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Business Fleet – Market Trends

What Percentage of Your Budgeted Fleet Dollars are Wasted?

January 17, 2013

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How much of a fleet’s annual budgeted dollars are wasted? Is it 5 percent, 10 percent, or even more? If we are honest with ourselves, we would readily acknowledge that there are wasted dollars in all of our budgets and, in light of this, I’m reminded of the saying, “If you watch the pennies, the dollars will take care of themselves.” Typically, waste occurs because of non-compliance with fleet policy and, conversely, the lack of enforcement of it. Reducing fleet costs is a constant, never-ending struggle for all fleet managers, since every aspect of fleet management revolves around money. In lieu of additional budget dollars, one course of action is to stop the waste of existing dollars. There are a number of fleet-related areas where waste occurs. For example, how much money is wasted in unnecessary over-spec’ing of vehicles, keep-ing under-utilized assets on the books, or non-compliance with scheduled preventive maintenance intervals that result in unproductive downtime? Often, cost-reduction initiatives focus on operating expenses, but depreciation is a fleet’s largest annual expenditure. Are you maximizing the resale potential for all assets, whether sold at auction or to employees? Or, are your remarketing practices leaving money on the table?

Eliminating Waste is the ‘Low Hanging Fruit’
In my mind, eliminating waste is the proverbial low-hanging fruit. At its most fundamental level, waste involves consuming resources through inefficient or non-essential activities. It is not just waste, but wasteful. The greatest amount of waste occurs with the fuel budget. If up to 30 percent of a vehicle’s fuel efficiency is impacted by driver behavior, you need to minimize this inefficient use of corporate assets. In fact, many of these be-haviors are in violation of fleet policy. Let’s start with one of the most wasteful of all fleet activities – unnecessary idling. Until the advent of telematics devices, unnecessary idling was not perceived to be a major problem for fleets. But, once engine data was captured by fleets on a large-scale basis via telematics, it quickly became apparent that idling represented a significant “hidden” problem. The amount of unnecessary idling varies by fleet, but some fleets have recorded idling as much as 35 percent of the time.

Besides unnecessary idling, there are many other ways that fuel dollars are wasted, ranging from inefficient routing to drivers not being price conscious when refueling. But, what about having drivers ensure that tires are properly inflated? Driving on under-inflated tires is not only dangerous, but wastes fuel dollars as well. This is the easiest, most cost-effective (and most neglected) way to boost fuel economy. For instance, keeping tires properly inflated increases fuel efficiency by 3 percent.

What about overloading? This also may be perceived as strictly a safety issue, but overloading is another way precious fleet dollars are wasted. Overloading shortens a truck’s service life and increases operating expenses. In fact, fleet maintenance surveys consistently show that overloading is the No. 1 cause of unscheduled maintenance for trucks. There’s a direct correlation between vehicle weight and fuel consumption. Every pound of extra weight requires an engine to work harder, increasing fuel consumption. For instance, an extra 100 lbs. in vehicle weight can reduce mpg up to 2 percent. In addition, every pound deleted from curb weight is converted into revenue-generating payload.

Scofflaw Drivers & Equipment Abusers
Vehicle violations represent 1-3 percent of total fleet costs. However, the total cost will vary by fleet depending on the cities and states where vehicles operate. This is an area ripe with waste. Some drivers are egregious in their violations. In my mind, vehicle violations are not the cost of doing business; it is a needless waste of dollars. Let’s target flagrant scofflaws and stop the waste. Speeding is a common moving violation. Reducing driving speed not only reduces violations, it also conserves fuel. For every 10 mph of speed reduced, fuel economy improves by 4 mpg.

Similarly, at-fault accidents are the ultimate form of waste, not only because of the expenditure to repair damaged assets, but also because it increases corporate liability exposure. Yes, accidents happen, even to the best of drivers, but often there is the lack of accountability. If one doesn’t exist, establish a fleet safety and accident committee to examine incidents to assess preventability and fault, with the ultimate goal to reduce the frequency of at-fault accidents, which, in turn, will reduce accident repair expenditures.

Waste Not, Want Not
Before implementing new fleet initiatives requiring new dollars, let’s make our No. 1 priority to stop the waste of existing dollars. The most effective way to reduce waste is to increase compliance with fleet policy. Fleet policy must be a powerful component of a company’s overall cost-control strategy.

Let me know what you think.

mike.antich@bobit.com

Comments

  1. 1. Anonymous [ January 25, 2013 @ 03:32PM ]

    In response to your question “what of your fleet budget is wasted”. My first thought was…. my Salary. I am so under-utilized here it is amazing. We are repairing vehicles (replacing engines, transmissions) in units that are not worth the repair, such as a 1998 Ford Ranger with 224,000 miles.

  2. 2. Wasted [ January 31, 2013 @ 05:17AM ]

    The sink hole in our agency is just befor a unit is to be replaced. Usually 6 months befor it is slated to go to auction the transmission needs replacing or brakes and tires, which at one time was not to expensive. So we put $ into it and send it to auction.

  3. 3. John Brewington [ January 31, 2013 @ 11:19AM ]

    Mike,
    You certainly hit the “nail on the head” with your article on wasted fleet dollars. All of us waste a certain amount of fleet dollars but the largest single area of waste, in my opinion, is when management neglects to enforce its own policy and procedures – allowing drivers to operate beyond the practices that should be followed. Unnecessary upfitting, premium vehicle content, or “off dealer lot” buying are some examples of waste on the front end of fleet management. Not enforcing fuel grade requirements, not adhering to recommended maintenance schedules, doing business outside approved vendors, and adding accessories to the vehicle are examples of waste during the life of the unit, while failing to hold anyone responsible for the condition of the unit when its useful days are over, falls straight to the bottom line at sale. Can this waste be controlled – certainly! However, management must suck it up and enforce reasonable requirements equally across all users – regular guys and manager’s pets, as well.

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AUTHOR BIO

Mike Antich

Editor and Associate Publisher

Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing. He was inducted in the Fleet Hall of Fame in 2010.

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