{"id":4835,"date":"2020-03-29T18:00:46","date_gmt":"2020-03-29T16:00:46","guid":{"rendered":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/?p=4835"},"modified":"2020-03-29T18:01:53","modified_gmt":"2020-03-29T16:01:53","slug":"best-in-class-truck-replacement-strategies","status":"publish","type":"post","link":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/2020\/03\/29\/best-in-class-truck-replacement-strategies\/","title":{"rendered":"Best-in-Class Truck Replacement Strategies"},"content":{"rendered":"

Ordering decisions at Archrock Services used to be left up to the field. Now, the fleet has created a replacement list to prioritize replacements by business unit.\u00a0Photo: Archrock<\/strong><\/span><\/p>\n

The decision to replace a truck is a big one. Replace it too early, and you\u2019re dealing with unnecessary acquisition costs. But, replace it too late, and maintenance costs and downtime can soar.\u00a0<\/span><\/p>\n

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All of that, of course, translates directly to a fundamental metric: total cost of ownership (TCO). How do you find the sweet spot to maximize your TCO?\u00a0<\/span><\/p>\n

Fleets and OEMs share their best-in-class replacement cycling strategies to help your fleet get it right.<\/span><\/p>\n

Assess Age & Maintenance Costs<\/span><\/strong><\/h5>\n

One of the top factors in determining truck replacement is vehicle age and related maintenance costs.\u00a0<\/span><\/p>\n

\u201cWhen I started with Hawaii Gas 16 years ago, we ran the trucks pretty much until they had to be replaced. Now we are looking at replacing before it gets expensive to run,\u201d said Glenn Yamada, fleet and facilities supervisor for Hawaii Gas. \u201cIn doing so, we\u2019re also looking into maximizing any return that can be obtained from the vehicle being replaced to lower and control our replacement costs.\u201d\u00a0<\/span><\/p>\n

Because the fleet operates in Hawaii, replacing trucks takes additional planning and lead time.\u00a0<\/span><\/p>\n

As Yamada said, \u201cWe are on an island and can\u2019t just drive to the next state to get a truck.\u201d\u00a0<\/span><\/p>\n

Having a set replacement strategy has improved forecasting replacements for the fleet, allowing Hawaii Gas to get ahead of lead times before the truck being replaced has a significant repair expense while still in service.\u00a0<\/span><\/p>\n

\u201cIn the new replacement design, we\u2019re emphasizing safety first and foremost as well as new designs for productivity improvements for the employees to make their job a little easier,\u201d Yamada said. \u00a0<\/span>
\nHawaii Gas is seeing benefits from the updated strategy.\u00a0<\/span><\/p>\n

\u201cWe have lowered the upward swing of the expense curve, for the most part, avoiding major repair expenses in our core business area of Honolulu. We are now in the process of carrying this over to the other island locations,\u201d Yamada said. \u201cAs a result, we are seeing better utilization of specialized trucks, improved driver satisfaction, and are slowly lowering avoidable vehicle accidents with additions of new collision mitigation technologies.\u201d<\/span><\/p>\n

Rank Replacement Units Based on Weighted Factors<\/span><\/strong><\/h5>\n

Archrock Services, a natural gas\/compression services company, has also made a major strategy shift.\u00a0<\/span><\/p>\n

\u201cUp until the 2020 model-year, there hasn\u2019t been any sort of defined replacement strategy at Archrock. Vehicle budgets and ordering decisions were left up to the field operations,\u201d said Emily Garza, vehicle fleet manager for Archrock. \u201cThis system does not effectively work; therefore, a few changes were put into place for 2020.\u201d<\/span><\/p>\n

To develop a new replacement cycling strategy, Archrock Services worked with its fleet management company to identify and rank replacement units based on several weighted factors, including miles, months in service, and operating expenses. \u00a0<\/span><\/p>\n

With the replacement listing in hand, Archrock factored in its proposed budget and prioritized the replacements by business unit.\u00a0<\/span><\/p>\n

\u201cAdopting a \u2018Net 1\u2019 philosophy has helped plan for 2020,\u201d Garza said. \u201cSince replacement units and new units had never been linked via the fleet database in the past, we\u2019ve adopted that process as well. This will help better manage disposals when the new units deliver.\u201d\u00a0<\/span><\/p>\n

