{"id":1876,"date":"2017-07-19T17:53:08","date_gmt":"2017-07-19T15:53:08","guid":{"rendered":"http:\/\/en.advancedfleetmanagementconsulting.com\/?p=1876"},"modified":"2017-07-19T17:53:08","modified_gmt":"2017-07-19T15:53:08","slug":"disposalreplacement-of-the-vehicles-fleet","status":"publish","type":"post","link":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/2017\/07\/19\/disposalreplacement-of-the-vehicles-fleet\/","title":{"rendered":"DISPOSAL\/REPLACEMENT OF THE VEHICLE\u00b4S FLEET"},"content":{"rendered":"<p><a ref=\"magnificPopup\" href=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg\"><img loading=\"lazy\" class=\"aligncenter wp-image-1877 size-full\" title=\" DISPOSAL\/REPLACEMENT OF THE VEHICLE\u00b4S FLEET\" src=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg\" alt=\" DISPOSAL\/REPLACEMENT OF THE VEHICLE\u00b4S FLEET\" width=\"2345\" height=\"1089\" srcset=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg 2345w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n-300x139.jpg 300w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n-1024x476.jpg 1024w\" sizes=\"(max-width: 2345px) 100vw, 2345px\" \/><\/a><\/p>\n<h5 style=\"text-align: center\"><span style=\"color: #0000ff\"><strong>\u00a0DISPOSAL\/REPLACEMENT OF THE VEHICLE\u00b4S FLEET<\/strong><\/span><\/h5>\n<p style=\"text-align: justify\">The organization has to design and implement policies for disposal and renovation of the vehicles, when to renew them, choose the sales channel, choose the sales suppliers, or establish the maximum time to sell the vehicles.<\/p>\n<p style=\"text-align: justify\">The maximum time a vehicle is used is established by its renovation period, for which the vehicle can be used during this maximum time period and renewed for another vehicle, or be disposed from service, and sold before the maximum time is due because it\u2019d no longer be needed for the service performance.<\/p>\n<p style=\"text-align: justify\">The goal for disposal and renewing the fleet\u2019s vehicles is to sell them as fast as possible with the highest price possible, and use this income to acquire new vehicles or in any other fleet\u2019s necessities.<\/p>\n<p style=\"text-align: justify\">It has to be considered that once the vehicle is retired of service and until the vehicle is sold, the organization has to pay for transportation and storage costs, which have to be minimized.<\/p>\n<p style=\"text-align: justify\">The vehicle has to be sold in perfect use and safety conditions, and for this reason, it\u2019d have to be repaired if needed, and in some cases the vehicle\u2019s condition has to be certified by an third company.<\/p>\n<p style=\"text-align: justify\">If the vehicle was acquired through renting\/leasing, the vehicle would be taken back to the renting\/leasing company during or after the end of the contract, and because of this, the vehicle wouldn\u2019t have to be sold by our organization.<\/p>\n<h5 style=\"text-align: center\"><span style=\"color: #0000ff\">Join to The Fleet Management Group<\/span><\/h5>\n<p style=\"text-align: justify\"><a href=\"https:\/\/www.linkedin.com\/groups\/8603639\"><img loading=\"lazy\" class=\"alignnone size-full wp-image-1677\" src=\"http:\/\/en.advancedfleetmanagementconsulting.com\/wp-content\/uploads\/2017\/04\/Logo.jpg\" alt=\"Logo\" width=\"3995\" height=\"882\" srcset=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/04\/Logo.jpg 3995w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/04\/Logo-300x66.jpg 300w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/04\/Logo-1024x226.jpg 1024w\" sizes=\"(max-width: 3995px) 100vw, 3995px\" \/><\/a>In this group, you can know and share knowledge, experiences and meet people interested in Fleet Management over the world. Each week we publish posts, conferences, news, scientific papers, and technology related to Fleet Management.