How To Address Excessive Idling During Peak Summer Months
On top of the expanded fuel costs and environmental harm caused, engine idling also increases wear and tear on engine components and can lead to costly aftertreatment expenses. The more hours an engine is running, the harder the aftertreatment system must work to keep the exhaust clean resulting in faster wear on aftertreatment components.
Advanced Software And Analytics Can Help Audit And Interpret VMRS
Advanced software with maintenance analytics can help organize the entries and interpret the data for better decision-making. The codes themselves are recognized for their brilliance in unifying the ability to communicate service issues.
Hefty Fuels Savings Prompt Fleets To Replace Big Trucks
Fleet Advantage uses software to extract fuel, maintenance and mileage data from a truck’s onboard computer. In a recent study, the company said upgrading from a 2012 to a 2019 sleeper cab model saves $26,687 in annual fuel costs.
There are still fleets today that aren’t leveraging data to see their total cost of ownership (TCO), many can’t use the data because it lives in disparate sources, and others have no way of sharing reports across the organization.
Business Intelligence Tools Monitoring & Analyzing M&R Data Keep Fleet Managers In Check
Over the last twelve to twenty-four months, it seems as though topics such as autonomous driving and ELD mandates have flooded the news headlines for the fleet transportation industry. And deservedly so, these are no doubt topical, important issues. However, in running your fleet day-to-day, understanding the evolution of maintenance and repair (M&R) issues and costs continue to be on top of the level of importance.
“When it comes to fuel economy, all parties involved in a truck’s lifecycle and operation play a role in getting the most out of the fuel tank. Drivers, maintenance and fleet operators included,” says Jim Griffin, chief operating officer and chief technology officer of Fleet Advantage.
How Technology Provides Better Visibility Into Tire Scrap Analysis
The cost of truck tires is significant in fleet operations. Tire programs should consistently analyze tire scraps to learn valuable information on the fleet, as well as identify unnecessary expenses to subpar tire casings
Fleet Survey: Many Fleets Still Not Utilizing Data To Fullest Extent
Fleet Advantage released a survey addressing the gap that remains for today’s fleets in the way they utilize data and business intelligence to run their trucks and fleet operations. The online survey was presented to more than 2,000 fleet executives during April 2019.
Final Rollout Of ELD Rule Means It’s Decision-Making Time For Truck Fleets
Fleets that have been operating on the AOBRD extension for the last two years are now faced with the same decisions that fleets had to make when the ELD mandate was initially put into place: Who do I select as my provider?
A driver still plays a role in mpg and always will, but advancements have made it easier for drivers to allow technology to be the heaviest contributing factor in fuel economy, according to Fleet Advantage.
Fleet Owner recently spoke with Jim Griffin, chief operating officer and chief technology officer at Fleet Advantage, to get another perspective on how drivers affect fuel economy.
Food safety remains at the heart of FSMA with documentation being required for compliance.
The Food Safety Modernization Act (FSMA) was signed into law in January 2011 as a means to give the Food and Drug Administration (FDA) authority to regulate the way food is grown, harvested and processed.
Within FSMA includes regulations specific to the sanitary transportation of farm-to-table food processing. That means motor carriers are specifically held responsible with regards to prevention practices during transportation. These food safety risks include failure to adequately clean vehicles between loads; failure to protect food; and failure to properly refrigerate throughout the trailer. This rule applies to all shippers, loaders, carriers and receivers.
When It Comes To Investing In New Trucks, Listen To The Data
We make a lot of decisions with our gut, but truck lifecycles are complicated, and the decision to invest in new trucks isn’t one that should be made based solely on how you feel about it. While your gut has served you well, your gut can be wrong. Maybe not all of the time, maybe not even most of the time, but some of the time. Fuel efficiency and maintenance costs add up to tell you the truck’s cost per mile, valuable data that can take the emotion out of your decisions and base it on what’s actually happening out on the road.
The Truck As A Service Market Will Register A CAGR of Nearly 22 Percent By 2023
Digital transformation in the trucking industry will be a key factor driving the growth of the market.
The market appears to be concentrated and with the presence of few companies. Factors such as the growth of e-commerce and the digital transformation in the trucking industry will provide considerable growth opportunities to truck-as-a-service manufactures. Daimler AG, Fleet Advantage LLC, Fleet Complete, Trimble Inc., and Volkswagen AG are some of the major companies covered in this report.
A recent Truckload Carriers Association (TCA) panel concluded that to reduce driver turnover, carriers must pay drivers adequately and on time.
While this is no doubt true, the fact that a panel has to point this out would indicate adequate pay and being paid on time is an issue in the industry. To me, this is a sad state of affairs. And we wonder why we have a driver shortage and turnover issue?
Metals Supply Chain Can Choose A Different Method To Combat Long Lead Times For New Trucks And Better Control Costs
Truck procurement has been a key challenge for private fleets, for-hire carriers and establishments that rely on trucking across many industries, including metal fabricators, welding, manufacturing, construction and retail. This challenge has been accentuated by the backlog of orders for Class 8 heavy-duty trucks, stemming mainly from an American economy that has been positive and resilient since the Great Recession ended in 2010, and an outmoded attitude toward truck procurement that is finally changing.
Fleet Advantage Opens Vault To Advanced Data Reporting, Improved Lifecycle Management
Taking its vehicle lifecycle business model another giant leap forward, leasing provider Fleet Advantage is touting its new ATLAAS Unified solution. Built off the original ATLAAS, Unified takes basic per mile cost reporting several steps further, breaking down those costs into useful dashboards that not only help fleets decide how long to keep assets, but helps them better understand the underlying costs of those assets.
Commentary: Bringing Millennials Into the Trucking Industry
Finding good people is probably the most common issue facing every business in the heavy-duty trucking industry right now. With an aging workforce, everyone recognizes the need to have youth injected into our businesses. All of the experience and knowledge our aging workforce has may soon be lost if we cannot find a new pool of talent to cross train and educate. So, what can we do?
How Running Model Year 2020 Trucks Can Help Improve The Bottom Line
Fleet Advantage data shows fleet operators can realize a first-year, per-truck savings of $16,928 when upgrading from a 2015 sleeper model-year truck to a 2020 model. For a fleet of 100 trucks, upgrading to 2020 vehicles can result in savings of as much as $1.7 million.
Are Fleets Heading Toward Electric Trucks? Not So Fast...
Check out the latest article by Fleet Advantage in Heavy Duty Magazine regarding Electric Trucks. In the article, we explain that Diesel is still the power of choice and the recent survey that we administered echoes the same.
Four Truck Trends From 2018 and Whether They Will Continue Into 2019
Fleet Advantage CFO Brian Holland discusses how a shorter lifecycle combined with a lease can help with the backlog situation as well as driver shortage, and accounting benefits of a lease in the current state of economy.
Companies Take a New Approach to Alleviate Truck Order Backlog for 2019
Truck procurement has been a major challenge for many private fleets and for-hire carriers this year. This challenge has been emphasized by the backlog of orders for Class-8 heavy-duty trucks, largely stemming from an American economy that has been healthy and resilient ever since the Great Recession ended in 2010, and a dilapidated industry philosophy toward truck procurement that is now changing.
According to the latest truck orders data, preliminary North American Class-8 orders for August—typically a weak order month—topped the historic records set in July. FTR Transportation Intelligence reported 52,400 units were ordered in August; ACT Research reported Class-8 orders at 53,100.
Instead, today’s leading private fleets and for-hire carriers are taking a different approach.
Truck organizations are now paying closer attention to a truck’s point at which it costs more to operate a truck than it does to replace it with a newer model, called TIIPPINGPOINT. Factors such as the cost of fuel, utilization, finance costs, and M&R, are all factored into arriving at each truck’s unique TIPPINGPOINT, giving fleet operations personnel and finance departments a closer look based on data and analytics into determining and even predicting the optimum time to replace an aging truck.
Just as important, recent changes to the corporate tax rate, as well as new accounting standards, have made it more attractive to lease equipment. With these changes, at least in the case of truck acquisition, purchase of equipment remains costlier compared with shorter-term leasing of the equipment. What’s more, leasing remains the preferred method for companies regardless if they have a stronger or weaker balance sheet. In addition, leasing also allows companies to avoid the risk of residual value and the expense of remarketing.
By adopting this new mindset of shorter truck lifecycles, transportation companies will become better equipped at replacing their aging truck fleets in a more cost-efficient manner heading into 2019.
Fleet Advantage Named Food Logistics Top Software & Tech Provider
Fleet Advantage, an innovator in truck fleet business analytics, equipment financing, and lifecycle cost management was named by Food Logistics as a Top 100 Software and Technology Provider in 2018, the fifth straight year the company has been included in the list. Each year, the FL100+ Top Software and Technology Providers list highlights the top technology companies for the global food and beverage supply chain.
ATLAAS offers comprehensive asset management solutions that include asset optimization, and complete lifecycle management offerings. The software’s recent enhancements – ATLAAS Unified, allow for even more features and functionality for food and beverage providers. ATLAAS Unified now enables private fleets and for-hire carriers to leverage intuitive dashboards instead of complicated spreadsheets and allows users to create their own custom view with the information that interests them most: financial data for CFOs, vehicle performance for fleet managers, and maintenance data for repair personnel.
Since inception, ATLAAS has helped customers save an estimated $75 million, and as a result Fleet Advantage now services 28 of the top 100 private fleets in the country. ATLAAS has over six billion miles of data as part of the company’s tracking and analysis and monitors over 40,000 vehicles offering advantages in benchmarking of operating costs and providing monthly, quarterly and annual fleet reporting for Total Cost of Ownership.
The Food Safety Modernization Act (FSMA) was signed into law in January 2011 as a means to give the Food and Drug Administration (FDA) authority to regulate the way food is grown, harvested and processed.
Within FSMA includes regulations specific to the sanitary transportation of farm-to-table food processing. That means motor carriers are specifically held responsible with regards to prevention practices during transportation. These food safety risks include failure to adequately clean vehicles between loads; failure to protect food; and failure to properly refrigerate throughout the trailer. This rule applies to all shippers, loaders, carriers and receivers.
Food safety remains at the heart of FSMA with documentation being required for compliance. Since documentation is critical, the widespread adoption of recently mandated Electronic Logging Devices (ELD) will help significantly.
By using data analytics, motor carriers can monitor every aspect of data, including FSMA, to help determine the right lifecycle of each truck, compliance and documentation. Doing so, fleets will ensure a stronger compliance record with FSMA, and will realize better bottom line savings that can be utilized for critical business expansion opportunities or driver recruitment programs.
How to eliminate the perception of maintenance as the cost center of fleet operations
Maintaining a fleet of vehicles is a necessary, but expensive undertaking by nature. Oftentimes the maintenance department of an operation can be seen as a “cost center” by the finance team, explains George Williams, CEO of asset management consultant company ReliabilityX. So naturally, when cost cuts come around, the maintenance budget is often a target.
A Fleet Advantage survey confirms that 34 percent of fleet executives believe finance doesn't understand the benefit of investing in newer equipment. Furthermore, 31 percent said finance doesn't understand various operating costs associated with the fleet.
In other words, fleets need to be able to translate their data and ROIs into something that makes sense for the entire operation in order to avoid unreasonable budget cuts.
That can be quite the undertaking for some, especially when data sets aren’t universal across all functions of an operation. Matthew Hendrix, senior director of fleet services at analytics company Fleet Advantage, says miscommunication is common when maintenance and finance are looking at two different - sometimes completely different - indices.
That’s something Fleet Advantage wanted to combat with recent enhancements to their fleet analytics software, ATLAAS Unified, which offers the same data for all functions in a fleet from maintenance, to finance, to operations. While the software’s “dashboard” can be customized by a user to focus on the most relevant data for their position, every function funnels the same data sets.
“If you have 10 mechanics and you predominantly spend an hour longer diagnosing one OEM versus the other, that would be 10 hours a day you could be saving and focusing on preventive maintenance,” Hendrix says. “[ATLAAS] just gives better visibility and dissects the data to a friendly user interface where it’s very easy to be understood.”
Fleet Advantage Survey: 25 percent of Fleets Receiving Below Market Value on Trucks
Fleet Advantage released the second part of its recent annual benchmarking survey, with topics on procurement and disposal of Class-8 heavy-duty trucks for private fleet and for-hire carriers.
According to the survey, the same number of respondents said they pay for their trucks through cash purchase (34 percent) as finance through leasing (34 percent). Equipment acquisition strategies have become a larger area of focus recently, especially with more private fleets and for-hire carriers replacing aging trucks to meet the demand of the economy. According to research firm FTR, North American Class-8 orders for October were 43,000 units, surpassing 40,000 units for a record eighth month in a row.
In addition to the economy, last year’s corporate tax reform has also created more incentive for firms to place orders on new trucks. Fleet Advantage’s benchmarking survey revealed that nearly half of respondents (47 percent) say the recent tax reform and new lease accounting standards are impacting their lease versus purchase decision when acquiring new trucks. The change to the corporate tax rate, now at 21 percent, along with new bonus depreciation rules make leasing more favorable than purchase. Under the new FASB accounting standards, customers with Operating Leases will show a better Return on Assets (ROA), better Return on Invested Capital (ROIC), and better Return on Capital Employed (ROCE).
The majority of survey respondents (37 percent) said they dispose of used equipment through trade-in, followed by wholesale (33 percent). Equipment disposal is a significant part of lifecycle asset management, and an ineffective disposal and replacement strategy can negatively impact an organization’s bottom line on the back end of the deal. One-in-four survey respondents (25 percent) said they are currently receiving below-market value for their used trucks.
“Having access to the right business intelligence, as well as a consultative approach to equipment acquisition can make a world of difference to a company’s bottom line when it comes to equipment disposal,” said Brian Holland, President and Chief Financial Officer of Fleet Advantage. “As evidenced by the heated economy and backlog of truck orders, private fleets and for-hire carriers are more aggressive today in replacing aging trucks. We’re now seeing the effects of having access to this type of business intelligence that is shifting the business philosophy of asset management more toward a lease model.”
Study unveils insight into truck procurement, disposal strategies
Fleet Advantage, Fort Lauderdale, Fla., released the second part of its annual benchmarking survey, with topics on procurement and disposal of Class-8 heavy-duty trucks for private fleet and for-hire carriers.
According to the survey, the same number of respondents said they pay for their trucks through cash purchase (34%) as finance through leasing (34%). Equipment acquisition strategies have become a larger area of focus recently, especially with more private fleets and for-hire carriers replacing aging trucks to meet the demand of the economy.
In addition, last year’s corporate tax reform created more incentive for firms to place orders on new trucks. This survey revealed that nearly half of respondents (47%) say the recent tax reform and new lease accounting standards are impacting their lease vs. purchase decision when acquiring new trucks. The change to the corporate tax rate, now at 21%, along with new bonus depreciation rules make leasing more favorable than purchase.
The majority of survey respondents (37%) said they dispose of used equipment through trade-in, followed by wholesale (33%). And, one in four survey respondents (25%) said they are currently receiving below-market value for their used trucks.
“Having access to the right business intelligence, as well as a consultative approach to equipment acquisition can make a world of difference to a company’s bottom line when it comes to equipment disposal,” says Brian Holland, president and CFO. “As evidenced by the heated economy and backlog of truck orders, private fleets and for-hire carriers are more aggressive today in replacing aging trucks. We’re now seeing the effects of having access to this type of business intelligence that is shifting the business philosophy of asset management more toward a lease model.”
Fleet Advantage announces enhancements to its ATLAAS software
Business analytics company Fleet Advantage equipment financing has announced that it has enhanced its ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software). The company says the newly launched platform, ATLAAS Unified, will reshape the way private fleets and for-hire carriers operate, manage and evaluate fleet costs through several strategic advancements and new solutions.
Fleet Advantage’s ATLAAS software offers asset management solutions that include asset optimization, and complete lifecycle management offerings. Since inception, ATLAAS has helped customers save an estimated $75 million, and as a result Fleet Advantage now services 28 of the top 100 private fleets in the country.
According to Fleet Advantage, the new enhancements in ATLAAS Unified include:
Enables private fleets and for-hire carriers to leverage intuitive dashboards instead of complicated spreadsheets and allows users to create their own custom view with the information that interests them most: financial data for CFOs, vehicle performance for fleet managers, and maintenance data for repair personnel. Clients can now manage their entire fleet utilizing ATLAAS Unified, with views on everything from operational costs, maintenance and repair (M&R) data, replacement vehicle savings, vehicle servicing and histories; and the new platform is now mobile-responsive for on-the-go fleet management. ATLAAS Unified also offers visibility into a truck’s TippingPoint – the point at which a truck reaches economic obsolescence, when it costs more to operate the current vehicle than to replace it with newer equipment. Clients can view a list of vehicles for which they would experience gains to their financial bottom line by disposing of an older truck and replacing with a newer unit. “The innovation behind ATLAAS Unified is important because it delivers to each of our clients a clear competitive advantage in an industry that demands optimum performance on the road and in the board room,” said John Flynn, chief executive officer of Fleet Advantage. “The launch of ATLAAS Unified represents a continuation of our associates’ commitment to excellence, and our dedication to offering the best resources available to private fleets and for-hire carriers.”
Fleet Advantage unveils new enhancements on its ATLAAS solution
Fleet Advantage, the U.S. transportation fleet solution provider has unveiled new enhancements to their ATLAAS software, a solution that has helped fleets better manage their transportation assets and financing. ATLAAS has been in a constant state of flux over the last five years. “It was initially a platform that we put together for our personal needs, because we were looking to understand the performance of the assets while doing lifecycle management,” said Jim Griffin, COO and CTO of Fleet Advantage. “So we needed data to help us understand how those assets were performing, from the fuel economy perspective.
To understand costs better, the company has built integrations in its ATLAAS platform, helping put all the costs into one house. Customers can now operate out of the same data structures, allowing finance to get costs based on the true operational performance. This enhanced version of ATLAAS is now called ATLAAS Unified - symbolizing its extension from being about performance, to now adding costs to the mix.
“We bring costs to the unit level, and also break it down to the cost-per-mile level which you can then aggregate in a variety of different charts and dashboards. From a fleet perspective, that is the biggest functional enhancement we did to the platform - with the addition of all the new data from different sectors of operations and finance,” said Griffin.
Since inception, ATLAAS has helped clients save nearly $75 million, with the company servicing 28 of the top 100 private fleets in the U.S. “We have almost seven billion miles on our database. We are collecting data off 40,000 units a month, and are getting about an additional 100 million miles every month added to the database,” Griffin said. “This allows us to benchmark operating costs within industry verticals and use predictive models to locate the tipping points.”
Fleet Advantage announced it has enhanced its award-winning ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software) with new sophisticated advancements. The newly launched platform - ATLAAS Unified - will reshape the way private fleets and for-hire carriers operate, manage and evaluate fleet costs through several strategic advancements and new solutions.
ATLAAS has helped Fleet Advantage become one of the most disruptive and innovative companies in transportation asset management and financing today, the company said. The software offers comprehensive asset management solutions that include asset optimization, and complete lifecycle management offerings. Since inception, ATLAAS has helped customers save an estimated $75 million, and as a result Fleet Advantage now services 28 of the top 100 private fleets in the country. ATLAAS has over six billion miles of data as part of the company’s tracking and analysis and monitors over 40,000 vehicles offering advantages in benchmarking of operating costs and providing monthly, quarterly and annual fleet reporting for Total Cost of Ownership.
“The innovation behind ATLAAS Unified is important because it delivers to each of our clients a clear competitive advantage in an industry that demands optimum performance on the road and in the board room,” said John Flynn, CEO of Fleet Advantage. “The launch of ATLAAS Unified represents a continuation of our associates’ commitment to excellence, and our dedication to offering the best resources available to private fleets and for-hire carriers.”
How To Lower Truck Maintenance & Repairs Post Natural Disaster
Hurricane Florence, which came ashore in the Carolinas on Sept. 14, will be known for its massive rainfalls, which caused flooding and water damage throughout North Carolina, South Carolina and parts of Virginia. According to reports released by Moody’s Analytics, New York, property damage from the hurricane is expected to total near $22 billion, and that may be on the conservative side.
This type of flooding is damaging not just to homes, businesses and even the lives of local residents, but also causes severe damage and even destruction to heavy-duty trucks, and can cost millions in repair and replacement for truck fleets throughout the region.
The following are some critical maintenance issues to be cognizant of for any truck that’s had proximity to flooded areas:
1. Water intrusion of main components inside the engine, transmission and axles. Unless properly flushed to ensure all water is drained, this can cause catastrophic failures and equate into extended downtime.
2. Corrosion of electrical components, which can cause havoc.
3. Water intrusion in any wheel bearings in the tractor or trailer. Water breaks down the viscosity of the oil, which causes the temperature to rise and wheel bearing failures.
4. Water intrusion into the air brake system. Due to the high humidity from the storm, as the air compressor pumps air into brake systems, it will cause condensation to collect, which will cause the air brake system to malfunction especially, during the winter and fall. Condensation will freeze and cause air flow to decrease, which will in turn cause brake system to lock up.
Optimizing Your Fleet Can Help Alleviate The Wait for New Equipment
As you probably know, the trucking industry is absolutely booming right now and things look to continue this way into next year. It seems like every month a new record is being set by truck orders, trailer orders or both.
This is fantastic news for the industry, but there is a downside for fleets, which comes in the form of an extreme backlog of truck orders. This year’s success has been so overwhelming that truck OEMs can’t make trucks fast enough to meet customer demand. Backlogs are stretching well into 2019. (See the Post Script on page 96 for the numbers).
This could make things difficult if you’re a fleet that needs new trucks soon. If you don’t want to or can’t wait until the backlogs resolve themselves, you will have to get creative. A couple of popular options include opting for used equipment that is only a couple of years old, or going with remanufactured equipment.
Survey reveals fleet operators ranks maintenance & repair as top motivating factor for acquiring new trucks
Fleet Advantage, Fort Lauderdale, Fla., released results of its latest annual benchmarking survey, which takes the pulse of fleet executives on a variety of industry issues. The online survey covered topics such as the outlook for electric and hydrogen fuel-cell trucks, fuel economy trends and how they view maintenance and repair (M&R), safety and driver retention.
According to survey results, 40% of respondents listed M&R as their top motivating factor for acquiring new trucks (topped in the last benchmarking survey as well).
However, the survey shows that costs are not the only concern fleets have regarding maintenance; 26.7% also believe a safe, well-maintained truck is most beneficial in driver recruitment and retention. Compensation ranked higher as most beneficial in driver retention at 50%.
Fuel economy ranked second (36.7%) as a top motivator for truck replacement. This is especially important since 86% said they’ve experienced a consistent increase in fuel economy in model years 2013-2018.
The survey also asked a handful of questions on the topic of electric and hydrogen fuel-cell trucks. Only 4% of respondents said they are currently procuring these types of trucks, and 53% said they either do not see the value nor will they consider the technology for at least another 10 years. Nearly a quarter of respondents (21%) also said they believe electric or hydrogen fuel-cell trucks will never be widely used for over-the-road operations. As for their reasons, 39.4% said they will not consider the technology because of limited fueling or charging station infrastructure; and 33.3% have concerns over the vehicle’s range or fuel economy.
How Flexible Leasing Can Help Truck Technician Shortage and Reduces Maintenance Costs
By Matt Hendrix, CTP
It’s easy for the trucking industry to talk about the driver shortage. We’re accustomed to it, the pain touches virtually every component of the supply chain, and, quite frankly, it’s well-documented.
However, there’s another labor shortage that continues to grow within the trucking industry that’s just as alarming to the overall supply chain, although it’s far deeper in the background of the industry.
Case in point, the shortage of technicians for diesel trucks appeared on the American Transportation Research Institute’s Top Industry Issues Report for 2017. Even though it ranked last among the top 13 challenges listed by survey respondents, it was the first time it made its way into the report1.
The problem with a shortage of technicians is that it adds to an already expensive problem the transportation industry has been grappling with in maintaining and repairing trucks. No doubt, older trucks are far more expensive to repair than newer ones, and there are still far too many fleet executives who continue to operate on legacy, outdated philosophies where they try to drive their trucks as long as possible.
The proof is in the data. Even when you factor in the investment costs associated with a new truck, it costs far less to operate and maintain newer trucks, acquired more frequently, as opposed to maintaining the same trucks over a longer period. This is why leasing is less expensive when looking at the Total Cost of Ownership today.
In a recent analysis of actual fleet truck utilization data comparisons, fleets that adopt a three-year, lease-based truck philosophy realize significant savings. Those that replace their trucks in year four realize a savings of $42,830 in M&R alone, calculated in years four through seven when compared to a fleet driving the same truck for the full seven years. A savings of $17,150 is achieved when comparing a three-year lifecycle to a five-year lifecycle.
Calculate these savings over a fleet of a few hundred trucks, and you can see where this represents millions toward the bottom line.
Data Analytics and the Digital Revolution Help Replace Aging Trucks More Efficiently
Private fleets and for-hire carriers are looking to replace older trucks with newer, more efficient units. However, several factors are forcing longer wait times from OEMs to complete orders for new trucks and move them into service.
by BRIAN HOLLAND
The trucking industry is facing an interesting dilemma as 2018 matures into the second quarter. Many private fleets and for-hire carriers are now looking to replace older trucks with newer, more efficient units. However, several factors are reaching a boiling point forcing longer wait times from Original Equipment Manufacturers (OEMs) to complete orders for new trucks and ultimately move them into service.
