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Maintenance

Evaluating Options for Outside Service

July 2017, TruckingInfo.com - Cover Story

by Denise Rondini - Also by this author

More than 15 cents per mile. That’s what it costs a fleet on average for maintenance and repair, according to the American Transportation Research Institute. That equates to about 10% of a fleet’s vehicle-based operating costs.

Currently fleets are conducting 75% of their maintenance in house, according to Molly MacKay Zacker, vice president of operations at MacKay & Company, a market research company for the trucking, construction and agricultural equipment industries. However, when her firm surveys fleets every four years in its Truck and Trailer Service Study, fleets indicate they want to outsource more of their service work — yet the percentage of in-house service continues to remain steady. MacKay’s predictions are that in 2020, 68% of the 672 million service labor hours will be handled in house.

According to MacKay Zacker, “The reason fleets cite for not outsourcing more is they can’t afford the turnaround time.” Quality of work and cost of repairs are the other items that top the list of fleet concerns about outsourcing their service work. “Concern about downtime and turnaround time is a huge issue,” she explains, “and it is not just getting the truck where it needs to be to get the service done, it is how long is it going to take to fix it once it gets there.”

She adds, “Fleets consider that to be a deep dark hole. The truck goes to [a shop] and they have no idea when it is coming out.”

CK Commercial Vehicle Research’s Fleet Productivity Study found that 36.8% of the fleets surveyed (mostly fleets with fully staffed maintenance facilities) improved productivity over the past several years by performing more maintenance in house. Chris Kemmer, consultant at CK Commercial Vehicle Research, a market research company focusing on the trucking industry, says the average productivity gain was 14.5%. “It comes from the time saved doing it themselves vs. having to wait at an outsourced vendor, along with the time spent getting the vehicle to and from that vendor.”

However, as trucks continue to get more complex and as there continues to be a shortage of qualified technicians, more fleets, especially small to mid-sized fleets, may find they need to outsource at least some of their service work.

Joe Gallick, senior vice president, national account sales at NationaLease, a full-service leasing organization, doesn’t think companies wake up one day and say, “let’s outsource our fleet maintenance operations.” Rather, he says, “There is usually an event or financial recognition that triggers a company to explore better alternatives to properly maintain their fleet.”

Outsourcing can be done for a variety of reasons, says Charlie Roach, director of fleet services for Snider Fleet Solutions, a provider offering mechanical service both in-shop and on a mobile basis. “It could be to have a provider take on bigger jobs to free up the fleet’s own shop to handle the day-to-day workload of PMs and driver write-ups. It could be to cover manpower deficiencies. It could be to react to increased workloads caused by an increase in business.”

For some fleets, it’s about dealing with the increasing complexity of trucks.

“Vehicle technology continues to become more complex as diagnostic tools and telematics integration is making it difficult for fleet operators to keep pace,” says Bill Dawson, vice president of maintenance and engineering for full-service leasing provider Ryder. “The required investments in shop technology and technician training resources are just some of the factors driving the marketplace to make the decision to outsource. Many fleet operators faced with the decision to invest in these areas are finding that it’s not their core competency.”

Ask potential service providers what kind of training they provide for their staff as well as what certifications their technicians hold. Photo: Kroger Equipment And Supply
Ask potential service providers what kind of training they provide for their staff as well as what certifications their technicians hold. Photo: Kroger Equipment And Supply

What to outsource and to who

Before beginning the process of finding the service provider that best meets a fleet’s needs, a fleet manager needs to do some homework on the fleet’s operations.

“Fleets that truly understand their costs have the data they need to perform the deep analysis that is required to reach the best conclusions about meeting their maintenance needs,” Dawson says.

Victor Cummings, vice president, service operations, for mega-dealer group Rush Truck Centers, says before fleets review outside service providers, they need to look at their truck utilization, including what percentage of the fleet is out of service each day, as well as the business dynamics impacting downtime. Once you’ve looked at that, he says, you can “evaluate your internal inefficiencies and lost revenues versus [your] maintenance budget.

“Service providers need to know what specifically is causing the downtime,” Cummings says. “Is it a people shortage? Equipment shortage? A lack of support at their local dealership? Lack of internal resources/technicians?”

