What do Executives and Fleet Managers need to do to increase productivity with a smaller fleet than they really need?

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Maximizing Fleet Management Productivity with a Reduced Optimized Fleet

The focus for Executives and Fleet Managers is to increase productivity with a minimal fleet while achieving customer service/delivery requirements.  This typical “do-more-with-less” approach creates a challenging environment which can result in suboptimal short-term wins.

Optimizing fleet management performance starts with deciding how to best manage the tradeoffs between customer service levels (on-time-in-full performance: OTIF), efficiency (labor costs, supply chain costs), and asset utilization (facility utilization, inventory turns).

If customer service level is optimized, efficiency and/or asset utilization will be at risk of increasing costs.  If your fleet is managed and controlled, most likely your fleet will be oversized to meet your customers and/or internal customer service level requirements.  Most customer demand requirements are not level-loaded, therefore if your fleet manages every shipment, the fleet and distribution facilities will be sized for your maximum volume to maintain high service levels.  This will result in sub-optimized performance, reducing productivity and increasing costs.

To address these challenges, start by ORGANIZING your company’s inbound/outbound delivery requirements, STABILIZING resources to provide consistent, predictable cost and performance, and OPTIMIZING your end-to-end supply chain.  Below are some best practice guidelines to consider increasing productivity with a minimal fleet (Organize à Stabilize à Optimize):

ORGANIZE: Fleet and Carrier Outsourcing (Build Foundation)

  1. Hurry Up and Wait à Demand Planning and Forecasting: While this is one of the most difficult to perform, it is often overlooked.  It is critical to link short-term to long-term planning.  How do you manage your fleet to minimize cost while delivering to meet customer expectations?


2. Fleet Driver Turnover Rate: Address driver issues such as driver pay, layover cycle time, regulatory constraints that are plaguing the industry with inefficiencies, and high driver turnover.

3. Volume Surges à Minimize Internal Company Fleet Resources à Leverage 3PL Carriers: For volume surges in 3PL, contracted carriers should be utilized to minimize fleet maintenance and capital costs. Leverage available 3PL contract-based carriers for peak demands.  Size the fleet to meet your lowest volume requirements.  Ensure to integrate delivery and freight costs into a transparent real-time TMS.

STABILIZE: Customer Performance and Cost (Heijunka – Level Loading)

4. Minimize Size and Time-To-Repair: Minimize fleet size to maximize applied hours for equipment (cabs and trailers), and drivers. Maximize turns at the lowest cost per origin-destination-return (ODR) run (maximizing partial or full load returns).  Minimize time-to-repair (TtR) for fleet vehicles.  Predictable ODR milk runs should be managed by your fleet.

5. Network Stability and Transparency: Stabilize delivery performance to customer demand by transportation mode via robust network planning scenarios. Utilize data to create transparency in tracking shipments, understand cost per shipment (per SKU) and on-time performance.

OPTIMIZE: Customer Performance and Margin

6. Minimize Cost per Shipment Performance: Align manufacturing volumes and warehousing (local and regional) to ensure full-truckloads versus LTLs. Maximize use of rail.  Optimize network performance.

7. Customer/Supplier Collaboration: Analyze high cost (out-of-the-way) runs from a margin and profitability perspective to determine viability. Collaborate with customer and suppliers for alternative solutions (e.g., terms of freight ownership cost, reduced run frequency, staged warehousing)

Stabilize the delivery to the customer’s performance at the lowest delivered cost prior, before attempting to optimize your costs and margin.  Attempting to optimize prior to stabilizing will result in un-sustained improvements and create inconsistent OTIF performance for your customers while overall cost per shipment rises.

Company Fleet Managers should become comfortable giving up control of deliveries that cannot be predicted and optimized with a company owned fleet.  The “peak” loads (surge) should be managed by your 3PL carriers under your control with transparency.  This will relieve the company’s fleet team from having to manage demand surges allowing them to focus on optimizing fleet cost.  Once this is stabilized, network optimization and adjustments of DCs/Warehousing can be performed.

In summary crawl (organize) and walk (stabilize), before you run (optimize).


Additional Reading

Top Talent: Supply Chain Operational Excellence

Fleet Driver Logistics: How to make Your Fleet More Productive with Less and Reduce Driver Turnover

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