Episode 148: Resource Efficiency: Utilization vs. Availability

This is the Fleet Success Show dedicated to helping you and your fleet succeed using the experience of fleet professionals and Hall of Fame fleet legends. The show that explores how the pillars of stakeholder satisfaction, intentional culture, resource efficiency, and risk management all combine to lead your fleet to success. We're glad you're here. Now let's get into the show. All right. Welcome back for another episode of the Fleet Success Show with your hosts, Josh Turley, Mark Canton.

Hey, everybody.

And you've recently been doing some episodes, I guess, presentations on resource efficiency, one of the 4 pillars that we have for fleet success.

That's right.

Right. And we wanted to talk about maybe something we don't talk a lot about. And given some of our expertise, right, for those who don't know, I'm the CEO over at RTA Fleet. I've been here almost 20 years serving the fleet industry. I have a technology and business and, you know, whatever background you want to give me. But big on efficiency and, you know, supply chain and those kind of metrics. Right?

Right.

You previously ran Fordham University.

That's right.

And have been a consultant for a number of years.

Yep.

And so you've seen a ton of good fleets, bad fleets, and everything in between.

Correct.

Right?

Yes.

But we were talking a little bit, and as we talk about resource efficiency, you know, you and I are both aligned on this, which is the number one metric is availability.

Right.

It's the whole purpose of a fleet.

That's right.

To be available for the job to get done.

Exactly.

But the thing that doesn't really get talked a lot about and, you know, maybe we talk about it a little bit when we start talking about right-sizing and right-typing for a fleet is how you get to that point. And it's utilization.

It's utilization, big time.

Right. So it's not something we've done a ton of episodes on, but it's something that, you know, has recently come to your mind.

Right.

About why utilization is so important and how the way that we're tracking it is completely wrong.

Correct.

Right. So one of the things, you know, for our listeners, when I think about utilization, right, well, I guess first before I even dive in utilization, when you think of it, what do you mean when you're telling a fleet manager what's your utilization rate?

Right.

What are you looking at?

Well, that's a great question.

Traditionally, let's talk about, you know, like how we're looking at it wrong.

Bingo. Because when I ask that question, I know what they're going to tell me. I expect them to tell me how many miles that they drive on it. If we're talking about assets that aren't over the road, I expect them to tell me about engine hours, runtime, things of that nature.

Yeah.

Some more sophisticated fleet managers might start pulling into fuel burn and things of that nature. And generally speaking, for government fleets, you know, schools and really most fleets, that's what they're going to talk about. On the private side, especially like in the construction world and utilities world where fleet is a profit center, not only a cost center. Yeah, right. They have a completely different meaning for utilization and it's all about Did I build it? How close to 100% of the time that I could have built it did I build it?

Right.

And that's what utilization means for them. It means nothing about the, let's say, objective quantity of use of the asset. And to your point, yes, I'm here today to, to essentially argue that we need to really expand our minds a little bit more on how we think of utilization and how we're measuring it. If our goal is ultimately good resource efficiency, right? Which is, is the goal, right? So yeah, that's, that's kind of the, the preface here.

Yeah.

Yeah.

So as I, as I think about utilization, right, the— I remember who it was, might have been John Doerr. And we were talking about OKRs, right? This is the guy that came from Intel. You know, basically him and Andy Grove had this whole thing, management by objective, right? He basically spawned what we call Objectives and Key Results, OKRs, very popular goal-setting framework.

Right.

But he talked about key results and having what we call a quantity-quality pair.

Right.

And when I think about availability, that's a terrific quantity metric.

Yes.

But what it doesn't have is necessarily a quality pair. That's obvious anyways. And, you know, as I've talked to you, as I've talked to Steve and we've seen this in fleets, there's a very easy way to get your availability up. It's expensive. Expensive as hell. Right. You basically just increase your spare fleet, right? Right. If you have— let's say that, you know, let's keep this super simple. Let's say you've got 1,000 vehicles and 30 of them are down. You've essentially got a 3% down rate or 97% availability rate, which looks awesome.

Phenomenal.

Right. But what if you only needed 500?

Right.

That means you've got 500 spare vehicles.

Exactly.

And really your availability rate, instead of being 97%, is 3 out of 500, which is, you know, it's 90— what is that, 97 or 93%, 94%. And what I realized is that, wow, you could really stack the deck and just change the denominator when you think about, you know, what are my total availability vehicles over my total assets?

Right.

And so it's very easy to kind of change that metric just based on, well, I'll just have a bunch of spare fleet. And usually that's almost the first red flag.

That is it.

