What to Do About Your Underutilized Vehicles

Fleet managers probably know how many vehicles are in their fleets, and they may also know how many vehicles should be in their fleets. Unfortunately, for many, that second number is smaller than the first number.

At a Glance

Fleets looking to improve their utilization should: Make sure they have accurate utilization numbers Seek support from upper management Work with a fleet user group from various departments Disseminate utilization reports periodically.

An unnecessarily large fleet is inefficient, but it’s difficult to get user departments to give up their vehicles. One reason may be that it’s harder or may take longer to add a vehicle once it has been taken away. Another is the convenience of having a car nearby, without having to worry about reserving or picking up a vehicle. And a third could be cost — many don’t consider the total cost of ownership.

“When they have a vehicle, they don’t think about the purchase cost or the depreciation. They think about maintenance and fuel cost. If your vehicle sits, you’re not paying maintenance or fuel. ‘Well, it’s not costing me anything,’ ” said Terry Kader, CPFP, fleet services superintendent, City of Denton, Texas. “But that’s not true. That’s not the whole equation.”

Set Up a Utilization Threshold

How many miles should a vehicle be driven for it to be considered properly utilized? There isn’t a one-size-fits-all number; it can depend on vehicle application and service area.

One way many fleets determine a mileage minimum is by using their current utilization data to determine a baseline.

The City of Greenville, S.C., which began its utilization improvement program four years ago, used its numbers plus those of other fleets of the same size in the area, eventually settling on 500 hours or 5,000 miles per year.

At Sacramento County, Calif., the fleet has been working on improving its utilization for the past few years, but it has only been able to get more serious recently as it fully rolls out its AssetWorks software system and collects accurate data.

Fleet Chief Keith Leech Sr. and staff have determined a 3,000 annual mileage threshold — a number that 18% of the fleet’s 2,000 light-duty vehicles don’t meet.

The City of Denton doesn’t have a formal utilization policy but Kader is still working on informing users of mileage. He used historical numbers to set a 3,600-mile annual threshold.

The Sacramento Municipal Utility District (SMUD) uses activity-based utilization rather than mileage or engine hours. If a vehicle has been used at all during the day, it’s considered used. With the help of Utilimarc, the utility determined a goal of at least 60% days used, with an aim of 63%.

‘Because Fleet Said So’

While fleet departments may set a policy, they don’t necessarily have the power to take away other departments’ vehicles.

“There is no role here of fleet cop. That’s not what we do,” Leech ­emphasized. “We are information providers, providing accurate information to share with people so they can make the right business decisions.”

Fleets provide this information through periodic reports, and disseminate it to department heads and higher-ups.

The City of Greenville distributes utilization and other performance indicators quarterly with its fleet oversight committee, made up of representatives from user departments. Fleet staff determine why the vehicles aren’t being used and note it for when the vehicle reaches the end of its lifecycle. This provides a justification for not replacing that vehicle.

At Sacramento County, it’s up to department heads to justify keeping an underutilized vehicle. Department heads are accountable to the county executive and deputy county executive, who are on board with the rest of the executive team on creating a more cost-effective fleet.

Kader also receives support from upper management, including the city manager and assistant city manager, to emphasize the importance of utilization when user departments are reluctant to do something “because fleet said so,” he said.

Kader has quarterly user department meetings where he brings up utilization. He also sits down with department heads when it comes time to replace ­equipment.

For SMUD, utilization is one of the department’s key performance indicators. Fleet staff look at it quarterly, monthly, and even weekly to ensure the fleet is right-sized.

Taking Away Vehicles

At the City of Greenville, Fleet Manager Scott McIver, CPFP, likes holding out a carrot. He tells users:

“You give me those three useless vehicles that you’re not really using that are costing us money, because we still have to PM [perform preventive maintenance on] them and take care of them. If you give me those three, I’ll give you this new one that will do the work of those three, but it will be a brand new vehicle and it will cost you less money in the long run.”

Another incentive was joining the city’s new replacement plan, which would allow the departments to obtain new vehicles in a timely manner.

The fleet oversight committee also helps fleet with the decision to not replace a vehicle — the committee may have already discussed the vehicle and decided it would not be replaced.

“We won’t replace that piece of equipment because they say they don’t need it anymore,” McIver said. “Everybody [in the committee] has a say. We all came to the same conclusion.”