Freight volumes are near all-time high levels, particularly as retailers look to restock shelves after a healthy holiday shopping season and online shopping continues its heated pace. According to the Federal Reserve in a report by The Wall Street Journal, industrial production had the largest year-over-year gain since 2010 this past December, meaning there’s more demand to ship goods across the country.
According to ACT Research, sales of Class-8 trucks jumped 59 percent to 296,440 vehicles in 2017. The firm estimated that manufacturers will receive orders for 305,000 Class-8 trucks in 2018, which would be a 19 percent gain. However, transportation intelligence provider, FTR Transportation Intelligence has raised its 2018 production forecast to 330,000 vehicles. Along with the healthy economy, recent changes to the corporate tax rate have incentivized firms further to replace trucks.
Entering 2018, private fleets and for-hire carriers have been forced to keep up with a robust economy, which has meant heavier transportation schedules due to increased online shopping and the transport of goods for other business customers. This healthy economy, combined with the recent changes approved to corporate taxes, means that investments in various types of equipment including trucks are expected to continue to grow.
The start of 2018 has also introduced the dual challenge of requiring that finance leaders deciding whether to lease or buy equipment become familiar with the new lease accounting rules and provisions of the new tax laws as many of these issues are complex. It is important to analyze and understand how these changes may impact their acquisition strategy, balance sheet, financial plan, and tax strategy, and then adjust accordingly to help improve their financial performance.
The report addresses the following:
Differences between leasing and purchasing equipment
Advantages of leasing
Tax Reform key business provisions and implications on truck acquisition
Impact of new FASB accounting standards on acquisition strategies and key provisions
Dispelling leasing acquisition myths
How to structure a lease agreement
International provisions - summary
“Even though we’re seeing a rise in the number of fleets and carriers changing to leasing, there remain a lot of questions regarding leasing and purchasing under the new tax and accounting landscape,” said Brian Holland, President and CFO of Fleet Advantage. “The days of re-procurement based on legacy methodology are long gone, and it’s critical for companies to make the right acquisition strategy to remain competitive in all facets of asset management.”
The changes to the tax law for 2018 as a result of Tax Cuts and Job Act of 2017 have led more fleets to consider vehicle leasing, and many of those are smaller fleets and owner-operators who may have only sought out equipment on the used market previously.
James C. Griffin Jr., COO & CTO of Fleet Advantage, said the company has launched new flexible leasing programs in response to the tax changes to help fleets achieve more balance-sheet benefits. Speaking to FreightWaves at the National Private Truck Council’s conference in Cincinnati this week, Griffin said that previously, fleets could deduct only 50% of the depreciation of their new leased vehicle in the first year, but the tax plan now allows them to deduct the full 100% of the vehicle, even if the lease runs for seven years. The change has altered the way fleet CFOs account for their assets.
“We got ahead of the tax changes and have some new lease products that take advantage of the tax changes,” Griffin said. Leases now hit the balance sheet at “net present value,” he said.
This change is important for a company like Fleet Advantage, which has always pitched its leasing programs as total lifecycle management programs. Griffin said there is a clear uptick in maintenance costs in year 4 of a vehicle and a decline in fuel economy. According to Griffin, fleets can save $42,000 total over a 7-year lifecycle in maintenance and repair costs by trading out their vehicle in year 4. That savings is about $17,000 when trading out at 3 years versus a 5-year lifecycle.
Most Fleet Advantage leases are 5- to 7-year leases to account for a fleet’s budget and monthly expenditures on the cost of those vehicles, but all leases include an “exchange” clause that allows fleets to swap out for newer vehicles any time after 3 years. Griffin said most fleets are around 4 years, which is where the costs start to spike, but each fleet is different.
“We know in years 3 to 4 is when you start to see increased maintenance,” he said. “Our model is about lifecycle management.”
The lifecycle management looks at direct costs only, he said, but even with just fuel and maintenance/repair, the case for shorter leases is compelling.
Adopting Shorter Vehicle Lifecycles Eases Technician Shortage and Reduces Costs
It’s easy for the trucking industry to talk about the driver shortage. We’re accustomed to it, the pain touches virtually every component of the supply chain, and, quite frankly, it’s well-documented.
However, there’s another labor shortage that continues to grow within the trucking industry that’s just as alarming to the overall supply chain, although it’s far deeper in the background of the industry: Technician shortage.
Case in point, the shortage of technicians for diesel trucks appeared on the American Transportation Research Institute’s Top Industry Issues Report for 2017. Even though it ranked last among the top 13 challenges listed by survey respondents, it was the first time it made its way into the report.
The problem with a shortage of technicians is that it adds to an already expensive problem the transportation industry has been grappling with in maintaining and repairing trucks. No doubt, older trucks are far more expensive to repair than newer ones, and there are still far too many fleet executives who continue to operate on legacy, outdated philosophies where they try to drive their trucks as long as possible.
The proof is in the data. Even when you factor in the investment costs associated with a new truck, it costs far less to operate and maintain newer trucks, acquired more frequently, as opposed to maintaining the same trucks over a longer period. This is why leasing is less expensive when looking at the Total Cost of Ownership today.
In a recent analysis of actual fleet truck utilization data comparisons, fleets that adopt a three-year, lease-based truck philosophy realize significant savings. Those that replace their trucks in year four realize a savings of $42,830 in M&R alone, calculated in years four through seven when compared to a fleet driving the same truck for the full seven years. A savings of $17,150 is achieved when comparing a three-year lifecycle to a five-year lifecycle.
Calculate these savings over a fleet of a few hundred trucks, and you can see where this represents millions toward the bottom line.
These cost savings grow even larger when you look beyond the typical M&R expenses that include tires, tubes, liners and valves; preventative maintenance measures; brakes; expendable items; exhaust systems; fuel systems; and more.
The older the truck, the costlier the repairs become. What’s more, technician time becomes more expensive, too, because fleets end up requiring more technician time for service. Consider the breakdown of technician time at the average shop:
Five mechanics working eight hours each day equals 40 hours of time inventory every day, 200 hours a week, and 800 hours a month. Subtracting time off for vacations and sick days, the available inventory of time equals 720 hours a month based on an eight-hour day. Typically, 85% of a technician’s time is spent working on a vehicle. 15% is spent administratively (inputting work performed), retrieving parts, cleaning the work area, and any other activity other than working on a vehicle. Now the inventory of available time to work on vehicles drops from 800 hours to 612 hours a month.
Additionally, the hours required to maintain an aging tractor fleet increases every year. On average, a tractor requires two-and-a-half hours each month to maintain in its first year, compared to year three, which requires four-and-a-half hours each month. Therefore, the demand almost doubles but the supply (Labor Hours) remains the same.
All of these costs eat into the bottom line, not to mention create frustrations for drivers, which then exacerbates the ever-growing driver shortage problem. And for an industry that’s now feeling this growing technician shortage, these costs can quickly escalate out of control, not to mention the cost of replacement trucks that sit idle at times. Fleets that adopt a shorter, lease-based lifecycle asset management philosophy can avoid many of these additional costs and headaches.
From April 1, 2018, all commercial trucks must be equipped with electronic log devices, or ELDs. These electronically tally driving time, more accurately monitoring and enforcing hours behind the wheel and rest periods than do traditional logbooks.
The only exceptions are local carriers, vehicles built before 2000 and those trucks that have automatic onboard recording devices, which are given another 18 months to transition. Drivers caught, face being placed out of service for ten hours and possible fines.
Buoyed by more demand for their services and higher freight rates, many trucking firms are ordering new tractors and trailers. At the same time, some trucking firms are opting to replace their equipment every three to four years, instead of the industry average of seven to eight years. By doing so, companies are “able to significantly reduce the running costs of the asset, and able to introduce newer technologies and safety components,” said Brian Holland, the president and CFO of Fleet Advantage, a Fort Lauderdale, Florida-based data analytics, leasing and private fleet management company. He adds that “having newer trucks helps with driver recruitment, it also helps with a technician shortage.”
On many fronts, the trucking industry is struggling to catch up. Data analytics and onboard technology help ease that struggle. “Innovation changes everything,” said Holland. “As distribution continues to evolve, new equipment, new technology will continue to evolve as well.”
The influence of technology and innovation, including data and analytics, has been among the largest developments in the fleet transportation industry over the last several years. Innovation-driven data and analytics, through advanced technology and reporting platforms, are now completely reshaping the way organizations with private fleets and for-hire carriers run their businesses. This includes a fleet’s asset acquisition and overall lifecycle management strategy.
This is critical today, since private fleets and for-hire carriers continue to deal with many challenges despite a booming economy. Company executives and operators remain focused on areas such as acquisition strategies, rising demand, driver retention, safety regulations, diesel prices and ELDs, to name a few. Each one plays a critical role in an organization’s overall lifecycle management, which can affect everything from employee/driver retention to asset optimization for the bottom line. Transportation organizations are realizing flexible, innovative lease solutions help achieve more optimal lifecycle management practices and help meet targeted financial goals and metrics.
Technology Provides Optics for Procurement Strategies
The varying decisions to operate a fleet and lifecycle management philosophy can greatly affect a firm’s financial metrics and the bottom line. And while acquisition strategies are central to any financial discussion, shaped largely by the decision to lease versus purchase, for example, organizations aren’t just looking at the initial cost of investment. Instead, they are leveraging innovation and analytics to look at their operating costs through new optics such as variable versus fixed costs. Costs such as tires, maintenance, repair and fuel are the variable costs. Interest and lease payments are the fixed costs. Long-term ownership of one asset means an organization has more variable and unpredictable costs to manage, whereas a shorter lease lifecycle of two trucks may cause a slight increase in the initial fixed cost of acquiring the second vehicle, due to higher equipment costs, but is still less expensive over time and makes for easier budgeting.
Innovation, analytics and advanced technology platforms are helping more industry executives change their fundamental business philosophy and move toward a shorter asset lifecycle to lower their total costs utilizing flexible leasing — more innovation steering a new industry path forward.
Innovative Lease Solutions
Technology is shaping leasing solutions, which provide the necessary flexibility to adapt to changing markets and business conditions and allow for replacement or addition of equipment before lease expiration. When leasing, operators can adapt a shorter lifecycle, replacing equipment every three to four years as opposed to running seven- and 10-year lifecycles. This means they are operating newer equipment more frequently, which provides many benefits, including lower total cost of ownership, reduced emissions, safety improvements and better driver retention and recruitment, since drivers prefer to operate newer trucks.
Fleet Advantage published a lease versus purchase study, illustrating the missed opportunity for cost savings when comparing a seven-year ownership of one truck to a four-year ownership and a four-year lease of two consecutive trucks. The analysis showed while there is a slightly higher investment level in lease payments over the seven-year period, the investment is overshadowed by much larger financial losses on the four-year and seven-year ownership in areas such as fuel expenditures, maintenance and repair, tires and financial losses resulting from disposal of the financed trucks.
In fact, the overall financial outlay shows that a four-year lease model would save approximately $27,893 per truck in comparison to the seven-year ownership model because of the aforementioned factors. The lease model even proves to be beneficial when compared to the four-year ownership model, showing savings of $12,710. If you multiply this amount across the fleet, the result is in millions of dollars in savings. This insight is now made possible as innovation, data and analytics allow fleet organizations to treat each individual asset as its own profit center by monitoring utilization and expenses, such as fuel and maintenance on a per-truck basis.
This study was driven by technology, data and analytics. Advanced software platforms have been built for the purpose of aiding smarter decision-making for lifecycle asset management. These platforms serve as a one-stop resource that enables executives to manage their entire fleet operation with a few keystrokes. They leverage sophisticated algorithms which pinpoint each vehicle’s optimum economic lifecycle to identify the point at which it costs more to operate an existing asset compared with replacing it with newer, more efficient equipment and determine an optimum replacement point.
These innovative lease solutions also affect financial performance. Flexible leasing allows companies to keep up-to-date with the latest technology and avoid obsolescence. In many instances, organizations can outsource asset management. Leasing also helps accelerate return on investment, increase return on assets and increase return on capital employed. What’s more, leasing allows companies to benefit from the bundling of hardware, software and services, and companies can customize lease terms to match utilization patterns. This is critical, since a one-size-fits-all approach does not work in transportation strategies.
Innovation Now Drives Vehicle Disposal
Data and analytics have proven to change the way equipment is initially procured today, but it’s also affecting the way trucks are disposed of in the secondary market as well. The used market plays a significant role in the decision to lease versus purchase. Equipment resale is one of the most critical components, particularly as fleets must recover the highest possible value of the asset at the time of disposal or lease expiration. In fact, a 5% gain in used equipment can drastically reduce finance costs throughout the lifecycle of the vehicle. Leasing also helps to eliminate residual risk while providing for higher residual values at the end of the lease term.
Consequentially, the second buyer also benefits by acquiring used but young and well-maintained equipment with a more efficient engine than what’s typically available on the secondary market. This bigger picture effect, driven by innovative and flexible lease solutions, has an exponentially positive impact not only on the costs for the second buyer, who also benefits from lower fuel and maintenance costs, but also on the overall environment as a result of lower emissions.
It is essential for fleets to leverage today’s technology and innovation so they can have an appropriate and effective strategy for equipment acquisition, finance with flexibility to meet changing market conditions and dispose of equipment in a timely and efficient manner to capture the highest resale values and provide a seamless transition to newer equipment.
2018 NACFE Annual Fleet Fuel Study Featuring Data from Fleet Advantage
Annual Fleet Fuel Studies
Data And Tools That Help You Decide Which Technologies Will Help You Save Fuel Dollars
This report contains the results of a deep-dive investigation into the adoption of various products and practices for improving freight efficiency among 20 major North American fleets. This is the sixth annual update of the 2012 inaugural study that has been described as an important read for anyone working in this area. “I look forward to this report and read it each year within days of it being published. It is important to Schneider’s efforts and it can be a critical resource to any fleet or owner/operator as well as manufacturers and others who are working to improve Class 8 efficiency,” offers Rob Reich, Senior Vice President, Equipment, Maintenance & Driver Development, Schneider, Inc. And, each year the report has been published, it has been NACFE’s most downloaded report. The findings of this report should prove invaluable to efforts both to improve the fuel economy of a fleet and to develop and deliver fuel efficiency products to the marketplace.
Something new for this year is a comparison of MPG studies from our friends at NPTC, ATBS and Fleet Advantage. The current trend is for a 1% to 2% increase in MPG every year. This report can help put your fleet on that path too. There is a benchmarking spreadsheet to allow a direct comparison of your fleet to the 20 study fleets as well. In 20 minutes you can show your fleet leader where you stand and what options that you might want to consider. Your chance to impress the boss!
In the age of the Internet of Things (IoT), fleet has an opportunity to gain unprecedented visibility into the operations and actions of drivers and their vehicles, thanks to mobile devices and connected vehicles. But fleet managers are missing a critical component of connectivity, and it’s limiting their ability to deliver cost savings and strategic insights for their organizations.
Researchers at Fleet Advantage published the results of a survey earlier this month, highlighting the disconnect between fleet managers and finance departments under the same corporate roof.
More than a third of fleet management professionals surveyed said they lack the ability to adequately communicate with members of their organizations’ finance departments, preventing them from delivering metrics on fleet spend. With most fleet professionals acknowledging that cost reduction is a top concern for their firms’ finance professionals, a lack of communication on how much fleet departments are spending and saving reveals a fracture in their ability to deliver on those priorities.
The report pointed to a lack of understanding by finance professionals with regards to how fleet may support their cost reduction and cash flow goals. For instance, Fleet Advantage found that finance professionals are unclear about lease-versus-purchase decisions or fleet acquisition strategies, and their impact on the company’s bottom lines. Only a quarter of survey respondents said their finance departments are concerned about these fleet-related spend metrics.
Cheap fuel over the last three years has had its effect: pickups, SUVs, and larger vehicles have been disappearing off dealer lots while smaller, more economical car sales in many cases have languished. Fleets have found truck fuel efficiency technologies harder to justify with slower ROI. Are we on a collision course with fuel prices?
Since last October through April 2018, according to Motus, fuel reached an average of 25.6% of vehicle costs—the highest it'd been since 2015.
On the fleet side, where there are far more miles driven, diesel now accounts for some 61% of the total cost of ownership of a heavy-duty truck, according to Fleet Advantage, a fleet financing and business analytics provider. And that number is also on the rise.
Fleet Advantage's James Griffin Selected As Finalist For SFBJ 2018 Tech Awards
Fleet Advantage, a leading innovator in truck fleet business analytics, equipment financing, and lifecycle cost management announced today its COO and CTO, James Griffin, has been selected as a finalist for the South Florida Business Journal’s 2018 Technology Awards, honoring chief information officers who lead their organizations in delivering business value and innovative use of IT. He is one of three finalists in the category of private companies over $50 million in revenue.
Griffin joined Fleet Advantage as CTO in 2014 and was also appointed COO in 2016. He has built a successful career providing technology leadership development and strategic planning for large-scale technology and informational architectures. Over the last two years Griffin’s efforts have resulted in industry-leading platforms that have enhanced customer value, data security and overall company performance.
Under Griffin’s leadership, Fleet Advantage introduced an award-winning software called ATLAAS, a one-stop resource transportation executives leverage to manage their entire fleet of trucks. ATLAAS is engineered with advanced algorithms that identify each truck’s optimum economic lifecycle – the TIPPINGPOINT®, which is the point at which it costs more to operate an existing asset compared with replacing it with newer, more efficient equipment and determine an optimum replacement point. As a result, Fleet Advantage is able to provide cutting-edge technology tools to its clients allow them to improve productivity, be more environmentally responsible, and save millions in operating costs.
New Generation of Diesel Power Driving 36 Percent of US Commercial Trucks
Adoption of the newest, cleanest diesel truck technology has jumped by 6 percent in one year and now makes up more than one-third of all trucks on the road, with some states having new technology diesel in more than two-thirds of their fleets, says new research from the Diesel Technology Forum (DTF).
“Especially for the largest of trucks, no other fuel matches what the newest generation of diesel technology continues to improve upon: efficient performance, low-emissions, reliability, durability, low-cost operation, and maximum flexibility in utilization, routing and fueling,” said Allen Schaeffer, executive director of the Diesel Technology Forum.
With diesel costs rising and fuel representing 61 percent of total cost of ownership, transportation companies can realize a first-year savings of $26,687 when upgrading from a 2012 sleeper model-year truck to a 2019 model.
This represents a 15.5 percent increase in savings compared with a similar analysis a year ago upgrading to a 2018 model when diesel prices registered $2.57. Based on data analytics from Fleet Advantage’s ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software), these calculations remain a critical part of a fleet’s asset procurement strategy, which includes identifying the TIPPINGPOINT — the point at which a truck reaches economic obsolescence, and costs more to operate than to replace with newer equipment.
Florida Businesses Give Back After Federal Tax Reform
Dozens of business owners, managers and leaders of privately held companies in Florida have given raises and bonuses to their employees, invested in new equipment, hired new employees and enhanced benefit packages as a result of the Tax Cuts & Jobs Act President Donald Trump signed into law last December.
Fort Lauderdale-based Fleet Advantage provided greater options for its customers and helped expand its vehicle leasing operations. Many of its smaller fleets and owner-operators couldn’t afford to use new equipment. Because of tax reform its COO James C. Griffin Jr. said they launched new flexible leasing programs “to help fleets achieve more balance-sheet benefits. Because of the depreciation aspect of the tax plan, the company is now better able to predict planning for its customers.“
“A lot of organizations are looking at this as an opportunity to upgrade their fleets. [And] our model is really starting to resonate, so we’ve seen a huge uptick [in business],” he told Freight Waves News.
The U.S. average retail price of diesel fuel fell 2.8 cents to $3.216 a gallon, the fourth week in a row of declines, according to the weekly report from the U.S. Department of Energy’s Energy Information Administration.
Diesel remains more expensive than a year ago, up 75.1 cents per gallon compared with the same period in 2017.
One way fleets could reduce their diesel fuel costs would be to replace their older sleeper models with 2019 Class 8 trucks, according to Fleet Advantage’s 2018 Truck Lifecycle Data Index.
According to Brian Holland, president and CFO of Fleet Advantage, which provides equipment financing and lifecycle-cost management to fleets, basing the lease vs. buy decision on “functional obsolescence and for how many years trucks can be operated” is outdated.
Instead, he contends fleets should “look at economic obsolescence, which uses data and analytics to determine how many years each individual truck should be operated. We call this the ‘tipping point,’ that point in time where it costs more to maintain and fuel an existing vehicle than it does to replace it with a new, more fuel-efficient model.” Under this approach, a fleet would move to “a shorter asset lifecycle to lower their total costs by utilizing flexible leasing.”
Holland holds that leasing provides the flexibility to run newer equipment more frequently. “That provides many benefits, including lower total cost of ownership, reduced emissions, safety improvements, and better driver retention and recruitment, since drivers prefer to operate newer trucks,” he says.
Specifying and designing your Class 8 trucks for maximum fuel economy, low maintenance and strong resale values can be like walking on a tight-rope. Most fleet operators do business with a local truck dealer. That dealer wants to keep the fleet manager happy and he knows that a happy driver makes for a happy fleet manager. Therefore, the driver has some influence over the spec, including its powertrain and options.
Drivers want to spec a truck for high performance and appearance rather than for fuel efficiency and improved resale value. This conflicts with business models where management requires safe equipment with low operating costs and high resale values. A strong desire to maximize fuel economy is ingrained in both the first buyer and the secondary buyer because fuel represents 70% of a truck’s operating cost.
Based on 100,000 MPY and $3.50 gallon, a 0.2 MPG improvement is worth about $1,500 year. If you specify a truck to satisfy driver performance and preferences, it will result in excessive fuel burn and unnecessary costs that do not add to its resale value.
The larger corporate purchase decision is even more riddled with complexities. The purchasing department wants the lowest “up front” price. After all, their mission is to “buy right”. The finance group’s goal is to take a long depreciation period to lower the fixed monthly charge. Virtually no one other than a smart fleet manager is orchestrating an economic method of managing the depreciation equation by using the correct formula: upfront cost, minus future resale divided by the number of months in service.
See chart on right.
Priorities to enhance residual value: (1) maximize fuel economy (2) complement specs with aluminum wheels and some other resale enhancements (3) cycle the vehicle out of service when mileage is low and residuals can be maximized. Note: a 5% gain in residual value equal to $100 month during its holding period.
As fleet managers asses the trucking industry landscape for 2018, what stands out is a dynamic market that is growing alongside an expanding economy—both domestically and globally—coupled with advancements in technology that promise increased safety, visibility and efficiency.
Like most business obstacles, the other side of the coin usually reveals opportunities. Compliance with the ELD mandate undeniably represents added costs for many carriers, yet there are benefits associated with the investments required to achieve compliance, notes Jim Griffin, chief operations and technology officer at Fleet Advantage.
Not surprisingly, fleets that have been using telematics for a while are in a better position to more quickly comply with the ELD mandate compared to those that have just recently started outfitting their equipment with the technology.
“Introducing telematics into a fleet is initially disruptive and challenging,” acknowledges Griffin. “It impacts behavior, processes, reporting systems, culture and a host of peripheral activities. In fact, the cultural mindset alone might be the most challenging aspect, especially for fleets that are new to telematics.”
“You really need ELD data to make sense of it all,” added Jim Griffin, COO and chief technology officer for Fleet Advantage. “I’ve been telling anyone who will listen not to just look at complying with the ELD mandate itself—that’s shortsighted. Take an extra step and look for systems that can leverage that data [from an ELD] for operational savings going forward. By doing that, you don’t have to buy a new device to gain those capabilities; in other words, you don’t have to buy an ELD twice.”
While many small fleets and drivers decry what many call the “intrusiveness” of collecting and reporting HOS data for all to see via ELDs, Griffin stressed that in reality trucking operators are “driving blind” if they don’t have such data close at hand on a regular basis.
“In today’s world, any business that is not making data-based decisions is not making good decisions,” he emphasized. “This industry tends to move very slowly; but in this case, the regulatory environment is causing it to pick up and push the envelope a little bit.”
How Tax Changes Will Affect New Equipment Strategy & Procurement
Corporations from various industries throughout the United States are ordering new equipment at a faster pace heading into 2018. Business investment overall has been increasing largely because of the American economy, which has continued to remain healthy over the last several years. The economy grew at its fastest pace in more than two years during the third quarter of 2017, expanding at a rate of 3.2%, according to the Commerce Department.
The healthy economy, combined with the recent changes approved to corporate taxes, means that investments in various type of equipment are expected to grow. In the transportation industry, companies with private fleets such as the Sygma Network, Costco and Air Products and dedicated carriers are ordering trucks at an increased pace. The latest figures from ACT Research show that orders for Class-8 trucks surged 62% in October compared with activity from the previous month, and up 167% compared to a year ago.
According to the Equipment Leasing & Finance Association, investments in equipment and software are expected to increase 9.1% in 2018, nearly double that of 2017. Looking ahead, the 2018 Equipment Leasing & Finance U.S. Economic Outlook report expects the economy to grow at a clip of 2.7% in 2018, fueled by the acquisition of equipment such as construction machinery, railroad parts and medical equipment.
Recently approved changes to the corporate tax rate will help to further fuel this activity. Manufacturers alone are expected to save roughly $261 billion during the next decade from the Tax Cuts and Jobs Act of 2017. These savings are poised to spur additional new investments in equipment and workforce particularly.
