Making small fleets profitable

Forget everything you know – or think you know – about managing a small truck fleet for your construction business. If you’re wondering how you can make sure those trucks hauling your equipment around or dirt off jobsites are making you money, stop and begin looking at them in terms of productivity. That’s the advice Bob Johnson of the National Truck Equipment Association has for you.

This is an issue Johnson has been studying for more than 30 years, first as a fleet manager and now as fleet liaison manager for NTEA. And over time, Johnson has reached some startling – and sometimes controversial – conclusions. “I really don’t think profitability is the right way to look at managing small vocational truck fleets,” he says. “There’s no doubt trucks indirectly affect profitability but you cannot realistically expect a vehicle itself to bring you a profit, unless it’s a crane truck, for example, and it provides a direct billable service for your customers. But trucks hauling dirt or equipment, serving construction machinery or construction materials to a jobsite should be expected to contribute to the efficient operation of your business in such a way that you will maximize your overall profit.”

In other words, don’t separate your trucks and try to turn them into an independent profit center. Instead, integrate them into your overall business plan and make sure they’re complementing the types of equipment and the type of work you’re engaged in.

Consider truck size and type when analyzing fleets
A good place to start is by determining what Johnson calls a fleet’s utilization factor. “You can never expect 100 percent utilization of the trucks in your fleet,” he explains. “But start with the obvious questions: Do you have a lot of trucks sitting around half the time or not being used at all? Say you’ve got a truck in the yard that you only use 20 percent of the time. Ask yourself if you can get rid of that truck and rent a vehicle suitable for the application when the need arises.” If you bought the truck as a backup in case your primary truck goes down, take a hard look at how often you actually put that backup unit into service. Peace of mind is one thing, but you might be able to tweak the specs on your primary truck and get rid of your backup altogether.

Next, look at your fleet and see what the utilization rate is among different types of trucks. If one type of truck works consistently while another type spends an inordinate amount of time sitting idle you may have the wrong type of truck in your fleet.

Size is another critical aspect you’ve got to consider when evaluating your fleet. If you’re using some trucks – say, your Class 7 dumps work every day, but you only use your Class 8 dumps once every other week or so – it’s a sign something’s wrong. Maybe your equipment is more productive loading Class 7 trucks. Or maybe the Class 8 units just can’t maneuver on your jobsite or through town effectively. Either way, use your overall productivity as a guide to see if liquidating your odd-sized trucks and replacing them with more different-sized vehicles will boost your crews’ performance.

Bob Johnson’s 20-plus years of vocational fleet experience has led him to some controversial theories about truck management strategies.

The balancing act
Optimizing truck sizes is important for your pickups too, Johnson adds. “Lots of times, I see contractors who’ve bought their supervisors heavy-duty pickups – an F-350 or 3500 Series, for example – on the theory that it can be used to haul heavy materials if the need arises. But in reality, all the supervisor does is run up and down the road in it.”

What you’ve done, Johnson says, is over-spec’d for a particular application. “It’s always a good idea to get by with a smaller vehicle whenever you can,” he explains.

This philosophy holds true for large trucks too. Many contractors spec trucks with heavy-duty components, feeling they’re getting a tougher, longer-lasting truck that won’t be overloaded. But Johnson points out if you don’t actually need the extra capacity, all you’ve done is increase that truck’s costs across the board. The initial purchase price will be higher, and your carrying cost will be as well. Your fuel economy decreases right off the bat, and routine maintenance costs increase. “Big trucks require bigger, more expensive tires and heavy-duty brakes,” Johnson says. “They might last a bit longer than standard tires and brakes, but they’re going to be much more expensive when you do have to replace them. Remember every component on a truck becomes more expensive as the truck gets bigger.”

But here’s the rub – an under-spec’d truck is no bargain, either. Johnson says an under-spec’d vehicle is going to cost you money just as surely as an over-spec’d one. “If you focus too much on savings up front, you’ll typically end up with a smaller truck that isn’t right for your business,” he says. “It’s pretty easy to figure out if you’ve made this mistake because you’re literally working your trucks to death. They’re overloaded, they have high maintenance costs and an extremely short service life. And to top it all off, you have next to no resale value in the truck at the end of its life.”

Forget fuel economy
Next time you’re in the market for a new truck, Johnson suggests drawing up its overall configuration by first determining your payload requirements, since they determine the weight and type of vehicle you need. Next, work on the design of the truck – this includes basic requirements like axle placement, cab layout and body type. “Generally the last thing you do is actually spec the vehicle itself,” Johnson says. That’s when you want to make sure its gross vehicle weight and the gross combined weight ratings are adequate for the job and the individual axle ratings are adequate so that you’re not overloading. Then, select the right engine and transmission – but not necessarily the biggest available.”

To help you do this, Johnson notes just about all major truck manufacturers now have computer programs that will do a powertrain design for you, and the NTEA has spec’ing information on its website. These programs can take factors like your desired road speeds, gradability and other performance factors and help you optimize your truck’s performance.

But, Johnson says, don’t get too hung up on fuel economy. “That’s almost a non-issue for short-haul commercial vehicles,” he explains. “You’re going to burn fuel; it’s a fact of life. We recently tested a standard 3/4-ton panel van, running it through a standard course for a set number of miles to obtain a reasonable fuel usage factor. We then took the same van and installed a ladder rack and a ladder on the roof. When the van was run through the course again, with the same driver at the wheel, its fuel economy dropped 35 percent.”

Those are the kinds of factors that drive Johnson to tell construction contractors to spec for productivity and performance instead of vehicle-driven profits. “A truck is a tool,” he says. “And the key to its success is utilization. If you ensure that, then you can be sure your truck is contributing positively to your bottom line.”