Is that, hey, your availability, maybe it's down or it's low. But when we see a lot of vehicles just sitting in the yard, or your fleet size doesn't quite match, you know, maybe your population size or, you know, right. Trucking companies are notorious for this. They have a gajillion trailers and only a handful of power units, right? Well, it's because trailers are cheap. They're easy. You don't really have to maintain them.

And nobody questions, do you need a trailer?

No, right. And you never want to be out of trailers. But yet you go around any dispatch yard and there's a, you know, just a ton of them sitting there.

Right.

You know, but we also see this in white fleets. You see this at universities.

Well, in every fleet.

Every fleet. There's always some kind of spare, right? Yeah.

And that's part of our point around availability, right? Excuse me to interrupt you, but it's, hey, your availability is low, necessarily you have too much fleet because that's the only way— well, it's not the only way. There's one of 5 ways, but that's the most common way. So people are doing exactly what you're saying. They're stacking the deck by accident in many cases, and their availability is still low. So that's a wormhole that I won't go down that or rabbit hole.

But it's what it actually means is that their availability is worse than they think it is.

Exactly correct.

Because, you know, they've not done the right sizing and actually look to see. How many vehicles aren't even moving?

Right.

So the utilization is really to kind of keep that availability metric honest.

Correct.

And so a lot of fleets, you know, when we talk about how do they track utilization today, and I think you and I both agree they're tracking it wrong.

Agreed.

Most of the time I see fleets, they'll track it either by a certain number of miles threshold.

Right.

Right. Like it's got to travel at least 500 miles in a year.

Right.

They'll track it by, you know, maybe number of trips or something like that. Which I think number of trips is actually not terrible. Gallons used, I see that one a lot, that it has to burn so many gallons of fuel.

Right.

Because you get—

and that can make sense, right?

It's idling or something like that, like a fire apparatus or whatnot.

Right.

But we think that, you know, they might be looking at the wrong metrics. Yeah. Sometimes. Right. And you gave a great example. This is something you tell people all the time.

Right.

And that's the, you know, like the plumber truck example. Yeah. I think fire apparatus would probably fall into the same category. Yeah.

In many cases. I mean, fire apparatus is interesting because hopefully your utilization is way down on it, right?

That's right.

It's— that's a kind of a different asset where it's almost an insurance policy, right?

But when you think about like the plumber truck—

Yeah, exactly.

For our listeners, you know, kind of walk them through that example.

Sure.

Why you think that we're measuring utilization wrong.

Yeah, I think plumbers and frankly, a lot of the trades folks are great examples of this, right? You know, and especially in the context of folks are under more and more pressure to justify what fleet assets that they need right now. So, you know, let's just take your average plumber's van, right? It could be plumber's truck, whatever it is. I worked at a university, so it's very relevant there. But maybe you work at a town or municipality or you have some buildings at your corporation and so you have your plumbing team and that plumbing team maybe takes their van and they travel 2 miles around town or, you know, downtown, let's say, and they're going to go spend the day at a particular building that's part of your purview. And they're going to fix 10 or 100 work orders that they're going to go attack, right? They're going to get there. Maybe they drive 2 miles there. Park the thing. It's not going to run. It's not going to have a lot of miles. It's not going to burn a lot of engine fuel or have a lot of engine hours because it's off. It's off. Okay. Meanwhile, this plumber is back and forth from this van getting supplies, getting parts, getting tools, maybe even using tools that are installed on there like a welder or something like that that slides out, right? And they spend 8 hours there, let's just say, and they're fixing, you know, various tasks that they've been assigned to fix, to fix all day. That is a highly utilized asset, especially in the context of what its mission is.

Yep.

And what its purpose is, why it exists and why that organization is bothering to spend money on acquiring that asset.

Right.

It's to fulfill that role. And so I would argue that that was a highly utilized asset in that scenario.

But even if the mileage used— correct. Let's say this is a super dense city like New York.

Right.

And, you know, maybe the mileage is like they only drive 5 miles in a day.

Exactly.

It might not ever cross that 500-mile threshold. Right. And so based on common metrics, we would get rid of that vehicle.

Correct.

Even though it's fulfilling the mission.

