Saving Time, Saving Dollars
The financial upside of reducing a route (or increasing productivity) by 30 minutes a day.
Running an effective fleet operation is all about efficiencies—especially time efficiencies. According to industry research, the global market for fleet management solutions will experience significant growth over the next few years. The current economic climate, shrinking profit margins and sustainability goals have all driven the demand for technology solutions to improve efficiencies and reduce costs.
Some of the more advanced fleet management solutions on the market today have the power to help waste fleets slash up to 30 minutes per truck from daily routes. We can imagine that this will have a measurable bottom line impact. But what exactly are the dollar impacts and how will these be achieved?
To best illustrate the projected savings from a fleet management implementation, we’ll use the example of XYZ Disposal, a waste management firm with a 50 route per day operation. By using a few simple fleet management tools, XYZ Disposal is better able to manage its assets and staff toward a goal of improving its efficiencies. Whether you reduce route times by 30 minutes, or increase productivity by 30 minutes, the net effect is essentially the same. Time-saving fleet management tools should include:
Onboard driver direction to better plan each truck’s routes to reduce time spent on the road and the number of engine hours per day. Driver direction optimizes routes to use less fuel and driving time. This is especially important in the roll-off business where routes tend to have more new stops.
Fleet mapping to deliver a real-time map view of individual vehicles’ positions relative to towns, cities, highways and streets. With fleet mapping and the ability to digitally send route information to the driver, dispatchers can more efficiently assign stops with an up-to-date view of the routes for each truck. Combining mapping and a real-time view of the run sheets allows dispatchers to make better decisions to reduce route distance and driving time. Better dispatch decisions lead to better economics.
Back office integration with the RMS (routing and billing software) saves hundreds of hours in administrative time as drivers and dispatch no longer have to manually key route data into those systems.
Reporting and alarms features provide automated and accurate data for fleet managers to better manage assets. Alarms automatically alert managers on key issues such as speeding and idling in real-time—eliminating the need for ongoing and inefficient data review and analysis. Alarms can alert drivers in-cab if they are exceeding speeding or idling thresholds so that they can adjust immediately. In addition, drivers inherently change behavior once they now know everything they do can and will be monitored and managed.
XYZ Disposal’s time saving analysis is broken down into three potential results from worst case to best case scenario: 15 minutes, 20 minutes and 30 minutes. It takes into consideration the three major costs of operating a vehicle—labor, vehicle maintenance and fuel.
This analysis assumes that the average hourly burden rate to operate a vehicle is $80.13 for an annual cost of $221,155 per vehicle. It further assumes that a vehicle is operating 10 hours per day, 22 days per month, 12 months per year and that administrative costs equal 10 percent of driver labor.
Labor: Driver Hours and Overtime Reduction
The average annual cost for every driver plus office overhead is estimated at $112,332. By automating run sheets, reducing start times, improving outbound planning, reducing both administrative and driver paperwork, optimizing pickup dispatch and more, XYZ Disposal estimates the following labor-related savings:
Best case: Reducing 30 minutes per day (5.2 percent) saves $5,808 annually per driver
Worst case: Reducing 15 minutes per day (2.6 percent) saves $2,904 annually per driver
Expected: Reducing 20 minutes per day (3.4 percent) saves $3,872 annually per driver
Vehicle and Maintenance Cost Reductions
The average annual vehicle operational burden rate is estimated at $77,280 for parts and labor assuming 10 hours a day per truck. By better managing hard braking and driving patterns, and reducing idling and accidents, XYZ Disposal estimates the following vehicle-related savings:
Best case: Reducing 30 minutes per day (4.9 percent) saves $3,809 annually per truck
Worst case: Reducing 15 minutes per day (2.5 percent) saves $1,904 annually per truck
Expected: Reducing 20 minutes per day (3.3 percent) saves $2,539 annually per truck
Fuel Consumption Reductions
The average fuel costs per truck are estimated at $31,543 assuming 160 miles per day at a fuel cost of $3.99 per gallon with 4.01 gallons of fuel being consumed per hour. By monitoring and reducing idling times, better managing speeding and reducing the amount of unnecessary travel, XYZ Disposal estimates the following fuel-related savings:
Best case: Reducing 30 minutes per day (5 percent) saves $1,573 annually per truck
Worst case: Reducing 15 minutes per day (2.5 percent) saves $787 annually per truck
Expected: Reducing 20 minutes per day (3.3 percent) saves $1,049 annually per truck
Working from the worst case to best case scenario options of 15, 20 or 30 minutes time savings, the annual cost savings benefits range from $280,000 to $373,000 to $556,000, respectively, per year for XYZ Disposal’s fleet of trucks. This amounts to annual savings of anywhere from $5,500 to over $11,000 per trucks! These are compelling numbers.
Additional Savings and Benefits
However, the previous description is not an exhaustive example of potential fleet cost savings. It does not consider or evaluate improvements such as automated service verification that lead to better customer service. Waste fleets using fleet management solutions have amply proven that automated service verification dramatically improves customer service efficiencies and decreases credits and write-offs accordingly.
Newer RFID-enabled cart delivery and management systems also drive bottom-line benefits. By associating specific carts to customers and tracking service specifics in real-time, waste firms are capturing missed revenues and enabling process improvements and cost savings through automatic asset tracking.
Fleet management solutions can also improve safety standards which significantly impact fleet costs. With the potential threat of fatalities and injuries, and the related costs of accidents—safety initiatives have become a critical concern for any fleet manager. Fleet management solutions provide real-time visibility into driver activity and behavior. Managers that have limited or no visibility into their drivers’ behavior cannot address or mitigate at-risk drivers. This lack of visibility directly impacts their risk factors, safety records, operating costs and insurance premiums.
Realistically, any fleet operation can fall off track in terms of efficiencies. The difference between success and failure is determined by how quickly you can identify that you are off track, and how quickly you can get back on track. Advanced fleet management solutions deliver real-time business intelligence on your performance so that you can identify problems in hours rather than days. This enables you to be proactive to take action and resolve issues faster. Time is money—and a problem fixed quickly is a far less costly problem.
By adding in these considerations, it is entirely plausible for a well run fleet to achieve more than $12,000 in annual costs savings for every truck. For XYZ Disposal, this would mean savings of $600,000 per year. The point is fleet management solutions can make a big difference to your profitability. The numbers speak for themselves.
Achieving Cost Saving Goals
Every waste and recycling firm is unique. How they leverage fleet management technologies to achieve cost-saving goals is dependent on their current operations and management. While some efficiencies are universal, there is no one size fits all. Typically, major time savings come from a multitude of incremental improvements throughout the entire operation.
When selecting a fleet management vendor, make sure that they understand your operations and goals and will create a solution that fits the way you work. The key to achieving efficiencies is to set clear goals, implement the fleet management solution in a carefully phased approach that is digestible for your staff, and work closely with your vendor to measure, tweak and adjust as required. The results will be well worth the effort.
Martin Demers is a proven C-level technology executive with more than 20 years experience in the technology and communications sectors. He joined FleetMind in 2007 as co-owner and became the company’s CEO. Previously, he served as President and COO of Radialpoint, CEO of Interstar and as CMO of ACE*COMM. Martin has also held a number of leadership roles at Teleglobe Foxboro and CAE where he managed large scale international projects. Martin has often been quoted in industry publications and is a frequent speaker at industry events. He can be reached at [email protected].