Anticipating Budget Cuts? Here’s a Few Places to Start:

This week on Fleet FYIs, we’re chatting all about budgets. 

In this episode our host, Gretchen Reese, is  joined by Utilimarc senior analyst, Paul Milner.  Paul primarily works on custom solutions for clients and right-sizing initiatives. With the company for nearly ten years, he helps find the stories and solves problems within complex data sets, making him the perfect person to dig a little deeper into this topic.

Today, Paul and Gretchen begin to break down what can be expected from the shockwaves of COVID-19 in relation to fleet budgets, the after-effects and some of the parallels that can be drawn from previous crises like The Great Recession of 2008-2009. 

 Fleet growth and decline is something to be expected, as economies are always changing and there will always be ways to better optimize your fleet. For some, it may be that they need to undertake a right-sizing initiative, for others, more extreme measures. Either way, looking at your fleet data will allow you to be better equipped to deal with any factors that may affect your annual budget or operational strategy.

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Here’s a quick summary of my conversation with Paul:

With so many opinions surrounding upcoming or current budget cuts, it can all get a little muddled. Beginning to cut through the noise, here’s a few of Paul’s key talking points for this episode:

• The trends we’re seeing from COVID-19 echo what we saw in 2008-2009.
• The rate at which fleets purchase new vehicles may not recover until 2022.
• Renting can be an option to save capital when it comes to budget cuts.
• Right-sizing your fleet remains ever-important.
  
  and
  
• Understanding your mission critical equipment needs is essential for a solid fleet management strategy.

Paul’s most memorable quotes:

“The great recession hit in 2007-2009. We saw in our data, a roughly 20% reduction in new vehicles in service for the 2010 calendar year. So there’s always about a year lag when the economy goes down in comparison to the effect we see in fleet budgets.”

“Across the industry over the past 5-10 years, we’re showing that more fleets are supporting more vehicles per staff members than any year we’ve had on record, fleet sizes are increasing but staff is not.”

“If you’re able to quantify the risk of the vehicle being unavailable for the crew when they need it, then the capital investment starts to become very easy to justify…When you’re budget is being scrutinized, it becomes very important to mathematically defend those spare units.”

Paul Milner, Anticipating Budget Cuts? Lessons Learned From Past Crises to Face Those of the Future with Paul Milner | Utilimarc Fleet FYIs Podcast

And if you’re more into reading – that’s fine, too! Here’s a copy of the transcript for the first episode of #UtilimarcFleetFYIs:

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Anticipating Budget Cuts? Lessons Learned From Past Crises to Face Those of the Future with Paul Milner | Utilimarc Fleet FYIs, Episode Two

Gretchen (00:04):

Hey there, Gretchen here. Welcome to Fleet FYIs, the weekly podcast by Utilimarc that makes fleet management strategy smarter by bringing to you nearly two decades worth of data insights, industry hot topics, and expert analysts together in conversation. Our aim is to help you better understand your data and your key metrics by hosting candid conversations with some of the industries finest. But before we begin, if this is your first time listening to our podcast, thanks for hitting the play button. I’m so glad you decided to come along for the ride and have a listen. Once you’ve finished today’s episode, if you could take a few minutes to leave us a review, we’d really appreciate it. Give us a rating, tell us what you liked or perhaps what you didn’t, or you can leave us a comment or a question about what we’ve covered today. Also, if you have a topic that you’d love for us to cover but we haven’t touched on yet, let us know. We’d be happy to go over it in detail in a later episode. Sound good? Alright. Let’s get back to the show.

Gretchen (01:06):

Hey there. Happy Thursday. Welcome to the latest episode of Fleet FYIs. This week we’re diving into a topic that in my opinion, it’s pretty relevant, especially now with COVID-19 still sending shockwaves across multiple industries. Today on Fleet FYIs, it is all about budgets. We’re touching on tips on how to potentially maintain a fleet budget if you’re in a crisis, what to do if you’re anticipating budget cuts or how to plan for a potential future crises that could potentially affect your spending in the future. Fleets are actively aiming to reduce costs. If you ask any fleet manager today, COVID-19 aside, odds are they’ll agree. This could be for a variety of reasons, external – like economic fluctuation, or internal – such as an interest to outsource or improve their operations. Fleet growth and decline is something to be expected as economies are always changing and there will always be better ways to optimize your fleet.

