Cost Control: Look Beyond the Obvious

Cost Control: Look Beyond the Obvious

Digging deeper leads to a better bottom line

While there is generally a focus in fleet operations on top line revenue, fleet executives know that the only way to boost profitability is to improve the bottom line through cost savings.

In 2012, Ernst & Young conducted a total cost of ownership (TCO) study, in which it evaluated costs for Class 8 tractors, Class 6 and 7 trucks, and reefer and dry van trailers at the operations of 22 private fleets across a range of fleet sizes and industries. The firm concluded, among other things, that the total cost of truck fleet ownership can differ significantly between different fleet sizes and that fleet managers do not always have a strong sense of their relative fleet cost efficiency.

To effectively control costs and evaluate savings opportunities, it is essential to clearly understand existing costs. While it’s relatively easy to track costs for things like labor, tires and fuel, other areas are often somewhat less obvious and may be overlooked.

For example, accidents can cost more than just towing and repair expenses, notes James Svaasand, Penske Truck Leasing’s VP of Collision Center Development and Operations. “There are the costs of downtime and replacement vehicles, and the management time needed to work with insurance carriers to resolve claims,” he says, “and those costs can escalate significantly when winter weather and storms lead to a higher number of fleet vehicles in need of body repair at one time.

“Fleets that need to perform body and paint work, whether to repair accident damage, or even refurbish vehicles for resale, have to consider a number of expenses,” Svaasand continues. “There are brick and mortar costs and in many places permit fees and environmental regulations to address, especially when it comes to painting operations.”

Finding and training body repair and paint specialists can also be costly on an ongoing basis. “Adding to that challenge is keeping up with equipment and training needs for the different repair techniques required for today’s vehicles,” Svaasand relates, “with their variety of structures and use of a mix of aluminum, steel and plastic components.”

Penske says it addresses those concerns for fleets at 18 collision repair centers that are staffed by more than 200 technicians certified in repair techniques for virtually all makes and models of trucks, and in applying premium coatings using the latest spray equipment.

Higher volume outside collision repair centers, by investing in advanced technology, can help fleets keep costs for body and paint work down. With the ability to staff facilities around the clock if needed, they can also speed repair cycles to help reduce downtime. Additionally, they can streamline repair activity by working with major insurance companies to resolve claims, keeping time needed for management oversight to a minimum.

Making effective choices when it comes to all types of fleet maintenance operations can improve productivity and simultaneously lower costs. Identifying the obvious is a good start. Digging deeper can mean finding and lowering hidden costs, a practice that can add up quickly in savings.

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