Maximizing Fleet Effectiveness
Whether you are the U.S. Postal Service, a major city, state agency or a public utility, effectively and efficiently managing your heavy vehicles and equipment fleet can drive substantial cost savings and service improvement for your business. Fleet management and fleet operations have generally not been viewed as ripe for innovation by nontransportation businesses many of which tend to focus on optimizing other, more readily visible stages of the supply chain. So it may not seem obvious that improving the effectiveness in managing fleets of nontransportation organizations, when approached rigorously, can contribute to achieving high performance and improving stakeholder value.
However, consider the following: leveraging our industry expertise and business experience, Accenture has embarked on a major program to identify the characteristics of the high-performance business. As part of that effort, Accenture has aligned supply chain mastery behaviors with operational performance drivers to significantly enhance fleet operations. These include adopting leadingedge practices and technologies and executing effectively against defined goals and metrics. In our experience, most organizations that do not primarily focus on transportation are missing the opportunity to apply leading practices and operational rigor to drive significant improvement in overall fleet management. Rather, these organizations lean more toward traditional practices and businessas- usual approaches.
For many, the results are suboptimal fleet management practices and operations with a list of poorly performing characteristics. This is particularly true of many specialized fleets that we typically find in utilities, government agencies, construction companies, etc. Fleet asset utilization is not typically tracked or measured, which leads to missed opportunities for cost savings and value enhancement. These missed opportunities can result in organizations having more vehicles than necessary; having higher operating and maintenance costs; and still not always having the right vehicles for the job, in the right place and at the right time. Standards and specifications for these fleets also have typically grown out of control, making internal maintenance and repair programs difficult to manage and driving procurement costs to unnecessarily high levels. Decision support technology necessary to understand these costs and rigorously evaluate alternatives is rarely adopted. Additionally, without this technology, it is difficult to understand usually fragmented fleet costs, which lead to problems in trying to adequately and accurately assess operating efficiency and evaluate outsourcing opportunities.
By challenging the way vehicle and equipment fleets have been traditionally managed and run, executives can identify exceptional opportunities to create an integrated fleet management strategy. This strategy, supported by carefully structured business processes and enabled by technology, can offer near-term benefits of cost-savings and improved service. But more than these substantive potential early benefits, the development of a sustainable, re-engineered process can have results far into the future of a high-performance organization. Such far-reaching and effective initiatives have the long-term effect of freeing up scarce capital while producing sustainable reductions in operating costs.
Total Cost of Ownership Takes Center Stage
Accenture has deep experience in working with leading private and public-sector fleet management executives in what we call maximizing fleet effectiveness. Our approach to fleet effectiveness focuses on ensuring that an organizations fleet has the right number of vehicles designed and engineered to perform the right jobs at the lowest total cost of ownership (TCO) which encompasses vehicle procurement, operations and maintenance, along with disposition and replacement as measured by the appropriate metrics and key performance indicators (see Figure 1).
Conventional approaches to fleet management operate as traditional silos related to buying, operating and maintaining, and ultimately disposing of vehicles. Accentures innovative approach maximizes fleet effectiveness by managing across functions to the lowest TCO. The approach puts fleet management within the context of an organizations overall supply chain performance. That is why we view TCO as one integrated and continuous process that can be colloquially referred to as buy smart, deploy smart, run smart, sell smart. Our experience shows that executing at a level anything short of this drives up fleet operating and capital costs and diminishes performance and stakeholder value.
Buy Smart, Deploy Smart, Run Smart, Sell Smart
Organizations looking to maximize fleet effectiveness need to start by evaluating their existing fleet. This includes analyzing the types of vehicles and their utilization and operating costs; reviewing the administrative and operating practices related to procurement, deployment, maintenance and disposition; and determining replacement scheduling.
The first step is to conduct a right-sizing exercise to determine if the fleet's size and makeup is appropriate to the function it is intended to perform. This will typically identify potential surplus vehicles that show a pattern of low usage. While not all low-usage vehicles are good candidates for disposition, the key outcome of this step is documenting the value that each vehicle brings to your organization.
The resulting ability to rationalize vehicle classes, standards and specs will help drive out excess costs. This often is facilitated by a standards and specifications committee field-operating and fleet management experts who work together to develop a simplified, standardized fleet configuration with the highest possible volumes assigned to each class of vehicle.
