Many companies overlook the opportunity to save money, decrease costs, and increase profits through effective management of fleet/equipment operating costs (fuel, repairs, parts, personnel, and vendors). These same companies want to know how their money is allocated. However, they do not put the resources in place to drill-down into the operating costs for each piece of equipment. Fleet/equipment operating costs are tossed into the “necessary expense” box by many companies. This jaundiced view causes companies to have:
- No definable equipment replacement program.
- Inefficient (and sometimes limited) record retrieval of repair orders, fuel transactions, and parts receipts.
- Indefensible safety and moving violations.
- Unpredictable insurance rates for the equipment.
- Increasing fines and penalties due to government audits.
- Increased risk of law suits.
- Decreased availability of equipment for projects.
Taken together or separately, these items place the company’s products and services at a cost disadvantage to the competition. Changing the way the fleet/equipment operating costs are recorded and tracked requires a mindset change from “expense” to “controllable cost.”
CONTROLLABLE COSTS
Most likely your company has the operation infrastructure in-place to establish where your money is going by recording each fuel and repair transaction for each piece of equipment.
Fuel transactions are the easiest. In-house fuel purchases require the quantity of fuel, mileage, and hours (if installed). With outside fuel purchases, you will also need the total fuel cost.
Repair transactions require the following items to be set:
- If you have in-house mechanics, a burdened labor rate is needed.
- PM schedules for each type of equipment. These would include the type of PM, a service/inspection checklist, and the frequency intervals (e.g., days, miles, hours, fuel consumption).
- Implement a coding system, such as VMRS 2000. (www.trucking.org)
- Make the codes that apply to your operation available for use. (Most fleet maintenance professionals should have had exposure to these codes as they have been around since the late 1960s.)
- Have one standard repair order form for your mechanics to use throughout the company. This repair order will be compliant with the coding system established in the preceding item. Having a unique number for each repair order is very helpful.
Once these items are in place, repair orders will have parts and labor for each repair job on the repair order (one piece equipment per repair order). In-house repairs will require labor hours; outsourced repairs usually have only labor cost. Each repair job will be coded as to why it was needed (Reason-for-Repair) and where it happened (Repair-Site).
OPERATIONAL BENEFITS
With the mindset change of “expenses” into “controllable costs,” here are some of the basic benefits:
- Zero reliance on a person’s memory or paper records as you have real-time access to all fuel and repair records.
- Compare a mechanic’s paid labor hours to his/her reported labor hours (direct and indirect labor).
- View costs for each piece of equipment and group them by jobsite, profit center, class, make/model, etc.
- Identify which equipment has the highest cost/mile or cost/hour.
- Monitor the fuel burned by each piece of equipment and equipment groups, such as make/model.
- Discover trends as to non-scheduled repairs related to the equipment’s operator, jobsite demands, and weather conditions.
- Break out standard repair costs (PMs and normal wear and tear) from non-standard repair costs (accident, abuse, theft, vandalism, recall, warranty, etc.).
- Increase scheduled/planned repairs and reduce non-scheduled/emergency repairs.
- Learn which piece of equipment has the highest frequency of repair.
- Track miles (and/or hours) on each piece of equipment being used.
- Remove dead parts from inventory (and sometimes get credit from your vendors).
- Monitor vendor prices.
- Make proactive equipment replacement decisions based on qualified and quantifiable data.
EFFICIENT DATA MANAGEMENT
The most direct way to identify problems and control these costs is by entering them into a database designed for fleet maintenance management. Spreadsheets will not work. If you have a fleet maintenance management system that captures and reports fuel and repair transactions as you have defined, use it.
If you do not have a system, you will need one. Most of these systems can be accessed through an Internet connection, so you will not need to buy additional hardware or hire IT people. Money well-spent will be on training and/or system implementation. Data entry can be optimized by uploading transactions from your fuel system, GPS/AVL, repair vendors, and parts vendors instead of manual data entry.
RESULTS
This shift in thinking will create a professional and efficient fleet/equipment maintenance operation. This gives you a competitive edge and will allow you to extend the life of your equipment with maximum uptime to generate revenue for your company. ■
About The Author:
James Magee is a partner at CFA Software, Inc. He has been a software developer and systems analyst since 1984. He has also worked as a network administrator and IT manager. He has worked with fleet and equipment maintenance service operations for more than 25 years. James is currently the product manager at CFA Software. He can be reached at mageej@cfasoftware.com, or 630.543.1410.
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Modern Contractor Solutions, May 2013
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