Episode 011: What Metrics Should I Use to Measure Fleet Success

Welcome to the Fleet Success Show, a podcast dedicated to talking about the fundamentals, standards, and best practices that empower today's fleets to achieve fleet success. Let's get into the show.

Welcome back to another episode of the Fleet Success Show. Joining me again, I'm going to go reverse order this time, Steve.

Thank you.

How you doing?

Glad to be here.

Also joining me, Jeff Jenkins.

Well, I'm a little offended that you put Steve first this time, but we'll live.

All right, good. Bless the always. That was the I don't care face. All right. So one of the questions that comes up a lot when we talk about fleet success is how do I measure whether or not I am successful? Right. We had a great episode last week talking about how to measure stakeholder satisfaction, probably something that not a lot of people are doing. This week we're going to talk more about the fleet— what do I want to say here— the fleet-focused metrics, the KPIs that we've probably heard about, we've talked about, and we wanted to kind of set our stick in the ground and say, you know, these are the ones that you really should focus on first, right? As we felt these ones were really important for running a successful fleet operation. And these are going to be more traditional, right? What you typically have seen in fleet management articles and fleet management courses. So with that, some of the KPIs that we came up with that we felt we wanted to discuss and talk about how you measure them, what they should be at, how to improve them. The first one that we had, you know, Steve, you talk a little bit about this one, is this idea of scheduled versus unscheduled. Maintenance. How do you track it and why is it important?

Well, I think the reason it's important is if you're running some type of a shop operation, you obviously want to be proactive versus reactive. So essentially the measurement is just a ratio between, you know, scheduled versus unscheduled. It's a very simple metric and you should be somewhere— we talked about what is the metric that we should shoot for. And we know historically, I mean, you know, you could use something like the 80/20 rule or you can use something close to that. Typically a good score would be 65%, 70% scheduled. So that would mean that you're running a preventive maintenance operation or predictive maintenance operation where you're bringing vehicles in before they break down.

Yeah.

And it's obviously cheaper to do that and it's obviously less impact on your shop operation.

Well, how much cheaper is that? I mean, like, you've— because I know you've talked about this before, but why? It makes sense in my head, right? Hey, we need to bring these vehicles in, be proactive versus reactive. But then I've seen other fleets out there that, no, they run reactive, right? We don't fix it till it breaks, you know.

And you've seen some of the charts that I've done and some of the studies that I've looked at where, where it's cheaper. I mean, sometimes it's up to 4%, 4 times cheaper. But if you think about it, what happens when you bring a vehicle in proactively? You make, you coordinate with a driver, they drop off at the shop, and then by that time you do that, then the driver takes another vehicle. And so it's all arranged.

So you haven't lost any productivity from the driver, right? Because you scheduled it and planned it ahead of time.

But if that driver goes out and then it breaks down on the road, now you've got a driver that's stranded on the side of the road and he's X dollars per hour. Now you've had to call a tow truck. Now you've had to get the shop involved. I mean, it's just exponential by the time you actually rescue that person and then bring it in. The other thing too is if you allow it to break on the road, you can damage the vehicle even further, right? You can actually destroy a component that you may have been able to save when you're, or catch before it got destroyed internally. So it's a lot less expensive and a lot less impact on the whole operation.

I think you've talked about like the rule of squares. Right. Right.

Yep.

You know, like that $15 bearing ends up costing you $225 if you let it, you know, if you don't catch it.

If it becomes a road call, $225. If it becomes an accident, it's $225 times $225.

Right.

Right.

And so exponentially gets bigger, right? In trucking, how big of a deal is a road call versus catching it before it breaks down?

Well, it can be very expensive. The tow bill or the road call. So typically a road call, when someone's going to call out, it's about that $250. It's even more expensive at night, on the weekend, um, plus you've got to pay for whatever the mileage is they got to come do it. But it's, it's— I would, I would agree. I mean, it can be 4 up to 10 times more expensive. Um, some states regulate how much it costs for a tow, some don't. The ones that don't, they can really price gouge you when it comes to towing. I mean, you're towing a tractor plus a trailer, so you've got 53 feet that you're towing, which is a heck of a lot more expensive than if you're just towing the truck or you're just towing the trailer or just a regular vehicle. So obviously, you know, we would much rather have that scheduled maintenance take place and prevent anything that could go wrong over the road because those costs are a heck of a lot higher.

