How to create a fleet strategy that will reduce costs and increase productivity.
Equipment, especially heavy equipment, is one of the biggest line items of any construction company’s budget. Making smart decisions about how long to hold onto these assets and when to rent instead of own can help companies make the most of their fleet budget.
But many companies lack a fleet strategy. They make ad hoc buying and selling decisions. Some are still using Excel spreadsheets to manage their fleet. As a result, they are likely spending more than necessary on equipment and maintenance, and they may be experiencing more equipment downtime than they’d like.
What are the secrets to effective fleet management? United Rentals, in the course of managing its own $14 billion fleet, has arrived at a set of best practices it uses when managing its fleet as well as the fleets of large industrial customers.
“With $14 billion-plus in total equipment at more than 1,000 locations, we have to be awfully good at managing equipment,” said Bret Kasubke, senior director of United Rentals’ Customer Equipment Solutions. Many construction companies, whose main focus is on building rather than on equipment management, may not have that same level of expertise. “We have talked with a lot of customers who would benefit from having a defined fleet strategy,” said Kasubke.
Companies serious about creating a fleet strategy should start with these steps.
Keep good historical records
Collecting detailed historical data on usage and utilization is essential to creating a fleet strategy and finding optimization opportunities. Good fleet management software is critical to generating that data. (United Rentals customers enjoy the benefit of Total Control, the company’s cloud-based fleet management system, which lets them see data on their entire fleet of rental equipment in one place.)
Historical data will show you your utilization rates for different equipment types, which will help you make decisions about new equipment purchases. It will also help you determine the operating costs associated with each unit, including maintenance and fuel costs, which will in turn help you establish the total cost of ownership (TCO). Knowing the TCO is essential to making smart buy vs. rent decisions as well as decisions on when to dispose of the asset.
Telematics devices linked with fleet management software can provide detailed information on usage, mileage, operational performance and more.
Develop and implement the optimal preventive maintenance program
A good preventive maintenance program is critical for preserving the longevity of equipment assets. Preventive maintenance helps prevent downtime, ensure regulatory compliance and support end-of-life residual value. Reference the OEM recommendations to establish asset-specific service steps and service intervals. Use a fleet management system to plan, schedule and complete required maintenance service.
Performance reporting is another important aspect of an effective preventive maintenance program. Develop performance reporting and use the reports to gain insights into the overall success of your preventative maintenance program and also to help you identify assets with lower or higher utilization. These assets may require adjustments to the planned maintenance schedule.
Predictive maintenance, which is possible through the use of telematics, can also help you optimize the planned maintenance schedule. It allows you to perform just-in-time maintenance based on how, and how often, the machine is being used. It also helps you more accurately factor maintenance time into the work schedule.
Use your data to create lifecycle plans
Put lifecycle plans in place for equipment types or specific assets so you can dispose of them at the ideal time.
“If I go out and I buy a piece of equipment, I need to know when the best point in time is for me to rid myself of that unit before it starts costing me more on the maintenance side, while making sure I maximize residual value,” said Kasubke. “I would want to establish a lifecycle plan for all my assets in order to minimize my total cost of ownership.”
The ideal lifecycle plan will differ from equipment type to equipment type and also from contractor to contractor based on how the equipment is being used and how well it’s being maintained over time. If your utilization is high and/or you’re using the equipment in a challenging environment, you may want to retire it sooner.
“Most customers work in a rear-view mirror scenario when trying to manage equipment costs. Having a well-defined budget for equipment operations allows you to understand where you are with equipment spending and why your costs may be fluctuating over time. If you can measure it, you can typically improve on it.”
Make smart buy vs. rent decisions
Units with a utilization rate below 50 percent are a good place to start when evaluating your fleet for assets that could be good candidates for rental consideration. But there are no hard and fast rules. For instance, even if your overall time utilization of a particular unit is under 50 percent, if you use it every day, you probably should own it. Same goes if you regularly need a piece of specialty equipment that is hard to find in the rental market or that is expensive to rent. On the flip side, a unit that’s been on rent for an extended period may be a good candidate for purchase.
Create an annual total cost of equipment operations budget
This is an area United Rentals customers request help with. “Most customers work in a rear-view mirror scenario when trying to manage equipment costs,” said Kasubke. “Having a well-defined budget for equipment operations allows you to understand where you are with equipment spending and why your costs may be fluctuating over time. If you can measure it, you can typically improve on it.”
One way to help ensure that you can achieve your annual budget goals is to effectively manage and track your repair and maintenance costs, which will likely increase as the machine ages, as well as your fuel costs.
Analyze your reports
Fleet management software can generate any number of automated reports. The trick is having someone who knows which reports to look at and how to effectively analyze them.
Analyzing performance reports can help you create and adjust lifecycle plans. Another critical area to look at is utilization.
Utilization reports allows you to validate whether your utilization rates are improving or declining over time. (United Rentals customers can compare their utilization of rented equipment to proprietary industry benchmarks.) The goal, of course, is to improve them. Higher utilization means the machine, whether owned or rented, costs less per hour of use. Selling underutilized assets is one way to boost utilization. Using GPS to know the location of all your equipment and find “hidden” equipment assets is another.
Gathering and analyzing the data needed to create an effective fleet strategy is no small task, and companies that do it successfully typically have a commitment from the highest levels of management. The return on investment — decreased fleet costs and increased productivity — can be significant.
Marianne Wait is an editor and writer who creates content for Fortune 500 brands.