Fleet operators know that these are the times that test their mettle and business savvy.

The economy is tough and getting tougher as the litany of woes increases. Product volume is dropping. Distribution options are shifting. Employment levels are dropping. The one bright light is decreasing fuel prices, which plummeted from more than $147 per barrel of oil in July to just above $30 by December. Coping with all that is causing companies to reevaluate how they conduct business. Commercial fleet managers, for their part, must work smarter and run their fleets more efficiently than ever to stay ahead of the forces that are buffeting major corporations and ‘ma and pa’ businesses alike.

Michael Cole, director of North American Transportation for Kraft Foods Inc., summarizes the situation this way: “The biggest challenge in managing a fleet today is dealing with a time of extreme unpredictability, whether it is fuel costs or overall volume, and doing so in an environment of ever-escalating expectations from our customers and our shareholders.”

The spate of layoffs triggered by the recession adds another layer of complexity. “The biggest thing we’re challenged with is deciding when to buy vehicles if we may be stuck with cars because of downsizing,” according to Tony Rossi, senior program manager and operations support for Xerox. His solution, at the moment, is to keep vehicles longer, at least until the situation solidifies, and to work closely with the human resources department to forecast vehicle demand.

Fuel efficiency

Xerox lists fuel efficiency as one of its biggest challenges. When Xerox’s Canadian Technical Service team audited the automotive fleet in 2006 (when oil was just below $70 per barrel), it found that nearly 60 percent of operating costs were attributed to fuel consumption. To combat that, it began what it dubbed a Green Belt Lean Six Sigma project. One of its first actions was to assess the need for the minivans, cargo vans and pickup trucks that comprised most of the 800-vehicle fleet. Downsizing to smaller, more fuel-efficient vehicles-including small SUVs and electric hybrids-saved more than $100,000 annually in fuel costs without sacrificing cargo space, or the traction and maneuverability needed during the Canadian winters, Rossi says.

In Europe, the fleet includes many personal cars, Rossi continues. For those, Xerox began using 1.9 liter, clean diesel engines in 2002. Now it’s using 1.3 liter, 90 horse power engines.  The change increased mileage from 47 to 59 miles per imperial galleon, Rossi says. In the process, CO2 emissions were reduced by five to six tons.

“In the U.S., we have mainly a service fleet,” Rossi points out. The challenge here is to have the right mix of cargo vans, minivans, station wagons and hatchbacks to ensure that each individual is in the right vehicle for the assignment and territory.

Dispatch operations provided an obvious avenue for improvement. Xerox is transitioning from a situation in which service team members decide who is nearest the next call, to one in which members’ GPS units are integrated into the dispatch system. “Currently, they all talk to each other and determine who’s nearest the call,” Rossi says. The new configuration can transform dispatches from debates to firm assignments, thus increasing productivity.

Fuel Quest provides another way to cut fuel costs through localized arbitrage for bulk purchases. “We help companies decide which supply sources is correct,” explains Ryan Mossman, Vice President and General Manager of fuel management. That includes the timing of bulk buys, the choice of buying from distributors or directly from oil companies, and the locations involved. Other options, like wet hosing, in which smaller tankers with nozzles fill up the fleet at the yard, and installing tanks and fueling facilities also figure into the calculations.

“Companies often keep way too much fuel,” Mossman says. Optimizing the order and guaranteeing delivery to within a two hour timeframe can free up tens of thousands of dollars, particularly in a volatile fuel market. The rack price of fuel lags about one day from the movement of oil on the stock exchange, he explains. Therefore, “It’s possible to have some idea of tomorrow’s market conditions,” he says and time orders accordingly.

Alternative fuels

In terms of fuel, “We’re experimenting with just about everything out there,” UPS spokesperson Donna Barrett says. UPS has one of the largest alternative fuel fleets in the nation, with 1,576 alternative fuel vehicles in its small package fleet. Biodiesel, natural gas, electric hybrids and other options have all made their appearance. A hydraulic hybrid developed by NavStar and the EPA is showing a 40 to 50 percent reduction in energy consumption, she says.

