Episode 099: What Does Fleet Rightsizing Really Mean

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Welcome back to another episode of the Fleet Success Show. I'm your host, Jeff Jenkins. And I gotta tell you guys, this is episode 99. So we're like so close to that, that triple-digit number. And the number of podcasts that hit triple digits is actually pretty slim in comparison to how many start them. So we're getting close to that, that 100. We're glad that you guys have joined us. Today we've got a special guest. We're going to talk about fleet right-sizing, and we got a pro. But before I, before I introduced the pro, I actually found a definition for fleet right-sizing, which surprised me. It is the practice of verifying that all company vehicles are effectively serving the duties they were brought into a business to help serve, as well as making any required changes to the scope of the fleet to make the company more operationally efficient. So I know, sounds fun. Joining me on this adventure is gonna be Mr. Tony Yankovic. How you doing, Tony?

I'm doing great, Jeff. Thanks for having me.

Good. So I know you fairly well, but our audience may not. Can you go ahead and just kind of give everyone your pedigree, talk about your experience a little bit?

You bet, Jeff. I've been in the fleet industry for about 35 years now. I started my career working in a municipal government. I was the fleet asset manager of a fleet of about 1,200 vehicles and pieces of equipment. I started in fleet as one of those other assigned duties. I joined the organization as a fleet— as an engineering technician with the Department of Public Works, and within a year or two, I became the fleet asset manager for the entire city's fleet. Since then, I've worked there for about 12 years managing the fleet. Then I moved over to the consulting side. I've been a full-time fleet management consultant for about 20, 22 years now. I've worked in several countries. I've done about 375 fleet studies over the course of those 20 years.

Dang, that's a lot of fleet studies. It is, it is. So you know, you know a thing or two about this topic. Do you think that the definition that I read is accurate?

You know, Jeff, it really is. The thing that we want to do is help organizations make sure that they have the optimum number of vehicles or pieces of equipment, whatever it is, or any type of asset really, to meet the mission and goals of their organization.

Right. And to do that, you have to have the perfect number of assets, whatever it's going to be— vehicle, trailer, generator, doesn't matter. You have to have that perfect number so there's no waste, right? So that's kind of why you're looking at fleet rightsizing overall. Now, I know everybody's seen, they've driven by like a yard or some business and they just see just a parking lot full of vehicles, right? Trucks, trucking companies, you see all these trucks sitting there, you see all these trailers at warehouses and you see this equipment. And have people ever sat there and wondered, be like, man, why is there so much, right? Do they really use it that much? And the answer is not usually. Right? I mean, there is, there is waste throughout anybody that has a fleet of equipment.

Well, absolutely. You know, in my career of consulting, this is one of the top areas that we look at and conduct analysis for organizations. You know, simply put, the more vehicles and pieces of equipment an organization owns, the higher their total fleet costs are going to be. So if you want immediate cost reduction strategies, The easiest thing to do is to cut the number of assets that you have in your fleet. Now, when we talk about fleet rightsizing, though, we're not necessarily talking about downsizing. There's, there's a misnomer that every time that we come into an organization and try to help them optimize their fleet, that we're looking to cut vehicles and eliminate them from the fleet. That's the farthest thing from the truth. What we want to do is make sure that the, the various operating divisions, departments, units within that organization or company have the assets and the resources that they need need to effectively meet the mission of their organization.

Yeah. And that's a good point because usually when I think of it, I think of reduction. Right? My example in the beginning was, hey, there's too much here. But we're gonna get into— we're gonna kinda talk a little bit more about, you know, you know, why it's important, when is the good time to do it, how to do it. But I'm curious just off the statement that you made about, you know, just making sure everyone has the equipment. When you go in and you do a right-sizing, how can you tell for sure if they need more equipment? Less seems pretty easy, right? But what about more?

Well, you know, it really depends. One of the things that I like to remind people is that the missions of an organization change over time, right? So the, the staff size changes, they get more employees, there's more population in the city, so they're providing more services, so they need additional vehicles and pieces of equipment to provide those services. You know, think about a fire department. If a city continues to grow, in order for them to maintain their insurance ratings, they have to have X number of fire stations within so many miles of the rooftops that they support. So when a city or a county or an organization or a community grows, what they do is they will increase the number of fire stations in that community. Well, when they increase the number of fire stations, they also need to increase the the number of assets to support that, you know, activity, whether it be fire suppression, whether it be brush suppression, whether it be EMS or medical service supply. So one of the things that we have to make sure that as the mission changes, as the population or the volume of services change, we have to make sure that the fleet continues to evolve with the mission of the organization.