Exactly. And we'd be asking their, you know, whatever, that department's fleet coordinator to justify it and we'd be questioning it. And we— and the point is here that I think we're trying to get at is not only did that analysis not give us the answer we were hoping for, it actually pointed us in the wrong direction, wasted our time, wasted our stakeholders' time. Right. And so that's the other piece. This is this is where the pillars— we always say fleet's a web and pillars overlap, right? But from the stakeholder satisfaction perspective of it, you know, you're constantly pushing that. Do you really need that van? Come on, man. You put 1,000 miles a year on it. You don't need that van. And they constantly have to defend them. So they feel like they got to defend their work, their existence, right? Like, this is exactly what they're here for. And so, yeah, I think what I'm encouraging folks to do is, number one, embrace the stakeholder satisfaction piece by by really understanding and engaging with folks and understand what is the work that they're accomplishing with fleet. And if you understand that and you, you know, you put your minds together and you do a little thinking, I think you can come up with much better utilization metrics that better match what the use case is for that asset. In this case, you might come up with something like work orders accomplished, days utilized, work orders per day, you know, something that is actually an indicator of how well we fulfilled or how much of our mission we fulfilled with that asset, because that's what utilization really is. It's the fulfillment of our mission by use of this asset. How much of that did we do? Right. And that's what I perceive it to be anyway. And so, yeah, there are use cases like the long-haul trucking where miles makes a whole heck of a lot of sense, right? Absolutely. That's not to say that metric never matters, but in the average municipality or government setting or school setting, I mean, or service fleet, whatever you want to say. Absolutely. The data is overwhelming. We've studied enough fleets. We have fleet data in our system. You'll find things very commonly of like 6,000 miles a year for an average light-duty asset. And then go to AAA or go to the Department of Transportation, the federal government's website, and look at what they record as averages for the region and the state and so forth. And you'll see things like 12,000 miles a year and 15,000 miles a year, which means that us retail customers are driving that for the most part.

And that's where those numbers are coming from.

And yet I talk to fleet managers all the time, and they're obsessed with the fact that, hi, I'm only getting 6,000 miles a year out of this thing. Yeah, that's all you're ever going to get, right? Good luck. Motorpool might be exception. You can usually hit reasonable numbers there. So anyway, that's what I'm getting at. In this case, you're barking up the wrong tree. You think that that vehicle is underutilized. You're trying to figure out what you can do to replace it. And again, it's a bunch of wasted effort. And if you accomplish your goal and replace or get rid of it, eliminate it, you've hurt your organization. Right.

Yeah.

So I want folks to, you know, my message today is I said to you, I was like, I really feel passionately about this. I want folks to kind of think, think a little more. I don't know if it's even outside the box as much as it's get in the box with your stakeholder and sit with them for a little bit and tell them, hey, this is what I got to do. I got to go to leadership and tell them that you're using the vehicle or you're not. How do I do that? What's a good way that we can accomplish that?

How do we measure the success of this unit? Right.

Right.

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And I think this is where, you know, we talk about Jobs Theory and we talk about, hey, when you buy a quarter-inch drill bit, you're really not buying a quarter-inch drill bit, you're buying a quarter-inch hole, right? And you have to understand the job to be done by that asset, right? We've talked about tools like ZARD, right? Yeah. Steve and I've mentioned that. I think you and I've talked about it.

Yeah.

You know, basically the zero-based, you know, asset research definition where it's what are we actually using this unit for, right? And then you sit down together and you come up with a common language around, you know, and it's metrics really. It's deciding how are we going to measure the metrics on that unit. And every unit has a specific metric. To track utilization.

Exactly.

That means you got to figure out how you're going to measure it. It's not enough just to come up and say, well, we'll track it based on days used. Okay, well, how are you going to measure that? How are you going to track it?

Right.

It's interesting, you know, as somebody who's used our system for a long time, like this is something Grandpa designed back in the '90s, right? It was as simple as just, hey, when you're doing your fuel entries, tally up a quick little tally mark, as low-tech as that is, right?

But it works.

But it worked. And a lot of people, I would say 95% of our customers don't even use that field. Because they're not tracking utilization that way. Correct. I've seen others, they'll use it based on especially fixed route. This is a really good method for them is look at the number of times that, you know, that vehicle was used on a route that—

Right. Exactly.

Maybe it was used for multiple routes in the day, but if it was used for one, then it counts.

Right.

How many times for motor pool vehicles? Right. How often were they checked out?

Yeah.

And you could just look at a green-blue board and say, you know, show me all the days it was checked out and show me all the days that didn't get checked out. That's underutilization if it didn't get checked out.

Exactly.

That's a motor vehicle that's not fulfilling its purpose and obligation.

Bingo. It's so funny. Quick on the motor pool one, because we, we talk about that a lot and it does generally have higher over-the-road utilization for all sorts of reasons. You know, then we'll be talking and I'll— and it's pretty much doesn't matter. The over-the-road utilization is irrelevant to your point. What matters is did it get checked out that day? Yeah, because that means that some job needed to get performed that was worth someone's resources to pay for it.