That being said, finance professionals within these organizations involved in equipment acquisition, specifically for equipment that is advantageous to lease like tractor-trailers, must be cognizant of the new tax cuts and jobs act. The way the financial experts decide to procure this equipment can have a significant impact to their company’s overall business, bottom line and financial performance.
What are the Impending Tax Changes?
The new tax plan contains several provisions that will impact equipment procurement – lower tax rates for businesses, non-deductibility of interest expense for C corporations, limiting like-kind exchanges to real property, and expensing of depreciable assets instead of writing them off over years. The key is to know how these changes may impact a company’s balance sheet, financial plan, and tax strategy, and to adjust accordingly to help improve the company’s financial performance.
How Tax Changes Will Impact Retail, Food Manufacturing and Distribution Organizations with Private Fleets in 2018
Like many industries, America’s foodservice corporations with private fleets are ordering units at an increased pace. The latest figures from ACT Research, Columbus, Ind., show that orders for Class-8 trucks surged 62% in October compared with activity from the previous month, and up 167% compared to a year ago.
That’s why it’s critical for food manufacturing and distribution organizations to replace their aging equipment, especially since the American economy continues to rely heavily on truck deliveries and commercial drivers. According to the Bureau of Transportation Statistics, Washington, D.C., more than $1 of every $10 produced in the U.S. GDP can be directly tied back to transport activity. Also, The American Trucking Association, Arlington, Va., indicates that trucks contain 70% of America’s freight (by weight).
That being said, foodservice organizations must be cognizant of 2018 tax changes because the way they procure their equipment can have a significant impact to their overall business, bottom line and financial performance.
What are the impending tax changes?
The tax plan proposed by the current administration contains several provisions that will impact equipment acquisition – lower tax rates for businesses, non-deductibility of interest expense for C corporations, limiting like-kind exchanges to real property and expensing of depreciable assets instead of writing them off over years. While it’s hard to say how much of this ultimately gets implemented, the key is to know how these changes may impact a company’s balance sheet, financial plan and tax strategy.
In terms of what is being proposed, the corporate tax rate would be cut to 20%, and a proposal to allow for immediate write-off for equipment. For example, bonus depreciation is doubled to 100% and companies can write off the full amount of qualifying purchases in the same year of acquisition, which is intended to spur investment. In addition, used equipment will qualify for bonus depreciation for the first time. Organizations can continue to deduct the cost of leased assets and the tax benefits inherent in tax-advantaged leases get passed along to the leasee through lower pricing. Leasees will also enjoy lower tax rates that will help them expand the business.
This is particularly critical for foodservice organizations, as echoed by Mark Allen, president and CEO of the International Foodservice Distributors Association (IFDA), Washington, D.C., and chair of the Coalition for Fair Effective Tax Rates. In a recent statement, he addresses that wholesaler-distributors are currently taxed at an effective tax rate of 37%, which is significantly higher than many other industries.
What’s more, the overall foodservice industry will benefit from tax cuts, particularly since retailers pay the largest income tax rates out of every industry in the United States, according to Matthew Shay, president of the National Retail Federation, Washington, D.C., in a Washington Post article.
**The Tax Cuts and Jobs Act was passed during the publishing of this article and is therefore not cited in the article.
December 27, 2017
Upgrading to newer trucks more frequently is paying off
Fleet Advantage, a truck fleet business analytics, equipment financing and lifecycle cost management company, released its 2017 Truck Lifecycle Data Index (TLDI) comparing all-in operating costs of early-model Class 8 trucks to 2018 model year (MY) replacements. The TLDI shows significant cost savings when replacing older-model vehicles with 2018 MY trucks.
Working from Fleet Advantage’s Advanced Truck Lifecycle Administrative Analytics Software (ATLAAS), the TLDI shows that fleet operators can realize a first-year per-truck savings of $22,162 when upgrading from a 2012 sleeper MY truck to a 2018 MY, a 17% increase in savings compared with year-ago figures ($19,023) for 2017 model-year upgrades.
A significant portion of these savings can be found in the maintenance costs, Fleet Advantage reported, in addition to the 15% fuel economy improvement—especially considering that the U.S. average retail price of diesel currently sits at $2.915 per gallon, the highest mark in more than two years and 35 cents higher than a year ago.
“Maintenance and repair [M&R] costs increase drastically in years five to eight-—about three and a half times higher than years one through four,” said Michael Spence, senior vice president of fleet services at Fleet Advantage. “When analyzing M&R in the Fleet Advantage Truck Lifecycle Data Index, the M&R cost of a 2012 MY sleeper is $17,315. When comparing this to M&R cost of $1,820 for 2018 MY, that’s more than a $15,000 difference.”
Big ticket maintenance items, according to Spence, include:
Equipment issues combined with warranty expiration—emissions issues such as DPF cleaning or replacement; failing engine components; and brake issues in which costs jump significantly at 250,000 miles.
Fleet Advantage - Truck Cost Savings Continue to Increase Year Over Year
Fleet Advantage published its 2017 Truck Lifecycle Data Index (TLDI) comparing all-in operating costs of early-model Class 8 trucks to 2018 model-year replacements. The TLDI shows significant cost savings when replacing older-model vehicles with 2018 MY trucks.
According to Fleet Advantage’s ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software), the TLDI shows that fleet operators can realize a first-year per-truck savings of $22,162 when upgrading from a 2012 sleeper model-year truck to a 2018 model, a 17% increase in savings compared with year-ago figures ($19,023) for 2017 model-year upgrades. These comparisons are critical in helping fleet operators’ future procurement plans.
Experts Say Fleets Should Prepare for New Lease Accounting Rules
Fleets that lease their trucks should start preparing now for new lease accounting rules that begin taking effect for public companies at the end of next year, accounting professionals and industry experts said.
Private fleets and for-hire carriers are now taking a closer look at how the buy or lease decision can impact their company’s balance sheet, “and how certain equipment lease structures impact their overall financial performance,” added Brian Holland, chief financial officer and president of Fleet Advantage, an asset management and financial services consulting firm.
The decision between leasing or buying new trucks often comes down to dollars and cents, and can have far-reaching effects on a company’s long-term finances, industry experts said.
The choice “is one that can impact an organization’s bottom line not just today but for years to come,” said Brian Holland, chief financial officer and president of Fleet Advantage, which provides asset management, financial services and consulting to clients operating Class 8 truck fleets. “Factor in the need to make this decision on hundreds of trucks, and this decision can impact your bottom line by the millions,” said Holland, who is a member of the board of directors for the Equipment Leasing & Finance Association.
Upcoming Tax Changes May Affect Equipment Acquisition Approach
America’s corporations with private fleets as well as for-hire carriers are ordering units at an increased pace. The latest figures from ACT Research show that orders for Class-8 trucks surged 62% in October compared with activity from the previous month, and up 167% compared to a year ago. An economy that continues to strengthen is adding to this trend, as well as the need to replace aging equipment.
It’s critical for organizations to replace their aging equipment for multiple reasons, especially since the American economy continues to rely heavily on truck deliveries and commercial drivers. According to the Bureau of Transportation Statistics, more than $1 of every $10 produced in the U.S. GDP can be directly tied back to transport activity. Also, The American Trucking Association indicates that trucks contain 70% of America’s freight (by weight).
That being said, organizations must be cognizant of 2018 tax changes because the way they procure their equipment can have a significant impact to their overall business, bottom line and financial performance.
What are the Impending Tax Changes?
The tax plan proposed by the current administration contains several provisions that will impact equipment acquisition – lower tax rates for businesses, non-deductibility of interest expense for C corporations, limiting like-kind exchanges to real property, and expensing of depreciable assets instead of writing them off over years. While it’s hard to say how much of this ultimately gets implemented, the key is to know how these changes may impact a company’s balance sheet, financial plan, and tax strategy, and to adjust accordingly to help improve the company’s financial performance.
Fleet Advantage Secures More Than 80 Million Dollars Q3-17 Origination
Fleet Advantage reported results of its Q3/17 operating cycle, with more than $80 million secured in loan originations during the quarter, as well as onboarding two of the top private fleets in North America in the food distribution and industrial gases sectors.
With the client additions during the third quarter, Fleet Advantage is now servicing 25 of the top 100 truck fleets in the country. ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software), the company’s data analytics software, now has more than five billion miles of data as part of the company’s tracking and analysis.
Both private fleets and for-hire transportation organizations are increasingly relying on data-driven analytics found in fleet studies that offer customized optics into overall truck lifecycle performance, as well as the costs associated with each vehicle. These fleet study analytics address equipment performances including truck lifecycle, utilization, acquisition strategies, spec and residual values with a consultative approach that offers guidance on better fleet optimization. These fleet studies have helped organizations save millions by realizing a more cost-effective way to utilize assets, including remarketing strategies that best-position each vehicle at the end of use.
“Through their comprehensive fleet analytics, Fleet Advantage delivered an innovative modernization plan to manage our truck lifecycles and utilization,” said David Myers, senior vice president of Operations at SYGMA. “Their commitment to perform continuous fleet monitoring and analysis is one of the leading reasons we chose Fleet Advantage. They proved to be a strong partner early on, as they remarketed our previously owned trucks in a timely fashion, which enhanced the value of the equipment.”
The SYGMA Network provides delivery services for some of the largest food chains in the country and is part of the SYSCO Corporation with a fleet size of more than 1,500 vehicles.
Hurricanes Cause Domino Effect On Rates, Capacity And Fuel
Fleet Advantage, a data-driven fleet management solutions provider, says outbound and inbound freight will take weeks, if not months, to get moving again. This will be true for both for-hire and private fleets in Texas and Florida. Companies in the affected areas that had a fleet will have to find other vehicles or sources to move goods or freight if their trucks were damaged.
The shortfall that may occur with oil and refining capabilities will surely create an under capacity situation and fuel prices will likely increase. Demand for capacity and volume drive price. We can expect prices to increase not only on fuel but also on supplies and materials. Production will be affected negatively and other production resources outside of the disaster areas will have to fill in behind the damaged plants. We always counsel our fleet truck partners to pay close attention to fuel and diesel prices, even when prices are low. Diesel can represent a significant portion of operational costs for a truck fleet company, which is why many are now shifting their strategies to a shorter operational lifecycle. This ultimately helps drive down costs not only for the fleet operator, but throughout the supply chain, the Fleet Advantage representative added.
This snaps a stretch of recent gains in recent weeks, due to the impact of Hurricanes Harvey and Irma on freight transportation and logistics operations. From the week of August 28 to the week of September 4 after Harvey hit Texas that week’s average price jumped 15.3 cents to $2.758 per gallon, which at that time was the highest weekly level going back to $2.782 from the week of July 20, 2015 and the largest weekly gain since March 2011.
Analysts at Fleet Advantage, a provider of truck fleet business analytics, equipment financing and asset management, told LM that the shortfall that may occur with oil and refining capabilities, as a result of Harvey, will surely create an under capacity situation and fuel prices will likely increase.
“Capacity and volume demand drive price and volume demand and capacity will likely become unbalanced,” the company said. “We can expect prices to increase not only on fuel but also on supplies and materials. Production will be affected negatively and other production resources outside of the disaster areas will have to fill in behind the damaged plants. We always counsel our fleet truck partners to pay close attention on fuel and diesel prices, even when prices are low. Diesel can represent a significant portion of operational costs for a truck fleet company, which is why many are now shifting their strategies to a shorter operational lifecycle. This ultimately helps drive down costs not only for the fleet operator, but throughout the supply chain.”
How you can benefit from an ELD solution beyond compliance
Come this December, most commercial drivers will need to be using electronic logging devices (ELDs). It is anticipated that approximately three million drivers will be impacted. Like any equipment, your ELD selection is going to be determined by application. It’s important to take a look at your fleet’s needs and see how those align with the ELD mandate. If you think of this as an opportunity rather than a legal obligation, you’ll be able to reap the benefits of the latest technology. And the opportunities go beyond compliance.
“As you go through the implementation process, you soon find that there is a lot of information available at your fingertips,” said Mike Spence, senior vice president, Fleet Services, Fleet Advantage. “You will have direct access to the fuel economy of your vehicles. Then you find that there are certain vehicle operating conditions that create better fuel economy. Those are parameters that you can measure, monitor and, in some cases, change.”
by Brian Holland, president and CFO, Fleet Advantage
A leasing solution provides flexibility to adapt to changing markets and business conditions, and allows for the addition or replacement of equipment prior to lease expiration. Specifically, short-term leases reduce operating costs and allow a fleet operation to take advantage of the continuous vehicle safety improvements, improved fuel economy, and lower maintenance costs. Fleets are seeing the operational savings of shorter life cycles enabled by leasing directly hitting their bottom line, as well as better driver retention, improved corporate image, and overall productivity.
In addition, the new lease-accounting standard instituted by The Financial Accounting Standards Board during 2015 will continue to favor leasing over debt. Under the new rules, all leases, including those used to acquire trucks (with few exceptions), must be shown on the balance sheet as a right-of-use asset and corresponding liability, which in most cases will be less than if the trucks were acquired using debt.
When looking for improved fuel economy, decreased maintenance costs or virtually any other aspect of running an efficient fleet, spec’ing a newer truck will, in nearly every case, improve each of those numbers, according to the results of a recent Fleet Advantage survey. Trucks and equipment are constantly pushing the boundaries of efficiency and, thus, offering more product value than previous generations.
The Fleet Advantage survey found exponential gains year-over-year in both truck turnover and in maintenance concerns with older trucks.
In 2015’s Fleet Advantage survey, 22% of fleets said they were operating their trucks on a three- to five-year lifecycle. That number jumped by an enormous margin this year, all the way to 48%. Twelve percent of these trucks were on a three-year lifecycle, as opposed to zero in 2015, and trucks on a six- to eight-year lifecycle fell from 44% down to 32%. Clearly, an industry-wide movement toward shorter lifecycles is underway.
The shortening of lifecycles also led to an improvement in fuel economy, with the number of fleets saying that they experienced a consistent increase in fuel economy growing from 68% in 2015 to 84% this year.
“Fleets are seeing the operational savings of shorter lifecycles directly hitting their bottom line,” says Brian Holland, president and chief executive officer of Fleet Advantage. “They now have access to data and analytics that can show a larger operational savings when running a three- to five-year lifecycle, as opposed to seven or more years. Running newer, more efficient models is a large reason why a shorter lifecycle saves more money, particularly since fuel is about 60% of operating costs. Newer tractors also require lower service and repair, which improves the bottom line as well.”
Higher interest rates - What they mean for trucking
Late last year, the Federal Reserve approved its second rate increase in a decade, upping the interest rate by a quarter percentage point between 0.5% and 0.75%. So, what does that increase, though seemingly small, mean for private truck fleets and for-hire carriers going forward?
According to Brian Holland, president and CFO of Fleet Advantage, higher interest rates have historically had a negative impact on truck demand as the cost to finance equipment increases. However, the underlying movement in interest rates is tied to an improving economy, he noted.
“The GDP [Gross Domestic Product] numbers increased again, and the stock market is approaching all-time highs,” Holland explained.“These are indicators that businesses will continue to expand and their demand for trucks will increase.”
“Based on Fleet Advantage data analytics, we’ve determined that depreciation and interest represent a smaller percentage (26%) of truck costs compared to fuel (59%) and maintenance and repair (15%) costs,” he added. “By replacing older tractors with new highly efficient units, fuel and maintenance savings easily offset higher interest costs. In fact, a recent analysis of shorter lifecycle practices proves a significant fuel cost savings, particularly on a three-year replacement strategy. And while rates are marginally higher, they are still close to historic lows.”
So, to offset those higher interest costs, Holland recommends businesses evaluate the total cost of their fleet operation.
Your fleet winterization strategy is found in last year’s data
The holiday decorations are in the stores, the days are growing shorter, and unless you’re a New England Patriots fan, your football team is at the bottom of the standings.
Winter is here.
As any driver or fleet manager knows, winter weather and the icy conditions can be hard on trucks. While solid knowledge of equipment can save some downtime this winter, your best defense from Old Man Winter may actually be your fleet data.
Big Data can prevent the big chill
By way of on-board computers (OBCs), today’s trucks are tracking and analyzing many types of data that offers visibility into the performance of a truck. Fleet managers and operators are also relying on third-party analyst teams as a way to squeeze every ounce of performance out of trucks – not to mention profit potential. Afterall, increasing fuel economy and reducing maintenance service and repair downtime can add to a fleet’s bottom line. None of this is possible without the abundance of data now being produced by each truck’s OBC.
With trucks facing harsh elements during the dead of winter, it is important to recognize that OBCs have been tracking these effects over the last few years, with newer-model trucks producing even more data and insight into vehicle performance.
In addition to fuel economy and mile-per-gallon trends, critical data sets such as road speed, top-gear time, idle time, routing and scheduling can all be scrutinized through data and analytics to track performance and efficiency gains or losses when the weather turns colder. The data will also support the initiatives that were correct from the previous selected period and allow for adjustments.
When it comes to being prepared for winter, the keys to the winter game aren’t necessarily all in the garage. Your biggest competitive edge may be right now, when you still have time to review what last winter’s data presented about certain vehicle performance characteristics during certain winter conditions day in and day out.
Past data clears the future path
Looking at data another way, when you go to the store to pick up toys and gifts, last year’s data was scrutinized by the store’s manager in order to set inventory schedules for this upcoming holiday season. By studying and using the data, each store can ensure a better guestimate of how much inventory it will take to get through the holiday season, so that products can be priced appropriately for the largest profit margins. Without last year’s data, a store manager may be stuck with excess product, leading to erosion of profit after the holiday season.
This same theory can apply to fleet managers and operators. By studying last year’s vehicle performance data, you can make the timely adjustments to your truck and routes to ensure success at navigating the harsh weather patterns and possibly minimize time in the garage for service and maintenance. A fleet manager can also discuss past performance with the drivers to commend them or provide instruction for improvement.
by Michael D. Spence, senior vice president of fleet services, CTP, Fleet Advantage
The U.S. Dept. of Transportation (DOT) is proposing a new rule for heavy-duty truck operators that would set a maximum travel speed. The rule is expected to save more than $1 billion in fuel annually as well as improve safety efforts for drivers, trucks, and passengers across the country. The rule, proposed by DOT’s National Highway Traffic Safety Administration (NHTSA) and Federal Motor Carrier Safety Administration (FMCSA), would set important safety standards mandating all new vehicles with a gross weight of more than 26,000 lbs. be equipped with a speed limiter device.
Many fleets are already using speed limiting technology as a way to help manage fuel costs and increase their chances of safer transportation routes. And with advanced technology already embedded into today’s new trucks, leveraging, monitoring and extracting data from the electronic control module is a practice that’s commonplace for many of these fleets leading the industry into the future.
Truck lifecycle comparisons - A picture is worth a thousand words or thousands of dollars
By John Flynn, CEO Fleet Advantage
My whole career has been dedicated to the efficient use and management of transportation assets. It’s a simple formula that starts with properly specifying the asset, then financing it at the lowest price with the least risk, then utilizing it efficiently, maintaining it per the manufacturer’s recommendations, and, when the time is right, disposing of it at the top of the market—whether the market is bullish or bearish. Sometimes, the longer you keep an asset the more valuable it becomes—like a rare gem or bottle of wine. But with other assets, the longer you hold on to them, the more they will cost you—especially if the asset is utilitarian in nature. Transportation assets fall into the latter category.
Since fleet asset management and transportation operational efficiencies are my forte, I have had the opportunity to amass large quantities of data over the last 35 years. At no prior time has managing fleet efficiencies and vehicle lifecycles been as beneficial and rewarding. This in part is credited to the ongoing GHG mandates and OEMs, who are working relentlessly to reach higher levels of quality and performance year-over-year. The comparisons are stark and the savings glaring.
According to the axiom ‘a picture is worth a thousand words’, I thought it would be advantageous to present a visual cost comparison of vehicle lifecycles. These charts show both fuel and maintenance costs for a comparison of vehicle lifecycles ranging from 3-10 years. The savings are on a per-truck basis and take into account both fuel economy improvements in new models and degradation as trucks age.
This visual format makes a strong case for short-term leasing and shows significant reduction in costs and increased efficiencies.
A proposed rule to mandate the use of speed limiting devices on heavy-duty trucks was published in the Federal Register on Sept. 7, 2016, officially opening the 60-day comment period on the rule. The U.S. Department of Transportation (DOT) released the proposed rule Aug. 26, which would require trucks weighing more than 26,000 lbs. to use speed limiting devices (also called speed governors). The DOT did not specify a speed to which trucks should be governed, but did suggest three possibilities: 60 MPH, 65 MPH or 68 MPH. Overall, the proposal offers little in the way of guidance toward what a final version of the rule could look like, and the DOT is mainly looking for feedback from the trucking industry and equipment manufacturers about the technical aspects of requiring speed limiters on new trucks as well as those already on the roads.
What does the ruling mean for new and older vehicles? According to Sandy Rosenfeld, CTP, manager of safety operations for Fleet Advantage, the rule will impact all new trucks in service once passed.
“Because of the significant safety implications involved with speed limiters, this is yet another reason why newer is better when it comes to trucks on the road,” she says. “Speed limiters will help reduce accidents and fatalities/injuries, as well as help improve a fleet’s total cost of ownership, driver retention, and overall air quality in the environment.”
How will the varying proposed speeds impact drivers and trucks? “It depends on where the DOT eventually settles,” Rosenfeld answers.
When it comes to figuring out how to benefit from the fuel economy improvements purportedly being offered by greenhouse gas (GHG) regulations, fleets are finding that a lot of hard-to-calculate factors are involved, especially in terms of driver behavior.
Consider all costs
Consulting firm Fleet Advantage takes all of that a step further with a new data index resource it has compiled. John Rickette, vice president of transaction management, notes the resource compares “all-in” costs of older model-year Class 8 trucks and calculates the savings of new model replacements to help fleets identify the sweet spot for replacement and which specs may add the most cost savings.
That all-in approach means taking into account operating costs related to fuel, finance, maintenance and repair, and tires, he explains.
“When you do that, you are looking for the point in time when a truck becomes economically obsolete,” Rickette says. “There’s always an inflection point, but that also depends on miles driven, type of duty cycle, etc. Roughly between 400,000 and 500,000 mi. is the sweet spot. That is when maintenance and repair costs spike; there’s degradation in fuel economy; resale value spikes; and warranty coverage begins to expire.”
Lifecycle Index Shows Boost from Buying Latest Trucks
Fleet Advantage’s quarterly Truck Lifecycle Data Index shows that in the second quarter of 2016, replacing 2011 model-year trucks with 2017 models will save fleets around $18,861 in the first 12 months of operation.
This is over $700 more in savings over the first quarter numbers, reflecting a 9% increase. Rising fuel prices over the past few months contributed to the increased savings realized by the more fuel efficient 2017 models.
While the biggest benefits are seen by replacing the older models, replacing a 2015 model-year day cab with a 2017 model will still net $5,964 in savings over 12 months. The savings calculations are based on an operation running 100,000 miles per year and were compiled from Fleet Advantage’s’ ATLAAS analytics software.
No matter the cost of fuel, new trucks can still offer savings
Fleets fret a good deal about the cost of fuel, and understandably so — it's one of their biggest and most variable business costs. But regardless of whether diesel prices stay low or even were to spike suddenly, new power units can still save you money.
So says Fort Lauderdale, FL-based truck leasing and business analytics firm Fleet Advantage. "Even though the price of fuel could go up significantly, if it were to do that, a new truck really offsets it because it brings your maintenance costs down to brand-new truck first-year maintenance," contends Mike Spence, the company's senior vice president of fleet services.
Most analysts' and consultants' predictions for the price of oil this year don't herald a fast, dramatic climb upward, to be sure, and neither does Fleet Advantage. "We don't anticipate that diesel is going to go from about $2.40/gal. now to $3.40/gal. anytime soon, but I think we've discovered that the world economy doesn't work very well on $35/bbl crude oil prices," Spence says.
Fleet Advantage Recognized for Sustainability Efforts
Green Fleet Top News
Fleet Advantage Recognized for Sustainability Efforts
Fleet Advantage has been recognized by the Food Logistics Magazine as a “Top Green Provider” for 2016.
The truck fleet business analytics, equipment financing, and lifecycle cost management company was acknowledged as a leader in the sustainable global food supply chain for improving efficiencies and reducing food distribution carbon.
Food Logistics’ annual Top Green Providers list recognizes companies whose products, services, or exemplary leadership is enhancing sustainability within the food and beverage industry.
Fleet Advantage achieved this with the help of Advanced Truck Lifecycle Administrative Software (ATLAAS) and their asset management solutions.
“Having better visibility into the profit and loss of each truck allows our clients to not only improve performance but significantly enhance the social, economic, and environmental sustainability of their fleets,” said Brian Holland, president and CFO of Fleet Advantage. “We are honored to be recognized for our leadership in this area and are excited to continue to provide the highest quality of service to fleets across the country.”
What millennials want: Attracting today’s generation to trucking
Brian McMahon, 28, is a lot like others in his generation. He graduated from college and immediately started an internship. His thought at the time was: Build a resume, learn something new, gain some exposure, and leave after about a year.
But things change, especially when one sees potential.
McMahon, who has a degree in finance, began working as an intern at Fleet Advantage, a Florida-based truck fleet business analytics, equipment financing and lifecycle cost management firm, back in 2010. He was the company’s first intern and is now a full-time financial analyst there. He was hired full-time after serving a year as an intern and worked in operations and pricing before taking on his current position.
