Why You Need to Give Your Fleet’s TCO a Little TLC

By January 28, 2016Fleet Management

Not knowing exactly what your fleet is costing you may be costing your business more than you think.

Fleet Equipment ran an article late last year on how to determine the total cost of ownership (TCO) for your fleet. This is a subject that is gaining more and more traction as businesses everywhere have to look at optimization, productivity, and profitability in every aspect of their business. For companies that have to get their goods to market, transportation is not often their core business. Therefore, this aspect of their business will need to receive greater scrutiny, so the better evaluations you can make, the more cost- and time-efficient your fleet will be…and that can add to a more positive bottom line for your company.

Many factors weigh into the TCO equation; overlooking just one piece of the puzzle can skew the calculation one way or another. The variables that must be considered include the cost of a truck (either through purchase or lease), its residual value, vehicle usage and life considerations, tax consequences, fuel economy projections, maintenance costs, the cost of downtime, and so much more.  While traditional views of TCO often favored retaining a vehicle for as long as physically possible, factors like technology, governmental regulations, and fuel consumption are fast becoming key considerations in truly enabling fleets to make educated decisions as to the most efficient length for a lease or purchase.

Since fuel is the single biggest cost in operating a truck, companies are looking for the most fuel-efficient technologies. When calculating the TCO, the cost of purchasing that technology needs to be measured against the fuel cost savings resulting from utilizing that technology. But fleets are urged to look at both fuel costs and maintenance issues when assessing which technologies to utilize.

Whereas, in the past, the best available data for TCO analysis was only found in historical spreadsheets and analytical archives, today’s trucks and technology can provide real-time operational information and leading indicators of future, predictive costs.

Joe Puff, NationaLease’s Vice President of Truck Technology and Maintenance, was one of the experts interviewed for the Fleet Equipment article. Commenting on how technology and regulations have changed the way fleets analyze vehicle life cycles, Joe notes, “Typically, that full life-cycle analysis took seven years of data collection to make good informed component selection decisions. Today, with the continuous regulatory changes, hyper-speed technology advancements, and engineering and materials development, we no longer have that proven life cycle data to support these decisions.”

You still have to do life cycle analyses, but it’s essential to note that by the time you’ve collected and analyzed the data, a number of the components and technology may have changed. That’s why, according to Joe, choosing the right supplier who will stand behind their product, is so essential. Because regulations are changing as quickly as technology, the amount of time for testing new products and technology has shortened significantly. That’s led to a number of product issues that have resulted in increasing maintenance costs which may not have been calculated in the original life cycle analysis.

It’s clear that there are a great number of variables to consider when calculating your fleet’s true costs. Perhaps it’s time to give your TCO a little TLC.

Read the full article.

Joe Gallick

About Joe Gallick

Joe Gallick is Senior Vice President of Sales for NationaLease. An experienced supply chain executive and spokesperson in the logistics provider industry, he held senior management positions with Penske Logistics before joining NationaLease. He serves as a liaison with the Penn State University Center for Supply Chain Research.

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