At Xerox, “all the vans purchased in the past three years have been E85 compliant,” Rossi says, so they can run on fuel with up to a 15 percent ethanol blend. However, he adds, “The economics didn’t pan out.” Now the company is moving towards hybrids, with about 100 in the fleet.

Unlike many fleets, which keep vehicles a specified timeframe, Xerox bases retention on mileage. Keeping vehicles till the odometer reaches 100,000 to 110,000 miles is typical, Rossi says. That equates to about five or six years, but with the recession, he may keep them a bit longer. “We have an open ended lease with GE Fleet that is paid for over 50 months, so after that, we’re only paying for the gas,” he says.

Beyond fuel

With a fleet of more than 250 over-the-road tractors, Kraft is working closely with the EPA’s SmartWay Transport Partnership program to test and deploy a range of solutions to optimize fleet management. For example, “We’ve replaced nearly 100 tractors from 2003 with newer, cleaner burning, 2008 models and outfitted them with idle-reducing auxiliary power units (APUs). We’ve implemented a no idling policy at all of our mixing centers and many of our plants, and have reduced governed top speeds on all our over-the-road tractors from 65 to 62 miles per hour,” according to Cole. That, coupled with other energy conservation measures, resulted in a 7 percent improvement in miles per gallon when compared to 2003 figures.

Last year, Kraft reduced miles driven between manufacturing and distribution facilities by more than nine percent by optimizing routing and its internal network, consolidating distribution and reducing multiple stops. Kraft also has pilot programs in place to test advanced engine oil filtration systems, cetane boosters and various types of tires. “We’re also experimenting with tractor side skirts and perforated mud flaps,” Cole adds.

UPS made headlines a few years ago with its “no left hand turns” policy for its 94,000 vehicle small package fleet. Barrett explains that the policy is just part of its efforts to optimize delivery routes. “Left hand turns are more dangerous and increase idling time at stop lights,” she points out.

Reducing idling time is the goal of most commercial fleets. TransLogic Auto Carriers, for example, uses electric motors to operate the hydraulics needed to load cars, rather than letting its trucks idle, according to Russ Parks, Vice President of Operations. UPS, like many firms, staggers delivery times based upon flow into a facility. Night deliveries are increasingly common. That practice has helped UPS (which also delivers cars and trucks) deliver an additional 6,000 vehicles per month, according to Phil Vickers, director, UPS automotive industry solutions.

“Optimize” is the UPS watchword, Vickers says. With that in mind, the company works to find the most efficient way to deliver packages. Sometimes that includes motorcycles and even bicycles, Barrett adds.  In cities with tight parking or narrow streets-Florence or New York, for example-the package trucks are parked in a central location while the driver delivers small packages by bicycle.

Technology

To optimize return on investment, David Gulian, president and CEO of InfoLogix, reminds that implementing the right type of enterprise technology properly makes a difference. Automatically uploading the latest identification and location information in real time can result in improved order accuracy and increase on-time delivery, he says.

For example, remote asset management is credited with reducing the number of trailers rented by a trucking fleet by 60 percent while increasing cargo capacity and, according to a recent Skybitz report, the trailer to tractor ratio dropped by 15 percent over a four year period. The reason, according to Skybitz CEO Homaira Akbari, PhD., is that companies now know where their trailers are, and whether they’re full or partially full. “Companies lose 30 to 60 minutes daily searching for their trailers,” she says.

Just adding technology isn’t a solution, however. It must fulfill a need. TransLogic Auto Carriers, for example, had a system that tracked such metrics as whether drivers were breaking hard and their average speed. It provided some worthwhile information, but, ultimately, “it didn’t work for us,” Parks says.

