What Is Telematics and How Does It Work?

In short, telematics is a method of monitoring vehicles using GPS tracking technology and onboard diagnostics data (OBD). It’s often a core part of successful transportation businesses, helping optimize routes, improve driver safety, and facilitate top-notch service to clients.

But what telematics companies provide in practice, who they are used by, and how it is implemented can be a little more complicated than this topline definition suggests. In this guide, we break down how telematics systems work, exploring how they relate to fleet management software and what benefits it can bring to your business.

What Is Telematics?

Telematics is the use of technology to monitor and manage vehicles and assets. By installing specialized hardware in cars and trucks, or other equipment, telematics systems collect and transmit data to centralized platforms for analysis.

This data usually encompasses vehicle location (also referred to as GPS vehicle tracking), speed, fuel consumption, engine diagnostics, and driver behavior. Such comprehensive insights enable fleet managers to make informed decisions, which can help improve operational efficiency and safety such as the optimization of routes, the tracking of vehicle fuel efficiency or maintenance issues, and the monitoring of dangerous driver habits.

How Do Telematics Systems Work?

So, how do telematics work? Telematics systems combine various technologies to collect, transmit, and analyze data from vehicles. This can be broken down into four parts:

1. Data collection

At the center of a telematics system is a hardware device installed in the vehicle. This device is often called a “telematics control unit” or “black box.” It has sensors that continuously monitor various aspects of the vehicle’s performance, including its location, speed, fuel consumption, engine status, and more.

One of the primary components of this device is a GPS module. It communicates with satellites to determine the vehicle’s precise location and can be used for real-time tracking and route optimization.

2. Data transmission

The data collected is then sent to a central database or server for analysis, typically through fleet management software. This is done using wireless communication, typically via cellular networks. Some telematics systems can switch to satellite communication in areas without cellular coverage.

3. Data storage and analysis

Once transmitted, the data is stored on centralized servers. Fleet management software takes this information, analyzes it, and generates digital reports. These reports offer insights into vehicle health, driver behavior, and route efficiencies—information you can use to improve your operations.

4. User interface to access data

Telematics systems come with user-friendly interfaces for fleet managers and other users to access and interpret information. These can be web-based platforms or mobile applications, and they allow you to view real-time data, generate reports, and make informed decisions.

Below is an example of a vehicle route tracking tool inside one of our top-rated fleet management platforms by Verizon Connect.

7 Key Benefits of Telematics Systems for Your Fleet Vehicles

Implementing telematics can offer numerous advantages for your fleet operations. Here are seven core ways it can help:

Increased efficiency and cost savings

Telematics can greatly boost your fleet’s efficiency and lower fleet management costs. By tracking routes and driving patterns, you can identify quicker routes or congested areas to avoid. This means less time on the road and therefore noticeably reduced spending on fuel over time.

Additionally, monitoring fuel consumption can highlight vehicles needing maintenance based on declining fuel efficiency. It also highlights the point at which you need to replace older vehicles and purchase more efficient ones.

Enhanced safety measures

Safety is paramount in fleet management. Telematics helps monitor driver behavior like speeding, hard braking, or rapid acceleration. For more advanced systems like Teletrac Navman’s TN360 suite seen below, dangerous behaviors will be highlighted via reports or driver safety scorecards.

By accessing this data and addressing these behaviors with your drivers, you can reduce accidents. Fewer accidents mean lower insurance premiums and fewer potential liabilities.

Preventive maintenance

As alluded to, telematics systems can monitor vehicle health. You get alerted if a vehicle shows signs of a potential issue, like engine trouble or brake wear. This lets you address problems before they become bigger, saving on costly repairs and reducing vehicle downtime.

You can usually manually log maintenance checkups you have made, as well as set alerts for future ones based on select criteria, as shown for Verizon Connect below.

Real-time tracking and communication

Knowing where your vehicles are at any time is invaluable, and telematics makes this possible through real-time tracking. You can respond faster to customer needs and provide immediate assistance if there’s an emergency with one of your drivers or a vehicle gets lost.

Improved customer service

With telematics, you can provide accurate delivery times to customers, respond faster to service calls, and even reroute vehicles on the go if needed. This improves the customer experience and can give you an edge over competitors. Some fleet management software even integrates scheduling tools into its application, including Verizon Connect shown below.

Environmentally-friendly operations

Telematics is also beneficial in green operations efforts. You can use telematics to optimize routes and reduce unnecessary idling. As a result, your fleet will produce less pollution and be more eco-friendly overall.

Compliance and reporting

Many states have regulations for driving hours, maintenance, and more. Telematics can help you easily record this information in an electronic logbook, ensuring you remain compliant.

Electronic logbooks also benefit truck drivers, too. They simplify record-keeping, making it quicker to log hours and activities. So, while you monitor compliance, your drivers enjoy a hassle-free way to track their work.

Real-World Applications of Telematics

In 2024, telematics continues to be instrumental across various industries. Here are three examples of the sorts of ways telematics is used today.

• Transportation and logistics: Companies have achieved significant cost savings and improved delivery times by leveraging telematics for route optimization and real-time tracking. An example here might be the oil and gas industry, which uses telematics to monitor the location and status of equipment for security and operational oversight.
• Insurance: Insurers use telematics to assess driving behavior, offering personalized premiums based on individual risk profiles. This is frequently used by drivers who have just passed, as it helps reduce the cost of insurance. It can be beneficial for all drivers though, since insurers can get more accurate data from telematics devices to aid in reconstructing accidents, streamlining the claims process, and reducing fraud claims.
• Public transportation: Real-time updates on bus and train locations enhance the passenger experience by providing accurate arrival times. Telematics also helps internal operational efficiency through improved route planning and scheduling.

Implementing Telematics: A Step-by-Step Guide

Adopting telematics for your fleet business involves five key areas for consideration:

1. Assessment: Evaluate your fleet’s specific telematics needs and objectives. This will allow you to know what sort of features, beyond basic telematics location tracking, that you want or need. You may also want to consider customer support availability, particularly if you are new to telematics. This will also dictate what sort of price you can expect to pay, too.
2. Selection: Choose a telematics solution that aligns with your requirements.
3. Installation: Deploy devices across your fleet, ensuring proper integration. In most modern vehicles, this can be done yourself as installation is fairly straightforward (as we’ll come to shortly).
4. Training: Equip your team with the necessary skills to utilize the telematics system effectively. This may be the use of an accompanying driver app when drivers are on the road or simply making sure the system is on when the vehicle is being driven.
5. Monitoring, analysis, and optimization: With all the vehicle data being recorded, you can now review data insights to continually refine your fleet operations over time.

How are telematics systems installed?

Installing telematics is straightforward, and you don’t need any special tools. You’ll get a small device that you connect to the vehicle’s On-Board Diagnostics (OBD-II) port, usually located under the dashboard near the driver’s seat. Once connected, it starts collecting and sending data.

Ensure a good fit so the device stays connected and transmits data without interruption. If you’re not confident about the fit, consider getting professional help ‌installing the device.