Episode 217: Why Replacement Planning Solves 95% of Your Problems #podcast #fleetmanagement #fleet

Hey, welcome back to the Fleet Success Show. I'm your host, Mark Canton. And today we're going to be talking with Steve Saltskiver about some of his experiences and the challenges he's run into getting leadership to buy into a solid replacement program. Let's get into it.

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.

Steve Saltskiver, how you doing, Steve?

Doing great today.

Yeah.

Yeah.

So I wanted to have you on because very few people match really in the industry can match your level of real-world experience, you know, and in leveraging data on very large fleets, on very small fleets, and in your track record around sort of taking fleets that are falling apart and turning them around. So folks have heard some of those stories. If you hadn't, if you haven't, you know, go to our other episodes and other podcasts, and there's plenty of them. Look for Steve, and you'll learn a lot more about his track record. But it's, it's pretty legitimate. I don't think we need to go through your resume, you know, in great detail. But because of that, and because of some of the stops on your resume, I wanted to bring you in to kind of get your reflections on your experience with frankly, with replacement planning. Now, I know it's something we've been— it's been a hot topic again recently. It's something we've been talking a lot about. Josh and I talked about, you know, what would you put first? Would you put rightsizing first? You know, you know, replacement planning. What if you think you need more techs? Do you go after more techs? If you think you need a facility and how would you prioritize, you know, all of those? And so we've talked about that. You know, you're getting questions about it. You were at Fleet Forward this week. You're getting questions around how to decide when to replace vehicles. It was really big at conference. So it's something that people are interested in. And I had asked you a few questions and you had some, frankly, some really cool stories about some of the things you face. And I think many of our listeners, especially in the public sector, but really throughout, I mean, you have these experiences in the private sector, can relate to some of those experiences. So I was hoping to maybe just kind of talk through it with you. You know, we can talk about the principles, but also talk about your— some of those real-world experiences and how you handle them, and see if maybe folks can, you know, take that and learn from it and figure out some other ways to, you know, to help them accomplish what they need to be. So with that, I'll jump into it. You know, I don't think I'm putting words in your mouth. I think you and I agree very, very strongly. We recently presented at Connect that A fleet replacement, a strong fleet replacement program is, it really is key to fleet management. Many folks out there are running fleet maintenance programs and they have all kinds of issues that they're trying to solve. And there's probably not enough attention, generally speaking, within the industry to doing really high quality and strategic replacement planning. Is that a fair statement? Is that something that you agree with?

Well, yeah, I mean, the one thing we always talk about, the granddaddy of all metrics is fleet availability. Right. You know, we all agree on that. But the one, the granddaddy of all processes in fleet, in my opinion, has got to be fleet replacement because that impacts every single thing in fleet. I mean, we were talking for a second about techs. We're talking about, you know, depreciation costs. We talk about space and parking. We talk about any of those things related to fleet, even metrics like asset availability are all driven by a good replacement program. Replacement program.

If you do replacement well, you're going to mitigate, if not solve, 80 to 95% of all your other fleet issues. Something in there.

I agree. Yep.

And so, yeah, sometimes we'll get a question. You and I have done work for, you know, clients in the past where it was, you know, they wanted to help us improve their maintenance and repair program and maybe analyze how many techs they needed. And when we're done, we said, replace your vehicles. And they looked at us like we had two heads, right? Talk about that. Why is that true? Why is that— make that point for me.

Well, I think one of the things that we were talking about earlier was writing a draft article. And probably one of the biggest frustrations in my career, if I could say one frustration— I probably had many— was I was hired at a big company, a Fortune 500 company. I was headhunted. I was sought out. Moved from another Fortune 500 company, and I was brought in specifically to lower maintenance costs. That was the big issue, you know? And we had a lot of high maintenance costs in the fleet and a lot of parts costs and everything else. And so, you know, as I said, you know, as I join a company, and you know me, I mean, you call me the Fleet Whisperer, the one thing I do is I'm also the fleet listener. So, and I, I sat there and I didn't do anything at this company for almost 45 days. Just went around talking to people, listening, thinking about, you know, what is my strategy? What is my plan going to be? And after I did that, the one thing that I came away with is, you know what, we're not replacing vehicles timely. We're keeping some of our— in this case it was a refuge company and we're, we're keeping roll-offs for 20 years. We were keeping some of our rear loaders for 15 years at times, you know, and 2 jobs ago, had just recently left a company that we did a lot of fleet consulting. And so I had already done the optimal replacement analysis for trash trucks. And so I had a pretty good idea how long they should be in the fleet before you change them out. And I knew it was around 7 or 8 years at that time. And that was prior to using any data. And my goal was, OK, look, I know what it is. Here's the analysis. And I had spreadsheets. I showed them. Our data could have been a little different, but let's look at this because I think this is a big issue. And we started looking at it. And what we got it down to is around 7 years, which was the replacement cycle.

