Fleet efficiencies are intertwined with operational needs. To be effective, fleet managers need to know how to measure operational needs. According to Christopher Lyon, director of fleet relations for NTEA, there are several approaches that help quantify necessary functional requirements while filtering out end-user operator demands, often communicated as needs.
“In the end, fleet managers are responsible for maintaining order between operational realities and requirements of the work that needs to be accomplished,” he says. “Fleet departments are often viewed as red marks in organization budgets. Without understanding the importance and unsung accomplishments of fleet operations, it is easy to see them as expenses and operational necessities rather than assets that can increase productivity and lower the bottom line. Fleet managers, though, can act as champions for their organizations and potentially turn a perceived expenditure into a tangible resource.”
Dollars and sense
Every successful company needs a sound business plan. Controlling costs and saving a few cents on every dollar spent can compound in the long run, Lyon points out. Regulating expenditures that are within your control contributes to the success and solvency of an organization. This journey normally begins with leadership directing fleet managers to reduce overall operating expenses. Creating a business plan becomes a necessity. Taking the time to analyze fleet operating costs and address problems, rather than cure symptoms, can pave the way to long-term success.
“Some fleet managers fail to effectively execute long-range goals,” Lyon notes. “This often occurs when management expects instant cost reductions, which mangers accomplish by eliminating surplus vehicles and equipment; extending service intervals; deferring maintenance; and reducing parts inventory.”
Although these items may need to be addressed, they are short-term solutions and can increase overall operating expenses down the road. “At some point, lengthening service intervals and postponing maintenance may result in costs that are greater than savings,” Lyons says. “Downtime is frequently overlooked as an expense that takes a toll on operational efficiency. Stocking enough inventory for maintenance and repairs, as well as optimizing the amount of second-line equipment, often brings greater financial savings in the long run.”
Scrutinize vehicle inventory
In the vocational fleet world, inventory can be an asset or a liability, and having the right type for your vehicles is critical to cost control. Fleet managers should periodically take a global view of their operations to assess inventory, prioritize needs and take action to reduce costs.
ABC analysis is a way of categorizing inventory based on quantity and amount of resources consumed. Although there are no defined thresholds for each class, different proportions are weighted based on where they fit within the organization’s overall inventory.
- A items account for a small amount of inventory, but are high in value and resource consumption
- B items represent a moderate amount of inventory and moderate consumption of resources
- C items account for a large amount of inventory and small consumption of resources.
To put this numerically: A equipment may only represent 20% of the fleet. However, it could account for 60% of operating costs. B equipment would represent 30% of the fleet and 25% of operating costs, and C equipment would account for 50% of the fleet and 10% of operating costs.
“As technology advances,” Lyon says, “fleet managers can no longer rely on what they have always purchased to continue their operational efficiencies. Conducting front-end research and following a systematic approach will help lessen the burden of determining operational requirements of work vehicles.”
NTEA offers data and resources to help fleet managers optimize their operations and benchmark with others in the vocational community, which you can read here.