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Photo courtesy of istockphoto.com<\/em><\/b><\/p>\n In today\u2019s data-driven world, it\u2019s a given that fleets are awash in the kind of information that will allow them to measure their effectiveness with little difficulty.<\/p>\n The reality is that data is simply bits of information that have no meaning until they are collected, analyzed, and interpreted. While fleets can do much of this work themselves, there are a number of companies available to them that specialize in helping to interpret and measure the plethora of data.<\/p>\n Fleet Financials<\/em> asked several of these services about the best ways to audit data to measure fleet effectiveness.<\/p>\n While the process of reviewing fleet data to discover the effectiveness of a fleet operation could rightly be called an audit, this label has some negative connotations that can impede the process.<\/p>\n \u201cWhen we perform a comprehensive review of a fleet operation we typically refer to it as an \u2018operational assessment of program effectiveness\u2019,\u201d explained Tony Yankovich, senior manager for Mercury Associates, Inc. \u201cThe term \u2018audit\u2019 can have a negative connotation to some people. An operational review is more of an assessment of current operations with the ultimate goal to identify opportunities for improvement. Benchmarking performance is just part of what we do in a typical operational assessment of a fleet operation.\u201d<\/p>\n Sal Bibona, president of Chatham Consulting, uses the term \u201caudit\u201d to describe the process his company uses in evaluating a fleet operation.<\/p>\n \u201cA management audit is a methodical examination of the agency\u2019s efforts to plan, organize, coordinate, direct, and control the organization\u2019s fleet activities,\u201d he said.<\/p>\n In the fleet context, Bibona said that a management audit will have several goals and evaluate several fleet-specific areas, including but not limited to:<\/p>\n No matter the terminology, a comprehensive overview of fleet effectiveness can be handled using a number of criteria to get to the same result, as Chris Shaffer, a partner with Utilimarc, noted.<\/p>\n The next step is to refine the items in these \u201cbuckets\u201d to develop a consistent, logical methodology to measure the data.<\/p>\n \u201cWe take those line items in the various buckets and kind of build a methodology, a standardized methodology, that looks at those line items the same way and kind of makes sure that we\u2019re including the same things in the line items and then we provide a trending analysis for our clients how are they performing for the past three years or 10 years and how do they compare to their peers and what\u2019s changing and help discover things about what\u2019s changing and why is it changing,\u201d Shaffer said.<\/p>\n Consistency is the key element in establishing the methodology, according to Shaffer, in order to build a clear picture of the fleet\u2019s operation.<\/p>\n Fleets are awash in data, but capturing all of it can involve going to a number of spigots. Many fleets have fleet information systems that include financial or other operational data, maintenance data, and telematics.<\/p>\n \u201cWith the use of fleet management information systems to capture, record, and report on fleet information (i.e., maintenance and repair costs, utilization, fuel, etc.) and other technologies (e.g., telematics) more and more information is available,\u201d said Yankovich of Mercury Associates. \u201cHowever, in this emerging era of Big Data, many organizations are simply collecting that data and do not necessarily have the ability (expertise or staff resources) to analyze the data to determine how it can help an organization become more efficient. However, telematics solutions and other on-board solutions can help by providing data and information often without human interaction therefore it can reduce the likelihood of errors such as data input errors when entering odometer readings, etc. Solutions can improve routing, maintenance diagnostics, utilization data capture, etc.\u201d<\/p>\n Shaffer of Utilimarc said he collects data at a granular level. \u201cWe go right to the source and we pull it at a vehicle-specific level, so we\u2019re pulling the data at the most granular level and then roll it up to a class level, and a fleet level, and that way we identify any anomalies, so if parts costs jump 37% or fuel spend goes down 42% in a year, because we\u2019re capturing at that vehicle granular level, we can drill into the data and explain why,\u201d he said. \u201cOne of the important things about an audit is when you identify something you have to be able to go to that next level and explain why.