Controlling Work Truck Costs: Five Rules of Component Purchasing

The National Truck Equipment Assn. has released a paper on keeping costs under control by properly specifying components on new work trucks.

According to the paper, specs should be written to include as many components as possible, such as frames, suspensions, engines, transmissions, brakes, lights, power takeoffs, tires and specialty equipment.
”Far too often, fleets purchase on a hunch,” says Robert Johnson, lead consultant, Fleet Consulting and Design Services, Jefferson, Md.
Johnson, a former fleet manager, recommends these five rules for specifying commercial vehicles to maximize the fleet’s return on investment.
1. Develop written specifications for complete vehicle applications (including upfits). Written specs ensure that components chosen by the fleet manager are the ones installed on all of the company’s vehicles. Without written specs, fleets may receive different components depending on which upfitter assembled a particular vehicle. Putting specs in writing protects against ordering errors and makes it easier to order the next round of vehicles.
2. Standardize components. Standardizing components ensures continuity in vehicles from dealer to dealer and upfitter to upfitter. Most upfitters have their own preferred brands, so if the fleet manager does not specify which brand to install, the brand used will vary depending on who is doing the work. When components are standardized in a fleet, it minimizes the number of parts the maintenance department has to keep in stock and reduces the amount of training required for maintenance personnel. If a variety of lines are used, maintenance personnel have to learn how to work on all of them.
3. Don’t automatically under-spec or over-spec. Fleet managers who want to save every penny upfront tend to spec for the lowest possible upfront cost. As a result, these vehicles often perform poorly and have more down time and higher maintenance costs. Then there are the fleet managers who avoid that trap by buying the most heavy-duty components available, whether the application requires them or not. These over-designed vehicles generally cost more upfront and usually require the use of more expensive maintenance and repair components. Increased weight may reduce payload leading to a loss in productivity or the need to purchase a bigger vehicle.
4. Identify vehicle requirements up front based on job requirements. It is important to optimize components for the required application. Start by identifying the vehicle’s basic requirements for the intended use. Then consider additional features intended to increase productivity, reduce maintenance costs and improve operator comfort.
Some of the parameters to consider include:
o Net payload requirements
o Operating environment
o Operating conditions
o Operating cycle
o Loading cycle
o Starting gradability
o Reserve gradability
o Minimum desired road speed
o Towing requirements
o Special vocational requirements
o Maintenance environment
o Operator proficiency
o Regulatory and contractual requirements.
Requirements should be reviewed before each vehicle purchase, to make sure they have not changed.
5. Consider life cycle costs. An optimized vehicle will provide the lowest overall cost of ownership over its lifetime. The primary life-cycle cost factors are initial purchase price, long-term operating and maintenance costs, vehicle productivity and resale or salvage value. When evaluating the cost-to-benefit value for any component, a for-profit business should consider the time value of money and the impact of taxes on cash flow. This can be accomplished by using a basic after-tax net present value analysis.
“It’s very important that fleet managers learn as much as they can about the various components that go into their work trucks, so they can make informed purchasing decisions,” Johnson says. “One easy way to learn more is to attend The Work Truck Show. Many trade shows display finished vehicles and vocation-specific equipment, but exhibitors at The Work Truck Show also exhibit all of the pieces and parts that go into and on the vehicles. This single show gives fleet managers and others a perfect opportunity to look at all of the parts and to talk directly to component suppliers.”
Johnson will lead a technical session titled “Component Spec’ing for Optimum Vehicle Life-Cycle Costing” on March 3, 2005, at The Work Truck Show 2005 in Indianapolis, Ind.