I remember one of our Coke trucks years ago breaking down on a New York bridge and there was one vendor that had that territory.

Yep.

That he towed on that bridge.

And you paid whatever he wanted.

Exactly. He had no choice. If you wanted to get that thing back to the shop, you paid that guy.

Well, then what do you do with all the merchandise?

That's the other issue.

Well, you gotta, you gotta transload it, right? If it's broken down. And that's part of the other issue, right? Is, right, how much now does it cost to get that repaired over the road as well, as opposed to my own internal shop where I'm actually paying someone $25 an hour to work on it? And now I've got to go to an external shop where I'm paying $150 an hour for them to work on it. Not to mention the parts, which I get at cost. They're going to mark up 4 or 5 times cost, right? Plus the downtime. Now I've got a driver, so I've either got to put him in a hotel, um, until his truck's repaired, or I've got to figure out a way to get him to a different truck. So you've got those travel costs and meals and whatever else takes place as well. Then that cost of sending someone else back to go get it. So it adds up pretty—

all the deadhead miles involved.

Yeah, it adds up very easily.

All right, so scheduled repairs versus unscheduled repairs. You want to be somewhere around 65-75% scheduled, right?

Yes.

I know Grandpa, when he used to run things, you know, at UPS, his number was always 65% of your work should be PM related, right? It should either be working on the PM itself or it should be things that you found during the PM. And that's how you knew you had an effective PM program and, you know, you knew that you weren't letting things go too long and breaking down on the road. Right. Like road calls. You know, he says in a bad fleet, you'll see that in the 30s, 40s percent. You know, a good fleet, you'll see that down around 10. Right.

You know, I was doing fleet consulting. I ran into a couple of fleets that had that completely flipped.

They're 65, 75% road call.

Yeah. And it was a mess. Huge mess. They had more vehicles than they needed. They had way higher costs than they, you know, they should have had. You know, so I mean, it's an important metric.

And that's probably why, right? Like, because it affects so many other things and there's so many other compensating controls that you put in place when you don't have that right. You know, like you just mentioned, you have to double the size of your fleet. Well, when we talk about resource efficiency, it's a total waste of money to buy vehicles just to avoid a road call when you could have just done more PMs.

Let alone intentional culture when you have work-life balance.

Right.

Well, because now you got to address that on the weekend or— Exactly.

You get called all the time. Yeah, right.

You know, Jeff, you talk about that in trucking is like there is no sleep in trucking. Like it's just go, go, go all the time. Yeah, it's super cutthroat. So scheduled versus unscheduled, you know, if you want to call it PM versus corrective, we've seen that too. But again, the idea is what's planned versus unplanned. You know, what did you plan for versus what happened to you that you reacted? All right. Another metric that we think is a great metric for you to track And this one's pretty universal, but very heavily used in trucking, you know, and it's been pretty standard across for decades. It was one of the, you know, I know my grandfather used quite a bit and that's the maintenance cost per mile. Jeff, you wanna tell us a little bit about that and why that's so important?

Yeah, I mean, roughly you're just gauging how much it's gonna cost for your equipment repairs and preventative maintenance, whatever it is per mile. So typically, and the, the mileage rates are just all over the place from what they used to be, but, um, a, a good-run maintenance department in trucking probably has a 9 to 12-cent cost per mile when it comes to their maintenance costs. Poor trucking companies, and a trucking company that I worked at, our maintenance costs were about 70 cents per mile.

No.

So, so look at that and think about what that does to your profit margin. Right. And a lot of that was because there wasn't, um, there wasn't a lot of equipment turn, right? So age of equipment was really old, which has a huge hit. Here's the other thing is because of how much it would cost for repairs out on the road, the owner would much rather be damned if he was going to pay someone else to fix his equipment. So he would, he would actually bring it back 1,000 miles to his shop just to repair it, or he would ship a part on one of his trucks to a repair facility so he didn't have to pay their wholesale cost. So he'd actually spend double, triple just to stick it to the man in a sense, just for the freight charges.

