Maximizing Utilization as a Cost-Containment Strategy

By Mike Antich

One consequence to reduced (or non-existent) capital purchase budgets is that public sector fleets have had to extend vehicle and equipment lifecycles. Across the country, government fleets have extended lifecycles for all vehicle classes.

However, achieving true cost savings involves more than just putting off expenditures in the hope your organization's fiscal situation will improve in the future; it requires eliminating costs. The best way to eliminate fleet costs is by removing underutilized vehicles and equipment from inventory. Underutilized vehicles are defined as those accumulating fewer than 5,000 miles and/or 500 engine hours per year. Deferring acquisitions saves costs by keeping vehicles and equipment in service longer. However, money saved by deferred capital purchases is often diverted to maintenance to keep older units operating at optimal performance.

Longer lifecycles result in an overall maintenance cost increase when equipment life extends beyond its optimal replacement cycle. For fleets that operate as an internal service fund, the hourly billable rate is designed to cover all operating expenses. With older, worn-out equipment, fleets must invest more labor, which increases the cost to customers. What is saved in capital purchases often goes directly into maintenance to keep older assets in service. It's not unheard of for user departments to park or auction units because they are worth less than the cost of the repair.

Extending service life also increases maintenance requirements, which impacts service levels to user departments. This is best exemplified by an increase in unscheduled repairs, which also adversely affects constituents. When service levels diminish, citizen complaints invariably increase.

Fleet operations are struggling to keep rates low to allow customers to weather budget constraints. In the long run, extending vehicle lifecycles is not a good solution; however, in the short-term, fleets have been enabled to do so by an abundance of available units for reassignment due to turn-ins. This is only a short-term budget bandage designed to buy customers time to develop alternate strategies to address severely decreased funding levels.

Difficulty in Maintaining Aging Assets

To reduce costs, some fleets have stretched PMs to 5,000 miles or six-month intervals on light-duty vehicles. They have implemented extended, modified, or enhanced PM services and schedules.

With tight budgets, fleets are watching all purchases and re-evaluating stocking levels. Fleets must keep older vehicles on the road longer, which typically means more maintenance and parts.

"With the lack of new cars, the need to keep the ones we have running is even higher. Parts purchases will increase, but the budget will not," said Charlotte Ashcraft, director, Franklin County Commissioners Dept. of Fleet Management in Columbus, Ohio. "This will require some stock adjustments and even more comparison shopping. One shining light in the parts arena is that many of the suppliers are feeling the effects of the slow economy, so they are cutting their costs significantly."

Keeping older, higher-mileage vehicles on the road is a challenge. These vehicles require additional repairs, which slow the return-to-service time. As a result, customer service suffers. Mechanics take pride in their work, and when a repair takes longer than usual, the drivers blame the mechanics, even when it has nothing to do with their abilities.

"The fact a car now has 200,000 miles on it and the driver hasn't been careful to make sure they got it in on time is not relevant," said Ashcraft. "The story will get out that the car broke down, and that is a reflection on our mechanics' abilities. We need to be watchful and diligent in our inspections, and if it takes an extra half-hour to get a service done, then so be it."

Maximizing Utilization to Reduce Costs

Too often, politicians are penny-wise, pound-foolish. Politicians do not possess fleet management expertise, although they think they do. It is up to fleet managers to advocate effective (proven) fleet management strategies, especially during times of fiscal constraint. One proven strategy is the efficacy of maximizing fleet utilization. This should be the key focus for all fleet managers. Already numerous fleets, large and small, have performed fleet utilization studies and removed vehicles not fully or only partially utilized. However, many fleets have yet to conduct a fleet utilization audit of their operations.

Fleet size reduction and proper vehicle application should be foremost on the mind of every fleet manager because this is the quickest way to lower expenses. The reason fleet utilization maximization is the best cost-containment strategy is because it ultimately reduces the size of the overall fleet. Fleet reduction is an effective cost-reduction strategy. A smaller fleet generates lower costs by requiring fewer maintenance techs and less money for parts, vehicle replacements, and fuel. If you haven't conducted a utilization audit, now is the time to do so. In fact, it's overdue.  

Let me know what you think.

mike.antich@bobit.com