Module II - Fleet right-sizing: The financial drain of a bloated fleet and key strategies to effectively reduce its size
On the road to lower fleet costs, a right-sized fleet makes all the difference. Is your fleet too big for its budget?
When managing a fleet, having too many vehicles in your roster can make it challenging to reconcile your agency's finances, maintain transparency and optimize operations. On the other hand, not having enough vehicles in your fleet can also make it challenging to accomplish everything your agency needs to on a daily basis. However, through a process called fleet right-sizing, you can help prevent problems like these from plaguing your agency and speed towards greater savings. Right-sizing a government fleet involves assessing current vehicle usage and determining if disparities warrant increasing or reducing fleet size. This module will cover the many ways that a larger-than-needed fleet can hurt your department’s budget, key ways to right-size your government fleet and an engaging story about how telematics helped one agency identify the proper size for their fleet.
How does a bloated fleet drain my department’s budget?
A bloated fleet is one that has too many vehicles in it, which can present a host of cost-related problems for your agency. In addition to deeper inefficiencies like high downtime and issues keeping up with each individual vehicle, bloating in the fleet can result in excessive maintenance costs and lost vehicle value.
Studying driving utilization metrics is one of the best ways to know if your fleet is too large. While using these analytics to optimize usage is smart, if your overall fleet utilization rate is low, you could be missing an opportunity to lower your fleet costs by selling underused vehicles or terminating expensive rental agreements. Below, we’ve detailed the primary ways that bloating in your agency’s fleet cost you money.
- Expensive upkeep costs on maintenance and registration
- Vehicle age and devaluation over time
- Lost productivity managing unnecessary vehicles
Expensive vehicle rental agreements
Next, we’ll explore what it means to right-size your fleet and key steps you can take to start the process.
What does right-sizing a government fleet look like?
Given the financial costs of a bloated fleet, it's essential to find ways to optimize your fleet size. However, you must have the proper insights to avoid overreducing the size of your fleet. If you cut down the number of vehicles in your fleet too significantly, you could jeopardize your agency’s ability to carry out its daily responsibilities.
Here’s our step-by-step guide to perfecting the size of your government fleet.
Step 1 - Set the right usage goals for a right-sized fleet
Set a realistic goal for utilization rate improvements before starting to right-size your fleet. While a utilization rate across your entire fleet of 80% or higher is generally considered the gold standard for peak efficiency, it may be too tough to immediately reach that number. Start with an achievable goal and work toward it in a phased approach. Removing vehicles from your fleet at a manageable pace reduces the risk of downsizing your fleet too drastically. Conversely, if all your vehicles’ utilization rates are too high, it might be time to add more vehicles to the fleet. To learn more about vehicle utilization, read “Module I - Utilization and your budget: The hidden price of underutilized vehicles and what you can do about it.”
Step 2 - Start to look for large vehicle utilization rate gaps
Study key metrics like miles driven and days or hours operated to identify if chasmic gaps exist in your fleet’s utilization patterns. Additionally, consider the purpose of each vehicle in your fleet and if utilization rates are skewed at all by external factors like seasonal responsibilities. Have a minimum utilization threshold in mind and customize your asset utilization reporting accordingly. These tailored reports will help you find the numbers you need to make a decision on certain vehicles’ continued presence in your fleet.
Step 3 - Calculate vehicle operating costs
If your fleet is too small, it’s critical to add more vehicles to it in the most responsible and cost-efficient ways. Right-sizing additionally means expanding your vehicle roster if resources are currently stretched too thinly. By calculating vehicle operating costs and determining which of your agency’s vehicles are most expensive to use, you can find cheaper makes and models to add to your fleet. To zero in on a vehicle’s key operating expenses, you can calculate cost per mile and unnecessary downtime.
- Easily calculate cost per mile by dividing total monthly vehicle costs (like fuel and maintenance) by the number of miles driven
- Monitor downtime by tracking pass and fail rates of daily vehicle inspection reports (DVIRs) to see how often certain vehicles are out of commission
Step 4 - Strategically make vehicle cuts or additions
Once you’ve carefully decided which vehicles will stay in your fleet and which will be removed, forecast your potential savings from selling or terminating the rental agreements of the ones you plan to get rid of. After leaning out your fleet’s size, reinvest the savings into other areas of your operations that might need additional support. If your fleet is found to be too small, be sure to factor in potential depreciation rates for the new vehicles you’re looking to acquire so that you can help protect your agency financially later on.