What did make a difference was working through tractor-trailer owner/operators. “You don’t have the cost (of maintaining a fleet) and they care for the trucks better than do hired drivers. They are more concerned about damage-free deliveries, too,” he says. Why? “They’re businessmen.”

Management decisions

Before Xerox began working with a fleet management firm, Rossi recalls, “We had about 35 people doing fleet management at one time. With GE, we avoided that.” The move to a fleet management company also keeps the vehicles off the balance sheet. In terms of day-to-day operations, GE deals with the drivers for issues like maintenance and repairs, and the Xerox fleet manager manages the relationship between the two companies. “We work shoulder-to-shoulder,” he adds.

Optimizing the commercial fleet goes beyond managing the fleet to discussing how it is affected by other business units. At Xerox, Rossi says the company worked to improve the components that were most often replaced, either redesigning them so customers could replace them easily themselves, or making them more reliable. Xerox also increased its remote diagnostics capabilities. “About 40 percent of the time, issues can be fixed remotely,” Rossi notes. Because these approaches reduce service calls, Xerox can maintain a smaller fleet.

UPS also leverages its position as one of the largest commercial fleets in North America by allowing its customers to purchase fleet vehicles through UPS. It’s a win-win situation that helps UPS get better pricing through high volume discounts, and increases customer loyalty by increasing their savings. The dealers, in turn, move more vehicles with less paperwork, increasing their own productivity.

Auction action

“We’ve seen a dramatic increase in the number of companies with large fleet that are moving to online auctions,” to reduce fleet size or divest themselves of older vehicles, Dan Parsley, CEO of AssetNation, notes. The benefit, he continues, is that companies reach an international audience without the expenses of moving assets to an auction yard or of preparing them for quick sales. Parsley reports strong markets in Mexico, the Caribbean, Central America and the Philippines for U.S. assets, particularly for damaged equipment, which is refurbished and often resold into the U.S. 

Most vehicles listed on AssetNation sell within five to seven business days, he says. “It’s very straightforward.” The optimize results, “Supply as many pictures possible from different angles, including a wide angle shot and the VIN number, and complete details on the maintenance history and condition of the vehicle, “ he explains. “The more information, the easier the sale.” It also helps to give the auctioneer leeway on how to position the asset and, once an item is flagged for auction, to ensure it isn’t being used or its parts cannibalized.

On the flip side, “If you have protected cash in preparation for the opportunity afforded in these days of depressed demand, there is an opportunity to come out of the recession with new or near new equipment,” at bargain prices, points out Bill James, chief executive, Sydney Consulting LLC (USA). “There are fire sales going on for all types of assets,” James says. wt



Contributing Editor Gail Dutton covers transportation and logistics from her base in Washington state.

Sidebar: The Wheels Go 'Round...

Everybody knows that proper tire inflation makes a huge impact on gas mileage. What you may not realize is that the type of tire also has a significant impact. Michelin America Truck Tires has introduced the X One® wide-sized tire to replace two dual tires on tractor-trailers.

Bill Knee, group leader, transportation technology research group, Oak Ridge National Laboratory, reports that in a 700,000 plus mile test of six tractor trailers, running in all conditions and weighted states, averaged at least a 6 percent increase in fuel efficiency. When they were fully loaded, fuel efficiency was 10 percent higher than for rigs running with dual tires. Michelin’s customers report similar results, according to Michelin’s Don Baldwin, Product Marketing Manager.

There may be another benefit, too. Preliminary evidence suggests, “There may be a positive effect on roll stability,” Knee adds. Data on that aspect of the tires is being compiled now, with analysis expected to begin by June. Users also report a tighter turning radius-by about 8 or 9 feet-and dramatically reduced rutting of roads, which is an important consideration for logging trucks and other off-road applications. They also reduce the overall weight of the vehicles, allowing them to carry more. A tanker truck, for example, can carry about 130 gallons more liquid simply by changing to wide tires. Baldwin says the tires also reduce the number of flats simply because they are readily accessible, unlike the inner tires on dual configurations.