<\/p>\n<p style=\"text-align: center\"><span style=\"color: #0000ff\"><strong>The fleet management group<\/strong><\/span><\/p>\n<blockquote>\n<p style=\"text-align: center\"><strong>Vehicles renewal policies<\/strong><\/p>\n<\/blockquote>\n<p style=\"text-align: justify\">The organization has to establish policies for the vehicles\u2019 renewal, which could be when the vehicles reach certain kilometrage\/mileage, a certain age, or whichever comes first. The main aspects to consider are the following:<\/p>\n<ul style=\"text-align: justify\">\n<li>Brand image<\/li>\n<\/ul>\n<p style=\"text-align: justify\">New vehicles models in the automotive market represent a better brand image for the organization than older vehicles<\/p>\n<ul style=\"text-align: justify\">\n<li>Vehicles technology<\/li>\n<\/ul>\n<p style=\"text-align: justify\">New vehicles models in the automotive market incorporate the latest technology for active and passive safety measures, fuel consumption, and contaminating emissions. For this reason they\u2019re key aspects for the reduction of traffic accidents, fuel consumption, contaminating emissions and breakdowns; they\u2019re also a good opportunity to incorporate in the fleet, vehicles that use new technologies regarding alternative fuels instead of fossil fuels.<\/p>\n<ul style=\"text-align: justify\">\n<li>Traffic accidents<\/li>\n<\/ul>\n<p style=\"text-align: justify\">After the 6th-7th year of the vehicle\u2019s life, traffic accidents increase, and because of this, the vehicle\u2019s availability for service performance decreases, and the variable operational costs increase<\/p>\n<ul style=\"text-align: justify\">\n<li>Fuel consumption<\/li>\n<\/ul>\n<p style=\"text-align: justify\">After the 6th-7th year of the vehicle\u2019s life, the vehicle\u2019s fuel consumption increases, and for this reason, the contaminating emissions and variable operational costs do too.<\/p>\n<ul style=\"text-align: justify\">\n<li>Breakdowns<\/li>\n<\/ul>\n<p style=\"text-align: justify\">After the 6th-7th year of the vehicle\u2019s life, the number of breakdowns increase, and for this reason, the vehicles availability to perform the service decreases, and the variable operational costs increase<\/p>\n<ul style=\"text-align: justify\">\n<li>The organization\u2019s market<\/li>\n<\/ul>\n<p style=\"text-align: justify\">In determined occasions, the vehicles renovation is dictated by the competition within the market in which the organization operates, and represents a competitive advantage. Car rentals have to offer their clients the newest vehicles in the automotive market to perform their services and be competitive<\/p>\n<ul style=\"text-align: justify\">\n<li>Financial restrictions<\/li>\n<\/ul>\n<p style=\"text-align: justify\">The budget destined to the vehicles renovation, limits the number of vehicles to renew each period, and for this reason the average age of the fleet.<\/p>\n<ul style=\"text-align: justify\">\n<li>Information organization system<\/li>\n<\/ul>\n<p style=\"text-align: justify\">The more information about the vehicle\u2019s direct costs and residual value there is the more precise and trustworthy are the results about the renovation period.<\/p>\n<blockquote>\n<p style=\"text-align: center\">\u00a0 <strong>Total cost of ownership (TCO)<\/strong><\/p>\n<\/blockquote>\n<p>There is a vast field of scientific literature on fleet vehicle renovation; the most used models are the basic model of Life Cycle Cost Analysis (LCCA), the decreasing use rate with age model, or the parallel fleet replacement problem model. (Simms, Lamarre and Jardine, 1984) (Buddhakulsomsiri, Parthanadee y Charnsethikul, 2012).<\/p>\n<p>Other methods based on the LCCA are the equivalent annual cost, annual cost comparison, asset repositioning, or the ones developed by Eilon, King and Hutchinson (1966), and Redmet (2009). Most of these methods use the vehicle\u2019s life cycle costs to determine the renovation cost.<\/p>\n<p>The model to use in the organization would be the one that meets more adequately the fleet\u2019s specifications, characteristics, operative and goals, and the data availability.<\/p>\n<p>We explain the basic model because it is the most simple and widespread, the model considers that the vehicle has a constant use rate through its life.