November 2, 2021 | Insights
What is Your Aging Fleet Really Costing You?
November 2, 2021 | Insights
How an Aging Fleet Costs More, Not Less, in the Long Run
If there’s anything that both consumers and commercial fleet managers both know, it’s this: Vehicles, whether they’re purchased for commercial or residential use, are terrible long-term investments. The second you drive a car off the lot, it depreciates 10%. In another year, that same car will be worth at least 20% less, depending on wear and tear. You can triple those figures for commercial vehicles.
Even after you’ve paid off the financing expenses for a vehicle, that never means the cost of operating that same vehicle goes down. In fact, the longer you use an aging truck in the fleet, you may actually be spending more.
The Cost Trap of the Extended Life Cycle
We don’t normally generalize, but here’s a good rule of thumb we feel confident in: Every good CFO encourages every team and every department to get as much use as possible out of every piece of equipment purchased. On paper, that makes perfect sense. Those vehicles, their depreciation, and the maintenance costs can serve as a smart long-term tax strategy, for example. Also, the moment a truck is paid for, the immediate impact on the bottom line is—and this may be an understatement—appealing to any number cruncher.
However, just because a truck has been paid for doesn’t mean it’s not costing the company serious money. An unreliable fleet has serious cost outcomes for you and your customers. Extending the life cycle of older equipment always has hidden costs.
The Real Cost of Down-Time
Older trucks long past their use-by date aren’t exactly known for being reliable. You can easily calculate the hard costs of fleet maintenance and how much you’re spending on part replacements.
Have you spent enough time calculating the soft costs? One soft cost that’s relatively easy to estimate is the hourly cost of a driver. If your driver can’t work because of a mechanical issue, simply multiply the amount of hours they couldn’t work by that number and you can see how quickly that adds up. There are quite a few more metrics to consider when you’re calculating just how much inoperable or unreliable vehicles are costing your company.
To understand how much a downed vehicle costs you per day, start tallying the total:
- The total value of profits delivered per driver
- Lost hours of driver productivity
- Regularly scheduled maintenance hours lost due to unscheduled repairs (including technician hours)
- Penalty costs imposed per late load
- Lost productivity per driver, including extra impact on other drivers and loads lost
- Higher costs per load due to inefficient fleet
In the digital age, speed may prove to be the most valuable currency. Even if you roughly estimate conservatively that down-time could cost a minimum of $500-$800 per day, that potentially adds up to several thousand per month.
Consider also benchmarking other hidden costs, including the expense of outside technical expertise (mechanics and suppliers for older parts) and other factors that are having a direct impact on your customers. Eventually, your reputation could suffer, something that no yard can afford.
Proactive vs. Reactive Fleet Management
When you’re operating an aging fleet, many managers will opt to wait until a truck is completely inoperable before replacing it. The problem? Inoperability is rarely scheduled. Trucks are generally ruled completely ineffective the minute they can’t be fixed or maintained in a cost-effective way, leaving the yard operations team to scramble until the replacement is purchased.
That unplanned replacement strategy clearly is going to be less cost effective over time. When your equipment is generally less reliable, it eventually impacts the customer experience. Good drivers and mechanics may leave to work under more optimal conditions. In fact, newer vehicles with maintenance plans and warranties, or even leased vehicles, have the added advantage of being more reliable.
How to Manage an Aging Fleet
There are plenty of fleet managers who still assume that the single metric they need is what the odometer says. However, the total mileage a truck has accumulated tells only part of the story.
Just like anything else in the yard, your fleet management requires a strategy. Each vehicle has a life cycle. At a very minimum, track the following for each truck:
- Frequency of operation vs. inoperation
- Does it satisfy current regulatory specs, and how soon will it become obsolete?
- What is the life cycle analysis of each vehicle (cost of operation, upgrades, etc.)?
- When will the vehicle cost more to repair than to replace?
The intent should be to replace or upgrade the vehicle before you have to make a major repair. For the best ROI, each yard needs a set of predictive analytics to help your management make decisions for the fleet itself.
Yard analytics is a specialized skill set, and one that your staff may not necessarily have the time or the inclination to learn. Their primary focus likely is getting through the day, and making sure the cargo gets precisely where it needs to go.
Our internal experts can provide you with an audit and the intelligence you need to make the right decisions for your yard personnel, staffing levels, and fleet management. We can also provide you with the right skilled labor, as well as top-of-the-line equipment, to keep your yard traffic running smoothly and on time.
NSSL’s shuttling trucks include tablets to signal to our drivers exactly where they’re needed, when they’re needed. We can also track where your trailers are at all times, as well as provide you with the additional flexibility of having the right number of drivers and staff precisely when you need them.
For more information and to get your free yard assessment, contact us today.