The Car and Truck Fleet and Leasing Management Magazine

Market Trends

Top 15 Trends in Truck Fleet Management

March 29, 2005

1. Proliferation of Onboard Technology in Trucks
The computing power contained in a truck will be tapped in increasingly creative ways. “Fleets are already utilizing the ability to program the software of the onboard control modules to turn on lights with the windshield wipers, flash the marker lights when a PTO is engaged, and require the driver to identify his or her authorization to operate the vehicle by use of a fingerprint reader,” said Ken Gillies, manager of truck management for Donlen Corporation. “Managing the operation and security of a fleet will push the use of the existing and yet-to-be-implemented technologies to enable remote control of cameras to avoid more than a backing hazard, but also to provide meaningful information about the vehicle's proximity to other hazards beyond the driver’s ability to see.” For instance, Gillies envisions a utility vehicle application that would allow a driver to inspect a transformer or other electrical distribution components from inside the truck’s cab rather than in a man-lift, keeping the worker out of the range of dangerous wires or sheltered from inclement weather. “These advances will aid the efforts of a fleet manager to manage the costs and keep the goods and services moving by avoiding downtime as a result of accident or other outside influence,” said Gillies. 2. GPS and Remote Access Diagnostic Capabilities with Real-Time Reporting
The price for GPS and telematics technology with remote access diagnostic capabilities has dropped dramatically over the past few years. GPS systems can monitor a vehicle’s engine system to identify mechanical and electronic problems or other maintenance issues.“The adoption of this technology will not only help make drivers more efficient and allow fleet managers to track and monitor use with real-time reporting, but in the medium- and heavy-duty truck market, it will help meet future legislation related to Homeland Security and the real-time monitoring of vehicle locations,” said Ron Dapkunas, director, network services for PHH Arval. Since the late 1980s, telematics has been used by the over-the-road truck industry for delivery scheduling, route optimization, and driver communication. The widespread use of satellite tracking and communication technology in the Class 8 market will migrate to the Class 3-7 market, which includes vehicles with gross vehicle weight ratings between 10,001 and 33,000 lbs. “Land-based tracking via cellular phone will grow significantly and the associated price competition will make sense for a growing number of fleets. The uses will likely remain core to dispatch efforts, tracking of driver activity and security concerns. The security as-pect will be especially important to fleets transporting hazardous materials,” said Gillies. Wayne Reynolds, manager, corporate fleet trucks for LeasePlan USA, also foresees increased applications for telematics/GPS systems in fleet trucks. “One factor driving this trend is the systems’ ability to provide real-time mileage reporting. Mileage reporting is a major challenge for fleet administrators,” said Reynolds.Fleets are also interested in the technology from the standpoint of accident management and to minimize liability exposure. “For instance, some systems include cameras designed to record accidents to resolve liability and claim issues. The systems also have the ability to detect driver speed and routes taken, which will be helpful in managing a fleet safety program,” said Reynolds. 3. Increased Cycling of Truck Bodies and Mounted Equipment
Cycling a truck body every other time a chassis is replaced will become more common as a result of the increase in the cost of raw materials. “Steel surcharges for a truck body will likely continue at the current level of two percent with the high probability that it will edge up even higher,” said Gillies. “Managing specialty applications such as pumping or crane operation will motivate closer scrutiny of the decision process for replacement or refurbish and transfer when a chassis is ready for retirement.” 4. Workmen’s Comp Considerations in Upfitting
Consideration of workmen’s compensation claims is becoming more prevalent in fleet upfitting decisions. “Several products and options are available to fleets to help reduce the risk of injury to drivers, which more fleets are including in their specifications. Examples include hydraulic self-unloading ladder racks, newer low profile chassis, even simple things like step bumpers,” said Mike Corchin, manager of truck business development for Wheels Inc.5. Increased Use of LED Lighting
Fleets are increasing the use of LED lighting technology on service vehicles. “With an average life span of 10 years, increased intensity and ease of installation, we are seeing a trend towards an increased use of the LED lighting versus the strobe lighting historically employed on service vehicles,” said Corchin. “Besides the emergency light application of LEDs, we are seeing them becoming the ‘standard’ in brake light, turn signal, and running light applications on both trucks and bodies due to their long lifespan.”6. Implementation of Radio Frequency Identification Tags
