For many vocational fleets, reliability is paramount as it supports revenue and productivity. Often one of your biggest challenges is keeping vehicles on the road and in peak operating condition to service your customers. Delays in acquiring new vehicles or extended downtime can impact efficiency and your ability to maintain service levels.
As more organisations work with us to manage fleet as a strategic business asset, I often begin the conversation by focusing on one of the key pillars of successful asset management: buy right.
Buying Right in the Real World
With that in mind, here’s an example of how one of ARI’s large utility clients revisited their replacement cycle with a three step process. The company’s ultimate goal was to “buy right” in order to maximise the fleet’s revenue generating abilities.
Step 1: Determine Asset Criticality
The client first conducted an internal fleet analysis to identify the vehicles most critical to maintaining operations. The client turned to ARI for support in evaluating the operational fleet data for these vehicles to help determine which units should be replaced first, and how those decisions would impact their budget.
Step 2: Align with Capital Planning
Our team worked together to evaluate the company’s capital planning strategy and explored how fleet vehicles influence that strategy as a financial asset, examining factors such as available capital, cash flow and fiscal outlook. Improving the health of the fleet was universally accepted as a necessary undertaking, but staying within budget was critical to winning internal buy-in for the new replacement plan. When there are capital limitations, it is absolutely critical to be able to evaluate the assets that have the biggest impact on operating costs and those that have the greatest influence on productivity and revenue generation.
Step 3: Analyse Operational Data
Finally, we conducted a thorough analysis of the fleet’s operating costs and a few trends quickly began to emerge. We identified a steady increase in maintenance costs through a vehicle’s first seven years in service, after which expenses became erratic. The data also showed fuel consumption and utilisation declined significantly with vehicle age. The conclusion – the oldest vehicles in the fleet were both unproductive and the most costly to operate. This confirmed the decision to move forward with the plan, and replace unpredictable operating costs with planned investment into the new vehicle assets.
Metrics Change the Conversation
By taking criticality, budget, vehicle economic service life, and operating data into consideration as part of the planning process, the utility ensured all blind spots were eliminated before finalising their new cycle. The final outcome of this initiative was a well-rounded strategy that empowered our client to manage their vehicle replacements with a strategic asset mindset.
This type of approach combined with operational expertise drives better fleet decisions that deliver meaningful business value. For additional advice on capital planning, download ARI’s whitepaper, “Strategically Maximise Capital Using Finance Leasing in a Changing Landscape of Accountancy Rules.”