<\/p>\n<p>The following ownership costs must be considering, as shows the graph 1 (<span style=\"color: #0000ff\"><strong><a style=\"color: #0000ff\" href=\"http:\/\/en.advancedfleetmanagementconsulting.com\/2017\/05\/01\/vehicle-fleets-costs\/\" target=\"_blank\" rel=\"noopener noreferrer\">vehicle fleet\u00b4s costs<\/a><\/strong><\/span>)<\/p>\n<ul>\n<li>The cost of capital, like depreciation and financing, decrease with time independently of the financing choice<\/li>\n<li>The unavoidable variable operational costs of a vehicle, like the fuel consumption, tires, maintenance, breakdowns, and accidents increase with the vehicle\u2019s age and kilometrage\/mileage<\/li>\n<\/ul>\n<p>The fixed operational costs, like insurance, taxes, and rates remain practically constant through the vehicle\u2019s life; there\u2019s no need to consider the driver\u2019s salary.<\/p>\n<p>Considering all these costs, the results graph a curve for the total costs of ownership in a \u201cU\u201d shape.<\/p>\n<p>To calculate some of the vehicle\u2019s costs of ownership, it could be included the organization\u2019s historical data, also the vehicles manufacturer, other vehicle fleets, third-party companies, or to directly estimate them.<\/p>\n<p>If the vehicle was acquired through renting\/leasing, the cost of capital is the annual vehicle\u2019s fee.<\/p>\n<p>Once the total ownership costs are calculated and\/or estimated, the Total Discounted Cost of Ownership (TDCO) is used to evaluate an investment project, which would allow the organization to calculate the current cash flow value, using a discount rate.<\/p>\n<p><a ref=\"magnificPopup\" href=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/formula-2.jpg\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-1878\" src=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/formula-2.jpg\" alt=\"formula 2\" width=\"400\" height=\"141\" srcset=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/formula-2.jpg 400w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/formula-2-300x106.jpg 300w\" sizes=\"(max-width: 400px) 100vw, 400px\" \/><\/a><\/p>\n<blockquote>\n<p style=\"text-align: center\">Equation 1: Total Discounted Cost of Ownership.<\/p>\n<\/blockquote>\n<ul>\n<li>TDCO: Total Discounted Cost of Ownership<\/li>\n<li>CTt : Total costs of ownership<\/li>\n<li>t: period of time<\/li>\n<li>r: discount rate or cost of capital<\/li>\n<li>n: reposition period<\/li>\n<\/ul>\n<p>The vehicle\u2019s renewal period is when the total cost of ownership is minimum, using the basic model shown in the graph 1 (<span style=\"color: #0000ff\"><strong><a style=\"color: #0000ff\" href=\"http:\/\/en.advancedfleetmanagementconsulting.com\/2017\/05\/01\/vehicle-fleets-costs\/\" target=\"_blank\" rel=\"noopener noreferrer\">vehicle fleet\u00b4s costs<\/a><\/strong><\/span>).<\/p>\n<p style=\"text-align: center\"><a ref=\"magnificPopup\" href=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-1877\" src=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg\" alt=\"20102015 Renovaci\u00f3n\" width=\"2345\" height=\"1089\" srcset=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n.jpg 2345w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n-300x139.jpg 300w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/07\/20102015-Renovaci\u00f3n-1024x476.jpg 1024w\" sizes=\"(max-width: 2345px) 100vw, 2345px\" \/><\/a><strong>Graph 1: vehicle\u2019s renewal period.<\/strong><\/p>\n<p style=\"text-align: justify\">The renewal period must be established according to the type of vehicles, they must share similar characteristics, have to have the same costs structures through their life cycle, and perform the same type of service. The renewal management is more complex the more differences are between the vehicles ages and types.<\/p>\n<p style=\"text-align: justify\">When the number of vehicles is over the optimal number, the drivers\/users prefer using vehicles with lower kilometrage\/mileage, causing an excess in their use, and underusing the older vehicles. This makes that the unavoidable variable operational costs in the vehicles with less mileage\/kilometrage or age to be higher than the older ones. So the basic model\u2019s hypothesis that these costs increase don\u2019t apply, which added to the fact that the costs of capital always decreases, causes the graphed curved for the total costs of ownership to not have an \u201cU\u201d shape, and for this reason the renewal period calculation is more complex.