Eliminating Soft & Hidden Costs

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Hard fleet costs are pretty straightforward: vehicles, parts, fluids, fuel, etc. The soft costs, like those related to safety, productivity, and downtime, on the other hand, can be tricky. And then there are the hidden costs — those expenses just loitering about hoping no one will notice them.

While the terms “soft” and “hidden” may sound rather innocuous, those costs add up. Here’s how to eliminate them:

1. Reduce Excessive Idling

Idling may seem harmless — it’s just a truck sitting there quietly, not hurting anyone, right? While idling might keep a driver cool in the summer or warm in the winter, it’s harming your budget. Think about it this way: when a truck idles, it gets zero miles per gallon. Is that the fuel economy you strive to achieve? Not likely.

Here’s another way to look at it: A broad estimate suggests that idling wastes 1/5 of a gallon of fuel per hour. If you have a fleet of 500 trucks that each idle 10 hours in a year and you pay an average of $2.65 per gallon, those 5,000 hours of idling cost $2,650 in fuel to travel zero miles.

So while idling might seem harmless, it’s an expense hiding in plain sight.

What to do: Educate drivers on the expense associated with idling and encourage them to turn off the motor when the truck isn’t in service. Telematics devices can help, too, by logging the number of hours every vehicle spends idling. This is data you can use to make drivers aware of their behavior and strive to do better. Some fleets even create idling competitions, recognizing drivers with the lowest number of idle hours.

2. Improve Driver Behavior

Reducing idling isn’t the only thing drivers can do to diminish hidden costs. The way they drive can also have an impact on fuel economy. Things like rapid acceleration, harsh braking, hard cornering, and speeding can all waste fuel.

What to do: Track driver behavior. Telematics devices can reveal data about exactly how drivers are performing on the road, allowing you to coach drivers on the proper driving techniques — and reducing the costs associated with fuel wasted due to these behaviors.

3. Prioritize Proper Preventive Maintenance

While preventive maintenance is an expense, it’s a necessary investment — and one that can save costs down the road.

First, think wear and tear. If PMs aren’t performed properly and on time, vehicle health degrades faster — and that means additional expenses associated with unplanned repairs (parts and labor) and downtime (towing and vehicle rental).

Second, additional wear and tear has an impact on your fuel economy, which can be reduced by anywhere from 10 to as much as 30 percent.

And finally, when you go to sell that truck, resale value can take a hit. After all, a truck that’s in good working order and has documented PMs will sell for a lot more at auction than one with a rough running engine.

What to do: Don’t skimp on preventive maintenance, and be sure to perform it on time. Telematics technology can conduct real-time diagnostics, and alert drivers and fleet managers when PMs are due.

4. Leverage Fuel Card Controls

If your fleet uses fuel cards, they can be beneficial for rooting out those hidden expenses and eliminating them. For one, fuel cards allow you to see charges in real-time, so there are no surprises when a credit cards statement shows up next month.

But beyond that, fuel card programs also offer several controls that let you lock down expenditures. When drivers can only use fuel cards for the right purchases at the right places at the right times, you’ll eliminate unnecessary purchases that may have previously gone unnoticed.

What to do: Fully leverage your fuel card program’s controls. Do you put a dollar limit on daily, weekly, or monthly purchases? Great. Now, consider adding geographic limits by ZIP code, which make sure drivers only make purchases in their assigned territories. Swipe limits are also a popular control. Make them even more effective by adding time of day/day of week parameters, too. The more you can control, the more you can save.

Adding Dollars to the Bottom Line: Alternative Resale Options

The flip side of the “eliminating soft costs” coin is finding ways to bring more revenue into the fleet. Getting a higher resale value on retired assets is one way do so.

Auctions are a popular option to sell trucks quickly, but there are also alternatives that may yield a higher sale price.

Brokers are one option, as they have access to buyers for specific vehicles in specific markets. They might have connections with contractors who are in the market for your specific type of truck.

Or, for instance, they may have contacts in California, who would be more likely to purchase an alternative fuel vehicle due to stricter emissions standards than would someone in your own geographic area.

Catering to these specific buyers in specific markets ultimately provides opportunities to increase resale proceeds.

Company programs are another option. Your drivers or other employees are a readymade pool of potential buyers.

Price out vehicles, then reach out to them to let them know the offer. Some companies list vehicles on their company website, so even buyers outside of drivers and the fleet department are aware of them.

Selling to employees allows you to sell “whole-tail,” offering a price lower than an employee would find in the open retail market, but higher than auctions, wholesalers, or brokers will pay.

