Take it outside
Equipment maintenance is more complicated than it used to be. Remember the days when engines didn’t rely on electronic fuel injection or Electronic Control Modules? When there was a ready supply of diesel mechanics to do the work? When fluid tests involved looking at the size of oil spots underneath the truck?
Those days are gone, leading many fleets to reconsider whether they should conduct their own maintenance, or turn the work over to third-party specialists.
“We’re trying to hire some maintenance people right now for a company I’m working with,” says maintenance consultant Bill Spence of Bill Spence and Associates, referring to the shortage of available manpower. “You put an ad in the paper, and you get two or three people. [The shortage of skilled tradespeople] is a serious problem.”
Finding quality tradespeople may not be as large a problem for third-party specialists such as UAP’s TruckPro, a name already familiar to mechanics from its considerable presence in the automotive sector and which is setting up Canada’s largest network of truck and trailer service centres. As TruckPro’s Daniel Montmarquette attests, experienced maintenance personnel are more likely to be attracted to companies capable of offering ongoing training programs, benefits and retirement savings plans.
The costs of equipping a modern shop also continue to rise, particularly as new technology is introduced to meet tighter emission standards.
“Very specialized and expensive diagnostic equipment and technician training is required to carry out proper service and repairs,” explains Oliver Silver of Ryder Canada. “Often the technology is ‘captive’ to each OEM, causing greater reliance on OEM dealer service, or large full-service leasing and maintenance companies.”
The demands for a shop don’t end with the related tooling, either. For example, Spence refers to ever-stricter health and safety regulations and Workplace Hazardous Materials Information System (WHMIS) laws that govern the handling of any fluid or toxin on the shelf.
“You got to have the health and safety committee, and you have to follow the rules,” he says.
It can also be a challenge to keep up with the requirements of every jurisdiction in which a fleet may operate, points out Montmarquette, adding “What we did was call every province to make sure that we were meeting its out-of-service standards.”
Who should outsource?
Al Boughton, president of Trailcon Leasing in Mississauga, Ont., suggests a decision to outsource equipment maintenance is no different than looking to an outside company to repair the office photocopier. “How many people look after their own photocopier?” he asks. “We don’t, but our photocopier works 365 [days a year].
“What the customer really wants is to utilize his assets 100 per cent of the time.”
Indeed, some fleets will find it harder to meet that goal than others.
Mixed fleets, for example, are ideal candidates for outsourced maintenance services, Boughton says. Otherwise, they need to bear the costs of parts and personnel to maintain everything from an Econoline van to a straight truck, shunt truck, highway tractor and reefer.
“A mechanic is not necessarily as skilled on a reefer as he is on a diesel engine and a Class 8 truck,” he explains, noting that while he’s “the best guy you’ve ever seen on a 1970 Corvette,” he won’t open the hood of a late-model design.
The debate about whether to run an in-house shop often comes down to a decision about the core competency of a business – and Boughton suggests that anyone whose primary business is something other than transportation should leave maintenance to third-party experts.
“Quik X maintains all its own equipment. They’re a trucking company. That kind of makes sense that they do that,” he says, referring to the Ontario-based fleet. “A food distributor, their primary business is getting pork chops from the food terminal to the warehouse, to the trailer, to the truck, to the store, to the shelf.”
In some cases, the outsourcing may come down to the nature of work that needs to be conducted. Specialized service such as suspension work or body repairs can be more effectively completed by outside experts, rather than investing the time and money to prepare your shop for the infrequent tasks, Silver says.
At the close of last year, U.S. Xpress, the fifth largest publicly-owned truckload carrier in the United States, signed an expansive, six-year agreement with Bandag to handle its tire management needs. While no Canadian fleets have signed on as of yet, Bandag’s Greg Filer, says the interest is there.
“The key is to understand the current situation in the fleet. That’s a challenge. Where are the fleet’s costs on tires and what’s included in those costs? What kind of controls are there? What are the maintenance and disposal practices? What casings go into what applications? There’s so much to know before going into a total outsourcing arrangement that a lot of groundwork needs to be done before any kind of outsourcing proposal is made,” he says.
Bandag’s Tire Management Solutions division suggests there is an array of benefits relating to outsourced tire work, including:
* Streamlined processes, and
improved process quality
* Guaranteed cost per vehicle mile
* Guaranteed uptime
* Refocused resources for your core
* Reduced infrastructure costs
* Comprehensive reports
What are your costs?
Any outsourcing decision is going to come down to the findings of a balance sheet, and at first glance it may not appear to make any sense at all. In any outsourced maintenance agreement, for example, labor costs are likely to be higher than the $40 to $50 hourly door rate that you calculate for your own facility.
“Once you go outside, that can double,” Spence acknowledges, referring to the costs associated with outsourcing. “But when you outsource, you have to negotiate a better rate than the door rate – perhaps 15 per cent off.”
Then again, labor fees are only a portion of the consideration.
“When a company performs repair work internally, there is a presumption that it is at a lower cost. However, this is not always true,” insists Silver. “If maintenance is not a core competency of the company, it is unlikely they will operate with the efficiency of a company which has maintenance as a core skill.”
Certainly, other costs will also be higher.
“You need to look at the overhead you’ve got to put in to hire people, pay benefits,” Spence says. “There’s the expertise you need, and the amount of training you need to do to keep people at the high level.”
Those who turn to third-party providers can also shed any inventory of parts and free the capital that’s associated with it. “You’d want to turn parts four to six times a year,” he explains. “You don’t want to keep a $100 slack adjuster [on the shelf] for 12 months … [and] you should be able to buy your parts as cheaply as if you had your own shop, especially if you’re dealing with a dealership.”