<\/p>\n<p style=\"text-align: justify\">If the budget for the vehicle\u2019s renewal is limited, the organization has to determine the order of the vehicles to renew. In order to do this, it has to be establish a criteria, like the vehicles with higher mileage\/kilometrage, the higher residual value, that have higher contaminating emissions, that have priority in the fleet, or have the highest accumulated total costs.<\/p>\n<blockquote>\n<p style=\"text-align: center\"><strong>Sales channels of the fleet&#8217;s vehicles<\/strong><\/p>\n<\/blockquote>\n<p style=\"text-align: justify\">The organization has to establish the sales channels for selling the disposal vehicles, such as selling them to the employees of the organization where they&#8217;ve been used, selling them directing to the second-hand market, create a sales central in the organization, use personally or electric biddings, or exporting them to other countries. The sales channels can be established depending on the vehicle\u2019s characteristics and type.<\/p>\n<ul style=\"text-align: justify\">\n<li>The organization&#8217;s employees<\/li>\n<\/ul>\n<p style=\"text-align: justify\">An interesting option is to sell the vehicles to the organization&#8217;s employees where they&#8217;re being used, since they have direct concepts on the conditions and use of the vehicles.<\/p>\n<ul style=\"text-align: justify\">\n<li>Direct sales<\/li>\n<\/ul>\n<p style=\"text-align: justify\">Selling the vehicles directly is recommendable when the organization doesn&#8217;t want to deal with major sales costs, and there&#8217;s only a few vehicles to sell. This sale could be done to a regular person, or to another company.<\/p>\n<ul style=\"text-align: justify\">\n<li>Sales central<\/li>\n<\/ul>\n<p style=\"text-align: justify\">Creating sales central within the organization is advisable when there&#8217;s a major number of vehicles and rotation of the fleet, and need to be sold in a short period of time. This sales central requires an initial investment and the salary costs that have to be evaluated, and not all organization are capable of it. Big car rental companies often use this channel to sell their vehicles.<\/p>\n<ul style=\"text-align: justify\">\n<li>Bidding<\/li>\n<\/ul>\n<p style=\"text-align: justify\">Personally or electronic bids are more complicated to do, clear and advisable when there&#8217;s a whole lot of vehicles to sell.<\/p>\n<p style=\"text-align: justify\">There are three main factors to maximize the total sales value, like establishing the number of vehicles in the lot, the vehicle bidding order, and the type of bid (ascending, descending, sold over the first price, sold over the second price, etc.).<\/p>\n<p style=\"text-align: justify\">Doing the bidding requires an initial investments (software and a license), and salary costs that have to be evaluated.<\/p>\n<p style=\"text-align: justify\">The game theory field has developed a vast scientific literature about bidding.<\/p>\n<ul style=\"text-align: justify\">\n<li>Exporting to other countries<\/li>\n<\/ul>\n<p style=\"text-align: justify\">Exporting vehicles is an interesting option in countries where the second-hand market is strong, and can be sold for a higher price than in the countries where the vehicles have been used.<\/p>\n<p style=\"text-align: justify\">The exportation costs have to be considered, like transportation, storage, insurance, taxes and importation rates for vehicles in the destination country.<\/p>\n<p style=\"text-align: justify\">The organization can use an online website for selling the vehicles, but the organization has to consider there&#8217;ll be an initial investment, mainly for the software that can be acquired from another company, and salary costs that have to be evaluated. In this way, the organization has total control over the selling process of their vehicles.<\/p>\n<blockquote>\n<p style=\"text-align: center\"><strong>Outsourced suppliers for selling the fleet&#8217;s vehicles<\/strong><\/p>\n<\/blockquote>\n<p style=\"text-align: justify\">In the market exists several remarketing companies that specialize in vehicles sales through any of the type of channels previously mentioned.<\/p>\n<p style=\"text-align: justify\">Using one of these companies will depend on several aspects like honorariums and commissions, saving all the administrative costs, and knowing the best market and channel where the vehicles could be sold.