Before he signed on as an intern with Fleet Advantage, McMahon said he never really equated trucking with technology and was under the misconception that the industry was antiquated and lacked entrepreneurialism. He soon found out how mistaken he was. And he thinks other millennials might share those same misconceptions.
“It’s not about what attracted me to transportation, but more about why I stayed,” McMahon said. “I believe this is the real message that needs to be communicated to other young professionals who are still deciding where to plant their professional roots.”
A Millennial’s View- Bringing Younger Talent to Trucking Industry
By now, the shortage of incoming talent to the trucking and transportation industry has been well documented. The American Trucking Associations (ATA) is on record saying we’re 35,000 drivers short, and this could grow to about 240,000 by 2020. What’s more, turnover is approaching 97 percent.
However, the talent shortage in the industry goes far beyond just the drivers. While professional commercial truck drivers most certainly drive the American economy, the transportation industry also encompasses fleet executives, managers, technicians, financial experts, analysts and more.
Attracting millennials is key to not only the survival of the industry, but its ability to thrive as the lifeblood of the American economy.
When I graduated from the University of Miami in 2010, I had several career options in finance. An internship with Fleet Advantage opened my eyes to not only the opportunities of working in the transportation industry, but the excitement of the direction of the industry as well.
The electronic logging device mandate might seem to an outsider like a simple change that was desired to improve highway safety and driven into being by the advance of technology. But trucking experts know all too well that implementing the ELD rule, which takes effect in December of next year, to replace paper logs with electronic recordings is not a simple matter of out with the old and in with the new.
Add to the list of hiccups the concern of truck rental and leasing companies that the rule doesn’t address the difficulty in recording and accessing ELD data coming from different technology sources.
“This issue presents a great challenge to truck and lease companies as well as fleets,” says Jim Griffin, chief technology officer for Fleet Advantage, Fort Lauderdale, Fla., which provides business analytics and equipment financing to large private fleets.
He says having to deal with ELD data generated by different devices and platforms makes it essential for fleets “to identify the right telematics partner that has the technology to capture and analyze ELD data from many disparate sources,” including trucks and engines of different makes and vintage.
Fleet Advantage, Fort Lauderdale, Fla. Mike O'Hare joined the business development team, responsible for launching a new business development initiative with finance partners looking to add value to clients in the transportation sector. O'Hare maintains over 30 years of experience in the leasing industry, and was most recently senior vice president at SunTrust Equipment Finance, where he established their vendor vertical sales program. He also has extensive experience providing technology solutions, creating new business opportunities and developing strategic cross-selling initiatives.
Data metrics are, in a way, the new “app.” Need to know your average downtime due to an unplanned service stop? There’s a metric for that. Want to know where your truck is? There’s a metric for that. Do you have an idea for how long your trucks typically idle? There’s a metric for that too. Today’s heavy-duty truck industry is all about tracking, charting and analyzing; one big concern that some fleets are tackling today deals with truck turn-around time.
“The resale market is always one of supply and demand,” said John Rickette, vice president and manager of the transaction team for Fleet Advantage. “The migration from a six to eight year life-cycle to a 36 to 42 month cycle has been generating demand due to the lower associated operating costs, reliability and safety of the later model year vehicles. Resale buyers are now able to purchase relatively low-mileage, pre-owned vehicles that are still under warranty and have been in service only three to four years in the primary market. Using information from the on-board computers, resale buyers have access to the MPG history allowing them to calculate the savings in fuel costs.”
Speed limiter legislation on heavy-duty trucks has been petitioned for by RoadSafe America and the American Trucking Associations for nearly ten years now and has recently been getting a lot of press. The proposal has been slow in coming and will not be published until spring/summer 2016. Under the proposed speed limiter rule, the maximum speed limit for all new and used Class 7 and Class 8 vehicles will be permanently set and limited to 65 mph via the engine’s Electronic Control Unit (ECU).
Getting to GHG Phase 2 - About those speed limiters
The Dept. of Transportation has been planning a heavy truck speed limiter proposal for some time, and meanwhile, speed limiters will be one of the technologies truck makers can tap regarding fuel efficiency under the forthcoming Greenhouse Gas (GHG) Phase 2 rule. But as those regs are hashed out, fleets may not always see eye-to-eye with the federal agencies involved when it comes to GHG Phase 2 tech.
Fuel savings and safety
If you talk to the folks at fleet leasing and business analytics firm Fleet Advantage, they'll tell you they're all for speed limiters for heavy trucks. Stephen Katona, the company's director of purchasing, recalls putting in speed limiters while at a former job managing the logistics division fleet of a major truck rental company.
"We ran 10,000 tractors and trailers. When we hit a spike in fuel and diesel hit $4.00/gal., that's when we started limiting the speed on all of our trucks," he says. "We did it primarily to save fuel back then, but what we noticed was we got safety benefits above and beyond that.
Proper vehicle maintenance is always factored into the safety equation by progressive fleets. But the twin forces of increasing safety regulation and a burgeoning driver shortage are compelling the modern maintenance manager to do nothing less than think, live, and breathe truck safety.
Just the need to rack up a positive score under the federal Carrier, Safety, Accountability safety-monitoring program is impacting how maintenance is managed. CSA measures safety performance by violations. Whether those are compiled by roadside inspections or crash data, the resulting scores are attached to motor carriers and their drivers alike.
“I thought [early on] that CSA was only going to make everybody better at safety,” says Terry Clouser, vice president of fleet service for Fleet Advantage. The longtime fleet maintenance exec now works for the Florida-based firm that provides equipment financing and cost management to large private fleets. “By having someone else — ‘big brother’ — watching over it, everybody’s got to be more compliant and watch their CSA scores. Vehicle maintenance has a direct impact on your overall score and it’s one of the easy ones to regulate.”
New data, analytics tools prompt more fleets to favor leased vehicles
TANK fleets and other companies in the heavy-duty trucking industry continue to deal with many of the same issues it has experienced in recent memory. Company executives and operators remain focused on areas such as driver retention, safety regulations, diesel prices, electronic driver logs, tax law, and total cost of ownership, to name a few. Additionally, industry professionals continue to keep a watchful eye on the broader economy to identify trends that may impact the transportation industry.
One area that links all of these is leasing. There are clear signs that point toward more industry executives changing their business philosophy and moving toward a shorter asset lifecycle to lower their total costs, with leasing as the preferred mode of equipment acquisition.
A new accounting standard instituted during 2015 is expected to continue the movement toward leasing. The Financial Accounting Standards Board (FASB) voted to institute a new standard for reporting lease obligations.
Fleet Advantage congratulates two additional NPTC Certified Transportation Professionals graduates
In accordance with their commitment to the education and development of its staff of industry professionals, Fleet Advantage, a leading innovator in truck fleet business analytics, equipment financing and lifecycle cost management, announced today two additional executive graduates of the 2016 NPTC Certified Transportation Professional (CTP) program.
As CEO of Fleet Advantage and the pioneer of heavy-duty truck lifecycle cost management, John Flynn has established a standard of excellence within the company. “We will continue to cultivate the most knowledgeable and professional staff in the industry to serve our clients. We are equipped to provide our clients with the insights required to guarantee the lowest cost of operations and to make wise decisions regarding their fleet and their business,” he stated.
Fleet Advantage - New data index helps find 'sweet spot' for equipment replacement
Fleet business analytics company Fleet Advantage unveiled its new data index resource designed to compare "all-in" costs of older model year Class 8 trucks and calculate the savings of new model replacements.
"We thought it would be helpful if we released a periodic index so that fleet operators know more about current costs related to replacing equipment — this can help them identify the 'sweet spot'" of when new equipment would save overall costs vs. what fleets are running currently, says John Rickette, vice president of transaction management at Fleet Advantage.
According to Fleet Advantage, "all in" means taking into account operating costs of fuel, finance, maintenance and repair, and tires. The index calculates that companies would save about $18,000 per truck in the first year by upgrading from a 2011 to a 2017 model year day cab or sleeper truck while reducing CO2 emissions by 14%.
The phrase “Business Intelligence” is not new to the corporate world or the fleet transportation industry. However, a surprising number of industry professionals aren’t maximizing Business Intelligence and the real stigma is that it is truly costing companies many millions of dollars in available operating costs.
Business Intelligence is a technology-driven set of data and analytics that turns raw information into actionable insights, so that industry professionals can make educated decisions designed to improve their bottom line. Transportation fleets of all types and sizes have the potential to benefit from Business Intelligence to drive key performance indicators (KPIs) such as fuel spend, vehicle performance, maintenance and repair, amortization and finance expenses, as well as equipment resale opportunities and other critical data that impact the total cost of ownership or the total cost per mile.
Data-driven Business Intelligence provides information from trucks using methods that until recently did not exist. Most importantly, Business Intelligence and analytics present the data in a meaningful way so that fleet managers can take immediate action and use it for predictive modelling and even future budgeting.
Aside from the information gathering process, when implemented effectively, the most advantageous feature of BI is an easy-to-digest, visually appealing and intuitive dashboard of information that helps fleets measure progress against specific benchmarks. The dashboards should display accurate, real-time information critical to measuring the fleet’s success. Instant access to selected KPIs increases efficiencies and reduces time typically spent analyzing a myriad of spreadsheets that have little meaning individually, but in a collective context can help meet corporate goals. More importantly, the ability of the data to tell a story so that fleet executives can easily process and share the information in cohesive reports with multiple stakeholders, enables greater understanding and collaboration within the entire organization.
Where are the fleets missing the mark? There is an old saying, “you can’t manage what you don’t measure”. Business intelligence is a significant part of the paradigm shift taking place in the transportation industry today.
Fleet Advantage recently conducted a survey that was presented to 500 professionals in the fleet industry and 45% stated that they were unsure of the operational savings from the new technologies implemented in their fleet.
The survey also pointed out that nearly a third of executives have not implemented new features such as aerodynamic mirrors and cab extenders because they haven’t processed data that can prove their value. They may have the information, but the data is not giving them a meaningful result, such as Return on Capital Employed (ROCE).
Transportation executives can measure the impact of truck specification changes to the bottom line by properly analyzing outcomes. Although the variety, volume and velocity of data can make it difficult to digest, we now have the means to decipher that data into actionable business intelligence.
Having a method of aggregating the data, appropriate algorithms to determine its effectiveness, and a concise process for capturing and measuring fleet performance and costs makes operating costs much easier to manage. Then it’s an easy calculation to determine the return on equipment investment dollars or capital employed in a form and manner readily understood by the finance stakeholder in their organization. This makes it simpler to access capital for fleet modernization.
Survey - Execs unsure if fleet management technologies result in savings
A recent Fleet Advantage survey of more than 500 fleet executives and managers assessed how private fleets use data-gathering technologies (and what they know of these supports) intended to help them run efficiently and to make informed business decisions. The survey revealed that many industry professionals have no tools to analyze the abundance of data available to them, and 45% of respondents are not sure if such technologies have even resulted in operational savings.
As fleet industry technologies continue to spin out, tools have been enabling companies to manage tasks from creating checklists to ensuring environmental compliance. Specifically in the solid waste management arena there are applications for managers to schedule fleet trash collections. And cameras for monitoring drivers on their routes to determine if they are speeding or otherwise not operating safely.
Trucks, equipped with the latest technologies and features, emit tons of data for fleet managers to sort through – from fuel usage and idling to route tracking and driver behaviors. But when it comes to effectively leveraging that data to run more efficient operations, many fleets may end up feeling they fall short.
A recent Fleet Advantage survey – presented to more than 500 private and transportation fleet executives and managers – shows that 45% of respondents are unsure of operational savings resulting from the implementation of new technologies to heavy-duty trucks in their fleet.
“Ever since the recession ended, the industry has gone full-speed ahead in adopting newer technologies to their trucks that in turn provide access to a wealth of data and intelligence, especially as it relates to fuel economy,” said Mike Spence, senior vice president of fleet services at Fleet Advantage. “Unfortunately, this survey validates that data has become increasingly voluminous, and many industry professionals do not have the tools to analyze and digest this data that can then be used to make critical decisions for their fleet operations.”
Alarming Number of Industry Execs Unaware of CV Cost-Saving Technologies
Fleet Advantage, a provider of truck fleet business analytics, equipment financing and lifecycle cost management, unveiled results of its latest survey showing an alarming percentage of the industry still unaware of the savings achieved by incorporating new fleet technologies.
The online survey, presented to more than 500 private and transportation fleet executives and managers shows that 45 percent of respondents are unsure of operational savings resulting from the implementation of new technologies to heavy duty trucks in their fleet. “Big data” has played a significant role in the industry, but clearly many organizations are unsuccessful in trying to assimilate and quantify operational savings from the information.
While the implementation of the Federal Motor Carrier Safety Administration’s electronic logging device (ELD) rules will usher in significant changes for our industry, there are many potential benefits. Despite the startup costs and learning curves, fleets may be poised to see significant improvements.
“We’ve been focused on helping fleet customers understand the full landscape and impact ELDs will have on their business—specifically why it’s important to take this as an opportunity to implement changes above and beyond satisfying the minimum requirements per the mandate,” says Jim Griffin, chief technology officer at Fleet Advantage. “The value of the additional data that is available and ability to analyze that data to drive bottom-line costs down is significant.
“The new ELD mandate will be a key factor in the decision of which system to choose,” he continues, “but we are advising our customers to look beyond the mandate. With a plethora of options on vendors, applications, features and costs, where do you start? This conversation is where our dialogue begins with our fleet customers.
Budgeting, Forecasting and Knowing ROCE for Truck Fleets
Managing financial performance in today’s complex and rapidly changing business climate is crucial for any fleet executive. To provide insight to management, there is an increased demand for organizations to offer perspective on business trends and key performance indicators. Financial planning, forecasting, and budgeting are critical components that drive business performance and guide strategic decisions. This is generally a time-consuming and inaccurate process for many companies due to flawed analysis or logic. This is especially true in the transportation industry where many managers base their decisions more on anecdotal evidence rather than actual data. New forecasting techniques and access to accurate data on fleet performance are making the forecasting and budgeting process a more accurate and PRECISE tool.
The faster pace of today’s business is rendering traditional budgeting inadequate as companies find that real-time cost assessment and technology advances provide reliable metrics for decision-making. The need for agility is fueling this transition. Companies need to react rapidly to changing regulations, budding innovations, new competition and erratic economic events. A rolling forecast allows companies to predict the impact of these changes, take actions to mitigate unforeseen events, and act quickly when new opportunities arise. To move to a rolling forecast effectively, successful organizations leverage internal and external indicators in their planning and forecasting, which improves results and accuracy.
Finance departments have many different metrics to evaluate because they must formulate a holistic plan rather than just on a departmental level. They typically calculate return-on-investment (ROI) to gauge if an investment is a sound business decision and how it will affect the company as a whole. When approaching Finance for capital needed to keep your transportation fleet operating at peak efficiency and looking its best, the fleet manager must have their I’s dotted and T’s crossed; but they will also be well served knowing the difference between ROI and the return-on-capital-employed (ROCE). This measures profitability against the amount of capital used. A high ROCE indicates a more efficient use of capital and should be higher than the company’s cost of capital or debt. The ROCE trend over the years is an important indicator and measure of overall corporate performance.
Armed with this information, the fleet manager can more readily convince the finance manager that their request is not only an action that will reduce operating costs but is a sound financial decision as well. Consider this simple example of how to use Return On Capital Employed to gain access to capital to upgrade and modernize your fleet:
Assume you have a five-year-old truck that originally cost $100,000 and was depreciated over seven years. Its current book value would be based on the remaining two years with an unamortized balance of $28,000. Also assume its fair market resale value is $28,000.
Next, confirm that a new truck would improve your fuel economy by .8 miles per gallon and reduce maintenance expense by nine cents per mile (year 1 maintenance vs year 6 maintenance) and that the truck is operating 100,000 miles per year. The operating cost reduction would be about $14,000 (fuel $5,000 and maintenance $9,000).
Converting from purchasing the equipment to an operating lease, the company would be taking on a five-year lease payment obligation with a net present value of approximately $90,000. This would be offset by the sale of the old truck at $28,000, leaving a balance of capital employed of $62,000. The year 1 operating savings of $14,000, when compared to the capital employed of $62,000, yields a 22.5% return on capital employed. Approaching the finance department using this perspective gives fleet managers better access to capital and a newer, more productive fleet.
March 21, 2016
Fleet Advantage Hires O’Neil SVP, Business Development
Trip O’Neil has joined Fleet Advantage as senior vice president, business development to its leadership team.
O’Neil has specific expertise in structuring complex finance and service offerings, as well as technology-enabled solutions. He will launch an aggressive effort to expand Fleet Advantage’s footprint in both the private fleet sector and newly expanded for-hire markets, as well as strengthen its business development team.
NASHVILLE. With the shortage of technicians growing more acute by the day, calls are growing for a wholesale overhaul to the recruiting process for this critical industry profession.
“The technician shortage is going to get catastrophically worse,” Doug White, VP of maintenance for national armored car fleet Dunbar Armored and the newly installed general chairman of the Technology & Maintenance Council (TMC), told Fleet Owner.
“Finding and keeping technicians is one of the industry’s biggest challenges today,” noted Terry Clouser, VP of fleet services for leasing company Fleet Advantage, in a separate interview.
New Trucks With Latest Safety Features Dramatically Reduce CSA Violations
Safety is the top priority for motor carriers. Running a safe operation requires thorough knowledge and understanding of the Federal Motor Carrier Safety Administration (FMCSA) regulations. In addition to educating drivers on these regulations, there are specific company fleet safety policies and procedures that must be reviewed; such as the completion of roadside inspection paperwork to ensure that both the fleet and drivers are in compliance with all FMCSA regulations, as well as ongoing driver training on how to operate the equipment and its added safety specifications in the proper manner.
Telematics technology for the trucking industry has been around for decades, but until recent years, the focus on telematics was primarily used for tracking, mapping/route optimization, and dispatching functions. While these are certainly important aspects of fleet management, advances in truck specifications and design and telematics technology are unlocking a whole new level of fleet management. These advancements are changing the industry’s perspective on the definition of fleet management. Specifically, the application and use of the vehicle network and data collected by the Engine Control Module (ECM).
FORT LAUDERDALE. Want to reduce equipment breakdowns and maintenance costs? A shorter vehicle lifecycle might be something to consider.
Mike Spence, senior vice president of fleet services at Fleet Advantage, said maintenance costs for vehicles aged 4-6 are 2.75 times higher than they are in years 1-3. Spence was speaking to clients and attendees at Fleet Advantage’s Changes in Attitudes Fleet Conference in Fort Lauderdale.
“Newer trucks significantly reduce your maintenance costs, but a fleet has to see if that will fit their model,” Spence said. “You’ve got to make sure that you’ve got the data to make the decisions when it comes time to do maintenance.”
Transportation and fleet managers have wrestled for years with the cost versus benefit of incorporating telematics on their trucks. The term telematics derives from the combination of telecommunications and informatics and represents a variety of devices also known as onboard computer systems. Although telematics devices have been around for decades, the percentage of Class 8 tractors outfitted with them ranges between 27% and 40% — percentages that speak volumes about the perceived value of telematics.
New Fleet Advantage software gauges vehicle performance
FORT LAUDERDALE. Fleet Advantage launched its new real-time fleet performance software, ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software) during the company’s conference on technology and safety in Hollywood, FL. According to the company, ATLAAS allows Fleet Advantage customers to gain visibility into the financial performance of class 8 trucks in their fleet.
ATLAAS is a dashboard-driven software that allows private and transportation truck fleets to drill down into specific performance metrics of individual vehicles, or gain visibility into their entire portfolio, Fleet Advantage said. ATLAAS offers a user interface and interactive filters to view a variety of reports and export capabilities.
“With insight from ATLAAS analytics, private and transportation fleets can make more profitable decisions on their equipment to determine the optimal point of financial obsolescence, otherwise known as the ‘tipping point’,” said Jim Griffin, chief technology officer at Fleet Advantage. “Fleet professionals can now leverage this insight to better understand their equipment’s financial position so they can determine if it makes sense to continue operating or replace with newer equipment.”
The Modern Maintenance Manager - Managing Today's Technicians
Everyone knows that today’s technicians need to know how to do much more than turn a wrench. With trucks turning into sophisticated equipment resembling computers on wheels, plus increasing emphasis on uptime, controlling costs, and safety and compliance, it’s an ever-more-demanding job.
“Training is an operating cost you cannot afford not to have,” says Terry Clouser, who spent 27 years with UPS and has provided maintenance consulting to companies such as AAA Cooper and NFI. “Lack of experience and lack of training will cost you more in hourly labor every day than the cost to properly train and educate a good technician.” Clouser is now vice president of fleet services for Fleet Advantage, which offers truck fleet business analytics, equipment financing and lifecycle cost management.
Fleet Advantage LLC has released fleet performance software that helps customers gauge real-time vehicle performance for financial decision making.
The Fort Lauderdale, Fla.-based logistics operator’s ATLAAS (Advanced Truck Lifecycle Administrative Analytics Software), is dashboard-driven business intelligence software that allows operators to gain specific performance metrics of individual vehicles or to gain macro visibility into the fleet’s entire portfolio, according to a news release.
ATLAAS offers an improved user interface and interactive filters to view a variety of reports and export capabilities.
As fleet managers continuously monitor logistics and route data on their vehicles, ATLAAS now provides insight into the vehicle performance data collected by onboard computers.
FORT LAUDERDALE. Driver turnover and retention continue to be the top challenges for fleets across the country. Within private fleets, however, the problem doesn’t seem as bleak.
Tom Moore, senior vice president of the National Private Truck Council (NPTC), told attendees at last week’s Fleet Advantage Changes in Attitudes Fleet Safety and Technology Conference that private fleets have only a 14% driver turnover rate. Compare that to the 100% annualized turnover rate at large truckload carriers – according to 2015 third quarter data from ATA.
Industry-wide, not only are fleets dealing with an aging driver workforce – potentially leading to more workers’ compensation issues – Moore explained, but 70% of drivers are leaving due to disciplinary problems. “To me, that number shouldn’t even be on the table,” he said. “We’re hiring our own problem.”
How one fleet saved millions by managing its assets
FORT LAUDERDALE. One way to cut costs in the trucking industry these days is to take a "disciplined" approach to managing truck turnover and utilization. That's the lesson Air Products and Chemicals learned three years ago, and since then, Air Products reports it saved millions of dollars in operating expenses.
According to strategic sourcing manager Tim Tulio, the company runs about 55 million miles a year in North America and consumes nearly 10.5 million gallons of diesel a year. As is the case in most – if not all fleets – Air Products’ top costs are fuel, tires, and unplanned maintenance.
Air Products, which provides atmospheric and process gases and related equipment to manufacturing markets, operates a fleet comprising 500 day tractors, 100 sleep tractors, 85 micro-bulk tanker units, 2,000 tractors, and 400 light-duty pickup trucks.
During Fleet Advantage’s inaugural conference Changes in Attitude here in Fort Lauderdale, FL, Tulio explained how it tapped data collected and analyzed by Fleet Advantage to improve asset management whiled calculating a lifecycle cost plan for its vehicles.
A long-awaited final rule on electronic logging devices (ELDs) from the US Federal Motor Carrier Safety Administration (FMCSA) will force truckers in the US – including the estimated 140,000 Canadian drivers who operate there – to modernize how they track and present their hours of work.
Released on Dec. 10, 2015, the hefty 516-page final rule outlines extensive technical requirements that must be met by ELD manufacturers before their systems are accepted by the FMCSA. Requiring drivers to transition from paper to electronic logs will improve compliance and simplify enforcement, according to US Transportation Secretary Anthony Foxx.
Griffin warns fleets may struggle with how to manage and coordinate the data generated by disparate ELD sources. Every ELD presents data differently, Griffin noted, and fleets could find themselves having to become familiar with many different platforms as they encounter systems from a wide range of suppliers through acquisitions, pre-equipped leased trucks, the purchase of pre-equipped used trucks or the signing-on of owner/operators.
Five years and counting since its rollout, the federal Compliance, Safety, Accountability safety-monitoring initiative continues to bedevil fleet managers.
In the abstract sense, CSA is a complicated structure. Its methodology seeks to bring various disparate facts together to draw an accurate — and actionable — picture of the moving target that is the nation’s motor carriers at work.
Certainly, technology can be an important tool to help improve your safety scores. Yet the majority of fleets have been slow to adopt such systems.
“Although telematics devices have been around for decades, the range for Class 8 tractors outfitted with telematics is approximately 27 to 40%. That speaks volumes about the perceived value of telematics,” says Jim Griffin, chief technology officer for Fort Lauderdale, Fla.-based Fleet Advantage, which provides equipment financing and lifecycle-cost management to large private fleets.
Resistance to telematics is understandable, given the dizzying array of solutions on the market. “Amid the overload of telematics applications, hardware and services available, deciding on the range of system functionality and associated costs can be overwhelming,” Griffin says.
To put the chart above in perspective, 2014’s average diesel price was $3.86 per gallon, while 2015 came in at $2.74, an average savings of $1.14. For a truck that uses 3,000 gallon, for example, that’s a total savings of $3,370. For an average-sized fleet of 100 trucks, that’s a staggering $333,700 savings, and for very large fleets, it could be exponentially higher.
So why did this occur? There are a number of reasons, as outlined by Mike Spence, senior vice president of fleet services for Fleet Advantage.
