Business Fleet, September/October 2019

WWW BUSINESSFLEET COM 10 BUSINESS FLEET September October 2019 Fleet management success requires an understanding of the lifecycle costs of fleet vehicles Managers typically factor in elements such as depreciation financing opportunity costs fees and taxes fuel insurance and maintenance into the total cost of a fleet vehicles service life But in this new era of leveraging analytics and crunching data do managers leave out other factors that could lead to a more accurate assessment of the lifecycle cost picture Analysts at Mount Laurel New Jersey based fleet management provider ARI say the answer is yes They believe more accurate cost assessments require a more holistic approach Were incorporating elements that we believe havent been addressed historically to help paint a clearer picture of the actual economic performance of an asset over time says Mike Bryan department head of business intelligence and analytics with ARI The idea is to understand the overall economic service life ESL of a vehicle Bryan says which includes concepts such as cost per unit of utilization and capacity of work or productivity With these in mind ARI has created its vehicle economic service life VESL model to help fleet operators optimize their cycling strategy While VESL is specific to ARI these new elements can be brought into other types of homegrown analyses With a greater focus on the vehicles productivity fleets may not only find it advantageous to adjust their replacement schedule but also realize higher equipment utilization ARI analysts incorporate a vehicles productivity as a key component in its overall economic service life For example fleet vehicle A might cost 5000 per year to operate while vehicle B might cost 7500 per year Simply analyzing expenses vehicle B is clearly more costly However vehicle B may be utilized more and generate twice as much revenue as unit A What a simple cost analysis typically doesnt show you is that vehicle A experiences significant downtime and isnt nearly as productive and efficient as vehicle B says Ed Powell assistant manager of business intelligence and analytics for ARI By focusing on vehicle economic service life and not just lifecycle costs Powell says fleets may identify an opportunity to reduce the number of vehicles in their fleets which would reduce overall fleet expenditures TWO USE CASES Bryan offers an example of a midsize fleet in the lawn care industry that streamlined its fleet by eliminating the need to purchase 15 replacement vehicles resulting in a reduction of nearly 450000 in capital expenses over the next three years The lawn care service achieved this by identifying opportunities to increase productivity with newer more efficient vehicles which in turn improved revenue generation on a per stop basis This allowed the company to reduce its fleet size from 150 vehicles to 135 without sacrificing its revenue generating capabilities Bryan also provides another example using the same productivity based methodology A local delivery company had been keeping its fleet of vans for longer than 48 months in service informed by a traditional analysis of maintenance expense Using the new methodology the company discovered that by keeping the vans longer than 48 months in service the average maintenance cost per gallon of fuel burned a better measure of productivity increased by 138 Based on this analysis the delivery fleet began replacing vans at the 48 months threshold Through one replacement cycle the fleets average maintenance cost per unit dropped 668 from 3879 to 3211 ARIs analysts say most fleets regardless of size can achieve similar results using this more holistic methodology for vehicle asset acquisition FACTORING PRODUCTIVITY This approach offers an alternative to a traditional replacement strategy which often uses year and or mileage thresholds to establish replacement parameters but typically does not account for a key element of the equation utilization The methodology ARI is championing delivers a more holistic view helping fleets establish replacement thresholds based on the facts of their specific operating conditions Bryan says an ESL method uses a cost per unit of utilization such as per mile driven gallon of fuel consumed or hour of engine operation The method which Understanding Economic Service Life for Better FLEET COST FORECASTING A lifecycle cost analysis that incorporates a work vehicles productivity can lead to greater fleet utilization and decreased fleet spend BY GREGORY VAN TIGHEM LIFECYCLE ANALYSIS