Yeah.

To get that job done that was needed. I don't care if it went downtown, stayed parked all day, and all it did was load boxes into it. It's, it's totally relevant. So it's a very interesting point that you just made. I, I, I find that one, you know, fascinating. Now with Motopool, you have a way to track it, right? Because normally if you have reservations, check-in, check-out, correct, you know, so it's a little easier.

Yeah. And I'll even go so far as to do like a full overlay And that's how I'm going to get like that spare ratio because, yeah, it might have been used 3 times that week.

Yeah, that's ideal. Yep.

Were you completely out of vehicles and it was the only vehicle left? Bingo. Or are you trying to spread the load and load manage between several assets?

Right.

Because that can also affect your utilization.

Right. And that's the message to the corporate friends out there, right? Because they think, oh, I got 97% utilization. My boss loves me because we're getting all this income associated with charging out for this vehicle. And it's like, well, yeah, but suppose you could have made the exact same revenue but only had the expense for 90% of the assets or 80% of the assets that you have an expense for? Wouldn't you look even better? Wouldn't your P&L look even better? So again, whatever world or segment or industry, it still falls back to this concept of coming up with the appropriate utilization metric for that use case. That's what you need. And when you do that, and again, try to think beyond— it doesn't mean throw away all of the ones you're using. Because there might be some insight gleaned from them. But, but kind of go beyond that.

To that point is, you know, when you're looking at something and maybe miles used is good for 90% of your fleet.

Right, exactly.

And maybe it's good to identify even those ones that are, you know, like the plumber vehicle, right, that you start— it just gets another level of scrutiny. Right, right. But the idea would be is that take another further look and make sure that you're not looking past the mark.

Right.

You know, no pun intended, Mark, but the idea of trying to truly understand what that job is to be done and how you're measuring it, how you capture it.

Right.

But there could be an opportunity for consolidation even at that level.

Exactly.

And so that's what you're really looking for is, you know, hey, make sure you're tracking the right metrics. And then once you know you are, then look to see if there's opportunities to right-size the fleet, get rid of that vehicle, right? Have that conversation with that stakeholder of like, hey, I've actually got a better way for us to handle this. And that's to do maybe a shared motor pool vehicle, or maybe there's a different type of asset that we could be using for that instead of a big old service van.

Exactly. That's the kind of conversation that comes out of doing this, that you end up getting wins you weren't even searching for by going through the exercise of it. So I think that's a great point. And you mentioned something else earlier too that I want to emphasize is this concept of the overlay, right? You could be using that asset every day. But if they're, you know, let's say you got two assets and one's used, you know, 6 to 2 and the other one's—

Yes.

Right. 3 to 10.

That's why I like the overlay. Yeah.

You know, it's important, you know, because you have, you know, major opportunities there. You see some of this in fleet, some of them, let's say fleets that are—

I want to make sure we're hitting that and people understand what we're talking about.

Yeah, sure. Go for it.

And so the concept I was mentioning, I don't think I explained it very well. Mark just hit it, which is that if we just track whether or not a vehicle was used in a day, right, it doesn't tell us the full story because a vehicle might have been used from like 6 a.m. to 1:00 PM, right? And then maybe it didn't get used the rest of the day. And there might be another vehicle that wasn't used all morning, and then it got checked out from 3:00 PM to 7:00 PM, right? Technically, one vehicle could have done the job of both. And so what you're looking for is that overlay between the two. And you'll see, you know, like if you stacked them right next to each other, you would see a solid line of, you know, blue basically in-house, right, versus green checked out. And you'd be able to look at the overlay to show you that you have a spare fleet, that you have an underutilized asset between the two of them. You had one utilization and not, you know, every hour is basically the way you look at that is you break it down.

Bingo. Yeah. So you could be scoring high on your utilization metric and still be underutilized and still have an excess spare fleet. Right, exactly. Yeah. You know, again, our goal was always to— we should be pushing towards maximizing resource efficiency, right? That's the implied comment there when we talk resource efficiency. So there's your opportunity to do it. I will say, I will caveat quickly.

Yeah, hit it.

Um, two, two quick things, but one is there is such thing as overutilized. People ask me that all the time, right? There's a couple different definitions about it. Well, if you're pulling 10,000 pounds and something that's only rated for 5,000 pounds, I wouldn't call that overutilized. I would call that misutilized. Yeah. So for those of you who have that definition, that, that's fine, that too. But, you know, there is such thing as, you know, do you get to a point where I'm putting— I'll give you an example. When I first got to Fordham we were putting like 30,000 miles a year on our 15-passenger vans. It was a lot, right? And so what was happening is, is the— we couldn't keep up. It was creating a lot of increased downtime because of the M&R needs that it had, right?

