The Car and Truck Fleet and Leasing Management Magazine

Is Maintenance Management Obsolete?

September 2005

There is little argument that one of the most widely used fleet service program is maintenance management. Leased or owned, autos, light trucks, or vans, fleets of all sizes trust their maintenance and repair functions and expense to maintenance management providers, and have for more than 30 years. The concept is simple, yet effective. Drivers are provided some form of “purchasing instrument,” most commonly a coupon book, which acts as a combination preventive maintenance schedule and purchase order, permitting drivers to have regularly scheduled maintenance performed at thousands of repair facilities nationwide. The coupons are printed at pre-set mileage increments (usually 5,000 miles), and if the work needed is limited to what is approved on the coupon, no further authorization is necessary. If, however, work beyond that specified on the coupon is necessary, approval can be gained in two ways. Drivers can be provided with a card that approves additional work up to a dollar limit ($50 or $100, for example). Beyond that, the shop must call the provider on a toll-free number, where they are connected with one of the vendor’s certified technicians, who then discuss the work and provide approval. In addition, in the event the driver has a problem (breakdown, overheating, etc.), the driver can call the same number to get help. The provider accumulates expense history for each vehicle and offers the fleet various reporting options to manage the resulting costs. Fees for the service are charged either via a flat per-vehicle, per-month charge or a charge built into a lease rate factor. Other than various procedural differences, that, in a nutshell, is how a maintenance management program works and has always worked. Programs Have Been Reactive
Maintenance management programs had their genesis in the 1960s and took full flower in the following decade. To offer the widest coverage, providers contracted with large national repair chains, tire companies, quick-lube chains, and the like, bolstered with a network of independent repair facilities to cover major mechanical repairs. Considering the vehicles providers covered, the need was immense. Before the era of electronic ignition, fuel injection, and computers, cars and trucks required regular adjustment and monitoring to keep them running at peak performance. Warranties ran only for 12 months or 12,000 miles, whichever came first, barely six months of driving for a typical fleet vehicle. Beyond that, fleets were on their own in obtaining repairs when problems occurred. And occur they did; the old adage “they don’t build them the way they used to” does not apply in the auto business. Breakdowns, compared to today, occurred far more frequently, and major mechanical failure was not rare. Unless the fleet manager was well versed in auto technology, and had the resources and staff to use, outsourcing maintenance was a must. In essence, maintenance management has been a reactive program; fees are paid and services rendered primarily in reaction to what has already happened. With the changes in vehicle reliability and warranty protection, predictive vehicle capabilities have eroded the need and effectiveness of traditional maintenance management. Oil monitoring systems, which provide real-time information on the state of engine oil, tire monitoring, and the remarkable promise of telematics, are all systems geared toward diagnosing problems as they develop, which enable fleet managers to take action before major failures occur. So how has maintenance management, perhaps, become obsolete? To paraphrase a certain manufacturer’s slogan, fleet cars today are not your father’s fleet cars. Beginning in the 1970s with the advent of electronic ignition, advances in vehicle technology have come at a dizzying pace. Tune-ups, one of the mainstays of preventive maintenance, are gone. Fuel injection eliminated mechanical carburetion. Tires that used to wear out regularly at 30,000 miles now last 60,000. And computer technology allows vehicles to monitor themselves, making the kinds of delicate adjustments electronically that mechanics with wrenches used to make. Combine all these advances with better, longer lasting materials and far more effective production techniques, and manufacturers now offer bumper-to-bumper warranties of 36 months/36,000 miles and more, good for 18 months or so of typical fleet driving. The only items not covered are wear items, such as belts, hoses, tires, and brakes (tires, of course, are covered separately by the tire maker). With this kind and extent of warranty coverage and with vehicles more reliable than ever before, some in the fleet industry have begun to question whether traditional maintenance management programs meet the requirements of an industry that has changed so much. They point out:
  • With new-vehicle warranties now extending to 36,000 miles and longer, fleet managers have coverage well into the second year of a typical vehicle’s service life. As a result, almost every mechanical failure is covered, and the vehicle is repaired under the warranty at the dealership.
  • Items not covered are generally wear items: belts, hoses, tires, and brakes. Does a fleet manager need a certified technician to approve the replacement of a broken belt or failed hose? Will a maintenance management vendor risk the possibility of serious liability by not approving tire replacement or a brake overhaul?