“Efficiency from newer vehicles and newer engines has been holding supply and demand in check,” Spence explains. “Another reason would be increased competition with different sources of fuel, such as natural gas, which kept prices at a lower level than everyone expected them to be.”
Spence also points out that some of the changes simply come from price trends returning to normal.
“Historically, diesel fuel and gasoline have trended together. That kind of got out of sync over the past two or three years, but over the past few months they’ve gotten back on the same path.”
It may be a better time than you think to buy a used truck, and there are more options than ever out there. For one thing, “Money’s still cheap,” says Mike Spence, senior vice president, fleet services, for Fleet Advantage, a leasing and asset management and consulting company that also sells used trucks.
Notwithstanding the recent Fed rate hike, interest rates are still at historic lows. And while prices of today’s complex, low-emissions new trucks have soared, depreciated used trucks are affordable and can be nearly as reliable. Supplies are growing and prices are coming down as thousands of 3- to 5-year-old trucks are coming into the market.
“Rates are as low as 3 to 6%, depending on your credit,” says Mike Spence at Fleet Advantage. “Others are 8, 9, 10%. A quarter-point shouldn’t deter anyone from moving up to a newer vehicle, especially these new, fuel-efficient vehicles. A one-quarter percent hike on a $70,000 to $90,000 loan is going to add only 20 to 30 bucks a month. And if you go from a 2008 to a 2013 or ’14 tractor, you’re going to bump your fuel economy by a half a mile per gallon. You’re looking at saving $4,000 a year in fuel, and there’s $350 to $375 a month.”
Bonus Depreciation Means Lower Payments for Leased Fleets
On December 18, 2015, the President signed the "Protecting Americans from Tax Hikes Act of 2015" (PATH Act) passed by Congress. While the PATH Act has far reaching benefits for consumers and business, there are special advantages to fleet owners. For the first time in many years, the government extended these tax breaks for several years which will allow businesses to plan ahead and capture these valuable tax benefits.
For the smaller fleet owner that purchases or finances equipment, Section 179 of the IRS tax code can be very helpful. It is a great tax savings tool as it allows you to deduct the 100% of the purchase price of your equipment from your gross income, up to a limit of $500,000 annually for the years 2015, 2016 and 2017. This benefit is targeted to the small business owner as it is phased out on a dollar-for-dollar basis beginning at $2 million in annual qualifying equipment purchases and is completely eliminated above $2.5 million. Section 179 was extended permanently (or at least until further notice).
Fleet Advantage recently conducted a survey designed to take the pulse of truck fleet managers on topics that included equipment acquisition and disposition. The survey produced puzzling outcomes. While 70% of fleet operators reported a consistent increase in fuel economy for truck model years 2011–2015, and fuel economy, maintenance and repair expenses ranked highest as motivating factors for equipment replacement, most continue to operate trucks an average of seven years before replacing them with new, more fuel efficient models.
“Fleet operators realize they can improve fuel economy and lower operating costs with newer equipment, since 80% responded that they are aware of federal regulations that require new models to increase their fuel efficiency,” said Brian Holland, president of Fleet Advantage. “Fleet managers also know that maintenance and repair costs on new models are a fraction of the costs of a four- to seven-year-old truck, yet they continue to operate older, less efficient models. So what’s driving this contradiction?
“The answer to that question is saving our clients millions of dollars in operating costs annually,” he continued. “Because certain concepts and beliefs are entrenched within every organization, some fleet managers are under the misconception that switching to a three- to four-year lifecycle will increase operating costs. Understanding the difference between a truck’s functional and economic obsolescence alleviates that concern.”
Four Steps to Access Capital Approval for Modernizing Your Fleet
The transportation group of any company is operationally intensive. Their mission is to get the product delivered on time and safely. Although most transportation managers recognize new equipment is a key factor in equipment reliability, driver satisfaction and on-time deliveries, they are often challenged by competing departments when it comes time to access capital. CFOs typically allocate capital based on its potential to grow the company or by its return on investment. Although it is challenging for the transportation group to demonstrate how new trucks can contribute to the growth of the company, it is not difficult to calculate the return on investment. However, it requires a financial analysis that is familiar to finance.
There are four steps necessary to calculate an appropriate return on investment and although not easy, it is well worth the time and effort as the results demonstrate a rapid return on investment.
Benchmark your fleet by completing a fleet study. This should be in the form of a spreadsheet that contains the following:
Current equipment model year
Prior 12-month mileage, maintenance and repair costs
Five ways newer trucks can impact safety and improve the bottom line
Safety is the top priority for motor carriers. Running a safe operation requires thorough knowledge and understanding of the Federal Motor Carrier Safety Administration (FMCSA) regulations.
In addition to educating drivers on these regulations, there are specific company fleet safety policies and procedures that must be reviewed. This includes the completion of vehicle inspection paperwork to insure that both the fleet and drivers are in compliance with all FMCSA regulations, as well as ongoing driver training on how to operate the vehicles and any added safety equipment or technology in the proper manner.
Ultimately, though, equipment may be having the most profound impact on driver safety, as newer fleets equipped with the latest technologies are experiencing a dramatic reduction in highway violations and accidents.
Rather, according to a cross-section of technology providers, view the ELD final rule as an opportunity to gain critical benefits – especially in terms of data that can ultimately generate significant costs savings for any size of trucking operation.
Yet those fleets in need of adopting ELDs need to view the now-imposed mandate to install them as an “opportunity” to generate major cost savings for their operations, stressed Jim Griffin, chief technology officer with truck-leasing provider Fleet Advantage.
“If you don’t view this [mandate] as an opportunity, you are being short-sighted,” he explained to Fleet Owner.
Everyone knows operating tractor-trailers during the winter comes with some big risks. But did you know that, on average 467 fatalities are associated with icy driving conditions annually, or that 23% of all vehicle crashes every year – some 1.3 million – are caused in part by inclement weather, such as rain, sleet, snow, fog, and wind? (Those weather-related findings are courtesy Federal Highway Administration research, by the way).
On top of that, cold weather can cause diesel fuel to thicken into “gel” or get waterlogged, potentially damaging a truck’s fuel system and engine. Colder temperatures also affect fuel economy, too, by increasing tire rolling resistance and reducing aerodynamic efficiency, to name just two impacts.
Michael Spence, senior VP of fleet services at Fleet Advantage, recently penned a white paper delving into how winter weather can impact commercial truck operations.
“Many transportation routes run north and south,” he explained. “This means that trucks originating in the south also need to winterize their fuel since they may be traveling up north. Many times, those drivers aren’t thinking of how the weather can affect them since they’re starting out in a warmer climate.”
To Spence’s mind, those types of conversations ultimately come back to the kinds of data fleets record and analyze.
“Whether it’s having data to identify your fuel costs and fuel efficiency, or data on what type of weather you will be experiencing on your route, it’s important for fleets today to have access to the right business intelligence,” he stressed. “That way, they can make the right decisions to keep their drivers safe and productive, while also maximizing cost efficiencies for the entire fleet.”
Thanks to a combination of government regulations and market pressures, operating trucks safely has never been more mutually beneficial to fleets and drivers.
Along with promoting a culture of safety in general and providing specific ongoing training and feedback on safe driving, a fleet can have a powerful impact on a driver’s safety performance by how its approaches vehicle maintenance. That, in turn, can make the fleet the kind of employer that drivers want to work for and keep working for.
“CSA has increased the need to have more reliable equipment and to make that commitment visible to drivers,” says Mike Spence, senior vice president, fleet services for Fleet Advantage, Fort Lauderdale, Fla., which provides financing and cost management to private fleets. “That’s helped lead to shorter trade cycles. It’s a business model based on staying up with technology.
“When we talk with customers that have converted to newer trucks,” he continues, “they report that equipment complaints from drivers have melted away. This approach boosts fuel economy, reduces maintenance expenses and increases the likelihood drivers will stay with the fleet. By keeping CSA scores low, fleets are protecting their drivers, too.”
Since the formation of the US Environmental Production Agency (EPA) and the passing of the Clean Air Act in 1970, the transportation industry has faced considerable scrutiny. Manufacturers, end users, and environmental advocates alike have pursued solutions for better fuel economy and tools to cut transportation emissions. When the government passed the Clean Air Act Amendments in 1990, the EPA’s spotlight fell on heavy-duty trucking.
According to US government statistics, Class-8 trucks today represent the second-largest source of greenhouse gas (GHG) emissions. In fact, in 2010, heavy-duty vehicles composed just 4 percent of registered vehicles on US roads but accounted for roughly 25 percent of on-road fuel use and GHG emissions. The heavy-duty transportation sector first responded by focusing on reducing emissions harmful to human health. Selective catalytic reduction, diesel particulate filters, ultra-low sulfur diesel, and new engine technologies have made contributions to clean-diesel trucks and reduced their emissions by approximately 96 percent compared with 1990 models. However, clean-diesel technology had a few downsides: higher equipment and maintenance costs and a decrease in fuel economy over pre-emissions trucks.
Yet there still is a long way to go. The EPA reports that heavy-duty truck emissions have increased by 30 percent since 1990, and these emissions are expected to grow another 20 percent throughout the next 20 years. Furthermore, nearly one-third of all GHG emissions in the United States are a result of transportation sources.
New government programs and mandates are advancing the transportation industry. In 2003, for instance, the EPA introduced the SmartWay Transport Partnership Program, which focuses on sustainability initiatives. SmartWay presents opportunities to optimize transportation networks through policy options, partnerships, and education. The program’s 2,900 member companies leverage reporting opportunities to communicate sustainability advancements throughout their transportation organizations.
SmartWay’s approach is highlighted by a six-point strategy:
Reduce the national speed limit to 65 miles per hour for all vehicles, and install truck governors to limit fuel consumption.
Increase fuel efficiency by encouraging participation in the US EPA SmartWay Transport Partnership Program.
Reduce congestion by improving highways—if necessary, by raising the fuel tax.
Use more productive truck combinations.
Support national fuel-economy standards for medium- and heavy-duty trucks.
Although SmartWay’s guidelines move the industry in the right direction, even more can be done to achieve greater ecological and financial impact.
Tips for transportation professionals
If the transportation industry wants to take a more active role in reducing GHG emissions, distribution companies will need to acknowledge their roles and responsibilities in enacting new measures within their organizations—beyond government mandates and low-hanging fruit. Manufacturers have been investing millions of dollars in research and development to increase fuel efficiency in new models. This, plus the reduced emissions, has the added benefit of cutting operating costs and is a common-sense strategy. However, most companies do not have the budget, analytical expertise, clean data, or time it takes to implement a process that continually incorporates new fuel economy technologies and forms long-term emissions reduction strategies.
Understanding the financial impact of integrating never-before-available technologies that continually increase fuel efficiency and reduce emissions is critical. Some fleet managers are choosing to transform their distribution operations from a support function to a competitive differentiator with quantifiable revenue-enhancement strategies aligned with corporate goals. By using these technologies and incorporating advanced analytics to monitor fuel burn, they also reduce emissions, optimize efficiencies, increase reliability and customer satisfaction, enhance fleet safety, and eliminate wasteful spending.
To incorporate these eco-friendly technologies in your operation, measurement comes first. Start with a baseline of where you are today by calculating your true operating costs. Exclusive of driver pay and benefits, the areas to focus on are fuel, maintenance, and finance expenses, as well as the monthly cost of new trucks equipped with these technologies. Note that the actual price of new equipment does not enter into the equation—it’s not what you pay for the equipment that matters, but the cost you pay per month.
Advantage is gained by being smarter and faster than your competitors. Data supports the fact that cycling out your trucks earlier (between three to four years rather than five years, seven years, or even longer) is saving fleets millions of dollars annually in operating costs and reducing emissions of both the primary and secondary users of the equipment. In other words, operate your trucks only to the point of economic obsolescence rather than functional obsolescence—the tipping point when truck maintenance and fuel expenses are greater than the cost of a new, more fuel-efficient model. Shortening your vehicles' life cycles is the single-most-ecological and economical action a fleet manager can take to reduce emissions and control and predict operating costs.
Flexible equipment lease financing also is gaining popularity instead of traditional purchase strategy, which is testament to the environmental, economic, and social benefits that a shorter vehicle life cycle provides. A well-planned lease structure tailored to your operation’s use enables operators to seamlessly exchange older models for newer, more efficient ones—reducing millions of metric tons of carbon dioxide annually and all at a reduced monthly cost. As they turn their attention to lightweight components, parasitic drag loss, and trailer efficiencies, government mandates to further reduce emission via improved fuel economy will increase the demand for the flexibility that a lease-finance solution provides for both the tractor and the trailer.
The transportation industry’s focus on sustainability will continue to be front and center for many years to come. With access to advanced data and analytics that track vehicle performance metrics, fleet companies can improve their sustainability strategies and bottom lines. As the future becomes reality, companies with clear knowledge of their costs, resources, and key usage data will benefit from these sustainability efforts and gain the competitive advantage.
Fran Flynn is vice president of sustainability, marketing, and community relations for Fleet Advantage, a truck fleet business analytics, equipment financing, and life cycle cost management provider. She may be contacted at email@example.com.
November 19, 2015
Prepping trucks, trucking, and roads for Old Man Winter
Thus it’s high time to examine some of the ongoing winter preparatory activities across the transportation spectrum.
Then go check out the recent white paper penned by Michael Spence, senior VP of fleet services at Fleet Advantage, concerning how winter weather can impact commercial truck operations. For example:
Cooler ambient temperatures decrease engine efficiency and increase aerodynamic drag, with every 10 degree drop in Fahrenheit equating to a 2% increase in aerodynamic drag.
Tires lose pressure as temperatures drop and rolling resistance increases, thus reducing fuel economy.
Rain, snow and slush all increase tire rolling resistance as well, with cold water significantly cooling tires plus transmission and rear axle lubricants. This results in a 0.2 to 0.3 MPG loss as cited by the Society of Automotive Engineers (SAE) data.
Headwinds/crosswinds impact MPG as well, with every 10 mph worth of wind equating to a 13% drop in MPG.
Engine idle time increases in the winter months as drivers seek to stay warm, while poor driving conditions brought on by the cold and snow lead to decreased use of cruise control.
DSRC and ITS - The Acronyms Behind Life Saving Technologies
He was driving on the Long Island Expressway on Thursday July 16, 1981 traveling in the left lane at approximately 65 mph. For some unknown reason he engaged the emergency flashers near Exit 40 in Jericho, NY. He slowed to about 15 miles an hour and veered into the center lane. Nearly colliding with another vehicle, he swerved back left, then back right. But this time he swerved directly in front of a Supermarkets General tractor-trailer truck. The driver could not brake in time and rammed the rear end of the blue 1975 VW Rabbit, rupturing the gas tank and causing it to burst into flames. Unfortunately, the truck that ended the life of singer/songwriter Harry Chapin was one that I had leased to Supermarkets General. That incident began my advocacy for safety specifications in the equipment we lease.
Today, new technology offers solutions. DSRC, the acronym for Dedicated Short Range Communications, is a two-way, short-to-medium wireless communications capability in transportation vehicles. The Federal Communications Commission allocated 75 MHz of spectrum in the 5.9 GHz band for use by Intelligent Transportation Systems (ITS).
The recent organizational restructuring of Crestwood LP’s transportation services division signals a major expansion for the company’s tank truck transportation and logistics services. The newly formed Crestwood Transportation LLC is a wholly owned subsidiary of Crestwood Midstream LP. Crestwood Transportation identified an opportunity in the $20-billion petroleum-related tank truck transportation sector to strengthen its footprint as a full-service logistics solution provider.
Fleet Advantage has joined Crestwood Transportation as a strategic partner providing leasing services for trailers and power units. In addition, Fleet Advantage will provide expertise in using data analytics to manage large private fleets. All transportation equipment includes electronic on-board recorders (EOBRs), which will allow Crestwood Transportation to track the operational effectiveness of its fleets. Capturing and organizing operating data and combining it with an understanding of the marketplace provides efficiencies that ultimately lower costs. Fleet Advantage has provided significant savings for its clients as a result of data-driven fleet management solutions.
Why trucks are one step closer to automatic brakes
Automatic emergency braking (one of various names for the systems) uses radar, lasers, and cameras to see as far as 650 feet in front of a truck—about three times the typical follow distance on highways. They first signal a driver of upcoming obstacles, and then, if the driver doesn’t react, will slow or stop the vehicle. The technology has been available for nearly a decade, and is already in service in tens of thousands of trucks across the U.S. and Europe.
The NHTSA’s acceptance of the petition is “a significant step forward,” according to Clarence Ditlow, director of the Center for Auto Safety. CAS joined with other safety groups to petition for the rule.
There are still several stages left in the process, but many in the industry think the rule will eventually go into effect. “It’s just a matter of when,” says industry veteran John Flynn, CEO of fleet management provider Fleet Advantage. The systems are already scheduled to become mandatory on many new commercial trucks in the European Union starting Nov. 1.
Flynn also points out that the life cycles of large trucks have gotten much shorter in recent years, thanks in part to steadily rising fuel economy standards. That means the new safety technology would penetrate the commercial fleet quickly once a rule is enacted.
Hauling dry vans down the highway offers plenty of opportunity to reduce fuel usage. But if your cargo is something less boxy, say automobiles, your aerodynamic options are more limited.
That’s the predicament in which Toyota Transport, part of Toyota Logistics Services, found itself. The fleet, with about 120 drivers and 91 tractors, moves Toyota, Lexus and Scion automobiles for Toyota Motor Corp. throughout the West Coast (it is on pace to transport 400,000 vehicles this year) from locations in Southern and Northern California; Portland, OR; and Phoenix, AZ.
Looking to reduce fleet emissions and improve fuel economy, Toyota Transport turned to Fleet Advantage. The lessor made a compelling case when it came to shorter lease cycles and newer equipment, but the additional advantages available from advanced driver and vehicle data sealed the deal.
“It came time to replace the trucks, and we looked at a number of leasing options,” says Kirk Welch, safety and compliance manager. “We found out about some of [Fleet Advantage’s] benefits. We started out with a five-year lifecycle with them, but they gave us an option to look at a three-year term.”
I have been fascinated with two things my entire life—trucks and mathematics. More specifically, mathematical statistics, comparative analytics and benchmarking metrics. With the volume, variety and velocity of data now being produced in the trucking industry, I feel like a kid in a candy store. Data is the bedrock of productivity, performance, and cost reduction. However collecting the data is fruitless if you are not using the correct metrics to analyze it. The variety and relevance of data is opening our eyes to new connections and different factors that until recently were not even a blip on a fleet manager’s radar—or mine for that matter.
Take MPG for example. For years fleet managers used the metric of overall MPG to measure their fuel expense, a metric that is equally useful in calculating your total operating cost, forecasting your budgets and rating drivers in a leaderboard analysis. Often referred to as an activity metric, many fleet managers conclude their analysis here because historically that was all that they needed.
Over a quarter of large fleets said that data analysis is reducing operating costs by $4,000 annually per truck, according to a recent survey by Fleet Advantage. As many as 30% of the respondents lowered operating costs by at least $1,000 annually per truck.
Fleet Advantage talked to over 700 transportation executives and managers who oversee large fleet to ask them questions about analytics adoptions, what areas they use analytics in, and what results they had seen. Over 45% of those surveyed manage fleets of over 200 vehicles.
Data Analysis is Lowering Fleet Costs - Survey Results
Over a quarter of large fleets said that data analysis is reducing operating costs by at least $4,000 annually per truck, according to a recent survey by Fleet Advantage. As many as 30% of the respondents lowered operating costs by at least $1,000 annually per truck.
Fleet Advantage, which uses data analysis to help fleet customers manage lifecycle costs, talked to more than 700 transportation executives and managers who oversee large fleet to ask them questions about analytics adoptions, what areas they use analytics in, and what results they had seen. Over 45% of those surveyed manage fleets of more than 200 vehicles.
A new survey complied by trucking business firm Fleet Advantage finds that 61% of trucking industry professionals are now monitoring and tracking data either daily or weekly, compared to just 19% five years ago.
On top of that, some 26% of the 700 transportation executives and managers polled by Fleet Advantage – with 45% of them operations comprised of 200 or more tractors – said that data analysis is lowering their operating costs by $4,000 annually per truck.
“The movement toward comprehensive business intelligence speaks volumes about this industry’s thirst to truly leverage and maximize the technologically advanced trucks on the roads today,” noted Jim Griffin, Fleet Advantage’s chief technical officer in a statement.
“It’s notable that we’ve evolved from focusing on routes almost entirely to now analyzing every facet of truck performance to identify where improvements can be made for the bottom line,” he added.
Other findings from the firm’s survey include:
Some 80% of fleet executives now say they analyze a variety of truck performance data, using metrics such as: idling and time in gears; tapping into engine ECM data; plus accessing routing and logistics information.
Some 25% of those polled said the most impact from data analysis so far has been on managing fuel costs.
Another 19% of those surveyed also point to service and maintenance and driver behavior improvements as key areas now being impacted by data analysis.
In the next five years, 87% of those fleet professionals expect data analytics to play a key role in managing fuel costs and truck performance, or feel data will drive their entire business operations in all areas.
I’ve read numerous articles and opinions on the savings that result from new truck technologies either already on the market or technologies that will result from future emissions mandates. The official predictions are suggesting an ROI of approximately two years. While that may be true for some operations, it is certainly not true for all operations.
The appropriate calculation for an ROI on a new truck equipped with the latest technologies is an equation of miles not years. It is a simple calculation of comparison—your current cost per mile versus the cost per mile of your new equipment. If you purchase a new truck equipped with the latest technologies and your total monthly expenses are less than your previous month’s expenses, you are achieving an immediate return on investment.
So, what else is there? As a culture we have to ask ourselves what is important to us and what value do we put on it?
While it may seem there are as many advocates for green trucks as blades of grass, that’s not to say every fleet should switch from conventional fuels, according to John Flynn, CEO of Fleet Advantage, Fort Lauderdale, Fla., which provides equipment financing and lifecycle-cost management to large private fleets.
“Currently, there is no compelling reason to change to alternative fuels,” Flynn says. “Diesel is still the most efficient method of powering Class 8 vehicles available.” Still, he doesn’t entirely dismiss the value of going green. “Some companies may benefit from byproducts of the manufacturing of their product. A large agriculture or dairy operation may generate methane gas. If the production volume exists for the generation of methane and eventual processing into a fuel-delivery system, then that fuel could be used to power a fleet at a lower cost per diesel gallon equivalent.”
Years ago, the truck spec’d at the time of purchase was the truck you had five years later, with little or no chance of enhancing performance later down the road. Today, however, data is allowing trucks to continuously achieve performance improvements. Buyers are no longer bound by the original specification of the truck.
This is where companies like Fleet Advantage, a company that provides IT-based solutions for fleets and other companies, come in.
“Our business is managing data that we get from customer vehicles,” explains Mike Spence, vice president of Fleet Advantage. “Every truck has an onboard computer, which extracts the information.
Because safety is the top priority for motor carriers, running a safe freight transportation operation requires thorough knowledge and understanding of the Federal Motor Carrier Safety Administration's regulations.
Ultimately, though; equipment may have the most profound effect on driver safety, as trucking companies equip their fleets with the latest technologies that dramatically reduce highway violations and accidents.
As sports like baseball increasingly use metrics to enhance game strategies, so is the retail food industry turning to data-driven "game plans" to improve supply chain logistics beyond the truck terminal.
Brian Holland, president and CFO of Fleet Advantage says his company uses data analytics, industry experience and flexible financial solutions to develop actionable intelligence that helps clients reduce fuel consumption and maintenance costs, improve efficiencies of their truck fleets and be more environmentally responsible.
Reading the Green Like a Pro - Heavy Duty Truck GHG Phase 2 Mandates Can Help You Ace It
On the putting green, the golfer who putts last has the advantage of watching his predecessor ‘show him the line. There is valuable information to be gleaned if his attention is focused on the details. For example, he can determine many uncontrollable factors such as speed, slope, and other essential characteristics of the green that influence the direction and speed of the ball. If he is smart, he will keenly focus on these details to determine a strategy for his successful stroke.
On June 19, 2015 the Secretary of the Department of Transportation, Anthony R. Foxx, and the Administrator of the Environmental Protection Agency, Gina McCarthy, signed the 629 page proposed Greenhouse Gas Emissions and Fuel Efficiency Standards (Phase 2 of the Medium- and Heavy-Duty Engines and Vehicles Truck initiative) for publication in the Federal Register.
Truckers are a crucial cog in the U.S. economy, but there simply aren't enough of them
Truckers are a crucial cog in US economy, but there simply aren't enough of them - Fleet Advantage's Mike Meehan contributes in the latest article in US News on the current state of the trucking Industry and the driver shortage.
A seemingly innocuous spin behind the wheel of a U-Haul 22 years ago completely rerouted the life of Brett Aquila, then a 21-year-old warehouse employee living near Atlanta.
He'd found his calling as a truck driver.
"They needed someone to jump in a little U-Haul truck and haul a load of freight downtown and back," Aquila says. "Boom. That was it. I went home that day, and I called J.B. Hunt and I said, 'How much do truck drivers get paid?' And they said, 'About $700 a week.' I said, 'Holy crap, I'm making about $225.' And about two weeks later I was in school."
Advanced computer systems and data analysis are increasingly being used by firms within the trucking industry and within the rigs themselves, helping reroute freight based on traffic patterns, recording the number of miles a rig has driven, and everything in between. This use of big data could potentially allow a fleet to optimize efficiency enough to operate at full capacity with fewer drivers, or let a company save enough money to raise wages and attract more workers.