Yeah, because that's where people don't value their time, right, in that equation.

Tripping over dimes, let's say. Yeah, pennies.

Yeah, but it's, it's very important, right, because you need to know what those costs are associated with it. And then, you know, that's how you dig into your P&L and you can figure out, hey, this is what I've got to do to actually change that cost. But You know, typically if you're running a truck, let's say you're getting $2 a mile, okay, just for that, just for that to move that freight, and you're spending 70 cents of that $2 just on maintenance costs. I mean, you look at that and you're like, geez, I'm spending 40% of my overall cost. And that doesn't include the fuel, it doesn't include the driver pay, it doesn't include the G&A or the back office or any of that other stuff. So, well, no wonder you're running at a break-even at best. Because of how high those maintenance costs are. Those well-run fleets, right, they are much more likely to have higher profit margins because they're spending so little, and they're the ones that actually turn and churn the equipment, and they have the newer equipment. They're not the ones that sit there and hold their equipment as long as they can.

I know companies like Knight-Swift just here locally, they're turning, turning trucks over now in 3, 2, 3 years.

So I think there's that. I think theirs is like 2.2, 2.7 years or something like that, that just to avoid these kind of— yeah, and they do a lot of it based off of miles. Right? How many miles do you have? And some, some companies that run team freight, they'll, they'll exchange those out quicker just because they put more miles on them. But yeah, I mean, once you get after that 3 years and you get those 300,000 miles on that equipment, it starts to digress real quickly, especially with all the technology that you're seeing now.

That's— we're kind of like the beta testers of technology when you're in the trucking business now.

Yep. There's a lot of things that came out in trucking first before they came out to the public and consumer cars, for sure. I think what's interesting, like you just kind of talked about that a little bit, is this replacement side of it. Another metric that I like looking at is this, this TCO cost, right? Like, what's your total cost of owning that vehicle? A lot of people, they do get hung up on just maintenance cost per mile, and they totally neglect the other side of that, which is the capital cost, right? How much did it cost you to actually buy that vehicle up front? And it's about running, running the right balance between how much did it cost me to buy the vehicle versus how much does it cost me to keep maintaining it, right? And this is one of the things I really like, like the efficiency curve. We talk about the optimum replacement window. TCO is what drives that, right? And how much did you spend out front for that vehicle? How much do you spend each year for ongoing maintenance? And a lot of people say, well, as soon as the maintenance cost and the depreciation intersect, like right after that, you should be looking at replacing that vehicle. Right.

It's not absolute, but it's a good gauge.

It's a good gauge.

Yeah. I mean, that gives you at least something to shoot for.

Because after that, like your risk of, you know, catastrophic road failure or your risk for significantly higher maintenance cost goes up, right? It doesn't happen all the time, but your risk is increased.

We've always said there's a flat, flat little curve at the bottom where you've got 2 or 3 years there. You can play with that.

It's a fairly wide window, right?

Right.

But you could do that for every vehicle and kind of you map out, you know, what your depreciation is over time, what the capital, you know, the maintenance expenditure, and then you map those two together to create your TCO curve. So I think that's an important one that you understand the whole picture and that it's not just as soon as maintenance cost gets going high, but how much is it going to cost to replace that vehicle? You know, if you're— I know a guy, you know, he runs a crew of, of Fords, right? He's got a lot of light-duty trucks and he runs them every 2 years, right? And he just has them on a 2-year replacement cycle. And for them, you know, part of that that goes into that is the recapitalization. How much do they actually get back from the vehicle, you know, they capture? And then that offsets, you know, the cost of the new vehicle. They kind of balance that with, you know, the cost of the maintenance. And they found that, you know, after about 2 years, the cost of the maintenance starts getting to a point and the depreciation gets to a point where, you know, like for the first 2 years it actually holds its value fairly well, but then after that it drops off. Um, if you go the other way, I've seen them where, oh no, we turn those vehicles quickly, you know, it's like every 1 or 2 years, but we're not waiting for the maintenance cost to go up. Well, what's happening is they just end up buying— they're spending all their money on depreciation, right? In a, in a private area, you know, like personally, you know, if you ever listen to Dave Ramsey, one of his biggest things for for building up wealth and saving money is never to buy a new vehicle, right? Because what happens as soon as you drive it off the lot? Well, it loses half of its value, right? It loses most of its value in the first year. And so, if you're replacing your vehicles every 2 years, well, guess what? You've eaten most of that appreciation in year 1 and you're not taking advantage of the life of the vehicle where you have lower depreciation. And so, one way to maybe lower your total cost of ownership would actually not be buy new not buy new vehicles, but buy, you know, semi-used vehicles, right?

