Manage High Fleet Costs with Must-Do Steps

By Tony Yankovich, Director of Advisory Services

Fleet management is a critical function within many businesses and organizations, especially those involved in logistics, transportation, delivery, public safety, and municipal services.

Whether you manage a private fleet with profit/loss responsibilities or a government type of fleet, managing fleet costs should always be one of your top priorities.

While inflation is easing a bit, the all-items Consumer Price Index (CPI) experienced the smallest 12-month increase (3 percent) since the period ending March 2021, according to the U.S. Department of Labor’s most recent CPI report released in mid-July. Fleet costs in a number of areas continue to outpace the overall index during the same period. Some examples include:

• The cost of new vehicles is up 4.1 percent.
• The cost of maintenance and repair services is up 12.7 percent.
• The cost of parts (including tires) is up 3.6 percent.
• The cost of motor vehicle insurance is up 16.9 percent.

Make Data-Driven Decisions to Improve Fleet Performance

There are many cost-saving steps an organization can take to lower total fleet costs.

The first step is to embrace technology and data analytics. Traditional cost management and margin improvement strategies are no longer sufficient. Data-driven decisions are essential because they improve the overall decision process, rely on empirical evidence rather than subjective opinions or gut feelings, provide cost and performance transparency, identify areas in need of improvement, and provide a competitive advantage to any organization that embraces this approach. This can be accomplished by using a dedicated fleet management information system (FMIS), in addition to a telematics solution.

A telematics solution can provide real-time data on vehicle performance, utilization, fuel consumption, driver behavior, vehicle idling, maintenance and repair, and more. It can help an organization stay on top of scheduled preventive maintenance services and required annual inspections which will improve the performance of the assets in the fleet and reduce breakdowns and the need for unscheduled repairs and ensure compliance with local, state and federal requirements.

Optimize Your Fleet to Better Serve Your Community

Typically, the most impactful and quickest way to manage fleet costs and realize cost savings is to optimize your fleet.

Fleet optimization refers to right-sizing and right-typing your fleet to make sure that you have the correct number and accurate types of assets to effectively and efficiently meet the mission(s) of your organization, whether it is transporting goods across the county in a 53-foot dry box trailer, transporting children to school, performing residential solid waste collection, providing last-mile delivery services, or providing any number of other services that require a vehicle or piece of motorized equipment.

Simply stated, the more vehicles and pieces of equipment you have in your fleet, the higher your overall fleet costs.

In our experience working with fleets across all industries, we have found that most organizations can reduce the number of vehicles and pieces of equipment by 5 to 15 percent by conducting a comprehensive fleet optimization study.

By critically examining the need for each asset, the way the asset is assigned (i.e., is it assigned to an individual, a crew, a department, etc. or is it a resource that can be shared across the organization), its purpose, availability of alternatives (i.e., can we rent this type of vehicle to meet a temporary need instead of owning it), and how well it fits the current need. Missions of an organization often change, levels of service are increased or decreased, and staff sizes change, all of which affect the need for fleet assets.

And consider the impact of the recent pandemic and the meteoric rise in the use of virtual conferencing solutions for meetings that were only a few years ago conducted in person – many of which required a vehicle to transport an employee across town to attend. According to Forbes (Forbes Advisor June 12, 2023), 12.7 percent of full-time employees work from home while 28.2% work a hybrid model. The report further projects that 32.6 million Americans (22 percent) of full-time employees will work remotely by 2025. For many organizations, this has reduced transportation requirements and provided the opportunity to eliminate vehicles.

Most people inherently understand that an older vehicle is more expensive to own and operate than a new one. This has been proven countless times with any total cost of ownership model that illustrates that while the capital cost of an asset decreases over time, the variable costs of operating the vehicle increase during the same period. Therefore, keeping an asset in the fleet beyond its ideal replacement lifecycle will end up costing the organization more in the long run.

In a recently completed study of a fleet of several Class 8 rear-loading refuse trucks, we found that maintenance and repair costs (M&R), on average, increased from 8.2 percent to 9.8 percent per year as the vehicles aged. By replacing these assets at the ideal replacement cycle the organization was able to save over $90,000 per year for M&R costs over the 16 vehicles in this classification.

Using data-driven insights to optimize your fleet, replace fleet assets at the ideal time, monitor shop performance, and track costs is the foundation for managing fleet costs.

Get help cutting your fleet’s costs. See how our FMIS can help you gather the information you need to make data-driven decisions,or book an appointment with Tony and our other consultants!