Fleet managers industry-wide are faced with new problems continually, but the circumstances that face them in today’s vehicle replacement environment are more complex than ever. Of course the age-old problem of funding rears its ugly head in every corporate environment, and with that comes the task of trying to do as much (or more), with less as in previous years. Some of the concerns influencing re-thinking replacement strategies are: -- Shrinking or non-existent funds for vehicle replacement. -- New company acquisitions, mergers and/or combining of fleet assets. -- Needs to comply with clean air legislation. -- Cost of replacement vehicles in deference to extended lifecycles. -- Maximizing returns on used-vehicle disposal through proper spec’ing and timely purchasing. Many fleet managers have become innovative in setting up more customer-friendly leases and purchase programs, while others have had to completely change their operation to survive. A large part of fleet re-thinking has seen some fleets going to smaller vehicles for lower initial cost and fuel economy, while others have gone to larger vehicles and combined usage of a vehicle in order to cut the numbers of units required. Both solutions seem to work, but the application of the vehicles is the governing factor. Whatever your solution may be, vehicle replacement trends and concerns don’t differ that much from industry to industry. Lockheed-Martin Gets Maximum Utilization From its Vehicles One of the simpler methods to stretch the vehicle dollar is employed by Gerald Cumby, fleet manager for Lockheed-Martin Aeronautics Co. based in Ft. Worth, TX. In an interview with AF, Cumby says, “First of all, I haven’t purchased many new vehicles recently, as a large part of our corporate funding has been directed at machinery and production equipment replacement. So I’ve had to develop a system of moving vehicles around, from lesser-use environments to heavier-use capacities, to get the most out of the vehicles. Sometimes I have to get pretty inventive.” In some cases, Lockheed-Martin may have vehicles in the inventory that are as much as 12 or 13 years old, but with seemingly low mileage due to their use pattern. “I try to move vehicles from one use to another till it can’t logically be moved any more and then dispose of it,” Cumby said. “Of course, when you keep equipment around for lengthy periods of time, maintenance costs become a factor, and when dealing with a fleet of 7,000 to 9,000 vehicles it’s easy to have some drop through the cracks, so I had to put some trigger mechanisms in place to alert us to the fact that it’s time to sell a certain piece of equipment,” Cumby added. “One thing I’ve discovered over the years is that if it’s at all possible, you should assign a vehicle to an individual (driver). When a unit is dedicated to one person it becomes much easier to assign any liability for misuse of the vehicle or to praise an employee for a job well done in caring for his assigned equipment. A company really benefits from getting the employee on their side in protecting their investment,” Cumby stated. Cumby added, “Forty percent of Lockheed-Martin’s fleet is comprised of over-the-road type vehicles, which generate higher mileage, while other vehicles may not (without our rotating them about), ever leave one of our facilities. Our vehicles and equipment vary greatly, and as such, any vehicle or equipment budget must be spread over cranes, tractor-trailer rigs, forklifts and even golf carts.” Fleet managers are being increasingly pressured to comply with more and more new federal and state legislation regarding clean air initiatives, their requirements, and pending enactment. With all the other problems of vehicle replacement, there comes the need to meld in any number and type of alternative-fuel vehicles, to meet requirements. In most cases, even with generous discounts and rebates provided by the manufacturers, fitting these special units into the system is just one more costly fly in the fleet manager’s ointment. One of the most critical parts of a fleet manager’s job is to develop a fleet vehicle specification (or selector) that will allow his or her fleet to operate to the parameters decided upon, and to return a reasonable dollar figure at the end of the vehicle’s lifecycle. An improperly configured piece of equipment will completely negate any planning for lifecycle time and costing. This planning phase should also incorporate considering the person to be using the equipment and not only the vehicle itself. Another concern should be the time of the year the vehicles will be purchased and disposed of, to benefit the most from manufacturers' incentives and hit the best annual resale periods. Operational Requirements Mean a Younger Fleet is Mandatory Carl Nelson, motor vehicle administrator for AT&T Network Services Business Unit in Summit Point, WV, related to AF , “Our vehicle replacement system has not yet been impacted by clean air initiatives. However, it’s coming. About all I can do for right now is to stay abreast of all the options and requirements and try to develop a plan of action for future implementation.” Nelson added, “I guess I’m lucky when it comes to vehicle funding, as our organization has to have top-notch equipment available 24/7, and it has to be dependable. I usually don’t have a problem with justification