Deploy Smart
Your deployment capabilities are a critical input to customer service and satisfaction. This step involves ensuring that sufficient vehicles, with the right specifications and capabilities to perform the required work, are ordered properly and delivered on schedule to meet the demands of the field organization responsible for their use. This is driven by appropriate management of your fleets life cycle, the outcome of which is a calendar that provides the replacement order cycle times (charting what vehicles should be replaced and when) for all vehicle classes.
Run Smart
A comprehensive review of maintenance and repair practices is also needed. This review examines everything from inventory on hand and vendor management, to mechanic productivity and shop facility costs. The focus of the review should be on establishing a reliable baseline of costs and getting a good handle on whether the operation is running efficiently and effectively versus what could be accomplished by third-party providers.
Sell Smart
Selling smart discarding vehicles identified as surplus or end of useful life is very important to life cycle cost management because of its role in maximizing residual value (culling vehicles when the most cash can be gleaned, typically through wholesale vehicle auctions). One way to sell smart is to track the commercial value of vehicles being sold. This will often influence your approach to standards, specs and future purchases at the beginning of the cycle, which can enhance marketability at the time of disposition.
Once you understand your optimal fleet size, operations, maintenance costs and service profile, its time to assess whether it makes sense to evaluate outsourcing options and on what component of the business. Typical candidates that can be considered are maintenance and repair activities, warranty management, parts inventory management and routine fleet administrative tasks, such as titling, licensing and registration, as well as disposition management.
While all of these aspects of buying, selling and running smart are critical to successful fleet management, the program still must be rigorously implemented. Only then are the true benefits realized. This also is the hardest, grittiest, most detail-oriented, painful and demanding part of fleet re-engineering and often the downfall of programs large and small.
Comprehensive Fleet Re-Engineering, High-Performance Results
Most organizations do not undertake a comprehensive fleet re-engineering program all at one time; rather, they focus on developing a coordinated and well-defined program that enables them to start achieving noticeable and high-value steps. In this way, they can implement a fleet management effectiveness program in pieces and parts as time, resources and budgets permit. An example might be rationalizing vehicle classes and specifications, and then following through with a strategic sourcing program for vehicle acquisitions.
The advantage of taking such an integrated approach is that a level of continuity and momentum is achieved that, once executed, can carry the program for years to come and provide optimum fleet efficiency essentially building a new corporate culture of excellence in fleet and equipment management in their organization.
An example of an organization that took this approach illustrates the impact that can be generated through an integrated fleet management process. As part of its ongoing efforts to become a high-performance business, a large utility with a national scope of operations recently undertook a comprehensive fleet management effort in partnership with Accenture. This project combined the tasks of re-engineering fleet standards and specifications, while executing a companywide strategic sourcing initiative that led to singlesourcing with one vehicle manufacturer. A relatively modest investment has generated dramatic savings to date. Accomplished over six months, the programs achievements include:
- More than 20 percent reduction in the cost of acquiring vehicles;
- A drastic reduction in vehicle classes, from 450 to 32 in the core fleet;
- Standardization of vehicle life cycles;
- Improvement in maintenance and repair practices; and
- Additional savings in administrative costs.
These kinds of dramatic results are not unusual when Accenture has collaborated with companies to help them maximize fleet effectiveness. Furthermore, the development of a sustainable, re-engineered process can have results far into the future including freeing up scarce capital while producing sustainable reductions in operating costs.
Moreover, the application of GPS technologies and predictive monitoring techniques to the tracking, deployment and maintenance of vehicle fleets is just around the corner. In fact, we are currently conducting a pilot with Metro St. Louis (one of the United States top municipal organizations) to incorporate a predictive monitoring system for its bus fleet. The buses operating data, which comes from the sensors on the bus, are compared with healthy operating models to enable a shift from preventative maintenance to predictive maintenance extending maintenance intervals, reducing costs and optimizing inventory and labor scheduling.
Organizations should look for similar opportunities to maximize their fleet effectiveness. Those that have an established fleet management process in place are positioned to seize the next generation of innovative solutions and accelerate their journey to high performance.
This article is adapted from Maximizing Fleet Effectiveness by Brooks Bentz and Kris Timmermans in Pushing the Envelope, a thought leadership initiative focused on the revolution in business and technology within the postal industry. Published by Montgomery Research © 2004.
