FORT LAUDERDALE. One way to cut costs in the trucking industry these days is to take a "disciplined" approach to managing truck turnover and utilization. That's the lesson Air Products and Chemicals learned three years ago, and since then, Air Products reports it saved millions of dollars in operating expenses.
According to strategic sourcing manager Tim Tulio, the company runs about 55 million miles a year in North America and consumes nearly 10.5 million gallons of diesel a year. As is the case in most – if not all fleets – Air Products’ top costs are fuel, tires, and unplanned maintenance.
Air Products, which provides atmospheric and process gases and related equipment to manufacturing markets, operates a fleet comprising 500 day tractors, 100 sleep tractors, 85 micro-bulk tanker units, 2,000 tractors, and 400 light-duty pickup trucks.
During Fleet Advantage’s inaugural conference Changes in Attitude here in Fort Lauderdale, FL, Tulio explained how it tapped data collected and analyzed by Fleet Advantage to improve asset management whiled calculating a lifecycle cost plan for its vehicles.
“It starts with the data,” said Brian McMahon, transaction administrator at Fleet Advantage. “If you are not aware of your fleet data and the current market conditions then you are not aware that there is money on the table.”
He explained that the firm crunches fleet data through its lifecycle management software (LMS), which depicts the cost savings of replacing certain trucks.
“We look at what trucks should come out first and get into a good rhythm,” added Peter Flynn, Fleet Advantage's senior VP of portfolio management and re-marketing. “We want to empower you with the information so you can decide where to apply it.”
LMS also breaks down maintenance and accident repairs, normal scheduled maintenance, tires, and other maintenance curves to help fleets make their leasing and vehicle replacement decisions.
“The data’s available and if you have a good format, it gives you what you need to make a good decision later on down the road,” Flynn said. “Let the data drive the decision to replace a truck.”
Flynn explained that when the company is conducting these asset models for trucks that are running 80,000-100,000 miles per year, fleets will see an estimated cost savings of around $11-13,000 for replacing that vehicle.
Mike Spence, senior vice president of fleet services for Fleet Advantage, offered the following tips to ensure purchasing strength when replacing a vehicle:
- Establish multiple OEM engagement to deliver a fair concession
- Review within a tight circle with select team members and develop an agreed upon spec
- Agree upon contact strategy
- Initiate an RFQ for a truck order
- Review the quotes from each OEM
- Review the final spec
- Confirm selected vendor or vendors
- Agree the spec is correct
- Establish accurate delivery requirements and confirm production and lead-time
- Develop correct warranty strategy. “Cover yourself for the longest period of time without a lot of thought of how long you’re going to keep that truck,” he said.
And when it comes to spec’ing, Spence said it is important to know the following:
- Work hard upfront to get the spec that you want on the lowest cost.
- Keep safety in mind, and make sure you’ve gone through all the safety equipment available.
- Think about the residual environment, meaning if a fleet spends money on a truck, what will it be worth when it goes to sell it?
- Look at the fuel economy factors. “That’s where we do everything we can do to persuade you to consider different ratios than you’ve been running,” Spence said. “There are things you can do that make the truck significantly exceed the averages.”
- Make sure the maintenance components don’t exceed the cost of the trucks.
Since implementing using such data-based asset management recommendations, Tulio said Air Products has developed a more strategic focus on fleet management; significantly increased its knowledge on asset leasing and the overall leasing market; implemented an active fleet lifecycle management across all asset types; and reduced its average fleet age to take advantage of new technology, MPG improvements and lower maintenance and repair costs.
When it comes to the company’s cost savings, Madhu Stemmermann, Air Products’ line manager for customer engineering and fleet operations, said in the last three years, the company has saved over a couple million dollars.
“Once we started seeing the savings that started helping,” she said. “Small wins started growing, and ... literally it’s hitting our bottom line.”
“This is more of a long-term relationship,” she added. “We expect year over year that we’re going to see savings.”