TRUCKS: Driving Truck Savings

Tight times require tight ships. Fortunately, there are steps fleet managers can take to ensure their armada of people, parts, vehicles and facilities is sailing smoothly.

Effective fleet and maintenance management programs should provide safe, economical and reliable transportation. The best way to accomplish this is to be proactive as vehicles move through any age and condition. Additionally, creating a tactical plan that fits with upper management's business strategy and monetary goals is vital.

To formulate its goal's, upper management will want to know:

  • What is next year's expected operating revenue?

  • How will the company finance new vehicles, if needed?

  • Has the company budgeted for any changes?

  • What are the three, five and 10-year plans for the fleet?

  • Fleet managers can find answers by exploring different maintenance scenarios to see which options fit best. For example, assume a four-year-old vocational vehicle on an eight-year life cycle has mechanical engine problems; the fifth cylinder in the six-cylinder inline engine is defective. Upon removing the piston assembly, the mechanic then may discover that the wrist pin is bad. To fix the engine, fleet managers can:

  • Repair the piston, connecting rod and wrist pin;

  • Conduct an upper end in-frame overhaul;

  • Conduct an out-of-frame overhaul;

  • Install a rebuilt block assembly with present accessories installed on the rebuilt engine;

  • Install a remanufactured engine; or

  • Install a new engine.

  • Fleet managers can choose all of these options with new, rebuilt or remanufactured components and accessories. So if a manager doesn't provide any direction, the shop will address the faulty cylinder with an array of alternatives. This would be OK if the mechanical failures require minor repairs, such as replacing the defective wrist pin. However, if mechanics choose to rebuild an engine with an in-frame or out-of-frame action item, or replace the engine, costs will be considerably higher.

    To alleviate cost discrepancies before they occur, fleet and maintenance managers can establish a policy that states if a vehicle requires more than 30 percent of its residual value in annual repairs, then the vehicle's worth should be considered.

    Even when dealing with major repairs, have a fleet manager sign-off on any major corrective actions.

    To help shops, vehicle management information systems also can address historical information, forecast future costs based on a truck's labor history, and predict the 30 percent target date by attaching a labor rate to future costs. This data will help managers to forecast which trucks are ready for the upcoming year and to examine the capital budget to maintain the shop's life cycle policy.

    Despite the best-laid fleet maintenance plans, if upper management decides to withhold capital for use elsewhere or the revenue stream shrinks, then a fleet may be forced to age. This eventually will create a need for more operating dollars to offset the increased costs for parts and labor on an aging fleet. Thus, fleet managers should provide executive management with a budget that offers three capital and operating dollar alternatives.

    For instance, a fleet manager could provide executives with the following budget options:

    For a fleet in which the vehicles' average is four years old: Average cost per vehicle per year: $22,350; Operating dollars necessary: $4.7 million; Capital needed: $2.6 million; Labor and facilities required: 13 people and 16 bays on a one-shift operation.

    The manager also should include simplified $22,350 per vehicle principle, interest, parts, fuel and labor declinations.

    As an alternative, a fleet in which the vehicle's average is six years old would require: Average cost per vehicle per year: $24,200; Operating dollars necessary: $4.8 million; Capital needed: $1.7 million; Labor and facilities required: 16 people and 20 bays on a one-shift operation.

    Here, the manager would note the higher operating costs in addition to the higher costs per vehicle per year (principle, interest, parts, fuel and labor). Additional costs would result from higher annual maintenance costs, despite reduced principle and interest costs. Managers will save $900,000 in capital when this fleet ages from four to six years, but operating dollars will increase $1,850 per vehicle per year.

    Providing executive and operating management with budget options can help fleet and maintenance managers effectively communicate their shop's economic capital, operating expenses, manpower and space requirements in understandable terms. And this will help shop managers, too.

    Ultimately, fleet managers need to communicate their capital and operating dollar needs to upper management while holding their shops accountable.

    Equipment Replacement Calculator

    Examining the ideal replacement target time using a $70,000 chassis.

    Year 1 2 3 4 5 6 7
    Principle 14,000 14,000 14,000 14,000 14,000 0 0
    Interest 3,500 2,800 2,100 1,400 700 - -
    Parts/labor 1,455 2,475 3,780 3,690 3,495 3,375 3,800
    Fuel 3,600 3,600 3,600 3,600 3,600 3,600 3,600
    Cost per 15,000 mile 1.50 1.53 1.57 1.51 1.45 .47 .49
    Resale 49,000 39,200 31,360 25,088 20,074 16,056 12,845
    Percentage of maintenance residual 3% 6% 12% 15% 17% 21% 30%