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An In-Depth Look at Proper Fleet Utilization: Part I

Having a right-sized fleet should be a top concern for any trucking company, large or small. Whether you are a small last-mile delivery company with 12 vans or a large government, utility, or commercial enterprise with thousands of trucks, understanding and managing fleet utilization should be a top-of-mind thing that is at the core of right-sizing initiatives. That’s why we wanted to start a new blog series looking at proper fleet utilization. This is a BIG topic, so we are going to bring you these blogs in manageable chunks.

Today, we will look at the absolute definition of fleet management and the initial factors you must pay attention to properly manage your fleet. If you want to ensure you have the right number of vehicles, you must pay very close attention to utilization.

Fleet utilization metrics tell you about the size of your fleet relative to your actual needs. This is important because the size of your fleet directly impacts the ability to complete your mission. It also has a big impact on your organization’s financial bottom-line. If you have too few vehicles, you might not be able to get work done. With too many vehicles you’re wasting money. The key is to have the “right” utilization when it comes to your fleet.

But what is a right-sized fleet? Every fleet has some unique characteristics that change the importance of each component of utilization, yet fleet managers must realize that quantity and use of vehicles are not the only variables you must pay attention to. Let’s dig deeper into how you must properly right-size and utilize your fleet.

Quantity, Location and Class

First, you want to have a look at the number of vehicles in your fleet. While this shouldn’t be the only factor you judge utilization by, it is one of the most important. Do you have the right quantity of vehicles, i.e., not too many and not too few?

Next, have a look at where your vehicles are. Are they housed where they are needed? If you have vehicles that aren’t accessible at the location where the work or the drivers are located, then those vehicles are effectively not available.

Alternatively, if a rarely used class of vehicle is accessible just a short distance away, perhaps that class of vehicle is not needed at each fleet location. This is also where we can take asset utilization criticality into account. There are some pieces of equipment that are so critical to supporting an organization, that they are needed at several locations, regardless of use, such as fire trucks.

Also, consider whether you have the right type or class of vehicle? If you have ten delivery vans available yet have a need for more pickup trucks, then you are not fulfilling the proper class need for your company.

Finally, consider time. Do your truck drivers have access to vehicles when they need them? Are vehicles available after hours or on weekends, if required? If access to vehicles requires access to a motor 1-2 pool office or an outside rental office that is closed, you might be missing business. Your truck drivers need access to vehicles at the time the job needs to be done. Anything less means a loss revenue.

A Closer Look at Fleet Utilization

Fleet utilization is a measurement of fleet asset performance or level of use. In the end it’s is all about the raw numbers. To understand the metrics behind use of fleet vehicles, you must have access to the information needed to ensure you have the right fleet on hand. Fleet utilization experts can probably tell you that they’ve heard things like, “I think I have too many vehicles” or “We need more vehicles to get the job done” dozens of times.

One reason that fleet utilization is such an important aspect of fleet management is that what you think, and feel does not cut it. Thoughts and feelings may have an impact of hundreds of thousands or millions of dollars to a fleet. What you need is real measurements of vehicle use so you can manage your fleet properly and justify fleet acquisition or down-sizing.

If you asked five fleet managers to define fleet utilization, you’d probably get five different answers. And that’s okay. Each fleet is different and fleet managers need to look at utilization in a way that makes sense for their organization.

Utilization is generally expressed as a measure of demand compared to a certain capacity level. The value is often expressed as a percentage. For example, if 10 out of 20 vehicles in a fleet are used in each period, you might say your utilization rate is 10/20 or 50% for that period. Similarly, if we have a target utilization rate of 500 miles driven in a month and we only travel 250 miles, you might say our utilization rate is 250/500or 50% for that month.

Other Variables to Consider

A new fleet manager might think utilization is straightforward to calculate. For example, utilization rates of a passenger vehicle fleet vary daily. Logic would dictate that you’d calculate capacity by counting the number of passenger vehicles in the fleet. This would be your level of capacity. Then you’d count how many of those vehicles were used each day. This represents your demand level. Then you’d simply do the math of demand divided by capacity.

Still, there are other considerations when it comes to capacity and demand. For example, are you accurately counting the number of available vehicles as they enter and leave the fleet? Capacity may change daily depending on your procurement method and frequency. Even something as simple as a vehicle being out for preventative maintenance may alter your capacity equation.

On the demand side, other appropriate questions should be asked. For example, does the use of an outside rental vehicle count against demand? Furthermore, if a truck driver drops keys in a manual key-drop box and keys remain there until the next morning, am I still “using” the vehicle? These may seem like benign questions, but they are necessary when you are making a proper evaluation of capacity and demand.

In the end, there are variables to consider. Removing vehicles from service for preventive maintenance or augmenting the fleet with outside vehicles does impact utilization. While important to understand in the long run, variables like these do not need to be considered on the first day of your fleet utilization initiatives.

Isolating the Right Fleet Utilization Metrics

Quite frankly, there are tons of differing metrics for evaluating fleet utilization. But the most effective metrics are those that are easily quantifiable. Here is a list of some of the most used fleet utilization metrics:

  • Number of vehicles in the fleet
  • Odometer readings
  • Number of days used or idle time
  • Hour meter
  • Overall fuel consumption
  • Number of trips
  • Unfulfilled vehicle requests
  • Number of outside rentals used
  • Age of the vehicle
  • Number of reimbursements due to no vehicle coverage

No matter what metrics you use, they must be well defined. They must also be captured with the consistency required to help fleet managers analyze utilization. If a modern fleet management information system is being used to collect and manage the data, it is easy to correlate the data you are collecting with different classes of vehicles, vehicle owner, vehicle location, and so on.

But, on the other hand, if data is being collected and stored on log sheets or in spreadsheets, it may be necessary to capture the related information such as vehicle class, owner, location, etc. every time other metrics are captured. This is much more time and labor-intensive process, but not every fleet has the wherewithal to upgrade to complex fleet management systems.

Why It’s So Important

Why is there such interest in fleet utilization? Well, it isn’t a difficult answer. When fleet managers understand utilization, they can effectively maximize the efficiency of their fleet. This ultimately means cost reduction, which everybody loves. When you understand utilization, you can confidently modify the composition of your fleet. In doing so, it is almost certain you will save your bottom line from being ravaged by improper vehicle utilization.

It’s easy to see that calculating utilization can be confusing. The good news is that it doesn’t have to be. A word of advice on where to start relative to utilization calculations is to just start them somewhere. You must at least begin the process.

Because you’ll always be able to refine your utilization calculations as your fleet and fleet technologies change. The most important thing is to start understanding utilization even at its most basic level.  Understanding different approaches to calculating utilization and understanding different approaches to measuring your capacity and demand will likely change over time. And that’s okay.

We hope you have enjoyed Part I in what will be an ongoing series looking at the importance of fleet utilization. Quite frankly, while properly managing financials is important, this should also be one of the most important jobs a fleet manager does, and we are happy to help you get it right.

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