Ever wondered why some company fleets run like well-oiled machines while others struggle to keep their wheels turning? The secret sauce is fleet lifecycle management.
It’s not just a fancy term—fleet lifecycle management is the key to unlocking serious savings and keeping your vehicles on the road longer. However, it might seem like a handful at first. You’re juggling vehicle resale values, maintenance schedules, and fuel costs while figuring out expense management and reporting.
In this article, we’ll dive into what fleet management is, the components of a fleet management plan, how to create one, and vehicle lifecycle management methods.
What is Fleet Lifecycle Management?
Fleet lifecycle management is a set of processes that maximize the value of each vehicle in your fleet. It involves purchasing, monitoring, and replacing fleet vehicles to maintain an optimal fleet total cost of ownership.
Now that we have a handle on what fleet lifecycle management is, let’s dive into why it’s so crucial for your business.
Why is Vehicle Lifecycle Management Important?
Vehicle and fleet lifecycle management are important for the following reasons:
Optimizing total cost of ownership (TCO): Vehicle lifecycle management helps you choose the right financing, monitor resale values, and minimize running costs. All of this optimizes your total cost of ownership.
Ensuring vehicle safety: Safety isn’t just about following FMCSA regulations—it’s about protecting your drivers and reputation. A fleet management policy includes regular maintenance schedules and timely replacements, ensuring that every vehicle in your fleet is road-ready and safe to operate.
Ensuring optimal service: Your customers rely on your fleet to deliver goods or services on time. By managing your fleet’s lifecycle effectively, you’re ensuring that your vehicles are always in top shape. This reliability translates directly into customer satisfaction and repeat business.
Increasing driver retention: Happy drivers stick around, and nothing makes a driver happier than a well-maintained vehicle. By implementing a strong vehicle lifecycle management strategy, you’re boosting morale and retaining experienced drivers, saving recruitment and training costs in the long run.
Components of Fleet Lifecycle Management
Let’s break down the key ingredients that make up a solid fleet lifecycle management strategy. Think of these components as the secret recipe for keeping your fleet running smoothly and cost-effectively:
Purchasing: This is where it all begins—it’s not just about finding the best deal, it’s about thinking long-term. For example, buying vehicles outright might cost more upfront but is worth it if your cost of capital is lower than fleet financing interest rates.
Monitoring: This involves regular maintenance checks and proactively tracking performance metrics. Use fleet management software to monitor fuel consumption, mileage, and maintenance schedules. By staying on top of these details, you can catch small issues before they become big, expensive problems.
Replacement: Out with the old, in with the new—but timing is everything. Replacement is a balancing act between keeping vehicles long enough to maximize their value and replacing them before maintenance costs skyrocket. Analyze your fleet data to determine the optimal time to sell or trade-in vehicles. The goal is to maintain a modern, efficient fleet while keeping your TCO in check.
Fleet Replacement and Lifecycle Management Methods
Let’s talk about the elephant in the garage—vehicle replacement. While each component of fleet lifecycle management is critical, your fleet replacement policy can make or break your TCO, and your fleet’s total uptime.
Replace a vehicle too late, and even the sweetest fleet financing deal can’t save you money. Jump the gun, and you’re leaving cash on the table.
So, how do you nail that perfect timing? Here are a few vehicle lifecycle management methods you can use.
Fleet Replacement Method 1: Replace After Mileage or Age Thresholds
Simplicity reigns supreme and the mileage or age threshold method is the most simple one out there. Set a predetermined endpoint for vehicles based on either years in service or miles on the odometer.
For example, seven years or 300,000 miles? Time for retirement.
This method removes the guesswork from vehicle replacement decisions, creating a clear, objective standard that applies across the board.
However, it has its limitations. While it simplifies the decision-making process, it doesn’t account for the nuances that can make a big difference in fleet TCO. Some vehicles are built to last, performing efficiently well past your predetermined thresholds.
Others might become money pits long before they hit your thresholds.
You might miss out on opportunities to maximize the value of their more reliable vehicles or cut losses on problematic ones. Also, if your fleet has specialized vehicles that are hard to locate and purchase, this policy can put you in a tough spot.