Linking replacement units to new vehicles have simplified the ordering process.\u00a0<\/span><\/p>\n

\u201cI\u2019d like to eventually get into a specified spring and fall order cycle, so vehicles are consistently being replaced throughout the year,\u201d she said. \u201cThis would also allow us to take advantage of certain OEM production schedules and project more accurate upfit lead times.\u201d\u00a0<\/span><\/p>\n

Following the first year of the new strategy, Garza anticipates years two and three will bring true cost savings and efficiencies.<\/span><\/p>\n

\"Operating<\/span>
Operating in Hawaii requirements additional planning and lead time when replacing truck models. Hawaii Gas has set a replacement strategy to get ahead of lead times.\u00a0<\/span>Photo: Hawaii Gas<\/span><\/p>\n<\/figcaption><\/figure>\n
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Replacement Cycling Strategy Mistakes & How to Avoid Them<\/span><\/strong><\/h5>\n

The mistake: Doing things the way you\u2019ve always done them.<\/strong><\/span><\/p>\n

\u201cThe \u2018if it isn\u2019t broke, why fix it?\u2019 mentality is understandable, but the technology in these vehicles is coming quickly,\u201d said Mark Namuth, senior manager, commercial vehicle sales for Nissan North America.<\/span><\/p>\n

\u201cEmbracing new technology is the key to staying ahead.\u201d<\/span>
\n\u00a0<\/span>
\nThe mistake: Wearing blinders.<\/strong><\/span><\/p>\n

\u201cIt\u2019s important to be an educated fleet manager,\u201d said Namuth. \u201cStaying on top of trends and changes that are coming allows you to proactively manage your fleet instead of reactively responding to changes you didn\u2019t see coming. Stay current on market trends, including keeping an eye on what technology the truck OEMs are introducing and why. Be aware of the changes that are coming. For example, are there new emissions regulations or major compliance dates on the horizon? What safety initiatives is NHTSA going to mandate?\u201d<\/span><\/p>\n

The mistake: Making decisions on data alone\u2026or instinct alone.\u00a0<\/strong><\/span><\/p>\n

\u201cIt\u2019s critical to use fleet data and end-user feedback in decision making and stick to your game plan before making any drastic changes without substantial data to prove otherwise it\u2019s not working,\u201d said Glenn Yamada, fleet and facilities supervisor for Hawaii Gas. \u201cUse your data and your instinct (from your experience) to plan your strategy. Sometimes it takes more than numbers to be effective.\u201d<\/span><\/p>\n

The mistake: Building a strategy in isolation.<\/strong><\/span><\/p>\n

\u201cWhen defining a strategy, be sure to incorporate input from all stakeholders. The program has to work for all aspects of the business for it to be truly effective,\u201d said Emily Garza, vehicle fleet manager for Archrock. \u201cMake sure the details are thoroughly understood by the key stakeholders and ensure clear & concise communication is orchestrated to the drivers and\/or field operations.\u201d\u00a0<\/span><\/p>\n

The mistake: Not planning ahead.<\/strong><\/span><\/p>\n

\u201cIf proper and timely planning does not occur, order to delivery lead times will most certainly increase. Having a defined strategy and being able to execute when model year order banks open is key,\u201d said Garza of Archrock. \u201cAlso, without proper planning or a defined strategy, capital expenditure budgets may be severely overextended and\/or operating costs will skyrocket.\u201d \u00a0<\/span><\/p>\n

The mistake: Making decisions for the \u201cnow\u201d and not for the future.<\/strong><\/span><\/p>\n

\u201cMake decisions for today, tomorrow and beyond whenever possible,\u201d advised John Ruppert, general manager, commercial & government fleet sales of Ford Motor Company. \u201cThe experts are managing their fleets in three- to five-year\u00a0windows, not just by \u2018how much money do I have this year?\u2019 \u201d<\/span><\/p>\n

Match the Application<\/span><\/strong><\/h5>\n<\/div>\n

A truck\u2019s application can also factor into a fleet\u2019s replacement cycling strategy. Determining when to replace a truck can vary widely between applications, as can different markets and segments.\u00a0<\/span><\/p>\n