Gretchen (02:03):

For some, it may be that they need to undertake a right-sizing initiative. For others, maybe it means that they need to undertake more extreme measures. It totally depends on the fleet and that could even vary by region or by state. Either way, looking at your fleet data will allow you to be better equipped to deal with any factors that might affect your annual budget or your operational strategy. To dig in a little bit deeper here, we’ve got Paul Milner on Fleet FYIs today. Paul is a Senior Analyst at Utilimarc and he primarily works on custom solutions for clients and right-sizing initiatives.

Gretchen (02:37):

He’s been with the company for nearly 10 years, so he’s kind of had his fingers in a little bit of everything. His big kicker is that he really tries to help find the stories and solve problems within complex data sets, which is kind of cool. Anyways, let’s bring him on.

Gretchen (02:51):

Hey Paul, welcome to the podcast. I want to start with something easy, just to help people get to know you a little bit better. I’ve told them previously that you’re a Senior Analyst for Utilimarc, but because it’s a little bit hard to know exactly what senior analyst means, because it can change based on the company. Why don’t you start by giving us a bit of a rundown as to what makes up your day as a Utilimarc Senior Analyst?

Paul (03:16):

Sure. Normally, I just say, I do a lot of math, that’s what I do. But I like the fourth quarter because it’s a time where we get to do a lot more exploration into the data itself, finding new applications and insights and what we’ve collected to really help clients out.

Gretchen (03:31):

I love the exploration phase. I think that’s really cool and I think that’s where a lot of innovation can really happen. You mentioned you really liked the fourth quarter, but for so many businesses, the fourth quarter is considered their absolute busiest peak season. I’m curious though, in your opinion, what would be peak season for data science at Utilimarc?

Paul (03:51):

Yeah. Just because of the way the benchmarking service works, we get a lot of data sets that come in, in the February to April timeframe and we’re kind of churning those out as quickly as we can to get the benchmark results available to everyone, and then right kind of front. After that’s available through what seems like the August time period, a lot of folks are doing their kind of high level analysis, corporate reporting metrics, and they’ll rely on us quite a bit to help with the investigation into their performance for the year and any other help that they might need with their corporate reporting for the year.

Gretchen (04:33):

Okay. I’m curious and I’m sure there’s a few others out there too, but I’m a really big words person. I mean, I don’t think I make it a secret that I like to talk to people. But I’m curious, how did you decide, when you say that you do math every day and it seems like you enjoy it, how did you decide that a career in mathematics or in data science was a career that you’d be interested in pursuing? What sparked the interest there?

Paul (04:57):

When I went into college, I wasn’t really sure what I wanted to do. I knew I was good at math, so I just kind of kept taking math courses and before I knew it, I wound up with a major in mathematics. I was originally in the education program, but rather than going straight into teaching, I thought it would be a good idea to get some kind of practice using those skills in a professional setting. Inevitably when I have a student asked me, “When am I ever going to use this in my real life?” I’d have an immediate counter-example for them. I haven’t really gotten back into teaching, but I think a good portion of my job is helping clients understand their data and helping them understand the mathematics that we use to derive the insights that we do. I think overall, it kind of turned out to be a good fit for me.

Gretchen (05:42):

Ipso facto, still kind of getting into teaching then?

Paul (05:46):

Still kind of getting a little bit into teaching. Yeah.

Gretchen (05:50):

I never really pictured you as the education type, but that’s really interesting. That’s actually really cool. What level of school were you looking at? Was it high school, college or something else?

Paul (05:59):

No. It was a high school level and I think it’s just, I’m a philosophy guy as well. Epistemology is the study of how we know what we know, and it’s always been really interesting and to me, that kind of light bulb moment where kids go from, or not just kids, but all people go from kind of not understanding it and to understanding it and how that works with different types of people, has always been pretty interesting to me.

Gretchen (06:29):

No kidding. Yeah. I definitely think you’re right there and it’s definitely going to give me something to think about the next time I learn something new when the little light bulb goes off. But one thing that I’d really like to touch on, and this is kind of getting into the meat of what we’re going to be talking about today is budget cuts, specifically because of its relevance right now. I mean, with COVID-19 sending shockwaves throughout various industries and specifically the fleet industry, with fleets large and small, no one’s not been affected by this. Are you seeing any clients use of their fleets change as the pandemic has continued on, either in an increase in utilization or maybe even a total standstill?

