Critical Areas Where Truck Fleets Can Realize Cost Savings
With many unpredictable variables impacting expenses, fleet professionals must continually adapt and think strategically when identifying areas for cost savings. Truck fleets can reap significant savings by looking at their fleet as a sum of many parts. Critical areas such as vehicle selection, upfitting, maintenance, lifecycle, and driver behavior all present opportunities to make small adjustments. Even just a few percentage points’ improvement or a few thousand dollars saved, when repeated and accumulated across a fleet, can add up to great savings and improved efficiencies. No two fleets are alike, so the areas of focus and the exact adjustments will vary, and the examples below are just the beginning of what is possible.
Choose the Right Vehicles
Purchasing trucks based on previous specifications or what the operator feels is best is a recipe for disaster. Specifications and applications change over time, and fleet managers should ensure they are designing trucks using data relative to the need. At a minimum, prior to building a truck specification, it’s important to ask a number of questions to internal customers:
- What is the vehicle being used for?
- What environment and geography will the truck operate in?
- What is the expected accumulated mileage of the vehicle annually?
- What is the maximum width, height, and length the truck needs to be able to accommodate?
- Is the vehicle towing anything?
- Do you know the weight of the truck, both loaded and unloaded?
- Have you explored whether you have the correct powertrain for the vehicle (diesel vs. gas)?
Taking the time to answer the above questions can result in significant savings. Having specific data about vehicle weight, both loaded and unloaded, can reduce upfitting capitalized costs by up to 10% on average, and that is only one aspect. Another example is a fleet that was using upfitted Ford F750s, which put them on weight and required drivers to have a CDL. It was determined that an upfitted F650 would be sufficient for the task, at a savings of approximately $2,000 per truck due to reduced weight and regulation.
Optimize Your Upfit Specs
Truck fleets have many touchpoints from the chassis, body, auxiliary equipment and individual components. As such, engineering a truck specification takes a great amount of time, and it is critical to driver safety and job performance. The first step is a site visit and driver ride-along with an upfit engineer. Having an engineer on site to review current upfit configurations, observe how drivers utilize the vehicle in the field, and gather feedback from drivers and technicians provides insight into what equipment is required and what can be reconfigured. Through this hands-on process, you can expect a more accurate spec. For companies with multiple locations across the country, regional ride-alongs will identify different needs so that urban delivery trucks are configured to handle tight corners and trucks in winter areas are fitted with a cold weather package.
One of the main ways an accurate spec can produce cost savings is by controlling weight. Utilizing equipment made from heavy-duty composite plastics or aluminum can minimize unloaded vehicle curb weight while increasing fuel economy and payload capacity. This can help companies stay under the DOT Gross Vehicle Weight limit and avoid additional costs and regulations. Properly spec’ing upfit packages can also increase residuals by identifying inexpensive factory options that make vehicles more attractive when it’s time to sell. Examples include safety features, driver amenities like Bluetooth connectivity, or a Power Take Off provision and power group.
Finally, once a new spec is in place, it should go through a pilot process before full production. A pilot review involving the upfitter, client, and fleet management provider is an important step to ensure specs are delivering the required results before significant dollars are spent on making changes to the whole fleet. It’s also important to set standard specifications and review them annually as OEMs and upfitters launch new product features and updates. Standardization allows fleet managers to leverage their specification for OEM and upfit component volume discounts, and it streamlines the process from order to delivery.
Leverage Bailment Pools
Bailment pools are a key way for fleets to manage both costs and order to delivery times, especially when utilizing standardized upfits across multiple vehicles. Fleet managers can work with a fleet management company and upfitter to determine how to set up a bailment pool so standard chassis, liftgates, or other pieces are ordered at factory pricing and stored until needed. This avoids significant delays in order to delivery time or the high cost of having to order vehicles out of stock.
Optimize Your Lifecycle
Trucks are generally more expensive to acquire and have higher operating costs, specifically relative to maintenance and fuel. It’s imperative to keep a close eye on all costs throughout the life of the vehicle to ensure the replacement cycle is optimal.
One aspect is understanding your vehicles’ maintenance cycles and how this impacts replacement timing. Fleets that leverage a longer lifecycle to reduce or eliminate lease payments can expect a 30% increase in non-preventive maintenance costs, as well as more down time. In addition, the average service on a truck past its optimum replacement cycle will increase by nearly $400 dollars. Truck fleets that take the strategy of a shorter lifecycle will have more predictable and lower maintenance costs but will carry a regular lease payment. Additionally, optimizing the lifecycle can also improve fleet fuel economy anywhere between 2-4 miles per gallon (mpg) by bringing more fuel-efficient vehicles into the fleet.