Right. So, I mean, it kind of goes, it goes both ways, right? You're thinking about how to save money, and that could be through a fleet reduction, but also, right, you got to keep the stakeholder in mind, right? Making sure that those people that depend on you are also considered in that decision.

Well, absolutely, Jeff. You know, one of the things that when I was with the city government, we used to collect leaves from the residents. So the residents would rake their leaves to the curbside. We would have this big leaf collection unit followed by dump trucks, and we would actually vacuum the leaves from the curb for the residents. So we had a huge fleet of leaf collection vehicles. It was the blowers, the vacuum cleaners, it was the street sweepers following behind, it was the dump trucks. So we had an entire fleet of vehicles assigned to that mission. However, due to budget cutting reasons, the city determined that that was not a cost-effective use of resources and that the residents weren't willing to pay a user fee for that service any longer. So that was one of the services that was cut from the city. So what you have to make sure is that the corresponding fleet assets are also eliminated or repurposed or reassigned when the missions of the organization change.

Yeah, I mean, you can see how something like that can create waste just sitting out there not doing anything. So what's the right time? When should fleets look at, you know, themselves and say, hey, we need to do a little bit of an assessment to see what the right size is?

So we tell our customers and clients that there's never a wrong time to look at fleet size and composition. You really want to do it all the time. So what we— what we recommend is that a formal fleet right-sizing analysis be conducted every 2 to 3 years, but you actually look at utilization of the fleet on an annual basis. And really, even more often than that, if you know through the budget process that a certain function or activity is going to be added to the services that the organization is providing, if you know the number of routes that a company is going to be serving is going to grow, then immediately need to address that with your fleet resources. And conversely, if the number of routes that the organization are going to be decreasing, then we certainly want to reduce the number of assets as well. So there's never a wrong time to look at fleet utilization. It's something that needs to be done on an annual basis, but certainly every 2 to 3 years we recommend doing a full analysis of fleet utilization for all vehicles and pieces of equipment in your fleet.

Yeah. Now I know it's going to depend on how many pieces of equipment you have, but how long should one of those take if you're doing it every 2 to 3 years?

You know, the initial fleet analysis is going to take a while. Generally speaking, anywhere from 3 to 6 months for a fleet of about 500 assets. Okay. The smaller the fleet obviously won't take quite as long. But if you're going to do a full analysis of fleet utilization for a fleet of about 500 units, you can really expect to spend about 3 to 6 months doing it. The way we look at it is you don't simply look at miles driven, engine hours operated, gallons of fuel consumed. It's really a much more complex endeavor than that. So we look at a lot of different things in addition to the standard utilization metrics. We also want to look at the criticality of the unit. How important is this asset or vehicle or piece of equipment to the mission? Is it something that can be provided through short-term rentals? Is it something that can be leased? Is it, is it a service that can be done with a contractor? You know, street sweeping is a good example. Some organizations, some municipalities will own their own street sweepers and provide that service from in-house operations. Other people contract that service out and have a contractor provide the driver, the street sweeper, and that activity for the community. So it really depends on how you're going about it and when you're looking at it, but it's, it's a very complex endeavor. There's a couple of ways of doing it. One is to look at what you have in the fleet and try to justify the assets that you currently have. So in that case, what we would do is we would look at the vehicles in the fleet, do some statistical analysis on utilization. In addition to looking at miles driven, engine hours operated, and fuel gallons consumed, we also want to look at the number of trips the assets are used. I like to use the example of a plumber's van, for instance. So if you're working on a university campus and you have a trades organization and you have a plumber's vehicle. That's essentially a toolbox on wheels. The plumber is not going to be able to perform that service effectively without that vehicle. However, in the morning, the plumber gets in his or her vehicle, drives it from the shop, maybe 2 miles down the road to a building on campus. The plumber's inside that, that building all day making repairs, making maintenance service calls, and at the end of the day, get back in the truck, drive it back to the shop. You might accumulate 2, 3, 4 miles on that vehicle that day. But what you really need to consider is that vehicle is fully utilized. It has been used all day. It is— and it is not available for use by someone else. So effectively, that is a vehicle that is highly justified, highly critical in the fleet. So we have to look at things beyond the standard metrics. So we look at the criticality, we look at the number of trips We look at alternative forms of transportation. So if that— and one of the questions that we ask the organization is, okay, when that plumber's van is down or when that pickup truck is down for the day or down for the week in the shop, what do you do? How do you fulfill that transportation mission? And one of the things that people will say, oh, well, we can't provide that service without that vehicle. So the criticality on something like that is a lot greater. We also look at, you know, is this something that could be done temporarily with a person's personal vehicle? So can we offer reimbursement to an employee for providing their, uh, or driving their personally owned vehicle for that period of time? Or can we go out to the commercial market and rent that vehicle for 2 to 3, 4 days or a couple of weeks? One of the things that a lot of organizations and companies struggle with is meeting peak seasonal demand. So a lot of times what you will see when you go by a company's lot, you'll see a ton of vehicles sitting there. That's because they're waiting for that peak season, whether that peak season is in the, the winter when they're fighting snow, or whether it's in the spring and summer, maybe when they're maintaining ball fields for— or soccer fields or something like that. So the, the trick is to manage those peak demands. There's a lot of different ways to do that. There's also a lot of different ways to assign vehicles so they're more fully utilized. One of the things that we don't like to see is that a vehicle be assigned permanently to an individual or to a group or a department or a division if they don't have full-time need for that vehicle. We want vehicles and resources to be shared across departments and divisions so we have full utilization of those assets.

