Is your maintenance program adding to the bottom line or putting a drain on it? Is the technician shortage causing a bottleneck in your operation? Are ever-more-sophisticated equipment and diagnostic tools adding to your woes?

More important, could someone else do a better job?

"Running your own shop should be treated like running another business," says Reed Murphy, president of MHC Paclease, part of a multi-state network of Kenworth dealers based in Kansas City, Mo. "The shop impacts the balance sheet and needs to prove it's producing the appropriate return and meeting the operational objectives."

Increasing complexity of equipment, including the new 2007 engines, plus a shortage of qualified technicians make that harder to do. It's no wonder that more and more fleet owners are interested in outsourcing some or all of their maintenance. In fact, the Truck Renting and Leasing Association reports it is the fastest-growing segment of the leasing industry.

There are some very good reasons to outsource maintenance. Many companies want to focus on their "core competency," whether that's manufacturing in the case of a private fleet or delivering freight on time in the case of a for-hire carrier. Others find they can outsource maintenance cheaper than they can do it themselves. They may also prefer the predictability of a consolidated monthly bill.

"Fleets are finding it increasingly difficult to find the kind of maintenance leadership [they need] in the industry," says Riley Asher, president of Bandag-owned MaintenanceIO, which does maintenance consulting as well as full-service third-party maintenance outsourcing. "Also, they're finding they're having to bring mechanics in at a lower level and train them in-house." Costs, he says, can get out of control.

Small fleets of all types may be well-served by outsourcing, says Peter Souza, vice president of maintenance for Salem NationaLease in Winston-Salem, N.C. "It typically takes in excess of 20 trucks to justify the wages of one employee – but one employee doesn't give you a lot of coverage when it comes to taking care of your fleet's [maintenance] needs." Because trucks typically don't run just 8-to-5, he says, it takes more than one person to handle the maintenance needs of even the smallest fleet, and that's often not very cost-efficient.

Increasingly, even larger fleets are looking at third-party maintenance providers, Asher says. "Over the last 12 months or so, we've been getting inquiries from larger companies, over 1,000 power units."

TRUE COSTS

To decide if outsourcing maintenance is right for you, you have to know the true cost of maintaining your own trucks. That might be more that you think.

"You need to look inside your operation before you look outside it," says Terry Dubowick, director of Mack Leasing System. "You begin by analyzing your current method and the results. Benchmarking against the best competitors in your industry can also help you to measure your own performance. Understanding the areas of your existing maintenance program that could benefit from outsourcing should be the first objective."

Just some of the things you need to consider:

  • The cost of building and maintaining the facility
  • Overhead, including electrical bills, property taxes, insurance
  • Parts inventory
  • The cost of finding, training, and keeping good technicians, such as wages and benefits (including ever-rising health insurance costs), and human resources department costs
  • How efficient your technicians actually are
  • Worker's compensation
  • The cost of buying diagnostics and repair equipment
  • Parts and supplies, from shop towels to oil to light bulbs
  • Environmental disposal costs and liabilities
  • DOT compliance costs

Fleets may have several employees who are spending part of their time on maintaining the fleet, such as paying bills, doing permitting, etc., notes Andy Stopka, national account director of maintenance for NationaLease. "A lot of companies don't take those folks into the equation, because, 'I have to have them anyway.' " By outsourcing those duties, he says, you could get those employees to handle work that will produce revenue, rather than being a cost to the company.

One thing that's hard to put a dollar amount on might be called peace of mind. With the technician shortage, you could find yourself short and have trucks down waiting for repairs. There's also the question of how good a maintenance job you're really doing. If you're skimping on preventive maintenance because you're short on technicians, you're likely to face more expensive breakdowns and repairs later on.

"We demand, as part of the contract, that those vehicles get back to us on a regular basis," says Peter Vroom, president of the Truck Renting And Leasing Association, about contract maintenance programs. "So you often don't have the failures that occur when you didn't get the oil changed often enough."

THE BOTTOM LINE

Fleets may shy away from outsourcing, believing it will cost more than doing their own maintenance. "Quite often the opposite is true," says MaintenanceIO's Asher. "A third-party provider, if they do a good job, can save a fleet enough money to more than pay for any outsourcing."

So you need to look beyond the price, whether it's a per-month or per-mile contract maintenance fee or an hourly rate.