US truck emission mandate offers savings potential
On the putting green, the golfer who putts last has the advantage of watching his predecessor ‘show him the line’. There is valuable information to be gleaned if his attention is focused on the details. For instance, he can determine many uncontrollable factors like the speed, slope, and characteristics of the green that influence the ball. He must have knowledge of these details in order to determine the ball’s path and the power of his stroke once he is over the ball.
On June 19, 2015 the Secretary of the Department of Transportation, Anthony R. Foxx, and the Administrator of the Environmental Protection Agency, Gina McCarthy, signed the 629 page proposed Greenhouse Gas Emissions and Fuel Efficiency Standards (Phase 2 of the Medium- and Heavy-Duty Engines and Vehicles Truck initiative) for publication in the Federal Register. It establishes a comprehensive technology advancing program to reduce greenhouse gas (GHG) emissions and fuel consumption for new on-road heavy-duty vehicles that will strengthen Phase 1 mandates and extend emissions reduction standards through model year 2027.
When you download the engine parameters you will end up with 22 pages of seemingly nonsensical settings that can be changed, enabled, modified and tweaked to suit your operation. Downloading and adjusting engine settings has become a large part of the value proposition for some fleet managers. Some have realized gains of as much as .4 MPG by adjusting the settings. If you are a fleet manager, it is well worth your time to learn the many functions of your engine parameters and to adjust them so your trucks run at optimum efficiency.
Fleet Technology Expo is Packed with Heavy-Duty Focused Sessions
There are several informative sessions and panels for heavy-duty fleets at this year’s Fleet Technology Expo, in Long Beach, Calif. The conference kicks off on Monday Aug. 24 and runs through Wednesday Aug. 26 at the Long Beach Convention Center in downtown Long Beach. The event covers all segments of the fleet spectrum from small to big fleets and everything in between. For heavy-duty fleets, this year’s focus will be on making every mile and component count.
Another highlight of the conference is a panel on Tuesday called Technology in Trucking and Growing Profits. The panel will discuss technology that saves fleets time and money and improves routing, scheduling, asset tracking, customer service, hours of service, driver compensation and productivity. The panel is being moderated by Fran Flynn, vice president of sustainability, marketing and community relations at Fleet Advantage. The panel includes representatives from Con-way Truckload and Toyota Logistics Services.
“Forward thinking fleet operators are leveraging technology and data analytics to gain visibility into their total cost of ownership; said Flynn. “We are pleased to be a part of this important conference that helps educate industry leaders on emerging technologies and smart, efficient fleet management.”
Next-gen fleet manager - Huge opportunity if businesses seize it
The old mold and way of doing things for the corporate fleet manager are changing entirely, one industry insider says, and it's creating an opportunity for a new pool of applicants not traditionally associated with the job. Companies that get ahead of this curve could see less fleet down time and lower maintenance, recruitment and related costs, and other benefits.
So says Mike Meehan, vice president of sales at Fleet Advantage, a provider of business analytics software and services for fleets. According to the sales exec, businesses operating fleets can effectively scrap any past assumptions they have about who fills the fleet manager role.
How Is Software and Technology Impacting The Food and Beverage Supply Chain
BY LARA L. SOWINSKI
As part of this month’s special coverage on Software & Technology, we contacted over a dozen industry executives at companies that play a significant role in the food and beverage supply chain to ask them about the impact of Big Data, the Internet of Things (IoT), analytics, cloud technology, apps and more to get a sense of the changes underway and what they portend for the future. Without a doubt, Software & Technology represents one of the fastest-moving, promising and disruptive segments in the business and consumer worlds today. In the food/bev supply chain it facilitates visibility from farm-to-fork, compliance, improved food safety, productivity, better management of people and processes, and cost reductions and accuracy, among other benefits.
Who: Mike Meehan, CTP, VP of Sales, Fleet Advantage
Key Topic: Mining Big Data for competitive advantage
Takeaway: Rethinking the fleet lifecycle management practice
“In the arena of food distribution, understanding the financial impact of integrating technologies that continually increase fuel efficiency and reduce emissions is imperative,” emphasizes Meehan. “Leveraging data can be the catalyst to elevate a distribution operation from a support function to competitive differentiator with quantifiable revenue enhancement strategies. Using newly-available technology that generates data from a wide variety of sources, then combining and mining that data to discover new ways of cutting costs is the key to gaining competitive advantage.”
Meehan says that, “While data has long been used for route optimization, only recently could it be leveraged to provide new insight into the equipment performance, operating costs and fleet lifecycle management practices. By combining equipment performance data with maintenance and finance data, it is possible to determine each vehicle’s point of economic obsolescence—the exact time that a tractor starts costing more to run than it does to replace it with a new model. The data essentially provides a P&L statement on each truck.”
On the topic of fuel-related regulations, Meehan notes, “Fuel economy mandates on heavy duty trucks focused on emissions reduction and resource conservation and will be in effect through 2027. That means only one thing—continuous improvement in fuel economy for years to come. Since fuel is approximately 70 percent of a fleet’s operating cost, this is good news for the industry as a whole. Effective in model years 2014, Phase I mandates are indeed proving to save transportation operations millions of dollars annually in fuel and maintenance costs. The new data intelligence is prompting fleets to address long held fleet lifecycle management practices. Fleets are increasingly moving from a purchase/bank financing model to a short-term, more flexible leasing solution that allows them to capture the benefits of the fuel economy improvements (and) reduce their maintenance—gaining efficiencies and competitive advantage.”
Fleet Advantage featured in the List of Florida Trend's 225 Biggest Private Companies
July 14, 2015
The Data Driven Fleet Manager
Some fleet managers long for the days of yesteryear when operating a fleet was so much simpler. There were no engine emission technologies, few (if any) OEM computers , no third party on-board computers to track logistics routing, equipment utilization, fuel economy and other factors. It was a pretty simple world – you purchased a truck, typically ran it six to eight year life, performed preventive maintenance and repaired as best you could and operated the fleet based on intuition, experience and prior practices. The truck purchases were evenly distributed with roughly the same number of trucks being purchased and replaced each year.
Many of the so-called equipment technology advancements started in 2000 due to the Diesel Emissions Reduction Act (DERA). These environmental regulations called for new technologies like Exhaust Gas Recirculation to be incorporated into 2003 model year trucks. Unfortunately, the unbudgeted costs of the new technologies (in the form of expensive repairs, declining fuel economy and mechanical complexities) wreaked havoc on operating budgets. Amid reports of a second round of EGR technology in 2007, some fleet managers extended their vehicle lifecycle, opting for higher M&R expenses; while others contributed to the largest Class 8 pre-buy in 2006 (approximately 350,000 trucks) in the history of the industry. In addition, the “great recession” hit in 2008/2009 which further disrupted the purchase pattern, lifecycle management and operating costs. Many fleets were told by CFO “no capital for now”, run what you have!
Buyers market-The truck purchasing landscape for owner operators
The market for used trucks, favored by owner-operators in three out of five purchases, is better than it has been in years. Thanks to a higher volume of newer used trucks becoming available, prices have dropped. Also, interest rates are in owner-operators’ favor, particularly those with good credit.
“One thing we look at is build rates,” says Mike Meehan of the Fleet Advantage leasing service, which is geared toward larger fleets. Because of the recession, production was low for 2008- ’10 model trucks, most with 2007-’09 emissions-spec engines. Many owner-operators also were reluctant to buy at that time due to emissions-system performance.
Because supply was low, pricing for those trucks has “been very lofty for the last 18 months or so,” Meehan says. As the economy recovered, production picked up. Now many of the 2011-’13 model-year tractors, with post-2010 engine technology, are hitting the used market. They’re more affordable, and trucks with similar age on them are expected to get more so year over year as times goes by.
We’re all about solutions—global solutions—here at Supply & Demand Chain Executive. That’s why this issue is so valuable. Our annual SDCE 100 singles out the innovations that help ease the pain of so many supply chain problems.
The vital issues that keep supply chain people—providers or practitioners, on the shop floor or in the C-Suite—awake at night are pretty much known to all of us: risk management, talent management, Big Data and a technology boom that shows no signs of slowing down. Within these pages you should find some tips, some hints, and some outright solutions that will work for you, no matter your industry.
Talent management, including hiring and retaining staff, as well as blending the generations can be particularly vexing. How do you blend the Baby Boomers, who are nearing retirement and have immense knowledge, with the Millennials (also known as Gen Ys, ages 18-34) who have grown up in a technological age, but perhaps don’t know supply chain or a particular industry?
I had an interesting conversation earlier this month with Sandy Rosenfeld, Manager of Operations at Fleet Advantage. We were chatting about the driver shortage—conservatively, there are 30,000 open jobs out there.
There are an estimated 75 million millennials in the United States. These folks, she told me, “tend to think that the trucking industry is older men in cumbersome equipment that’s inefficient, hard to drive and isn’t good for the environment.”
What will it take to bring them into the trucking industry? Companies often don’t know how to recruit this huge talent pool. “Some companies are not advertising to them properly,” Rosenfeld said. “They’re still using newspaper ads. Millennials are all about social media and connectivity. Those are important tools to tap into that workforce.” Let them know that there are new vehicles out there that are technologically and environmentally sound, and contain the very latest safety features.
“Millennials are environmentally conscious. Their lives blend into their work, and their work blends into their lives. They’re tech savvy and visual. You can’t recruit them if you don’t know who they are.”
So there’s an assignment for you if you need drivers. Learn about the millennials. In fact, that’s a talent pool you should know about no matter what employment needs you have.
Over the past years, we’ve focused on the technology and software that drive supply chain, but there’s so much more. Beginning in this issue, check out our new department, On the Floor, where we’ll highlight such important components as fork lifts, racking, conveyors, pallets, power sources and related solutions that increase efficiency and ROI in the warehouse. Turn to page 44 to read Associate Editor Carrie Mantey’s informative story on the latest in racking and slotting.
Buy Smart - On the Road or at Home--Contributed by Mike Meehan VP Business Development
Even the most fuel-efficient fleet can further reduce its fuel spend by how it buys the diesel it must consume. Mike Meehan, vice president of sales for Fleet Advantage, Fort Lauderdale, Fla., which provides equipment financing and lifecycle cost management to large private fleets, contends that no fleet can afford not to be strategic about how it buys fuel.
Meehan recommends taking a data-driven approach to make sure fuel is being purchasing wisely by drivers on the road.
“It comes down to the fleet directing where the drivers should buy fuel,” he explains. “With today’s software, you can program a truck’s route from beginning to end without deviations and advise where to by fuel” at the best price along the way. “A fleet can also benefit by publishing a report each week on fuel buying that will encourage drivers to comply. Drivers will ‘compete’ to not be at the bottom of that list.”
Issuing fuel cards to drivers, he says, can “provide ease of transaction for drivers and effective recordkeeping while also helping avoid fraudulent purchasing.”
Some fuel cards will batch fuel purchases and issue volume-based pricing after a certain period, according to fleet management software provider Fleetio, Birmingham, Ala. The company points out that while those features could potentially save a fleet money, they could also include “added requirements or fees that other cards may not. The key here is to have an idea of what you are currently spending on fuel (and where), and if that trend will continue, increase or decline in the foreseeable future.”
Fleetio also says a number of fleet-management products now integrate with major fuel card providers. This can create a direct link to other vehicle information to provide better analysis and decision-making across a fleet’s operation.
If you can buy bulk fuel, even better, says Fleet Advantage’s Meehan. He argues that “on-site fueling done with any kind of regularity will save the most over the long run compared to fueling only on the road.” He distinguishes, however, between a fleet contracting for on-premises bulk fueling vs. opting for a company that provides mobile on-site fueling.
Meehan says the latter approach “sounds good but, according to the data we’ve seen, there’s always more fuel spend as [those vendors] tend to pump as much fuel as they can at a given time. But a bulk fuel supplier will do the data analytics to show the fleet that installing their above-ground tank sized to the operation will save them compared to fueling on the road, as well as speak in terms of return on investment.”
That’s because the bulk supplier “can build that infrastructure investment into the fleet’s fuel spend or show the cost to capitalize it,” explains Meehan. “Typically, the fuel supplier selected will design, engineer and build the storage and fueling equipment for the fleet” as a turnkey solution.
“Still,” he adds, “the best way to save money on fuel is to burn less of it.”
Safety is the top priority for motor carriers. Running a safe operation requires thorough knowledge and understanding of the Federal Motor Carrier Safety Administration (FMCSA) regulations. In addition to educating drivers on these regulations, there are specific company fleet safety policies and procedures that must be reviewed; such as the completion of roadside inspection paperwork to insure that both the fleet and drivers are in compliance with all FMCSA regulations, as well as ongoing driver training on how to operate the equipment and its added safety specifications in the proper manner.
About the author
Sandy Rosenfeld has more than 25 years of experience in private fleet management. Sandy is a Certified Transportation Professional and an expert on Department of Transportation (DOT) regulations and Compliance Safety Accountability (CSA) compliance. In addition, she adds a customer-based perspective to fleet management analytical reporting, one of the foundations of Fleet Advantage’s lifecycle management philosophy. For more information visit www.FleetAdvantage.net.
An invaluable financial tool used to analyze whether it is more advantageous to purchase or lease tractor equipment is an analysis commonly known as a ‘Lease vs. Buy’ analysis. What follows, is a step-by-step illustration and explanation of that analysis. In the illustration, the alpha notations in ‘Assumptions’ correspond to the variables in the exhibits that follow.
Assuming that the equipment cost and usage terms are the same, the three primary factors that affect the results of a Lease vs. Buy analysis are:
1. Residual Value (RV) 2. Income Tax Rate 3. Weighted Average Cost of Capital (WACC or Discount Rate)
The most widely accepted format is to calculate the Net Present Value of the tractor purchase (discounted after-tax including its associated depreciation tax benefits), and compare that to the after-tax cash flow payments of a ‘walk-away’ lease (a walk-away lease presents no residual risk to the user at expiration).
The tractor’s residual (resale) value has the single largest effect on the analysis, followed by the after-tax cost of capital (discount rate) and the combined federal and state income tax rates of the buyer (or lessee).
An over-the-road tractor qualifies for accelerated depreciation tax benefits (Year 1 @ 33.33%; Year 2 @ 44.45%; Year 3 @ 14.81% and Year 4 @ 7.41%). Because tax filings are due on a quarterly basis, depreciation is fully utilized in 39 months. The accelerated depreciation benefit illustrated below assumes that the tractor purchase takes place at the end of December and the tax reporting is on a calendar year. The buyer is entitled to a 33.33% depreciation expense allowance (calculated on the tractor’s initial purchase price including applicable taxes (‘its cost basis’)) as a tax deduction—an overly simplified example. Using the Year 1 depreciation benefit of 33.33% and the 40% tax bracket (c), results in a 13.33% cash flow savings (33.33% X 40% = 13.33%). Since the tractor cost is $100,000 (a), the buyer saves $13,300 on his quarterly tax bill immediately upon purchase. This is equivalent to receiving an interest-free loan from the government that essentially reduces the cash invested in the tractor from $100,000 to $86,700.
Cost of Capital:
The Cost of Capital is known as the discount rate (sometimes referred to as a ‘hurdle rate’). It is a company’s Weighted Average Cost of Capital. The WACC calculation is a formula based on the average cost of debt (in this case a 5-year loan), return on equity (ROE), and the debt-to-equity ratio.
Here’s how the math works: Take the average cost of debt and convert it to an after-tax basis. This illustration assumes a pre-tax debt of 4.00%, a 2.40% after-tax cost of debt (4.00% less a 40.00% tax rate (c)) and an ROE (which is always after-tax) of 15.00%. If the debt-to-equity ratio is 2 to 1, the WACC is calculated by using two components of debt to one component of equity.
ie: There are two components of debt equaling 4.80% (2 X the after-tax debt of 2.40% or 4.80%) plus the 1 component of equity (15.00%) for a combined total of 19.80%, divided by 3 (2 debt components and 1 equity component), which equals an after-tax discount rate of 6.60%.
The residual value factor is the most critical to the analysis. In a purchase scenario, every $1,000 of gain or loss at expiration affects the after-tax net present value outcome by $436. It is important to note that the residual (resale) value must be calculated on an after-tax basis. It is a common error in this analysis to overlook this detail. Having taken the tractor’s tax depreciation to zero, the buyer will incur a taxable gain on its resale proceeds.
The analysis is depicted in the following table:
The net present value of the after-tax cost to purchase this tractor is $51,585, whereas the net present value of the after-tax cost to lease the same tractor is $40,284. In this example, leasing provides a clear financial advantage by lowering the after-tax cost by $11,301 (1).
Looking at the analysis from a different angle, you can calculate the residual (resale) value necessary to reach a breakeven point between a cash purchase and lease. To achieve the same financial benefit as leasing, the tractor requires a residual (resale) value of $55,926 (2) at the end of five years, rather than the more realistic $30,000 as estimated in the illustration. Even in today’s strong resale market, the probability of selling a five year old tractor for $55,926 is highly unlikely. However, it serves to highlight a fundamental advantage of a walk-away lease, which transfers the residual (resale) risk from the buyer to the lessor. At the end of the lease term, the lessee returns the tractor to the lessor and walks away with no responsibility to sell the tractor for its required residual (resale) value.
Although the calculations can be somewhat difficult at first, the Purchase/Lease Analysis is an invaluable financial tool that can help you determine the most cost-effective method for acquiring equipment.
IoT Impact-Part Two - Understanding IoT Data and How IoT Changes Your Business Model
In Part One of this series, we looked at the 10 questions posed by Michael Porter and Jim Heppelmann in their HBR article How Smart, Connected Products Are Transforming Competition and we examined questions about how to think about what Internet of Things (IoT) phenomena means for your product strategy and decisions. Here in Part Two we discuss data and business model questions.
Using IoT to Transform a Service Business
Business model transformation from IoT is not just happening to physical product manufacturers. Take the case of Fleet Advantage, a finance company specializing in leasing tractors and trailers for vehicle fleets.
As much as it's affecting the shopper experience inside the grocery store, technology is influencing the way products reach the supermarket. To be sure, all points along the supply chain are being honed by the influence of digital, and fleet management is no exception.
“Technology is driving rapid change in fleet management and is impacting the competitive landscape in the areas of data analysis and equipment specifications,” says John Flynn, CEO of Fleet Advantage.
The company’s philosophy of economic obsolescence posits that it’s much more efficient and cost effective to run trucks until it becomes cheaper to get a new truck thank to operate an old one, rather than trying to extend vehicle’s working lives by operating trucks until they become functionally obsolete.
In the future, by focusing on economic obsolescence, he asserts, companies can implement a continuous improvement model, enhancing efficiency, lowering costs and providing environmental leadership via reduced greenhouse gas emissions. To that end, Fleet Advantage has developed systems and software that capture information in a structured format and allow fleet operators to calculate their total cost of ownership, giving them the tools to identify and capture cost savings opportunities.
Diesel Climbs 2.6 cents to 2.904 dollars - Spread With Gasoline Narrows
By Michael G. Malloy, Staff Reporter This story appears in the May 25 print edition of Transport Topics. Diesel’s national average price rose for the fifth straight week, climbing 2.6 cents to $2.904 a gallon, the Department of Energy reported May 18. Gasoline also rose for a fifth week, gaining 5.3 cents to $2.744, DOE said after its weekly survey of filling stations. The motor fuel was at its highest level since Dec. 1 but is still selling at 92.1 cents below year-ago levels.
Current diesel prices that are below historical averages “are offering significant relief to many carriers’ budgets, but we’re advising them not to take their eye off the ball"
When fleets address the total cost of ownership they have a tendency to analyze historical maintenance expense data by category, repairs, fuel, labor costs, parts, tires, etc. and they focus on reducing cost by category, i.e. reduce labor hours, purchase fuel at a lower price, etc. Each is important, however there is a more comprehensive approach that will achieve a greater impact on reducing total cost—managing the truck’s lifecycle!
There are multiple sources of empirical data outlining maintenance and repair costs at 100,000 MPY. Data indicates that over an 8-year/800,000 mile period the M&R cost allocation during years 1 through 4 is only 3.7¢ per mile, while years 5 through 8 cost is12.98¢ per mile. In the first four years (or half of its life) fleets spend only 22% of the total life maintenance. This is equivalent to a maintenance cost increase of $9,280 in years 5-8; or the same amount in M&R savings by running the truck for a shorter lifecycle.
As equipment ages, it becomes less fuel efficient. A 2-4% MPG degradation occurs at approximately the 3-4 year range in the vehicle’s lifecycle. Since 2011, Clean Diesel truck engines equipped with SCR have proven year-over-year gains in MPG, which correspond with the CO2 government mandates of a 2-3% fuel economy improvement per year. Advancements in engine technology and design, lower rolling resistance tires, automated transmission, proper setting of ECM and driver training have all contributed.
Managing your fleet’s lifecycle based on fuel economy will afford a big pay day. If you purchased a 2012 model year tractor achieving 6.4 “driving MPG”, four years later it will attain only 6.2 MPG, while a 2016 model will achieve 6.9 MPG. Using the last 12 month average cost of diesel of $3.64 per gallon, the 2016 truck will reduce cost by $6,000 year.
An additional component of the lifecycle cost equation is depreciation. Most companies use seven years to zero. The original equipment cost is significant. Over the past four years, new truck costs have increased by about $10,000. Acquiring a new tractor at the end of year four would add a depreciation cost of $1,400 per year. However, this cost is offset by the maintenance and fuel savings of $15,280. The quick return on investment in the first year is what makes this new investment desirable. Instead of paying year five maintenance at 7.6¢ per mile, you will pay year one maintenance at 1.3¢ per mile – a savings of $6,300. Add to this the year one fuel savings of $6,000, and you have a total of $12,300. Now deduct the $1,400 in depreciation and there will be a windfall of $10,900 of savings in the first year. A 22% return on investment!
There are significant soft cost savings as well, including better driver retention, less downtime, improved CSA safety and equipment scores, reduced maintenance personnel and a likely reduction in total fleet size.
Fleets Miss Opportunities by Not Understanding Younger Generations
CINCINNATI. Fleets, and most businesses for that matter, have struggled for years integrating younger workers into the workforce. Either they can’t find enough of them to replace retiring Baby Boomers, or they don’t stay onboard. That is particularly true for truck drivers, which theindustry is facing a serious shortage of to the tune of some 35,000 or so.
The solution to both issues may be two-fold: understand the generational characteristics of workers and pushing technology.
“Companies need to realize they have to train their people to understand [the differences in generations] so they can collaborate and work together,” said Sandy Rosenfeld, manager-operations for Fleet Advantage. “Millennials don’t like to be micro-managed. Millennials are not real loyal. They are into working for companies that…have the same work-life [values as they do]. They want to have experiences and they want to feel good about what they are doing.”
So, to start, what does a Millennial want? Millennials tend to have high self-esteem, are fast-paced, optimistic and technologically advanced. They also like to multi-task, enjoy technology and social media, are focused on results and advancement. What they do not like are long hours, being treated like a child, focus on tenure and face-to-face interaction.
Understanding those traits, Rosenfeld told Fleet Owner, can help managers understand their workforce and better manage those workers.
“You have to train; you have to communicate and get [everyone to understand] that we have differences but a common goal,” she said. You have to recognize that this group [of workers] is there, it’s been identified, and we need to learn more about this group to be successful in business.”
Each generation has its own characteristics, Rosenfeld said. For instance, Generation X workers tend to be highly educated and strive for a work-life balance (the first generation to really do so, she added, as previous generations tended to put work first). But Generation X workers dislike strict rules and structure, slow processes and micromanaging.
Even the Baby Boomer generation has its specific traits, such as being workaholics and liking face-to-face communications but preferring to avoid conflict.
Understanding all these differences and then managing to each generation’s strength can improve the business as a whole.
But, there is also another way this information can be used to help fleets and that is in the marketing of truck driver jobs. The industry needs younger drivers. It is also adopting (in some instances rapidly) advanced technologies, whether they be safety systems, telematics, or cab comforts such as satellite TV. These two areas align nicely, Rosenfeld said.
“We need to advertise this to the Millennial driver,” she said. You’re feeding right into what they want, which is technology.
“We need to make them understand you’ve got the latest equipment, the latest technology, and that you care,” Rosenfeld added.
For instance, electronic logs could be an advantage to younger drivers seeking that work-life balance. Less time spent filling out logs might mean more time the driver can devote to talking with or even seeing family if the driver is equipped with computers or tablets with video-based communication tools.
Ultimately, the old business adage remains true: tailor jobs to each employee’s strength. But by understanding generational differences, employers could do a better job of attracting talent and utilizing that talent effectively.
On Sunday, NPTC honored its 2015 CTP graduating class; Monday was set aside for its Professional Leadership Awards and the Driver Hall of Fame Induction ceremony; and Tuesday was dedicated to the NPTC/Lytx Fleet Safety Awards.
The four inductees into this year’s Driver Hall of Fame are William Bowley, Unifi Manufacturing; Stephen Edwards, Sherwin-Williams Co.; Mark Hannon, Upstate Niagara Cooperative; and Leon Turner, Batesville Logistics.
