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Stretched Utilization on Fleet Lifecycles by Chris Hill

Chris Hill fleet manager
Chris Hill. PHOTO Jack Kazmierski

The pandemic has turned procurement practices upside down, forcing many fleets to stretch utilization on the assets they currently have.

Extending vehicle lifecycles is becoming more and more commonplace as we continue to adjust to the pandemic-influenced world around us.

It has been a forced march for many fleet managers because currently, there simply isn’t that abundant choice in new vehicles we are used to having.

Factory orders for light-duty vehicles that used to arrive in about eight weeks now take six months from order to delivery.

Dealers in heavier and more specialized vehicles are telling customers to wait for 600 days and longer.

New customers

The pandemic caused many automotive assembly plants to shut down in 2020. Some were back in business after two months while others stayed idle for almost half the year.

This was not because of a decline in orders, although rental company business disappeared for months in 2020.

The drop in automotive production did, however, force many suppliers to find new customers for their products. Once the assembly plants were re-opened it was not the same supply chain anymore.

The output of new vehicles has not returned to the levels of the previous decade.

Fleet managers are responding to the lack of new vehicles by extending the lives of those they currently have in service.

This has been made easier by the improved durability and quality of vehicles that have made traditional limits on ownership obsolete.

In many cases, a substantial drop in travel in 2020 made it possible to postpone replacements for several months or longer.

Increased expenses

The usual caution against extending vehicle lifecycles is that maintenance and repair expenses will increase.

This can be mitigated by keeping to a strict preventive maintenance schedule.

Another offset is the unexpected surge in resale values.

The evidence of a shortage of used vehicles was made clear to me earlier this year.

I drove past the huge Toronto Auto Auction yard in Milton, Ontario one day in June and was startled to see acres of empty parking.

Where there was once the glittering sight of thousands of vehicles waiting their turn on the auction block, only a few hundred were clustered just behind the building.

This may be the result of rental companies restocking the fleets they sold off last year when air travel almost ground to a halt and the airport car rental business practically disappeared.

My organization had a much harder time sourcing rental vehicles for our summer work programs this year.

Keeping older vehicles

Some of our needs were met by keeping older vehicles that were replaced with the scant new ones that were delivered.

It goes against a solid fleet management principle to continue driving vehicles already identified as being at the end of their useful lives but there was no alternative this year.

It may be difficult to get users to surrender those extended service vehicles when the summer programs end.

There is a common misunderstanding that these vehicles are free because they are fully depreciated or because the lease payment schedule has been completed.

Extending lifecycles has relieved pressure on capital budgets in organizations that own their fleets.

It is critical that Fleet continues to work with Finance to avoid having capital reallocated to other projects next year on the assumption that Fleet no longer needs to replace vehicles as often as before.

The funding will be needed once the pace of replacing vehicles resumes after a delay of a year or two.


Chris Hill has been a fleet manager and advisor with some of Canada’s best-known companies, several municipalities and the Ontario government. He has served twice as chair of NAFA Ontario Chapter. Currently, he is Program Manager, Fleet Planning at the City of Guelph.

 

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august, 2021

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