Fleet Replacement and Lifecycle Management

What Is Fleet Replacement and Lifecycle Management?

Lifecycle management refers to the decisions a fleet makes in order to get the most value out of its vehicles. It includes everything from the cost of buying the vehicle, the cost of insurance and maintenance, and the price of selling it once the fleet is done with it.

The best fleet vehicle is efficient, safe, and holds its value. Fleets will pay a lot to acquire it, but will save more and more money with every year they own it. Up to a point, that is.

Fleets can’t just run their vehicles into the ground. As vehicles age, repairs are more frequent and safety begins to drop, both of which increase costs. With the right lifecycle management system and a smart replacement analysis, fleets can figure out the “goldilocks zone” in which they should sell off their old vehicle and buy a new one.

Do I Need Fleet Replacement and Lifecycle Management?

Yes. Unquestionably. Any fleet will benefit from a lifecycle management system. By collecting information on the time and money that go into every aspect of owning and operating a vehicle, managers can save tens of thousands. This level of real-time data allows you to replace vehicles at the end of their optimal lifecycle, minimising the need for costly maintenance.

Manually logging all that data and turning it into actionable insights would be a full-time job. But with a software system to automate the process, the best lifecycle management plan for your fleet’s unique needs will be clear.

Top 5 Benefits of Fleet Lifecycle Management

Without lifecycle management, a fleet is likely to continue running its vehicles into the ground, dragging out their use despite an increasing likelihood of breaking down, ever-increasing downtime, or even getting into expensive accidents.

• Reduced downtime
• Fewer repair costs
• Fewer accident costs
• Safer drivers
• Newer features

There are even a few intangible benefits, like driver satisfaction. For example, one survey found that 85% of employees at one Minnesota snow plow fleet found newer vehicles to be more comfortable than older ones.

Ultimately, all these benefits can be boiled down to one impact: saving money. A lifecycle management system will wring the most value out of each vehicle in your fleet, boosting your bottom line.

How Does Lifecycle Management Differ By…

Industry

Lifecycle management significantly varies by industry. Asset lifecycles are one major reason: A fleet’s asset needs vary by industry, with the construction and field service industries using an array of powered assets on a daily basis.

These assets need maintenance and part replacements, so lifecycle management is a money-saving solution.

Industries like delivery services sit on the other end of the spectrum, as they rely on inventory rather than assets. These fleets only need to manage their vehicle lifecycles, and can opt for a less feature-rich management service.

Fleet Size

The number of vehicles in a fleet is a key component when it comes to deciding on a lifecycle analysis method.

If your fleet is around five vehicles or smaller, you likely don’t need an in-depth analysis. You might instead want to pick an established age or mileage at which to replace a vehicle, or a minimum threshold of repair costs.

However, with any medium or large fleets, a more complex analysis will be worth implementing, as managers will likely save more than the initial investment would cost them.

Vehicle Type

Different vehicles have different lifespans, and need to be replaced at different times.

Forklifts, for instance, have a lifespan average of 10,000 to 12,000 work hours.

The average varies as well: Class 8 tractor’s average lifespan is at 6.5 years across the industry in 2020, which is down a significant amount from the average private fleet’s lifespan of 8.7 years, just four years earlier. To figure out your own fleet’s unique lifecycle, you’ll need to study your fleet data.

Different types of vehicles have different maintenance needs. One study found that a fleet’s workers spend 17.8 times as many work hours to maintain a Solid Waste Truck than they did to maintain a passenger sedan.

Distance Travelled

For fleets with high-mileage vehicles, vehicle condition is a top factor in lifecycle management. Typically, major components will fail between 150,000 and 200,000 miles, hugely dropping resale value and often making it cheaper to sell the entire vehicle as salvage rather than buy the replacement part.

Best Fleet Replacement & Lifecycle Management Companies

Lifecycle management is important for any business with a fleet, because, no matter what size, a fleet is always a large investment and needs to offer a high benefit compared to its cost.

Explains Greg Raven, department head of customer experience at global fleet provider ARI.

But how does fleet size affect which lifecycle management is best for you?

Small Business

Quartix is a smart fleet management system (FMS) for smaller companies: It offers the essential functionality a fleet needs and starts at just $15 per vehicle, with no upfront costs. Its lifecycle management features are limited to historical tracking data, so managers will have to figure out their replacement cycle themselves, but that’s also a decent fit for a smaller company with no need for granular data.

If you need a more custom-designed lifecycle management solution, though, consider AssetWorks’ FleetFocus, which offers vehicle equipment lifecycle management and includes 200 pre-set but customizable report templates. It can also be integrated with the popular Samsara FMS with a simple plugin.

Medium Fleets

Teletrac Navman offers a fleet tracking system with complete lifecycle management alongside resource-saving stables of fleet management including fuel tracking and real-time maintenance and collision alerts. Asset lifecycle management is also available from Teletrac Navman as an add-on, so fleets in any industry can be supported.

Large Fleets

With 24 offices around the world, Verizon Connect Reveal is a large FMS provider that can serve fleets of any size. A strength of this system is the depth of features it offers, which can be used to create a granular lifecycle analysis fit for the biggest fleets. The service comes with a free in-person demo, too, so you can be sure you know what you’re getting before you commit.