Paul (07:09):

Yeah. It’s been a little odd because on the one side, it’s an essential service. We haven’t seen the same contraction in activity that we’ve seen elsewhere in the economy. But then, kind of the opposite side because of the extra social distancing requirements, fleet activity in particular has started to increase, crews who used to carpool to work sites now are winding up taking separate vehicles and there’s additional cleaning requirements for the mechanics who are maintaining those vehicles as well. In kind of a weird way, the fleet portion especially, is busier than they’ve ever been. But I know a lot of folks are still kind of worried about budget restrictions for the coming year just based off the economy.

Gretchen (07:55):

One thing I would really like to know and maybe you have the answer to this maybe you don’t. But because some fleets are seeing an increase of utilization, one person per cab or that increased expense or a potential overspend with cleaning efforts and making sure that everything is absolutely up to CDC standards or company’s standards, making sure that everyone has their own vehicle that’s operating properly. It’s not just fleets, but most people plan for a little bit of budget flexibility. Would you say that because COVID-19 wasn’t planned for, I mean, no one thought that we would be where we are today. Do you think this flexibility might be gone now that with all of these new cleaning measures and the need for more vehicles out on the road, do you think this flexibility has been hindered at all? Is it gone completely?

Paul (08:42):

Well, people are definitely going to expect to have their fuel costs and their maintenance costs go up much more than they have budgeted for this year, because of that change in work practice definitely.

Gretchen (08:54):

That’s interesting because, I mean, I think everyone thinks that, Oh, utilization might mean, who knows more flexibility with the vehicles you have, but fuel is a huge part of it and I think for fleets especially, fuel it might be one of the largest costs that they have aside from maybe maintenance or data management. But I’m anticipating like many, so COVID-19 has impacted this year’s and next year’s budgets likely for everybody. It’s not just the fleet industry, it’s all across the board. But what I would love to know is, do you think that this effect on budgets, do you think it will continue past 2021? Or do you think next year it’ll start to stabilize?

Paul (09:35):

I guess it’s all up in the air depending on what actually pans out with COVID-19. But if we look at historical examples, the great recession hit in 2007 to 2009, we saw in our data, a roughly 20% reduction in new vehicles in-service in the 2010 calendar year. There’s always kind of a year lag when the economy goes down to what the effect that we actually see in terms of the fleet budget, so that recession actually hit folks in 2010 in terms of what they were able to buy, and then it took another two years before those numbers’ kind of returned to the pre-recession levels in terms of what folks were buying. Even if COVID is kind of solved today, I think we can instill expect to see another two years of reduced budgets for folks just based off of the damage that’s already been done to the economy.

Gretchen (10:33):

Tell me then, do you think we’ll see this come to fruition potentially by getting rid of spare units or right-sizing efforts? What do you think we’re looking at here?

Paul (10:41):

Yeah. I think you’ll see a lot of folks who are going to do kind of whatever they can in order to account for that reduction in capital, where they’re spending those dollars is going to start to becoming much more important.

Gretchen (10:57):

That’s a really valid point. I think fleet managers pre COVID, even they’re looking to cut costs just because they want to make sure that their fleet is as lean and as nimble as it possibly can be. But I’d love to get your take on this because everyone especially now, is trying to spend smarter and make sure that their monetary assets or even physical assets are being allocated to the best possible place they can. Where do you think that people should begin when they’re looking to make budget cuts? If we’re assuming that a reduction in staff would be the absolute last step that they’d want to pursue? I mean, because if we’re being honest, a reduction in staff is probably the last step that you want to take, especially if you’ve got good people and the only thing that would prompt the removal would be a tight budget.

Paul (11:44):

Yeah. Capital budget is usually going to be the first thing to go and that’s kind of whether it’s willing or not. They might not have the capital that they actually want commit. But that makes sense, I think from a financial perspective as well. For most fleets that we work with, 40 to 50% of their budget is associated with just the cost of owning the vehicle, whether that’s depreciation, lease expense, licensing whatever. If you look at technician staff, so the labor and benefits associated with the people who are turning wrenches on vehicles, that’s only about 16% of their budget and administrative staff is about six percent. Just in terms of kind of where the money’s being spent, there’s more room for savings in terms of your capital than kind of anywhere else.

