Preparing for the Next 10 Years in Public Fleet Management

Arguably, the two most consequential developments in fleet management in the last 50 years were graphical user interfaces (GUIs) for computerized fleet management information systems (FMIS) and vehicle telematics solutions. 

The deployment of GUI-based systems starting in the late 1990s marked a turning point in the transformation of fleet management practices from ones governed primarily by past practice, first-hand observation, and subjective judgment, to ones informed by quantitative data and empirical analysis. 

Telematics solutions, which untethered many types of fleet-related decision-making from their dependence on direct vehicle observation and inspection and driver-­provided information, dramatically increased the availability of such data and the scope of such analysis.

However, relatively modest progress has been made in the last two decades in the establishment of data-driven fleet management practices, which is downright scary when compared to the changes in transportation, employee mobility, and fleet management practices that are likely to occur over the next decade. 

There is little doubt that many fleet owners are not ready to deal with these changes.

'Brain Drain' Opportunities & Risks

The loss of first-hand experience and practical knowledge resulting from the retirement of the baby boom generation and a shortage of new talent entering the fleet profession are creating a “brain drain” for which many fleets are unprepared. 

Many organizations are far more reliant on their veteran employees’ experience and intuition for day-to-day fleet needs than they realize. As such veterans retire, however, decades worth of problem-solving experience is lost, and the fabric of relationships those employees have woven over time is frayed, and much of the knowledge derived from them also is lost. Spreadsheets and dashboards only go so far in replacing it.

This loss of institutional knowledge creates opportunities as well as risks for fleets. Younger employees who grew up in the digital age are more comfortable with and adept at using data-driven decision-making processes. Unlike some of their older counterparts, they tend to not view expectations of transparency and accountability as a nuisance or a challenge to their judgment and authority. For these reasons, the generational change underway in the fleet profession conveniently comes at a time of technological change that promises to increasingly replace experience and subjective judgment with objective data, machine learning, and artificial intelligence.

Thus, fleets will be navigating uncharted waters for years to come where human resources are concerned, making the complicated business of managing a fleet that much more difficult. 

Technological Change and Uncertainty 

Current and anticipated changes in automotive technology — from alternative-fuel vehicles to electric vehicles to connected vehicles to autonomous vehicles — promise to make fleets safer, more sustainable, and more efficient. Advances in information technology will not only change the way fleet activities are performed, but the way fleet-dependent workforces do their jobs. Drones, for example, are beginning to replace vehicle-equipped employees inspecting bridges, buildings, and power lines.

Another type of change, the “Uberization” of personal transportation, is likely to change the way employees think about their mobility needs. Autonomous vehicles may still be years in the future, but there is little question they also will eventually have a profound impact on fleet practices in many industries.

Changes in the types and quantities of vehicles and equipment that agencies use will affect fleets in a myriad of ways. In the absence of grants, the capital costs of electric vehicles are much higher than those of gasoline- or diesel-powered vehicles, but maintenance and repair costs are much lower. The retirement of experienced technicians will require many fleet organizations to rethink the traditional mix of insourced and outsourced — and decentralized versus centralized — maintenance and repair work. The shift to alternative-fuel and electric vehicles will require fleet managers to re-assess their in-house fueling practices and fuel site networks. 

These examples highlight how much uncertainty exists in fleet management. Combine this with changing human capital and it is clear that traditional fleet management business models need to be reviewed and either validated or re-engineered to deal with rapidly evolving fleet challenges and opportunities.

An added complication is that, based on historical patterns, the U.S. is overdue for a recession. How will the next one figure into the above mix of industry trends? Perhaps by accelerating the rate of retirement of older fleet managers and technicians? By putting the brakes on replacement spending and investments in telematics and other IT solutions? By improving the use of data to ferret out fleet cost reduction opportunities? By dampening enthusiasm for strategic fleet management improvements such as organizational restructuring and consolidation? Probably all of the above. 

“Advances in information technology will not only change the way fleet management activities are performed, but the way fleet-dependent workforces do their jobs. Drones, for example, are beginning to replace vehicle-equipped employees inspecting bridges, buildings, and power lines.”

An Inherently Complex Business

Fleet management is a complicated business that requires expertise in both asset management and enterprise management. Asset management involves the purchase, operation, fueling, maintenance, repair, and replacement of fleet assets ­themselves. Enterprise management activities in such areas as procurement, human resources management, information technology support, and financial management are governed by the needs and priorities of the larger government jurisdiction or agency, not just the fleet. Many fleet organizations struggle to master interdependencies between the two.

A case in point is managing fleet replacement costs, which typically vary from year to year due to the diversity of asset purchase prices and replacement cycles. Not replacing vehicles and equipment in a timely manner results in an aging fleet, rising repair costs, and increased pressure on maintenance resources. Avoiding such impacts requires understanding how different capital financing and cost charge-back methods affect the availability of funds for fleet replacement.

To further complicate matters, in government and many other industries, fleets are a cost, not a profit, center. Despite the fact that government cannot function without them, securing sufficient financial support to invest in fleet management resources such as a fit-for-purpose FMIS, regular technician training, and data analysis personnel is a never-­ending challenge in many jurisdictions. 