Right. So, I'm going to guess that, you know, right now we're coming out of a, you know, what could be called a scam-demic, right? Where a lot of people weren't necessarily working, vehicles weren't utilized as much as they would have been if things had been just the way they were before that. What kind of impact has that had?

It's had a huge impact. One of the things that we've seen is that really two big things have come out of the pandemic. One is the use of virtual conferencing. So in the past, pre-pandemic times, people would simply jump into a car or a vehicle and drive across town for a meeting. That happened all, all the time, all day, every day. Nowadays, people are so used to using some of the virtual conferencing applications that that's not required anymore. Most of the meetings are being conducted virtually. People are not leaving their offices. And the other component of that is people are working remotely. So they're not even coming to the office on a full-time basis anymore. So it really has impacted the size of the fleet. We've done more work helping organizations reallocate vehicles and pieces of equipment post-pandemic because their, their needs for vehicles and equipment has changed dramatically. You know, it's really been a cost-saving measure in a number of ways for these companies, realizing that, you know what, they don't have to spend 2 hours getting in a vehicle, driving across town for an hour meeting, and then driving back. And you don't need that resource sitting on your parking lot.

Isn't that crazy? Like I, I'd mentioned before, I'd never even heard of Zoom until into the pandemic. Like video conferencing was not something people thought about doing even though it was there and available.

Absolutely. You know, I mean, we went from scheduling conference calls to actually sitting down looking at people through our computers. And it's amazing. And you know, the people that have adjusted better than anybody are the kids that had to go through that in school. Right. I remember my kids doing that and sitting at the dining room table taking classes online. Through the camera and through the laptop. So it really has impacted everyone. I mean, it's impacted people in so many different ways, and fleet organizations are certainly not exempt to that.

No, they're not. So, you know, kind of just like, let's touch a little bit, you know, in closing on the overall impact, right? When you actually, when you go through and you do this resizing of your fleet.

Sure. So one of the things that we're looking for is to make sure that the assets are allocated directly in proportion to the needs of the organization. So we want to make sure that they have the right number of vehicles, the right types of vehicles, and in the right locations. We want vehicles to be shared among others. What we want to do is when we— obviously, one of the reasons that a lot of organizations engage us is to help them save money. When we can eliminate vehicles and find a better allocation of vehicles for specific locations or across the company's many locations, there's an immediate savings. So if you think about it, if you no longer need that vehicle, the first thing you do is you dispose of that vehicle. So there's an immediate generation of revenue by disposing of that or selling that asset. The other thing that you have is you have cost avoidance. So now that we've gotten rid of that vehicle and we realize that we no longer need it in our fleet, we don't have to replace it next year or the year after or the year after. So there's a cost avoidance with the replacement of that asset. We also don't need to pay insurance on that asset. We don't need to have tags and titles and insurance on that asset. So there's a lot of other— they're not really soft savings, they're hard savings, but they're not as significant. But there's a lot of ways to save money. What people don't realize is that in the industry, when a vehicle sits idle, it loses its value faster than a vehicle that's being used every day. You know, the vehicles, the seals dry out, the tires, the rubber on the tires is diminished. So there's a lot of factors that go into a vehicle sitting idle or not being used. So there's a lot of ways to save money. The other thing that people don't realize is that— and it's something that we can touch on later— is right typing your fleet. So not only do we want to make sure that we have the right number of vehicles in the fleet, we want to make sure we have the right types of vehicles in the fleet. One of the things that we did a large study for a— one of the largest counties in the desert state area. But what we found is, that their needs had changed significantly since the last time they did a study about 10 years previous to our, our study. And the population exploded. They were providing additional services. The mission of the organization grew, and we were able to actually save them money even though we increased the size of their fleet. But one of the things that we were able to do is right-type their fleet. So instead of using a 1-ton pickup truck for this mission, as they always had, just because they always had. We were able to identify that, hey, you know what, the payload capacity, the towing capacity of the half-ton pickup trucks is what a 1-ton pickup truck used to be 10 or 15 years ago. So by right typing the asset, you're now able to save money on fuel consumption. You're able to save money on the capital cost of the vehicle, on maintenance and repair. So just because you're adding vehicles to the fleet, if you're adding them strategically to meet the mission and not over-fleeting or over-sizing your fleet, there's still an opportunity to save money.