Paul (12:33):

On top of that, across the industry, over the past five to 10 years, we’ve shown that fleets across the industry are supporting more vehicles per staff than any year we’ve had on record. It’s been constantly increasing, fleet sizes are increasing, but staff is not increasing at the same rate. I think that’s going to make it a lot harder for folks to start cutting additional staff. In particular, if they’re doing all this extra cleaning on the vehicles, all these extra procedures to make sure the vehicles are safe for the crews as well, that kind of adds to the labor demand for the staff. In terms of kind of efficiency of spending, I think reducing capital expenses and ownership expense is going to be the most effective strategy for reducing costs.

Gretchen (13:24):

Tell me then Paul, how do you think that fleets would be able to adjust to this new reduced capital?

Paul (13:30):

On the front end, I think fleets need to reevaluate the size and utilization of fleets to make sure that they’re only purchasing units that they truly need. The way we’d approach this problem is start to look at the number of vehicles driven on any given day and then the risk associated with the vehicles going down and I really liked that, kind of framing it in that way because it becomes a problem about risk assessment for the organization. If you’re able to quantify the risk of a vehicle being unavailable for the crew when they need it, then the capital investment starts to become very easy to justify. I think most fleets already have spare units in their inventory but when your budget’s being scrutinized, it’s important to be able to mathematically defend those spare units otherwise you wind up in a situation where leadership is going to give you pushback when they see that you have a bunch of low utilized units, and they’ll say, “You don’t really need to buy anything more because you’ve got all these units that you’re not using.”

Paul (14:31):

But kind of the nature of a spare unit is that it does have that lower utilization. On the backend, managers need to be evaluating their maintenance program to determine what they can do to keep the vehicles that they do have in the service for longer. A good example that we’ve had with clients even before COVID was, we had a bunch of folks who’d noticed on some of their older bucket trucks, that by the time that they got to the end of their life cycles the chassis was usually fine.

Paul (15:01):

The hydraulic was usually fine, but the actual body of the truck had so much rust damage that that was what was actually bringing the vehicles out of service. Again, even before the pandemic, they were looking at ways to address this rust problem in order to keep the vehicle longer. I bring up this example not because I think rust is going to be a problem for every fleet, but I think the methodology that they were doing was that they were looking across their company and trying to evaluate their repair histories to figure out what were the common problems and what they could do to actually address those problems in order to extend the life cycle on those assets.

Gretchen (15:42):

Here’s the kicker then, did they ever actually figure out the answer to the rust problem or is it still kind of up in the air?

Paul (15:49):

Well, so they’re implementing a plan at this point, right? To try to prevent it. But I think the reality of the timescale is that we won’t know if they’ve been successful or not for another 10 years. But I know that they are doing incentives to, or changed some of their purchasing patterns and changed some of their preventative maintenance patterns in order to try to prevent that bad rust damage in the long run.

Gretchen (16:14):

Too bad they can’t just use those Mr. Clean Magic Erasers and just wipe it away. I mean, wouldn’t that be nice? Like boom, problem solved, I’ve just fixed your problem. I think that’d be great. I mean, you’d save a ton on maintenance, easy peasy.

Paul (16:29):

I don’t know what the cost of bulk Mr. Clean scrubbers is. I don’t know.

Gretchen (16:34):

I don’t know 10 bucks for six of them or something, I don’t know. Anyways, so are these measures, not the Mr. Clean ones but the side with adjusting to reduce capital, are these measures suitable for smaller fleets as well as larger fleets with more assets?

Paul (16:55):

Larger fleets are going to certainly benefit from economies of scale and access to larger data sets when they’re trying to evaluate these types of problems but the similar principles should apply. You should still, even with a smaller fleet, it becomes more important to be able to understand and justify those extra units and really making sure you’re getting the most bang for your buck out of your units as well.

Gretchen (17:24):

That’s a good point you bring up there because I think a lot of us actually tend to look over the fact that these larger fleets seem to have the answers but the reality is, they just have a lot more data to work with, so it gives them an advantage in that respect. But I’m curious, do you think that this would be something that could be solved by an internal benchmark or would this be an entirely different data set altogether?