for vehicle replacement. Just because the justification is there doesn’t mean I don’t have to fight for my funding. It seems like every year I’ve had a reduction and have only been able to keep close to my original budget by eliminating vehicles and eliminating abuses. “We try for vehicle replacement at 36 months and/or 60,000 miles, but with an eye on actual replacement at between 42 and 48 months and around 70,000 miles. The low mileage on the equipment normally provides a good used vehicle for resale. We have also found it really helps to assign one person to a piece of equipment and to have accountability for the equipment’s condition and appearance. When the driver takes pride in his equipment, it shows, and the company benefits not only by the image presented to the public, but in the resale of the unit at the end of its serviceability,” Nelson said. Looking at the two previous fleets, their replacement systems and needs, it’s clear they’re a world apart in their operational needs, equipment requirements, and purchasing priorities, but both fleet managers have developed a method that does the job for them. AF research also looked at a cross section of fleets, covering some of the largest fleets in differing segments of the fleet industry, such as chemical & petroleum, telecommunications, electronics, consumer products, insurance, pharmaceuticals, tobacco companies, and service fleets, to get an idea of their vehicle replacement trends. Kathy Kent, fleet manager for Avaya Inc., in Baskin Ridge, NJ, experienced some downsizing and restructuring over the past few months, but still manages a mixed fleet of more than 3,800 vehicles. Kent said, “After all the changes, I feel the Avaya fleet is finally at the right number of vehicles for the present operation. She told AF that her fleet replacement parameters for sedans are probably a little higher than other comparable fleets, with sedans being replaced at about 90,000 miles or 60 months. Kent also watches the long-term maintenance expense, and vehicle replacement is also considered if that dollar value exceeds $3,500, excluding tires and normal preventive maintenance. Avaya is one of a large number of communication industry giants who employ SUVs in their operation. However, as with most other SUV users, those vehicles are pretty much dedicated to rural and off road use.” Kent also said, “Due to many circumstances, our fleet could shrink somewhat as some work could be sub-contracted over the next few years.” Avaya currently has operations in 33 countries plus the U.S., and Kent is in the process of assuming responsibility for much of the International operations. AT&T Vehicle Replacement Program Stands the Test of Time Rodger Evans, director of fleet management for AT&T Broadband in Englewood, CO, manages a mixed fleet of more than 29,000 vehicles said, “We currently replace our light duty trucks (up to 10,000 GVW), at seven years and 100,000 miles and those trucks over 10,000 GVW at 10 years and 100,000 miles. Although our fleet size has increased over the past five years, through mergers and acquisitions, we have had to change our replacement policy very little, and feel our policy is comparable to some similar industry fleets. As a utility fleet, the need for autos has always been minimal, and some work functions require the use of SUVs.” Evans added, “We have over 8,000 cargo vans, 2,000 SUVs, 13,000 pickup trucks, and over 16,000 trucks between class-1 and class-5, with those trucks ranging from 6,000 pounds GVW to 19,500 pounds GVW, so our fleet does require a varied replacement schedule.” “We do not use imports at all in our operation, as the domestic manufacturers offer sufficient models to fill our needs and at competitive pricing,” said Evans. An Increase of 60% in Fleet Size Requires Creative Thinking Patsy Brownson, fleet director for Cox Enterprises Inc. in Atlanta, GA, responded to our research by saying, “Our mixed fleet currently numbers close to 13,000 vehicles. Our fleet has actually seen an increase of over 60 percent over the past five years and that has required a lot of thought to replacement and restructuring criteria. The increase has dictated a need to include more alternative fuel and LEV vehicles in our fleet to meet requirements. We have also had to do some extra planning and organize our vehicle routing to optimize our assets and gain productivity.” “We have raised our replacement mileage parameters over the last five years to try to offset increased fleet size and operating costs,” said Brownson. “Benchmarking our fleet replacement parameters against like fleets, we show a lower mileage and month criteria. However we’ve had to increase that criteria somewhat over the past five years,” Brownson said. “We currently replace high-level executive vehicles at two years and low level executive vehicles at three years or 65,000 miles. Work vehicles (automobiles), are turned at 65,000 miles while all other vehicles are set for turn in at 85,000 miles. There has been a slight shift in preference to SUVs as executive vehicles,” added Brownson. Living and Working in the Rockies: Whatta’ Life Being the fleet manager for Nextel Communications and getting to live in beautiful Colorado is a pretty good way of life, according to Randy Shadley. When responding to AF’s recent survey, Randy related, “The Nextel fleet has increased