Vocational Fleets By the Numbers
Coca-Cola operates one of the largest food and beverage fleets in the U.S. Picture courtesy of Wikipedia images.
Vocational fleets, which provide a specialized service or function, are the literal drivers of the economy, operating a legion of vehicles from sedans to medium-duty trucks, and everything in between.
And, the numbers tell a compelling story. While the roads are still filled with hundreds of thousands of vehicles handling specialized tasks for a range of industries from transportation to agriculture, fleet numbers have thinned in the five leading vocational markets since the Great Recession began in 2008.
According to representative numbers self-reported by fleet managers to Fleet Finanicals' sister publication, Automotive Fleet, fleets in major vocational segments, for the most part, have seen their numbers shrink. There could be a number of reasons for this, including rightsizing in the industry, consolidation, and overall downsizing as a result of efficiency and sustainability initiatives.
Facing Challenges Head On
Customization and standardization are two of the biggest challenges faced by Steve LaPorte, fleet manager of Iron Mountain's 2,600-plus vehicle fleet, and Anthony Foster, corporate fleet manager, for Pioneer Natural Resources' 2,400-plus vehicle fleet.
"I would say one of the biggest challenges in running a vocational fleet is ensuring there is consistency in the vehicle upfit and body build when there are multiple plants involved for those users whose operations are geographically dispersed," LaPorte observed.
Compounding this problem is the quality of the labor on these upfits.
"The level of customization involved seemingly necessitates the use of a high level of manual activities to construct vehicle bodies, and given a reliance on semi-skilled and low-skilled labor in some parts of the construction, you have more opportunity for quality issues to arise," LaPorte noted. "Further exacerbating this condition is the cyclical nature of the industry, which forces the participants to add and drop headcount to adjust to the demand climate."
In the vocational market, the demand exists for very specialized vehicles, which can be a challenge. Foster of Pioneer Natural Resources said that he has solved this problem by standardizing his fleet.
"My task is to standardize as much as possible, but be flexible at the same time," he said. "However, there's no way that one single entity or a fleet department is going to know all the different capabilities necessary to run the fleet."
But, while Foster's aim is to standardize Pioneer's fleet, he is staunchly avoiding a cookie-cutter approach.
"I've worked at other companies where you have more of a cookie-cutter approach, and that just doesn't work, particularly in the oil and gas industry, because it's a lot more vertically integrated," Foster said. "For example, in our fleet, we have 80,000-pound trucks all the way down to 10,000-pound pickups."
This is where Foster's flexible approach comes to the forefront.
"My vehicle selection process identifies everything related to the request. Instead of trying to script out everything — here's your playbook and if you can't work within those parameters, then give us a call," he said.
Foster sees standardization throughout his process.
"It is all standardized to me. I also standardize my vendors. All my light-duty trucks go to one vendor; all my specialized vehicles — anything with a flatbed, crane, etc. — goes to another. I think the biggest challenge is the technology. How do you spec it to that group and make sure it's still safe?"
For Ken Jack, vice president fleet operations for Verizon's 40,000-plus North American fleet, technology is also one of his biggest challenges.
"We want to find the technology solutions that have the right ROI and really make us more reliable and more efficient," Jack said. "At the same time, increasingly sophisticated technology in the vehicles themselves and evolving fleet management systems require us to be continually developing our employee and supplier base to support our objectives and maintain that edge. I think fleet operators, upfitters and equipment constructors are struggling to find and hire the skilled folks to consistently maintain and construct more sophisticated equipment. Another big challenge is making sure equipment is properly spec'd, fully-utilized, and ensuring the fleet's operational-readiness given the already strong internal competition for the next dollar we might spend on fleet equipment. This is especially true as we come through a difficult economic period — companies are faced with investment opportunities in a variety of areas and each investment has to be carefully weighed."
Chart courtesy of AF Research Department.
The other challenges are ones facing fleets of all shapes and sizes.