Right. And let me just pause you for the sake of the audience here real quick. So you're talking about doing data-driven lifecycle replacement analyses that get you to the correct economic point to minimize total cost of ownership for these assets.

Absolutely.

And for those unfamiliar with, you know, refuse or waste, you know, management type assets, sanitation, I mean, they take a beating. They have their complicated pieces of equipment with heavy hydraulics that, you know, operate, you know, the amount of times that those things are doing lifts and those hydraulics are pumping per day are many. And And, and the fact of the matter is they get beat the crap out of them, right? So they, they take a beating. So when you are doing a repair, to your point, those repairs tend to be massive repairs, right? Generally speaking. So now you've done the math and you figured out that if we're going to minimize our total cost, we're going to land in 7 years.

All right, absolutely. And one of the, the tangents— I probably should have back— did a little background on this. Within the first few weeks of being on the ground, I was signing invoices for $60,000. Big, big ticket expenses, you know. And to me, it was like putting lipstick on a pig. And I'm sitting here going, why the heck are we doing that? I mean, that is 20% of the cost of buying another vehicle, right? Plus the other thing that I saw immediately when I hit the ground is we had like a 30% spare ratio. Yeah, and that's why, I mean, yeah, 30%, you know. And having been in fleet a long time, I know that the sweet spot's somewhere around 10, maybe 15, because they're specialized pieces of equipment. But I mean, every extra piece of equipment you have at a cost of $350,000 apiece is a huge problem.

And, and you can just imagine, especially $60,000 for a repair, how long is that thing going to be down? That's a lot of freaking labor hours.

Oh yeah, I don't care what the price goes. I mean, we had, we had issues like we had We had lots of inventory in our parts rooms. We had, I mean, it was just one thing after another, but I was trying to target the one thing I thought could be the catalyst to driving the cost down. That was the replacement program. And much to no one's surprise, you know, I finally ended up getting up to the CFO level and sat down with him and I told him, you know, this is what needs to happen, you know. And we have, and this was a corporation, so we're having quarterly earnings calls, right? And part of those quarterly earnings calls, we're talking about about all the maintenance expenses that are happening, all the breakdowns, things that are impacting service levels, all that. So, I mean, that's just a quick thing that we do in the corporate world. So, I sat down and I said, "Yeah, this is what we need to do." And I gave him the, in his mind, grim news. And the first thing out of his mouth says, "Well, that'd completely fuck up our cash flow. So, we're not going to do that." I'm going, "It may in the short term. Absolutely. It may in the short term. But if you do this," I told him, "you will become the premier fleet and garbage company in the entire United States because over a course of— I mean, we're talking a window of 7 years. I mean, so halfway through that window, you're going to start seeing the positive returns on the other side, right? But they were just so uncertain about that and they're so worried about their quarterly earnings and their stockholders and everything else that they said, "We can't do that because of cash flow." Which is mind-boggling, right?

Because you're basically— your analysis would have shown them that in the big scheme they're going to save money. Oh yeah, right, absolutely. Like you said, it would require some CapEx investment, but overall, I mean, you, you wrote a— you, you wrote a— you, I know you're working on an article where you're using this as sort of like a background and a case study. And remind me, I mean, I think you were, you were— am I misremembering? It's like savings in the $300 million range.

Just reducing the spare count in half would have saved them somewhere around $800 million. I mean, that's like a no-brainer, right? Because you have all those vehicles sitting, sitting there, you know, idle, not doing anything unless we need a backup, right? So I mean, that was part of the problem.