Ultimately, fleet managers must find the balance between using vehicles to their full potential but also retaining enough value toward the end of the lifecycle when it is time to sell. Fleet consultants have access to auction information, real-time data about resale market trends, and data about seasonal price fluctuations. Through careful analysis of this information, the ideal time of year and point in the vehicle’s life for sale can be identified. This proactive and strategic lifecycle approach can impact proceeds at sale by as much as 10%.
At every point in the lifecycle, fleets need to use data to guide decision-making, whether that is by using your fleet’s own past performance to create a benchmark or looking to similar fleets and industries for performance standards. Companies can often benefit substantially from having industry experts examine their data, identify trends, and evaluate which steps will result in the most meaningful lifecycle gains.
Be Proactive About Maintenance
Following a regular maintenance schedule to ensure proper preventive maintenance of the chassis, body and specialty components is critical to ensuring longevity and uptime. It is a common mistake to overlook proper inspection and maintenance on items such as roll-up doors, liftgates, cranes, and more. Failure to service these in accordance with manufacturer recommendations can be costly and debilitating to the fleet.
Additionally, fleet managers should look for ways to minimize downtime and cost through their vendor network. For example, investing in a mobile maintenance program that performs preventive maintenance services during non-work hours can save fleets from costly rentals and the inconvenience of ferrying vehicles to the service center.
Finally, fleet managers must be aware of any warranties that are available on both the chassis and the body. Understanding warranty eligibility and limitations can save fleets thousands of dollars on repairs that should be covered under warranty but went unnoticed or unverified.
Invest in Driver Safety, Behavior Management, & Compliance
It’s not just about which vehicles are in your fleet – it’s also about how they’re being driven. Behaviors like aggressive braking, idling, and speeding, can at best drive up maintenance and fuel costs, and at worst result in costly and dangerous accidents.
Today’s telematics technology and the rise of the connected vehicle mean fleets have access to real-time data about where vehicles are located and whether they are being used effectively and safely. Setting clear policies and translating data into driver scorecards can help you monitor performance and identify drivers that require additional training to mitigate risky behaviors. Depending on how a fleet manages driver behavior, they can reduce preventable incidents by up to 10%. While equipping drivers to avoid accidents is common sense safety, the other benefits of safer driving, like avoiding surprise repairs, downtime, and increased fuel efficiency will quickly add up to financial savings – driver behavior management alone can yield a 2-3% improvement in miles per gallon.
Many telematics solutions today not only offer safety benefits but can assist with regulatory compliance. Fleets can now meet ELD requirements with proper hours of service (HOS) logs and can perform daily driver vehicle inspection reports (DVIR) using the telematics device. The data is stored electronically and can be accessed at any given time, which can be helpful for drivers during roadside inspections. This takes a huge administrative burden off both drivers and fleet managers.
Build & Nurture Strategic Partnerships
In all of the above areas, fleet managers work with a wide array of vendors that “touch” the truck throughout the lifecycle. This includes OEMs, upfitters, component manufacturers, and maintenance vendors. Fleet managers should form strategic partnerships with their suppliers and keep tabs on their network of vendors. Meetings with each should take place on a reoccurring basis to provide feedback, review performance, analyze costs, and discuss process improvements.
Making Sure Cost Savings Last
Even in today’s rapidly changing fleet landscape, truck fleets can find opportunities to reduce costs while respecting company culture and driver satisfaction. The important piece of any strategy change is to stay engaged by monitoring results on an ongoing basis rather than viewing cost-saving changes as a finite project. Creating a regular schedule to review your fleet’s strategies and programs is critical to staying on top of fluctuating costs. As fleets make changes, data needs to be collected and regularly evaluated to determine whether the implemented changes are effective and if additional opportunities for optimization are being revealed.
by Chad Edmonson, CAFS Senior Strategic Consultant
FLEET MANAGEMENT AUDIT
Fleet management is the use of a set of vehicles in order to provide services to a third-party, or to perform a task for our organization, in the most efficient and productive manner with a determined level of service and cost.
Fleet management activities are shown in the following graph 1:
Graph 1: fleet management activities
The proposal audit analyses and assesses all fleet management activities shown in the graph 1, and its main goals are:
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With the information obtained, we’ll elaborate a report that holds the overall status of the fleet management as well as the suggestions, recommendations and the measures to take in order to cut costs and optimize the fleet management activities.
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José Miguel Fernández Gómez
I´m a Fleet Management expert, and the manager of Advanced Fleet Management Consulting, that provides Fleet Management Consultancy Services.