Cost Savings Through Equipment Rotation

By G.C. Skipper, Contributing Editor | September 28, 2010

Utilization audits and lifecycle studies may be common practice among public and private fleet professionals, but some equipment managers simply do it better than others.

One operation that has fine-tuned the practice almost to an art form is AEMP's 2009 Public Fleet Master, Manatee County (FL) Fleet Services. The county was able to dodge $4 million in costs during 2008 and is on track to save another $2 million this year by rotating equipment based on utilization audits.

The man managing the Manatee County fleet is Michael Brennan, CEM, who says the first step in utilization audits — sometimes called cascading equipment — is an in-depth lifecycle analysis of the equipment. Brennan's 2008 analysis included a look at vehicle utilization, not only fleet wide, but also by class of vehicle, by department, by account, and by other classifications. Usage data was captured through an automated fueling system, CCG FASTER, and transferred to Manatee's maintenance-management system.

"This system gives us a really accurate flow of data each day that is fed into our management system," Brennan says. "From that point on, it's just a matter of running a simple utilization report by class, account, company or however we want. We look at that when it comes to swapping equipment."

When that report is run by class, as it is for construction equipment, Brennan is able to review, for example, all 4-cubic-yard wheel loaders or all 420 backhoes or all 26,000-pound excavators that are in the fleet.

"We can see who is really using the equipment and who isn't," Brennan says. "When we start to see a big spread between primary and secondary equipment use, we will move the high-usage machine to a mid- or lower-range usage. It's called cascading. We cascade the machines right down the line."

When equipment is rotated, it doesn't surprise any end-users. Various departments that use equipment are visited twice a year; once in April or May when the county is required to do an annual inventory for asset management, and a second time when new budgets are planned.

Another simple tool that helps him make equipment rotation decisions is figuring the average age of the equipment by class. If a 4-cubic-yard wheel loader has a life cycle of 10 years and there are 20 such units in the fleet, the average age of those units will indicate how healthy the fleet is, he said.

"In that case, for instance, the average age should be somewhere between 4-1/2 and 5-1/2 years old," he says. "That tells you that you have a very good rotational program and your units are sliding through quite nicely."

Brennan looks at his entire fleet—construction, agriculture, sedans, emergency vehicles, light machines— using this method. "We have a 9.3- year average lifecycle across our entire fleet," Brennan says. "I lump them all together. At a 9.3 year lifecycle, I want to keep my average age between 4.7 and 5.7 years old. In our geographical area, that is the most economical age to keep equipment running, keep up availability, and keep the shop flow moving."

Because of the quarterly utilization audits and the twice-a-year visits, "operators know that if they have equipment that is heavily used, they probably will get a new machine. If that happens, we take their former unit and move it to a secondary location. This is just part of the system that we have in place," says Brennan. "Everybody is good to go with it. Occasionally some guy will ask why he always gets a used machine, so we have to explain that that is what the function calls for."

Florida doesn't have a snow season, but equipment rotation does depend on seasonal work. "We have a lot of turf equipment," Brennan says. "Grass grows like gang busters from April to the end of October or November, then it almost stops completely. We know the equipment is not going to be used much during the first and second quarters of the year, so that's when we bring them into the shop for major preventive maintenance. When the season starts in February and March, they're ready to go again."

Equipment rotation doesn't necessarily mean that Manatee technicians have opportunities for additional work. With three shop locations, Brennan strongly believes it is critical to keep a balanced staff of technicians. "I don't want to call anyone into my office and tell them I no longer can afford to pay them," he said. To avoid such situations, he uses vehicle equivalencies to determine how many technicians he needs.

With heavy equipment, Brennan says one technician can handle 76 machines. "This is on average. Some situations differ. I have one guy at my landfill that takes care of 20 pieces of heavy landfill equipment, and he is saturated. To help him out we contract out some of the work. He handles routine maintenance, but we contract out the big jobs such as major overhauls."

Subcontracted work is monitored to make certain technicians have enough work so staff reductions are avoided. When the economy turns around, "Everybody is going to be screaming for technicians. I don't want to lose any of my guys."

All this time-consuming analysis and planning are well worth the effort, Brennan says. For instance, this year he had initially targeted 109 units for replacement.

"We knew what our replacement costs were," he says. "When we finished with the lifecycle analysis and utilization audit and looked at that data, we had reduced our replacements to only eight or nine units. We avoided $3.8 million in capital expenditures. We also reduced maintenance by reevaluating our assignment processes and policies. As a result, annual maintenance costs were cut by about $400,000."

In a recent equipment swap, Brennan said one of the high-use units was rotated to a dam where application was less demanding. "That particular move right there saved us about $250,000 in capital cost. That machine will run at the dam at least another four or five years," he says.

Not everything is done by the fiscal calendar. If an engine fails on a piece of equipment that's scheduled to be replaced next year, he makes that change in the middle of the year.

In special situations Brennan does dispose of low-use machines. "If we have a unique piece of equipment that we purchased years ago because we once needed it and find out we don't need it anymore, that equipment will go to public auction," he says. "If we do need that machine again, we will rent it, which is more cost-effective."

Brennan suggests conducting a lifecycle study every other year. The market changes, and today is different than it was two years ago.

"The 2008 analysis was the first comprehensive study we had ever done on our own fleet in our own area," he says. "Because it has been so beneficial, we plan to repeat the exercise every two years. After we've done this a couple of times, I believe we will be able to put the data together and chart out an average base line for future projection."

The critical ingredient that goes into this kind of program is solid data, he says. "If you know the data is reliable and you've got accurate historical data that covers several years and several processes, your forecast will be fairly accurate. Of course, the further out you forecast, the greater the margin of error. If you look five years out, you could have a 5 to 10 percent variance," he says. "On that same chart, if you look one year out, you shouldn't have any more than a 3 to 4 percent variance."

All said, it is that kind of meticulous planning and precision that led to Manatee's being named the Public Fleet Master for 2009.

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