GPS is a transformative technology

Mike Forbes at Electric Compass explains how GPS is a real asset in Enterprise Mobility

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


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.