I mean, and then, and then you found that there were some— and this is the— this is something that I try to explain. I don't know that I always do a good job, but you know, the impact that replacement planning has on behavior within the organization is is so poorly appreciated. And then you had this really interesting example where it was like, you know, these folks had these big repairs, but like the regional leaders put off the repairs or something like that.

Oh yeah.

Can you tell us about that?

One of the problems you had, and this is typical corporate, but I saw this a couple of times in my corporate background. Well, what ends up happening is all— in this case, I was in a matrix organization, so none of the fleet people reported to me. They actually all reported to a general manager, and then I had a dotted line to that fleet person. Well, I had all these fleet people that wanted to do the right thing, wanted to repair the vehicles, but long about, I'll say the 20th, 25th of the month, they would be expending so many parts that the general manager would lock up the parts room and wouldn't let them fix the vehicles. And so I was constantly in arguments saying, hey, we're not operating that way. This is not safe. This is not, you know, the right, right move, the right decision. And but, you know, all they were doing is preserving their, their bottom line so they didn't get fired. That was what they were looking at.

They were managing to the P&L. Yeah, the short-term P&L, right?

Yeah, yeah. And frankly, I got that because a lot of them did get fired for missing their numbers. So, so it was a legitimate thing, but that was a bigger issue in the entire company rather than a fleet issue, right?

Right. And so you, I think you said to me something like, when budgets drive behavior instead of data, safety and common sense are often the first casualties.

Yeah, absolutely. Yeah. Even though that's an uncomfortable truth, but that's what happens, right? Yeah. So yeah, that was, and that was of all my frustrations in fleet, that probably had to be one of my biggest because I could have really saved this company a lot of money had they really listened to me. And that's what they paid me to come in and do. You know? And so consequently, I actually left after 3 years because it just— I was a waste of time.

You probably felt like you were beating your head against the wall.

Yeah, I could have literally retired from there if I had done nothing. And that just wasn't me, you know? So I finally strategically decided that I would walk away from that operation. And then some of that, honestly, was self-preservation. I did not want to be the guy that got sued for some casualty or somebody because we didn't take care of our vehicles.

That kind of thing, right? So, but, but ultimately, this is an interesting thing, right? And I think many of our listeners can relate to this, or at least, you know, believe that they can, you know, which is, hey, you had the experience.

And by the way, you were successful at this before, where you got the dad together, 500 Fortune 500 company, and we reduced the fleet by $10 million in the first couple of years, and We won, you know, this— the Team of the Year award and everything else. And all I was doing, frankly, was applying those same principles at another company of actually fleet size, the same fleet size.

Right. So you replace them on time, which reduces your M&R and reduces the size of your fleet. And the savings generated there more than pays for replacing the vehicles on time. Essentially, it does require a capital investment or access to debt or access to something. excuse me, to a line of credit. But that investment pays off pretty much— it pays off every time. And you can model this to know that it's going to pay off, essentially.

Well, at the exact same time, you know, and it's been no secret that we've been short techs in this industry for years.

Well, that's a great point.

You know, and had we done something like this, we would not have had to hire those vacancies and waste time on that.

Okay, so let's pause on that because you're making a great point. So now We have vehicles that are too old, which means they're breaking down and require more M&R. We also have too many spares, means we have a larger fleet. And look at the trickle-down. Now you need more techs, which means you need more shop space. You already talked about parts, you know, more bays, etc., etc., more, more money spent on training, etc., you know, all of those additional costs. And you're still having sort of some hidden costs on the operations side of work that couldn't get done. Or overtime that needs to be paid or outsourcing that needed to be done because the fleet's not— struggling to hit its availability rate.

Yeah, I mean, talked about the backlog repair list that was like so long that nobody even looked at it. So it was, it was huge.

