Episode 053: Measuring Utilization in your Fleet

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.

All right. Welcome back for another episode of the Fleet Success Show. I'm your host, Josh Turley, joined today by my full complement of hosts. It's so awesome to have you guys both back. Steve Salzgiver.

Good to be here.

And Jeff Jenkins.

Steve, great to see you, buddy.

Yeah, it's been a while. Thank you.

It's, uh, it's been quite a few weeks and, uh, we're just glad you're here and glad everyone at home is, uh, on the mend, I'll say, as they're, they're in a safe place.

That's right.

They're in a good place right now.

So it's, it's helped me immensely to start focusing again. Right.

So today we have a fun topic. Uh, it's all about— we had a LinkedIn post a little while ago from a gal named Brenda. So I won't call her out totally by name or where she works, but she's out of the county in Florida. And I just want to say thank you for posting this on LinkedIn because it was a great discussion. But I wanted to bring in the experts because I know, Steve, you got some opinions on this and Jeff, you've got some great insight as well and kind of bring our knowledge to bear on the question she had, because I'm sure a lot of people have the same question. And what she was doing, she's working on fleet utilization reports. And she's really trying to figure out, you know, like which vehicles aren't being used and which ones are. And her first thought was to figure out if there was a standard cost per mile that she should have for her light and medium duty vehicles. You know, if there was a dollar per mile, like in an ideal world, she's got vehicles with less than 50 miles and some vehicles with over 1,000 miles a month and trying to figure out how does she balance between those two types of use cases. And how does she figure out which vehicles should be right-sized, which ones should be pool vehicles, and which ones should be kind of, you know, maybe rotated through the fleet? But I think our first question was, you know, is cost per mile the right metric for utilization? So, you know, Jeff, your hot take, that question right there, is cost per mile the right metric for utilization?

It depends.

What a great answer. Great non-answer. That was my exact answer on LinkedIn too, as well. It kind of depends on what you're looking for. And is there an ideal? Ideal cost per mile?

Well, I will say there's an ideal cost per mile, but it, it totally depends on what your utilization is and how much you're using that vehicle. So it's hard to say, like, if you're comparing apples to apples, then 100% cost per mile is where it's at, right? However, if you have underutilized versus over or medium utilized vehicles, then you cannot use the same standard because you're not running as many miles.

Well, and it depends on the vocation, the application of the vehicle. A lot of people, uh, like in a government for example, may have a utilization policy where they actually take the classes of vehicle by department and then they set minimum and maximum parameters based on historical usage. You know, that's how they justify vehicles. That's how they manage the vehicles to that standard.

They'll even replace them off of that same standard.

Right.

They won't look at any kind of scoring or anything. It's just straight, you know, when it hits 100,000 miles or 3 years, it's gone.

Which actually takes you back to the, probably the root cause, the root to answer this whole thing is you have to get an analysis by type of vehicle and by department. That's where you'd have to start.

Yeah, I think—

You can't compare Parks to the Highway Patrol or the Sheriff.

Right, because the usage, right? Like the use case is totally different for those two types of vehicles, even though they're both running, you know, Fords, you know, Ford sedans, you're not going to get that same measure between the two of them.

That's right.

One of the things that I pointed out was the biggest driver when you're looking at a cost per mile The number one expense on that is going to be the depreciation acquisition. And so if you have a vehicle like she mentioned where it's only getting 50 miles per month versus the same exact vehicle getting 1,000 miles per month, your depreciation, right, your depreciation acquisition cost is going to be totally different between those two. And so you can't go through and say, well, this is our cost per mile and this should be an ideal. You know, when we look at what are the better metrics to use for utilization, I think we can all agree is that the number of miles is okay. And even like engine hours, because you might have some vehicles that don't move a lot, but they're in use a lot. But, you know, cost per mile isn't probably the right way to do it. There's a lot that you get out of cost per mile. And so we don't want to knock that metric. I think there's a lot that, you know, there's a right way to do that metric. But we could talk a little bit about when you would use that metric. I just wouldn't use it for utilization.

No, I wouldn't use it for utilization either. I would use it like at a, for a pro, for-profit organization, like a trucking company.

Right.

Cost per mile is very important because you got to know where you're sinking that money into, right?

Well, and if you're going to bill based on the mileage, right, if you're a trucking company especially, you have to know how much to bill and what your costs, uh, usually their standard rate set.

But yes, I mean, that's how you get what your rates are, right? If I want to run an 85 operating ratio, then I need to know what my cost per mile is versus what I'm going to charge my customer per mile. Right, you know, to make up that difference and to hit what that operating ratio ends up being. But very important to know what the cost per mile is because you need to know how to adjust and some of the things that may go wrong or going right. However, when you're looking at utilization, it's not the right metric to go off of, especially with government, you know, because there's so many different applications in government.

