Mark McKenna of Bluedrop Services confirms that one of the most challenging aspects of fleet management is knowing when to retire a vehicle. Take it off the road prematurely, and you could negatively impact your business’s bottom-line. But leave it in circulation for too long and you run the risk of costly maintenance repairs. Without trusted fleet replacement approaches such as Life Cycle Costing, you can also be left with reputational damage caused by an aging fleet with questionable reliability.
It’s this astute balance that’s integral to fleet management success and ensuring the sustainability of your business. Just one vehicle off the road is estimated to cost a small or medium sized company up to £500 a day in lost revenue. So making sure your fleet is fit for purposeis the best way to guarantee longevity, and secure a solid financial future.
Especially since every repair, failed MOT, increase in fleet car insurance premiums, or cancelled customer order is yet another hitto your year-end profit.
Keeping your fleet cost effective
Fortunately, there is a way for fleet based businesses to curb their spend, and offload their vehicles at the opportune moment every time. It’s called Life Cycle Costing (LCC), and for businesses where fleets are a core component, it’s an integral practice to get right.
Life Cycle Costing not only involves keeping accurate records of a vehicle’s maintenance history, road performance and running costs. It also relies on fleet managers to recognise when a fleet vehicle is about todiminishin productivity. Taking it from a core business asset, to a costly drain on company resources.
If you’re in charge of fleet operations at your company, or you rely on your fleet for revenue, here are a few ways Life Cycle Costing (LCC) can benefit your business:
Know when to cash in on your fleet (before it’s too late)
One of the biggest misconceptions made when assessing a fleet vehicle’s life expectancy is by comparing its performance with that of an average road vehicle. While the mechanics might be the same, the demands placed on a fleet day-to-day far exceed those of a privately owned car or van.
Fleets typically have higher acquisition costs than standard household vehicles, as well as greater output. So while a non-fleet vehicle may perform cost effectively for up to 10 years, for fleets this number is greatly reduced. With the average fleet lifecycle typically only 3-4 years – less than half that of an ‘ordinary’ roadworthy vehicle.
Wait too long to replace your fleet and you could be accruing repair costs that far outweigh the resale value of the vehicle. Meaning that when you do eventually part ways with it, the money you invested in maintenance won’t be recouped. Life Cycle Costing (LCC) avoids this common operational pitiful. Ensuring that when you do come to sell, it’s at the right time, for the right price.
Keep your customers (and your crew) happy
In the digital age we live in reputation is everything. And even the smallest of setbacks can quickly escalate into a PR nightmare that can cost a business face, as well as a significant decline in revenue.
Not to mention, once lost, reputations are seldom easy to repair.
With accurate Life Cycle Costing (LCC) you can inhibit the occurrence of fleet breakdowns that do damage to your business’s credibility. As well as initiate a rotation system to ensure your fleet is always ready for action. Helping to keep your customers happy, which in turn keeps your reputation intact.
By accurately recording the age, condition, and running costs of your fleet, together with regularly rotating your vehicles, not only can you monitor performance and reliability. You can also pre-empt any potential problems. Putting out any fires before they begin. Whether it’s getting your passengers to their destination on time. Or ensuring a prominent fast food chain receives its core ingredient.
Ensure the safety and sustainability of your fleet
Extending fleet lifecycles, rather than upgrading vehicles for newer ones, has become a growing trend among companies looking to cost save in key operational areas. And inevitably, keeping an existing vehicle is often regarded as a sensible solution where budget constraints are concerned.
However, this is a dangerous generalisation (and often one that often results in higher costs overall). Not only does keeping your fleet in service for longer than is recommended present a reliability risk. It also brings to light serious safety implications too.
By their very nature fleets depreciate and degrade far quicker than any other road vehicle. Understandable considering the amount of miles they accrue compared to an average driver’s typical road usage. By extending the life of your fleet rather than upgrading vehicles as they age, you inevitably expose yourself to higher operational costs, unbudgeted repairs and a depreciation in resale value. While also taking a gamble on the safety of your fleet and as a consequence its passengers.
Take advantage of new technology
By upgrading your fleet lifecycle regularly when it nears the end of its life, not only are you less likely to lose out cost-wise in the long term, but you’ll also benefit from the latest technological updates available. Which can further benefit your fleet’s performance. As well as reduce your organisation’s carbon footprint, and the overall impression of your business.
Technology is advancing at an ever-increasing speed, bringing us innovations such as electric powered vehicles and even self-driving cars. And with an ever-growing consumer mind-set of aligning with companies that demonstrate greater environmental responsibility, investing into technologies that demonstrate clear green values can only boost business.
Organisations that have already upgraded to fleets powered by renewable energy sources and smart technology are reaping the benefits that sustainable infrastructure brings. While simultaneously acquiring a valuable business asset, the value of which will depreciate less quickly than traditional technology. Not least of all because older diesel and petrol powered vehicles typically consume more fuel than their younger counterparts. Another significant cost to businesses that choose to extend, rather than upgrade, their fleet.
Always have the right fleet for the job
Just as a business hires its respective roles against a checklist of suitability criteria, so too is it vital for fleet managers to stock their fleets with the right vehicles for the job. A significant part of Life Cycle Costing (LCC) involves this assessment. Putting the right ownership model in place not only improves efficiency but also the overall cost effectiveness of your fleet. So it’s a vital process for any fleet manager to undertake and execute.
Of the available fleet ownership types (leasehold, pool, eco schemes, ownership and contract hires) it’s important to weigh up the benefits and any disadvantages of each model. Both independently and in terms of your own business needs. Taking into consideration day-to-day operational challenges, such as average mileage of your fleet, accessibility of your vehicles, and ground coverage from point of origin. Among other key influencing factors.
Only by doing so can you come to devise a Life Cycle Costing plan that will sustain your business efficiently in the long term and offer the most viable solution for your unique requirements.
Author: Mark McKenna, National Sales Manager of Bluedrop Services who specialise in Motor Fleet Insurance and offer advice and support to customers managing Motor Fleets.
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