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So what would you say to folks who feel like they're in a similar situation where it's like, hey, I feel like I have shown the math? Because one of the things we say, they hear us say a lot, is you, you, you gotta show the math, right? You gotta tell your story with data and with numbers. And I stand by that. Like, if you're going to be successful, that is the way to be successful. So you got to do that. But there may be folks out there who feel like I did just that and I'm still not able to move the needle on this. What are your thoughts to them? I mean, have you ever had a situation where you struggled to move the needle at first and then got there? Uh, you know, so maybe not like, you know, one case you hit a home run and this case it was like, this is insane, you know, but, but I, you know, cause I feel for people. That's what I ran into.

We actually did have one home run in the same company.

Okay.

And what it was is we were looking at, um, we were having a severe increase in costs from 2010 to, in my case, '15 when I was there. And so what we did is we did a lot of data analytics and we looked at the cost of emissions and equipment and all the regulations that happened between 2010 and 2015. And we saw that there was Some were like, just for the emissions alone, all those regulations was a 25% increase in cost. It was huge. And so that helped at least bridge some of the gap on the maintenance cost because now they understood it.

You could tell the story, right?

You could tell that story. And so that really helped a lot. I think we were running $16 an hour at that time and probably 25% of that was maintenance if I recall the numbers correctly. So yeah, it was crazy. So, but those are the things you need to really look at, you know? You know, what is driving your costs? How do you back into that? 'Cause you gotta tell that story. That helped us when we went on those quarterly earnings calls because we were able to show them what all that increase was. The other thing that happened too that we quantified was technology. We went from rear-load garbage trucks to front-load and side-load garbage trucks. And all that technology had a huge increase to it because of all the extended maintenance that you have to do on like a side-loader, right? Because of all the articulating arms and those things. So we quantified that as well. And that at least got us some goodwill, you know, as we went through the process because we were able to figure out why the costs were getting so astronomically high.

At least what you're able to do is get also get leadership to be able to get out in front of it. Like, hey, this isn't some big huge mistake we're making. This is because of decisions that were made or regulations that were put upon us. So we need to change our model and prepare ourselves from a budget perspective that this is going to be the new reality sort of a thing.

Here's a funny thing that happened actually as we're digging into the sideload issue and finding out those costs. We went to that model because it got rid of one extra driver or one extra driver helper. And we found out because the operations department never got rid of those drivers. So, so that didn't actually save the company any money. They cost them money because there was a driver shortage, like a tech shortage. And so they, right, they basically hung on to all those guys so that they could have a backup, you know, like a spare, like a spare vehicle, spare driver, right? So it was— wow, it was almost a waste of time in a lot of cases, right?

Nonetheless, you were able to tell that story. So that's, that's interesting. So at least we still get a point here and there for telling your story with data in this case. But, but again, I want to get back to it. I mean, is your message just, hey, if you've— I mean, so at that, at some point you felt like you did all you could do, right? You had, you had solved the side loader issue, you had solved the emissions issue, and you said this place ain't for me and you left. Is, is, you know, we've talked about this once before, I think. I, I don't know if you left as much because you did all you could do or because of management blocking you from doing the rest of what you could potentially.

You know, I, I felt like there was a cultural issue. I mean, so that, I mean, that's something I've always been— I mean, I know RTA, we talk a lot about culture, intentional culture. Um, they certainly had an intentional culture there, but it wasn't my intention to work in that culture. So it was, it was rough. It was challenging. You know, from me at the vice president level down to the rank and file was awesome. I had some of the best workers I've ever worked with in my life. But from there, you know, there was just a lot of tradition, a lot of holdover garbage, I would say, at the management level. And frankly, they were working on changing it. They were. But maybe I just ran out of some patience.

So, so what's your advice to folks who feel like they're running up against it? I guess part of it is evaluate that. Is this a culture issue? Is this a leadership issue, or is it a temporary issue? Because you could certainly understand, right? Like, I could certainly understand a situation where, okay, I've done all the analytics, I've, I've brought the story home, I've showed you how it's impacting us, I've given you the indirect costs and the indirect implications, and you still say sorry— there's a certain sorry that could be acceptable to me. It's like, okay, well, now that you've made us aware of this, great. We're going to have to figure out how to get our hands on this capital money, and it might take a little time. So the answer may not be throw your hands up immediately, but certainly if it never comes, then that— you could imagine that being very frustrating.