in size every year. However it may experience a small decline in 2001.” “A mixed fleet of about 1,800 vehicles, with the demanding requirements of the communication industry, dictates a need for equipment that’s in top-notch shape,” said Shadley. Shadley said, “We do not have a firm replacement policy, but operate with guidelines that we feel are set up to allow the company to operate as efficiently as possible and at the most cost effective level. We replace most cars at about 65,000 miles. The trucks we try to replace at 100,000 miles and/or three years. We are looking at the feasibility of extending that use criteria, from 100,000 miles to 150,000 miles, predicated of course on the condition of the individual vehicle. Extending the lifecycle by 50,000 miles could really help the replacement budget.” “As with most outdoor communication and service related operations, there has been some influx of SUVs, but not many. The SUVs remain as one of the most popular vehicles in the fleet, even though last year they only made up about one-third of the purchases. SUVs are being gradually switched over to our heavy-half pickup configuration, said Shadley.” “We have already switched a lot of our operations into beefed-up super cab 4x4 pickups with trailer towing capabilities, and it seems to be well received and cost effective," Shadley said. Nextel doesn’t incorporate any imports in their operations at this time, according to Shadley. (See AF, Nov. 2000 issue on Nextel’s “Heavy Half Concept.) Honeywell Policy Works Well and Remains at 65,000 mi. for Sedans Shelly Lofgren, fleet manager for Honeywell in Minneapolis, MN, responded to our questions with the following: “We have a policy in place of 65,000 miles for sedans and passenger vans and 90,000 miles for cargo vans and trucks.” Lofgren said, “The replacement policy has changed only slightly over the past five years.” At the time of Lofgren’s response, Honeywell had a fleet of more than 5,000 vehicles, comprised of cars, minivans, SUVs and pickups. The fleet had increased somewhat over the last five years due to acquisitions. But according to Lofgren, “We have eliminated executive cars and increased the minimum mileage criteria required for obtaining a company car, in an effort to control expenses. Executives now receive a cash allotment rather than a company supplied vehicle,” Lofgren stated. “Honeywell does not purchase imports for their fleet, but has had a global fleet deal with General Motors since 1998,” Lofgren told AF. Cutbacks, Realignment and a New Product Line Pose Concerns The fleet administrator for the 2,600-vehicle fleet of a large consumer products company, who also wishes to remain anonymous, answered, “Our fleet has decreased slightly over the past five years, but in terms of vehicle replacement schedules, we have stayed about the same. Our fleet is primarily autos (2,500) and about 100 mini vans, and no trucks. When benchmarked against industry peers, our vehicle lifecycle may be a little higher as we replace our vehicles at five years and/or 120,000 miles, whichever comes first.” “Until recently, the composition of our fleet has stayed the same, but recent acquisitions have left things a little unsettled.” “Cutbacks, realignment, changes of operation and taking on a new primary product line, will present many challenges to our fleet department and the company in general. At this point, it’s hard to speculate on anything in the future.” Food & Beverage Fleet Segment Pete Silva, fleet manager for Frito Lay based in Plano, TX, manages a mixed fleet of close to 16,000 vehicles, and his response to our survey was, “Our current replacement policy is three years or 75,000 miles. Truck replacement schedules are based on size while pickup trucks are typically set at five years.” Silva feels the replacement cycle parameters at Frito Lay are comparable to other fleets in a similar industry. He does say that, “Frito Lay moved its replacement cycle from two to three years and increased the mileage parameters from 50,000 to 75,000 during that period.” “During the past five years there has been a slight shift to a higher percentage of minivans integrated into the Frito Lay fleet, and we expect a significant increase in the number of Class-3 and 4 trucks in the fleet in the future,” Silva added. “The Frito Lay fleet has a little different spin than some of the others surveyed, as I have to work in replacement schedules and funding for tractors and trailers as well as the usual fleet vehicles,” says Silva. Frito Lay doesn’t use imports in its operations. Insurance Companies Set Their Parameters for Economy Kathy Schulz, feet manager for Pro-gressive Insurance Co. in Highland Heights, OH, told AF, “Our current vehicle replacement policy is sedans at four years or 60,000 miles, whichever comes first, while SUVs are set at four years or 80,000 miles, again, whichever comes first.” “We feel our fleet parameters are close to those of like industry fleets,” said Schulz. She related, “Over the past six years, our fleet has changed to primarily SUVs from sedans. The breakout now stands at approximately 85% SUVs to 15% sedans.” Schulz supervises a fleet of more than 2,600 vehicles comprised of about 415 cars, 2,200 SUVs, and a smattering of other equipment to total the 2,600 units. Schulz added, “there may be some fleet downsizing and possibly a