\u201d<\/p>\n While consulting companies can do a deep dive on a fleet\u2019s operation, it is a function that can be done by a fleet manager and his or her team as well.<\/p>\n \u201cI absolutely think that a fleet manager can do that,\u201d said Shaffer. \u201cThe only requirements are No. 1 the quality of the data they\u2019re capturing, and No. 2 developing the line items they want to track. And just being consistent, having the same consistency year-in and year-out and you\u2019re measuring those same critical line items with good quality data will give you a very reliable internal audit result.\u201d<\/p>\n Benchmarking is an important part of the auditing process, but fleet managers need to take a number of elements into account when doing it. Crucial to the process \u2014 and really any fleet measurement process \u2014 is to make sure it isn\u2019t an attempt to make it one-size-fits-all, but still remain in the context of fleet best practices.<\/p>\n \u201cEvery agency has its uniqueness and not every benchmark will be correct for that agency,\u201d said Bibona of Chatham Consulting. \u201cInitially the agency should benchmark areas with the highest costs and with the greatest shortfalls in performance that greatly impact customers.\u201d<\/p>\n But there are appropriate starting points for the benchmarking process to put it into a larger fleet context.<\/p>\n \u201cFor benchmarking purposes, I like to measure performance in areas that will have the most impact for the fleet organization and the customers that they serve,\u201d said Yankovich of Mercury Associates. \u201cTypical measures\/benchmarks include fleet availability \u2014 the industry target is 95% of fleet assets are available at any given time \u2014 preventive maintenance compliance rate, average repair turn-around time, total number of \u2018comebacks,\u2019 total number of direct hours technicians charge to work orders in a year, average age of the fleet by major vehicle\/equipment classification, etc.\u201d<\/p>\n Bibona noted that benchmarking has to include several factors in order to be successful.<\/p>\n \u201cIt is important to be reviewing more than one parameter when doing a benchmarking analysis,\u201d he said. \u201cFor example, if an agency has a higher percentage of its staff in administration, this may be viewed negatively. However, if the value added by the administrative staff results in significantly lower costs, this is not a negative. When all or most of the indicators are in the wrong direction, then there may be a problem.\u201d<\/p>\n There are a number of steps that fleets should also take in making sure benchmarking is effective and successful, according to Bibona, and include:<\/p>\n Involve all stakeholders and have executive support.<\/p>\n One question a fleet has to answer for itself is how often it conducts an audit or benchmarking study. As with the questions and priorities associated with the audit itself, there is no \u201cright\u201d answer to this.<\/p>\n \u201cWhat we\u2019re doing for most of our clients \u2014 we\u2019ve turned on the data pipe, so most of these are coming to us on a regular basis,\u201d said Shaffer of Utilimarc. \u201cGenerally we do one big audit annually, and then we create dashboards, KPIs, and metrics that are available monthly and that sort of thing. We still have clients for whom it\u2019s a one-time deal. We go in and pull all year-end data and produce an annual data report online. Most of it is getting to be real time. We do lifecycle analysis and staffing analysis. That\u2019s much different than an audit. So it really benefits the client if the data\u2019s real time.\u201d<\/p>\n There are a number of techniques that can be used to audit and benchmark the effectiveness of a fleet operation. Chatham Consulting, which performs fleet audits throughout the industry, uses a form of vehicle equivalency analysis called maintenance and repair unit (MRU) analysis.<\/p>\n \u201cThis technique weights the numbers of vehicles in a fleet operation in proportion to their relative maintenance and repair requirements,\u201d said Sal Bibona, president of Chatham Consulting.<\/p>\n The results of this technique can reveal quite a bit about the needs of the fleet operation and how it stacks up against other similar fleets, according to Bibona.<\/p>\n \u201cFrom this computation, the number of personnel and financial resources that are needed to maintain the fleet can be estimated, and benchmarking comparisons can be made of fleets of different size and composition,\u201d he said.<\/p>\n The fleet\u2019s vehicle assets (vehicle and equipment) are classified according to classes.