"I don't think there's a fleet out there that isn't thinking about how to make their operations more environmentally sustainable and about how to minimize exposure to fluctuations in the price of vehicle fuel," Jack said.
Working with OEMs
Since vocational fleets require a higher degree of specialization than, for example, sales fleets, having a good relationship with OEMs and upfitters is key.
Foster of Pioneer Natural Resources noted that choosing the right OEM supplier is the crucial first step.
"From the OEM perspective, we go with Ford because we have more options with its products," he said. "It can be hard to determine which OEM fits the majority of your functionality. For instance, if I went with GM, I wouldn't be able to do medium-duty class. If I went with Chrysler, I wouldn't be able to get super cabs. For us, it's been Ford, because it offers more options to fit our setting. Better mpg and more payload is the golden rule of spec'ing a truck — whoever has that wins."
Jack of Verizon sees that the OEMs, overall, are working hard to court fleet customers.
"I think all the OEMs want to distinguish themselves in the eyes of fleet customers and, as the industry recovers, are trying to be more responsive in ways that will grow their business," he said. This seems to take the shape of trying to deliver on some combination of value-added features, ordering practices, simplifying the process for upfitting, durability, fuel efficiency, etc. OEMs seem to be making deliberate decisions that protect their long-term viability and diversify their sales base — such as investment in global platforms and consolidation of platforms. While they all appreciate the fleet customers, it seems most OEMs aren't necessarily trying to be all things to all vocations — they're focusing on the products they're best suited to deliver and create the best value for the fleet customer. The upfitters and equipment builders are also becoming much more sophisticated. They're working more with the upstream OEMs to streamline final delivery of the completed vehicles and incorporating better design and quality control, for longer lasting, more reliable equipment — but consistency is still a challenge. They do add value through training, maintenance and repair-parts programs that can take some load off the fleet operators."
LaPorte of Iron Mountain sees the OEMs' approach as a little more mixed.
"It is really dependent on the OEM's go-to-market philosophy," he observed. "One may actively court vocational vehicle operators as an important customer segment, while another may consider the vocational market to be a secondary market. The first party will be much more flexible and accommodating with their major component options and upgrades. As the end-user, it is important to distinguish between the two to avoid a frustrating experience."
For Foster of Pioneer Natural Resources, LaPorte of Iron Mountain, and Jack of Verizon, the future of vocational fleets can be summed up in one word: technology.
Foster sees technology becoming increasingly integrated in the way fleets do their business. "I think the biggest change will be how technology and telematics is going to change work-order management," he said. "For example, what is the frequency of utilizing that crane, how often are employees at that worksite, do employees spend more time behind the wheel, should you take a different approach, etc."
LaPorte predicts changes in technology bringing new challenges to the vocational fleet manager's table.
"The changes in technology over the last decade have placed extraordinary burdens on the vehicle use and design," he said. "For example, the additional emissions hardware has taken up space on the frame that makes it more difficult to accommodate aftermarket peripherals such as hydraulic tanks or dual PTO's when constructing a vocational body. I think this may become even more of a challenge as the industry introduces and adopts hybrid engine technologies or alternative fuel vehicles."
For Jack, technology will change the way vocational fleets do business for the better.
"Generally speaking, changes in technology may chip away at the underlying reason we even have vocational fleets," he said. "On the other hand, across the country, there is still aging infrastructure and physical services that can't currently be rendered in any other way.
"The economic downturn meant slower fleet sales, so there's really pent-up demand," Jack added. "The eventual purchases may look different, but these fleets will be around for a long time. Fleets will become more sophisticated and start looking at new tools such as advanced telematics and higher-efficiency vehicle platforms to accomplish the work — whether driven by environmental factors or simply because it becomes the norm for business to find ways to be 'lean' and more cost effective. The component and build quality for OEMs, upfitters, and equipment constructors alike will have to improve to keep pace with higher expectations from operators."
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