue by doing more with
less.
Air-Trak
Air-Trak specializes in fleet tracking services which are simple to use, yet powerful enough to scale with any
organization. We encourage you to contact Air-Trak and we will help you evaluate the financial benefits you
can expect from the Air-Trak fleet tracking solution.
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