"Everybody focuses on the hourly rate," says Tom Wiers, president/CEO of Wiers International Trucks in Plymouth, Ind. But if you're paying $100 an hour for work that's done in an hour or $50 an hour for work that takes two hours, the bill is the same – and the $100-an-hour shop gets your truck back on the road faster. Customers also often overlook cheaper rates offered by dealers for preventive maintenance work than for technical repairs – rates that may be even cheaper if you set up a regular maintenance agreement.

In addition to cost, the other big factor that prevents many fleets from outsourcing is fear that they'll lose control of their trucks, that having someone else handle the maintenance will slow them down and keep them from delivering the freight on time. But if you do it right, you may actually be able to get more control in some ways.

For the most successful outsourcing, Asher says, a third-party maintenance provider needs to work so closely with the company that "if they're sitting in a meeting with senior leaders of the company, you'd be hard-pressed to tell who's the company and who is third-party. That's integration."

This kind of integration is important, he says, because maintenance influences many other key areas within a fleet, such as driver retention, the safety rating, customer satisfaction and on-time delivery.

Then there's equipment spec'ing. Companies that track repair data on a large number of customer trucks (and in the case of leasing companies, their own as well) can often point you toward components that they have found to be more reliable.

Those capabilities to do data management and cost reporting are exactly what helps you better control your fleet, says Olen Hunter, director of sales for PacLease. He points out that most leasing companies, because they run very large fleets, have invested in a lot of shop technology that allows them to track the maintenance not only on their own fleets, but on customers' vehicles as well.

"If we want to know what a company's maintenance costs are, we can look at it from a 30,000-foot view," he says. "But if we want to drill down to a specific truck, we have the ability to look at, almost like an individual P&L for a truck, in terms of labor, parts, outside repairs, etc."

OUTSOURCING OPTIONS

"There are a wide variety of programs and providers for outsourced maintenance services," says Mack's Dubowick. "Some programs are designed to take over your entire maintenance operation, and some may be more indirect. A parts management and supply program, for example, might improve just one area in an existing in-house maintenance operation. There are basic PM service programs through complete guaranteed maintenance contracts. The potential combinations are almost limitless and dictated by the customer's specific requirements."

At one extreme, explains NationaLease's Stopka, is a full-blown contractual maintenance program, which takes care of the truck and trailer "from the bottom of the tires to the top of the roof, from the front bumper of the tractor to the rear bumper of the trailer." At the other end of the spectrum, he says, you're set up as a charge account customer and you'll be billed at an hourly rate for any work.

In between the two extremes, says PacLease's Hunter, is a preventive maintenance agreement. A fleet agrees to pay a fixed monthly rate for preventive maintenance services. The fleet may also get a discounted parts and labor rate for anything above and beyond that.

Maintenance outsourcing can be done by your dealership, a traditional leasing company, a leasing company that's tied into a dealership network, truckstops, independent shops, and consulting/third-party maintenance companies.

For instance, Jonathan Randall, director of product marketing for Freightliner Trucks, notes that some dealers are very active in helping customers in their local markets manage their maintenance. "They'll put service techs in the customer's shops on certain days of the week to handle warranty repairs and certain Freightliner-specific repairs, all the way to actually taking over the customers' shops for them and managing the whole shop process."

On a national level, Freightliner is looking at adding preventive maintenance and other options to its recently launched Excelerator emergency breakdown assistance program. Freightliner also offers contract maintenance for its SelecTrucks used trucks with its MileMinder program.

Peterbilt offers a nationwide program through its TruckCare Services, offering everything from breakdown assistance and fast QuickCare lube and A/C service through complete contract managed maintenance programs. Kenworth's PremierCare offers similar options.

If you want to dip your toe into outsourcing, you might want to look into getting some preventive maintenance work done on the road. Convenient PM services are offered by truckstop chains or Speedco, which not only offers quick oil changes but, since it is now owned by Bandag, also offers dedicated tire lanes as well.

TravelCenters of America, for instance, has been putting more emphasis on truck service. The company has invested nearly $35 million in the last three years to add service bays and has expanded its fleet of mobile service trucks to nearly 300, with a central dispatching number drivers can use for roadside breakdowns.

TA also has partnered with Freightliner to be an authorized express and light-duty repair center. This allows truckstop locations to handle warranty work and have the same access to technical information, diagnostic tools and parts that Freightliner dealers do.

