Fleet costs can be reduced tackling 3 main areas

Making Sustainability part of Business As Usualwww.weir-tscs.com +44 (0)8454 504021

Fleet costs can be reduced tackling 3 main areas

Maintenance & WorkshopsOperating Costs

Fleet Profile & Utilisation

• Workshop / Depot site costs• Direct Labour – fitters / chargehands• Indirect Labour – Workshop admin• Parts & Consumables (consumption)• External repair contracts• (Central Overhead allocations)

• Indirect labour (Fleet admin)• Fuel management• Insurance & Damage• On-the-road costs (licences, tax)• Parts & Consumables (procurement)• IT & systems

• Number of vehicles• Vehicle utilisation• Vehicle specifications / fit-for-purpose• Fleet age profile• Fleet ownership options (own, lease, hire)

In WCBC this is worth £350-400k

~£150k ~£50k

Making Sustainability part of Business As Usualwww.weir-tscs.com +44 (0)8454 504021Making Sustainability part of Business As Usual

Programme Overview: £0.6m over 12-18 months

Sept 2011 Dec 2011 Mar 2012 Jun 2012

Mobilise•Establish project team•All Services represented

Reduce Fleet Size•Eliminate vehicles•Build management info•Re-set replacement plan

Driver Engagement•Fuel monitoring•Tyre Pressures•Toolbox talks

Improve Utilisation•Vehicle shares•Process changes•Re-think Service delivery

Collaboration•Regional view•Specialist vehicle shares•Soft market testing

Admin & Processes•Simplify Fleet admin•Regional view?•Insurance & Damage data

Vehicle Base Locations•Home to work mileage•Stem miles/productivity•Task Management

Workshop Productivity•“Spanner time” review•Plan for reducing workload•Identify spare capacity

Workshop Contracts•External income•Soft market testing•Regional view?

Parts & Tyres•Review residual spend•Tyre damage campaign•Vehicle standardisation?

£220k £100k £50k

£80k £40k £30k

£30k £30k £20k

VEHICLE UTILISATION

OPERATING COSTS

SUPPORT COSTS

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Note: Savings are total figures for each Programme element – for PHASING see next slide


Many of the benefits are deliverable inside 12 months

• Both lines show repeatable annual savings run-rates

• Note: The savings include cost-avoidance measures (e.g. fuel savings), and savings in Housing budget which are not directly cashable

• Assumes immediate start for Transformation Programme. Blue line is conservative minimum savings projection

• Benefits relate to Fleet costs only (not Service delivery team costs)

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Q32011-12

Q42011-12

Q12012-13

Q22012-13

Q32012-13

Q42012-13

Min estimate 0 72 167 258 360 374

Target estimate 0 148 296 431 574 598

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WCBC Fleet Transformation - Benefits profile

Min estimate

Target estimate


Executive Summary - Opportunity• WCBC spends £4.2m per year on its fleet of 320 vehicles:

• £3.9m is attributable to specific vehicle and support costs• £0.3m is Central Overhead allocation (IT, HR, management charges & fuel on-cost charge)

• On average these vehicles spend 76% (18 hours) of every weekday parked at base locations not being used

• A conservative benchmark from other Council fleets would be to raise usage from 24% to 30%. Some WCBC vehicles are significantly worse than the average 24% utilisation figure.

• This presents a radical opportunity to transform fleet operations, eliminate waste, reduce costs, and protect service delivery through changes in operational processes & working practices

• Profile, specification & utilisation of the fleet is driven by Service (user) departments. Introduction of best practice Logistics management (ideally with a wider regional/sub-regional brief and building on existing best practice) will deliver cost reductions in:• Operational effectiveness (utilisation of vehicles, fuel management, provision of management

information)• Maintenance (Workshop optimisation, damage monitoring, spares costs)• Procurement (clear replacement programme with adequate challenge on specs)

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Executive Summary - Benefits• The cost reduction opportunity is significant, with potential benefits of £0.4 -0.6m over 18 months.

• Note: Savings include cost avoidance (e.g. reduced fuel usage to counter future price increases) and ring-fenced savings within the Housing budgets.

• We believe that the run rate of savings at the end of the first 12 months of a Fleet Transformation Programme will be £0.5m pa. This represents a major change programme, affecting all user groups.

• Initial priorities include:• Establishing fuel tracking measures & investigating vehicles with high fuel usage• Creating a vehicle Utilisation tracker & challenging the need for any vehicle with utilisation

levels <25% (based on “24/5” operation)• Detailed review of specific groups of vehicles with each Service area, including:• Working / shift patterns / Seasonality• Vehicle specification & ownership models• Routing & Scheduling improvements

• Developing a strategy to match Workshop productivity to current/future Fleet needs

• This level of cost saving has been achieved by other Local Authorities, but will require a clear Programme structure and strong sponsorship from senior Management and Council Members.