<\/p>\n Then maintenance and repair weighting factors are multiplied times the number of vehicles in each class.<\/p>\n The results are summed and produce the MRUs for the entire fleet. A further adjustment is made to reflect how much maintenance is done in house, according to Bibona.<\/p>\n The weighting factors can be derived several ways. One way is to survey the fleet managers to determine their best estimates for the annual amount of mechanic hours needed for the vehicle.<\/p>\n The median answers are determined for each vehicle class, then the median values for the passenger car requirement is divided into the median values of each of the other vehicle classes to yield the relative weighting for vehicle classes across the fleet with the passenger car class having the factor of \u201cunity\u201d or 1.0.<\/p>\n Other factors can be used to derive the vehicle weighting scores, such as vehicle utilization expressed in miles or hours, according Bibona.<\/p>\n Fleet managers need to be careful not to rely on this type of benchmarking alone, according to Bibona.<\/p>\n \u201cA word of caution needs to be introduced,\u201d said Bibona. \u201cWhile vehicle equivalency analysis is a proven technique that enables managers to make resource comparisons of fleets of different size and composition, it should not be used alone to evaluate a particular fleet\u2019s operation. Instead, consideration should also be given to operating environment, level of service requirements, geography, and other factors.\u201d<\/p>\n<\/div>\n Data points are simply data points. On their own, they may be interesting, but they won\u2019t tell much about the organization that is being audited\/benchmarked.<\/p>\n \u201cNumbers do not give you the answers \u2014 they just point you towards them,\u201d observed Bibona of Chatham Consulting.<\/p>\n One of the important functions of the audit or benchmarking analysis is that it creates a data-driven picture of the fleet and helps to bring context to where it stands among similar fleets.<\/p>\n \u00a0\u201cI think one of the most important things that we do is bring context to a fleet\u2019s data and its numbers,\u201d said Shaffer of Utilimarc. \u201cYou can do an internal audit and have a bunch of numbers, and metrics, and costs and numbers, but if you don\u2019t understand the context and how they relate to other people who are doing the same thing it gets really difficult. We bring an industry-accepted consistency of how we\u2019re going to look at the data. We have an industry-approved methodology that says we\u2019re going to do this apples-to-apples comparison. And the second thing \u2014 and this is critical, is bringing context to the numbers. We may say that your parts cost is 14% and it was 13% the year before that and 12% the year before that. Well, okay, so? We\u2019d say that compared to other fleets doing the exact same thing it\u2019s 27% and their costs have gone up from 27% to 42%. That gives the fleet we\u2019re analyzing some context and shows its increase is much less than its peers, and that piece I think is so critical in getting that data to fleets.\u201d<\/p>\n The context of looking at other fleets isn\u2019t the only angle that the fleet should be evaluating. There\u2019s also the context of the fleet itself within the organization it serves.<\/p>\n \u201cOperational context is very important and should always be considered,\u201d said Yankovich of Mercury Associates. \u201cSome fleet assets are used in direct support of the mission of an organization (e.g., delivery trucks, refuse trucks, fire trucks, police cars, etc.) while others are used in supporting roles (e.g., transporting a manager to a meeting).\u201d<\/p>\n While this contextual picture is important, ultimately the audit and benchmarking data needs to be used to quantify and answer two questions: How effective is the fleet and how efficient is it?<\/p>\n \u201cEffectiveness relates to how well a set of results is achieved, while efficiency relates to how many resources were needed to achieve the results,\u201d said Bibona of Chatham Consulting. \u201cThus, by measuring and comparing the ratio of output achieved (effectiveness) over input resources consumed (efficiency), within a specified period of time, we have a means to quantify performance. For most organizations, resources consist of capital, labor, material, and energy or some combination thereof.\u201d<\/p>\n Bibona cautioned about how fleets should use these performance measurements.<\/p>\n \u201cIt should be noted that performance measurement should be used as a means to an end, improved performance, and not an end unto itself,\u201d he said. \u201cMoreover, best practice fleet operations recognize that performance improvement is a continuing process whereby management is involved in an ongoing effort to utilize resources more effectively to achieve quality results.