Shane Gilliam, vice president of sales at Noregon, which offers diagnostic, repair, and data analytic solutions, says fleets need to assess their own capabilities to determine which work they have the ability to handle themselves. Then they need to ask themselves if they are willing to invest money into shops to get them to where they need to be.

“Anything that anybody does is an acquirable competency,” says Joe Evangelist, executive vice president of Transervice Logistics, a transportation and logistics solutions provider. “You can buy talent, but the question you then have to ask yourself is, what is the management diversion to manage that resource, and is it a good allocation of your resources?”

The difficulty of the work and the skill level of the fleet’s technicians need to be considered when deciding which type of work to outsource, according to Phil Watkins, vice president of customer support at Nuss Truck & Equipment, a Mack and Volvo dealership. “If the fleet technicians are pushed beyond their training and experience, the repair time and total cost often exceeds a qualified and competent OEM dealer or repair facility, where they would also have a warranty on the repair and many times higher quality.”

Rush’s Cummings recommends fleets consider outsourcing things that could be more cost-effective if outsourced, or jobs where they don’t have the resources they need. “That could be complex jobs that can’t be done internally or that cause interruptions in the business,” he says. “Large-scale jobs may be better to outsource because an independent service provider can complete the repairs in a shorter timeframe.”

Once you really dig deep into the costs, you may find it’s not really cheaper to do it yourself.

MacKay & Co.’s data shows that while fleets want to outsource more, most continue to do their own maintenance and repair work.
MacKay & Co.’s data shows that while fleets want to outsource more, most continue to do their own maintenance and repair work.

“Sometimes we may lead ourselves to believe we are more capable than we are and that we can save money by doing it ourselves, when really all we are doing is adding additional costs to the operation,” says Bruce Greer, president of Kroeger Equipment and Supply, a provider of aftermarket parts and service. He believes if the vehicle has to be hooked up to a laptop to clarify or validate a fault code, it needs to go to an outside repair facility.

Joe Laux, CEO of River States Trucks and Trailer, a Freightliner dealer, suggests fleets try to find a service provider that is an extension of the fleet. “Work with a service provider to determine how they can make their repair practices consistent with your fleet’s standard procedures.”

Make sure expectations are clear

After determining which service work to outsource, it is important for both sides to define expectations.

Above all else, Gilliam says, fleets should expect on-time repairs to minimize downtime. “There should also be an expectation that everything gets fixed correctly the first time, ensuring a return trip will not be necessary,” he says.

Greer says he tries to live up to customers’ expectations to get in and out of the shop as quickly as possible. “We try to get the truck in the bay within an hour to determine the problem, give them an estimate of how long the repair will take to complete, and when we can start on it.” He also has hired a retired technician to perform post-repair quality checks.

Preventive maintenance continues to be the lions’ share of service work, but electrical diagnostics and repair are on the rise, according to MacKay & Co.
Preventive maintenance continues to be the lions’ share of service work, but electrical diagnostics and repair are on the rise, according to MacKay & Co.

Evangelist takes a holistic view. “There should be the least amount of disruption possible. Fleets should be able to make the transition [to an outside service provider] without even knowing a change was made.” For this to happen, fleets and service providers have to share expectations in the beginning. “You have to establish KPIs [key performance indicators] so the service provider knows he is satisfying the fleet’s objectives.”

Avoid this costly mistake

In evaluating outside service providers, one of the biggest mistakes fleets make is looking at the lowest price vs. the lowest total cost of service, says Michael Riemer, vice president product and channel marketing at Decisiv Inc., a service relationship management solutions provider. “You may pay a lower labor rate and even purchase parts less expensively, but if your trucks are going to be down longer or have more frequent parts failures over time, your actual costs are much higher.”

Tim Grabow, vice president of Blaine Brothers, a heavy-duty truck and trailer service provider, urges fleets to pay close attention to the way a shop runs its labor rates. “Quite honestly labor rates, in my opinion, are an illusion.” For example, one shop with a labor rate of $100 an hour uses Standard Repair Times that say a wheel seal job should take 2.5 hours. Another shop may tell the fleet their labor rate is $75 an hour, but if they don’t use SRT they might charge four hours of labor. “Instead of asking a shop what their labor rate is, ask them how much they charge to do a brake job, for example,” he suggests.

