Module I - Utilization and your budget: The hidden price of underutilized vehicles
On the road to lower fleet costs, utilization matters. Are your vehicles and assets being used to their fullest potential?
Public sector fleets face unique challenges like tightening budgets, public scrutiny over how taxpayer funds are spent and difficulties keeping up with aging infrastructure. To save money and efficiently run day-to-day operations, it’s imperative to closely track your fleet’s usage rates and identify under- and overutilized vehicles. This module will outline how utilization rates impact your budget, some of the key steps you can take to optimize vehicle usage and critical insights from public sector leaders on utilization best practices.
What is vehicle utilization and why is it important?
Vehicle utilization is the concept of how much usage each vehicle in your fleet regularly gets. Vehicle utilization is critical to track because it can help you identify areas of over-usage or under-usage, which can cost you money. Through a series of metrics, you can measure your vehicle utilization patterns and make smarter decisions to either reassign vehicles to other operational areas or remove them from your fleet altogether via right-sizing.
Key analytics to track include:
Individual vehicle utilization rate
Perhaps the most reliable and granular way to track vehicle usage, the vehicle utilization rate helps you understand how much specific vehicles are being driven for work-related reasons. It can be calculated by identifying the total time a vehicle is actually used for work and dividing this number by its total availability time (the theoretical maximum number of hours it could be used for work). Once you’ve run this equation, simply multiply the answer by 100 to gain the percentage.
Average miles per driver
This statistic compares your fleet’s total number of miles driven to how many drivers you have employed.
Fleet utilization rate
This broad metric provides insight on the total demand your agency’s fleet has in contrast to its total capacity (typically expressed in percentages).
Total mileage capacity
Multiply your drivers’ average miles driven by the number of vehicles in your fleet to acquire your total mileage capacity.
With each of these metrics in front of mind, you can easily pinpoint which fleet vehicles are under-used in your operations and make data-driven decisions to reduce wasteful expenses.
How do underutilized and overutilized vehicles cost my department money?
Unoptimized vehicle utilization rates can limit your agency by consuming excessive budget in ways you might not even realize. Beyond the obvious costs of registration, insurance and devaluation over time, under-used vehicles can bring hidden expenses related to maintenance, even if they are unused for long durations. By having underutilized vehicles in your agency’s fleet, you also could be putting unnecessary strain on certain vehicles that your government fleet uses more frequently.
With high costs related to underutilization, it’s difficult for your agency to conserve public funds, provide optimal service to your constituents and build trust. Let’s dive into two key ways that underutilization costs your fleet money.
- Unnecessary maintenance on underused vehicles: Routine servicing is still often needed in underutilized vehicles, even if mileage-related maintenance isn’t necessary. Over time, tires can lose air from the weight of the vehicle alone and mechanical fluids can deteriorate. If there is a swath of vehicles in your fleet that are underused and taking up space at your depot, it’s likely that your maintenance costs are unoptimized and consuming more of your budget than necessary.
- Depreciation: With all vehicles, the value will drop the moment you drive it off the lot. While it’s inevitable that your vehicles will lose financial worth over time, you can lessen the impact by selling underutilized vehicles when they are no longer required . As vehicles become too old to reliably function, replace them by identifying viable, cost-effective new vehicle candidates and take into account their total cost of ownership (TCO). This will help you save taxpayer funds and account for depreciation, potential maintenance costs and fuel expenses ahead of time.
- Greater wear and tear in overused vehicles: If a certain number of vehicles in your fleet are underutilized, it could also have a certain number of overutilization of other vehicles. This could occur as a result of driver preference for certain makes and models or simply due to location. Over-usage can lead to higher-than-needed maintenance costs in the short term, and potentially more expensive repairs later on down the line. Oil changes, wiper blade replacements and tire rotations are all examples of smaller service jobs that may be needed more frequently in overused vehicles. Further in the future, larger and more costly maintenance like transmission repairs or brake jobs also may be required.
What can I do to optimize vehicle utilization?
Given the high costs associated with underutilized vehicles, it’s paramount to find ways to optimize utilization rates, particularly for vehicles with the lowest vehicle operating costs. By reporting on fleet utilization statistics and making data-driven decisions, you can free up additional space in your budget.
By reporting on utilization across your fleet’s assets and distance trends, imbalances in usage that are costing you money may be brought to light. Armed with this information, you can make smarter decisions around maintenance schedules, create accurate budget forecasts and avoid unnecessary downtime in your fleet. Below, we’ve provided a step-by-step guide to help you learn how to track—and optimize—your fleet’s utilization rates.
Step 1 - Calculate key utilization metrics for your fleet
Start to assess your vehicles’ usage patterns by calculating individual utilization rates and each vehicle’s cost per mile. If applicable, also try to identify any seasonal utilization trends in your fleet that may fluctuate due to the changing nature of your agency’s operations. It’s important to do this because it can help you avoid the possibility of removing certain vehicles from your fleet that you may not need now, but will need later.
Running meticulous usage calculations manually can occupy enormous amounts of time and potentially result in errors. Thankfully, telematics can help you replace complex spreadsheets and the need for a calculator by showing you precise usage metrics from your entire fleet in a single place.
For example, Geotab's Top 10 Most and Least Utilized Vehicles Report, as seen on the right, makes it easy to see where changes are needed to optimize your costs.
