Right Sizing the Fleet
Completing a fleet audit will identify all manner of things; good and bad. This is a big opportunity to significantly cut costs.
As we normally do, let’s start with the required end result because that will inform the process to be applied.
Reduce the fleet size by disposing of:
- Underutilised vehicles
- Out of service vehicles
- Vehicles with excessive TCO (total cost of ownership) - maintenance
- Vehicles beyond point of replacement
All of the above is totally subjective unless you have replacement policy and operating cost benchmarks in place (for this article we will assume you have).
Let’s address each objective
Underutilised vehicles. This is probably your greatest opportunity. Your audit will identify age, last known Kms and monthly usage. Target vehicles with low monthly usage, this could be for many reasons;- excess to need, wrong application, old and unreliable. Low usage can also be due to seasonal usage. Can this be replaced with a rental or outsourced service. Can these underutilised vehicles replace another vehicle older vehicle scheduled for replacement?
Out of service vehicles. This category of vehicle is often related to major mechanical repair. How long has this vehicle been out of service – have you missed it? The cost and benefit of returning out of service vehicles to fleet needs careful review.
Vehicles with excessive TCO (total cost of ownership) – maintenance. Assuming you have detailed maintenance records and expenditure benchmarks. Vehicles with excessive maintenance expenditure should be carefully reviewed and where appropriate should be shortlisted for replacement. Include fuel consumption in your TCO analysis.
Vehicles beyond point of replacement. Vehicles past their replacement timing should be shortlisted for replacement
Importantly the review and preparation of a short list for disposal or replacement is not an absolute. Your business will have budgeting constraints which will necessitate prioritisation.
Managing your fleet size is just not restricted to numbers. It’s also about selecting the right vehicle for the job – do you really need a 4 x 4. Can you use outsourced rental services to cater for seasonal or specialised and infrequent usage. It’s about understanding your needs and having information available to facilitate decisions.
The financial benefits of improved utilisation and reduced fleet size are substantial. For a fleet size of 200 vehicles a 5% improvement reduces fleet size by 10 – 15 vehicles depending on current availability levels. This has a minimum cost benefit of approximately R1.0 million pa, depending on vehicle type.
Remember “Your cheapest vehicle is the one you don’t have”.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za