If we are honest with ourselves, most of us will grudgingly acknowledge that there are wasted dollars in our fleet budgets. The overwhelming majority of fleet managers are good stewards of corporate funds so budgetary waste is not blatant but often comprised of the cumulative impact of hidden inefficiencies – the fiscal equivalent of a death by a thousand cuts. This situation is best resolved by a quote attributed to Henry Ford that says: “If you watch the pennies, the dollars will take care of themselves.”
In a final analysis, the majority of fleet waste occurs because of non-compliance with fleet policy and, conversely, the lack of enforcement of it. It is estimated that, on average, 5-10% of a fleet’s annual budgeted dollars are wasted. The best way to identify waste is to conduct an efficiency audit of your fleet budget.
Everything in Fleet Revolves Around Money
Reducing fleet costs is a constant, never-ending struggle for all fleet managers, especially since every aspect of fleet management revolves around money. In lieu of requesting additional budget dollars, one course of action is to stop the waste of existing dollars. There are a number of fleet-related areas where waste occurs. For example, how much money is wasted in unnecessary over-spec’ing of vehicles, keeping under-utilized assets on the books, or non-compliance with scheduled preventive maintenance intervals that result in unproductive downtime?
Often, it is the people closest to day-to-day operations who are best at identifying waste. Therefore, seek suggestions from supporting departments and drivers on ways to reduce unnecessary expenditures, or ways to streamline fleet procedures. Examine the entire vehicle lifecycle for opportunities to eliminate waste. Often, cost-reduction initiatives focus on operating expenses, but depreciation is a fleet’s largest annual expenditure. Are you maximizing the resale potential for all assets, whether sold at auction or to employees? Or, are your remarketing practices leaving money on the table?
At its most fundamental level, waste involves consuming resources through inefficient or non-essential activities. This is not just waste, but wasteful. The greatest amount of waste occurs with the fuel budget. If up to 30% of a vehicle’s fuel efficiency is impacted by driver behavior, you need to minimize this inefficient use of corporate assets. In fact, many of these behaviors are in violation of fleet policy. Let’s start with one of the most wasteful of all fleet activities – unnecessary idling. Until the advent of telematics devices, unnecessary idling was not perceived to be a major problem for fleets. But, once engine data was captured by fleets on a large-scale basis via telematics, it quickly became apparent that idling represented a significant “hidden” problem. The amount of unnecessary idling varies by fleet, but some fleets have recorded idling as much as 20% of the time.
Besides unnecessary idling, there are many other ways that fuel dollars are wasted, ranging from inefficient routing to drivers not being price conscious when refueling. But, what about having drivers ensure that tires are properly inflated? Driving on under-inflated tires is not only dangerous, but wastes fuel dollars as well. This is the easiest, most cost-effective (and most neglected) way to boost fuel economy. For instance, keeping tires properly inflated increases fuel efficiency by 3%.What about overloading? This also may be perceived as strictly a safety issue, but overloading is another way precious fleet dollars are wasted. Overloading shortens a truck’s service life and increases operating expenses. In fact, fleet maintenance surveys consistently show that overloading is the No. 1 cause of unscheduled maintenance for trucks. There’s a direct correlation between vehicle weight and fuel consumption. Every pound of extra weight requires an engine to work harder, increasing fuel consumption. For instance, an extra 100 lbs. in vehicle weight can reduce mpg up to 2%. In addition, every pound deleted from curb weight is converted into revenue-generating payload.
Scofflaw Drivers & Equipment Abusers
Vehicle violations represent 1-3% of total fleet costs. However, the total cost will vary by fleet depending on the cities and states where vehicles operate. This is an area ripe with waste. Some drivers are egregious in their violations. In my mind, vehicle violations are not the cost of doing business; it is a needless waste of dollars. Let’s target flagrant scofflaws and stop the waste. Speeding is a common moving violation. Reducing driving speed not only reduces violations, it also conserves fuel. For every 10 mph of speed reduced, fuel economy improves by 4 mpg.
Waste Not, Want Not
Before implementing new fleet initiatives requiring new dollars, let’s make our No. 1 priority to stop the waste of existing dollars. The most effective way to reduce waste is to increase compliance with fleet policy. Fleet policy must be a powerful component of a company’s overall cost-control strategy.
Let me know what you think.
Originally posted on Automotive Fleet