Replacement Planning – CAPEX and OPEX
The planning of a fleet replacement program is dependent upon 2 important requirements;
- A fleet register that details vehicle description, age, last known Kms and monthly usage
- A vehicle replacement policy that includes recommended timing for the replacement of each category of vehicle, based on time and Kms.
Integrating the above information only provides a guideline for replacement planning. Developing a finalised plan requires additional analysis.
The initial plan is based on calculations and the application of the following process;
- For each vehicle, identify the months remaining to the replacement AGE point ( Policy age less actual age)
- Identify the months remaining to the replacement KMS point (Policy Kms less Actual Last known Kms / actual monthly usage)
- The lesser of the Age and Kms calculation is the calculated time to replacement
- Determine the CAPEX requirement at the calculated point of replacement, by identifying the current cost of the proposed vehicle and inflating that cost to the point of replacement. Be conservative in your costing.
- Consolidate the replacement date for each vehicle into a spreadsheet. This will provide a replacement forecast for monthly CAPEX requirements going forward.
This replacement forecast cannot be considered to be the final program. Apply this additional Right Sizing process:-
- Review all high utilised vehicles; - can they be replaced by a similar and acceptable vehicle that has low utilisation, but has reached policy replacement AGE
- Review all low utilised vehicles. Can they be transferred to an area of higher usage?
- Identify vehicles with excessive maintenance costs and / or are unreliable
- Identify vehicles that are out of service and / or awaiting expensive and uneconomic repair
- Remove any vehicle that is unneeded and does not need to be replaced.
This process of transfer and identifying vehicles for disposal will Right Size your fleet.
It is probable that this replacement planning process will identify a CAPEX requirement that is in excess of the available budget. Using the right sizing methodology, vehicle replacements will be prioritised and vehicles to be disposed of will similarly be identified. This final analysis will provide a reliable CAPEX forecast
An OPEX forecast is developed in the same manner. The finalised CAPEX plan will look like a fleet register with existing and new replacement vehicles and becomes the OPEX framework.
The objective of the OPEX forecasting model is to identify future Fuel, Maintenance, relicensing and insurance costs. Plus of course anything your business requires. Importantly, include average monthly Kms usage in your model, as some of these OPEX costs are variable.
Determine and incorporate into your forecasting model cost and consumption benchmarks values for all vehicles, both old and new. Remembering new vehicles will have lesser fuel and maintenance costs than older vehicles. Again be conservative.
As examples;
- Old LDV travelling 2250 Kms pm maintenance 60cpk = R1350 pm
- NEW LDV travelling 2250 Kms pm maintenance 35cpk = R787 pm
- Old LDV travelling 2250 Kms pm Fuel @ 14L/100Kms = R3780 pm
- NEW LDV travelling 2250 Kms pm Fuel @ 11L/100Kms = R3217 pm
Build your CAPEX and OPEX forecast around the above and you will have a sound costing model.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za