Paul (17:46):

I think a lot of this is going to, if looking specifically at right-sizing as a problem, I think that’s a largely internal problem. You can look at benchmarking vehicles per crew or something like that. But I think it really is going to be tailored to how you guys are utilizing the assets, but in terms of benchmarking and cooperating across the industry more generally, I think there’s certainly an advantage there because you can kind of learn through the experiences of your peers in the organization, what’s worked and what hasn’t worked and try to implement that. I think sometimes there’s, and this is all really the value proposition of benchmarking, right? Is that, when you’re just looking at your own internal data, sometimes there’s a problem that just isn’t highlighted. But once you start looking and collaborating with your peers, you can actually see where the real issues are and make rules to adjust for that.

Gretchen (18:47):

Absolutely. I think a benchmark can be really valuable for people industry-wide specifically because, like you said, if you have a problem that doesn’t necessarily jump out at you because it seems normal in your data set but compared to the industry, it sticks out like a sore thumb. I mean, that can work wonders for fleets and really actually do a lot to help their budget strategy. But then the question is, if we have equipment that is mission critical, and for those that might not be familiar with the specific mission critical term and might know it by something else, it’s basically the type of equipment that, if there might be only one or two within your entire fleet asset structure or maybe in your region and it has to be at the job site, no exceptions at all, you really need to be able to understand why it’s needed and then also be able to analyze where it’s being used, when it’s being used, how frequently it’s being used year after year or month over month, basically just to be able to analytically defend your decisions for keeping that piece of equipment.

Gretchen (19:53):

I mean, we’ve been over that already and the thing is, I don’t know if that can be answered specifically within a benchmark or right-sizing and I’ll defer that up to you, Paul. But my question is, where then does mission critical equipment fit into the evaluation for a fleet, either for asset replacement or potentially even asset reduction?

Paul (20:16):

It fits into the right-sizing equation in the sense that you need to recognize that not all breakdowns are equal, right? If a pickup truck is having a breakdown event, it’s likely not a huge deal for the organization, but if you have a heavy duty or a specialized vehicle that’s not available, oftentimes that’ll mean that the job can’t be done that day. As a fleet, and as kind of from an analytics organization, being able to narrow down to specific class codes, I think is very important when you’re addressing these types of problems again, because for those more replaceable pieces of equipment, running them longer or running leaner on that specific class code might be a good solution because the cost of the failure for the business isn’t really that high.

Gretchen (21:13):

Got you. Then tell me, do you think that fleet managers will really be able to rely on the analytics that they’re gathering this year? Because it’s been kind of an abnormality into their fleet management strategy?

Paul (21:28):

Based on the budgets that they have, it kind of winds up going both ways. I think there’s a certain argument to be made saying that some of analytics projects are not essential and when the budget gets tight back, can be the first thing that you wind up cutting. On the other hand, budget increases are also going to increase the demand on managers to start making data-driven cost saving decisions, which is exactly the function that an analytics department or an analyst would be doing for that organization.

Paul (22:02):

It will become important then for managers to focus on the projects that are going to give them a clear ROI, and I think that’s very important for a lot of people. But I also just want to emphasize that a lot of times you’re not going to know what the ROI is until you actually start diving into the data. There’s certainly value associated with some exploratory investigation of your data to try to identify those problems. But at the same time, if you’ve been working on a problem for a while, and it’s not really giving you that return, you kind of got to cut it loose and start working on something else.

Gretchen (22:41):

I’m assuming that an ROI metric would be different for every single fleet that was looking to solve a problem.

Paul (22:47):

Yep.

Gretchen (22:48):

Cool. Okay. Paul, I know you probably know this better than anyone but one of our main driving value props at Utilimarc is being able to create analytical stability for our clients and really being able to use quality data when we’re looking at trying to solve any issues that our clients might be having. I’d love to know, where does this fit into the custom projects that you usually do on your side at Utilimarc?

Paul (23:11):

Yeah. It’s kind of a transitional period for Utilimarc. We’ve just created this new dedicated professional services department that specializes in addressing these kind of unique problems that are not easily addressed in our current applications based on the uniqueness of the data sets that we’re dealing and the problems that we’re trying to address. I think right-sizing as a topic, it’s not new as an overall topic, but because we now have widespread deployment of telematics across the industry, we’re seeing kind of a renewed emphasis because we’re able to understand the utilization of the fleets much better than we were able to historically just using odometer readings, being able to rely on days used as a metric. That’s right now kind of a big portion of my workload, is these types of right-sizing projects. I think that we’re kind of coming up with some interesting stuff as we start to look into them in more detail.