I even offered, you know, uh, to entertain a third party, a consultant to come in and validate my assumptions, you know, and those kind of things. They weren't too interested in that as well. So, um, you know, maybe at that point in my career too, I might have been a little more frustrated than most people because I usually fight very hard, you know. And, and I, I think, you know, they hired me under the premise that they got one of the most qualified fleet guys in the country, and they just weren't leveraging the expertise that I brought. And to me, I don't know how other people are, but to me, that's a waste of my time. And I walked away from a huge salary because at the end of the day, I'm more interested in being successful than playing politics. And the politics just were kind of horrendous there. And it just wasn't a good fit for me, I guess, is why I walked away eventually. But I would tell people, You know, if you're in a state government, I would say, you know, and I was in state government for 15 years, actually 30 of my career for Caltrans.

You did a couple states. Yeah.

I would say keep at it. Management changes happen. And as long as you're espousing true and data analytic political decisions, you're going to win eventually, I think. Or at least at the very least, someone's going to at least know you talked about it and showed them the numbers. Right? So if something ever happens or comes back on you, I mean, you've— hey, you've done your due diligence, right? Some battles you can't win. You just have to accept that fact. And but, you know, never keep trying. I guess that's my advice.

Just keep going after it because you've won that battle much more often than you've lost it. This is almost like it sticks out for you because you didn't win it.

That's sort of where my frustration comes in. Probably why I didn't stay there long. And I'm going like, man, I don't know what else I can do here, you know? And Right. You know, it's crazy.

Yeah. So when you want it, okay, you've told the story with data, you did the analytics, you were able to show the impact from a direct cost perspective on the fleet itself. You probably went after some of the indirect costs on how it's impacting operations and either their performance or their cost, right? Like you mentioned, maybe commercial rental or— and, and just being very holistic about it, showing how it impacts techs, your potential facilities, you know, that—

I'm at service levels.

I mean, it impacts everything with the downtime and So thinking about the times when you won, what else, is there anything we missed just there or what would be your advice to folks as far as how to go after this and how to keep going after it if maybe the yes isn't the first time?

Well, I think a lot of it depends on culture. I mean, at the other Fortune 500 company that I did manage, we had processes in place. And if you could show them, basically use your analytics to show some type of delta or savings what we used to have, what we call an IRR, internal rate of return. And we would fill out those forms and we would show what we could do by implementing whatever procedure or whatever we were doing. In this case, we had the same thing happen there. And when we show a double-digit internal rate of return, they're going to jump all over it because that impacts the bottom line. Unfortunately, they didn't have anything like that at this other company. You know, part of it was they might not have been as mature in the industry. Part of it might be that they were working towards that end. But I think most corporations, if you can show an internal rate of return or an ROI, they will move on it if it makes the bottom line a little bit more healthy. So that's what happened in the other company and they did move on it and that's why we were successful.

Right. And I think, I think at least, you know, I think governments and other organizations, it's similar because, you know, that ROI is essentially savings, right? It's money that they don't have to spend that they can then put elsewhere, right? And so you would think that everyone's interested in that.

Sometimes I think people lose track of who they're actually supporting, you know. I mean, in the case of government, it's your citizens that are your stakeholders. For the most part. And sometimes I think they can get lost unless you really focus on it.

It's almost a challenge sometimes that they're not more profit-driven, you know, in the sense of, well, sometimes the outcome is instead of, you know, overtime or more assets, it's just the work doesn't get done, right? To your point. And then who have they ultimately let down?

Well, and I had success too when I was working for state government. You know, we, we got good life cycles in state government. And we were able to quantify those and get that funding through the legislature. It wasn't absolutely as good as I thought it should be, but I mean, we did make a dent there. We did create some good policy and some good replacement decisions. And then we also had some good rate decisions because we were charging back our stakeholders, and that helped, you know, based on some of the utilization that I saw, some of the damage that I saw. We were, we were doing a pretty good job managing those life cycles because we had a good chargeback system.

So real quick, talk about chargeback and, you know, what it is and why it's so important.

