How to deploy fleet management solutions for faster ROI

In the current economic climate, many capital expenditure (Capex) budgets have been slashed.

Waste and recycling executives faced with shrinking Capex allowances typically have to grapple with the question:  “Do I invest in technologies to improve my operations and productivity, or do I buy more equipment?”

Both are essential to a healthy and progressive business.

From Capex to Opex

Understanding the essential nature of fleet management technologies, some progressive vendors are now re-adjusting purchase and licensing business models to offer these solutions as a monthly recurring service-oriented offering instead.

The difference? Fleet management technologies are then no longer capital expenditures, but become operating expenditures (Opex).

For example – a comparison

Capex Opex
Fleet management solution Large upfront purchase with additional maintenance, warranty etc. charges All inclusive monthly fee
How it appears in the budget Equipment with depreciation Operating cost
When it is accounted for Over a period of years as a depreciable asset In the current month/year
How is it taxed Deducted over a period of time as a depreciable asset Deducted in the current fiscal year

Not a lease – a service agreement

Services-oriented offerings are not lease arrangements – they are typically service agreements for a given number of months at a given monthly rate per truck for the fleet management equipment and software.

A monthly service approach is a long-term relationship that requires the vendor to provide the waste organization with consistent value throughout the term of the agreement.

Waste and recycling organizations will benefit

Here are 8 reasons why a monthly services model makes more sense:

  1. “All in” agreement – This means that there are no additional costs for maintenance, warranty or software upgrades.
  2. Monthly payment is an Opex line item – This typically has favorable tax and budgeting advantages to Capex.
  3. Faster ROI path – Given that the monthly Opex is minimal as compared to the Capex, your ROI will be drastically collapsed so that you will be in the black faster.
  4. Lower costs – A recurring monthly service model typically offers a smaller subscription-based pricing approach which avoids big upfront cash expenditures for hardware and software purchase or licenses. This model can slash your overall Capex.
  5. Reduced risks – With lower upfront capital commitments, you reduce risks of ‘hidden’ costs and budgetary concerns over ongoing support, maintenance and upgrades.
  6. Easy maintenance and upgrades – A monthly service model is more oriented to ongoing maintenance and support. Upgrades are managed as a component of the service.
  7. Better customer service – A monthly subscription-based model is more customer-centric and responsive to your ongoing and evolving business needs.
  8. Simplicity – It’s just easier. Easier to manage financially. Easier for budget planning.  Easier to manage the vendor and the solution. Easier to demonstrate an ROI.

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