Pay-as-you-go Mercs in 1999
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by Toby Clark III A few years ago David Thomas, then head of Mercedes-Benz' UK truck operation, made a startling statement: "Soon we will be selling kilometres, not trucks." The growth of contract hire brought this situation closer, and finally Thomas's prediction is coming true: CharterWay, Mercedes' contract hire division, is offering vehicles on a pay-as-you-use basis.
Cashflow
From 1 January operators can lease vehicles on a monthly basis, paying only for the miles they have done that month— making cashflow easier and ironing out seasonal variations. The system uses satellite tracking technology to measure the precise mileage each vehicle has covered: it incorporates comprehensive fleet management software. The man behind the scheme is CharterWay managing director Steve Mottershead, fie has already talked to potential customers, and thinks they'll be keen: "Distribution companies already think in terms of pence per kilometre, and they are hungry for management information," he explains. "But we also have own-account operators interested—in fact, there's not one customer who hasn't been interested."
Mottershead freely admits that the inspiration behind the scheme was the desire to differentiate CharterWay from the "super" contract-hire outfits such as Volvo-owned BRS.
"Sometimes operators have the impression that a manufacturer's contract hire firm is just a finance house, or a way of shifting more metal," he says. "CharterWay is itself a 50/50 joint venture between MercedesBenz UK and Mercedes-Benz
Finance. The firm has 840 customers with 3,000 vehicles, and already offers innovative contracts which include buy-andleaseback schemes.
"We asked ourselves, how can we add value?" says Mottershead. "We looked at with-driver contracts, but other firms are doing that why should we follow? We don't intend to have with-driver contracts".
So the new project goes in a different direction, by improving management information and reducing expenditure risks without adding significant cost. And because charges are paid in arrears a canny operator could keep his costs precisely in step with his income.
Differentiate
The scheme should certainly differentiate CharterWay from other operators—Mottershead is convinced that his system is ahead of the field, and that it is not dependent on any particular hardware platform: "We've put all our investment, that's £250,000, into software," he says.
CharterWay also aims to offer improved customer service, leading to improved customer retention. "All of it is customer-led," says Mottershead. Mercedes dealers will offer two quotes for contract hire: one conventional, and one for the pay-as-you-use scheme. The full fleet management system will become operational in the Spring.
It's difficult to imagine a customer who won't be interested— as Mottershead puts it: "It wouldn't surprise me if it becomes a standard within a couple of years."
THE SYSTEM
111 CharterWay's new system does net represent a fundamental departure fl'Ortl Current contract hire schemes: the operator still signs up for a three-to-seven-year contract (three or five years is most common). The difference is that the monthly cost depends precisely on vehicle usage, rather than an operator's estimate.
The vehicle's tracking hardware tells CharterWay the exact mileage that the vehicle has covered, and every month the operator receives a "statement" of each truck's sta Monthly payments are made in arrears, and the scheme is reviewed annually.
The monthly statement contains basic management information; the operator can also have continuous access to more complete fleet management software via a modem. The system allows for tracking, vehicle monitoring and constructing a complete audit trail of operations. This service is free: the operator pays only for airtime and connection charges between his base. CharterWay and the vehicle itself. These will be a minimum of around £20 per month, built into the hire cost.
The hardware itself costs money, of course, but again this is built into the hire cost. A black box will cost a couple of hundred pounds, while a base station tag interrogation unit might cost £1.000--the electronic tags themselves will cost next to nothing. Mottershead realises that "customer perception is most important". CharterWay benefits from the system too, so for fleet operators the cost will be minimal: "There will be a premium with just 1-2 trucks," he says, "but most customers won't see a difference."
THE TECHNOLOGY
RI The CharterWay scheme relies on accurate measurement of a vehicle's mileage and frequent communication between the vehicle and its base. The technology for performing each part of the job was already in place: the challenge was to integrate it all into a reliable, seamless system.
Rather than developing new hardware, Mottershead talked to MDM, a firm that has developed tracking and communication for McLaren racing cars as well as animal tagging systems for the beef industry.
This is an open system, capable of interfacing with any communications hardware (GSM mobile phone networks and RAM Mobile Data are the most likely) and with any engine management system. If one network doesn't work (if the truck is in an area of poor phone coverage. for instance) the system will automatically try another.
The heart of the system is a ''black box" containing a GI'S (Global Positioning System) receiver, a computer processor, memory and connections to the engine management system. This takes a position reading (accurate to 100m or better) every minute, and compares it with the speedometer and engine signals. If there is a disparity the system records it for later examination.
The most basic installation consists of an electronic "tag" which is interrogated by a base unit at the depot every time the truck enters or leaves—this system can also be used with trailers. The tag is built into the trailer's electrical connection, and identifies the trailer to the tractive unit's black box. This allows the operator to keep track of trailer use and mileage.
The black box regularly communicates with CharterWay's headquarters at Milton Keynes, transferring mileage data and any relevant management information, from fuel level or maximum engine revs to PTO usage and load-compartment temperature. This information can be accessed via a modem link, so the operator can keep track of the vehicle and its status. A "moving map" computer display shows the truck's current position and speed.
Communication is not just one-way: the operator can send text messages to the driver or communicate via the black box with the vehicle itself. If a vehicle is stolen, the operator can shut the engine down remotely.
And if the operator doesn't keep up the payments, CharterWay can do the same...