Yeah. And I want to come back to that.

Yeah. Yeah. So that's one piece. But towards the end of its life, which was 2 or 3 years later, who wants a 15-passenger van driven by 18 to 22-year-olds that has 150,000 miles of New York City traffic on it?

No one. You're hitting some big picture strategy stuff here.

Yeah, I hear you. But I just— yeah, and maybe I'm going too far, but—

No, I don't think so.

But the idea is there are considerations that you must have that go beyond just pure, OK. Because on the first pass, it was, wow, you guys got 150,000 miles in 3 years. You're great at utilization. No, we weren't. We were horrible at it because we were shooting ourselves in the foot on the back end of trying to resell that vehicle and getting resale.

You know, we literally had to sit on it through the warranty in the first 12 months. Exactly.

Like, you know, maybe 3 months.

13, 14 months if you're going that far.

Exactly.

But that's, you know, so you look big picture when we talk about big picture strategy stuff, it's looking at that whole picture and you hit the first metric, which is if you're overutilizing vehicles and you're getting too efficient, the first thing you're gonna see get hit is availability.

Availability is gonna get shot.

Right, which is downtime.

Those vehicles are gonna go down.

It's crazy, is 'cause we're basically beating these vehicles up way beyond what they were supposed to be.

That's a good point, yep.

So the availability's gonna be the first thing you see, which is weird because we just said in order to improve utilization, right? Like your availability is going to go up, but it's this weird like crossover, right? You know, if I had a whiteboard, I'd draw it. It look really cool.

Yeah.

Um, but then the second piece you mentioned, which is, you know, the resale value, and so you got to look at utilization over the, you know, what's the expected life of that asset.

That's important.

Um, if you could recoup an extra $10,000, $15,000 out of the asset, what's that worth to you, right? Uh, you know, what would it cost you to go out and buy another asset to spread the load a little bit between those two? And then like you mentioned, as you know, who wants to go— who wants to go buy this asset where they're down all the time because we're just— we're putting too many miles on them, we're using them too hard, right?

Changing suspensions all the time.

Right. Well, and you're breaking stuff that's not meant to break for 10 years.

Right. Exactly.

Well said. It's like not only are you past the warranty, but you're getting now— like, if I were to look at this on an Orca model, you just essentially compress the entire M&R schedule.

Yes.

First. So not only are you having a massive depreciation hit, for the first 3 years of the asset. But now you're also having a massive M&R hit with it.

Correct.

And yet the timeline is still the same time. It doesn't change.

Exactly.

That would be a really interesting Orca model to look at.

If it was beat up, man. We were finding that we were having to sit on vehicles because just to get that mileage to match the age expectation a little bit better. Right. Which was crazy idea because it's depreciating the whole time. So, yeah. Anyway, that's maybe that's another topic for another day to talk about how to, you know, to strategically model that.

Yeah, because there is a cost consideration. Yeah. Some people would say, well, that's awesome, Mark. Yes. You literally beat those things to hell and they just, you know, you didn't have to go spend— maybe you're spending money on M&A, but you didn't have to go spend money on acquisition.

Right.

There was no CapEx. Right. And my budget's all OpEx. So like, it's kind of— you're robbing Peter to pay Paul in some situations.

Yep. I can't wait for that conversation. We'll do that.

Yeah. All right.

It's like E equals MC squared, folks, generally speaking. Okay. If your OpEx is great, then something's wrong on CapEx and vice versa.

All right.

So, yeah, another day.

All right. Well, hey, if any of you guys want to see some of the diagrams that we've come up with or any of the models when we start talking about utilization versus availability and how those two actually complement each other and feed that data. If you want to know, like, how do I do a stakeholder interview so I can figure out what the right metric is? You know, reach out, email us at podcast@rtfleet.com. This is why we have, you know, our hosts, right? Our fleet manager experts here in the team. We'd love to hear from you. Any suggestions on that? Come to Connect. Come see us at Connect, right? Like, we're all going to be speaking and talking about these subjects. You can go talk to your peers, but I'd love to sit at the feet of guys like Mark and Tony and Steve and just pick their brains about stuff like this. So it's October 7th through 11th in Atlanta this year, and you can just go check that out on our website, rtafleet.com.

Yeah. Thanks, everybody. Yeah.

But otherwise, we'll see you guys next time on the next episode. All right.

Take care.

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