Teletrac Navman and Samsara are also great choices for large fleets, as they’re also known for their wide range of features and large customer support teams.

What Is Replacement Analysis?

Replacement analysis refers to the process of figuring out the optimal point in time to replace a vehicle. It’s the number-crunching behind lifecycle management.

How Do You Create a Replacement Strategy?

There are two basic strategies for replacement analysis. A fleet can choose to minimize one of two options:

• Downtime and maintenance
• Capital spend

If the replacement strategy’s focus is on reducing downtime and maintenance costs, then they’ll sell vehicles faster. Focus on cutting capital spend, however, and your fleet will keep its vehicles around as long as possible.

In practice, every fleet is somewhere in between these two extremes. Which one will your operation be closer to? That’s up to you.

Replacement Schedule

Why does minimizing downtime and maintenance mean your fleet must opt for shorter lifecycles? Because maintenance costs tend to rise as vehicles age. By ending the lifecycle early, a fleet cuts down on maintenance. And since they’re keeping the vehicles going with as little downtime as possible, they’ll get a lot of value out of the vehicles while they own them.

Reducing capital spend means buying vehicles only when absolutely necessary. Since vehicles are made to last longer, maintenance needs will rise, and the fleet will likely accumulate a larger collection of vehicles to ensure that there’s always a vehicle ready to go (boosting downtime as well). The downside is that the vehicles will become less safe as they age, and they may look a little ratty as well, which isn’t great for your fleet’s image. The upside: Capital saved.

Replacement Model Example

Let’s put those different replacement strategies into concrete terms. If your fleet is focused more on reducing downtime and maintenance, you may choose to sell your vehicles after just four years, though depending on the wear and tear that comes with your vehicle type and industry, they may last six to eight years before they need replacement.

If you opt to focus on cutting down capital spend instead, expect to keep your vehicles running for between eight and 12 years on average, though some fleets may push them even farther.

Ultimately, these are just guidelines. After all, the factors that influence your fleet’s best lifecycle are so varied that you need software to track them.

This includes data on vehicle location, speeds, safety violations, fuel consumption, maintenance needs, part replacement needs, and more. Most FMSs will also collate the data into automatically generated reports on a weekly, quarterly, or annual basis.

But while an FMS can automate a lot, it can’t automate everything. In the end, a fleet’s manager will have to take those reports and use them to determine when best to replace the commercial vehicles in their fleet.

Lifecycle Cost Analysis

Fleet lifecycle management comes down to tracking a series of cost elements. While they can vary by industry, they come in two categories, operating costs and carrying costs. Operating costs increase with time and include:

• Fuel — Fuel cost is directly tied to the number of miles driven, but the per-gallon price tends to rise over time (well, pandemics aside).</spa
• Maintenance & Repairs — Repairs are typically covered under warranty for three to five years, and typically begin to become more frequent as a vehicle ages.
• Administration — Administrative costs are fairly fixed, but can increase as a vehicle becomes less reliable with age.
• Accidents — Breakdowns and collisions become more likely with age.

Carrying costs tend to decrease with time. These include:

• Depreciation — Over 60% of the acquisition cost can be lost to depreciation in just the first year, although the rate of depreciation tapers off over time.
• Insurance — Insurance costs are fairly fixed, but are just-slightly higher for new vehicles, and drop slightly as the value of the insured vehicles depreciates.
• Interest and taxes — These are also tied to a vehicle’s value, and drop with depreciation.

Finally, there’s downtime. In addition to all the above costs, fleet managers should assess the factors that contribute to downtime. It can overlap with other aspects of vehicle lifecycle analysis. Accidents will lead to more downtime, for example. Less downtime is better overall, as it means a fleet is getting more value out of its vehicles, relative to their cost. 

Lifecycle Cost Management

Once a fleet has figured out its vehicle lifecycle cost elements, it needs to weigh the carrying costs that decrease with time against the operating costs which increase with time. As the years pass, the ownership costs of a vehicle drop while the operating costs rise.

The point at which operating costs surpass ownership costs is when a fleet should sell the vehicle. The total cost of owning and operating that vehicle will only get higher after that point.

Fleet Replacement Checklist

To figure out your fleet’s vehicle replacement needs, try putting together a checklist of anticipated metrics. Then, measure each new automated report against the checklist, to verify that you’re buying and selling vehicles at the correct point in their lifecycles.

• Time since in-service date — This tells you the months and years since the vehicle was first acquired and put in use.
• Odometer — This tells you how many miles the vehicle has driven since you’ve begun using it.
• Estimated resale value — This number drops as time passes.
• Annual cost of maintenance — These expected maintenance needs should be adjusted for each year that the vehicle has been in use, as they’ll increase with time.
• Annual fuel consumption — Measure this metric against previous years to track price inflation.
• Total expected downtime — If a vehicle is spending more downtime than expected, schedules may need to be tightened.
• Estimated resale price — This price drops quickly after purchasing, and then drops at a slower pace in the years following.

Fleet lifecycles will always need to be watched. But whether it’s a stripped-down solution or a feature-rich system, the right FMS can deliver the data a manager needs to establish the best possible fleet replacement system for their specific needs.