Making a Calculated ROI Case for Telematics

Implementing a telematics solution is often the easiest part of adding the technology to the fleet, at least compared to “selling” leadership on the idea. 

The numbers seemingly bear this out. While growing, only 30% to 40% of U.S. fleets of all types are currently using a telematics solution.

That’s the bad news. The good news is that after being commercially available for more than a decade, there is plenty of data available to show that telematics provides a positive return on investment to organizations that thoroughly plan and execute a telematics implementation. 

For example, 30% of respondents to a Bobit Business Media and Verizon Connect survey said they experienced a positive telematics ROI in six months or less. Similarly, a C.J. Driscoll and Associates study found that, overall, 66% of fleets reported having recouped their telematics investment. 

These are the types of real-world, hard numbers you’ll need to provide to company leadership and stakeholders as you make your case for a telematics solution. The operative words here are “making a case.” It isn’t enough to simply ask for telematics because it’s what others are doing. Your business leaders operate in a world of profit and loss, and, after being required to invest in an ELD solution, they may be hard-pressed to fund another potentially costly piece of technology. But it can be done, as long as you stick to the facts and highlight telematics’ value proposition for your trucking fleet.

Measuring Value 

It’s been said over and over, but it bears repeating: You can’t manage what you can’t measure. 

This is fundamental to making the case for a telematics solution to company leadership. Without a data-driven technology such as telematics, it is nearly impossible to have a full, to-the-penny accounting of both a fleet’s expenses and how it is helping to generate revenue. With this data, changes can be made to the operation to eliminate waste and improve productivity. 

There are three ways that ROI for telematics is typically demonstrated:

1. ROI in concept: This is a high-level look relying on industry data from sources (see examples above) such as C.J. Driscoll & Associates, the Aberdeen Group, or industry publications, such as Heavy Duty Trucking. These sources present well-researched data from across industries, giving a sense of expected ROI outcomes that others have realized.
2. ROI calculator: With an ROI calculator, you’ll be able to estimate — based on your fleet’s available data — the best-case cost-saving scenarios. 
3. ROI in practice: While this will mean outlaying some funds and committing a portion of the fleet to a telematics implementation, conducting a pilot will provide real-world proof that a telematics solution is right for your fleet. During the pilot, concentrate on a core business challenge you want to solve, such as cutting idling or improving routing (which will help maximize hours of service and keep your drivers in compliance). At the end of the pilot, which may cover several months, review the data and see if telematics helped to solve the stated problem, plus any secondary benefits that may have occurred. For example, if you cut idling time, you may find that maintenance costs have also been lowered.  

Making the Safety Argument

For many fleets, adding telematics is often motivated by a need to decrease risk. While the human factor — eliminating injuries and fatalities — is a compelling argument, there is a financial component to cutting risk, as well.

The costs associated with a fleet injury-related crash averages about twice the rate for a non-vehicle related workplace injury — and rise exponentially if there is a fatality. 

The costs of a truck-related crash could be potentially ruinous to a company’s bottom line. An injury-related crash will cost a truck fleet about $200,000, and a fatality crash will cost about $3.6 million, according to data from the Federal Motor Carrier Safety Administration. The average cost for large truck crashes is about $91,000 per crash. And those are just the averages. It is not unheard of to have multi-million-dollar liability awards in the wake of particularly high profile or severe crashes.

A high-profile crash may also bring with it significant, unfavorable publicity that could have long-term implications for the company’s brand and its profitability, further compounding the costs of a crash.

Cutting a single injury or fatality crash will not only avoid unnecessary human suffering, but also will save the company significant out-of-pocket expenses that go right to the bottom line.

Increased Productivity

Lowering costs is one thing, but telematics also provides heavy-duty fleets more than savings — increased productivity.

Most telematics systems offer numerous productivity-related features, including:

• Near-real-time tracking: Fleet and driver managers and dispatchers can actively track vehicles in near-real-time, giving accurate, up-to-date ETAs to customers.
• Route optimization: Vehicles are routed in the fastest, safest, and most efficient ways possible.
• Vehicle health monitoring: Fleet managers can actively monitor vehicle health, making sure that preventive maintenance is being handled properly and addressing emerging issues before they become downtime catastrophes.
• Total Cost of Ownership: With the data being captured by the telematics solution, fleet managers and business leaders can accurately calculate how much a customer call or a delivery costs and alter pricing accordingly, making this actionable data key for keeping an operation profitable.

Looking Ahead

As part of your case, you’ll need to address how telematics isn’t just for today, but can grow and evolve in parallel to the fleet and its company. 

Demonstrating that you’re thinking both tactically (solving a specific fleet challenge) and strategically (looking at how improving the fleet fits into the goals of the entire business) will help make your case. 

While you need to make a strong case, meeting any potential objections, and clearly outlining how telematics will help the fleet in the long- and short-term, make sure you know your audience. Walking into a presentation with senior leadership armed with a 50-slide PowerPoint deck won’t make your case. Instead, keep your presentation brief and to the point, with three to five slides that get to the essentials of your case, including the ROI potential. And know your stuff. If you’ve done an effective job with your short presentation, you’ll have piqued the executives’ interest, and — in the best-case scenario — you’ll be peppered with follow-up questions that show high interest in your idea, meaning that you have a good chance of success.

Finally, while cost should be a consideration, how telematics will solve your immediate business challenges and help add to the bottom line is the crucial point. By focusing on the solution’s ROI potential, you will have a good chance of convincing your company leadership that telematics is the right direction for the fleet and the entire company. 

While you’re preparing your telematics ROI case, start with free quotes from suppliers at HDT sister publication Businessfleet.com.