<\/p>\n<blockquote>\n<p style=\"text-align: center\"><strong>Maximum time for selling the withdrawn vehicles<\/strong><\/p>\n<\/blockquote>\n<p style=\"text-align: justify\">The organization has to establish the maximum time to sell the vehicles, which depend mainly on financial aspects, since it&#8217;s advisable that the income from selling the vehicles is used to acquire new vehicles, investments, or fleets expenses. Besides, the organization may have limited space to store a determined number of vehicles.<\/p>\n<blockquote><p><strong>References\u00a0<\/strong><\/p><\/blockquote>\n<p>Adam Redmer. 2009.\u00a0<span style=\"color: #0000ff\"><a style=\"color: #0000ff\" href=\"http:\/\/www.sciencedirect.com\/science\/article\/pii\/S1366554509000672\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><strong>Optimisation of the exploitation period of individual vehicles in freight transportation companies<\/strong><\/a>.<\/span> Transportation Research Part E: Logistics and Transportation Review. Volume 45, Issue 6, 978\u2013987.<\/p>\n<p>B.W. Simms, B.G. Lamarre, A.K.S. Jardine. 1984.\u00a0<span style=\"color: #0000ff\"><a style=\"color: #0000ff\" href=\"http:\/\/www.sciencedirect.com\/science\/article\/pii\/037722178490208X\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><strong>Optimal buy, operate and sell policies for fleets of vehicles<\/strong>.<\/a><\/span>\u00a0European Journal of Operational Research. Volume 15, Issue 2, 183\u2013195.<\/p>\n<p>Parthana Parthanadeea, Jirachai Buddhakulsomsirib, Peerayuth Charnsethikulc. 2012.\u00a0<span style=\"color: #0000ff\"><a style=\"color: #0000ff\" href=\"http:\/\/www.sciencedirect.com\/science\/article\/pii\/S036083521200023X\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><strong>A study of replacement rules for a parallel fleet replacement problem based on user preference utilization pattern and alternative fuel considerations<\/strong><\/a>.<\/span> Computers &amp; Industrial Engineering. Volume 63, Issue 1, 46\u201357.<\/p>\n<p>S. Eilon, J. R. King, D.E. Hutchinson. 1966.\u00a0<a href=\"http:\/\/www.palgrave-journals.com\/jors\/journal\/v17\/n1\/abs\/jors19667a.html\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><strong><span style=\"color: #0000ff\">A Study in Equipment Replacement<\/span>.<\/strong><\/a><strong>\u00a0<\/strong>Journal of the Operational Research Society 17, 59\u201371.<strong>\u00a0<\/strong><\/p>\n<p style=\"text-align: justify\"><img loading=\"lazy\" class=\"alignleft size-thumbnail wp-image-1680\" src=\"http:\/\/en.advancedfleetmanagementconsulting.com\/wp-content\/uploads\/2017\/04\/JMF-150x150.jpg\" alt=\"JMF\" width=\"150\" height=\"150\" srcset=\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/04\/JMF-150x150.jpg 150w, https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2017\/04\/JMF-350x350.jpg 350w\" sizes=\"(max-width: 150px) 100vw, 150px\" \/>I\u00b4m\u00a0a Fleet Management expert, and the manager of\u00a0<span style=\"color: #0000ff\"><strong><a style=\"color: #0000ff\" href=\"http:\/\/en.advancedfleetmanagementconsulting.com\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Advanced Fleet Management Consulting<\/a><\/strong><\/span>, that provides Fleet Management Consultancy Services.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0DISPOSAL\/REPLACEMENT OF THE VEHICLE\u00b4S FLEET The organization has to design and implement policies for disposal and renovation of the vehicles, when to renew them, choose the sales channel, choose the sales suppliers, or establish the maximum time to sell the vehicles. The maximum time a vehicle is used is established by its renovation period, for&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[18],"tags":[119],"_links":{"self":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts\/1876"}],"collection":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/comments?post=1876"}],"version-history":[{"count":0,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts\/1876\/revisions"}],"wp:attachment":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/media?parent=1876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/categories?post=1876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/tags?post=1876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}