Coping with rapid change and utilizing human resources exemplify the accomplishments in automation, efficiency and cost-savings Richard Catino has achieved at Digital Equipment Corp.
Directing the management of a business fleet of more than 11,000 vehicles requires acute professional expertise. That is what Richard A. Catino brings to his position as U.S. Fleet Manager for Digital Equipment Corp. based in Maynard, MA. Digital is the world’s leading manufacturer of networked computer systems, closing 1986 with $7.6 billion in sales. The company has built its reputation on innovation and technological leadership.
Catino joined the company nine years ago, and moved into fleet management three years later. His marketing background stems from the Essex Technical Institute, the University of London, and the University of Massachusetts, where he earned a business education degree.
As AFs Professional Fleet Manager for 1987 Catino joins Jack Lamb of Exxon, the 1985 winner, and E. Pierce Walsh of IC Industries, the 1986 recipient, whose names are inscribed on a permanent trophy. Catino was presented with a personal trophy in Montreal and a $2,000 scholarship in his name will be presented to an accredited university business school.
To discover more about Catino’s approach to fleet management, AF spoke with him about his experience, his assessment of the industry, and his outlook.
AF: What challenged you to become involved in fleet management?
Catino: Actually, I’ve been a fleet manager for only six years, so I am somewhat of a neophyte. It came about most by accident. There was a position open, and I had the administrative background required, so I took the job with the intention of a two-year commitment. I was amazed at the excitement I found, not only in the job, but in the industry. I’ve enjoyed it ever since.
AF: Six years ago, what impressed you about the industry?
Catino: The industry itself, frankly. Those were the days of escalating costs, such as “sticker shock,” and gas at $1.40 a gallon. Companies that had fleets for a number of years were seeing significant increases in the cost structures. Not only did the capital costs drastically increase, but the prime rate was in double digits at the time. Operating costs could double and triple, although, luckily, they didn’t at Digital, nonetheless, we were seeing a steep incline in our cost structure, while experiencing tremendous growth at the same time. When I joined Digital, we had just broken $1 billion in revenue and had an employee population of 37,000 people. We ended our last fiscal year with sales in excess of &7.5 billion and an employee population of more than 100,000, and a lot of these folks are in vehicles. Changes have occurred very rapidly.
AF: What major changes have impacted the industry and management attitudes over the past several years?
Catino: I don’t think fleets got the necessary management attention a few years ago. Because the costs did not seem excessive, I think it fostered the attitude, “if it ain’t broke, don’t fix it.” Cars were like real estate, in a sense everybody knew all about them: everybody had bought a few, sold a few, and no one every made a bad deal. Generally speaking, there was no real concern around fleet management, unless a real calamity occurred.
Today, there are two ends of the spectrum the fleet manager has to manage. We are very much involved in the service business, but we also have controllership responsibility. Both are equally important and need to be balanced in decision-making. Senior management at Digital has been very adept at setting
Directions for changes that are geared to customer satisfaction, employee satisfaction, and shareholder satisfaction, all three have become a significant part of a fleet manager’s responsibility. As it relates to the customer, we have concerns about our internal customers and our external customers. Basically, we want to deliver quality, cost effective fleet programs to give Digital a competitive market advantage. As it relates to employee satisfaction, we want to be the recognized leader for having a competent, motivated, and professional staff that is committed to quality and innovation. Stockholder satisfaction can best be defined as delivering the highest return to stockholders by providing value-added professional fleet management. Our challenge is to make Digital a unique company and provide the best level of service in the marketplace.
AF: What significance has change held for the industry and your company?
Catino: One was fuel prices that drove us to downsize the fleet, which was a real culture shock for many people. At Digital, we were very effective in downsizing, due to the strong support from line management. Tax changes had an impact as well. The Federal Budget Deficit Reduction Act of 1984 impacted our operations, both from an employee relations standpoint as well as increased reporting requirements imposed by IRS. Other legislative concerns have been the anti-fleet legislation proposed on both federal and state levels. We are active in NAFA and other organizations that attempt to educate legislators of the situation with in the fleet industry. An entire sequence of events forced us to examine our operations more closely and to plan our strategies more carefully. They forced us out of period of dormancy.
AF: What influences your decisions today as a fleet manager?
Catino: Balancing utility versus cost. For instance, the amount of equipment carried by our Field Service Engineers is considerable, especially in situations where we provide 7/24 coverage. I mean seven days a week by 24 hours a day. The balancing act involves space, security and reliability versus cost effectiveness of the actual vehicle in addition to cost; decisions are affected by lead times, a problem this year. We had downsized to subcompacts in many cases without fully understanding the utility constraints. We had to reevaluate the relationship of vehicles to our needs.
AF: How will the Tax Reform Act (TRA) of 1986 impact the industry?
Catino: It will have a major impact on this industry as a whole. The Investment Tax Credit was a major component affecting the cost structure of most fleets. Essentially, it has gone away. The three-year ACRS has become a five-year 200/DDB simply translated, much of the depreciation advantages have ceased to exist. I think this will push many fleets toward leasing companies more competitive.