Fleets can sign up for central account billing and can get information electronically about work done on their trucks, identified with VMRS codes. These in-house billing customers can earn rebates based on the number of oil changes done at TA each month. Fleets can use an instant-message-type system to arrange for a truck to get work done; when the driver arrives at the location, he's already "in line." The same system allows customers to efficiently approve estimates.

Randy Graham, vice president of shop marketing for TA, notes that convenience and speed are two advantages of getting light repairs and maintenance work done at truckstops. "We're right off the highway, we're open 24 hours a day, and typically our wait times are well under an hour, and our typical repair time is an hour to an hour and a half."

Petro was the innovator of the quick oil change for trucks back in 1983, according to Dave Latimer, vice president of Petro:Lube, adding it's a good choice for other maintenance and light repair work, as well.

"What we've tried to do is focus on certain areas of the truck," Latimer says. "So we spend a lot of time, energy and infrastructure in improving our efficiencies relative to repairing things like wheel ends, electrical and brake systems and air-conditioning systems."

DOT inspections are one area popular for outsourcing, Latimer says. Petro also can provide maintenance history to fleets on each truck via the Internet. Fleets can enter specifications for what maintenance they want done on trucks, which comes up on work orders automatically when the truck rolls into the Petro bay.

For fleets that have a stable of experienced technicians, MaintenanceIO's Asher says they might want to "look at a different paradigm" when it comes to routine oil changes and tire maintenance: outsourcing routine oil changes and tire changes to companies such as Speedco.

"Even those companies that have a very good handle on their maintenance would be well-served to consider that as an option – it frees up their mechanics to really concentrate on diagnostics and the highly technical jobs in-house."

ONE-STOP SHOP

A lot of fleets may outsource some of their maintenance. Maybe you have a tire shop handling tire repairs, get oil changes done at truckstops on the road, and get the dealership to do warranty work. But there are advantages to having one company handle all the work through a contract maintenance agreement.

"When you consolidate or deal with one source for full truck maintenance, you get the economies of scale of dealing with one vendor," says PacLease's Hunter. You also can reduce your transaction costs, he says.

"When you go to multiple vendors, you're going to be processing multiple invoices," he explains. "Many companies have determined that the cost of processing an invoice internally can range from $16 to $30. So when you deal with multiple vendors, you're increasing your accounting costs associated with that."

Wiers says his dealership took over all maintenance for a 50-truck fleet that was previously outsourcing it to several different independent shops. "We have a formal partnership in place, we approve all their bills, they review everything, then we have quarterly updates and annual planning sessions. We reduced their maintenance costs by 25 percent."

Having one vendor work on a truck is important for accountability, Wiers says. "It ends up being a finger-pointing situation when anything goes wrong. They don't know what you did, you don't know what they did. Things fall through the cracks."

It can also make a difference when it comes time to sell your equipment. Being able to provide complete maintenance records from a reputable company can mean higher residual values.

"If you're going to outsource on a regular basis, you need to do a contract saying you're going to pay X and they're going to do XYZ," says Kevin Seidl, until recently vice president/general manager of Scully NationaLease in Fontana, Calif., and previously head of maintenance at fleets such as National Freight and Guaranteed Overnight Delivery (G.O.D.). "It's crystal clear. It sets and holds standards as to what [the vendor is] accountable for."

Without a maintenance contract, he says, "You're not going to get the priority support you otherwise deserve. The more business you give the same provider, the more responsive and responsible the provider will be, and the more efficient your maintenance support and costs will also be."

WHO SHOULD YOU USE?

There are various pros and cons to choosing a leasing company versus a dealer for outsourcing.

Some of the pros of using a dealership include better availability and price on parts.

"I think the key difference between a dealership and a leasing shop is our ability to diagnose repairs and then get the repairs done, whether it be a simple preventive maintenance or whether it be a catastrophic repair," says Freightliner's Randall. "Dealerships have a much more robust capability in the service shop versus a typical leasing company," including a much larger parts inventory. "We've got everything at the dealership to be able to fix the truck at the point of the repair, so we don't have to stop turning the wrenches and take it somewhere else."

Dealers also have a vested interest in the relationship in addition to the maintenance contract. "Beyond the margin derived from the maintenance services, the dealer's performance definitely influences the next purchase decision," says MHC's Murphy.

However, even with a priority status as a contract maintenance customer, you may sometimes be faced with long wait times at the dealership. That's one of the areas where leasing companies say they have the edge. They are more likely to provide 24-hour service than most dealerships, and because they aren't being paid hourly, it behooves them to get that truck serviced and back out the door.