Brawley started his driving career in 1978 and has racked up 3.2 million miles of accident free driving hauling milk tanks through the mountains of North Carolina, petroleum tankers and pneumatic tanks with various employers. He joined Unifi in 1994, where he has racked up 1.8 million of those accident free miles. Among his awards are the 2012 National Safety Council Best South Atlantic, the 2010 Truck Renting and Leasing Assn. National Driver of the Year, and the 2007 North Carolina Trucking Assn. driver of the year.
Edwards has more than 40 years behind the wheel with more than 3 million miles of safe driving. He’s been with Sherwin-Williams for 28 years, averaging about 50 hours and 1,500 mi. per week without incident. He has served on Sherwin-Williams’ safety committee, conducted training for drivers of yard tractors and continues his own training.
Hannon has been with Update Niagara hauling milk and dairy products since 1979. Even with more than 2.1 million miles without an accident of moving violation, Hannon found time in 2005 to get a school bus endorsement.
Turner is a 38-year driving veteran and has accumulated 5.03 million miles of accident-free driving. He’s been with Batesville since 1990 and has been recognized as a Driver of the Month by the Indiana Motor Truck Assn. five years in a row and has been named a National Safety Council Safe Driver Award of Honor winner for the last three years.
The following are the winners of the Professional Leadership Awards:
Private Fleet Executive of the Year: Dan Norris, Pepsi Beverages Co.
Private Fleet Member of the Year: Joe Laskowski, Medtrans Inc.
Private Fleet Safety Professional of the Year: Nick Cindrich, CVS Health
NPTC Excellence in Membership: Keith McWilliams, Kellogg Company
Allied Member of the Year: Fleet Advantage
NPTC/C.H. Robinson Worldwide Excellence in Backhauling: Ashley Distribution Services
The Dan Smith Life Achievement Award: Tony Jolly, General Mills
The NPTC/Lytx 2015 Fleet of the Year Award winners are:
First place (tie): Dominion Virginia Power and Blain Supply
Third place: American Proteins
First place: TMH Transport
Second place: AEP Industries
Third place: Contract Transportation Services/The Sherwin-Williams Company
Small Fleet, mixed operation (less than 50 vehicles)
First place: Metal Exchange Corp.
Second place: Sugar Foods Corp.
Third place: Marzetti Company
Large Fleet, mixed operation (50 vehicles or more)
First place: Baxter Healthcare Supply Chain
Second place: New South Express
Third place: Orscheln Farm and Home
Also handed out was the 2015 Fleet Safety Awards. Gold Seal Awards (certificate of achievement) are given to fleets that operated without a single accident in the past year. Silver Seal Awards (certificate of merit) are awarded to a company that reduced its accident frequency rate 40% or more compared to the previous year. Finally, Bronze Seal Awards (certificate of progress) are awarded to companies that reduced their accident frequency rate by 20-39% compared to the previous year.
Fine-tuning trade cycles, The devil is in the details and the funding
An equipment trade-cycle plan should be more a science than an art, but talking to experts in fleet management, equipment evaluation, and maintenance, that science would seem to be an inexact one. Indeed, ideas on the subject are as varied as trucking operations themselves. Is the key factor a detailed accounting of operating costs? Understanding the impact of ever-improving truck fuel efficiency? Keeping drivers happy? Letting the banker win at golf?
All of the above, it turns out.
Fleet Advantage CEO John Flynn has developed a formula for what he terms as “a self-funding approach.”
“If you have a decent capital base—meaning you’re not under-capitalized and you have some capacity to take on debt of leases—what’s really happening now is the fuel economy on new equipment is getting so much better year after year,” Flynn said. “So when you can get out at year three or four, new equipment pays for itself.”
The math is straightforward, as Flynn explains it: An improvement in fuel economy of just one-half mile per gallon will save between $300 and $400 per month, based on 100,000 mi. per year for the truck. And that easily covers the higher cost of the new equipment.
And new trucks come with new tires and a full warranty, so maintenance costs will be reduced as well. Instead of paying 8¢ to 10¢ per mile to maintain a four-year-old tractor, buying or leasing new resets those costs to 1¢ to 2¢.
“For me, there’s not much to debate—as long as you have a strong enough balance sheet to withstand the acquisition,” Flynn says.
Ay, there’s the rub. The operating cost “is not the whole picture.” Indeed, the measure is typically only a small part of the decision-making process, says Darry Stuart, president and CEO of DWS Fleet Management Services.
“Every single trade cycle is a math equation,” Stuart says. “But it is truly a formula based on the ability to have funding. If the fleet is four or five years old, and the company hasn’t had a good financial year, and the residual isn’t right, and the price of the new truck isn’t right, then there’s a good chance they’re going to keep those trucks another year.”
It’s when those pieces of the equation all fit that a company will look at the operating cost of the vehicle, Stuart notes, and even then, “the problem with the operating cost is that most fleets don’t have the details necessary to measure it.”
With more than 40 years in transportation to draw upon, Stuart says the typical fleet is about 80% accurate in assessing cost per mile. Additionally, most companies don’t try to project that cost into the future.
Of course, the company accountant has to be involved: Depreciation schedules and tax implications are key parts of the equation as well, basically pushing the operating cost well down the list, Stuart explains. Indeed, the accountant is more involved in trade-cycle strategies than the maintenance manager, in Stuart’s experience. “Most places don’t even talk to the shop,” he says.
And he concedes some people may not agree with him.
“There’s no question you’ll have hockey stick operating costs; your cost per mile will increase,” he says. “But if the price isn’t right or you can’t get the financing, it’s easier to justify the higher maintenance costs than to take on the burden of the price of a new truck.”
Holding on to a piece of equipment beyond its depreciation schedule can be cost-effective. “If you don’t have depreciation and a payment, you can afford an operating cost and maintenance that’s higher than normal,” Stuart says. “At the end of the day, it’s the total cost of operating the truck.”
Fleet Advantage’s Flynn, however, sees a paradigm shift in the boom-bust cycle of equipment purchases.
“I don’t think you can run your trucks that way anymore,” he says. When you break down the costs associated with maintenance, fuel economy-related items, depreciation and amortization, fuel, and finance charges, it really makes you focus on what’s more important.
“And if these manufacturers continue to bring up the fuel economy by 0.1 or 0.2 mpg every year, there’s not much of a question about whether you should upgrade,” he continues.
Discipline is critical, Flynn adds, and fleets that don’t pay attention—those that do not track fuel and maintenance costs and that do not ensure the equipment is properly calibrated and drivers are properly trained and incentivized—will not realize the full potential of the newer equipment. And that means those trucks are much more expensive.
But for fleets that “do all the things you’re supposed to do,” the math works.
“Instead of the functional obsolescence model, which is what people have been doing for years—they run the truck until they can no longer run it anymore—our model is based on economic obsolescence,” Flynn says. “When do you reach the tipping point? A piece of equipment that’s three, four, five years old certainly has a lasting life, but is it going to be economic to do it? The answer is, not usually.”
The current set of federal truck fuel efficiency standards guarantee that even further improvement is coming, Flynn adds, although it’s still up to the fleets to keep track.
Making smart decisions
“So you sit down with your banker or leasing company, and show them,” he says. “‘Hey, as much as I’m going to amortize this equipment with you over a six-year period, it looks like somewhere between three and four years there’s going to be an economic opportunity for me to improve my cash flow, reduce my operating expenses and increase my profit.’ For every banker, that’s music to his ears.”
But just because a company has the wherewithal to refresh its fleet doesn’t mean it needs to max out capital expenditures.
Patrick Gaskins, group vice president, Financial Services, for AmeriQuest Transportation Services, cautions against a sudden surge in new equipment and suggests that rapid shift in a fleet’s equipment age can lead to unanticipated problems.
The 2014 run-up in truck orders was a prime example of the industry’s boom-or-bust tendency, or “consistent inconsistency” as Gaskins characterizes it.
He advocates an asset replacement strategy that keeps the average age of equipment consistent. There are benefits to fleet aging such as spreading maintenance expenses more evenly.
“The benefits of an asset placement strategy that ensures fleets age evenly are many, including giving fleets a hedge against the current diesel mechanic shortage,” Gaskins says. “As newer vehicles are cycled regularly into a fleet, there is less need for the skills that experienced, highly trained technicians bring. The labor for maintenance is minimized and downtime is kept to a minimum. And as new technology is introduced into the fleet, technicians can learn to master it in a more controlled environment.”
Additionally, a moderate and regular replacement schedule means the company is less susceptible to swings in the resale market. And overall, “a strategic long-term, thoughtful approach” means more consistent and effective budgeting.
For Nashville-based truckload carrier Sharp Transport, a reorganization of the shop has provided the key to tremendous improvements in efficiency, as well as much greater insight into the true costs of running the company’s 100 trucks, explains Jarit Cornelius, the fleet’s director of maintenance.
“If you want to establish a true trade-cycle plan, the first order of business is to gain complete control of your everyday operating costs—for the life of the truck,” Cornelius says. “You can put the numbers together, but you’ve got to know how to use them for your benefit.”
Prior to Cornelius’s arrival and adoption of VMRS coding to get shop costs under control, Sharp Transport had traded in trucks after five or six years—“because that was what we’d always done.”
“We just kind of set the financing up that way and let the chips fall,” he says. With improved visibility to the maintenance process, however, Cornelius was able to establish the operating costs for each make and year of Sharp’s mixed-brand fleet. The company’s trucks run between 115,000 and 125,000 mi. per year.
“I was trying to find a line in the sand: the cost for the first year for this truck, the second year, and so forth,” Cornelius says.
He broke out standard maintenance costs, looking for repair trends, and came up with 42 months as the point at which repair costs began to escalate. And he also gained valuable insight as to the best performing truck groups.
And that’s substantially changed the way Sharp buys its equipment.
“I’ve created a report for every single one of our trucks. I know the average cost per mile, year to date, for every single unit number in our fleet,” he says. “I’ve got my expectations for each OE, and when they come in and ask why I didn’t buy from them in my last order, I show them the costs and ask what we can do to get them down to a competitive level.”
As a result, Sharp has been able to negotiate lower purchase prices along with better parts and labor rates.
Looking at the bigger picture, trade cycles are impacted by issues outside the shop. Cornelius immediately cites the driver shortage. For instance, if a group of trucks is due to cycle out in June, replacement plans have to be made in April.
“But do we want to trade 10 for 10, or maybe just 10 for 5 because we haven’t been able to fill 5 trucks for the last three months,” Cornelius says. “So that’s a really big deal. It’s a gamble. Do we need to take on that financing? Trucks aren’t getting cheaper.”
Is there still value?
David Schaller, industry engagement manager for the North American Council for Freight Efficiency (NACFE), takes a slightly broader view of assessing operating costs: Essentially, does the fleet’s current equipment still get the job done?
While maintenance does come into play—in terms of impending major service work—he too argues that fuel efficiency and performance are critical. “Are you still operating the truck where you spec’d that truck to operate?” Schaller asks. “What generation of emissions technology is on the truck? Is the truck set up for downspeeding, or to run at low rpm? Is it geared appropriately for the fleet’s speed limit philosophy?”
And if the answer is no, trade-cycle plans likely need to be accelerated. NACFE’s equipment evaluation reports have detailed the advantages of idle reduction technologies and automated transmissions, for instance. “Plenty of fleets see the benefits of the newer vehicles,” Schaller says, although quantifying the impact on driver retention, for instance, along with the unknown residual value of new technologies make coming up with a trade-cycle formula “very difficult.”
“Driver turnover is one of the biggest issues, so it’s entirely likely that an AMT rise has occurred in the last buying cycle,” he adds. “Four years ago, AMTs weren’t nearly the force that they are now. Some of the early AMTs were not anywhere near the current generation for performance and reliability.”
The question of how well equipment specs fit a fleet’s operating profile has grown to include “the driver situation,” Schaller notes. “What sort of equipment do you need to recruit and retain good drivers? Do you have X, Y, and Z? If you don’t and somebody else does, your driver problem is only going to get worse. How do you calculate that in a trade-cycle plan?”
As with many things in trucking, there is no basic, industry-wide recipe for successful equipment cycle management. A fleet that runs sleepers over-the-road and relies on dealer service will have different needs than a local fleet that runs day cabs and does much of its service in-house.
“Everyone has a different financial picture, and everyone has a different interpretation of how to run their business,” Stuart says. “It comes down to how much the finance group wants to pay. You take the price of the piece of equipment, you divide it out, and that’s how many trucks you’re getting.” Essentially, the trucking business is cyclical. “It’s not going to change,” he adds.
So, what’s the bottom line for managing fleet trade cycles? Essentially, fleets just need to have one. “It’s one thing to talk about tracking your cost per mile or identifying your trade cycle. But if management doesn’t see it or if they don’t want to do it, they’re not going to change,” Cornelius concludes. “But if you think you’re not losing money, I can promise you that you are.”
Fleet Advantage announced its 2015 graduates of the NPTC’s Certified Transportation Professional (CTP) program. With 100% of all business development, fleet services, safety and transaction management professionals earning their CTP designation, Fleet Advantage maintains its commitment to professional development and industry expertise for all of its associates.
With 11 CTP designated professionals as part of the Fleet Advantage team, CEO John Flynn congratulated the three newest Fleet Advantage CTP executives: Charles Chevaillier and Vince Cornell, both VPs of Business Development, and Matt Hendrix, director of Fleet Services. He added; “We are grateful to the NPTC for providing such a robust and affordable program to the transportation industry and are proud of our participation with such a great organization. Accreditation evidences our commitment to our clients and to the industry as a whole. Our team is an elite group of professionals dedicated to providing the best service to America’s premier private fleets.”
Administered for 20 years, CTP accreditation also equips professionals with the highest level of industry understanding of critical areas of private fleet management functions, such as operations, maintenance, safety and human resources.
Fleet Advantage Named Top Percentage Gainer and Ranked #8 on Monitor Daily's Top Private Independents of 2014
After passing the $5 billion milestone last year, the Monitor Top Private Independents continued their trajectory of growth with $5.83 billion in 2014 new business volume. With a forecast pf 16.6% growth in 2015, these entrepreneurs are on the fast track toward the $7 billion mark, which is now on the horizon.
“We saw a more competitive marketplace in our space with new entrants and pricing pressures. Best-in-Class service and on-line finance offerings continue to be the difference makers in this space.”
-Top Private Independent
The Monitor Top Private Independents scored big in 2014 with new business volume of $5.83 billion, up 15.6% from $5.05 billion a year earlier. Increases were broadly based as 88% or 22 of the participants reported increases versus three or 12% that registered net deadlines.
The top five volume producers in the aggregate reported $2.84 billion of originations in 2014 – as a group these companies represented about a 49% share of the total for the top 25 Independents. However, when viewed from the perspective of having a meaningful impact on this year’s outcome, the top five only accounted for 30.9% or $243.5 million of the overall net increase of $787.1 million. So in effect, we have a much more broadly-based foundation upon which to judge the current and future viability of this group of market participants.
THE RANKINGS - TOP FIVE
Heading up this year’s rankings, CSI Leasing once again occupies the #1 spot with $984.2 million of 2014 new business volume, up 14.7% or $126.1 million from $858.1 million a year earlier. Solidly in the #2 position, GreatAmerica Financial Services’origination total of $737.7 million was up 5.7% from $697.7 million in 2013. GreatAmerica’s vendor/dealer activity accounted for 97% of its total 2014 volume with the balance, or 3% ($24.3 million), coming through the broker/indirect channel.
Ascentium Capital jumped two slots to land in the #3 spot on the strength of a 60% year-over-year increase in activity.Ascentium noted that increased customer demand for equipment and brand recognition provided the impetus to close the year with $440.0 million in new business volume, up from $275.4 million a year earlier. The vendor/dealer channel accounted for about 80% of the company’s 2014 volume with the balance—or 20%—emanating from broker/indirect (13%) and direct (7%) sources.
ICON Capital’s $358.5 million in 2014 volume was 19% lower than the prior year resulting in a drop of one slot to the #4 rank. New to the Top Private Independents rankings and rounding out the top five is #5-ranked LEAF Commercial Capital. In 2014,LEAF delivered $321.1 million in funded originations, a tad less than the previous year. It should be noted that LEAF was eligible for inclusion in last year’s rankings, having been the subject of a change in ownership structure the prior year.
TOP PERCENTAGE GAINERS
This year’s top five percentage gainers as a group accounted for about 58% of the overall net increase in originations reported by all of this year’s participants. The top percentage gainer, by far, was Fleet Advantage with an increase of 184.7% on the strength of a robust comeback in the Class 8 truck market in 2014. The folks at Fleet Advantage noted the “economic advantages offered by new technology, improving fuel efficiency and data analytics are driving significant growth.”
With year-over-year growth of almost 60%, Ascentium Capital’s increase of $164.6 million was the largest absolute dollar increase posted by any of this year’s Top Private Independents. Ascentium’s record new business volume of $440.0 million in 2014 was up from $275.4 million the previous year.
Others that reported an overall increase of 50% or better included: Lease Corporation of America (57.8%), First Financial Corporate (53.3%) and Crossroads Equipment Lease & Finance (50.1%).
New to the Top Private Independents rankings this year were LEAF Commercial Capital, Fleet Advantage, ENGS Commercial Finance and Med One Capital. As noted earlier, Philadelphia-based LEAF Commercial Capital has been a perennial member of the Monitor 100 as a NEC-classified commercial finance subsidiary of Resource America. In 2011, LEAF was “deconsolidated” by its parent (which retained a 15.7% interest) and became a joint venture that includes private investment firm Eos Partners andGuggenheim Securities. As a result of the foregoing, LEAF became eligible for inclusion in this report a year earlier than theMonitor acknowledged.
Fleet Advantage and Med One Capital each took a one-year hiatus and decided to return for this year’s report. The former, ranked #8 on the strength of a vibrant year in the trucking space, posted 2014 volume that was almost three-times higher than the previous year. The latter, ranked #16 with $132.6 million in volume, was up 29% from $103 million in 2013.
ENGS Commercial Finance joins the Top Private Independents for the first time and earned the #10 spot on the wings of a $206 million year, up 42.6%, or $144.5 million higher than a year earlier. Noteworthy was the recent announcement that NY-based private equity firm Aquiline Capital Partners decided to become a majority investor in ECF. Aquiline CEO Jeff Greenberg said, “With the growing demand for truck equipment financing, ECF is well positioned to continue to serve the growth in this specialized market.”
Each year we ask our participants to share their views and insights into the challenges and opportunities of this past year. The following note-worthy comments are representative of the environment that existed for many during 2014.
Much like one year ago, many of the Top Private Independents commented on the breadth and depth of competition present in the industry. Several noted that finding qualified staff members was also becoming increasingly difficult. One said, “As the economy has improved, competition has continued to increase with more lenders and banks entering [back] into the transportation industry. This has included competition and demand for skilled talent.” Another noted, “We saw a more competitive marketplace in our space with new entrants and pricing pressures. Also finding qualified applicants to fill job openings has been a challenge.”
FOCUS IN 2015
The need to attract and retain high quality people is evidenced by the following insights provided by several who commented on this particular subject in their feedback. A Top 10 respondent noted that the company’s focus for 2015 would be “hiring effective salespeople to help grow our business.” Another elaborated on this challenge by saying, “Our biggest need is to find the right people and retain those with us. There is a great deal of competition for quality people. An inability to find and retain the right caliber individuals will affect our business both short and long term.”
Indicative of what lies ahead was the positive nature of the forecasts that were provided by all of this year’s Top Private Independents. With the exception of two participants that did not respond to this question, the remaining 23 or 92% all said they anticipate volume growth in the current year. Anticipated volume growth forecast ranged from a low of 4% all the way up to a high of 42%.
On an average-weighted basis, the outcome for an overall increase of 16.6% growth would translate into about $968 million of new business volume in 2015. As an aside, last year’s forecast called for an increase of 14.9% or $755 million, which was exceeded by a tad more than $32 million. Assuming some semblance of a repeat performance in 2015, we have the real possibility that next year’s Top Private Independents will surpass the $7 billion threshold.
Given the competitive nature of the environment, we can’t help but be impressed by the overall performance of this year’s Top Private Independents. In some ways, perhaps disadvantaged, the large majority of this year’s participants held their own against formidable competition, i.e., the banks that are hustling to build earning assets.
Evidence of this trend continuing is shown by the overall forecast for 2015, which if realized will bring this group of entrepreneurs to a new level of achievement. We can only watch and listen from the sidelines as the reality of 2015 unfolds and we get to revisit the outcome in next year’s salute to the Top Private Independents.
We extend a sincere note of thanks for all those who once again participated in this annual event. To those who are new to the rankings we welcome your interest. And we’d be remiss if we didn’t recognize the loss of Direct Capital , last year’s #4-ranked independent, who was acquired by CIT Group in late 2014.
One the of aspects of covering the Mid-America Trucking Show I’ve come to appreciate over the years is just how many really clever, dedicated people there are in trucking. But every year there’s so much going on in Louisville that it’s difficult to keep up.
That’s why, when all the dust has settled and trucks are gone from the Papa John’s parking lot (where the real action is), I have the luxury of going back over my notes, of looking for an idea or a conversation that might not have been tied directly to a formal press event or product announcement that I wrote about.
The Idea Log I’ll be running this week will feature some of these noteworthy conversations and personalities. I’m not endorsing anyone or anything, but I am passing along items that were interesting enough to stay with me.
First up, I’ve always believed that good ideas are simple. And I think Fleet Advantage has a good idea.
With more than 5,000 pieces of equipment under its program and growing rapidly, the company is changing the way trucks are financed and leased, as VP of Fleet Services Terry Clouser explained in a chat.
Basically, the pitch to customers (companies with at least 200 trucks) is centered on total cost of ownership. That was a common theme at MATS this year, but it’s clearly much easier said than done—so how does a leasing company manage to pull it off?
First, they’ve done the math. It’s all about fuel economy. And with the new federal fuel efficiency standards for trucks only getting stronger going forward, there’s a built-in guarantee that next year’s truck is going to be more fuel efficient than last year’s. Plug in your fleet’s current mpg, truck payment and maintenance expense, and FA will show that you will actually save money with new equipment and by continually refreshing the fleet.
And, aside from the occasional bad vintage, who doesn’t want to run new trucks?
But even as the basic trade-cycle formula gets them in the door, FA closes the deal with its equipment management and maintenance expertise. Clouser, for example, put in 27 years with UPS, while other key leaders have had long careers in truck leasing—and their consulting services are included in the lease package.
“It’s the attention to detail that we offer,” Clouser says. “We do a fleet study first, and we’ll point out areas of concern that they should be looking at but they’re not. We’ll look at the duty cycle to find the speed that they want to run, the terrain, the horsepower and the torque, the driver and cab requirements, single axle or tandem. Then we specifically order every truck for every customer. It’s brand new the day they get it, then we’ll remarket it at the end of the lease.”
Critically, FA stays engaged. Clouser’s role is to periodically return to a customer’s fleet for follow-up inspection and evaluation. He’ll help with OEM recall campaigns, right down to training the maintenance technicians. Need assistance interpreting all that engine performance data? He’ll handle it.
“It’s a turnkey operation from the time they get the truck until they turn it back in,” Clouser says. “We help in every aspect, and we’ll spend days if needed. We’re just a phone call away.”
The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25)
The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $903 billion equipment finance sector, showed their overall new business volume for February was $6.1 billion, up 13 percent from new business volume in February 2014. Volume was down 9 percent from January. Year to date, cumulative new business volume increased 12 percent compared to 2014.
Receivables over 30 days were 1.1 percent, unchanged from the previous month and from the same period in 2014. Charge-offs were at an all-time low of 0.2 percent for the 12th consecutive month.
Credit approvals totaled 78.1 percent in February, down slightly from 78.6 percent in January. Total headcount for equipment finance companies was up 3.0 percent year over year.
Separately, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI) for March is 72.1, an increase from the February index of 66.3 and the highest level in four years.
ELFA President and CEO William G. Sutton, CAE, said: "February's new business growth reflects a U.S. economy that seems to be on the verge of a breakout performance. Most metrics measuring economic health are positive, although the strong dollar is negatively impacting our export markets. Capex shows favorable growth, particularly in certain market sectors. The wild card, of course, is U.S. monetary policy, with the Fed poised to raise interest rates in the not-too-distant future. While higher interest rates typically favor the fixed-rate structure of most equipment finance transactions, it remains to be seen if volume growth can be sustained going forward."
Brian Holland, President and CFO, Fleet Advantage, LLC, said, "The results of the MLFI report and increase in year-over-year new business volume are reflective of our results and what we are seeing in the market. In the transportation sector, order volume for Class 8 trucks continues to be very robust, and newer technologies and government mandates are driving improved fuel economy. By leveraging flexible leasing solutions to acquire newer, more fuel-efficient equipment, fleet operators are able to capture significant operational savings and achieve the lowest cost of ownership. We continue to see increased optimism and confidence in this sector and maintain a positive outlook for 2015."
Written by Brian Holland, President and CFO of Fleet Advantage
As we enter a new era in equipment leasing where competition continues to increase, pricing is becoming more commoditized and leases look more like loans, there is a tremendous opportunity to break away from the competition with innovative solutions and value-added services.
Much of the growth in the leasing industry can be attributed to creative solutions and innovative product design, and while these factors have historically separated leasing from other sources of financing, the abundance of capital is threatening to drive those elements out of the marketplace and further compress margins. Thankfully, there are a number of strategies that lessors can employ to leverage their expertise, foster growth and enhance margins.
