Five Steps to Successful Outsourcing
When you are looking to outsource your maintenance, make sure to consider all the angles.
August 2013, TruckingInfo.com - Feature
When you are looking to outsource your maintenance, make sure to consider all the angles.
Fleets have long wanted to outsource more maintenance, but have been frustrated by problems with the quality, cost and speed of the work. Today, there are more pressures on fleets to outsource than ever.
Equipment has become more sophisticated, more heavily computerized and complicated to work on.
It’s also hard to find qualified technicians. The Department of Transportation’s Compliance, Safety, Accountability enforcement program means more federal scrutiny of trucks and trailers than ever before.
“I think the interest is growing because shops are so full,” says Mike Besson, vice president of customer care and dealership operations for Rush Enterprises, which operates nearly 80 truck dealerships nationwide. “Dealers are at capacity right now, and the pain point is how long it’s going to sit before [the dealer pulls] it in and [says you] have an ABS sensor out.”
There are many types of outsourcing available. At the highest level is full-service leasing, where you lease the equipment and all the maintenance is taken care of.
Or you may sign a contract where work is done as needed for a negotiated up-front price. Ryder, for instance, has an offering it calls on-demand maintenance, explains Dennis Cooke, president of Ryder’s fleet management solutions.
“The customers we target for that have fleets that are large, national, and travel throughout the country, and they’re looking to sign a contract with a provider where their rates and part pricing are defined. We can offer them maintenance on an on-demand basis throughout our network,” he says.
Or, you may want to outsource one particular area, such as tire work or refrigeration unit maintenance.
Increasingly, outsourcing doesn’t have to mean taking the truck to the dealer or shop.
Outsourcing could involve keeping your shop but outsourcing the labor. For instance, Ryder manages about 200 fleet shop facilities around the country, about a quarter of its 800 locations. Rush’s Besson says this type of outsourcing is where they’re seeing the greatest increase.
“The most expensive shop you’ll ever operate is the one you don’t need,” says Mike Delaney, CEO of WheelTime, which has a network of nearly 200 service locations in the U.S. and Canada. “When you build a big shop, you can sometimes find yourself working hard to keep that shop productive. Maybe it’s time to share that capacity with other companies.”
Outsourcing also can mean having a dealer or other provider’s technician working in your shop alongside your own employees. Rush, for instance, has technicians assigned to customer shops, especially for technical jobs such as reprogramming engine ECMs or to do warranty work.
“Fleets often replace parts that should really be under warranty, costing them money,” Besson says.
Mobile maintenance is another growing outsourcing option. Trucks often come in after hours and on weekends to handle work when trucks aren’t running.
It’s all about customization, says Andy Stopka, vice president of maintenance at Nationalease. “You have this whole quiver of arrows, but you only use the ones you need to use.”
There are a number of steps to take to increase the likelihood of a successful outsourcing arrangement.
1. Look inward
“The first thing you need to do is identify a problem,” Stopka says. “If you’ve got personnel problems, what’s causing that? Are you not paying enough, are your benefits wrong? Do you want to fix it, or not?”
Before you decide to outsource, you might want to work with a maintenance consultant to see if you can fix some of those problems first, says Darry Stuart, who offers his expertise as a “limited-time executive” as president and CEO of DWS Fleet Management Service.
Some problems, however, can’t be fixed that easily. Stuart offers the example of a small shop with two different technicians on first and second shifts. That would be “cost prohibitive for a fleet of two trucks. When you factor in salary and benefits, it would be cheaper to outsource one of the shifts.”
The most common areas where fleets turn to outsourcing are larger, complex, time-consuming projects, such as rebuilding a batch of engines, body work, or for areas where they don’t have the expertise, such as maintaining natural-gas-powered vehicles.
Look at the specific pain points in your shops. If you’ve got particular items cutting into your productivity, consider outsourcing them.
“Look at what you can do really well, really consistently, to keep vehicles moving,” Delaney says. “If your guys in the shop can turn vehicles all day long within a certain range, then take everything out of that range they’re comfortable with and give them to people who know how to do it. We can turn a transmission or engine much faster than the average in-house shop.”
“Do what you do best, and let other people do what they do best, and you increase productivity across the board.”