AF: How has TRA affected your programs?
Catino: Frankly, we’re facing a pretty sizeable cost increase, which is causing us to evaluate other alternatives to fleet vehicles. We have many people in an employee reimbursement program today, and one alternative under evaluation is migrating some individuals out of company vehicles, where it can be done efficiently with minimum impact to the business.
AF: What is your personal philosophy toward fleet management?
Catino: Probably the best way I can describe it is in terms of the sharing that exists in this industry. Digital has saved a considerable amount of money because of the sharing by utilizing the ideas of other fleet professionals in our own operations. I’ve never seen so much comradery in any industry I’ve touched. The innovation is amazing. For example, I’m a member of the Ford Fleet Advisory Council, which meets twice a year to offer the ideas and suggestions of fleet managers to Ford in areas such as organization, planning, and programs. My peers at these meetings have a wealth of knowledge, and I have never come away from those meetings without volumes of notes, which are totally unrelated to the purpose of the Advisor Council.
To be an effective fleet manager, you need to be a sharing person and a good listener. You need to welcome change and have the ability to cope with rapidly changing priorities. I really enjoy this industry. The opportunities and challenges presented on daily basis are exciting. It’s a fun job, I enjoy it.
AF: What are your opinions regarding the issue of company ownership versus employee ownership of vehicles?
Catino: I’m not really sure why it has become so controversial an issue. In the best interest of your company, you have an obligation to evaluate all alternatives which can best support the company’s needs. We have 11,000 vehicles, but we also have 2,500 people on an employee ownership program.
What I sometimes hear is a fear of employee ownership on the part of many fleet managers. Sometimes, there is a parochial and protectionist attitude on the part of some fleet managers, which overrides the initial objective of providing the best cost effective transportation programs for their companies.
If a corporation’s needs may be better served with a reimbursement program, then it is essential that the fleet manager look at it seriously.
AF: What are some of the unique aspects of your operations at Digital Equipment Corp?
Catino: I’m not sure how unique we are, but we have automated to a large degree, which gives us greater efficiency in operations and stronger external controls. We’ve developed a tape exchange program with both of our lessors, so we can exchange information that keeps both databases pretty well updated. We are currently installing an electronic mail system to further enhance our communications abilities with our lessors and other vendors.
Our Field Service engineers are about 65 percent of our fleet. They are in white station wagons, rather than a mix of vehicles. This has enabled us to buy “vanilla” vehicles and purchase in bulk quantity. For example, from July 1986 to March 31, we have ordered some 3,600 vehicles.
Organizationally, we’ve changed considerable. We were organized by geography into seven regions, each with a fleet administrator. Now we are organized to better utilize people and their talents, with three people handling ordering of vehicles, two handling maintenance and repairs, two handling title and tax, vehicle sales and our internal automated billing systems, and one handling our employee reimbursement system. These people are managed by a topnotch supervisor, and we can handle more volume with our current organizational structure. In fact, our overhead cost per transaction has decreased over time, despite the fact that we have added professionals to manage safety/loss prevention, accounting and internal controls.
We also have an internal daily rental program, which is currently under evaluation. In addition to providing employees with internal daily rentals at a much lower cost, this group also manages the student car programs for our major training centers in the Northwest.
Also, we see many more automated processes as possibilities. The concept is to automate mechanical tasks and allow people the necessary time to make decisions. This will improve human efficiency and effectiveness.
AF: How do you handle vehicle procurement and disposal?
Catino: Both procurement and disposal hare handles through our lessors, PHH and Gelco. In procurement, we deal directly with the manufacturers, and the lessors handle the mechanics. The level of expertise and service which they provide has worked very well for Digital. In fact, we put the fleet out for a competitive bid and have selected PHH and Gelco for another three-year contract, until 1990. Vehicle sales are also handles by the lessors. This is an area in which we are beginning to expend considerable energy, to better understand the process and management the results.
AF: What are the major challenges facing fleet managers today?
Catino: Staying ahead of and on top of change. There have been incredible changes in this industry, which occurs almost daily. The real challenge is coping with change as it relates to the business. Staying ahead of technological changes is a major, if not impossible, challenge.
Another challenge is to take a leadership role in your corporate structure. It’s too easy to become parochial, and to feel that no one really needs to get involved in fleet operations, except yourself. At Digital, we want everyone involved. We share information, ideas and concepts at all levels, so everyone knows what our business is about, and channels are open to receive support and contributions from all groups within the company. You have to keep communications open or you end up making decisions in a vacuum.
AF: What changes do you anticipate for the future fleet managers?
Catino: The most significant change I would anticipate would be a change in focus. In years gone by, fleet management has been vehicle management. Now and in the future, fleet management must be asset and management.
For years, the general perception of the fleet manager was a guy who had grease under his fingernails or somebody’s secretary who could take on a little extra responsibility. The fleet manager of the future should have a strong general business background, strong managerial skills and a foundation in finance and accounting. Truthfully, I think this is more important than understanding vehicles components.