Or even leasing.

Leasing would be another great way. Spreads out the cost over time.

I always said it's better to, you know, buy as you go versus before you go.

Yeah.

So, 'cause when you buy a vehicle outright, you've bought the entire vehicle for that entire life cycle.

Yeah. Even if you don't use it.

Even if, yeah, if you don't use it the whole time or something happens in the business and you need to cut back or change or, COVID hits or whatever, you know, you're into that investment at that point.

Right. And yeah, and I love that, you know, even if you don't use it, if that vehicle sits, you know, you talk about the cost per mile, that vehicle sits and doesn't move. There is no maintenance costs. But you know what there is? The steady ticking of time eating away the residual value of that vehicle. Right. Depreciation will always happen no matter what. It always happens. Now, we're in a bit of a weird freak cycle right now, right?

Right.

There are trucks right now going and they're selling for more than what we paid for them 2 years ago because of the truck shortage. I will tell you is that the vehicle shortage— it's a chip shortage, right? But the chip shortage is causing now supply chain ripples. This will not go forever, right? It's a great time to go sell a vehicle if you have it, a terrible time to buy a vehicle if you want one. But it won't last forever like this, right? For the most part, the depreciation just keeps going down. Vehicles are not like homes. They don't appreciate in value, right? So it's one of those things you have to consider depreciation when you're looking at the total cost of ownership. I even have a controversial opinion. It's that, you know, you talk about that optimum replacement window. In my opinion is you actually shouldn't replace that vehicle until you're close, like maybe within 20% of the cost of the replacement, right? And you can look at this on a graph and you see like this really nice even curve. And then, you know, a lot of people say, well, you buy it when the curve is low. I say, no, you don't. You know, like you replace it when the curve is low. I say you wait until the replacement curve is closer to the cost of that other replacement. You're capturing more of that low total cost of ownership. 'Cause if the total cost of ownership for your 8-year-old vehicle is still lower than the total cost of ownership for a 1-year-old vehicle, it doesn't make sense to replace it in my mind. You know, now maybe that's just me personally.

As long as you've had a good maintenance program, that could hold true.

That might work. Now, if you're not very good at your maintenance.

Yeah, you increase the risk then, right?

But I think if you're mapping it out and you're, you know, you've run this number and you kind of see how they're, what your historical trend has been, And if all of a sudden after that trough it shoots up and it's exponential spike, then yeah, you definitely want to hit it in the trough.

Well, we talked about that earlier in the first metric, you know, scheduled versus unscheduled. And, you know, the older a vehicle gets, the more unplanned maintenance that could potentially happen.

Right.

You know, so you have to really look at that. I've always said fleet management, if you were to— if I was to define it, that word fleet management together, it would basically be flat, you know, flat costs. We don't want any peaks and valleys or unplanned maintenance. You know, the first thing that would get a fleet manager fired would be erratic maintenance, erratic costs going up and down.

Right.

You know, well, a lot of that cost— so this is why a lot of trucking companies trade at that 3-year cycle right before it's out of warranty. Warranty is key, right? So your costs have the potential of going through the roof the moment it's out of warranty, because that's when your, that's when your big nuggets are going to happen. Your transmission, your engines, your whatever it ends up being, you're on the hook because it's out of warranty. So you got to look at that cycle and see, hey, how long is my warranty? Typical on a truck, it's 3 years, 36,000, or 3 years, 300,000 miles, right? On a passenger vehicle or some for a fleet, you can get those up to 7 years, which for the powertrain, right? Yeah, absolutely. Which is great. Right? But, but at that point, that's a good time to start looking at, hey, is it time to— is it time to upgrade? Is it time to switch out? Just because cost is about to— your cost is about to go— you're about to get one, one thing go wrong and your cost is through the roof.

