Introducing our first in a weeks-long series on fleet management, we explore a closer look at fleet management and how to achieve better outcomes for your fleets.

In the pursuit of enhancing fleet performance, business owners often grapple with essential questions: Is it crucial to improve? Is the investment worthwhile? What does a better fleet outcome entail? 

Organizations that rely on fleet vehicles invariably allocate a significant portion of their profit and loss (P/L) to fleet-related expenses, encompassing asset costs, and operational outlays like fuel, maintenance, repair, and insurance. Profit-oriented businesses cannot overlook these costs, making it imperative to assess whether their fleet management deserves attention. 

If your fleet comprises fewer than 50 vehicles, you likely face not only financial burdens but also operational challenges. Who relishes the downtime and disruption when a vehicle requires repairs? Did you know that, on average, people would rather abstain from intimate relations with their partner for a month than endure the process of buying a vehicle from a dealership? 

Fleet management can be characterized as: 

1. Costly in terms of both time and money. 
2. Laden with operational hassles. 
3. Often under-resourced, lacking a professionalized approach. 
4. Associated with dealership experiences are best avoided at all costs

If your organization continuously grapples with any of these issues, it's time to address these financial burdens or, at the very least, explore options to alleviate them. 

However, before delving into solutions, evaluate whether the discomfort you're experiencing is compelling enough to overcome the human tendency toward "status quo bias." Most individuals are reluctant to change, especially when faced with uncertainty. Is altering your fleet program's potential financial and operational benefit worth the effort required to embrace change? 

Let's begin by examining the characteristics of a high-performing, cost-effective fleet. Then, you can decide if it's worth the endeavor to seek improvement. 

As any fleet manager can attest, total fleet expenses have been steadily rising across the board. These costs span from higher acquisition expenses to reduced incentives, soaring fuel prices, and overall increases in nearly every line item of a fleet's operating budget. In particular, we'll delve into five key industry trends that are driving up fleet maintenance costs. Be sure to look for my market recap (Jan – July) forecast of cost trends for fleet managers to anticipate throughout the remainder of 2023. 

Trend No. 1 – Vehicle Service Lives:

Chaotic supply chains have disrupted the ability to acquire vehicles when you need them and at a low cost.  Therefore, you’ve likely decided to defer at least some of the planned vehicle replacements, so your older vehicles have been on the road longer, which tends to be more expensive.  Undoubtedly, this has impacted your operations in at least a couple of ways: 

• Operating higher-mileage vehicles beyond their scheduled replacement cycles increases unscheduled maintenance incidents and overall maintenance expenses.
  
• Difficulty sourcing replacement vehicles leads to prolonging vehicle service lives, resulting in more unscheduled maintenance and expensive repairs. 
• Delaying vehicle replacement also increases scheduled preventive maintenance expenses, such as replacing expensive worn items like brakes and tires. 
• Rising prices of replacement tires, driven by higher costs of raw materials and increased logistics costs, contribute to higher fleet maintenance expenses. 
• Supply constraints on automotive components lead to longer lead times for parts, causing extended vehicle downtime and potential rental expenses. 

Understanding the costs of holding onto vehicles too long can help small business owners make informed decisions about fleet management and replacement cycles. 

Who has your back—helping your organization plan and execute strategies to help you best respond to these challenges?  If you don’t have a solid answer associated with a solid plan that you’ve been working on, consider lowering your “status quo bias”. 

 
Trend No. 2: Rising Costs in Replacement Tires, Spare Parts, and Labor. 

Have you considered the impact of increasing prices on replacement tires? Surprisingly, tires rank as the third-largest fleet expense, following depreciation and fuel costs. This makes the escalating cost of replacement tires a significant factor contributing to the overall rise in fleet maintenance expenditures. Your repair shop is likely grappling with the following consequences: 

• The prices of key tire production materials, such as rubber, crude oil, and steel, have surged. 
• Transportation costs for tires, from factory to distribution points, have seen dramatic increases. 
• Ongoing challenges in sourcing automotive components have led to extended lead times for back-ordered parts, ranging from days to months. 
• Consequently, these parts shortages are causing repair jobs to take much longer to complete, resulting in extended fleet vehicle downtime and, in some instances, incurring additional expenses for short-term rental vehicles. 

As you consider these challenges, I’ll bet you’ve felt it in your wallet—hard. Now, imagine the value of having a strategic partner to help you stay informed about market trends and navigate these complexities. Remaining vigilant about industry trends and market dynamics empowers executives to make well-informed decisions and adjust strategies to better align with the realities of the marketplace, ultimately benefiting the business. 

How is your organization positioned to confront these market challenges? Do you have the confidence and data to determine whether your organization is addressing these challenges optimally—or is there a more effective approach to tackle these issues? Consider the advantages of having a partner who can provide insights and solutions tailored to your specific needs. 

Stay tuned for more in our first series on Fleet Management.