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Executive Summary – Opportunities Overview

• Process change• Integration of services• Cooperation

• Trimming waste• Optimising performance• Simple Operational Change

• Policy• Service Levels• Offering

Operational Improvement

Organisational Improvement / Change

Strategic Change

Increasing Scope

£££

IncreasingOpportunity

• Pan-Service Fleet cost reduction programme• Management reporting improvements• Challenge/remove underutilised vehicles• Hire vehicle review process/challenge• Optimisation of internal Pool vehicles• Use Trackers effectively & analyse data• Comprehensive fuel management• Driver training & fuel efficiency monitoring• Review of spares purchasing & specs• Reduced fleet support/admin costs• Review stem mileage, vehicle basing• Reduce Home to Work mileage• Link vehicle purchases to fleet reduction• Eliminate vehicles as “toolboxes”• Review of damage by vehicle/driver• Driver vehicle care/checks/compliance

• Workshop optimisation• Review In-house versus bought-in

maintenance services• More effective procurement process• Challenge specifications, e.g. van size,

special equipment, crew cabs…• Improve routing & tasking of mobile

workforce (e.g. Streets, Highways)• Integrated courier services• Pool car tracking & usage• Gritting bodies & routing• Vehicle share within/between Services• Shift patterns / extend “active” times• Fleet Management drive review of vehicle

implications of future service requirements

• External contract income• Outsource / remove specific services• Review hire fleet versus Council tasking• “Cross-border” cooperation• Continuous improvement culture• Extension of Workshop hours• Non-vehicle solutions (e.g. grass cutting &

growth inhibitors)• Journey elimination, meeting protocols• Establish true costs of service levels (e.g.

Library vans) & range of options• Only procure a new vehicle after you’ve

first tried to eliminate it…• Remove spare vehicles (service level…)• Vehicle life optimisation

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WCBC spends £4.2m p.a. on fleet services

• This high level breakdown of costs helps prioritise activity & size of opportunity

• The majority of costs are variable with the size of the fleet, or semi-fixed (e.g. workshop labour and fuel, which are open to efficiencies but primarily driven by overall workload rather than incremental vehicle numbers)

• The Management Fee includes both direct wage costs and internal cost allocationsSource: Chart Overview2.2.xls

Note: These figures represent only the cost of keeping the WCBC Fleet on the road, and exclude the labour costs of the teams which use the vehicles.

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1,637

1,001

341

330

279

258 161

131 90

WCBC Total Fleet Cost Breakdown (£000s)

Vehicle Lease Costs

Fuel costs

Workshop Labour

Parts

Insurance & Licences

Fleet Admin & Stores

Central Overheads

Fuel On-cost

Vehicle Hire


• There are 3 main drivers for vehicle fleet costs, each of which can be improved:

1. Vehicle utilisation & ownership – The proportion of time when vehicles are actually being used to deliver services, and the choices made about leasing, owning or hiring vehicles, including projected working “life”. This is by far the biggest cost driver for the fleet.

2. Operating Costs – The “on-the-road” costs of using each vehicle, including fuel management, driver training, vehicle care and damage

3. Support Costs – The Workshop and maintenance costs to keep vehicles active and fully compliant

• Each of these has been analysed for WCBC, and a strategy developed to address and significantly reduce each main cost driver.

The Fleet Strategy addresses the key cost drivers

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• The “average” vehicle from the sample is only moving for 4 hours per day, and covers an average of 67 miles.

• Approximately 42% of total mileage is stem mileage (including Home to work miles). From sample comparison to Tracker data we believe this is under-reported on the manual data sheets which were completed.

• For around 20 hours on each weekday, most vehicles are either:• Parked at their “home” location (depot or driver’s home)• Parked up while other duties are performed or during rest periods or admin tasks• Used as storage facilities (tools, equipment, waste materials), or

• Significant opportunities exist to re-think how vehicles are utilised. This will require willingness to challenge current processes and organisation:• Calculate & assess utilisation patterns of each vehicle• Identify specific vehicles to remove from fleet, including vehicle-share opportunities• Generate monthly management information on vehicle utilisation• Maintain review of utilisation levels and challenge all vehicles below 30%

Vehicle Utilisation – Key points

Source: Manual Utilisation sheets

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Vehicle utilisation is not high – vehicles drive for ~4 hours/day

Source: Data compilation for high level stats WCBC Jul11.xls

Note: Nov 2011 Tracker data confirms overall Utilisation, but shows less driving and higher parked / static time

33%

44%

5%

12%

7%

WCBC Averages from data sheets

Idle - night

Idle - day

Stem

Driving

Non-Driving

• Vehicles sampled are driving for average of 4 hours per 24 hour weekday period, but this includes Stem mileage.

