Trucks: Five rules for controlling fleet costs
| June 12, 2007
Controlling costs and managing vehicle expenses is tough for fleet managers – whether you’re in charge of a large fleet of dump or mixer trucks, or simply trying to decide how to replace your company’s lone Class-8 equipment hauler.
The National Truck Equipment Association recently released its Five Rules For Controlling Fleet Costs. The study focused on outlining effective methods for keeping expenses under control by properly spec’ing components on new work trucks. “Far too often, fleets purchase on a hunch,” explains Robert Johnson, lead consultant, Fleet Consulting and Design Services, Jefferson, Maryland. “In today’s cost-conscious, competitive environment, it’s more important than ever that fleet managers take the time to understand their vehicle needs and evaluate components for the lowest overall lifecycle costs.”
Every contractor or construction fleet manager can glean something useful from these spec’ing guidelines, regardless of whether you’re spec’ing heavy-duty dumps or heavy-duty pickup trucks.
Rule 1. Develop written specifications for complete vehicle applications (including upfits)
Putting some time and thought into the components you want spec’d on your next work truck is a great start – but don’t stop there. Go the extra step and prepare written specifications to ensure the components you choose are the ones actually installed on your truck. Remember fleets may receive different components from the ones originally spec’d depending on which upfitter assembles a particular vehicle. Putting your specs in writing also helps protect against ordering errors and gives you a record that can simplify matters the next time you order a truck.
Rule 2. Standardize components when possible
Standardizing components helps ensure you get the same finished truck regardless of the dealer or upfitter used in the purchasing and spec’ing process. Most upfitters have their own preferred brands. So if you don’t specify which brand component you want on your truck, odds are the upfitter will automatically default to its preferred choice.
Another plus is standardized components on trucks minimize the number of parts your shop or maintenance department has to keep in stock. They also reduce the amount of training your technicians will need to keep the trucks on the road. If a variety of brands are used, technicians have to learn how to install and work on all of them.
Rule 3. Don’t automatically “under-spec” or “over-spec.”
If you’re committed to keeping truck acquisition costs in line, it’s awfully tempting to approach the spec’ing process with an eye toward coming in with the lowest possible up-front cost. But skimping on components up front can end up costing you even more money down the road. “Budget-spec’d” trucks often perform poorly and experience more downtime and have higher maintenance costs than trucks spec’d with performance as the No. 1 criteria.
At the same time, there are fleet managers who go overboard trying to increase uptime and reduce maintenance costs by spec’ing the most heavy-duty components available, regardless of whether their application calls for them or not.
These over-spec’d trucks generally cost more initially than a properly spec’d vehicle. And the irony is they often end up requiring more expensive maintenance regimes and replacement components. Worse, the increased weight heavy-duty components add to the truck reduces the payload they can carry, leading to a direct drop in productivity. In extreme cases, this productivity drop-off can be severe enough to force the purchase of a bigger truck to handle the job.
Rule 4. Identify vehicle requirements up front based on job requirements
This is the most important rule to follow when spec’ing a truck: Optimize the components for the application at hand. Start by identifying the truck’s basic functional requirements for its intended use. Next, factor in any additional features intended to increase productivity, reduce maintenance costs and improve operator comfort. Consider the following requirements as you draw up these specifications:
- Net payload
- Operating environment
- Operating conditions
- Operating cycle
- Loading cycle
- Starting gradability (average)
- Reserve gradability
- Minimum desired road speed
- Towing requirements
- Special job requirements
- Maintenance environment
- Operator proficiency
- Regulatory and contractual requirements
It’s a good idea to review these requirements before each vehicle purchase to make sure they have not changed dramatically since your last acquisition.
Rule 5. Consider lifecycle costs.
A truck that has been optimized for its intended application will provide the lowest overall cost of ownership over its lifetime when all factors are taken into consideration. The primary factors affecting lifecycle costs are:
- Initial purchase price
- Long-term operating costs
- Long-term maintenance costs
- Vehicle productivity
- Resale (or salvage) value
When evaluating the cost-to-benefit ratio for any component that might potentially be installed on your truck, consider the time value of the money and the impact of taxes on your cash flow. The easiest way to do this is to calculate a basic after-tax net versus present-value analysis and make sure you’ll be getting your money’s worth out of the truck.
The potential for error and costly mistakes is too high to simply go with your gut when spec’ing a work truck. “It’s important that fleet managers learn as much as they can about the various components so they can make informed purchasing decisions,” Johnson says.
Source: National Truck Equipment Association. For more information, call (800) 441-NTEA