Kader said while the fleet department can’t take away vehicles at the City of Denton, he is also taking the no-­replacement route for underutilized units.

For SMUD, Casey Fallon, director, Procurement, Warehouse & Fleet, sees taking away vehicles as a negotiation. He shows user departments the numbers and asks them the operational activity and the need. Another negotiation takes place during replacement time.

“Usually we say, ‘If you need something new, you have to give us this other stuff back that you’re not using,’ ” he said. “That’s leverage for us. It goes over pretty well.”

Evaluating the Results

The City of Greenville has been able to reduce its fleet from 827 to 693 units, or 16%, in the past four years.

At Sacramento County, Leech has identified 30 vehicles that could be ­remarketed or reallocated. Even if it’s just 30 vehicles for now, that’s 30 vehicles the county doesn’t have to replace next year.

SMUD has gone from 1,075 assets in 2014 to 982 units today. Its utilization has increased from 58% four years ago to 62% today, Fallon reported.

The City of Denton is focused on monitoring at this point, but even this has helped because more user departments are aware that this is being monitored and reported to management, Kader said.

Increasing the Threshold

Compared to a private-sector fleet vehicle, or a personal vehicle, the utilization thresholds of public fleet vehicles seem low. Even the fleet managers who set them say these numbers are just the starting point.

Utilization Thresholds

Here are the annual thresholds for the fleets featured:

3,000 miles	Sacramento County, Calif.
3,600 miles	City of Denton, Texas
5,000 miles	City of Greenville, S.C.
60%	Sacramento Public Utility District

Kader hopes to increase the threshold, but first he hopes to help “develop this culture of finding alternatives to the standard way to do things,” he said.

One such way is encouraging drivers to use motor pool units, or even share vehicles across departments.

McIver at the City of Greenville is happy with the fleet reduction and utilization improvements that have been made so far. But he’s hoping for more, including eventually increasing the utilization threshold to 6,000 miles.

“You drop a frog in hot water, he’ll jump straight out, but if you turn the water up slowly, he’ll sit there,” he said of the fleet’s plan to gradually increase the utilization minimum. “We’ll do the same thing.”

5 Steps to Improving Fleet Utilization

Randy Owen, senior manager at Matrix Consulting Group, has more than 20 years of experience working in public fleets and as a consultant for public fleets. He provides five steps for those embarking on a fleet utilization improvement plan:

1. Have good usage data, whether that’s through odometer readings, work orders, or telematics.
2. Have a process to analyze that data. This could be part of a staff member’s monthly duties.
3. Establish standards or thresholds. Ideally, this would be customized for each type of organization. A Parks Department would have a different utilization threshold from a Police Department.
4. Create reports and share the results of your analysis with fleet users and decision makers.
5. Be prepared to reallocate vehicles. Your effort goes to waste if you don’t have the ability to reallocate underutilized assets. Have a champion up the chain of command, such as a police chief, or a city or county manager. Get stakeholders involved and make sure they understand the importance of managing utilization and fleet size.

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The Problem with Odometer Readings

Odometer readings are the most common way to determine utilization. But how those readings are obtained will impact how accurate they are. Randy Owen, senior manager at Matrix Consulting Group, provides the various ways utilization can be obtained.

Odometer readings entered by drivers while fueling. It’s not perfect, but it’s commonly used. Fleets should note when the readings were taken.

Work orders. Odometer readings are usually taken when a vehicle is brought in for service, but frequency is low, so another method should be used as well.

Police dispatch systems. Oftentimes, officers will report their odometer readings daily.

Daily manual logs often kept by utility and public works fleets. Some keep these daily logs so they can bill miles or engine hours to certain projects.

Telematics, the gold standard for reporting usage. Odometer reading is available at all times, and fleets can determine how often the vehicle is used, rather than just miles. How? Set up a geofence around where the vehicle is housed and collect data on when it enters and leaves.

Despite the fact that they are most often used to determine utilization, odometer readings can be misleading. If a vehicle has decent mileage but is only used one-third of the time, is that vehicle justified? What about a vehicle that is used every day, but doesn’t go very far? What about vehicles that are idling, racking up engine hours but not miles?

And be wary of departments that are desperate to keep their vehicles, Owen warned. He’s seen some that have had their employees drive low-use vehicles up and down the freeway just to hit a mileage threshold.

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Related: How to Start a Motor Pool