From the August 2022 print edition
With supply chain issues in the heavy-duty truck industry, like lack of build slots for Class 8 vehicles, it’s crucial to pay attention to maintenance and repair (M&R) spend to keep trucks moving and on time, while keeping drivers happy.
Heavy-duty truck original equipment manufacturers (OEMs) have struggled with inventory trucks and many component parts over the past year. The semiconductor shortage has also hit assembly lines for Class 8 buildouts.
ACT Research shows subdued Class 8 orders, averaging 21,300 per month and falling to 15,800 in April. This slip in production has caused OEM’S to avoid committing to 2023 calendar production pricing or slots allowances. The drop will extend high prices for used trucks.
Supply chain challenges have put companies in an uncomfortable situation in which norms have been discarded. Budgets that used to increase between one and three per cent are now seeing double-digit increases. Trade cycles that ran for decades are now impossible, as they can’t backfill their equipment.
Our recommendations focus on understanding cost changes driven by increasing average age and from the inflationary parts increases. When you look at P&L, understand what impacts your costs down
to the line item. Working with a partner can help you understand your cost by VMRS codes and set
a strategy for asset procurement.
Fleets should leverage data analytics for asset management and procurement, along with flexible lease solutions. Finance options like sale-leaseback and temporary lease extensions can satisfy short-term needs without damaging long-term procurement goals. There are steps to keep fleet vehicles well-maintained, especially with vehicle supply limited, including:
- Understanding the diesel particulate filter (DPF) lifecycle.
- Track regeneration frequency by replacing high-DPF regeneration units and focus on upstream causes; and
- Ensure technician training
- Understand extended warranty cost from OEM or third party to allow predictable cost increases.
- Focusing on basics such as tire inflation and PM compliance.
- Identify items previously left off the PM check sheet. Extended lifecycles mean more items to inspect: suspension hangers, frame rail corrosion and engine and transmission leaks;
- Out-of-service items;
- Extended lifecycle will add maintenance downtime;
- Add mechanics or partner with a third party;
- Be prescribed to what you outsource; and
- Track outsourced versus internal repairs.
Regarding tires, review tire data to look for failure trends, pressure-related failures, and a geographic analysis as certain terminals/DCs can identify high failure rates. Check seasonalities’ impact on temperature and its pressure effects. Review dealer support for inspections and reporting, and leverage data and tools to select the correct tire program for vocation.
Also, it’s still essential that drivers do daily vehicle pre-trip inspections, checking engine lube oil levels, tire pressure, service brake adjustment and air system leaks.
Keeping M&R costs in check is critical, especially amid inflation. Cost control options exist; depending on your lease structure – full-service or unbundled – fleets may have a choice regarding what’s included
in M&R costs. There are variable inputs that make up these costs, and it’s not as simple as looking at M&R as one bucket. Fleets must dissect all M&R parts and components, including tires, brakes, service and repairs.
Fleet personnel should go line item by line item, reviewing efficiencies in each maintenance cost centre to determine how rising costs affect scheduled maintenance, preventative maintenance, as well as tire and brakes replacement.
In many of these lease agreements, fleets include maintenance with additional time and materials. So, they’re seeing the consumer price index (CPI) increase in general and in parts ranging from 15
to 30 per cent on individual items. Parts availability and shortages complicate this.
If a fleet typically runs 500 tractors, and there was an expected downtime of eight to 10 per cent, parts costs and labour have increased if they’re in a full-service agreement and the (CPI) increases. Review programs tied to CPI to see if the company can renegotiate or look at different approaches
to maintenance, such as unbundled leasing. With this visibility comes much-needed confidence in the leadership team, despite rising CPI rates and equipment supply challenges.
For fleets locked in a full-service lease, few economists see the CPI rate declining soon. While locked in, they should re-evaluate their longer-term truck acquisition strategies and plan to convert to a more flexible, unbundled lease. This includes a multi-year procurement forecast, not yearly planning.
Aging trucks and an M&R focus can erode bottom line profit. Review M&R from operations and finance angles. Use practices to keep a well-maintained fleet on the road, with happy drivers and a lifecycle approach to truck procurement.