Gut instinct, years on the job, and a ground-zero understanding of your fleet are all well and good, but senior management requires quantifiable data – metrics – that can unequivocally substantiate that the fleet is living up to (or exceeding) performance expectations, or where it needs help to do so. In a sea of data, crucial insights can be buried, so the task for fleet managers not only involves collecting relevant data for their fleet’s operational analysis, but also involves presenting it to senior management and line operators in the most salient manner.
The term “Root Cause Analysis” has become a popular buzzword in vehicle fleet tracking circles for getting to the bottom of a problem. Essentially, it means asking intelligent questions and being brutally honest about the revelations they reveal. Another way of looking at metrics is as a way to measure your proximity to your relative goals. Looking at key questions such as, what are we doing, how well are we doing it, what are our conclusions based on, and how can we demonstrate our progress to others, within the context of larger goals/targets, such as: improving customer service, reducing vehicle cost, decreasing accident instances and expense, and assessing and/or mitigating depreciation and lifecycle costs, can enable managers responsible for fleet vehicle tracking to provide depth and credibility to their progress reports.
Capturing and analyzing the most specific, measurable, attainable, realistic and timely (S.M.A.R.T.) metrics is similar to performing a SWOT (strengths, weaknesses, opportunities, threats) analysis. In the sections that follow, we’ll look at the top five metrics that must be measured and managed, to continuously optimize your fleet’s operations.
The Top 5 Metrics for Fleet Optimization
Number One: Customer Service
If location is the prime indicator in real estate, customer service is its fleet management equivalent and the first line of defense in fleet optimization. Fleet tracking software can help fleet managers see gaps in customer service and correct them. For example, certain routes may be prone to delays due to seasonal road hazards, construction, or other adverse conditions, causing drivers to arrive later than expected. Fleet managers can use their fleet tracking GPS to see real-time road conditions for their entire fleet, as well as predictions for future conditions, enabling them to optimize their routes, thereby averting customer dissatisfaction. More broadly, fleet managers can use fleet metrics to improve fleet-wide customer service by looking at every point of customer contact and assessing any areas for improvement.
Common questions for assessing customer service performance include:
- Are our fleet-to-customer communications proactive, preemptive and intuitive, or reactive?
- What are the common concerns of our clients (in terms of delivery and deliverables) and how well are we integrating them into our systems?
- How well do we communicate concerns across the fleet and build them into new best practices?
- Are our incentives for adhering to customer service best practices adequate?
- Do drivers consistently have what they need once they arrive at the site?
- How well do our drivers respond to a customer concern and how can they do this better?
- When drivers experience minor mechanical issues, are they properly outfitted to handle them on the road?
- If a vehicle breaks down, how fast are we able to repair it or deploy a replacement?
- How well do we manage customer-generated delays?
- If a delivery will be late, how rapidly do we alert the customer?
Like sales funnel analytics, customer service metrics measure a customer’s experience throughout the life of their contract. Inadequate communication and attention to your customers’ needs (even longstanding ones) can lead to lost opportunities and operational inefficiencies that compound loss. By continuously assessing customer service metrics, fleet managers can see where they are meeting, exceeding, or falling short of customer expectations and adapt their systems accordingly.
Number Two: Departmental Cost per Vehicle
This could be likened to the “no brainer” metric. Obvious to a fault, it is nevertheless a highly nuanced one to capture and accurately assess. A fleet tracker looks at how productive the department is, and how well it’s operating within its budget, by presenting an aerial view of fleet operation costs in order to present a detailed account of the ratio of costs per vehicle.
Some high-level variables for cost-over-vehicle metrics could include: how well a fleet tracking system serves the business intelligence needs of fleet managers; assuming a well-defined budget, how well a fleet is operating within it, and whether or not the critical aspects of a fleet’s remarketing process (i.e., geographic or individual auctions and resale values) are being monitored.
Mid–level variables to consider might include: route optimization; maintenance costs; vehicle utilization; fuel efficiency; and accident avoidance, which can be viewed on a route, business unit, or driver basis. Depending on the need, vehicle fleet tracking systems can provide comparisons by month, quarter, or year, or by criteria.