A relatively new technology that is finding increasing applications in logistic systems and supply chain management is radio frequency identification tags, often simply known as RFID. “Customers are pushing suppliers to ‘get smart’ by using RFID tags on rolling inventory,” said Mark Stumne, truck product manager for GE Commercial Finance Fleet Services.“This allows for increased dynamic routing of loads and the reduction of lost freight. It also increases rolling inventory and decreases warehousing. Customers and the federal government are driving this trend. One advantage to fleet is the reduction and identification of cargo ‘shrinkage’ resulting from pilfering,” added Joe Noonan, truck regional sales manager for GE Commercial Finance Fleet Services.7. Increased Security Issues
The increased regulatory demands resulting from the Patriot Act of 2001 are set to diminish significantly in 2005. However, “it’s probable many regulations will be extended with changes to accommodate conditions as we now know them. Managing a truck fleet through the changes and keeping costs contained will provide ample challenge,” said Gillies.Noonan of GE agrees. “There will be increased security issues concerning the load carried. There will be more extensive driver background checks. There will also be increased hazmat tracking and security. Recently, ‘Highway Watch’ was developed to have truck drivers ‘watch’ for suspicious activity,” said Noonan.“Use of telematics will drive geo-fencing around sensitive areas. (A geo-fencing system uses a GPS to alert a fleet manager whenever a vehicles travels outside a designated geographic area.) A geofence system will trigger actions such as alerting authorities, de-power the engine, or open and close gates, said Stumne.In addition, because of Homeland Security issues, commercial trucks will face more and more difficulties in where and at what time they can travel, forcing them to find alternative routes to avoid bridges and tunnels that are the subject of terrorist alert slowdowns, said Dapkunas.“Also, restricted truck zones in certain metropolitan areas will drive the increased use of an intermodal yard,” said Noonan.
8. Impact of New Diesel Emission Regulations
New diesel engines will cost more as a result of more stringent government regulations for diesel emissions set for 2007. Trucking organizations are work-ing now to lobby for incentives to help offset the higher engine costs. “The increased emission controls on trucks will increase maintenance operating costs,” said Reynolds. “As diesel truck emissions standards get driven to tougher standards, this has increased the complexity of engines and added concern about reliability, longevity, and added cost,” said Stumne.The new emission requirements also threat to impact new-truck sales. “As a result of the new 2007 diesel engine emission regulations, we feel that there will be a ‘shortage’ of diesel-powered trucks during the 2006-model year due to the fact that many large fleet diesel engine users are going to order additional units over and above their normal replacement cycle to beat the large price increase associated with the new standards,” said Dave Decker, manager of truck engineering for Wheels Inc.“As emission regulations change in 2007, and again in 2010, fleets are pre-buying to mitigate issues with first run engine changes. Emission changes increase costs by increasing the initial cost of a truck. There is increased on-going maintenance, and the impact on resale values is unclear,” added Noonan. Another possibility is delaying purchases until after the effective date of the new regulations to avoid anticipated initial problems that may occur with the new diesel engines.“As the next round of diesel emission regulations looms for diesel engines, there will likely be a waning of new truck demand starting early 2006 as fleets try to manage their replacement schedules to delay purchase until past the effective date,” said Gillies. “This is in the hopes that that someone else will experience the early problems associated with the additional controls and systems necessary to bring the engines into compliance.”9. Impact of Low-Sulfur Diesel Fuel
To meet the 2007 regulation, the sulfur content of diesel fuel must drop from an average of 500 parts per million (PPM) to 15 PPM. This is somewhat similar to the changes that the auto industry went through in the mid-1970s as gasoline was changed to unleaded to enable the use of catalytic converters.“Existing diesel engines will also have a catalyst and will need a particulate trap, both of which will motivate another change in managing a fleet,” said Gillies. “First, from a maintenance perspective, it will affect maintenance cost since the trap will need periodic cleaning and the catalyst system will need maintenance. Second, fleets that maintain their own fuel storage and dispensing facilities will need to prevent mixing of the low and high sulfur fuel. In some cases, this will be the ‘last straw’ and many fleets will finally cease to use and maintain the tanks and pumping systems necessary.” 10. Alternative Powertrain Systems for Trucks
