Roadmap to becoming leaner and meaner with a good Fleet Optimisation Strategy

In difficult times cutting costs and improving efficiencies is critical. Why not execute a multi-staged fleet optimisation strategy?

In the last article it was concluded that total cost of ownership (TCO) was a very important instrument to feel the ‘pulse’ of a fleet’s health and then focus on areas of relative weakness in a systematic manner – in order to achieve continuous improvements.

While TCO-driven fleet improvements offer a solid foundation for improvements of fleet operations, they may have the draw-back to focus on the outcome of weaknesses – and not the root causes thereof. Furthermore, once an area of weakness has been identified, the bigger challenge is to eliminate inter-related root causes in a well-orchestrated manner.

What are the principles of a fleet optimisation strategy?

Essentially, it provides a multi-stepped roadmap to deal with different ‘clusters’ of improvement potential – while also acknowledging that basics need to be in place before attempting more challenging areas of intervention. The three basic steps of a typical fleet optimisation strategy are: Figures 1 and 2.

Why is there need for utilisation optimisation?

Typically, when organisations start with a fleet optimisation strategy, their fleets have suffered many years of neglect. This means that there would typically be a huge variety of vehicles/equipment in all forms, shapes, sizes, ages, condition, etc.

More than likely, fleets would have tried to deal with the ups and downs of economic business cycles in different ways. This means that some vehicles may have been stretched beyond their optimal economic life, there would typically be different types of ownership (self-owned, financed, leased etc.) and probably significant heterogeneity regarding telematics, fuel cards etc. In short: a highly complex and difficult-to-manage fleet.

What are the goals of utilisation optimisation? The purpose of utilisation optimisation is to understand and optimise the existing fleet – without making expensive changes through replacements etc. This phase can be considered a so-called ‘understand’-phase to improve

• How vehicles are deployed in the best manner;
• The optimal number of assets really required;
• The un-availability of assets and the reasons for this;
• The different influencers of fleet efficiency and output; and
• Factors relating to risk and cost

What signals the end of Step 1? This occurs when the fleet is ‘under control’ and one has a good handle on costs; with key performance indicators (KPI) indicating a stable but positive trend. This leads to the next challenge, namely to get ‘more from less’.

What are the goals related to application optimisation?

In this step, the fleet operator is willing to modify the fundamentals of historic fleet management processes and actively change the make-up of the fleet. Also changes are made relating to the manner in which an optimal nurturing environment is created to reduce fleet complexity and cost.

What are the focus areas of application optimisation?

The principle is simple: Complexity in fleet management translates into higher cost; therefore, standardise and simplify wherever possible. This means a reduction in the number of brands and vehicle types used, contracting with fewer suppliers and optimising one’s procurement spend.

Furthermore, there is a big effort to achieve a greater output from the available capacity through ensuring that the assets remain reliable through inter alia preventative maintenance or telematics-enabled diagnostics. Also, focus is placed on how to quickly ensure available mobility, if assets should fail or be unavailable for a variety of reasons.

Part-and-parcel of this exercise is the definition of a strategy on how to deal with unplanned and planned down-time, with the following options typically needing to be considered:

1. No dedicated provision of any planned additional spare capacity with maximum pressure on all parties involved in returning vehicles to an available status in case of non-availability;
2. Some spare capacity provided by own extra vehicles or rentals from third parties; or
3. Investment in adequate spare capacity in order to ensure a very high degree of uptime.

What signals that the goals of step 2 having been achieved?

In a nutshell, it occurs when the current assets have a high utilisation coupled with benchmark life-cycle and running costs. This leads to the next challenge, namely to improve the effectiveness of the assets as well as the optimal manner in which the fleet mobility requirements are fulfilled in support of business strategy.

What are the focus areas of technical/innovation optimisation?

Here the emphasis is on asking fundamental questions relating to the current mobility model or system deployed – and whether this is still the best way to do things.

Areas of focus include the manner in which fleet assets are deployed in support of the business, whether improved planning is possible and how equipment, trailers, etc. should be deployed relative to the more expensive vehicle portion? Furthermore, fundamental questions should be asked relating to the selective in-sourcing or out-sourcing of certain mobility activities, and whether or not and to what extent fleet management is in fact considered core to the business’s strategy? Finally, there may be a need to optimise the overall logistics and mobility activities, which would then translate into a revised or optimised deployment of assets.

Which additional aspects could and should be considered – over and above the three steps mentioned?

The deployment of information and other technologies is, of course, a source of significant potential competitiveness improvements. These aspects will be addressed in one of the future articles. However, it is probably a good idea to stick to the principle that ‘if the fundamentals cannot be brought into place without technology, then technology will not be able to resolve fundamental problems’. Thus, it is maintained, that the three-step Roadmap is fundamentally the same, irrespective if there is strong technology enablement underpinning the actions – or not.

What should be considered before or during the execution of a fleet optimisation strategy? The biggest challenge organisations face is to commit to and execute a multi-year improvement initiative – without being side-tracked by a number of inhibitors to potential success:

1. Lack of skills, planning or top management commitment throughout the process;
2. The implementation of a technology solution instead of, or while, resolving the basics;
3. Lack of acknowledgement in organisations regarding the significance of its fleet as a competitive differentiator, major contributor to costs or influencer of profits;
4. Lack of coherent financial planning and investments over a multi-year period to underpin each of the steps; and
5. Inability to link overall business strategic imperatives to the definition and execution of an overall fleet or mobility strategy.

In conclusion

Fleet optimisation can significantly improve the competitiveness of organisations but requires dedicated attention and multiple interventions over an extended period of time.

Dr Harry Teifel is a Director: Strategy and Consulting, at idea 2 Business Services and Investments (Pty) Ltd. He has extensive experience in the transport industry and will be writing the Special Technical feature for Trucks & Heavy Equipment on a routine basis.

Dr Teifel holds the following degrees: B.Eng. (Industrial), M.Com and D.Com. He has worked both locally and internationally for a variety of firms, including IBM, DEKRA and Daimler/Mercedes-Benz South Africa.

His areas of focus at present are:

• Strategy Consulting and Systems Engineering challenges
• Support of large organisations with SA Economic Development requirements and large-scale tenders related to the SA Government policy/strategy of IPAP and NDP
• Business Transformation on the basis of Systems Engineering principles and with the application of Business Intelligence solutions such as Qlikview. Readers may contact him at: harry.teifel@gmail.com