What is telematics? How it works, benefits and examples

Telematics is a method of monitoring cars, trucks, equipment and other assets using GPS technology and on-board diagnostics (OBD) to plot the asset movements on a computerized map. 

Many telematics device companies now offer hardware and software solutions to help fleets track, analyze and optimize their assets. Also known as fleet tracking or GPS vehicle tracking, telematics has become an important management tool for many commercial and government fleets.

A fleet manager without visibility into vehicle data typically finds out about small issues only after they turn into costly downtime. Telematics helps by answering a basic operational question: “Where are the vehicles right now and how are they performing?”

What is telematics?

Imagine a knowledgeable computer in your vehicle that can monitor and report on nearly every detail — from speed and idling to fuel use, low tire pressure and more. This information, or telematics data, can help save on vehicle maintenance costs or improve fuel efficiency by learning more about driving habits. This describes telematics technology, also known as GPS fleet tracking.

To track assets, information from the vehicle is recorded via a small telematics device — also called a black box —  that plugs into the OBD II or CAN-BUS port. A SIM card and modem in the device enable communication on the cellular network.

There are several key hardware components of a telematics device:

• GPS receiver
• Engine interface
• Input/output interface (expander port)
• SIM card
• Accelerometer
• Buzzer

In addition to the hardware, the algorithm used for GPS logging is another critical factor because it impacts the quality and accuracy of the data. Fleet managers can use curve logging to improve data accuracy and reporting.

How does telematics work? 

A telematics system follows three steps: collecting vehicle data from GPS and other sensors, transmitting that data to the cloud and turning it into useful insights. Fleet management software analyzes the data and presents it in reports, alerts and dashboards.

Collect vehicle data  

The telematics device retrieves data generated by the vehicle, like GPS position, speed, engine light information and faults. Even G-force is measured by a built-in accelerometer in the telematics device. The data collected by the vehicle's telematics device is sent to the cloud.

A device gathers this data continuously while the vehicle operates, either idling or traveling. The telematics system combines this information with data from the onboard computer and CAN bus to provide a stronger picture of vehicle health. 

Sensors positioned throughout the vehicle add further detail, from seat belt status to door open and close events. 

H3: Transmit data securely 

Once the telematics device collects vehicle data, the SIM card and built-in modem send that information over the cellular network to a cloud platform. Transmission happens continuously and in real time, so fleet management software reflects the current vehicle status instead of a delayed snapshot. 

Encryption and authentication protocols protect this data in transit, which matters for fleets handling sensitive location and driver information. Where cellular coverage is temporarily unavailable, most devices store data locally and transmit it once a connection is reestablished, which means a short gap in coverage does not result in lost records. 

Turn data into insights 

The data collected from the telematics device is decoded and brought into a fleet management software application for visualization, reporting and analysis. With telematics software, users can view and export reports and gain business intelligence such as the top 10 drivers with the highest number of speeding incidents or vehicles due for scheduled maintenance.

Data analytics and machine learning offer a way to get further use of telematics data. For example, fleets can use benchmarking to see how their fleet performs on safety compared to similar fleets or understand if routes are structured in the best way.

Examples of these insights include: 

• Maintenance reminders that flag a vehicle before a small issue becomes a costly repair
• Speeding reports that highlight drivers who need coaching
• Route optimization that reduces fuel use and shortens delivery windows
• Remote diagnostics that alert managers to engine faults before a breakdown
• Weather hazard alerts that help dispatchers reroute drivers around dangerous conditions

What data can telematics collect?

Depending on the device, telematics can collect information on GPS location, and a wide range of other data points listed below: 

Industries that use telematics 

Any industry that relies on vehicles or mobile equipment can use telematics to improve operations. Specific benefits vary, ranging from improving equipment utilization on construction sites to optimizing routes for field service teams. The table below highlights common examples:

In trucking and transportation logistics specifically, telematics data supports transportation management software and helps carriers accelerate cash flow through freight factoring by giving factoring companies accurate, real-time proof of delivery.

Benefits of fleet telematics 

Fleet telematics gives managers greater visibility into vehicles, equipment and driver activity, helping them make more informed decisions and improve day-to-day operations. Telematics software assists in six core areas of fleet management: 

• Productivity: Improving customer service by using real-time GPS tracking, trip reporting and dispatching and routing tools.
• Safety: Increasing safety with in-vehicle driver coaching, risk and driver behavior reporting, collision notifications and reconstruction, and the ability to locate a stolen vehicle.
• Fleet optimization: Streamlining vehicle maintenance with predictive maintenance abilities and remote diagnostics, and fuel management by tracking idling and other fuel-guzzling habits.
• Compliance: Electronic logging and Hours of Service, IFTA reporting and vehicle inspections using electronic logging devices.
• Integration: Combining other software systems with telematics such as onboard camera technology or CRM software and even building new applications like Geotab Ignition.
• Sustainability: Reducing the fleet’s environmental impact and carbon emissions, plus managing electric vehicle fleets.

Fleets using telematics with active driver coaching programs reduce fuel costs by up to 14%. Safety outcomes improve significantly as well — Geotab's commercial transport fleets report up to 40% fewer collisions, and according to OECD Open in new window, vehicle maintenance costs drop by up to 14% when predictive maintenance data replaces reactive servicing.

In insurance telematics, vehicle owners share safety data with their insurance company to help lower the cost of premiums if they can prove safe driving habits. Telematics devices in a car can help insurance companies better pinpoint driver risk levels and offer different types of premiums based on driver usage.

Improve fleet performance with Geotab

Understanding telematics is only the first step. Geotab helps fleet managers collect accurate fleet data, improve fleet visibility, reduce operating costs and improve driver safety with tools like dash cameras and streamlined maintenance workflows. 

Fleet managers can view vehicle data in one connected platform instead of piecing information together across separate systems. This approach is part of the broader use of the Internet of Things (IoT) in fleet management. No matter if your fleet is running five vehicles or five thousand, the same underlying telematics principles apply. 

A connected platform can help turn that data into actionable insights for more efficient fleet management. See how Geotab can help you put those insights to work.