Step 5 - Track your results
Consistently evaluate your fleet’s utilization rates over time as your operations evolve. Optimize your fleet for cost savings and efficiency by looking for opportunities to lean out your vehicle roster in the future.
The power of telematics
Telematics provides a comprehensive solution for analyzing vehicle utilization trends in your fleet. These data-driven insights allow you to make informed decisions and identify opportunities to remove unnecessary vehicles, ultimately saving your agency money.
For example, Geotab’s telematics solution allows users to develop asset utilization reports that enable them to easily calculate utilization percentages, carefully study over- or underutilization rates and determine the minimum usage needed to justify still having certain vehicles in their fleets.
Key insights from the federal government’s Vehicle Allocation Methodology (VAM)
The federal government has called on their agencies to improve the efficiency of their fleets, with one of the primary ways of doing so through the process of right-sizing. Every five years, agencies must conduct a vehicle allocation methodology (VAM) or fleet analysis to see where opportunities exist to reduce their fleets’ size.
Regardless of if your agency resides at the state or local government level, there are many key takeaways that can be gleaned from the federal VAM process to estimate your vehicle needs over the next five years and enhance cost-effectiveness.
What is a Vehicle Allocation Methodology (VAM)?
The VAM is a planning strategy implemented by federal fleets to identify an ideal inventory of vehicles in their rosters. They must comply with a variety of requirements, including, but not limited to:
- Procuring only the most fuel-efficient vehicles
- Restricting engine sizes, vehicle body sizes and other equipment to only match what is necessary for an agency to accomplish its mission
- Acquiring Class III (midsize) or smaller vehicles, excluding high-profile vehicles used for transporting the president and vice president
- Only obtaining class IV sedans when they are mandatory for a federal fleet’s operations
Key VAM assessment questions
Within a VAM assessment, there are several key questions typically asked to determine a vehicle’s continued presence in a government fleet:
- Does the vehicle have a strong fuel economy and does it complete the tasks required of it?
- What responsibilities are typically reserved for this vehicle?
- In what specific ways can this vehicle help advance my agency’s mission and would non-vehicle options work just as easily?
- Are my vehicles too large or small to accommodate the people, equipment or cargo they must carry?
- Do vehicle sharing options exist?
The benefits of the Vehicle Allocation Methodology (VAM)
By asking these questions, you can better determine what size your government fleet needs to be, allowing you to:
- Pinpoint unnecessary vehicles or those deemed to be incompatible with your fleets requirements
- Find opportunities to share vehicles across many employees or departments
- Make sure that vehicle features usually considered optional (like four-wheel drive or aftermarket parts) are truly necessary for the task at hand
- Ultimately determine an optimal number of vehicles for day-to-day operations
Conducting a VAM (or leveraging some of the components within) can enable you to reduce your fleet costs by helping you potentially right-size your vehicles. In doing so, you can strip unnecessary fuel, rental, maintenance and insurance costs from your budget, sell underutilized vehicles your agency owns and reallocate valuable funds.
The State of Utah’s right-sizing success with Geotab
In one particular case, the State of Utah was able to use Geotab’s telematics to right-size their Department of Corrections’ fleet and reduce bloating. Low mileage vehicles in their fleet were expensive, and they wanted to conduct a thorough utilization audit that accounted for off-duty versus on-duty usage to responsibly shrink their fleet’s size. Geotab’s telematics enabled them to get the data they needed, correlating engine hours with true odometer readings for ultra-precise reporting.
Vehicle equipment integrations additionally allowed for studying time spent patrolling versus durations that light bars or sirens were in use. With all the rich telematics data at their fingertips, the State of Utah was able to reduce the size of their correctional fleet by 60 vehicles. In leaning out their fleet, they saved valuable budget space that could be channeled to other essential services.
With the knowledge in this module, keep your fleet’s size optimized and remain on the road to lower costs. Reduce pressure on your organization to operate with cost-efficiency and transparency by proactively evaluating your vehicles’ utilization and looking for areas to right-size your vehicle pool.