F or municipal fleet managers who have grown comfortable with the traditional way they control and manage the services they provide, Chris Hill's message at the Canadian Fleet Maintenance Seminars (CF...
For municipal fleet managers who have grown comfortable with the traditional way they control and manage the services they provide, Chris Hill’s message at the Canadian Fleet Maintenance Seminars (CFMS) served as a wake-up call.
The current approach to municipal fleet management leaves much room for improvement and needs to evolve considerably, according to Hill, who manages the public works department with the City of Hamilton, Canada’s ninth largest city.
“The change we need to make in Hamilton, and I think this may be applicable to many other fleets, is to move away from the impression that the fleet manager is there to control things and stop people, and towards the concept that the fleet manager is there to enable things and help people,” Hill said in speaking to delegates attending the “Today’s and Tomorrow’s Director of Maintenance” session at the 46th annual CFMS.
Hill shared a vision of several roles for fleet management in an organization, moving along a continuum that includes four stages, starting at a basic stage that is focused on control and evolves to an advanced stage focused on service. (The four stages are adopted from work by Barbara E. Quinn and Robert S. Cooke called Shared Services: Mining for Corporate Gold). The evolution of the fleet department through this spectrum moves it from “an inside monopoly with all of the enlightenments of early 20th century industrial establishments to a modern commercial dealership that puts quality of service ahead of everything else,” according to Hill.
The Basic Stage is where most municipal fleets are today, according to Hill, including Hamilton.
“We have made changes for sure, and everyone agrees it’s a lot different now than it was five years ago. But our role in the organization has not changed,” Hill said.
He explained that they still control the budget and have accountability for the expenses on a fleet that includes 250 heavy trucks, such as snow plows, street sweepers, forestry aerial trucks and garbage trucks, 200 medium-duty trucks and nearly 400 light-duty vehicles as well as about 500 off-road equipment units, all operating out of nine garages and serviced by 58 people, 30 of whom are licensed fleet technicians.
“Our job is to minimize the charge backs to the users. We focus on economies of scale, which means we don’t really try to be more efficient and the users don’t really try to right-size their part of the fleet. We are kept in check by having to ask for Council approval for any additional resources, whether it’s money, or staff, or equipment,” Hill said.
How can it be any different?
By moving away from complete control of the fleet and towards the next stage in the evolutionary continuum, which Hill refers to as the Marketplace stage.
Giving up control is sure to be met with resistance, but Hill argues that the control municipal fleet maintenance managers have is illusory in many respects.
“The fleet manager really can’t control the fleet the way others think he or she can, which really means controlling the consumption of fleet resources by the users,” Hill said. “The number one driver of fleet costs is the number of units in service. Take away 100 units from a fleet and costs are guaranteed to go down. But can any of us do that? I know that if I tried, the answer from the users would be, ‘When are you telling Council which services we are not going to provide?'”
He added there is also no control over how many kilometers the users put on the fleet, which is another critical cost driver.
So in the Marketplace stage of evolution, it is conceded that control needs to be provided by the operating groups and the fleet department is going to concentrate on improving service, Hill said.
He added that users would begin to share accountability for expenses by developing key performance indicator reports that calculate cost per kilometer or cost per hour for individual vehicles and the entire fleet.
“The successful direction of these KPIs will be downward,” Hill emphasized.
Internally, the fleet would measure things such as the number of vehicles in the shop during the day shift compared to the afternoons or night, work orders opened as inspections compared to breakdowns, work orders opened for the same repair on the same unit within 30 days, parts demand fill rate, mean time between failures, and percentage of inspections done on time.
In the next stage of evolution -what Hill referred to as the Advanced Marketplace -more control over the fleet is moved over to the users in the form of the budget. One benefit of doing so, according to Hill, would be significant reductions in the “just-in-case fleet,” essentially old equipment that should be scrapped but isn’t because there is little incentive to do so under current set-ups. Up to a quarter of public utility fleet vehicles are in excess to the needs of the organization, according to some estimates.
“Why are they there?” asked Hill. “Two reasons: first, it’s handy for operating foremen and supervisors, because it eliminates the headaches of planning and scheduling. Second, the cost is buried in the fleet’s budget, not theirs, so they are not held accountable for them.”
Hill pointed out that when the City of Winnipeg moved control of the budget from the fleet to user groups, the fleet was quickly reduced in size by about 30% because the users realized they couldn’t afford a “just-in-case” fleet and rationalized.
Hill added that at this stage, service level agreements would likely need to be put in place between users and the fleet department and the move be made to market-based pricing.
Yet service level agreements are not easy to pull off. “Have very many of you tried to get Service Level Agreements done?” Hill asked the audience. “Do you remember the reaction of the users when you called to ask for a meeting? Shields up, right? How do you get the shields lowered? Meet them on their own turf; managers and supervisors only. You come with a blank pad of paper only, so their ideas and needs get priority. Ask what is the minimum number of units they need in service at the beginning of each day. Your mission is to change your operations as needed to meet their minimum daily needs.”
Moving to this stage will also mean that “the days of the $100 oil change would be over,” Hill emphasized and the maintenance department would recover input costs, which are the employee-related costs, materials, office expenses and overhead by creating lines of business. He added that in Hamilton those would likely include vehicle rental as a cost per month, repair labour per hour, repair parts and mark-up, sublet work, fuel, driver training, and pool rentals.
The final stage, dubbed the Advanced Marketplace stage, is the creation of a separate business agency, standing alone from users or any other part of the organization and reporting in at a very high level. The new business entity would be operating in full competition with companies such as Penske, Hertz Equipment Rental and GE Capital which offer similar services. The new business entity would have a profit and loss statement and a return on investment that the city would want to see improve every year while users come in when they have money and stay away when they don’t.
“The fleet manager would be rewarded for doing more work, not punished,” Hill said.
But this final stage may not be feasible for many operations to consider, and in some situations may not even be legally possible. Winnipeg, however, has moved to this ultimate stage.
Evolving the municipal fleet is no easy task. As Hill acknowledged, he’s had the four-stage evolution chart on his office wall for five years, yet his own operation remains at the Basic stage.
The natural reaction of employees who have worked their entire lives for a monopoly is to go into denial when a change of this magnitude is being contemplated.
“It’s comforting to do that. After all, slow change is the way it has always been,” Hill said. “Changing the role of fleet management divides our colleagues into those who are focused on preserving the past, and those focused on creating the future.”