Boughton suggests that ability comes down to buying power.
“What is your buying power with 100 trucks as opposed to 5,000?” he asks. “What investment in software and clerical people [do you need]? How good is your IT system to track the warranty?”
The hidden costs can be most surprising. The obvious overhead for your shop will include such things as fees relating to the physical space, heat and hydro, but there are also other issues to consider such as the costs to update tools, train employees, and dispose hazardous materials.
“Companies with existing shops may be better to focus on Preventive Maintenance regular inspections, annual Safety Inspections,” Silver says. “That helps ensure safety and CVOR and other regulatory compliance.
Spence, however, suggests that it’s better to outsource everything once you make the leap.
“You can’t be half pregnant,” he says. “You’ve got to go all the way or not at all.”
Even though oil and grease jobs may be cheaper when conducted in house – compared to a flat rate of something like $300 – they’re also timed to coincide with 100-point checks and follow-up repairs charged at the hourly door rate and the cost of parts, he adds.
Who to choose
Once you decide to outsource the work, it then becomes a matter of deciding who to use.
Part of the decision will come down to the service network itself. Silver, for example, suggests that fleets should match equipment to their dealer networks. (“Use the International dealer to service your International trucks,” he says.)
Montmarquette, national coordinator of the TruckPro banner for repair facilities [see sidebar], says testimonials and the name of a trusted brand will also be the key to selecting a reliable shop.
“The honesty of the shop is really, really important, because you have to build a relationship,” he says. “It’s not something you can find at the beginning.”
Then there’s the matter of competence.
“Of course, not having a qualified, competent supplier can jeopardize costs, reliability, and even vehicle maintenance safety, if substandard work is performed. A loss of control over quality can happen. The key to eliminate these downsides is in the criteria used in the selection of the provider,” Silver says.
So, too, does he refer to the importance of the provider’s reporting procedures. The outsourcing of maintenance doesn’t mean you can forget about related issues altogether. A vendor needs to be able to offer reports that help you predict costs and downtime, to help establish replacement cycles and enhance equipment to reduce costs associated with fuel, repairs and downtime, Silver says. Equally, a fleet will want to establish some form of feedback on maintenance trends to ensure that it can make the changes that will improve costs in the long run.
The hidden costs
Once a service provider is chosen, any related agreement will need to consider breakdowns relating to abuse as well as scheduled repairs.
“There’s a perception from a customer that, ‘I’m charged four cents or eight cents per kilometer, and that’s it,'” says Boughton. “People are under the misconception that maybe everything is included.”
There are always issues that fall outside such contracts. What’s the difference, for example, between normal wear and tear and a part that has been abused? And who is charged if a driver asked for brakes to be adjusted even if they’re fine? Equally, water in a trailer’s brake system can only enter through the tractor – the source of the compressed air. So if brakes are frozen, there’s a charge.
“A driver picks up a nail in his tire, the tire slowly leaks air, builds up heat and blows to a million pieces. Who pays for it? The customer does. And the reason is, if there’s no casing to go back to the tire company, we assume that it has run flat. It’s abuse. It’s negligence,” Boughton says.
So, too, is there a question of where the work will be completed.
Maintenance providers will need to be able to meet your needs wherever you might travel, Spence says. If longer distances require a fleet to tap into a national service network, it will be important to establish a national pricing structure, to ensure costs are known from one region to another. And if a breakdown occurs outside of their normal service area, the third-party provider should be prepared to recommend another shop.
“We do 99 per cent of the business at their location,” Boughton adds, referring to location-related costs that can involve local service. “Eliminate the cost of a shunt truck and shunt driver. You couldn’t move a trailer across the street for $50!”
A decision to outsource your fleet can also affect the age of the equipment that you operate.
“When you outsource, you need to keep a newer fleet,” Spence suggests. “When you keep an aged fleet, you’re going to have a lot more [maintenance-related] expenses.”
In the first three or four years of a tractor’s life, much of the work will be conducted under warranty. The issue involves more than simple oil changes and brake adjustments once a tractor has accumulated more than a million miles. At that point, any agreement will need to factor such things as differentials and transmission work.
It is, after all, a decision that always comes down to the numbers.
TruckPro network established from coast to coast
When you need a job done right, you turn to the pros . . . and UAP has launched a service that adds to your options.
The company already known in automotive circles for its AutoPro banner has launched the TruckPro banner to identify Canada’s largest independent network of truck and trailer service centres.
The service, not to be confused by the TruckPro system in the U.S., was launched in October 2004, and now includes 39 shops.
“It’s a bit like a marketing program for those independent shops, so they could get access to a lot of programs that wouldn’t [otherwise] be available for them,” says Daniel Montmarquette, national coordinator of the TruckPro banner. It also helps them attract experienced maintenance personnel with benefits ranging from retirement plans to group insurance.
Each site requires a minimum of three service bays, and must be able to offer specific opening hours and a pre-determined number of mechanics. The sales managers who serve Traction stores are also polled to determine the reputation of each potential location.
For customers, TruckPro shops have established preventative maintenance programs based on the out-of-service standards followed in each province.
“The major point is, they could schedule those repairs with us, and they bring the truck when they are available, and many of our shops are open 24 hours a day,” Montmarquette adds.
With a one-year limited warranty on parts and labor, every TruckPro shop will also honor the work of another.
The network hopes to add another 30 members in 2006, virtually doubling in size.
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