Jacksonville Cuts Costs and Adds Revenue

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

Sam Houston,  division chief of fleet maintenance
Networking with fleet managers in a wide variety of industries is one of the key advantages of belonging to a national organization such as AEMP, says Sam Houston, CEM, division chief of fleet maintenance for the City of Jacksonville, Fla. Ideas that work for others often work for your own operation, he says. Plus, qualifying as a CEM took him "back to the books" and made him focus on 16 key core disciplines, including finance and ROI, that helped him recognize better methods of running his fleet more efficiently and more profitably.

With a fleet totaling 5,400 vehicles ranging from boats to motorcycles, fire trucks to buses, as well as sweepers, excavators, backhoe-loaders and cranes, some fleet managers might find their jobs running them, not the other way around.

Not so with Sam Houston, CEM, a retired U.S. Navy captain who is now division chief of fleet maintenance for the City of Jacksonville, Fla. Houston took over the division's top position three years ago and immediately set into motion a series of changes that cut costs significantly, increased productivity and revenue, and improved overall shop efficiency enough to attract the attention, and praise, of city government officials.

The numbers speak for themselves. Houston has cut $902,000 from the payroll and $777,000 from outside vendor costs. In 2004, his shop did 18,936 PMs, 96 percent of which were done on schedule. And he has kept a standing policy of paying a one-percent productivity bonus for his technicians.

While all this cost-cutting was going on, Houston added work and revenue to his operations by, one, becoming a warranty center and, two, performing work previously done by the Florida Department of Transportation.

The payroll savings, he said, was simple. He decided not to fill 21 positions that were open due to staff attrition. Vendor costs were cut, he says, when he realized that a lot of work was sent out that shouldn't have been.

"I brought all that work back in-house," Houston says. "It's amazing. What we found was we had the capacity to do more work, but it wasn't being done. Work was allowed loosely to go out the door."

For example, minor repairs on fire trucks were going out "because they had a vendor sitting right next door," he says. "Rather than doing that work in the shop, it was easier just to let the vendor handle it. Also, brake jobs were being done outside, so I brought all that work back into the shop as well. Those two steps alone account for the majority of the vendor cost savings."

Another change he implemented had to do with bidding. Prior to his coming on board, vendors would come to the city, show they were qualified, and be put on a list. Then, work would be let to that list. Houston reviewed all that and broke it down into sections.

"We broke all bids down into minute segments," he says. "If we wanted a filter, we had people bidding on it. If we needed spring work done, we had people bidding on that. That change reduced our outside repairs significantly.

"Some transmission overhauls used to cost up to $5,000 or $10,000," Houston says. "By bidding the work out, we got those overhauls down to between $1,000 and $2,000."

More shop savings were realized when he changed procedures for accident repairs. The standard hourly rate in Jacksonville is $36 an hour. Houston bid out the labor and got it down as low as $28 an hour. Also, since his shop can buy parts cheaper than anyone else, Houston provides the parts to keep the costs down.

Warranty rewards

He also revamped his tire service business and tightened up internal procedures for tracking warranty work. "We didn't have a method for tracking warranties very well," he says. "Now we identify warranty work by putting a big red stamp on work orders. A warranty clerk goes over all the work orders, looking for that red stamp. When the work is verified, we bill it. Before I took over, we collected about $18,000 to $30,000 from warranties. The first year after I took over we were up to $80,000. Next year will be even higher."

Houston says the extra revenue is the result of close monitoring of the program to "catch all the warranty work there is."

"It's much more cost-effective for me to do the warranty repairs while I'm doing some other repair and bill the manufacturer than it is to put the vehicle back together and send it out to a dealer. I've heard that 60 percent of all warranty is never claimed. This is found money."

Even more revenue was generated when the Florida DOT closed down its satellite shops in Jacksonville. "They needed someone to do the work. I knew we had the capacity to handle it, but we weren't taking advantage of our capacity. We brought that DOT work in-house and, with a little overtime here and there, we kept people rolling." Revenue for this year has already reached $250,000.

As for the shop's 96 percent on-schedule PM performance, Houston said it's all a matter of communication. A city agency tells him when they want to do a PM on a vehicle. The work is scheduled and, a month ahead of time, a report goes out reminding the agency that it's time for the PM.

"I add little notes to the report when I send them out," Houston says. "I point out what could happen if safety checks aren't done. I point out the liability. Or I point out that, if they wait, it will cost more to do the repairs in an emergency situation than it does to do the PM."

If the vehicle is not brought in, Houston puts the city agency on report. "A situation report goes out for the whole world to see saying Department Such and Such has five vehicles that are 60 days overdue for PM. I identify the vehicle number and who has it. All the departments and all the divisions get that report every Friday. It's working."

Employee incentives

One thing Houston didn't change was a one percent of base salary bonus paid to technicians who meet specified goals. The percentage was established bythe City of Jacksonville. "We pay the bonus annually just before Christmas," Houston says, "and each person has his own goal."

A technician's productivity is measured by tracking the number of hours available (usually about 7.5 hours after taking out such things as vacation time and sick days) and the number of hours billed. To reach a goal of 80 percent, a mechanic must bill about 5.4 hours, Houston said. "We track it all year and, if someone lags behind, we let him know. If he meets his goal by the end of the year, he gets the bonus."

In the beginning, such changes caused some problems, Houston admits, but now people have adjusted and morale has improved. The key factors behind it all are utilizing people, capacity, and paying overtime. "Overtime is cheaper than paying benefits and salaries while people sit idle," he says.

As for future plans, Houston says, "We'll continue to fine tune our operation and look for better ways to do business."

Networking with fleet managers in a wide variety of industries is one of the key advantages of belonging to a national organization such as AEMP, says Sam Houston, CEM, division chief of fleet maintenance for the City of Jacksonville, Fla. Ideas that work for others often work for your own operation, he says. Plus, qualifying as a CEM took him "back to the books" and made him focus on 16 key core disciplines, including finance and ROI, that helped him recognize better methods of running his fleet more efficiently and more profitably.

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