Leveraging a strong employee marketing program and exploring alternative markets beyond auctions can help add dollars to the bottom line.

5. Reduce Accidents and Avoid Liability

Accidents have clear hard costs for repairs (or total loss) but they also come with the soft costs of downtime.

The total cost of an accident is said to average between $6,000 and $12,000. So, let’s do some ballparking and say an accident costs $9,000 and 10% of those costs are soft costs. That’s $900. In a typical fleet, about one in five vehicles will have an accident. That means 100 of your 500-truck fleet could total an average of $90,000 per year. If your fleet can reduce the accident rate by just 10%, that’s $9,000 in soft costs you’ve eliminated — while keeping employees safer, too.

In addition to downtime, liability can be a huge expense associated with accidents — even totaling millions in the tragic event that someone is seriously injured or killed.

What to do: Check MVRs regularly for both new hires and existing drivers to help identify high-risk drivers and reduce the chance for accidents in the first place. But don’t stop there. Implement safety and training programs so you can proactively address high-risk behaviors like speeding, tailgating, and ignoring traffic signals. Doing so keeps safe driving practices top of mind for drivers, helping them stay safer on roadways each day and avoid expensive accidents. The safer your drivers perform, the fewer costs (both soft and hard) associated with accidents you’ll incur.

Now, let’s take it one step further: What happens if your driver gets blamed for an accident that isn’t her fault? Onboard cameras can provide solid evidence of liability and can help your company avoid the steep expense of wrongful blame.

6. Improve Productivity

When a driver gets lost, makes unapproved stops, or simply takes an inefficient route to his destination, that’s dollars out the door. Why? More miles equals more money, both in terms of fuel spend and the unnecessary wear and tear on the vehicle. So, making sure drivers are taking the most efficient routes — and sticking to them — can help improve productivity and reduce the soft costs associated with inefficiency on the road.

What to do: Use GPS mapping and navigation to optimize routing and ensure drivers take the most efficient path between stops. Likewise, telematics can allow fleet managers to track vehicles and verify drivers are following recommended routes. As drivers use optimized routes, it reduces fuel consumption and wear-and-tear on the vehicle, both of which result in reduced expenses.

7. Find the Optimal Replacement Cycle

One way fleets save on hard costs is by extending truck replacement cycles, since acquiring new assets comes with a hefty capital expense. However, extending replacement cycles too long can come with its own costs.

Why? Because older trucks tend to be less fuel-efficient, have higher operating costs, garner lower resale values, and often see greater downtime due to a higher incidence of repairs. That downtime is a soft cost that can add up.

The truth is, older trucks tend to have more unexpected repairs. When trucks go down, that can lead to lost revenue, towing fees, and can even affect employee morale.

Planned maintenance costs rise with age, too — after all, that’s why OEMs put age and mileage limits on new-vehicle warranties.

What to do: This is a more complicated answer, and will depend on the size, makeup, and application of the fleet. Generally speaking, though, for the first 35,000 to 45,000 miles, operating costs tend to be limited to preventive maintenance, which you’d likely be performing anyway. Those costs begin to rise when wear items, like tires and brakes, need to be replaced. Each time replacements are made, operating costs decline again, but not back to the previous level. So, as a truck ages, the operating costs continually trend upward throughout the life of the vehicle. Carefully monitoring operating costs can help fleets understand the right time for replacement.

Another consideration is utilization. If a vehicle has used less than 500 gallons of fuel or traveled fewer than 2,500 miles in the last year, that could be a sign it’s time to retire it.

8. Reduce Turnover

One way to eliminate soft costs doesn’t have anything to do with vehicles at all — it has to do with personnel. Employee turnover can have a ripple effect on costs. There is the obvious cost of recruiting and onboarding new employees, but there is also the cost of losing the institutional knowledge held by the former employee, who knew how the operation worked and how to do the job properly and efficiently.

Take a new shop employee, for example. This person may know how to maintain and repair vehicles, but there might be a learning curve when it comes to your specific make and model of truck. That means repairs and PMs may take longer, elongating downtime. As he performs the work, he might also make some innocent mistakes along the way — and that in itself could lead to unexpected repairs and downtime of vehicles.

What to do: To reduce turnover, ensure you’re fostering a positive work environment, offer a competitive compensation package, and make sure employees are equipped to do their jobs. A little work to keep current employees happy and engaged will cost a lot less than replacing unhappy ones.

About the author
Shelley Mika

Shelley Mika

Freelance Writer

Shelley Mika is a freelance writer for Bobit Business Media. She writes regularly for Government Fleet and Work Truck magazines.

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