I always tell people, if you first thing you need is a good replacement, then you need a good chargeback. Those are the two critical things in fleet management. But a good chargeback system basically is you're recovering all the costs associated with managing that fleet of vehicles. Everything from overhead to parts to capital costs to operating costs and even extraneous costs like, you know, damage to the vehicles, things like that. And if you do that and if you model your costs accurately, then you're going to be recovering costs to replace the next vehicle. I remember going through a scenario with the legislator one day and I had to draw it on a piece of paper. We actually drew an image. Showing, okay, I got my son in college now and I'm going to buy him a car. And then 5 years from now, my daughter's going to be in college and I'm going to have to buy her a car, but I can't give her the one that's been used for 5 years. So I'm going to replace that one with this new one, kind of giving them an idea, you know, because they typically run their own cars. They don't get the replacement cycle because they're more ad hoc. They're not looking at the total cost of ownership and the cost curves that we frequently talk about here. So you have to make your story understandable to the people that are involved in it because they don't, they don't understand it.

Okay, so that's key. So tell your story with data, but then take that data and, and translate it into something that's relatable that people can understand, maybe out of their everyday life or whatever profession or niche that they live in. Which isn't— which is an interesting piece too that often kind of goes, goes overlooked. And, you know, oftentimes it's, it's, you know, how does it impact them and how they're accountable for the potential decisions that they make, I think is also a key piece. So yeah, that's interesting. Well, I just thought, you know, this has come up a lot lately and to tell that story, I, you know, there's a lot of folks I know out there who are banging their head. They feel like they just can't get enough money for their, for their capital costs. And, and so they feel like they're chasing their tail. In the meantime, they're also struggling because they can't get enough techs They're trying to prove how many more techs they need. The fleet's growing, so they need more techs. You know, I'm curious out of you— Josh asked me this a few, a few weeks ago— curious what you would say. But, you know, here you are and you think you need more techs, and therefore you might need more space or whatever it may be. Um, you know, you might suspect that the fleet's not the right— like, what, what, you know? And then of course replacement, you know. How would you approach that if you felt like you needed all of that? How would you prioritize?

I think you need to really nail it down to whatever your top fleet metrics are. You know, I recently did that on site as a consultant and found out we just didn't have available vehicles. So you've got to work on the things that are immediately surfacing from the stakeholders. At the same time, you have to have a long-term strategy behind the scenes saying, okay, I can fix this for now, but how am I going to keep that where it needs to be? And so that's really what I look at is I have short-term goals and I have long-term goals and I set those. But what I would always tell people in my career, I never went into a year where I didn't have a plan ever. I would always sit down with my team and I would say, "Okay, let's talk about what the issues are, where we think the problems are, how can we solve these problems, and what are the goals and the metrics we need to track?" And I would narrow that down 3 to 5, and I would go into the year with a plan, you know, and I would adjust it as the year went on. But I think a lot of people don't actually have a plan. I think that is the biggest key that I would say to be successful.

One of the things we talk about all the time is, you know, I like to joke that fleet managers should all get fire helmets because that's what they do. They put out fires all day, you know. But that's— and while I think that's true, and on one hand it's sort of a badge of honor for fleet folks. On the other hand, it, you know, we talk here about trying to work on your business, not in your business, and, and there's probably not enough time dedicated to that sort of strategic thinking, strategic planning, is your point.

Yeah, I actually left one job that I could have retired from by now because I had done everything I could do without breaking a bunch of stuff. We actually were that successful that I actually walked away and took a different job. Right. So I mean, I've had— I've had—

I've run the gamut on different stops where I've been and different reasons to leave.

But I'll tell you what, the one thing that I learned early on, you know, is don't be afraid to jump. Don't be afraid to leave. You know, I did that early and it scared the crap out of me, but after I did that once, I figured out how to land on my feet, and I've done nothing but propel my career forward.

Great advice. All right, with that, I think we're going to call it a show. Thanks so much for being with me, Steve.

Oh, it's awesome. I love doing it.

Same here, my friend. Well, we hope you all enjoyed it, and, uh, if you have any ideas or questions for Steve or I or any of our SMEs, or please do email us at podcast@rtafleet.com or go click on our link www.rtafleet.com to learn more about our software or our consulting services. It's a pleasure talking with you, Steve, and I hope to do it again real soon.

Absolutely. Thank you.

All right, take care, everybody. We hope you the show.

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