What does this portend for the future, when fleet programs must not only continue to function competently, but meet heightened expectations for data-based planning and decision-making and come to grips with difficult personnel and technological changes? Conditions that have been relatively benign as the economy has gained steam are likely to become challenging. It’s not too much of an exaggeration to say that there is a perfect storm bearing down on many fleets; preparing for the storm needs to start now.

Raising Awareness

A good place to start preparing is making sure that users, senior management, and elected officials all understand today’s fleet challenges and the readiness — or lack thereof — of their jurisdiction or agency to tackle them. Historically, many fleet managers were allowed to behave like benevolent dictators, exercising considerable control over decisions relating to vehicle and equipment allocation, selection, utilization, and replacement. While fleet professionals like to think that they are more enlightened today in treating fleet management like the customer service it is, the reality is that many fleets are virtual monopolies that do not communicate as effectively as they should with their customers or senior decision-makers.

A shared sense of responsibility for preparing for the perfect storm will enhance the ability of resource-constrained fleets to tackle them. Regular meetings with a fleet advisory committee comprised of user-agency representatives and other officials are a good way to explore and develop consensus on how to address the challenges ahead. An annual State of the Fleet report is a good way to make senior management and elected officials aware of both past accomplishments and emerging challenges and needs.

Making Costs Visible

Many public fleets use cost chargeback systems to distribute their costs to user agencies. However, they often focus more attention on ensuring that they recover all their costs (an admittedly important goal of any chargeback process) than on the manner in which they do so. A well-designed chargeback system engages fleet users in the management of the costs. It is a collaboration and cost management tool — not just an accounting and cost allocation one. 

Unfortunately, many chargeback systems are structured in a way that discourages collaboration and masks deficiencies in the management of fleet costs. For example, monthly lease rates that combine capital and operating costs make it all but impossible for users to assess the reasonableness of, say, the cost per mechanic labor hour or to see how advancing vehicle age translates into rising repair costs.

The perfect storm has the potential to turn conventional thinking about fleet management practices on its head. When skilled mechanics are retiring, and assets are becoming more technologically complex, and there is no budget for technician training, employing a replacement principle of “drive ’em till the wheels fall off” makes no sense. Convincing decision-makers of this, however, requires being able to quantify and articulate trade-offs between capital and operating expenditures. When the monthly lease rate is the same for a 15-month-old as for a 15-year-old truck of a given type, or when a mechanic labor rate is kept artificially low for political or public relations reasons, it is difficult to have honest conversations about the necessity of changing long-standing fleet management practices.

A chargeback system that promotes understanding of capital versus operating, in-house versus outsourced, direct versus allocated, and avoidable versus unavoidable costs is critical for preparing for the storm.

Replacing Assets Effectively

An effective replacement planning and financing program may be the single most important tool for weathering the coming storm. Every fleet manager understands that young vehicles have high capital costs and low operating costs and that, as assets age, the latter steadily increase. If one has to choose between securing more funds for vehicle replacement or for more mechanics, training, tools, parts, and sublet services, the choice as to which is the easier path seems obvious. 

But this is not the only benefit of such a program. As advances in automotive and information technology change the way agencies meet the mobility needs of their employees and the management needs of their fleets, flexibility will become one of the most important attributes of high-performing fleet programs.

A robust replacement program is founded on an understanding of vehicle lifecycle costs and trade-offs between capital and operating expenditures. The effective management of capital costs entails the ability to make sound asset acquisition, replacement, and disposal decisions. Too many agencies allow themselves to be constrained by sunk costs, holding on to assets even if they are no longer needed, and even as their repair costs go through the roof. Stakeholders must understand that routinely disposing of used vehicles and buying new ones is usually more cost effective than keeping vehicles as long as possible. 

Be Practical

Not all new technologies can or should be embraced immediately. Elected officials’ enthusiasm for fleet sustainability — alternative-fuel vehicles, electric vehicles, connected vehicles, and the like — must be tempered by reality. Being able to explain the operational suitability and costs as well as the benefits of new technologies is critical.

Although we live in a world of increasing data immersion, fleet managers and their bosses also should not lose sight of the fact that data are a means to an end — better decision-making — and not an end in themselves. Moreover, converting data to actionable information requires more than just the latest and greatest data collection devices and analysis tools; it requires data analysis, interpretation, and presentation skills.

Finally, fleet managers need to be honest with themselves about the strengths and weaknesses of all their practices. The generational change underway in fleet industry workforces is an opportune time to re-assess and re-engineer outmoded organization structures and work practices. 

A good way to both modernize and institutionalize fleet management practices is through the development of formal policies and procedures. The very process of doing this forces an organization to define its mission, goals, objectives, and needs, and to spell out how it will fulfill them. An added benefit of doing this is that it reduces reliance on the experience and knowledge of particular employees. Given that the average job tenure of millennials is less than one-third that of baby boomers, the benefits of good, old-fashioned written policies and procedures are hard to ignore.

About the Author: 

Paul Lauria is the president of Mercury Associates Inc., a fleet consulting company. He can be reached at [email protected].

Originally posted on Government Fleet