Leasing providers tend to be very experienced at maintaining and managing a fleet because they are doing the same thing for their own fleets. "In the leasing world, that's my job," says Seidl. "If I don't do it successfully, I lose money on the truck."

Leasing companies with a tie to a dealership network offer some of the best of both worlds, says PacLease's Hunter. These are an especially good option if your fleet is all or mostly the same make of truck.

DOING IT RIGHT

No matter what type of maintenance you outsource or what kind of provider you choose, effective communication is key to making an outsourcing arrangement work. And that starts right from the beginning, when you set up the outsourcing arrangement.

"You have to negotiate it, not just throw it at a vendor," Seidl says. "You have to approach him with a contract where he has requirements and you have requirements."

Souza also emphasizes the importance of the contract, and knowing exactly what it covers. "I think a lot of times people sign a contract thinking they're getting more than they really are," he says, leading to dissatisfaction down the road.

Also, Asher says, it's important to have realistic expectations. "When a maintenance operation is in real trouble and a fleet decides to bring in a third-party provider, they cannot fix it all overnight. While there can be some low-hanging fruit, some quick-hit items that can bring savings to the bottom line, to really start fixing the underlying root causes usually takes six to 12 months to get the identification done and kind of stabilize the patient. In that second year we really start to get some returns."

Communication goes beyond setting up the contract. The provider is an extension of your business. Communicate changes in operating requirements and seek input on equipment specifications. Make sure you use the data they can provide on your fleet.

As Mack's Dubowick notes, "I have yet to see a successful outsourced program work without a strong commitment from both parties."

DOING YOUR HOMEWORK

When Mackay and Co. surveyed the service side of the aftermarket in 1998, they found that truck owners wanted to outsource more service work. But when they did a follow-up study five years later, they found less outsourcing actually being done, rather than more as they might have expected.

One of the main reasons cited by fleets was they couldn't find a reliable service provider that met their quality standards and need for fast turnaround time. That's why it's important to do your homework and find the right provider for your needs. Some things to consider:

Ability to get the job done right – and done fast. What is the experience and training level of the technicians? Does the provider have ASE-certified mechanics? Do they have quality standards in place such as ISO certification or employee Six Sigma quality processes?

Olen Hunter, director of sales for PacLease, suggests looking at the technician-to-power-equipment ratio. "If they have a very low technician-to-power ratio, you're going to have a situation where you'll get better service, whereas if there's a higher number, your service availability may suffer."

Crucial are items such as whether the network of locations matches up with where you run; hours of operation; and possible wait times. Is mobile maintenance available to take care of maintenance at your location or on the side of the road? Can the provider handle emergency breakdowns?

Warranty work. Partnering with a dealer or a leasing company tied to the truck maker offers the advantage of being able to handle warranty work directly. If you're not partnering with a dealer, find out their policies regarding warranty repairs.

Reputation. "Trust and integrity are values that form the basis of any good business relationship, so look for a supplier that has a solid reputation," says Terry Dubowick, director of Mack Leasing System. "The better suppliers will be looking at yours."

Look for things such as how long they've been in business and their experience in handling the work you're looking for them to do. If you want them to come in and run your shop for you, is that something they've done before?

In addition to asking other fleets about their experiences with service providers, ask drivers. "Managers negotiate these deals," says Peter Souza, vice president of maintenance for Salem NationaLease in Winston-Salem, N.C., "but the truck drivers are the ones that come face to face with the service providers, and they can sometimes be the best source for information."

Visit the facility. Get a first-hand view of the organization, cleanliness, parts inventory and general shop environment.

"You have to go onsite and spend time," says Kevin Seidl, until recently vice president/general manager of Scully NationaLease in Fontana, Calif., and previously head of maintenance at fleets such as National Freight and Guaranteed Overnight Delivery. "If his shop is a dungeon, you should be worried about the quality of the work on your truck."

Another thing to look for, Seidl says, is how technicians are tracking their time – they should be using an efficient, electronic system. "If they're writing things on paper, you're going to get late bills."

Pay structure. Are you looking at a monthly fee per truck, a per-mile rate, an hourly labor rate? Do you get a discount the more business you give the provider?

Extras. If a vendor will provide a substitute unit when yours breaks down, it gives them extra incentive to make sure your truck stays on the road, and that it gets fixed fast when it is down. Can you get fuel at a discount? What about truck washing? Can the company handle fuel tax reporting for you? Licensing?

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