• They are static (parked) away from their base for a further 2 hours while crews work

• When Refuse/Recycling is excluded, the Driving figure drops to < 2 hours/day

• Based on this sample we estimate the true utilisation figure for WCBC is just over 20% on a 24/5 basis

• Good performance across other Council fleets we have worked with would be between 30-35%

• For private commercial fleets the figure would be 70%+

• This represents a major opportunity

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Service Example : Housing Services – Nov 2011 analysis

• Scheduling/routing of jobs is efficient

• 60% of mileage is stem mileage (45mins/day)

• Non-Driving time is only 5.5 hours/day

• On average 40 vehicles either did not move or drove for less than 1 hour each day

Source: Vehicle tracking data, Nov 2011

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33%

38%

23%

3% 2%

Housing Fleet Activity - Nov 2011

idle night

idle day

nondriving

stem

driving

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Housing Vehicle Movements: Nov 2011Total = 97 vehicles

Drove < 1 hour

Didn't move


Vehicle example : Ford Transit Double Cab Tipper - Highways

• 120 mins non-driving activity in the morning and afternoon

• “Good” use of vehicle capacity – but storing rather than “carrying” except for 2.5 hours during the day

CY08 BSV: 12th July 2011

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24-hour vehicle activity

Maintenance

Admin

Non-Driving

Driving

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 4 6 8 10 12 14 16 18 20 22 24

24-hour MAX goods capacity used

33%

35%

3%

11%

17%

24-hour Activity %

Idle - night

Idle - day

Stem

Driving

Non-Driving

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Ownership – Key points

• Recent purchases financed by sale and leaseback agreement

• Invitation to tender specifies 5 year primary period plus potential 2 year extension

• Tender submissions based on annual mileage of 15,000 miles

• Actual average mileage of recently returned vehicles was <6,500 miles (based on 12 Transit vans returned during July 2011)

• Actual residual values can be 30% higher than anticipated within lease agreement, all for the benefit of the leasing company

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Source: Weir analysis of market value of 2 recently off-leased vehicles


Fleet Age profile is uneven and aging

• The average age of the WCBC fleet is 4.8 years

• This represents an opportunity to implement the Fleet Strategy relatively quickly, without cost penalties on leases

Source: Chart Overview 2 1.xls

020406080

100120140

WCBC Fleet age profile by type

< 4 years old > 4 years old

0102030405060708090

<1 1 2 3 4 5 6 7 8 9 10+

Num

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f veh

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Age in Years

WCBC Fleet profile by Age (years)

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Vehicle Hire – Key points

• WCBC have hired vehicles on 49 occasions in the past 12 months, totalling 4485 days of hire at a cost of £90k

• This adds the equivalent of an extra 12 vehicles to the Fleet & risks circumventing the main procurement process

• Most of these hires are non-specialist vehicles, whilst utilisation of similar vehicles in the main fleet is low

• However, spot hire may still be a valid option as fleet numbers reduce in future (cheaper to hire selectively than to own permanently…)

Source: Hired Vehicle Log July11.xls

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Vehicle Hire days - 12 months to 31 Jul 2011

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Improving performance depends on managing the detailed data•There is a clearly a range of different vehicle specs and activity which lies behind these graphs, but…

•The Tippers drove 88,000 miles in this quarter

•The difference between driving each mile at the best or worst MPG = £9,951 per month

•The refuse fleet drove over 55,000 miles in this period

•The difference between best & worst MPG is worth £11,813 per monthSource: Wrexham fuel data at vehicle level Nov-10 to Jan-11

Fuel costed at here at £1.20 per litre ex VAT

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An insight into inconsistent data points… (Environment fuel management system)

Source: Chart Overview.xls

- 200,000 400,000 600,000 800,000

1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000

0 50 100 150 200 250 300

Mile

s pe

r yea

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Vehicles

Total Mileage per Vehicle per year

• 35 vehicles shown as driving more than 100,000 miles each in one year…

• Gritters appear to get up to 45 MPG…• To improve performance, detailed data

needs to be available & correct.

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Utilisation & Ownership of the Fleet – Key Improvements

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Procurement /Ownership

Vehicle Utilisation

Vehicle Care /Compliance

Maintenance & Repair

Fleet Data & Expertise

WCBC Fleet Management Benchmark

Current

Dec-12

• Rapid reduction in existing fleet to remove surplus capacity identified in this study

• Procurement / Replacement freeze without a sound, utilisation-based business case

• Replacement vehicles procured using realistic “life expectancy”, and aggressive policy on multi-user sharing of assets

• Longer-term review of specialist vehicles at Regional level to identify potential to share with other public sector fleets

• Soft market testing of specialist services to ensure good value of in-house arrangements

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Vehicle Operating Costs – Key Improvements

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Vehicle Utilisation





Current

Dec-12

• Creation of best practice monitoring tools to support cost reductions

• Fuel monitoring at vehicle level & tightening of purchase & issue cycle. League tables on driver fuel economy.

• Improved data capture & monitoring of on driver checks, compliance checks, insurance & damage

• Extended use of Tracker data to optimise routes & reduce costs and carbon footprint

• Examine potential for live “tasking” of mobile services within Streetscene & other Services

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Support costs & systems – Key Improvements

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Vehicle Utilisation





Current

Dec-12

• Develop costed strategy for Workshop requirements based on revised future fleet profile & servicing needs

• Agreed policy on targeting external public sector work to recover overhead & use surplus capacity

• Standard times for fitters & full review of maintenance scope & periodicity

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Fleet costs can be reduced tackling 3 main areas

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