The same truck used for one type of job may have a shorter replacement cycle than the same truck doing a different job \u2014 or even doing the same job but across diverse terrain.\u00a0<\/span><\/p>\n

\u201cWhen we look at a typical Class 8, on-highway application, for example, a five-year 500,000-mile trade cycle is common,\u201d said Jim Nachtman, director, heavy duty product marketing for Navistar.\u00a0\u201cSome have shorter trade cycles for unique applications, such as team driver applications that accumulate mileage much faster.\u00a0Some other customers run much longer trade cycles and may choose to run the vehicle until its end of life. While a shorter replacement cycle comes with many benefits, best-in-class comes down to that customer\u2019s unique application and specific needs.\u201d<\/span><\/p>\n

Even though some applications may be better suited to longer or shorter replacement cycles, Nachtman said it can still be difficult to find the right fit.\u00a0<\/span><\/p>\n

\u201cThe challenges come in finding the correct balance between the benefits of a shorter trade cycle \u2014 such as improved fuel economy, uptime, and driver retention \u2014\u00a0with the incremental investment required to do so,\u201d he said. \u201cThis challenge varies depending on the customer \u2014 how many vehicles they have, where they are running them, and the vehicles\u2019 application.\u201d<\/span><\/p>\n

Adjust for Truck Type<\/span><\/strong><\/h5>\n

Just as application can inform the right replacement cycle, so can the type of truck driven.\u00a0<\/span><\/p>\n

\u201cThe replacement strategy should remain the same based on TCO,\u201d said Mark Namuth, senior manager, commercial vehicle sales for Nissan North America. \u201cThat said, the powertrains as one moves from light- to medium- to heavy-duty have different life expectancies, which need to be factored into the replacement models.\u201d<\/span><\/p>\n

Speaking specifically about medium-duty trucks, Brent Rottweiler, vice president of remarketing for Volvo Trucks North America, said they tend to run fewer miles per year, prompting customers to keep them for longer periods of time.\u00a0<\/span><\/p>\n

\u201cThe repairs and maintenance on a medium-duty truck are also usually less costly, so owners can justify a longer operation cycle, where it makes overall sense,\u201d he said. \u201cWith medium-duty trucks, many customers in this industry classification have specialty bodies mounted on medium-duty chassis, so a planned replacement cycle should give consideration to both chassis life and body life.\u201d<\/span><\/p>\n

John Ruppert, general manager, commercial & government fleet sales for Ford Motor Company, said gross vehicle weight rating (GVWR) plays a factor.\u00a0<\/span><\/p>\n

\u201cThere are some differences in replacement\u00a0strategies for light-, medium-, and heavy-duty vehicles,\u201d he said. \u201cIn broad terms, the vehicles at the lower end of the GVWR scale tend to be replaced based on mileage-usage patterns, whereas the trigger points for higher GVWR vehicles tend to be based on operating hours.\u201d<\/span><\/p>\n

Replace Based on Your Goals<\/span><\/strong><\/h5>\n

The decision to replace a truck may also come down to a fleet\u2019s specific goals. For instance, if optimized fuel economy is at the top of the list, fleets might opt for a shorter cycle, as fuel economy typically improves with each new model-year.\u00a0<\/span><\/p>\n

\u201cA shorter trade cycle helps provide higher average fuel economy,\u201d said Nachtman of Navistar. \u201cNewer vehicles typically have better uptime, further supporting a shorter trade cycle.\u201d<\/span><\/p>\n

If attracting and retaining drivers is your goal, replacing trucks sooner and providing newer, more desirable vehicles to drive can help.\u00a0<\/span><\/p>\n

\u201cFleets are in short supply of drivers, so to secure drivers, and the best drivers, fleets want modern, new equipment with safety and ergonomic features focusing on driver safety, comfort, and productivity,\u201d said Rottweiler of Volvo.\u00a0<\/span><\/p>\n

If reducing maintenance costs is your goal, Rottweiler said the length of the warranty could prompt a replacement.\u00a0<\/span><\/p>\n