Gretchen (24:14):

That’s awesome. I’m sure a bunch of other people would love to know too, but aside from right-sizing, what are some of the other custom client projects that you’re typically working on?

Paul (24:23):

Oh, Some of these, it really depends from client to client and I think in a lot of cases we’re not searching for specific problems but clients know us in the industry, either they’ve done different projects with us, whether it’s the benchmark, the dashboard, the telematics work that we’ve done, and they’ll kind of pitch us an idea of something that they’re having a problem with and we’ll have to kind of work on it. Some of more unique ones we’ve done for folks is, we had a client who had very strict regulations on the number of EBV vehicles that they had to bring into their organization every month. We were able to go in and kind of take a report that they had been running internally on a monthly basis and they basically had one employee at the organization whose job, the first week of every month, was to generate this report.

Paul (25:20):

We were able to kind of take that automated and get it so that it sends to him without even clicking a button every month so that they could manage the replacement of their gas and diesel vehicles with new electric and hybrid vehicles in order to stay in line with their governmental mandate for that organization. We had another client who came to us, who basically said, “We have inventory, right?” But because of a variety of reasons on their end, their maintenance was effectively unreliable. They were in a pickle then because they didn’t know what to charge back their departments in order to continue to fund the fleet department.

Paul (26:06):

They had a situation where they were billing their departments internally in order to fund their replacement fund to purchase new assets, and because of that breakdown and that kind of loss of that data, they were relying on us to actually clean up and leverage some of the data that they did have but also, leverage the industry information that we have in order to develop a chargeback rate model for their organization. These are all kinds of really unique problems that wind up kind of on our plate in the professional service department to help kind of get folks to where they need to go.

Gretchen (26:45):

When you’re saying that you clean up the data, I would love for you to expand on that a little bit more?

Paul (26:52):

Sure. The data sets that are given and, they say really with any analytics that you’re doing, that 80% of that process is just going to be putting the data in a format that makes it usable. In some cases, this is just literally bad entries, right? Either from the person who’s recording the input or a problem with the technology as it’s recording that input. But another big portion of it is actually making sure that when we’re manipulating these data sets and marrying data sets from different sources together, that they’re still telling a consistent story to us. It can be very, and it’s the weirdest things that can throw off the system, right? We had a client who, they had a practice in their work order system that when the vehicle retired, they took that unit number, put an R at the end of the unit number to signify it was retired, and then reuse the unit number for a new unit.

Paul (27:58):

They did that in their work order system but they didn’t do it in their telematic system, and that creates a really hard challenge when you’re, when initially they were merging these tables together and trying to do some analysis on it, it breaks everything because you’re no longer having kind of a one-to-one relationship between those two data streams. Those are the types of problems that we wind up dealing with. It’s not just somebody typed in an extra couple of zeros on there, those are all easy enough to fix. But when we have these types of procedural things associated with the collection of the data that aren’t consistent across the company or across the data sources, we need to be able to be flexible and combine these data sources in a way that we can actually then do the analytics that we do.

Gretchen (28:47):

There might be someone out there that agrees and they’re saying they’ve always viewed the analytics process as the process and they never try and understand it past that. I think it’s really helpful that you’re starting to break this down for me. It’s helping me and I’m sure it’s helping other people understand it out there too, but sometimes errors can be super simple like forgetting to mention that a specific unit’s been retired, but it can actually cause a lot more issues than one might think.

Paul (29:15):

Yeah. Well, before you know what’s going on, it’s like, “What the heck is going on,” and then when you finally figure out, it’s like, “Damn it,” now it’s really easy to see how we fix that. But I guess that’s kind of the heartache of being a data analyst.

Gretchen (29:36):

Totally. Now, one question that I actually had for you that I would be really important to touch on before we start to wrap up, is the concept of renting your assets. Now, do you think that with COVID still being a problem likely foreseeable into 2021, do you think that vehicle renting might start to, maybe pick up a little bit of traction, pick up a little bit of speed. I mean, obviously people are renting their assets now, but do you think it’s going to be a more popular option going forward?