\u201d<\/p>\n Again, each fleet is unique in what needs to be benchmarked.<\/p>\n \u201cWhile there are basic benchmarks for many areas of performance, each organization has unique challenges that must be considered and the benchmark for specific organizations may vary,\u201d said Yankovich of Mercury Associates. \u201cFor example, an organization that must meet specific \u2018roll-out\u2019 requirements \u2014 meaning that they need a specific number of vehicles to meet mission critical operations each day \u2014 and may have a higher fleet availability target than a fleet of general purpose vehicles that are used primarily to perform ordinary activities. However, the number of spare vehicles that the organization owns can impact the availability requirement.\u201d<\/p>\n The cause and effect relationships of decisions are another way benchmarking helps to deliver the context fleets need to improve their operations.<\/p>\n \u201cThere\u2019s always a cause and effect, and that\u2019s one of the things we try to provide \u2014 every decision has consequences \u2014 some are great and some are not so great. It\u2019s really helping the fleet organizations to understand the consequences of their decisions,\u201d said Shaffer.<\/p>\n There are a number of advantages for fleets and some pitfalls to avoid when conducting an audit or benchmarking study.<\/p>\n \u201cThe biggest advantage for fleets in doing regular audits is creating that year-over-year trending that helps fleet managers argue their case to senior management,\u201d said Shaffer of Utilimarc. \u201cIn the fleet space and the fleet world, doing an annual audit of your fleet and trending that year-in and year-out absolutely arms fleet managers with the ammunition to fight these battles. That\u2019s the problem. Fleet unfortunately kind of gets smooshed in the middle, so you have the executive at the top saying \u2018I don\u2019t want to give you any money,\u2019 and you have the user who is demanding \u2018I need better service and better trucks. I want more, I want more, I want more.\u2019 So fleet is smack dab in the middle of I don\u2019t want to give you any and I want more. The only way to effectively prove that you\u2019re doing a great job, and effectively argue your position to get what you need is with that financial audit information. If you don\u2019t have that information, you don\u2019t have a way to argue your point effectively. And that data is critical.\u201d<\/p>\n Ironically, one of the biggest pitfalls fleets often encounter is not with the amount of data, but with not having the personnel to interpret it.<\/p>\n \u201cWhat\u2019s happened over the past 10 years is that the analytics support staff that fleet may have had is now gone. So there are no bodies left and no talent left to do that hard core analysis that\u2019s needed to uncover the magic of that data and the potential of that data,\u201d said Shaffer.<\/p>\n Chris Wolski is the former managing editor of\u00a0Automotive Fleet<\/em>, Fleet Financials<\/em>, and Green Fleet<\/em>. He has a particular interest in telematics, fleet safety, remarketing, and global fleet management.<\/p>\n<\/div>\n<\/div>\n <\/p>\n Source: Fleet Financials<\/span><\/a><\/p>\nHow to Measure Fleet Effectiveness<\/h4>\n
Don\u2019t Call it an Audit<\/h3>\n
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\u201cOne of the things we do is an annual benchmark analysis and what that\u2019s doing is capturing all of the financial data and all of the operational data associated with these fleets,\u201d he said. \u201cIt involves looking at three buckets \u2014 the ownership bucket, the operating bucket, and what we call the support bucket. We look at it from a fleet perspective \u2014 fleet\u2019s kind of simple in some ways, you have to buy a vehicle, you have to maintain it, you have to fuel it, and you have to have a support structure around it, and that\u2019s what those buckets represent, so the ownership bucket is either depreciation or lease cost or licensing expense. The operating bucket is parts, labor, and fuel. The support bucket is kind of the supporting folks and the supporting costs around maintaining a fleet.\u201d<\/p>\nMeasuring at the Granular Level<\/h4>\n
Benchmarking the Fleet<\/h4>\n
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Setting the Frequency<\/h4>\n
\nWeighting Fleet Vehicles by the Numbers<\/h4>\n
Creating a Picture<\/h4>\n
Measuring the Advantages & Pitfalls<\/h4>\n
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