Good Fleet Management Leads to Good Remarketing

At a Glance

The Minnesota Department of Natural Resources' revised remarketing plan focuses on:

• Preventive maintenance.
• Identifying defects before a sale.
• Improving standards of new equipment purchased.

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Fleet department managers and staff at the Minnesota Department of Natural Resources (DNR) used to think of remarketing vehicles and equipment as an unpleasant chore. That was 10 years ago.

"It was more of a nuisance," said Dave Schiller, CAFM, fleet, safety, and materials manager for the department. "At that time, I think we just as soon someone else did it."

It's easy to see why. Early remarketing efforts were a struggle for the department, and the auctions didn't bring in much money at first. A bigger problem was that a couple of department workers suffered injuries while working at the auctions. Sometimes employees would try to move equipment themselves rather than use a forklift or other piece of equipment to help, and that resulted in back injuries and slips and falls.

But rather than focusing on ways to improve the vehicle remarketing process specifically, the department began working on improving its overall fleet management processes. The department decided to improve its fleet by focusing on lifecycle management, setting standards for the items it was purchasing, and working on safe driving to reduce its insurance costs and accident damage. Those efforts have led to the department selling higher-­quality vehicles. Better fleet management led to better equipment remarketing results.

"The standards have gotten us to a point where we're able to buy better units at lower cost because of the volume we're doing now with buying light equipment every year," said Schiller, who has worked in the department for 35 years, 11 in his current position. "It also helps with the resale because we don't have the oddball stuff we used to have. I think that's increased the value of the items to the public."

Focus on Fleet Management

The Minnesota DNR manages about 5 million acres of land in Minnesota, including resources such as parks, forests, prairies, and lakes.

Several years ago, the department hired a consultant to analyze its fleet of vehicles and equipment. The fleet includes about 5,000 vehicles and pieces of equipment, including about 1,800 road vehicles from various manufacturers, Class 1-8. About 1,300 of those are pickup trucks. The fleet includes about 1,700 off-road pieces of equipment, including about 400 snowmobiles and 500 ATVs, along with dozers, tractors, firefighting vehicles, backhoes, excavators, and trailers.

With the consultant's help, the department developed a list of about 40 areas of the fleet program for potential improvement, and one of those was the remarketing program. The department put together a plan to improve the program, focusing on several main areas. The primary focus was on preventive maintenance, and the second to identify all defects in the equipment before the sale. Improving the standards of new equipment purchased was the third area, which Schiller said helped limit the "oddball stuff that surprises our resale customers."

Lifecycle management was the fourth area of focus, which Schiller said helped the department "focus on maximizing economic life - rather than equipment life - so the stuff we're selling has been relatively freshly used, as opposed to something that's been sitting around for a while as a spare and deteriorating. We don't subscribe to the 'drive-til-dead' approach, and we're able to avoid a lot of the problems associated with that."

The department worked to improve its overall equipment remarketing process. In describing the process, Schiller explained that the department manages the fleet from four regional offices in Minnesota: Bemidji, Grand Rapids, New Ulm, and the central office in St. Paul.

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 Each office includes a shop, and all new equipment goes to one of the shops for any necessary upfitting. Sedans undergo simple work such as installation of license plates and placement of department decals on the doors. Some vehicles, such as those used for law enforcement, undergo significant upfitting.

"Then we call up who it's going to, tell them it's ready, ask them to bring in their old vehicle, pick up their new one, and change them out," Schiller said. The upfit shops also function as repair shops, and the mechanics inspect and perform work on the exchanged vehicle, such as tire replacement, front-end alignment, or brake work if needed. "We outsource some of the work," Schiller said. "We don't do transmission work, for example. Some of the vehicles we redeploy as seasonal loaners. The others that are going directly to sale, I wouldn't say they detail it, but they clean it out and make it fairly presentable. The customers do pretty well at keeping them clean."

The "customers" he refers to are internal DNR employees in areas such as the parks and forestry divisions. Fleet owns the equipment and charges customers for their use.

If the department determines that a sale is imminent, the vehicle will go to the site where the sale will take place.

"If a sale isn't imminent, we'll just park them, hopefully not for too long," Schiller said. In Grand Rapids, Minn., the sale will take place at the facility there. The Bemidji and New Ulm facilities aren't large enough to accommodate the auction crowds and the necessary parking, so the sales for those locations take place at the county fairgrounds in the vicinity.

Remarketing Prospects Look Bright

In May, the department held an auction in New Ulm for the first time. A large auction during the spring was unusual for the department, and most of the DNR's past equipment auctions focused on northern Minnesota, where most of the department's land holdings are located. However, Schiller had seen growing interest in the department's live sales, especially in rural areas. Still, Schiller was not sure the auction would generate sufficient attendance. "We always have some old equipment that was replaced in the winter, but we hang on to it in case we need it during the spring," Schiller said. "Rather than holding it this year or sending it to other auctions, we decided to have a sale in southern Minnesota." The four-hour auction of equipment from the DNR and the Department of Administration exceeded expectations, drawing 600 bidders and bringing in $715,000.

The success of the New Ulm sale has made the future look even brighter for all upcoming DNR sales. The department for the past five years has conducted a December sale in Grand Rapids, Minn. For the sale this coming December, the department might try an online sale, which it has conducted in the past for smaller sales. The online sale works similar to an eBay auction, Schiller said, and the department has used eBay to sell some equipment in the past.

For an online auction, the department will establish a viewing time and post pictures online. The online text will describe known problems with the equipment, and the public can bid on it.

"We have a reputation that we take pretty good care of our equipment and when we announce the auction and in the flyers that get distributed describing our equipment, we tell people what we know is wrong with it," Schiller said. "We don't try to hide anything. If we do sell something and a defect is discovered before they leave the premises, we'll try to make it right. We try to do what we can to avoid problems and make sure the customer knows everything that we know about the piece of equipment." 

Online auctions, he explained, are a means to sell some of the more unusual items that people wouldn't expect to find at an auction. Snow groomers, which the department uses for grooming snowmobile trails, might be an example of equipment to be sold online or sometimes traded in.

The department's efforts in remarketing, plus market conditions, have helped it do well in remarketing recently. The resale market for used equipment has been on the rise in recent months. Used car prices are higher than they have been for quite a while, Schiller said.

"Part of that is because new vehicle sales two to four years ago were down, so there are fewer used cars around and more demand for them, and we're certainly taking advantage of that," Schiller said, adding that the DNR uses the National Automobile Dealers Association (NADA) and Kelley Blue Book used vehicle publications as pricing guides.

"Our equipment gets used probably harder than a lot of typical citizen vehicles," Schiller said. "They're work vehicles, so they're often towing or hauling something. But we take care of them pretty well and strive to get average trade-in value. Usually, we do pretty well in that regard. We try to sell quality stuff, we let customers know what defects we're aware of, and we try to make sure we have plenty of potential customers at our sales who are interested in our equipment."