Well, absolutely. You think about just how far vehicles have come in advancement and the different class sizes or types where you thought you used to, you know, well, I need a truck. You don't need a truck. Can you use a midsize SUV? Could you use even a sedan?

That's right.

And a lot— I know a lot of people probably don't think about that. They just, hey, we've always bought Ford F-350s, so let's go buy some more F-350s, when in reality you need a 150.

That's right. I've done a fleet right-sizing study where the baseline vehicle for the organization— and I don't know if you remember the Smart Car.

Yeah.

Oh yeah, it was basically a one, one person vehicle. So that was the base or foundational vehicle for everybody. In order to get a larger vehicle, you had to justify the need or on a case-by-case basis of why you needed a pickup truck as opposed to a Smart Car. So that's the extreme on one end, but that's the same type of concept that most people need to have. You know, you don't always need that, the large SUV with the third row for general transportation of people.

Right. Yeah. And by the way, if my organization gave me a Smart Car, I'd probably find a new organization. That's just me. Exactly. I got pride.

Exactly.

And I wouldn't fit, you know, us guys over 6 feet, we don't fit in those type of cars.

So, right.

Well, this is great, Tony. You know, a lot of good information. Any, any parting words you want to get out to the audience?

You know, I think the one thing that I want to tell people is that you really need to look at when you're right-sizing your fleet, you need to look at class-based numbers. So you don't want to look at pickup trucks and sedans and dump trucks and transit buses and You know, whatever else you have in the fleet, all under the same umbrella. Each class of vehicle should be looked at and analyzed separately. So we want to look at, you know, standard passenger SUVs in one class of vehicle. We don't want to include the law enforcement or the public safety SUVs in that same analysis because it's used in a different application. So what we really want to do is we want to segregate the fleet, by class of vehicle, and by use case for that vehicle. And then, you know, we don't want generic utilization thresholds. We don't want to say anything under, you know, 7,000— 7,000 miles a year is underutilized and therefore needs to be eliminated. We don't want to be strict when we're talking about those type of thresholds. We want to have guidelines by class of vehicle, by use case, but then what we want to do is we want to look at the criticality. We want to look at alternative forms of transportation because there's sometimes there's just these unique assets in a fleet that there are no other, you know, options. And in fact, you know, if you look at a hazmat vehicle for a fire department or if you look at an armored personnel carrier for a police department, you hope those vehicles are never used. So you're looking simply at utilization statistics is not always the best thing to do.

Now, and this is why it takes 3 to 6 months to do a study, right? It's because you are breaking it down to a very granular level to make sure that you're making the right decision.

Correct. And I think we've done probably more than a— I've been involved in more than 150 right-sizing studies. And to this day, we have helped the organization save money every single opportunity that we've looked at the fleet. Not always through eliminating vehicles, sometimes by increasing the size of the vehicle, but doing it smartly. Doing it with the right type of vehicle and doing it in a way that makes sense to meet the mission of the organization.

Perfect. Well, great. You know, appreciate this conversation. So the audience knows, like, in a week, Tony's going to also be speaking at our Fleet Success Summit. So that's happening soon. Like, we're actually in the single digits on when it's going to happen. So super excited for that. Super excited to meet some of our listeners out there. Make sure you tell us hi. Don't forget too, we have the Fleet Success Playbook. If you would like a copy, go ahead and shoot us an email, podcast@rtafleet.com. Just give us your name, your address. We'd be more than happy to send one to you. Also use that email address if you have any suggestions on topics that you'd like to hear. Once again, podcast@rtafleet.com. That's gonna do it for us. Appreciate you listening. Thanks again, Tony, and we'll catch you guys later.

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