I mean, if you're looking for some type of a standard out there in the industry, Uh, the Runzheimer model is a standard. It does cost per mile. They actually do it for the IRS every year. They prepare that standard for the reimbursement. Uh, there is a, uh, you could use, uh, AAA. They always do an annual cost per mile report.

Um, but most of those are based on, uh, you think those would be more consumer focused though?

Yes. That's what I was going to say. They're more consumer focused where vehicles are somewhere around 12,000 miles a year to 20,000 miles a year depending on you know, the usage, but—

And again, it still comes back to acquisition depreciation.

It does.

Now, if you're looking for a maintenance cost per mile, I think that's a good metric to use because maintenance cost is usually pretty flat. The more you use it, the higher the cost, but, you know, like your ratio is going to stay pretty in line with itself.

Yes.

One thing to be aware of too is if you're going to include fuel cost in that calculation, because as we see, newer vehicles, they're more fuel efficient, they get better mileage. You have to take that into consideration. When you're looking at replacing a vehicle. But make sure that you're not including actual fuel cost. You know, use the actual fuel quantities, historical fuel quantities.

Gallons consumed.

Gallons consumed, exactly. But don't use the historical fuel. And right now is probably the perfect reason why you don't do that. We're in what, $5 a gallon for regular unleaded?

Yeah, it's doubled in a year.

It's doubled in a year. And if you compared your 2022 model years versus your 2021s, your 2022s are gonna look terrible because all they have is 1 year of fuel history and it's at $5 a gallon.

There's some fleet managers that only look at the incremental cost difference of fuel or the incremental efficiency difference. Yeah. Because it's, you're gonna have fuel no matter what you do, right? Yep. So it's not really a cost savings one way or the other.

And so, but if you look at the miles per gallon and when vehicles at 18 versus 16.

That's right. It's that incremental difference.

Figure out that like, well, this is a 2 miles per gallon savings, which equates to, And that's where you have that dollar, your average dollar per gallon, or just a— you could just throw a number into a spreadsheet to figure out a fuel cost. But the idea is that you really want to use historical or use the EPA numbers. I just have never found the EPA numbers to be accurate, which is why I like using it.

That's because they, they put it at the optimal OEM level.

Yeah, right. Well, the optimal running rate, the optimal speed, the optimal load, right? Like, they don't know your use case, your type of drivers, your type of fleet.

Yeah.

It's hard to believe the federal government can't get something right.

Well, I get 10 miles a gallon on my 20-mile-an-hour optimal.

Well, and driver behavior, right? You know, because Steve, you're a lead foot. I know that. Yeah. Jeff knows that. But so if we are going to look at utilization and really this is a rightsizing exercise, what are some of the things that we should be looking at? You know, we mentioned like the miles is definitely total miles is a good indicator. She's seeing a vehicle with 50 miles. Versus 1,000. Brenda, you're on the right track. You know that that vehicle's underutilized. That's something that you can go and have a conversation about. What are some other metrics that they could look at?

You know, I mean, you were talking about depreciation. You know, depreciation could be based on time, could be on months. Yeah. You know, I mean, because that's fairly consistent with financial standards.

Well, and that's something you just, you know, like you just maybe think about. The depreciation could differ based on the type of vehicle it is and its replacement life cycle.

Yes.

Yep.

You know, because if I've got a squad car that's a 3-year replacement cycle, but it's still a $60,000 car versus the same car, the $60,000 over 5 years, now my TCO is totally different because of that. So that's something to consider as well.

That goes back to what I was talking about earlier about having a policy based on the vocational use of the vehicle, because you could have a 10-year life cycle on a parks vehicle and a 3-year life cycle on a police vehicle, right, for the exact same type of vehicle. You know, I mean, they may say they're both doing F-150s, total different application use for those vehicles.

Yeah, right. So as we're, as we're looking at, you know, total number of miles, engine hours. So there's some vehicles that have PTO, you know, the power takeoff units where the engine needs to run for, you know, whatever attachment it is that's running or something like that. Garbage trucks use a lot of hours. I know those ones, the side loaders and things like that. What other utilization things could we look at?

You know, one that I learned about early on is gallons of fuel consumed.

Okay.

Because when the vehicle is moving, it obviously consumes fuel. If it's not moving, it does not consume fuel.

Unless it's on and idling.

That, that, that, that. So then you have to capture idling, which comes back to the GPS or the ECM controls, right? Right.

But if it's idling, it's still using fuel.

That's right.

And, you know, Ron Zima was telling us all about idle-free and all that.

It's like a gallon an hour, they say. Right.

At the same time, like you remember, I know, you know, pumper trucks and fire apparatus, when those things are running, you know, because of the PTO, because of the pumps, like they're using a lot more fuel, right? Even though they are idle, they're not running any more miles and their engine hours are, you know, if they're idling versus under load, it's totally different.