Step 2 - Set targets for utilization rates
It’s important to establish a realistic goal for your fleet’s utilization rates. While most organizations usually aim for an 80% rate for maximum efficiency, that might not be immediately achievable. Set a feasible utilization benchmark to reach for specific types of vehicles in your fleet. Incrementally create higher goals over time until you eventually reach the 80% threshold and make sure that your goals are diversified according to the different types of vehicles in your fleet.
Step 3 - Identify overutilized and underutilized vehicles and the reasons why
Based on the targets and calculations found in Step 1, determine which vehicles are under-used and which are over-used in your fleet. Once you’ve done so, it’s important to dig deeper to identify the reasons why. Causes for over- or under-usage can range from driver preferences for certain makes and models, locations and vehicle breakdown histories to some vehicle types not being compatible with usage requirements.
This type of analysis can be difficult and time consuming without a solution that automates these calculations. An example of this would be a telematics solution with a quick and convenient Asset Utilization dashboard.
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Step 4 - Optimize usage rates and right-size the fleet
Based on the patterns observed and their associated reasons, your agency will be able to not only optimize overall fleet utilization rates, but also use cost per mile data to effectively reduce its fleet size and subsequent operating costs. Read “Module II - Fleet right-sizing: The financial drain of a bloated fleet and key strategies to effectively reduce its size” to learn more about right-sizing best practices.
After reporting on vehicle usage, there are several additional actions you can take to balance utilization and optimize your fleet include:
- Verifying that vehicles are reaching their highest lifecycle limits before removing them from your fleet
- Efficiently managing downtime by seamlessly rotating vehicles when maintenance is needed
- Clearly communicating to employees what constitutes appropriate versus inappropriate use of a government vehicle
- Vehicle rotations or repurposement strategies to lengthen their lifespans
The sheer amount of data to sift through can seem insurmountable when you’re first starting out on your fleet utilization journey. Luckily, tools like telematics make it easy to report on only the most relevant KPIs to your fleet’s usage, including mileage, drive time and days driven. These categories will help you gain a detailed view of vehicle usage patterns and assess where opportunities exist to optimize usage.
Due to the ever-present need for transparency, efficiency and cost-savings in your agency’s operations, it’s essential to always stay mindful of vehicle underutilization and develop proactive strategies to combat it. Telematics data can help guide you to a more efficient and cost-effective tomorrow by helping you identify areas to balance usage in your fleet and be more efficient.
Ways that leaders in the public sector are currently optimizing their vehicles’ usage
With a focus on effective vehicle utilization in government fleets, many public sector fleet managers are relying on telematics data to manage fleet and asset usage. Insights from the data are enabling them to optimize their fleets’ sizes and reduce costs.
At Geotab Connect, speakers from various government fleets came together to share their agencies’ approaches to improving driving utilization with telematics. Here were some of their key takeaways.
Dale Speiss, Fleet Manager for Wyoming State Motorpool
Dale shared how during the winter season, low vehicle usage rates need to be thought of contextually due to harsh weather conditions. However, when underutilization that isn’t due to heavy snowfall occurs in his agency’s vehicles, it’s typically in older models. Speiss talked about how when a new vehicle is added to a fleet, it’s often common for the older vehicles’ usage rates to dwindle. By identifying decreased usage in older vehicles, a concerted effort can be made to use these more often so that they too can be replaced with newer models faster. Wyoming State Motorpool’s fleet has strictly defined policies around authorized and unauthorized vehicle usage and exchanges vehicles based on utilization metrics across their various departments. Wyoming lowered their mileage threshold from 150,000 to 100,000 for switching out vehicles after realizing the previous threshold was costing them too much money and making it difficult to replace their vehicles. Through all these methods, they are optimizing their vehicles’ usage rates and balancing their maintenance budget.
Robert Riddle, Fleet Director for the North Carolina Department of Administration
Robert shared that his approach to vehicle utilization begins with running routine reports to identify underused vehicles, then asking state agencies to justify if and why these vehicles are still needed in their fleets. Riddle’s team assesses the responses from these agencies and determines which reasons are understandable and which are discussable. This motivates agencies to only keep the vehicles they truly need in their fleets. His department tracks mileage and driving days, calculating potential rental vehicle costs with current usage metrics to potentially save money. For newer vehicles in the fleet, no matter if they’re internal combustion engines or electric vehicles, they must be driven. Monitoring utilization KPIs enables fleet managers to verify that each asset is getting proper usage. North Carolina uses targets of 100,000 miles and eight years’ time to help agencies determine when it’s time to replace a vehicle, but depending on how much they’ve invested in a particular vehicle, it may remain in the fleet for a longer duration.
Austin Lundy, Technology Specialist for Vehicle Fleet Services in the City of Raleigh
Austin spoke about how the city makes departments aware of underutilized vehicles in their fleet whenever one is detected. Data guides the City of Raleigh’s strategies on managing underutilized vehicles. Lundy shared how the City of Raleigh monitors their vehicles’ driving utilization and creates coaching strategies that resonate with drivers based on the data. The city evaluates leasing and rental vehicle options based on total vehicle counts or specific circumstances. A dynamic fleet scoring system factoring in potential maintenance expenses, vehicle ages and odometer metrics helps fleet managers pinpoint the best times to replace a vehicle, and employees receive regular communications about vehicle locations and usage rates. Using Geotab’s telematics solution, Lundy explained that employees can also log in directly to survey their assigned vehicle’s usage patterns and make better choices based on the data.
By paying more attention to how vehicle utilization affects your fleet, you can make a concerted effort to optimize usage, lower operational costs and better serve your public. Enhance responsibility with taxpayer dollars by reducing waste in your operations and running a truly efficient government fleet.