I've always told people, it's no accident how they set the warranty. No, no, manufacturers know how long— I mean, that's a, that's a risk they have to incur, right? Yep, right.

And they're definitely going to be on their side of the risk.

Exactly right.

Like, they're, they're not going to stretch anywhere near close And that's, you know, like you can usually stretch it past the warranty term, but the risk significantly increases as the further away you get out of warranty.

See, that's why we get that benefit of 20 calls a day about my extended warranty on my vehicle.

That's right.

Is because they're looking out for me and I appreciate those guys.

Thank you.

Thank you very much. Love you.

All right. So one of the last metrics that we thought, you know, we really enjoy looking at or that we typically will look at in a fleet And it ties back into maintenance cost per mile, but it's all around the technician, right? Whether you call it technician productivity, technician efficiency, you know, we look at— and this is something Grandpa really cut his teeth on, he made his name for himself doing this— was how much are we getting out of that technician, right? And when we look at efficiency, the first thing we're looking at is standard repair times versus actual, right? You know, if we had a 2-hour job How long did it take us to do that 2-hour job? Did we get it done in an hour and a half? Well, man, that makes us 130% efficient. If we got that 2-hour job done and it took us 2.5 hours, well, now we're 75% efficient, right? And so that efficiency just tells us, you know, based on how long these jobs should be taking, how long are we taking them? And I like using these metrics because it helps me identify with technicians, is there a coaching opportunity, right? Maybe I noticed that your efficiency really drops when it comes to things like brake jobs or engine diagnostics. Well, now I know that this is an area that you struggle with.

It's a training— also a training opportunity.

It's exactly what it is. It's training opportunity. I can get you into a class or get you into some training programs with the OEMs and see if we can boost that productivity or that efficiency, rather, and bring those windows closer together, you know, where your scheduled time is closer to the actual time it took to do the job. Um, you know, and good systems have ways to track this. I know, like, we alert people when, hey, the technician is getting close to the time, when they have exceeded the time, and when they've really exceeded it, right? Like, when they're within that 115%, um, you know, efficiency, or when they're like a 75%, you know, we'll give them like a little yellow tag or something. There's ways to track that where you can use that and proactively like, oh wow, hey, look, something happened with that job. Maybe it was a rusted bolt. You know, that's not something we deal with here in Arizona, but everybody back up in the Northeast, I know what that's like. You got a rusted bolt and, you know, sometimes your 2-hour job suddenly hits a roadblock. Now you're down on parts or something like that. But efficiency is one of those really critical ones that help you identify, are you running the shop as well as you could be?

Well, it also allows you to benchmark with outside labor.

Yeah.

You know, I mean, that's where I always get, you know, the outside labor. They'll say, well, they're charging $100 or $200 an hour and we're only charging internally, you know, $50 an hour. Right. Well, that's all well and good unless you're taking 3 times as long to do something.

Exactly. So it has to be balanced.

Right.

And, and I will tell you is that as dealership or any of those, they're using these same things. They're using efficiency metrics because they're billing for 2 hours of labor. Right? And they're billing based on that. And if it's taking their technicians longer than 2, well, now that company is losing money.

Right.

Right. And so if you treat yourself like a private repair shop, you know, I know as a public company, one of the biggest threats to a public fleet service division is the threat of privatization.

Right.

Right.

Well, you know, if you ran your fleet like a private fleet, you probably wouldn't have that threat as much, you know? And sometimes we get into that mindset of just thinking, oh, well, you know, this is just how we do things. Well, yeah, but what if we could really focus on efficiency and run it like a for-profit business and we end up with a surplus at the end? I think that's— how satisfied would your stakeholders be with that, right? I don't think anybody's ever gotten fired for coming up with a surplus.

No.