switch to a smaller SUV in the future.” Dave Edenhofer, corporate fleet officer for Farmers Insurance Group, in Los Angeles supervises in excess of 5,500 vehicles. Edenhofer said, “Our current replacement parameters are 36 months and/or 70,000 miles. Vans however are stretched out to 60 months and/or 150,000 miles." Edenhofer says, “We are able to expect higher mileages from our vehicles these days as they are of a much higher quality than in previous years. Previous replacement criteria was set at 36 months and/or 40,000 miles.” “We do purchase some imports and we have four in our fleet, but only for executives,” said Edenhofer. State Farm Insurance’s Tom Sours supervises a mixed fleet of more than 20,000 vehicles comprised primarily of cars, minivans and cargo vans, with a few Class-1 through Class-5 trucks thrown in for good measure. Sours said, “Passenger car and van replacement mileage is set at a minimum of 60,000 miles, while there is really no set parameters for trucks.” “Our replacement policies really don’t compare with anyone in the industry because of vehicle sharing, said Sours.” Sours added, “State Farm operates a small number of SUVs and imports, as needed for specialized use.” Security Services Vehicles Really Rack Up the Miles Cathy Crewson, fleet manager for ADT Security Services in Boca Raton, FL has a handful overseeing her brood of security vehicles. A fleet of close to 8,000 vehicles comprised of cargo vans and pickup trucks provide the mobility to ADT. Crewson told AF, “Our replacement parameters are 80,000 miles and or 60 months in service and that, when compared to fleets of like industries, ADT is comparable.” “Over the past few years, there has been a switch from cars to all trucks and vans.” “ADT has no import vehicles incor-porated in their fleet,” added Crewson. Crewson stated when asked about the future that. “She envisions acquisitions and growth in the future.” Tobacco Companies are Smokin’ When Scheduling Replacements Lorillard Tobacco Co. Director of Fleet Operations, Jim Anselmi, in Greensboro, NC, controls a fleet of more than 1,200 vehicles, comprised of cars, mini vans cargo vans, and pickup trucks. Anselmi says, “Our fleet size has remained pretty much stable over the last five years, with no major changes. I foresee no major changes for the future either, Anselmi added.” “Our current replacement policy is three years and/or 55,000 miles for Cars or three years and/or 65,000 miles for vans and trucks and we feel our parameters are a little lower than some of our industry peers.” Anselmi noted. Donna Reddington, is the fleet manager for Brown & Williamson Tobacco Company’s fleet of more than 1,500 ve-hicles in Louisville, KY. Reddington reported “Our company time and mileage parameters for vehicle replacement are 80,000 miles and/or 60 months. We feel our guideline are a little higher than our industry peers." “We are trying to switch to cars more than vans in the fleet and, we do have a few SUVs in service, said Reddington.” “We plan on eliminating the cargo vans and SUVs from the fleet, as they come up for replacement,” she added. Chemical Contingent Parameters Fall Into Line With Other Fleets Jeffrey Hipple, purchasing manager for Nalco Chemical in Naperville, IL is in charge of a mixed fleet of more than 1,600 vehicles. 67% cars, 6 % mini vans, 10% SUVs and 17% pickups and has seen an increase in fleet size over the past five years. Hipple said, “The biggest changes in the fleet’s vehicle replacement guidelines were to: extend the mileages, change the personal use guidelines, and eliminate employee paid upgrades.” “After changing the replacement criteria to 75,000 miles for sedans and 85,000 miles for trucks, I think we are comparable with like industries. The previous policy was 60,000 miles for sedans and 70,000 miles for trucks. The new mileage guidelines just went into effect on May 1 of 2001, so it’s a little early to say for sure,” Hipple said. We have found that many of our personnel prefer SUVs and we offer SUVs, but they must be approved and the re-questing person must have off-road accounts to justify the SUV,” Hipple related. Nalco currently has no imports in the fleet makeup. < Planning a Good Vehicle Replacement Program isn’t Easy There is “NO” golden rule to guide you through your vehicle replacement woes. Each company has its own unique set of concerns and solutions and works within those areas. Probably the most pressing of all con-cerns would be available funding. If you don’t have the cash, you may have to get very inventive. But here are a few hints that may make your life a little easier:  Keep good records to support your requests.  Buy smart, buy the right vehicle at the right time and buy at the right price.  Get all the incentives you can.  Think ahead of multiple or follow-on uses for the vehicles.  Before ordering, examine the pro-jected use of the vehicle and the drivers requirements and limitations if any.  Consider the time of year of the pur-chase against the projected resale time. In some cases, used vehicles sell better at a certain time of year.  Evaluate completely, the buy-sell VS. the lease programs.  Get yourself a set of driver guidelines published, to help protect your in-vestment.  Benchmark your fleet regularly against industry peers, to see where you stand.

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