You may be wondering why you would have to defend your capital budget as a fleet manager, right? A lot of senior managers take the fleet as a resource for granted — they think it’s an easy place to cut capital spending. “Can’t we just buy fewer trucks and extend the lives of the older ones?” It’s the folks in the trenches who understand that extending the life of older units well beyond planned replacement will dramatically increase maintenance costs.
I’m constantly reminding business owners and managers: No matter what industry you’re in, if you operate a fleet, “You’re in the trucking business.” I say this because I see opportunities for greater efficiencies and cost savings if those managers would only pay closer attention to their fleets and listen to the experts running them.
So how should you respond when it comes to cost-cutting pressure or unreasonable requests from management regarding your fleet?
Revisit the Plan
You have a fleet plan, right? The first step is to review it to make sure your choices are defensible — from your vehicle and spec’ing choices to accessory costs — understanding each choice may vary by your dispersion of the fleet and vehicle type.
If management is looking to reduce the total fleet size, be sure you have accurate figures on your scheduled maintenance, unscheduled repairs, and replacement rentals.
Even fleets achieving 95% uptime will need strategic replacements for the 5% that are in the shop. If overall fleet size is reduced, calculate the impact of added rental costs and the hard and soft costs of downtime related to accidents, which could take a truck out of service for a month or more.
Some fleets’ truck bodies and upfits are so specific to a particular job that renting a truck to cover for a breakdown isn’t feasible. Does management know that? How many spare trucks do you have and where are they located?
Confer with your drivers; they can be a good reinforcement of your strategies in many cases. If drivers are asking for extra equipment, be sure to calculate their residual values to show their lifecycle costs to management, not just the initial expense.
The key is to perform these analyses months in advance of when senior management wants to hear from you on total truck count.
Show the Numbers
Now that you’ve honed your plan, consider creating and distributing an “efficiency report” for senior management. This would come in handy, particularly if the fleet budget decisions will be reached at a board level meeting.
Make a list of your fleet’s top 10 maintenance costs and another list of the chronically most expensive vehicles. Depending upon your replacement cycle, the last list will immediately identify to management the units that need replacing.
Calculate your average maintenance cost per unit and identify (with specifics) the ones over the average. Management may not agree to replace them all, but you should be able to get rid of the worst offenders.
Calculate the average mileage driven on each unit and understand how that translates into maintaining an economical and efficient lifecycle. This could be another defense against a shrinking of fleet.
Now put this data and analyses into graphically pleasing bar and pie charts form. Your final pages should highlight the units you want to retire, including data on the expected remarketing proceeds.
Answer the Questions
So, with all of this done, let’s look at a few of those often uncomfortable and sometimes ignorant questions management might ask, and see how you should respond.
“Aren’t we buying too many trucks?”
This is one of my favorites from senior management.
Pulling the maintenance and repair records of the top five or 10 units of your small fleet should help tremendously to answer this question. Requesting replacement of 10% of your fleet would still give you a 10-year lifecycle — long enough to risk major repairs even at just 20,000 miles per year. Put this data into a spreadsheet.
Now compare this cost data broken down by month to the monthly cost of a new truck with the same specs. Be sure to update the data to reflect the benefit of technological improvements of the newer trucks.
Fleet vehicles with high miles run the risk of major costly breakdowns. If you’re operating light-duty vehicles and running them to 200,000 or even 300,000 miles, you will most likely have to repair or replace the transmission and rebuild or replace the engine. This can seriously sway the equation in the favor of buying new vehicles.
Make clear the costs of transmission rebuilds or replacements. Do the same for an engine rebuild (in frame) or replacement. (For the replacement, you might consider a remanufactured component.)
If you don’t know how to source these costs, call a supplier of these components for rebuilds. Some remanufacturers will give a credit (commonly called a core credit) for broken transmissions and engines.
Compare this monthly cost to that of renting a truck, and then emphasize that renting does not give the company a residual, no matter how long the lifecycle is.“Can’t we buy F-150s instead of F-250s? They are much cheaper, and I’m sure an F-150 can haul our loads just fine!”
To tackle this old gross vehicle weight rating (GVWR) question, you must identify to management the additional cost of tires, wheel alignments, front-end work, and the cost of broken components that result from overloading.
Under no conditions should you ever underestimate the gross vehicle weight (GVW) of the truck. If you’re not sure of your load weights, assemble your heaviest load and weigh the truck with this load — you may get an unpleasant surprise! This is also a clear answer for management as to how much truck GVWR you really need. Remember, the chassis with the higher GVWR will weigh more, as well.
You also need to factor in the residual value for both sizes of trucks. While the higher GVWR truck comes with a higher initial cost, its higher residual value upon remarketing could result in a similar or even lower overall holding cost than the smaller truck.
Be sure to have a discussion on managing liability risk. Overloaded trucks that end up in an injury or fatal accident will most certainly put the company in serious financial jeopardy and open the door to charges of criminal negligence. Is it worth risking the owner’s investment to save a few thousand dollars?
Finally, before you return to management with a response, check the specs and capabilities of the newer models. If you’re running three-quarter ton pickups from, say, model year 2009, you might be surprised by the increased payload and towing capacities of half-ton pickups from the current model year. It might work out that you can, in fact, run the same weight and payload in the newer model trucks.
“A manager in another department says he can buy the model of vehicle that you need at a better deal through his buddy at another dealership.”
This is another favorite challenge from management. I’ve had this happen to me more than once, and while difficult to combat at times, you can come out ahead and benefit the company at the same time.
First, get the specs of the truck with the “buddy deal.” Compare them carefully with yours —the great deal does not often take into account spec details or essential equipment. The buddy deal often under specs certain components. Be careful to search for these — they can account for significant dollar differentials.
The deal might be so good because of some quid pro quo. Is the other manager getting something in exchange from his buddy at the other dealership, such as a beneficial discount on a personal vehicle? I have personally seen this happen on more than one occasion. Obviously, the benefits should be in the best interests of the company rather than one manager.
Management might not be aware of how purchasing outside the usual channels could affect established buying relationships. Confer with your OEM fleet rep or regular fleet dealer and let them analyze the deal too. Ultimately, this may not be a negative. They might poke holes in it, or perhaps beat the price.
It’s Your Fleet
As the fleet manager, you are responsible for capital spending and there will always be those who will analyze and criticize your actions. You are tasked with establishing centralized purchasing to save money and eliminating “buddy deals,” and that will ruffle some feathers.
Let’s face it, some requests may have merit — a little research might reveal new information that would lend credence to their viewpoint.
Give management choices that will work for them and you, with an estimate of total cost of operating the same truck over the same period using both methods. This will gain their buy in to the process, show them you’re not married to one outcome, and promote your credibility.
Remember, data documented in a clear and concise manner will win in an argument, not emotion.
Finally, never lose sight of your job’s ultimate goal — to field the safest, most efficient vehicles possible at the lowest cost while keeping your drivers comfortable and productive.
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