Use technology to create new markets
Throughout the leasing industry, a rapidly evolving technology landscape is accelerating change in the customer experience. From education to manufacturing to transportation, cutting-edge technologies are helping provide more customized solutions to clients—often revealing insights that allow us to formulate solutions previously unavailable. As specific solutions are developed and tested, new markets are discovered and new products launched.
Focus on the total cost of ownership
Emerging information technology is also creating fundamental changes by capturing real-time operating cost data that measure the Total Cost of Ownership, not merely the cost of financing. This data, when properly managed, can dictate when and how often a company should acquire and dispose of equipment to achieve the lowest possible cost.
Pending accounting changes will drive shorter lease terms
If the proposed lease-accounting rules ever get implemented, expect to see shorter lease terms as companies look to have less debt on their balance sheets. Lessors that are nimble and can design practical, creative solutions to capitalize on this trend will gain a competitive advantage.
Functional vs. economic obsolescence
All equipment has both a functional life and an economic life. Depending upon outside influences (government regulations, the economy, operating costs, etc.) and new features included in the equipment, these timeframes can change dramatically in a relatively short period of time. The decisive factors come down to cost and productivity. Increased productivity at lower cost is the key to competitive advantage.
Design new product solutions to match changing needs and usage patterns
Most businesses are dependent upon the economy. Many times clients do not know what the future holds and need to develop contingencies. When it comes to finance, structuring and creativity are not only essential to the close the deal but may be paramount a business’s survival. Industry insights that anticipate change, in-depth knowledge of the client’s needs and plans for future growth, and clear understanding of the risk of pitfalls that may be encountered are your best arsenal. Reviewing all the “if-then” scenarios is a necessity to designing customized solutions for win-win transactions.
Look for less crowded spaces where you can bring specific expertise
In our business, we specialize in Class 8 tractors and trailers for private corporate fleets, and use data analytics and asset-specific expertise to bring additional value to transactions. Rather than competing on price and rate, we focus instead on fuel economy, maintenance costs, driver retention, new technology, safety and reducing CO2 emissions. By adding multiple elements to the value proposition, we are able to create incremental value, which we divide equitably with our customers and enhance our overall margins. There are numerous opportunities for lessors to expand their offerings and capitalize on their own respective expertise.
Use data to help customers make better decisions
The very nature of our industry dictates that we capture enormous amounts of data, which can be useful in enhancing transactions and creating new opportunities. With the avalanche of “Big Data,” companies don’t need more information, they need the right information in the form of actionable intelligence that allows them to make better informed and timelier decisions. Developing experience in mining and maintaining data on essential metrics allows lessors to deepen relationships with customers and increase customer reliance.
In summary, be on top of your game. Look for innovative ways to add value to the transaction. Embrace risk. Welcome change.
This piece appears in the March 9 print edition of Transport Topics.
By John Flynn Founder and CEO, Fleet Advantage
According to recent industry insight from research firm Frost & Sullivan, leasing companies will capture more business in the Class 8 truck market over the next six years. Access to advanced business analytic software, new truck technologies that offer reductions in maintenance costs and fuel consumption, and corporate directives to equip trucks with the latest safety features are motivating factors supporting the move.
This story appears in the March 9 print edition of Transport Topics.
Continued cold weather throughout parts of the United States pushed the diesel average price 3.6 cents higher to $2.936 a gallon, the Department of Energy reported.
Fleet Advantage’s Mike Spence said fleets moving to newer vehicles could save $300 or $400 a month in fuel expenses, in addition to lower maintenance costs. “You do not want to get locked into a vehicle you’re going to have to operate until it’s functionally obsolete, because you’ll spend a lot more than if you moved into a new vehicle,” said Spence, the company’s senior vice president of fleet services.
At the Technology & Maintenance Council Annual Meeting and Transportation Technology Exhibition, the latest and greatest products were on display and many of them aimed at tackling a fleet manager’s biggest headache: Downtime. While efficiency is often one of the most talked about truck buzz word, there’s no gain in efficiency that can offset a truck that is not on the road because of unexpected maintenance and extended repair times at the dealer level.
Several fleets the Fleet Equipment team talked to at the show expressed frustration with the service side of downtime. Sure, fleets can work with their local dealers to ensure that their needs are met when the trucks are home, but out on the open road, working with network dealers that the fleet manager might not have a face-to-face relationship with, downtime can stretch into days.
It had at least one fleet questioning if they shouldn’t look into shorter truck life cycles to avoid unplanned maintenance issues.
“For years, fleet operators have attempted to rein-in overall costs using the logic that operating a truck until it becomes functionally obsolete will avoid incurring the replacement cost of a new truck; however, maintenance costs continue to escalate,” said Mike Spence, senior vice president of fleet services for Fleet Advantage, provider of fleet business analytics. “There is a moment in each truck’s lifecycle where it reaches a point of economic obsolescence –a ‘tipping point’ when the truck maintenance and fuel expenses are greater than the cost of replacing it with a new, more fuel efficient model that carries a new truck warranty and significantly reduces maintenance. Forward-thinking fleet operators are leveraging technology and data analytics to gain visibility into the total cost of ownership. It would not make proper business sense to replace vehicles prior to the point of obsolescence.”
The data points driving the analysis of a truck’s economic “tipping point,” according to Fleet Advantage, are fuel degradation, maintenance and finance costs. As far as maintenance concerns, engine issues seem producing the largest costs.
Fleet Advantage reports that cost-per-mile on vehicles equipped with Pre-2007 and later engines has changed significantly as emission technology has developed. “Pre-2007 engines are the benchmark,” Spence said. “When comparing pre-2007 engines to 2007 emission vehicles, the cost has escalated significantly as the technology required to generate lower emissions required technologically enhanced systems, which increased equipment cost and added maintenance cost as well. Diesel particulate filters (DPFs) added complexity that was expensive to operate but at the same time significantly reduced emissions.”
As truck equipment continues its evolution, Spence proposed the idea of shortening up truck life cycles for operational savings.
“Companies across all industries are realizing the value of managing their fleet data and changing their philosophy to a three to four year life cycle from the historical seven to 10 years to take advantage of the year-over-year improvement in tractor MPG, as well as significant reductions in maintenance and repairs,” Spence explained. “Truck fleets that operate within a corporate culture favoring long-term ownership find it more difficult to have the capital to upgrade more frequently. By moving to a shorter equipment life cycle, fleets can realize a more flexible operating model that favors newer equipment.
As the food and beverage industry moves further into 2015, a number of difficult transportation issues from prior years are keeping us company, including driver shortages, proliferating and costly regulations, and the never ending pressure to keep operating costs in check. On the flip side of the coin, fleet managers are discovering innovative technologies and better strategies to more effectively respond to new and existing challenges alike.
Recently, Food Logistics asked industry executives to share their insight on what’s ahead for this year and what they’re seeing from their vantage point.
Todd Bernitt, director of global sourcing, foodservice, at C.H. Robinson notes that one of the main challenges facing fleet managers is the increasing shift from national to regional distribution strategies.
“Historically, successful truck fleet business models capitalized on long-haul moves with minimal stops in order to limit the effects of variable cost in the equation. Today, there is a heightened consumer demand for locally sourced product requiring fleet managers to take a different approach to their asset utilization strategies, including sourcing short-haul drivers in a tight capacity market and implementing more efficient modes, such as less-than-truckload (LTL) or other consolidated options. Many fleet managers are dealing with the realization that drivers have become a variable cost in a supply and demand market.”
Not surprisingly, regulations rank high as a top concern, says Bernitt, particularly “impending changes in regulations around food safety from a supply chain standpoint.” He says that, “Fleet managers will likely need to make large investments in equipment, service, and technology to meet the demands of these regulatory changes and avoid any indemnification or liability that could result from an oversight.”
Consumer demands are another consideration. The demand for freshness is more important than ever, Bernitt adds. “Subsequently, supply chains become shorter to meet demand. In an industry where speed to market and product integrity are imperative, technology and traceability solutions will continue to be important for members of the food supply chain.
When it comes to drivers, not only are they in short supply, the turnover rate is exceedingly high, points out James Langley, vice president of business analytics, TMW Systems.
“Driver turnover remains a challenge with over one-third of fleets reporting greater than 50 percent turnover, while only 19 percent achieve better than 25 percent. The aging driver population accentuates the challenge with 89 percent claiming the average age of their driving force is over 40-years-old, and 11 percent are over 50-years-old on average.”
Langley also observes that, “In 2014, dedicated/private fleet tractor costs per mile averaged $.11—a penny less than that of over the road trucking fleets. Overall, fleet ages appear to be trending downwards somewhat as organizations look to benefit more from warranties in a market of rising expenses. However, over 73 percent of organizations report visibility to fleet maintenance information is not comprehensive.”
On a more positive note, “In the realm of fuel management, the majority of fleets are running between 6 and 7 miles per gallon, but almost 19 percent are now achieving over 7 miles per gallon in fuel economy. Contributors to the improvements are 81 percent of fleets leveraging idle reduction technologies and other fuel saving measures, while stories of leveraging analytics to alter new equipment specs and achieve 1 to 2 miles more per gallon are getting more attention,” says Langley.
Raymond Zujus, business development for food and beverage at Telogis, also mentions the impact of marketplace trends on the industry.
“The explosion of new food and beverage products and innovative packaging is affecting the business in many areas. Most notably, more complex orders and heightened customer expectations around service quality and responsiveness are driving up delivery costs to record-high levels, while eroding productivity.”
The result is that “companies are being challenged to find ways to meet—and exceed—these expectations and still maintain profitability,” says Zujus.
“More often, they are turning to connected technology for answers. Connected solutions provide visibility to fleet performance and asset utilization, accountability to driver performance and driving habits, and real-time knowledge sharing between drivers, managers, sales, merchandisers and customers, enabling operators to see where the opportunities are and where to focus improvement efforts. Leveraging connected technology and intelligent location, there are unlimited opportunities to reduce miles, manage engine idling, route more efficiently, eliminate wasted time, reduce redundant tasks, and decrease accidents and related insurance costs.”
Zujus says more companies are beginning to explore different vehicle designs and applications as a way to gain flexibility and versatility in their fleets and still meet government guidelines and environmental standards.
Admittedly, “These vehicles can be more expensive, as well as complex, and it is the wise fleet manager who understands that diligent monitoring and maintenance is the key to getting the most value from them,” he says. “Many of the manufacturers that provide vehicles to this business—Isuzu, Hino,Freightliner and Volvo—have partnered with Telogis to provide connected intelligence from the factory than can be ‘turned on’ in an instant and provide detailed information and diagnostics. Real-time alerts empower fleet managers to assess a vehicle’s problem, repair it and get it back on the road as soon as possible.”
Isuzu’s Brian Tabel, director of marketing, Isuzu Commercial Truck of America, Inc., would likely agree that the latest vehicle designs and capabilities offer multiple benefits to fleet managers.
“We continue to see customers right-sizing their trucks to have the correct truck for the route, and in some cases that means moving up in class or moving down in class.” For example, “The Isuzu N-Series diesel trucks come standard with an on-board Health Report, which an Isuzu dealer can review for fuel economy, braking, acceleration and a number of other important items that can lower the total cost of ownership.”
Fortunately, there are financing options that make it easier to acquire new equipment.
According to Brian Holland, president and CFO at Fleet Advantage, “We are seeing a growing trend in the transportation industry, as more fleet operators turn to leasing to lower their overall costs, free up capital for growth and expansion, and gain the flexibility to upgrade to newer, more fuel efficient technology when it becomes cheaper to do so.”
Not surprisingly, the ability to free up cash makes leasing very attractive to fleet managers, emphasizes Holland. “Leasing allows fleet operators to avoid tying up large amounts of capital in their rolling stock, and instead invest that money to grow other aspects of their business,” he says.
From a more strategic perspective, deeper collaboration is one way to address current challenges, says Jorge Salas, vice president of operations at Ryder Dedicated.
“We continue to see more openness for collaboration, even between competitors, to drive supply chain efficiencies,” he says. “For example, Ryder continues to leverage indirect and direct competitors within both wholesale and retail grocery distribution. We have utilized this model successfully in our region to reduce costs (both to the distributor and end customer), increase flexibility/adaptability, and when possible, combine freight to reduce the carbon footprint of the goods.”
Salas says adhering to lean principles remains highly effective, too. “The general costs and complexity associated with operating fleets and supply chains continue to increase. While fuel prices dropped for months, the cost of drivers, equipment and maintenance continued to rise. Furthermore, as an outsourced provider, we have to deliver our service at a price that allows the customer to remain competitive. And, our customers are always looking to us to bring creative ways to continue to drive efficiencies.”
This is where lean supply chain execution comes into play, says Salas. “As a lean company, our focus is on helping our customers and partners understand where their costs lie and then presenting them with cost saving initiatives. We have engineers and on-site managers constantly exploring profitable backhauls, both internally and externally, to the customer. Cube per load analysis is broken down to cost per delivery and even cost per case. We give constant feedback on how expanding delivery windows will allow better equipment utilization.”
According to recent industry insight from research firm Frost & Sullivan, leasing companies will capture more business in the Class 8 truck market (which includes most tractor-trailers) during the next six years. Access to advanced business analytic software, new truck technologies that offer reductions in maintenance costs and fuel consumption, and corporate directives to equip trucks with the latest safety features are motivating factors supporting the move.
Fleet operators are not turning to leasing solely as a form of financing, but rather to address the need for a more flexible financing solution conducive with cost effective asset management. Leasing reduces operating costs by allowing fleets to operate shorter life cycles and upgrade trucks more frequently—enabling them to take advantage of the improved fuel economy of new models. At the forefront of the leasing resurgence are asset management lessors providing expertise in new truck specifications, real-time data analysis and precise management of a vehicle’s “all-in” costs to determine the optimum equipment lifecycle and used equipment disposition timing. By using shorter equipment life cycles fleet managers are experiencing greater cost savings, better driver retention and improved corporate image and overall productivity.
For years fleet operators have attempted to rein in overall costs using the logic that operating a truck until it becomes functionally obsolete will avoid incurring the replacement cost of a new truck. However, as noted in the Frost & Sullivan report, maintenance costs continue to escalate. There is a moment in each truck’s lifecycle where it reaches a point of economic obsolescence –a “tipping point” when the truck maintenance and fuel expenses are greater than the cost of replacing it with a new, more fuel efficient model that carries a new truck warranty and significantly reduces maintenance. Forward thinking fleet operators are leveraging technology and data analytics to gain insight into the total cost of ownership. By aggregating and analyzing real-time information, they can now prepare a cohesive profit and loss statement per vehicle and adjust their vehicle lifecycle strategy accordingly. Rather than continually purchasing new equipment and reselling used equipment, a well planned lease structure will allow fleet operators to seamlessly exchange the older model for a new more efficient model. Although logic may tell you that a new truck will cost more, the reality is that it is much less costly when compared to the ever escalating maintenance, repair and fuel degradation costs of continuing to operate the older vehicles.
Government mandates to reduce CO2 emissions and improve fuel economy in heavy duty trucks are adding to the demand for the flexibility a lease-finance solution provides. Exclusive of driver wages, fuel cost is 70% of the total operating cost of a vehicle and a chief concern of fleet operators. Even a seamlessly small improvement in fuel economy can yield large-scale savings year after year. At current fuel prices, every two-tenths improvement in MPG will save approximately $2,000 in annual fuel expense per vehicle. Across a large fleet, this can equate to millions of dollars in annual savings. Recent news coverage publicizing the decline in prices at the pump can be misleading to fleet operators. While the cost of gasoline has dropped by approximately 33% since July, the cost of diesel fuel has fallen only 10%.
Although this is good news for fleet operators in the short term, winning the long game will depend on the ability to cycle in and out of new equipment at the right time and with no penalty costs while remaining focused on their core business.
About The Author
John Flynn, is CEO of Fleet Advantage, a Fort Lauderdale, Fla. – based data and analytics company for the fleet trucking industry that offers EXchangeITTM, a proprietary leasing solution.
Q&A: Fleet Advantage's John Flynn on Truck Leasing Past, Present and Future
John Flynn is CEO of Fleet Advantage. He gained initial experience in full-service truck leasing in 1972 with the Hertz Corporation, then turned entrepreneur. In 1981 he founded Chancellor Fleet Corp, and 1990 he founded First Fleet Corp., which he sold to PHH Arval in 2006. In 2008, he came together with a group of seasoned transportation professionals to create a company focused on using Big Data analytics to manage large private fleet costs. The result was Fleet Advantage.
A favorite quote highlighted on the company website is, "Vision without action is a daydream. Action without vision is a nightmare." We talked to Flynn to learn more about Fleet Advantage, Big Data, fuel economy specs and more.
HDT: In a nutshell, tell our readers what Fleet Advantage does.
Flynn: A lot of people see us as a leasing company, but we're really far more. We go in and do a fleet study, doing analytics on data such as age, maintenance costs, mpg and other components -- a pretty extensive study. We've developed software so we can plug in that information and it'll spit out the ideal lifecycle of the equipment from a cost standpoint. Invariably, that's shorter than the term they're currently running.
Then we provide a specification to improve fuel economy and reduce maintenance costs. We install an electronic online portal that monitors that equipment, maintenance repair costs, utilization, mpg, and so on, and do some comparative analysis to prior year and prior months. Our initial premise may say they should run it for three, four or five years, but the data analytics over time determines what the true economic tipping point is for that asset. And we do it truck by truck. Every truck has its own P&L statement.
For example if the truck's three years old and we have some trucks we put in only six months ago, we know the newest truck gets 7.2 mpg and the older truck gets 6.8 or whatever the case may be. We've designed a system that concludes what the annual growth is in maintenance, repair and fuel economy, and can do some predictive analytics that say, 'If you run this truck the next 12 months it will cost X, and if you get a new truck it will cost Y.'
With the low interest rate environment we're in and the ever-improving fuel economy in new engines and technologies, more likely than not in three to four years they can save money by putting a new vehicle in.
HDT: You have a 30-plus-year career in truck leasing. How has leasing changed?
Flynn: The biggest change has been in equipment and technology. Back in the early '90s, most private fleets ran trucks five to six years. We've had two economic crunches since then, and each time we have those recessions, companies tend to extend life cycle a little bit, and on top of that we went through that terrible period of time where we had all those engine emissions regulations. People get into irregular purchasing patterns, so they ended up having a hodgepodge of fleet dynamics. Then on top of it the onboard computers came into play … and getting that data … added a great deal to our offering because that gave us access to that information.
Really the old way of doing business was 'equipment obsolescence' -- run the truck till you can't run it any more, seven or eight years. We believe the proper formula is 'economic obsolescence.' Run it until a certain point in time, we call it the tipping point, where it actually saves you money to get a new piece of equipment.
HDT: What trends are affecting truck leasing and spec'ing now and in the future?
Flynn: I think the trend is going to be toward better management of costs and better asset management. People that are going to buy [or lease] new trucks, they've got to be prepared to manage the equipment lifecycle. When you can pick up technology [buying a new truck] that's going to give you [an extra] half a mile per gallon, even at $3.20 a gallon that's worth about $4,000 a year, so it doesn't take long to figure out if the lease costs you another $150, $200 a month, you're better off.
HDT: When it comes to fuel economy, what are the most common things fleets can do to improve?
Flynn: The first thing is automated transmissions. But people make the mistake of taking their old specifications and putting automated transmissions into it. You have to change axle ratios and other parts of the drivetrain [for these transmissions to be most effective].
There are aero deflectors, low rolling resistance tires, and so on, but …. at the end of the day it's the driver. We have one company, they've had some driver training issues and we designed a driver training truck and included it no extra charge, you can put four drivers in at a time, with seat belts for all.
"We're finding ways to save money everywhere we look, but you can't do it unless you can aggregate all this data."
HDT: In addition to fuel economy, other industry issues where you feel you have impact include sustainability and safety. So first of all, are trucks becoming more “sustainable”?
Flynn: Regardless of the operator’s size of fleet, more fuel-efficient equipment can have an impact on our carbon footprint in addition to operational costs. A recent survey we commissioned showed that there is still a lot of work to do in helping companies lower CO2 emissions, and their equipment is an important big place to start this movement. A more sustainable fleet isn’t necessarily the top priority for these fleet companies, but there is growing outside pressure to help them move in this direction.
HDT: How are you addressing safety?
Flynn: Safety is as important an initiative as any for us and our customers. Our EXchangeIT business model has allowed us to include state-of-the-art safety features such as collision avoidance and lane departure warning systems. Our driver training model that can seat up to four drivers at a time not only helps with training for better fuel mileage, but also allows drivers to be active participants in the training of these safety features.
HDT: Where do you see truck leasing going in the future?
Flynn:The future's all data analytics. We're finding ways to save money everywhere we look, but you can't do it unless you can aggregate all this data…. When we see one fleet that's made improvements, we apply it to the next fleet. If we see a fleet that's making a mistake, we say we know better because we've [seen] this before.
Research firm Frost & Sullivan in a recent report projected that leasing will capture more of the Class 8 truck market over the next six years, in part due to the flexibility of leasing.
This is the most enjoyable company I've ever had. We've kind of taken the antagonistic element of buying and turned it into a very collaborative effort.
HDT: So you say it's fun …tell us what you do there.
Flynn:I do a little bit of everything. My days are spent more now in reviewing the data to make sure we're reporting it properly and customers are happy. It's also looking to the future to what designs we need to incorporate in the future. We' re looking closely at a new safety program we're going to install this year, and two or three other initiatives. My job is to just keep an open mind and try to put as much vision as I can into the future and guide the company.
Brian Holland, the CFO and president of Fleet Advantage, a truck leasing and big data firm, was trying to put his finger on what it means to be a finance chief at the kind of fastgrowing, sales-driven companies that have employed him over his more than 20-year career. And then he thought of something a former boss had said to him: “You’re one of the few bean counters that I can even stand to be around.”
To read the full story please visit the link below:
Fleet Advantage Transforms Maines to the Newest, Most Fuel Efficient and Environmentally Friendly Corporate Fleet
FORT LAUDERDALE, FL (October 16, 2014) - Fleet Advantage, a leading innovator in truck fleet business analytics, equipment financing and lifecycle management, announced that their EXchangeIT™ program and strategic alliance with Maines Paper & Food Service, Inc. has resulted in overwhelming success.
The companies first partnered in 2010 to study the feasibility of a paradigm shift from 6-8 year full-service truck leases to the EXchangeIT™ operating lease model using 4-year lifecycles combined with contract maintenance. The first one hundred new lease tractors were placed in service in the latter part of 2011 and predicted substantial reductions in fuel consumption and maintenance and repair costs. The program is now in its fourth year with 525 tractors under management. The actual results verify that Maines has substantially reduced its fleet operating costs, which has enabled them to maintain a competitive advantage with their customers. The final validation of the program is a recently signed EXchangeIT™ agreement that replaces the first one hundred tractors under the first EXchangeIT™ lease. "We in-serviced one hundred 2012 model tractors in Q4 of 2011 and are exchanging them even sooner than our preliminary models predicted," said Peter Flynn, Senior VP of Fleet Advantage and Portfolio Manager for Maines. "In 2010 we promised Maines a guarantee of the lowest cost of ownership and we have steadily monitored vehicle performance data and expenses to deliver on that promise."
Maines attributes the decision to exercise EXchangeIT™ in large part to the ever improving fuel economy on new model tractors and their confidence in Fleet Advantage and its product. "We estimate the new models will increase fuel economy by close to 10%," said Terry Walsh, COO of Maines. "EXchangeIT™ also allowed us to include state-of-the-art safety features such as collision avoidance and lane departure warning systems. The new vehicles add value to our stakeholders, to the public at large and to our customers through improved reliability, on-time deliveries, reduced down time, sustainable cost and public safety."
Walsh credits a portion of the increased fuel efficiency to driver acceptance and their comprehensive in-house driver training program that maximizes MPG. Fleet Advantage also designed and sponsored a driver training vehicle equipped with features to safely train up to four drivers simultaneously. Drivers are instructed on the importance and proper use of safety equipment options and how to drive in accordance with preselected engine settings established by Maines and Fleet Advantage to maximize fuel economy.
The 100 off-lease, low-mileage 2012 models surrendered under EXchangeIT™ will be approximately 39 months old. These vehicles will be "down-streamed" to Fleet Advantage's Certified Pre-Owned Lease Program through their remarketing division. The tractors will be leased or sold into the secondary market with full history of per vehicle fuel economy and maintenance and will include two year extended warranties on major components. EXchangeIT™ is a win-win for all parties in the transaction.
About Maines Paper & Food Service Inc.
Combining a time-tested "customer comes first" mentality with forward-thinking technology and service, Maines is one of the largest independent foodservice distributors in the nation. Maines generates annual revenue approaching $4 billion in sales and is ranked #153 by Forbes magazine in its Top 300 of America's Largest Private Companies list.
About Fleet Advantage
Fleet Advantage serves corporate fleets and guarantees the absolute lowest cost of ownership by matching proprietary data driven IT processes with fleet analytics using the latest eco-efficient clean diesel technology to achieve the optimum vehicle and productivity, while reducing fuel cost. Fleet Advantage is ranked as one of the fastest-growing privately held companies in the state of Florida and the fastest growing independent truck lessor in the U.S. In 2013, Fleet Advantage was also named to Inc. magazines' 500|5000 list of fastest growing companies in the nation. In 2011, CEO John Flynn was awarded the Florida Ernst & Young Entrepreneur of the Year® award in the "Emerging" category.
November 03, 2014
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