  • Perhaps the single-most common complaint in the field about maintenance management programs concerns pricing. Field managers, even drivers, for years have maintained that in many cases, they can obtain tires and service locally at prices lower than those billed under maintenance management. And the fact is, they are often correct. Local sales, and direct negotiation with local shops often result in consistent savings.
  • Fleets pay monthly per-vehicle fees for access to 24-hour, toll-free assistance from certified technicians who ostensibly apply their expertise to handling situations drivers, their supervisors in the field, and ultimately fleet managers are not trained to handle. But improvements in vehicle design and manufacture over the past few decades render this kind of assistance far less necessary than ever before. More Questions Posed
    Maintenance management programs address issues other than the simple provision of purchasing ability and mechanical expertise:
  • In order to provide useful mechanical expertise, maintenance programs retain a complete history for each vehicle in a client’s fleet. When a repair shop or driver calls, the technician can review that history to determine the approach to repair the vehicle.
  • Beyond the warranty period, vehicle manufacturers often provide consideration when once-covered components fail. Maintenance management providers track and submit such repairs for so-called “extended warranty” reimbursement, beyond the warranty mileage.
  • Repetitive failure of a particular part or system can signal that a recall may be necessary. Providers track such failures and communicate with the manufacturers to determine whether the failures warrant recalls or other consideration.
  • Maintenance management programs usually provide both “canned” reports and the capability for exception reporting, based upon the extensive expense database they maintain.
  • Using national account programs for the bulk of maintenance and repair activity provides what is known as “Level III” data, without which fleet maintenance expense cannot be properly managed. Unit number, mileage, driver information, parts/labor breakdown, and the type of work performed (front end, brakes, tires, etc.) are data that must be provided. Thus, not all of what maintenance management is today can be considered “obsolete” in that any re-invention of the service must include those segments necessary no matter what the program itself does. Use Another Management Model
    Some 30 years ago, another new service - accident management - was developed. The concept was similar to maintenance management. The service provided the client with administrative, record keeping, and technical expertise that the fleet generally did not possess with one key difference: rather than charging a per-vehicle per-month fee, the providers charged a transaction fee. The customer paid only when the service was used. The reason, of course, was that the accident service was used for far fewer instances than there were maintenance transactions. This program/pricing model, in which the service is paid for only when used, may better apply to fleet maintenance management today than the traditional program. The expertise required 20 years ago is less necessary, for a shorter period of time than ever before. With costs that can reach $5 to $6 per vehicle per month, a 1,000-vehicle fleet will pay as much as $60,000 per year or more for access to technical proficiency that, for the first 36,000 miles, will most likely remain unused, since the vehicle will be covered under warranty. Those components not covered, the aforementioned wear items such as belts, hoses, brakes, and tires, seldom require mechanical expertise to authorize. (One hardly needs mechanical certification to tell the shop to replace a worn belt or a blown tire.) What form, then, would a “re-invented” maintenance management program take? Considering the questions and issues already covered, it might look like the following:
  • Provide the same ability to purchase preventive maintenance, tires, and repairs as programs do today, with perhaps the added bonus of the ability to use local shops as well.
  • Have technical expertise available to assist when necessary beyond the basic warranty period.
  • Maintain an expense database for each vehicle, which the technicians would consult when providing assistance.
  • Communicate with auto manufacturers to track recalls and TSBs (technical service bulletins), and to submit for extended warranty consideration.
  • Rather than charging the traditional per-vehicle per-month fees, use the accident management pricing model and charge a transaction fee. Customers would not be required to pay fees during the period when the vehicle is covered under warranty. The issue in such a change, obviously, isn’t as much what is offered, but rather how the service is priced. The recordkeeping, availability of reporting, communication with manufacturers, and national coverage must necessarily remain the same. The only addition to the menu of services might be the ability to use local shops in addition to traditional national account providers, with the caveat that Level III data must be provided. All in all, it is the fee structure of maintenance management, as it has been sold for the past several decades, which some see as being obsolete. The accident management fee-for-service model is a possible solution. Whatever the point of view, only good things can come from a healthy debate on whether a “solution” is needed, and if so, what form that solution may take.
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