\u201cMany customers trade trucks close to the warranty expiration and before experiencing increased maintenance costs,\u201d he added. \u201cImproved safety, fuel efficiency, and telematics features are encouraging customers to replace sooner, too. Companies want to be seen operating the most up-to-date, safe equipment with the least amount of environmental impact.\u201d<\/span><\/p>\n

Update for Technology Benefits<\/span><\/strong><\/h5>\n

Although replacing units comes with a cost, newer models often come with updated technology that helps fleets operate more safely and efficiently. Those upgrades can offset some of the expense, allowing fleets to justify shorter replacement cycles.\u00a0<\/span><\/p>\n

\u201cWhile budget has always been a major factor in replacement cycle planning, fleet managers today also are having to consider the implementation of connectivity and driver assist technology and how all this new technology impacts the cost of operation of the asset and overall capital expenditures,\u201d said Ruppert of Ford. \u201cIf your old vehicles don\u2019t have the modern technology that enables your drivers to be as efficient as possible, your productivity can decline. If you\u2019re not taking advantage of connectivity and the insights fleet management software and telematics can provide, you could be wasting money every day and not even realize it.\u201d\u00a0<\/span><\/p>\n

Fleets are also purchasing units sooner to take advantage of safety benefits.\u00a0<\/span><\/p>\n

\u201cThe safety technologies and in particular the active safety features that OEMs are now providing have companies rethinking their replacement strategies, particularly as the newer technology units enter the fleet, and those benefits are recognized,\u201d added Namuth of Nissan.\u00a0<\/span><\/p>\n

And, Navistar\u2019s Nachtman said he sees the same trend.\u00a0<\/span><\/p>\n

\u201cCollision mitigation systems and other safety-focused technologies continue to advance, and a shorter trade cycle can ensure more of a fleet is running the latest technologies,\u201d he said.<\/span><\/p>\n

While updated technology may not be your primary goal, it can still be factored into the total equation. \u00a0 \u00a0<\/span><\/p>\n

Ruppert recommended taking a hybrid approach:\u00a0<\/span><\/p>\n

\u201cThe best replacement cycling strategies today have three parts: traditional, emissions compliance, and connectivity\/driver-assist technology,\u201d he said. \u201cTraditional considerations are the proven benchmarks like mileage and years in service that continue to underpin most replacement cycle strategies. You also need to understand the patterns around emissions regulations, especially if the fleet is buying diesel powertrains. Couple that with aligning the strategy to support your business\u2019s connectivity and safety programs. The most sophisticated fleets are finding ways to blend these three layers of consideration into a solid strategy.\u201d<\/span><\/p>\n

In a Budget Pinch? Swap Routes<\/span><\/strong><\/h5>\n

If you read these approaches and think, \u201cwe just don\u2019t have the budget for that,\u201d you can still employ this simple strategy: swap routes.\u00a0<\/span><\/p>\n

\u201cWe see far too often that as business slows or cash flow becomes tight, companies will extend their vehicle usage,\u201d said Namuth of Nissan. It\u2019s an understandable thing to do, but when forced into doing this, one simple tip would be to place the newer vehicles in the high-mileage routes and the older vehicles in the low-mileage routes.\u201d<\/span><\/p>\n

Any Strategy Is Better\u00a0Than No Strategy<\/span><\/strong><\/h5>\n

While there may be many options for replacement cycling strategies, having any strategy is ultimately better than having no strategy at all. \u201cThe best replacement strategy is, in fact, \u2018Having a Replacement Strategy\u2019 and doing your best to stay on track,\u201d added Namuth of Nissan.\u00a0<\/span><\/p>\n

by Shelley Ernst<\/a><\/p>\n

Source:\u00a0 https:\/\/www.worktruckonline.com<\/a><\/p>\n

FLEET MANAGEMENT AUDIT<\/strong><\/h3>\n

Fleet management is the use of a set of vehicles in order to provide services to a third-party, or to perform a task for our organization, in the most efficient and productive manner with a determined level of service and cost.<\/p>\n

Fleet management activities are shown in the following graph 1:<\/p>\n

\"fleet<\/p>\n

Graph 1: fleet management activities<\/p>\n

The proposal audit analyses and assesses all fleet management activities shown in the graph 1, and its main goals are:<\/p>\n