Fleet Management: It's All About the Numbers

Maher Hazine is responsible for a fleet of about 670 vehicles owned by the city of Peoria, Ariz. – everything from police cars, fire trucks and public transit buses, to dump trucks, garbage trucks and street sweepers, among others.

While he relies on a team of mechanics, a fleet supervisor and a fleet manager, his secret weapon is actually math.

The deputy public works utilities director, who came from the engineering side, earned his MBA in 2011, expanding his knowledge of financial analysis, including lifecycle costing for fleet management.

It's a mathematical model that enables managers to get the most money out of a vehicle by considering all its costs over its lifetime, thereby replacing it before maintenance costs go up and reselling it before the value gets too low. The timing can be determined using software programs or an Excel spreadsheet.

Hazine shared his experience with an audience at the American Public Works Association's recent International Public Works Congress and Exposition in Anaheim.

The approach is different from how the city of Peoria once made decisions about its fleet. At one point, the city extended the life of the entire fleet to 10 years.

"There was no analysis done," he said. "Whether it was a solid waste truck or whether it was a police car, it was 10 years."

Such decisions can lead municipalities to spend more on costly repairs than on preventative maintenance. A poor functioning or undependable fleet impacts the delivery of service, Hazine said.

"When a solid waste truck goes down, especially when it's full, you've got some major operational costs there because now you've got to get it towed to a landfill; you’ve got to empty that vehicle; and you’ve got to have it hauled back to you," he said. "In the meantime, that operator has to come back and get another vehicle, assuming you have another spare on the line. And if you don't, then the other routes are going to have to cover. And basically you're shuffling and you have to work overtime."

The old approach is based on educated guesses and best practices, Hazine said, which usually involved calling a vendor or another city. The answer would be a certain number of miles, or in the case of a sweeper, number of hours. Then one would take that number and make adjustments, based on a number of variables.

"This method is straightforward, and relatively easy to use. The problem with it is that it's not very detailed. It doesn't give you specifics for your experience," said Hazine.

K.M. Vigneau, a professional development strategist who creates educational programs for The National Association of Fleet Administrators, said NAFA created a Lifecycle Analysis tool that helps fleet managers do the number crunching

"It is different for every vehicle and it has to be tailored to your specific situation, for example, gas prices, maintenance costs, etc.," she explained.

The data collected has everything from fixed costs to operating expenses and incidentals. In a year-by-year comparison, Hazine said, the data can be plotted onto a graph to determine the optimum replacement point. Or the numbers can be examined in a table format. As the vehicle gets older, its annual costs begin to go down until it reaches a spot where costs begin to shift up.

“In lifecycle costing, you do not calculate out every vehicle,” he said. “Instead you should take an average of vehicles in the fleet based on type and use.”

"Whether you do that manually or use the greatest software programs out there…you've got to have detailed enough records," said Hazine. "How good a model you have depends on the data, so if you're going to start from anywhere, start by collecting the data."

Fleet managers, especially those with extensive experience, aren't just going to listen to some model, Hazine said. So he suggests looking at the model as a tool, a kind of tool you don't solely rely on, but one that backs up recommendations.

"Basically it quantifies our intuition. A lot of fleet managers, especially those with a lot of experience, have that gut feeling.” But, Hazine said, gut feelings don’t fly anymore with most council members and city managers.

“They want to see numbers," he said.

And the model can be used to aid other important decision-making processes. When fleet managers are asked about the cheapest vehicle to buy, the initial price tag doesn't really tell the whole story. A more expensive vehicle can cost less over its lifetime by requiring less maintenance, but data or numbers are needed to justify that recommendation.

"If you need to purchase a police sedan, and you want the more expensive one, you have to have the data to support that, over the life of the vehicle, you'll be spending less," he said.

The model can also help determine whether it's cheaper to lease or buy.

"For example, our mayor's car.…We don't buy our mayor's car because, based on the mileage that he drives, we’re better off leasing it. And we trade it in every other year. It just works best for us and we've done the analysis on it," he said.

Knowing the best time to replace a vehicle can help with planning. Solid waste vehicles take six months to be delivered, so the city of Peoria orders its vehicles ahead of time, knowing lifecycle costs for an older vehicle can increase with down time.

To secure funding, the city has a replacement fund established. When a new vehicle comes in, money is set aside each month for its replacement.

When the vehicle is ready for resale, its value can be maximized by finding the right auction house, Hazine said, or getting three quotes for trade-in. Or perhaps the vehicle can be transferred to another agency where it still can be useful in semi-retirement or as a backup.

But one thing not to overlook is educating the vehicle operators, he said.

"Your operators can either deteriorate the life of that vehicle or they can extend the life of that vehicle, depending on how they use it," Hazine said. And, when you find a good operator – use them to train your other operators.