In an era of ever-tightening fleet budgets, “rightsizing” has become the go-to strategy for squeezing greater cost-efficiencies out of vehicle fleets, without diminishing service to customers. But, achieving the proper equilibrium between vehicle inventory and service levels is often easier said than done, because rightsizing is never a one-time job. As the needs of the business change, so do vehicle requirements. How do fleet managers determine what exactly is the “right” (that is, optimal) size for company fleets at any given time?
The starting point is to define what exactly rightsizing means at a big-picture level. It doesn’t simply refer to downsizing or eliminating vehicles out of a fleet, though that could be part of the plan.
Instead, the operative term when describing rightsizing is “optimal.” What is the optimal number of vehicles for the fleet to properly support the organization’s customers? No more, no less. Any vehicle not fulfilling its purpose is fair game for reallocation to another region within the organization or elimination from the fleet altogether.
However, rightsizing isn’t just about maintaining the right number of vehicles in inventory, but also selecting the rightsized vehicle in terms of class, capabilities, and specification. For example, when Randy Burwell, lead buyer and fleet specialist for for Valero Energy Corporation, began transitioning the company’s sedan fleet from the V-6 Ford Taurus to the smaller four-cylinder-powered Ford Fusion in 2009, the fleet achieved savings as much as 6.5 cents per mile for each Taurus replaced by a Fusion.
Amy Blaine, director of strategic consulting and sustainability with Northbrook, Ill.-based fleet management company, Donlen, has seen similar savings with fleets that have shifted to smaller-spec, lighter-weight vehicles.
“We have had some customers move from a truck to SUV or from an SUV to a car. But, even if they are in a car, they may shift from a larger sedan to a smaller sedan,” Blaine said. “The key is getting them into a vehicle that is lighter weight, which drives improved fuel economy, often at a lower capital cost of the car, reducing overall vehicle cost in the system.”
Yet, rightsizing vehicle specification doesn’t always equal downsizing. In some cases, fleet managers need to spec a larger vehicle for the job to ensure optimal productivity.
“You have to make sure you’re thinking about the application — that you’re matching the needs of the driver with the function of the vehicle,” Blaine advised. “If you under-spec a truck, for example, and you don’t have enough towing capability — that can be an expensive mistake to make. Also, there might be different requirements in mountainous regions, requiring a truck with more torque and ability to handle snowy mountainous conditions.”
Four Key Rightsizing Benchmarks
Whether fleet managers are looking to rightsize vehicle inventory or specifications or both, they should analyze these benchmarks to uncover opportunities for achieving greater efficiencies and cost savings.
1. Utilization: Compare actual monthly miles per vehicle with the expected miles for each application. Which vehicles fall below the threshold? Why is that vehicle being underused?
“Sometimes you come across a vehicle that has recently operated with low monthly mileage, but has a high overall odometer reading,” said Blaine with Donlen. “When this happens, we often discover that it’s because the company kept a whole bunch of ‘spare’ vehicles in case others break down.”
While this approach can give fleet managers a sense of security, Blaine said that keeping “pool” vehicles can be expensive in the long run.
“You want to know where the potential vehicle hoarding is occurring,” noted Todd Ewing, director of product marketing with Fleetmatics, a provider of cloud-based GPS fleet tracking technology. “These are company assets that are not being used well. If those idled vehicles are down in Texas and I have greater need for vehicles in Oklahoma, do I have an opportunity to reallocate resources across my enterprise before I decide to invest in more resources?”
Blaine agreed. “Take a look at overall vehicle inventory — across all of an organization’s locations. Sometimes fleets can be managed in a decentralized way, which can create inefficiencies. You might have a lot of multiple types of vehicles with low mileage. Challenge your organization to look at ways it can share those vehicles across groups or across budgets. And, if you can find some ways to logistically do that, you might be able to reduce the total number of vehicles in the fleet,” she said. “Also, in low-mileage situations, company reimbursement might be a more cost-effective option versus a company-provided vehicle. So, weigh all those options.”
2. Productivity. Ewing with Fleetmatics said that one key indicator for evaluating vehicle “productivity” is the ratio of vehicles to work-shifts. “If I have 10 technicians, do I really need 10 vehicles?” Ewing posed. “In many cases, folks don’t account for shift work. You may have a policy that allows people to home garage vehicles, which leaves seven out of 10 vehicles dormant overnight when there might be an opportunity to repurpose those vehicles for off-shift employees in and around the area.”
Stops-per-day is another metric. “If drivers are doing fairly uniform work, but I’m getting more stops out of some and not others, would it make more sense to consolidate that activity to a single vehicle?” Ewing said.
Also consider route proximity and timing. “You want to know: Do I have multiple vehicles in operation in tight geographic proximity of each other within a certain amount of time?” Ewing said. “If so, can I consolidate these routes and serve these customers with fewer trucks? “
3. Fuel Economy. The key question to ask when examining fuel consumption data is if the same job could be done with smaller, more fuel-efficient vehicles.
Burwell of Valero posed that question shortly after he arrived at the refinery company in 2000, when he noticed every area manager was driving a minivan. “I started looking into it because, over the years, the manager’s job had evolved where they didn’t need to haul much weight to justify a minivan,” he recalled. He shifted those drivers to sedans, which not only substantially reduced fuel expense, but also depreciation costs as the minivan resale market began to plummet in the early 2000s.
4 .Vehicle Lifecycle/Repair Costs. “Fleets should make sure they’re keeping vehicles for a reasonable amount of time — to minimize the amount of non-preventive maintenance expenses associated with those vehicles and the downtime,” advised Blaine with Donlen. “This way, you don’t have to keep ‘spare’ vehicles on hand, because, if you’re cycling the vehicles within an optimal time frame, this enables you to keep fewer numbers of those ‘spare’ vehicles on hand, which reduces fleet costs on a number of fronts.”
Overcoming Potential Driver Resistance
What looks great on paper in terms of potential cost reductions may not seem like an attractive idea to drivers, if the rightsizing initiative is not rolled out with care. That’s why Burwell at Valero recommended involving drivers in the planning and decision-making process.
“We’ve made it a priority to get our drivers onboard with the changes by taking time to explain why we’re transitioning to a smaller vehicle. We involved them early in the process to get their feedback before finalizing our decision,” Burwell said. “We explained how the four-cylinder Fusion would save us a substantial amount in fuel, but without sacrificing horsepower. In fact, our drivers would be getting vehicles that generated 20 more horsepower than what they were getting with the V-6. This approach has made our rightsizing efforts very seamless and successful for us.”
The Bottom Line
Once you think you’ve achieved the right balance in terms of both vehicle inventory and specification, make rightsizing an ongoing initiative.
“Understand that the business needs from a year ago could be very different today,” said Blaine. “It’s important to have a managed process on [at least] an annual basis to make sure you’re challenging the vehicle requirement assumptions because everything is changing — from business needs to the vehicles that are available on the market, as OEMs are coming out with lighter, more fuel-efficient vehicles.” FF