Deryk Powell, president of Velociti, a provider of technology deployment services, acknowledges that price is always a major consideration in the service provider selection process, “but price is also far too often looked at in the context of ‘sticker price,’ rather than in the context of total cost of ownership and the effect on the overall return on investment.”

Riemer cautions that as a fleet moves to an outsourced service model, repair costs initially may go up, but they should go down over time. “Deferred maintenance is a huge liability that fleets rarely if ever capture adequately,” he says. When maintenance and repair are turned over to an outside service provider, there may be some catching up needed to ensure all the trucks in the fleet are up to date on their maintenance needs.

Set the rules in advance

Once you’ve selected an outside provider, fleets need to have a clear set of standard operating practices and metrics for success, Riemer says. “They also need to have what we call a ‘rules of engagement’ document, which clearly sets forth their expectations around service requests, communications, points of contact, inspection and labor operation standards, estimate approvals, data exchange formats, etc.”

These rules of engagement protect both parties because everyone knows what the expectations are and how things will be handled. “Fleets should expect what they set forth as their expectations,” he says. “I know that sounds corny, but most relationships fail because of unmet or misaligned expectations.”

Kenneth Calhoun, vice president of customer relations at Truck Centers of Arkansas, a Freightliner dealer, explains that the Technology & Maintenance Council of the American Trucking Associations recognized the importance of creating a relationship between fleet and service provider by creating a Recommended Practice. RP 535, Template For Establishing Fleet/Service Provider Relationships, “helps make sure there are no surprises,” Calhoun says. Using this RP as a guideline helps “make sure everybody understands the rules of the game from the start and it is not ‘let’s figure it out along the way.’”

Downtime is the biggest concern keeping fleets from outsourcing more work, according to MacKay & Co. research.
Downtime is the biggest concern keeping fleets from outsourcing more work, according to MacKay & Co. research.

The RP includes a section on repair and maintenance services that are required and what is available, sets forth an authorization process, provides information on technician certification, and gives labor and parts pricing, among other things.

Communication is key

Nothing makes a relationship sour faster than lack of communication. In fact, Greer believes a service provider can’t communicate enough with a fleet. “Communicating information in real time is becoming more and more important,” he says.

Gallick says, “There is more reliance on digital communication, and the ability to access and share real-time information is important in choosing a service provider. I’m not saying, within the context of managing the customer relationship, that you replace good, old-fashioned verbal communication with bits and bytes. Instead, the ability for partners to access and share information in a fast paced environment can enable improved communication and informed decision-making.”

If it were up to Calhoun, the telephone would disappear as a means of communicating during service events. “It has always represented a bottleneck in our world,” he says.

TMC is working on an RP on the transparency part of the service equation. “The task force has laid out some guidelines covering what information should be going back and forth and how that data should be shared. We are trying to get to the point where the fleet knows what we know when we know it. That is the ultimate goal,” he says.

Dave Latimer, vice president of shop strategies and operations for Pilot Flying J, operator of travel centers and travel plazas, looks at communication differently. “I think fleets actually want minimal conversation,” he says. “What they are hoping is that the initial touch is fairly complete, meaning that you’ve taken a look at what the situation is, you’ve sized it up, you’ve communicated to the fleet what the issue is and given them an estimate of the cost of the repair.”

Tips and advice

Grabow reminds fleets that they are looking for an outside service provider for a reason. “Identify what those reasons are and make sure that whoever you pick is not just the cheapest, but is someone that can actually meet your needs.”

Latimer concurs. “It is not just about price. It is readiness and how quickly they can get you back on the road and fix the truck right the first time. Then you can look at cost, but getting the truck ready to roll again is the most important thing.”

One thing to remember about outsourcing is that it is not an either/or proposition, “Fleets do not have to outsource all of their maintenance and repair if they have the capabilities to do some work in house,” Gilliam says. “Look for a service provider that fills the gaps, geographically, where the fleet does not have its own locations.”

He also suggests having more than one service provider. “It is a good practice to have a primary provider and a secondary option to help ensure bay, labor and parts availability for emergency repairs.”

Powell offers this final piece of advice: “Weigh all the pros and cons and look at the bigger picture. Maintenance and repair is more than just having a technician on site to fix a system that is down. Making sure the approach, whether internal or through an external provider, addresses all the key questions of access, inventory, minimal downtime, etc., is critical to your fleet’s bottom line.”

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