According to Gillies, more non-traditional trucks will push into the marketplace with alternative power systems as the emission regulations have tightened across the marketplace. “Most notably will be the emergence of some viable fuel-cell powered trucks. While the numbers will be small, their impact will be an asset to managing a fleet. The public will slowly take notice of these changes and that factor will provide benefits, albeit soft ones.” The acquisition cost of diesel-powered trucks is anticipated to increase due to the new emission standards. “It’s likely the ’07 emission regulations alone will push the price of a medium-duty truck upward by as much as 4 percent. When considering the escalating demand for steel on a global basis, the backbone of any truck is going to experience additional cost increases, the steel surcharge could easily be 1.5 percent or more within 12 to 18 months,” said Gillies. 11. Move to Synthetic Oils and Automatic Transmissions
The increased use of synthetic oils and lubricants is helping extend preventive maintenance intervals for trucks. “More companies are following recommended industry maintenance practices, in particular the American Trucking Associations recommendations. If followed, the recommended practices can reduce maintenance cost,” said Reynolds. There is also a trend to move away from manual transmissions to automatic and hybrid-automatic transmissions because clutch replacement is so expensive. “Increased driver transfers are leading to more wear and tear on truck clutches, resulting in high replacement costs,” said Reynolds.Another key reason that truck fleets are specifying automatic transmissions is to the decreasing number of drivers who know how to operate a manual transmission, said Decker. 12. Increased Fees for Truck Registration & Licensing
As state budgets get squeezed ever tighter, the most common target for finding money is to raise registration and licensing fees for trucks. “Unfortunately, the truck industry is of a low-enough population that it’s viewed to be the area that can least hurt a politician, and so it will continue to be an attractive revenue source,” said Gillies. “Controlling the exposure to the increased fees will likely result in many truck registrations moved to different states where possible. For a fleet domiciled in one state it may prove to be advantageous to drive the fleet to another state for registration. In some more ex-treme cases, it will result in reductions in the number of trucks a fleet will retain. At a minimum, at least some portion of the increased costs will filter through the supply chain, ultimately affecting con-sumer prices,” said Gillies. 13. Changing Skill Sets Required of Truck Fleet Managers
“The biggest challenge for fleet man-agers today is greater emphasis on the technical aspects of the operation of a truck and its upfitting,” said Decker of Wheels. “Most fleet managers are presented with the ‘goal’ of lowering fleet costs by upper management. The most effective way to meet this goal is to make sure that both the truck and the upfitting are spec’ed correctly to lower maintenance costs. This takes technical knowledge by the fleet manager or for the fleet manager to depend on the expertise of his fleet management company.”Fleet managers also need to improve their analytical skills. “Whether a company is hauling goods or transporting people and equipment to job sites, the job profile of the fleet manager will continue its rapid change to managers with strong analysis skills and a somewhat smaller emphasis on the technical operational aspects of a truck,” said Gillies. “The truck fleet manager position of today carries increased demands for analytical skills. It is growing more important for a fleet manager to manage the volume of information to glean the important data from the ‘noise.’ This sill will continue to rise in importance,” said Gillies.14. Coping with Ongoing Shortage of CDL Drivers
The truck industry is currently struggling with a shortage of CDL drivers. “Projections expect trucking to grow by 30 percent by 2006. Where will the CDL drivers come from?” asks Noonan. Stumne agrees. “Demand for CDL is greater than supply. The increased stringent background checks further reduces eligible pool of drivers. Plus, reduction in CDL driving schools has impacted the supply side.”More stringent security requirements are also impacting the available labor pool of truck drivers. “The restrictions on the hiring of people with criminal records have impacted many fleets, and the resulting shrinking of the labor pool will continue to push driver compensation higher,” said Gillies. “The demand on a fleet to find and retain competent drivers will continue to be a hurdle.”15. More Part-Time, Temporary, and Female Truck Drivers
“This trend is already well under way, and manufacturers have been developing trucks that are more friendly to any type of driver, for example, easier and more comfortable to operate, with automatic transmissions, air conditioning, power steering, easy access in and out, etc. Companies may choose to outsource truck drivers to other providers, avoiding workers’ compensation and liability issues, added Dapkunas

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