An efficient key to company transportation problems
Prodjo Sunaryanto, Managing Director of TRAC
The protracted economic crisis, which this country is still in the throws of, has forced companies to be cost-efficient.
Company cars, for example, are important for corporate image, but the price of new cars continues to soar as does the cost of car maintenance. If a company needs 100 cars at a price of Rp 150 million apiece, for instance, a huge amount of money must be allocated for transportation alone.
Besides which it will have to spend more money on car maintenance, drivers' salaries, insurance and vehicular taxes.
Obviously, this company, the core business of which is not transportation, will need a separate division to handle car registration and the maintenance and repair of the cars.
Unless a company operates taxis -- and as such can run a business with only 100 cars -- it is cheaper for this company to rent cars rather than purchasing them. If it rents cars, the car rental company takes car of any repair work that might be required.
Renting a car means that routine maintenance, the replacement of the lubricant, the renewal of the motor vehicle registration certificate and even insurance are taken care of.
In fact, renting cars is basically advantageous for a company. For many companies, while it is apparent that transportation costs are high, a clear account of transportation expenditure cannot be produced.
These are some of the problems companies may face:
- There is difficulty in drawing up a budget because there is no certainty about overheads, i.e. when the cars must be sent to a workshop for maintenance.
- A problem in cash-flow management arises when the company decides to buy cars because it must allocate a significant sum of money for the downpayment.
- The company's debt increases as it must pay back its car loan in installments.
- Return on assets will be lower because investment in operational cars will only augment the assets and reduce the chance for investment in areas more strategic for the company.
- The company must pay taxes such as the annual tax on motorized vehicles, the Value Added Tax on the purchase of cars and the expenses arising from the maintenance of the cars. Besides which, the company must also keep a file of the standard tax invoices for the collection of the Value Added Tax, for example.
- The company must spend time and money on processing its insurance claim and other important documents related to insurance.
In view of the aforementioned problems, it is clear that renting cars is more cost- and time-efficient than purchasing them.
It is common today for a company to employ domestic and foreign experts on a contractual basis for a period of two to four years only. Therefore, it is better for a company to hire cars along with their drivers rather than buying cars for these experts. When the contract expires, what happens to the cars and the drivers?
Obviously, the car rental business can profit both the companies hiring the cars and the car rental companies themselves.
TRAC Astra Rent A Car, for example, has enjoyed a favorable growth since its inception in 1986. This company was set up to support PT Astra International Tbk, an automotive company and the sole agent for several car makes. However, it rents both Toyota and other makes.
A low rent is not the main consideration for a company when renting a car. Before a company rents a car, it must find out if the car rental company can give an integrated solution to its transportation needs.
A bonafide car rental company must be supported by a skilled and hospitable staff, reliable cars, professional drivers and personal services. The staff must always be ready to lend a hand and understand the needs of their clients.
As a guarantee of its excellent service, a good car rental company usually has a customer-care division. The customer care officers will professionally and personally attend to the needs of the customers and listen to their complaints.
The more branches a car rental company has and the more workshops it cooperates with, the better it can serve its customers.
The format of business in the future will be greatly influenced by the ability to apply standard procedures in all corporate operations, as well as by the extent to which these procedures can be applied continuously and consistently to support all corporate activities.
Another obligation that constitutes the prime concern of a business is the development of information technology. Bonafide companies, including those in the car rental business, must meet all the requirements set for this format of business.
Since 2003, TRAC has applied the Astra Management System and implemented Balanced Score Card as its management tools to strategically communicate TRAC's performance to the stakeholders.
The application of this system refers to four perspectives, namely:
- A financial perspective, which is aimed at obtaining a strong and solvent financial structure.
- A customer perspective, which is aimed at ensuring good quality and satisfaction for the customers.
- An internal perspective, which shows reliance on an innovative attitude in products and services, a strong business network, an excellent corporate operation and quality management and technological systems.
- A perspective of learning and growth, which is aimed at producing competent human resources with strong teamwork.
At this juncture, three parties deserve equal treatment: the shareholders, the employees and the customers.