Fleet Replacement Method 2: Vehicle TCO Analysis
The Vehicle TCO Analysis method takes fleet lifecycle management to a more refined level.
This method revolves around setting a target total cost of ownership for each vehicle. This isn’t a one-size-fits-all number, but rather a customized threshold based on several factors.
How often is the vehicle used?
What are its maintenance costs looking like?
What’s its potential resale value?
By considering these elements, you create a unique financial fingerprint for each vehicle in your fleet.
The moment a vehicle’s costs start to exceed its TCO threshold, it’s time for a replacement. This method ensures you’re making replacement decisions based on data rather than gut feelings or arbitrary timelines.
However, to implement this approach, you need more than a clipboard and a calculator. You need telematics to track vehicle usage, smart fuel cards to monitor expenses, and integrated software to pull all this data together.
Without these tools, trying to run a TCO analysis is like trying to perform surgery with a butter knife—technically possible, but not recommended.
Fleet Replacement Method 3: Vehicle Maintenance Thresholds
This approach draws a line in the sand for each vehicle’s maintenance costs. You set a ceiling for repair expenses, typically around 25-30% of the vehicle’s current resale value.
If fixing it costs more than your predetermined threshold, it’s time to shop for a replacement. To make this work, you need to be plugged into telematics systems to keep you informed of each vehicle’s health in real-time. You need smart fuel cards to help you track every penny spent on fuel and operating expenses – and even better if you can plug into your in-house accounting system.
But let’s face it, no method is perfect. This approach can fall short when you’re dealing with specialized vehicles. For example, a custom-fitted van that’s essential for a specific job.
In cases like these, the maintenance threshold might say “replace,” but the reality of finding a suitable replacement could say otherwise. It’s also not great at handling those one-off repair situations that might skew the numbers.
Proactive fleet management: 5 steps for managing vehicle lifecycle
Creating a solid fleet vehicle management plan is about crafting a strategy that fits your unique needs like a glove. Here are five steps to creating a plan that works for you:
- Organize systems to gather vehicle data: Equip your fleet with comprehensive fleet management software integrated with telematics and smart fuel cards. This foundation provides the data-driven insights necessary to craft a tailored, effective fleet management plan.
- Define your vehicle lifecycle management method: Select one of the previously discussed approaches that aligns best with your current fleet needs and capabilities. Don’t worry about perfection—you can refine your method as you gather more data and insights over time.
Analyze TCO for optimal financing: Evaluate interest rates offered by various lenders against your company’s internal cost of capital. - Opt for the lower rate to minimize your total cost of ownership and maximize savings.
- Monitor ongoing expenses: Leverage your fleet management software to track all costs associated with your vehicles. Look beyond just fuel and maintenance—include licensing fees, tolls, and other ancillary expenses to get a comprehensive picture of each vehicle’s true operating costs.
- Replace vehicles based on policy: Implement your chosen replacement strategy consistently, using the data you’ve gathered to inform decisions. Keep evaluating its effectiveness, remaining flexible to adjust your approach as you gain more insights into your fleet’s performance and financial efficiency.
Smart Fuel Cards Empower Fleet Lifecycle Management
As you begin implementing a fleet lifecycle management policy, you’ll realize that you need a solution that automates fleet expense tracking. By staying on top of every vehicle’s expense, you’ll avoid unexpected maintenance headaches and have more data points to dissect each vehicle’s performance.
Smart fuel cards are the Swiss Army knives of fleet expense management.
From automatically recording every fuel purchase and maintenance cost to controlling those sneaky little expenses that slip through the cracks, smart fuel cards help you enforce a fleet expense policy without burdening you.
You can even instantly deactivate them if something seems off.
The best part of smart fuel cards is how they connect with your fleet management software.
Picture a clean, intuitive dashboard where all your fleet expenses are neatly organized and easily accessible. No more drowning in a sea of receipts or wrestling with spreadsheets—everything you need is at your fingertips.
Learn how Coast’s Smart Visa Fleet Fuel and Gas Card saves you 2-10c per gallon and gives you cashback on all fleet expenses.
Apply in minutes