Paul (30:06):

Yeah. The renting thing is an interesting piece. We hear a lot of folks in the industry that, especially for the heavy duty equipment, they want to buy enough vehicles so that in an emergency situation they’d always have enough vehicles. But I think that the value of kind of a good right-sizing effort and phrasing it as that risk assessment effort, is that you actually have the probability of what you would need for those extra units. You can say in a hypothetical situation, if you were to size at this pace and get this as whatever you would set as your acceptable amount of risk, you’d be able to say, “What’s the probability that I’d actually have to go and rent a vehicle,” and then see if that is available for folks.

Paul (31:06):

Again, I think taking that approach and framing the question as, not how many vehicles do I need for my organization but what level of risk is acceptable for my organization, really allows you to actually answer the question in a more meaningful way, because we can say that we’d always need the units but if you’ve got 50% of your fleet of spare units, obviously that’s not going to be appropriate for that solution. There is ultimately an area where we do have to draw the line and I think using a kind of risk-based approach really helps outline that for folks, and at the same time not only to the budgeting department, but to the user group as well.

Paul (31:51):

If they say, if they’re really worried about getting rid of extra units on the operation side, being able to look at the historic data and say, “Hey, here’s historically how many vehicles you guys have been taken out on any given day?” There’s no chance you’re ever going to use some of these units even though you’ve been keeping them as spares, let’s get them out of here, save the cost on maintaining those spare units, get the extra value from selling the asset and kind of moving forward from there.

Gretchen (32:23):

You’re right. There’s a few key trends that I really am excited to keep an eye on at the end of this year and going into next. Renting being pretty high on the list, I’m really looking forward to seeing how that goes. Paul, based on everything that we’ve spoken about today, in regards to right-sizing, benchmarking, professional services, client projects, is there anything else that you’d like to add that maybe you haven’t touched on yet?

Paul (32:46):

Being in a utility environment gives us a really unique opportunity to collaborate with our peers and I think that’s, even if it’s not strictly from the benchmarking perspective, right? I think that’s really good for the industry overall and will really help us all kind of get through what’s already been a rough year and then it’s likely to continue to be a rough year. If folks are out there and are looking to address specific problems, I really encourage them to either reach out to us or reach out to their peer group to try to see what we can do.

Gretchen (33:21):

Absolutely. I think leaning on your peers is so important and especially if you’re in kind of an abnormality crazy year as 2020 has been for everyone. But before we wrap up, just to kind of cover a quick rapid-fire section of a few points that, if someone’s looking to cut a budget or they’re anticipating budget cuts, quick rapid-fire points, what would be their top key takeaways from this episode?

Paul (33:45):

Yeah. I would say, really look at what the mission critical vehicles are for your units. Understand the utilization of those units so that you really do know how many you need and how many spares you need. That way, if you are making a commitment to capital for the vehicles that you replace, you can actually defend that mathematically. That’s going to be the bulk of your costs for the year, after you’re done with that, looking at your maintenance repair histories to see, what are kind of the most common failure points for vehicles in a specific class code and what you can do to address those areas. Those are kind of probably the key bullet points I’d say when you’re looking at those budget restrictions for the year.

Gretchen (34:34):

I think that Paul was really able to open up a few interesting points today, especially when it came to capital reduction, right-sizing options and even pursuing a renting route. While this episode was largely focused around budgets specific to the shockwave that COVID-19 initially unleashed, I think that his insights could be comparable to any past crises like for example, the 2008 or 2009 recession or any future crises that might arise where budgets again become restricted. But you know what they say, that’s another chat for another day and we’ll be back next week with another episode. But if you’re hungry for more content right away, make sure you’ve listened to our last episode with 2019’s Fleet Manager of the Year Award winner, Erin Gilchrist Rugg. If you haven’t tuned in yet, you won’t want to miss what she had to say because it was pretty awesome.

Gretchen (35:23):

Now, if you’d like to read more about what Paul had to say today, you can always head to our website, utilimarc.com/blog/budget cuts, to find the show notes for this episode. That’s U-T-I-L-I M-A-R-C.com/blog/budget-cuts. Before I hit the road, if you’ve got a few minutes, I’d love to ask you to leave us a review. You can write a review on your favorite podcasting platform or you can take a screenshot of this episode and post it to your social media with the hashtag Utilimarc Fleet FYIs. Until Thursday, that’s all for me. I’ll catch you later.

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