When I, when I took over at Fleetwood, there was nothing like this at all in the, in the maintenance shop. Nothing at all. In fact, I had a mechanic that would turn in his hours for the week and he'd say he worked 60 hours. But his maintenance that he did on, on equipment was like 100 hours. So he was only working 60, but he was logging 100 in the system saying it was working. Yeah, so it was a weird deal, right? God bless you, Larry. Um, anyway, so there was none of that. So it was all over the board. One person would do a PM in 3 hours, one person would do a PM in 6 hours, and one person would do it in 4. So there was no standardization whatsoever. And that's just PMs, but all the major jobs I mean, we would be a month, you know, to do an in-frame and you'd have all these different things and, you know, no one had any gauge of it. And I was like, guys, we've got to get, we've got to get standard on what our hours are to fix something. And if our mechanics aren't up to par on what they need to be, then we need to get them some training. We need to do, you know, assign them to different jobs, do whatever we've got to do to keep our costs down. Right. Our internal cost was $75 an hour. That's all it was. It wasn't very expensive. Right. But our external costs were a lot higher depending on where we took it. Um, but the fact that it took us so long on a lot of our jobs, we were paying more at that $75 an hour than to send it outsourced. In fact, I was having some of the operation owners of the different divisions calling me and saying, I don't want our shop working on stuff, I want to send it outsourced because it takes us longer than anywhere else.

It takes too long.

Well, that goes back to what we were just talking about. Yeah, $75 an hour is a burden rate, but if you're taking 3 times the standard fare, then it's, you know now you're up in the $200s. Yeah, right.

So, well, it's interesting that he was doing, you know, he was only clocking 60 hours a week, but then he was billing out 100. Yeah, I mean, like, there's no reason for that. Normally what we'll see is the opposite, right?

Yeah.

Oh, well, I got, you know, I want to get paid for 60 hours a week, but then we look at the billables and your direct time was only 20, right, or 30. Where did the rest of that time go?

You know, he was learning from lawyers. He was doing lawyer time, right? If it was a minute, it's 15.

We would just round it up.

You know, the thing, this isn't rocket science either. No, I mean, there are programs, templates, you know, things that you can subscribe to to get these, these actual metrics. I know when I was working in the garbage business, we actually asked the OEM, give us your warranty times, and they'll share them with you. I mean, this is not secret, you know, so you can actually come up with your own metrics internally for standard repair times if you have to.

And there's, you know, there's systems that'll do that. You know, I know ours will you can actually feed it back in on itself and say, you know, based on the VMRS code and that class of vehicle, and then you can say, you know what, let's try to do 10% better this year and you can actually reduce all the times by 10%, right? And then there's third parties, Chilton's, Haynes, right? And they all have kind of their standard repair times. I think the key is identifying which ones work for you and which ones are closer to your operation and then just setting a bar and then improving it, right? Same thing goes for, you know, like we talked about productivity, this idea of, you know, the guy was doing 60 versus 100 hours, you know, looking at the hours paid versus the hours worked. I like direct versus indirect. You've talked about that, you know, how much time do they actually spend wrenching versus doing other things like cleanup and break?

And well, the key benefit to that particular metric is you understand what you really need, right? You know, if you got mechanics that are working 40% wrench time, then maybe you don't need mechanics.

Yeah, maybe you need service workers or something else, you know, or maybe you need a foreman.

Yeah, or something.

Keep them on task and make sure we're working on the right things, you know.

Yeah.

So, well, this has been a fun little discussion. We have just scratched the surface, right? And I know there's a lot of opinions on which KPIs are the best and which metrics should we be tracking. These were 4 that came to our mind that, you know, like these are the kind of the 4 more global, more broad metrics that every fleet should be looking at, have an idea where they're at and have a goal for improving them, you know, and really drive that resource efficiency that we try to talk about so much.

Well, I think we'll expand on it in future episodes when we talk about resource efficiency. Yep.

So. All right. Well, until next time, we'll see you guys later. As always, let your friends, colleagues know about the Fleet Success Show and tag us on social media @FleetSuccess.

Sayonara. Have a good one.

Stay classy, San Diego.

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