Streamlined outsourcing

PROBLEM Joe Smolar says he realized pretty quickly that trying to make contract maintenance more efficient yet save money is a complicated if not impossible challenge when you're dealing with vendors numbering in the double digits.

Manager: Joe Smolar

Title: Manager for national fleet services

Fleet: BP (British Petroleum) North American Div., Warrenville, IL

Operation: 275 tractors

PROBLEM

Joe Smolar says he realized pretty quickly that trying to make contract maintenance more efficient yet save money is a complicated — if not impossible — challenge when you're dealing with vendors numbering in the double digits.

“We were looking to consolidate our equipment maintenance and our fleet outsourcing,” says Smolar, the manager for national fleet services of the BP North American Div.

He points out the fleet is responsible for delivering petroleum fuel products -- mainly gasoline and diesel -- to company-owned and franchised filling stations nationwide.

“At the time, we had nearly 15 different contracts with 15 different local companies. We wanted to cut outsourcing costs, yet receive maintenance for our entire fleet.”

BP also sought “guaranteed” maintenance costs, that is, fixed cost numbers that wouldn't change over the life of the contract so Smolar could build them into the fleet's budget. “Today, having those fixed numbers is standard in the industry, at least for the big leasing companies,” he points out.

SOLUTION

NationaLease, the Chicago-based truck-leasing network, offered the guaranteed maintenance cost Smolar was looking for, so in 2002 he selected them as part of BP's effort to consolidate its maintenance outsourcing contracts.

“In 2000, our total maintenance bill was $8.9 million,” he says. “By 2003, one full year into the program with NationaLease, our maintenance numbers dropped by half.” As of now, 75 of BP's 275 trucks are under contract with NationaLease

Yet the switchover wasn't just about the raw dollars saved, he stresses. One of the important benefits to the BP fleet was learning what preventive maintenance costs for their trucks should be. On top of that, Smolar learned when lifecycle costs for the trucks reached the all-important “tipping point” — when it became more cost-efficient to replace the entire truck rather than replace any more components.

“We developed a better understanding of what maintenance should cost,” Smolar relates. “As a result, we now have a 39-month lifecycle for our equipment. We found that there really was a higher cost associated with doing maintenance beyond that point, as opposed to bringing in new equipment.”

The BP fleet gained help on the administrative side of the maintenance equation, too. This included access to NationaLease's centralized invoicing system. In addition, the lessor lent spec'ing support as BP made significant changes to its fleet, including moving to automated transmissions, a new engine make and a different chassis model. NationaLease also provided access to a wide range of data, including current and life-to-date vehicle maintenance costs, via its Customer Web Access system.

“NationaLease was open and honest with what they could do and we were open and honest with what we could afford,” adds Smolar. “From that basis, we were able to negotiate quickly to reducing both maintenance cost and time.”


Maintenance Bay presents case studies detailing how fleets resolve maintenance-related issues.

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