Editor's Note: This post was originally published in February of 2022 and was updated for continued relevance.
At one point in my fleet career, I gave a presentation to a large group of fleet managers on the concept of replacing fleet equipment to minimize equipment lifecycle costs. This really wasn’t particularly innovative, since many fleets lease equipment to facilitate this approach. It was aimed at fleets such as utilities that capitalize (purchase) their fleet assets. Here, it’s easy to extend equipment's life far beyond its optimal economic replacement point, thinking, “It’s saving money.”
Some people told me this approach was obvious and nothing new. However, the manager of one of the largest West Coast utilities took me aside afterwards and told me they experienced lower costs the longer they kept their vehicles and equipment. I was caught so off-guard I didn’t know how to respond … particularly without embarrassing him in front of a number of his senior staff. So perhaps, not so obvious.
This is All About Downtime
It took me a while to realize how a fleet could make such an obvious (and very costly) mistake. And, particularly one that had such an extensive fleet database to work with.
With further thought, it turned out to be quite simple. As their equipment aged well beyond its useful life, customers increasingly avoided using it because it was less efficient, less desirable, and more prone to breakdowns.
It’s almost laughable, but you can see how the older equipment got less use and thus experienced lower maintenance and operating costs. Think of the “savings” (for the fleet anyway).
It’s About “Tunnel Vision”
This is the lesson: don’t develop “tunnel vision” thinking that your fleet management information system (FMIS) captures the real costs of the fleet to the organization. As fleets gain more information from continually evolving sources of technology, it’s logical to rely more on this data for overall fleet management. What can be overlooked is that often the costs captured are based solely on a fleet perspective – not their customers’ needs.
What’s the difference? Well, again, it’s all about downtime – particularly breakdowns. If you are a fleet manager where vehicles perform specialized functions and entail a crew, unscheduled downtime can be devastating to both your organization’s internal operating groups and external customers. This comes from the hidden costs experienced.
Think about it this way. Say a line truck crew is scheduled to perform an outage, and the truck can’t make the appointment. What’s the cost? Is it the fleet parts and labor? No, that’s only a small part of the real cost to the organization (in this case, a utility). You also have the lost operating group’s crew time, which includes both direct labor costs and overheads. And, if necessary, don’t forget the cost to reschedule the outage – both to the utility and the external customer. And, even if a spare vehicle can be used to minimize or avoid this, what’s the hidden cost of these spares (in both vehicles, tools, etc.)?
How many fleet management information systems capture these substantial hidden costs? None that I know. While it’s common to identify the direct fleet maintenance costs, what fleet includes their spare equipment costs, and equally importantly, their internal and external customer costs? That would be quite an accomplishment. In fact, often the actual direct maintenance costs have a very small overall impact compared to the total organization costs.
The lesson here is that it’s all too easy to develop fleet “tunnel vision.” The fleet portion may be only a small part of your overall organization’s real costs. Without recognizing this, blind over-reliance on FMIS data can lead to substantial misdirections, resulting in unnecessary hidden costs that impact all stakeholders.