2. Run the numbers
Before you enter into an outsourcing arrangement, understand what your costs currently are.
“I think it gets down to first, do I have an understanding of my total costs of ownership,” says Ryder’s Cooke – not just the acquisition costs of the vehicle and the actual parts and labor in the shop.
“I’m looking at costs that a lot of times aren’t shown – the overhead, the training of the people, the recruiting of the people and so forth.”
Look at costs such as parts inventory and warranty work. Delaney recalls one customer with more than $1 million they had not collected in core returns.
Stuart cautions that “outsourcing isn’t necessarily cheaper. Sometimes it’s just easier. Sort of like valet parking on a rainy day – you know there’s an upfront cost, but the benefits of staying dry in a downpour may be worth the extra money.”
3. Look to technology
One of the key reasons fleets don’t want to outsource is downtime. Technology can help.
“In studies, we found in the typical service event, scheduled or unscheduled, only 20% of the downtime related to that event is actual wrench time,” explains Dick Hyatt, CEO of Decisiv. “Over 80% is lost in inefficient processes. So our focus is around increasing the efficiency of that process, whether it’s in the fleet shop or external contract maintenance.”
Decisiv offers a platform used by dealers, independent shops, fleets and others that allows users to share information about the vehicle, their parts and maintenance preferences, pre-arranged parts pricing, etc.
Communicating with the outsourcing provider via a mish-mash of phone, text, email, fax, etc., can lead to delays in turnaround time. In contrast, Decisiv, as well as private-label versions like WheelTime’s, has all the communication going through a single platform. Everyone involved can access the communication history, as well as related documents such as estimates, authorizations and photos.
Decisiv says it has achieved 50% reductions in downtime with its system.
“I would ask how [potential outsourcing providers] you facilitate alerts, notifications, collaboration – how do I know you’re going to be efficient in the service you provide?” says Hyatt. “If my service provider says, ‘Joe’s going to call you every time you need something,’ I would say that’s old school and look for somebody else.”
4. Find the right outsourcing partner
“Just remember that outsourcing is a bit like getting married – it is much easier to get into some situations than to get out of them,” says Michael Marks, managing partner, Indian River Consulting Group.
Be clear on what you’re going to measure in order to assess the success of the project, he says.
“You need to be very specific about what you want, and there will be a cost to disengage,” Marks said, suggesting a 90-day proof of concept with an easy exit option if things don’t work out.
Don’t be too fixated on price, Stopka says. “If you are talking to three or four competitors and one is extremely low, it probably is too good to be true,” he says. Both sides have to make a profit. If the provider isn’t making a profit, he may cut corners and quality may suffer.
ATA’s Technology and Maintenance Council Recommended Practice 535 offers a two-page template for establishing fleet-service provider relationships. It lists some 75 questions and requests data in six major areas, from contact information to a checklist of repair and maintenance services available.
Don’t forget to ask for references – and to actually talk to them about their experiences. The right outsourcing partner for one fleet may not be the right one for yours.
5. Manage your outsourcing program
Unless you’re doing a total turnkey full-service leasing type operation, outsourcing does not mean you can abdicate all responsibility for maintenance.
“Anybody who outsources who thinks they don’t have to manage the outsourcing process is very, very naïve,” says Stuart. “You really have to manage what’s being done on the money you’re spending. You’ve got to make sure you know what you’re paying for.”
“You almost get the impression that there’s a ‘set it and forget it’ mentality when people go down this path,” says Jack Boetefuer, CEO of Arsenault Associates, which offers Dossier maintenance software. “They throw up their hands and say, ‘This company says they’ll help us reduce our costs’ and kind of wash their hands of it.”
That, however, is nearly certain to lead to disappointment in your outsourcing experience.
“If you do decide to outsource, you should have a plan for how you’re going to capture, manage and maintain all the information about the repairs, the downtime, your costs, and your compliance – all those things are ultimately still your responsibility.”
Again, technology can help. Dossier, for instance, has an External Work Management module that allows you to communicate with and manage the outsourced provider.
If you’ve tried outsourcing in the past and didn’t have a good experience, WheelTime’s Delaney suggests you think about it again.
“If you think about what technology can do to speed repair, many of the reasons you may not have outsourced in the past may not exist today.”