Measuring the cost of fuel breaks down as the cost/use ratio of cents per mile and the fuel-efficiency measure of miles/gallon. Ultimately, this metric is more suited to comparing the fuel efficiency of various models within a fleet, rather than the actual cost of fuel. By looking at the cost of each mile, fleet managers can best assess their fleet’s fuel efficiency, and make the appropriate purchasing recommendations. The fuel-cost metric is considered second only to depreciation in measuring fleet efficiency.
Number Three: Accident Frequency and Cost
The accidents-per-million-miles metric provides a window into the fleet safety program’s health. This metric looks at the number of accidents in a given period to determine a benchmark for accident reduction going forward. In a scenario in which 20 percent of a fleet’s vehicles are involved in an accident, and those vehicles travel 48,000 miles in a year, the accident metric would equal 16.6 accidents per million miles driven. One important note to consider is that these metrics must include factors that can be affected by a fleet manager, in order to be truly purposeful.
Costs for accidents will vary depending on the fleet, based on differentiators such as: how well drivers are screened and the fleet’s safe driving practices. Accident costs include:
- Driver and/or passenger injury or death
- Legal fees
- Fines or penalties, in the event of regulatory non-compliance
- Premature equipment repair or retirement
- Bad public and customer relations
- Lost business
- Higher insurance rates
- Downtime and staff reductions (e.g., suspended licenses for at-fault drivers)
- Subrogation recovery
- Third-party damages
- Replacement rentals
An ounce of prevention can mean a settlement of tens or hundreds of thousands versus millions of dollars. For this reason, fleet managers can use fleet tracking systems to monitor how well drivers are adhering to safe driver training and best practices and identify when they are not. By tracking compliance with a fleet’s internal accident management program, and empowering fleet managers to continuously address non-compliance more swiftly and consistently, both the occurrence and the costs of accidents can be dramatically reduced.
Number Four: Depreciation
This fixed cost is the king (largest) of the kingdom and no fleet optimization program can be said to be complete without tracking it. To avoid cherry-picking variables (i.e., percentage of depreciation, cents per mile, gross dollars per month, etc.), a good rule of thumb is to start with a benchmark and track future performance against it. Much like a system restore on a PC, this benchmark can correlate to a historical reference point or the current date.
Whether you opt for a cost/use ratio of dollars per month, or cents per mile (which supports comparisons to other fixed costs), depreciation remains a must-measure metric for managers grappling with the task of optimizing their fleet.
Number Five: Lifecycle Cost
This metric is essentially a 360 degree assessment of variable and fixed costs (expressed as cost/use ratio of cents per mile) and is considered by experienced fleet managers to be the most important cost metric to evaluate. While these costs cannot be completely determined until a vehicle is sold, it is strongly advised that managers use a vehicle fleet tracking system to track them throughout the service of each vehicle.
Either accounting depreciation or lease depreciation reserves are the only variables which can be used to compute lifecycle cost during a vehicle’s service. Once sold, the gain or loss from a vehicle’s sale versus its Blue Book value is compared to derive the actual true lifecycle cost. Combining this cost with the departmental cost completes the picture – showing the cost from acquisition, through usage, and sale of a given vehicle or fleet.
In Conclusion (alternatively: Final Thoughts)
Being a fleet manager carries a substantial degree of responsibility, namely, managing the fleet in a way that maximizes productivity, minimizes expenses, mitigates risk, and adheres to safety best practices. To manage this, fleet managers must be able to see into every aspect of their operations. Take for example, fleet productivity. Fleet managers need to continuously know how well each vehicle is operating and ensure that preventive maintenance is performed routinely and efficiently. Failure to keep each vehicle in optimal condition can generate unnecessary costs (e.g., excessive repair, premature replacement, and, potentially, accidents) that adversely impact the bottom line.
Through monitoring fleet metrics, managers can identify areas of improvement in vehicle and driver performance, review strengths and weaknesses in the customer service funnel, and track compliance with federal safety and usage guidelines for commercial fleets. Monitoring and analyzing the five metrics discussed above can empower fleet managers to field the toughest questions from upper management, customers, and staff, and respond with data that demonstrates that they are not only aware of their concerns, but that they have already taken decisive steps to address them or are capable of doing so.