Typically, if the PTO is on, you're at high idle, right? So you're even using more fuel.

And so I think Grandpa actually emphasized this a lot, was to use gallons as a PM driver.

Right.

And so if you use gallons as also part of your utilization metrics, you know, like those two end up dovetailing nicely together. One of the questions I had for her before she went and like started, oh yeah, no, the 50-mile vehicle, let's just make that a pool vehicle. And I know Ed Smith over at Agile Fleet, you know, with Fleet Commander, this is something they've done, studies they've done with Iowa State and Indiana University as part of the right-sizing is figuring out time of day usage.

Yeah.

You know, how many days did that vehicle actually get used? But not just, yeah, it got turned on and it ran that day, but it, it went out and it was used from this hour to this hour, and then it sat for 3 hours and then it was used again. And so there's idle time within an 8 to 12 hour window. And why that ends up being important is because you might have a department that has 10 vehicles and they need all 10 at 10 AM, but they don't need any of them at noon, and there might be another department that could use them at 1 and then give them back, and then another department could pick them up at 3. But you have to have that data because if you have every department needs the vehicles at 10 a.m., it's like the power company with demand charges, right? They've got to be able to supply all that demand to you and be able to fill the entire need, even though the very next hour you might not need anything. And so factoring that into, you know, if you're a county, especially your internal service fund, How you do billings if you're a trucking company, how do you do billings for your cost per mile on that? Because that all has to factor in as well. We actually don't need this truck except for twice a day. How do we make sure we're capturing all that cost?

And the other, the other things we're talking about is, you know, number of trips, how many hours a day are you using that vehicle? You know, is it a rolling toolbox for a facility, a carpenter or a plumber?

Well, again, that's a good point. Yeah. 'Cause it might just sit there.

Yeah, it might sit there all day. Indeed.

But it needs to be used.

That's where right-sizing really comes into play, or actually right-typing they call it. Uh-huh. Because if it's gonna sit there all day and it's a rolling toolbox, do you really need an F-250? Or could you use a golf cart?

Right.

Right? I mean, depending on what the application is, or maybe you could use a small electric vehicle. Yeah. Or something else. So those are the things that you wanna look at, you know. Other things that come in with right-sizing, right-typing is right fuel. Do you really need a gasoline or diesel engine if it's just very limited use, or can you get by with, you know, a battery-operated vehicle?

I think one of my favorite stories, there was a private university up in Utah, and I think I probably have said this story on this podcast before because it's one of my favorite stories, is when they switched from the F-150 to the Tacoma because the parks department did not need a 4-wheel drive V8 truck. They weren't towing, They weren't driving in the snow, even though there's snow up there, like they just didn't need it. And so they switched to the Tacoma and they had a lower cost of acquisition. They actually had a lower depreciation because they were able to get a better price for purchase and it maintained resale value. And so they were actually able to recoup the entire cost of purchase when they went and sold that vehicle. But they went with a V6, which was more fuel efficient. It was a lighter duty unit and it still got the job done. You know, so right typing is an awesome, you know, counterpoint. Whenever you're thinking about right-sizing vehicle, maybe you don't need to get rid of the vehicle. You just need a different kind of vehicle.

I know. And it's, you got to think of what is needed versus it's just more, I just want a bigger truck. Right. I just want that, like that, you know, I've got that pride. I want the V8, the big haha, big truck, you know.

Well, we've seen that with sheriff's departments a lot, right? She's at a county, so I'm sure this has happened in her county. You know, a new sheriff gets elected, and what's he do? Come in, he wants his own vehicle. It's gotta be a Dodge Challenger. It's all decked out in the latest graphics, and we've gotta put the Hellcat in there. Like, we can't just do our standard V8, you know. Oh, can I really, can I get the Demon motor? Like, I really would like the Demon motor, please. You know, and now you've got a whole new set of, you know, parts and engine that you gotta maintain. And for a Charger, and maybe you're a Ford fleet, right? But nope, the sheriff's a Dodge guy. So here we are.

You know what's faster than a Hellcat?

What's that?

A radio.

A radio. I thought you were going to say a Bell helicopter.

You know, I need one of those too, right?

Like, let's throw those in the fleet. I think one of the things as we're looking at a rightsizing exercise, you know, the first thing is get the data right. Like, you have to get the data, you know, and Brenda, you're on the right track here, is looking at the numbers, looking at the data, and then asking questions, right? Go meet with your stakeholders. We talk about stakeholder satisfaction. Part of that is just interviewing those stakeholders. What do they need this vehicle for? You know, is there a right typing opportunity or, you know, well, I only need this vehicle twice a week and I only need it for an hour or two. Oh, okay. Well, then, like, now you've got a really good candidate for a right-sizing vehicle, you know, that you could either get rid of or just not replace the next time the replacement cycle comes around and combine it with a pool vehicle that they could check out from the motor pool. But you have to do that. You've got to get the data and then meet with stakeholders to gauge utilization.

