Offering fleet automation: SmartFleet in the need of smart decisions

Abstract

In late September 2014, after reviewing the revised financial projection of their new venture, Maui Millan, the CEO and the head of product development, and Mannix Chong, the COO and the head of business development were alarmed. They planned to call their board of advisors to discuss the future of SmartFleet, the new product of the Philippines-based firm called Pahrsek Inc. SmartFleet is a cloud-based fleet management tool that provides enterprise resource planning capability to fleet vehicle operators. For Maui and Mannix, there were numerous challenges ranging from developing a pricing strategy, growing the market as a pioneer in this industry in the Philippines, to proactively managing the potential global competitors who were on the verge of the Philippines market. They were anxious because they knew that only a set of careful, well-thought out and smart decisions could ensure survival and sustainability of this new venture.

Appendices

Exhibit 1: Operations Automation Tool (OAT) dashboard

Exhibit 2—Fleet Management Tool (FMT) dashboard

Exhibit 3—SmartFleet: financial projections

Option A (Data extracted from the company records. All figures have been changed to protect confidentiality)

	September 2014			October 2014			November 2014			December 2014			Year end
	OAM	FMT		OAM	FMT		OAM	FMT		OAM	FMT
Number of vehicles	55	30		155	65		255	175		275	195
Implementation fee one time	10,000	2500		10,000	2500		10,000	2500		10,000	2500
Price per vehicle	100	1000		100	1000		100	1000		100	1000
Total revenue	15,500	32,500	48,000	25,500	67,500	93,000	35,500	177,500	213,000	37,500	197,500	235,000	589,000
Variable costs
Sales incentives	10	95		10	95		10	95		10	95
Application hosting/unit	35	150		35	150		35	150		35	150
Variable cost per unit	45	245		45	245		45	245		45	245
Total variable cost	2475	7350	9825	6975	15,925	22,900	11,475	42,875	54,350	12,375	47,775	60,150	147,225
Contribution margin			38,175			70,100			158,650			174,850	441,775
Depreciation	1000			1000			1000			1000
Office utilities	475			475			475			475
Office rent	2075			2075			2075			2075
Stationary	1050			1050			1050			1050
Events	3000			3000			3000			3000
Physical collateral	5000			5000			5000			5000
Online ads	2000			2000			2000			2000
Book keeping	750		15,350	750		15,350	750		15,350	750		15,350	61,400
Operating profit			22,825			54,750			143,300			159,500	380,375
Contribution margin ratio			0.79			0.76			0.75			0.74	0.75
Break-even point (in PHP)			19,301			20,364.5			20,608.6			20,630.5	81,862
Margin of safety (MOS)			28,699			72,635.5			192,391.4			214,369.5	507,138
Operating profit ratio			48%			59%			67%			68%	65%

Option B (Data extracted from the company records. All figures have been changed to protect confidentiality)

	September 2014			October 2014			November 2014			December 2014			Year end
	OAM	FMT		OAM	FMT		OAM	FMT		OAM	FMT
Number of vehicles	55	30		155	65		255	175		275	195
Implementation fee one time	5000	500		5000	500		5000	500		5000	500
Price per vehicle	50	600		50	600		50	600		50	600
Total revenue	7750	18,500	26,250	12,750	39,500	52,250	17,750	105,500	123,250	18,750	117,500	136,250	338,000
Variable costs
Sales incentives	10	95		10	95		10	95		10	95
Application hosting/unit	35	150		35	150		35	150		35	150
Variable cost per unit	45	245		45	245		45	245		45	245
Total variable cost	2475	7350	9825	6975	15,925	22,900	11,475	42,875	54,350	12,375	47,775	60,150	147,225
Contribution margin			16,425			29,350			68,900			76,100	190,775
Depreciation	1000			1000			1000			1000
Office utilities	475			475			475			475
Office rent	2075			2075			2075			2075
Stationary	1050			1050			1050			1050
Events	3000			3000			3000			3000
Physical collateral	5000			5000			5000			5000
Online ads	2000			2000			2000			2000
Book keeping	750		15,350	750		15,350	750		15,350	750		15,350	61,400
Operating profit			1075			14,000			53,550			60,750	129,375
Contribution margin ratio			0.63			0.56			0.56			0.56	0.56
Break-even point (in PHP)			24,532			27,326.7			27,458.4			27,482.7	108,783.6
Margin of safety (MOS)			1718			24,923.34			95,791.55			108,767.2	229,216.4
Operating profit ratio			4%			27%			43%			45%	38%

Exhibit 4: Competitors of SmartFleet

(a) Competitors for Operations Automation Tool (OAT)

Fleetio: Pronounced “Fleet-ee-o”, is based in the United States, and serves over 20 countries. It provides vehicle and driver overview, fuel management, service history, and reminders. It is accessible in the cloud and can be accessed either over the web or through mobile phones, by multiple users, with the possibility of different permission levels. It provides basic reports, listing and summaries filtered by time period and characteristics. It is offered free for one user and up to 2 vehicles. Price varies from $1.9 per vehicle per month (approx. PHP 85 per vehicle per month) for up to 10 vehicles to $0.69 per vehicle per month (approx. PHP 31 per vehicle per month) for up to 1000 vehicles.⁴

SmartFleet Australia: It is based in Australia, and serves over 160 clients and more than 35,000 vehicles in Australia. It offers managed services, and service providers themselves provide operational, registration, procurement/disposal, and road-side assistance. It also offers self-management modules that provide some services of Operation Automation Tool.⁵ The prices of its products are not revealed.

(b) Competitors for Fleet Management Tool (FMT)

Fleet Genius Pro: A product by Prova Systems, based in the United States. It provides both fleet optimisation and fleet tracking services and has more advanced telemetrics and vehicle health monitoring device than that of SmartFleet FMT. It provides free fleet optimisation services to SMEs with 5 or fewer vehicles. For larger fleets, it charges $2 per vehicle per month (approx. PHP 90 per vehicle per month), and $8 per vehicle per month (approx. PHP 360 per vehicle per month) for both, fleet optimisation and advanced fleet tracking services.⁶

Automotive Resources International: A US-based company, having offices globally. It has an office in Hong Kong also. It manages more than 1 million vehicles in the United States, Canada, Mexico, Puerto Rico and Europe, and over 2 million vehicles worldwide, along with its partners and affiliates. It uses ‘Big Data’ to manage all vehicles in a safe and inexpensive way. It uses thousands of rules and around 14,000 metrics tailored to each client for automated analyses. ARI Fleet’s clients get dashboards with data exploration and predictive models for decision making.⁷ The prices of its products are not disclosed.

TeleTrac: A US-based company that serves over 20,000 fleets across industries, and tracks over 200,000 vehicles, across 87 countries, mainly in the United States. It offers multiple products, but its Fleet Director Tool offers services similar to SmartFleet FMT. It also uses ‘Big Data’ for its operations, using intelligent data analytics to find root causes of high fuel consumption and waste. It helps in taking corrective actions to minimise safety risks leading to lower insurance premiums, and improvements in productivity, vehicle diagnostics, route optimisation, and customer service response times.⁸ Prices of its products are not disclosed.