4 reasons why metrics lead to better decisions
Effective fleet management revolves around optimizing both dollar and time utilization. In this article, we’ll explore how metrics play a crucial role in making informed, strategic decisions within fleet management metrics for better decisions and-based companies. By understanding and leveraging specific metrics, fleet managers can transition from relying on lagging indicators to more proactive measures obtaining real-time, proactive insights, ultimately leading to more profitable and efficient fleet maintenance operations.
Here's a table summarizing the four reasons why metrics lead to better decisions in fleet management:
These metrics provide fleet managers with valuable insights into asset performance, profitability, and resource utilization, enabling proactive decision-making for improved efficiency and profitability.
The Importance of Metrics in Fleet Management
When it comes to managing a fleet, making decisions solely based on high-level financial management metrics often leads to missed opportunities cost savings. Waiting for year-end gain/loss figures or a fleet's operations-wide utilization statistics means operating in retrospect—akin to steering a fleet by solely glancing at the vehicle tracking rearview mirror. This scenario becomes even worse when managing a fleet without any other management metrics, or financial insight.
To truly grasp the significant impact on the performance of a fleet, it's imperative to delve deeper into various levels of assets within tracking fleet metrics and the hierarchy of the fleet's key performance indicators itself. These include fleet-wide metrics, fleet managers, asset categories, asset classes, and specific assets. The following four metrics serve as beacons for making data-driven decisions in fleet management:
Dollar vs. Time Utilization Article
Written by: Patrick Tunnicliffe
Effective fleet management is about dollar and time utilization. For this article is to show the reader that to make the most money in a fleet-based company you need to appreciate where these often referred to ratios come from in the first place. Further, once the action is taken on measuring things, you've moved as close to owning actual leading indicators of a healthy, fleet's performance, efficiency and productivity as you can get. Building or maintaining a fleet based simply on the high-level financials like year-end gain/loss and fleet-wide utilization figures might feel right but by the time those figures are produced you've already missed the boat on identifying issues and making great decisions in real-time. Metrics at this level of analysis are known as lagging indicators. Using financial statements to see key fleet performance metrics and indicators make fleet decisions is more akin to driving your fleet using only your rearview mirror. The only worse scenario is managing a fleet without metrics or insight into financials at all.
In these examples, I will refer to a classic hierarchy of fleet.
Fleet: The whole thing.
Fleet-wide based key performance indicators and tracking metrics can come from high-level financial statements.
Asset Category: e.g. Earthmoving Equipment, or Reefer Vehicle
Asset Class: 10-ton Excavator 4x2 Refrigerated Van
Asset: Excavator 10t-701 Reefvan-005
Here's a table summarizing fleet-wide key performance indicators and tracking metrics:
These metrics provide fleet managers with valuable insights into fleet-wide performance and profitability, enabling proactive decision-making for improved efficiency and financial success.
Metric 1: Average Age of Fleet
On one end of the spectrum it's all brand new, on the other it's all scrap. Everything in between defines where the whole whole fleet vehicles it's whole fuel economy and efficiency now really lies in its useful life generally across all categories fleet vehicles.
Better decision opportunity number one. Knowing the average age of a fleet is important, but more importantly the respective average age of an asset class against the average age of the entire fleet. Why? The age of an asset class within the fleet can give an indication of where to look closer for opportunities. A better decision may come from recognizing a profitable asset class has an average age beyond a certain marker (getting old) and equipment financing happens to be historically low for that asset class. Here a metric has pointed to an opportunity for a decision to be made without depending on a gut feeling.
Metric 2: Washout-Ratio
Money-in to money-out. Purchase, the repair costs against fleet operations and maintenance costs against, and fuel costs against the revenue and the ultimate sale of an asset leave a measure of profitability. Clearly, we want money-in to win here.
Better decision opportunity number two. The comparison of established wash-out ratio metrics from former assets gives the fleet manager a washout ratio trend to examine. That trend allows for a profitability optimization of an asset class and also a line in the sand to respect for selling older assets. A better decision can be made here based on the statistical proof that at some point assets in this asset class begin to be profitless every day. Also, look for ways of improving a poor washout-ratio.
Metric 3: Dollar Utilization
$1M in fleet management software solutions that earns $450k in annual revenue has a 45% dollar utilization. Where it can get interesting is where a fleet's performance as a single asset gets dollar utilization far greater -- or far less -- than the other units within the fleet maintenance software asset class. Time to look closer for why.
Better decision opportunity number three. Look at the dollar utilization of a single asset against that of its asset class, then look at the average dollar utilization for the fleet as a whole. A better decision could come from identifying asset classes that have high dollar utilization and large demand in the local market.
But why stop there? Looking even closer, a savvy fleet manager may approach the leadership team and convince the company to take advantage of this new insight by adding only a few more of this particular high-performing asset class to create new cash flow to justify the acquisition of a known loss-leader asset class. Only a few assets though so that the company can reserve capital budget to purchase the loss-leader assets. Such a strategy could help differentiate the company's reputation further from a specialist competitor, reduce downtime and fuel consumption, operational the fuel efficiency further, and the overall market share of the company.
Metric 4: Time Utilization
52 weeks in the year and 6 months of work is 50% time utilization. Simple but powerful.
Better decision opportunity number four. Knowing that time utilization for any asset class has reached a certain marker like 80% you know there is little chance in the equipment rental industry that an asset would be available to work when the demand comes up. Customers being turned away because there is nothing available is troublesome.
In closing, I hope you are poised to have valuable insights and better appreciate significant benefits of how looking a little closer at asset classes and assets themselves leads to more informed decisions, intelligent, and near real-time decision-making opportunities. Time to look into the future and plan on spending some of my idle time on that new metric earned cash.
The Future of Fleet Management
As technology evolves, so does the field of fleet management software. With advancements in machine learning, artificial intelligence, and predictive analytics, fleet managers will harness even more powerful tools to anticipate market shifts, analyze fleet performance metrics, see maintenance issues, plan strategically, and optimize operations of their fleets for maximum profitability.
A Final Note
In the rapidly evolving landscape of fleet management, the significance of metrics cannot be overstated. By leveraging these metrics, fleet managers transition from reactive decision-making to proactive planning, ensuring the effective utilization of resources, anticipating market demands, and ultimately, ensuring the financial success and sustainable growth of fleet-based companies. Embracing these metrics isn’t just a strategy but a necessity in navigating the complex and ever-changing landscape of the industry.