And we're a fleet success. Stakeholder satisfaction is key for us, you know, and that's key for any fleet. So you need to meet with them upfront. Yep. And you need to meet with them at the back end. If you're planning to make suggestions on right size, right type, right fuel, you need a consensus at the end of that.

I mean, you need to get buy-in.

Yeah, they need buy-in on that.

Well, you need to explain the buy-in too, right?

Right.

Because if I'm going to a bunch of people who want their V8 F-150s and I'm saying, hey, we're downgrading to Tacomas, The buy-in is not going to be there, right? You've got to have your facts, the reason why you're going forward. It's not just saying, hey, we're going to do this. What do you guys think? And everyone's like, oh, hell no, we don't want that, right? Well, we're going to do this because of X, right?

And because of this, we can actually cut your fleet budget from $10 a month per vehicle down to $5 a month per vehicle.

Yep.

And you can now use that for something else. Oh, okay. Well, let's talk about that. Now we're a partner in the overall success of the operation. You had an interesting quote. You know, I like this because it reminds me of Stephen Covey talking about the map is not the terrain.

Yeah, right.

Like, just because you see it in front of you doesn't mean that's how it is in real life.

Well, that came to me when I was coined a car czar at one point in my— my free— sounds like a fun title where, you know, you're the guy that sits at the top of the pyramid chain and you're out there dictating what the guy on the bottom of the pyramid should be using. Yeah. But you're not in really any position to do that. And that's where that quote came up. You know, it's easy to be a farmer when you're 100 miles from the field and use a pencil for a plow. You know, so you gotta make sure you're not in that position. That's where it's important to the stakeholder satisfaction, meeting with people.

Can you just say that again for me? It's easy, 'cause I wanna remember this one. It's easy to be a farmer when you're 100 miles from the field and using a pencil for a plow.

Right.

I like that.

Yeah, I really, I think that was Harry Truman that said that. So don't give me credit for it, but I'll have to look that up. All right, all right.

No, trust me, we're not gonna give you credit regardless. Well, this is why it's important to have one-on-ones.

Yes, exactly.

It's important why we talk about stakeholder satisfaction. If you're not in tune with the people, then you're not going to be able to make good decisions. You're basically just going off of, hey, this is what the report says, and so we're going to move it and this is what we're going to end up doing. It's a knee-jerk reaction.

Can you imagine doing that? Like, this gets 0 miles per gallon, you get rid of a SWAT vehicle and then they have a catastrophe. Where guys holding up a bank and they got a bunch of hostages. Well, we weren't using that SWAT vehicle. Well, yeah, but it's— we need it when we need it, right? Or the fire truck.

And that's just it too, is like you can't just go off utilization because I think about like the APCs that these guys are buying now, right? Military vehicles that it really does have just a very specific use case, but when you need it, you need it.

Yeah.

So yeah, I have a buddy who, he was a fire captain in they were required to drive a certain number of miles. Yeah. Right.

Just to maintain.

Just to maintain. So he said that we'd get out and we'd just drive around town. But what a waste of fuel.

You know what's funny about that is—

Mileage. Oh yeah, all of it.

When you go back to the policy I mentioned at the first of the podcast, you have to be very careful about that because I remember early in my career at the State of Utah, the Attorney General's office would throw all their interns the keys because we had a miles threshold every month. Yeah. And they just say, go out and drive that vehicle around, you know, justify it. Yeah. We found out about that. We said, well, that's not the intent, right? You know, so you have to be really careful because human nature will, will drive whatever metric you're trying to get them to stay in performance with.

So, all right, well, I think that's going to wrap it up for us. Uh, I'm not going to talk about Fleet Success Summit because it's all over.

It's done.

It was so much fun.

Mashing success.

It was awesome.

So, well, I guess from here, just, you know, thanks for being back, Steve. We're glad to have you back. And, you know, keep letting your friends know about the Fleet Success Show. I will tell you is that we've been getting a lot of comments and, you know, love having you guys come up to us at the trade show telling us about the feedback. We're going to be at GFX is going to be coming up next. Yep. So we're looking forward to you guys out there at any time. If you want to send us in some comments or a question you'd like us to answer, just email podcast@fleetsuccess.com. Rtfleet.com, and we'll look forward to seeing you next time.

If you need the information on right-sizing your fleet, we're the ones to get a hold of. Give us a holler.

Don't plow with a pencil.

Thanks for joining us on this episode of the Fleet Success Show. If you liked our show, we'd appreciate your 5-star review. Be sure to subscribe anywhere you listen to podcasts and come hang out with us anywhere on social media @fleetsuccess. See you next time.