We use cookies and other similar technologies (Cookies) to enhance your experience and to provide you with relevant content and ads. By using our website, you are agreeing to the use of Cookies. You can change your settings at any time. Cookie Policy.


Leveraging Business Intelligence in the Transportation Industry: Mitigating the Maintenance Monster, Part 1

Originally published August 3, 2010

Fleet maintenance: every asset-owning, transportation-managing CFO’s worst nightmare. For asset-based carriers and private fleets, it is one of the top costs of doing business. The bad news is maintenance costs are projected to increase substantially for the foreseeable future. Go ahead and pop a couple more ibuprofen tablets while that reality settles into the tense area on your forehead between your eyebrows. Now massage your forehead and clear your mind. The good news is there are ways to help drive improved efficiencies allowing businesses to at least mitigate these rising costs if not completely overcome and outperform past results. How? Demystify it. Let business intelligence guide you to manage to the metrics, not the mechanical mayhem.

Rising Maintenance Costs

First things first, why are maintenance costs going up? The primary reason is new equipment prices are up and used equipment market prices are down. Combine that with a recession, and you have a formula for encouraging executives to hold onto their equipment longer, deferring the replacement cycle. New truck prices are higher largely due to new emission standards, which raise new truck prices by up to $20,000 per unit for trucking fleets. For a fleet of 1,000 trucks, that would be an additional $20,000,000 in capital outlay for fleet replacement. Now take into consideration that up to 200,000 for-hire trucks have exited the truckload market, and you have an abundance of used trucks for sale. So higher standards leading to more expensive new trucks and a flooded used truck market make holding equipment longer more and more attractive. Production costs are also rising for various replacement parts. For example, tire production requires petroleum. The general consensus is petroleum costs will continue to rise, or at least, they will not diminish in the foreseeable future. Since tires are one of the highest cost areas of fleet maintenance, this is just one more reason to expect maintenance costs to increase. What does it all mean? It means say goodbye to young fleets covered by manufacturer warranties, and say hello to the heightened expenses of aging equipment. It also means you can expect to pay more for the same things you have always needed to properly maintain your fleets due to increased production costs.

Many companies have already done the math and have committed to hold equipment longer. The key challenge becomes mitigating the costs of aging fleets. Executives will demand answers for dramatic increases in fleet maintenance expenses. In response, maintenance managers will desperately search for innovative ways to drive costs down. Knowledge is the key. Understanding fleet maintenance is valuable, but leveraging information in a way that demystifies an otherwise complicated problem is invaluable. With the right business intelligence, you can break it down into manageable parts, manage the key factors, identify the problem areas, encourage the right behavior, and achieve the desired results of reduced costs and increased efficiencies.

Leveraging Information for an Effective Maintenance Program

What are the key factors? Talk to any seasoned maintenance manager, and you will generally hear the same things: quality and efficiency. Okay, but what drives quality and efficiency? The fact is used equipment is going to wear out, and your maintenance manager is going to point out that the older the equipment gets, the more you are going to spend. However, that does not mean there is no opportunity for improvement. A quality maintenance program is founded on preventive maintenance. Properly maintaining equipment on a scheduled basis has proven to mitigate equipment failure and the risk of the inflated costs of breakdown repairs. That makes sense. However, how do you analyze and measure the success level of your quality maintenance program? Even if you minimize repairs between scheduled services, how do you know how efficient your shops are at performing scheduled work? If you are not careful, you can spend just as much money over-maintaining equipment as you can repairing failing equipment. In a perfect world, you would minimize preventive maintenance time and costs while successfully preventing failures between scheduled maintenance services. Minimal cost, minimal failures, and minimal equipment downtime are the primary goals of a high quality, efficient maintenance program.

How do you drive a maintenance program to such standards? First, stop building reports and start building tools. Oftentimes, reports are nothing more than lists of information. Is there any value in them? Yes. Are they the most efficient way to leverage the valuable time of your managers and yield optimal results? No.

Executive Dashboards

Frequently, we get caught in the trap of trying to manage everything, instead of what really matters. We all need focus. It boils down to communication and accountability. People tend to manage according to how they are measured, as long as they have a clear understanding of the expectations. Not everyone wants to be first, but very few individuals want to be last. Exception reports, alerting mechanisms, and performance scorecards are all excellent tools to help maximize your management team’s efforts. Now roll the key aspects of those tools into an executive dashboard, and you have the pulse of your maintenance operation at your fingertips. Instead of having them scouring over reports for hours on end and neglecting daily responsibilities, feed your managers a boiled down version of what matters most. In the retail world, it would be just like putting the items you really want to catch the consumers eye on the endcaps instead of lost somewhere in the maze of aisles and endless products on the shelf. Just like an expert retail analyst, you have to carefully analyze your business and find the best way to market valuable information to be consumed by your managers.

Operationalize Information Usage

If your organization is like most, you have probably built myriads of tools and reports that never achieved any real return on your investment. Why is that? There are two key reasons. First, you must have a plan to operationalize your shiny new tools and embed them into your company culture. This is where many good tools die a slow death. Wonderful new tools emerge, forged with great expectations. You see the problem. You can quantify it, capture the information, and distribute it to the masses. Then you can sit back and celebrate your glorious achievement, right? That would be lovely. In reality, however, until you operationalize the utilization of new information using a defined process, you run the risk of yielding very little to nothing from it. Second, even if you operationalize your plan, you then have to hold your people accountable to follow the plan. You must measure your progress. People manage to the measures. If you are not measuring it, then your people probably are not managing it.

For example, if you want to minimize the cost of breakdown repairs in your fleet, what do you do? You can go through every breakdown, one by one, every day and diagnose the issues. You will find the problems that way, but the reality is an experienced mind is using a learned pattern of logic to sort out what really matters. Take that tribal knowledge, generate an exception report using the same pattern of logic that the experienced manager would have used to find the issues, and feed only the exceptions to your managers for follow up. One organization did just this, and on the very first day of using this simple exception-based tool identified a $1 million annual opportunity in tire costs alone. Another organization with a large fleet used a similar tool and effectively reduced their over-the-road breakdown expenses by over $3 million annually in a matter of months. How? They tapped the minds of their experienced maintenance managers and leveraged that valuable knowledge into a new tool. Then, they identified low hanging fruit brought to light by their new tool and established a process to begin changing internal behavior and driving costs out of the system. They analyzed the business, designed a solution, operationalized the solution, and measured the results. Without operationalizing the plan by changing the existing processes and holding people accountable through monitoring and measurement, those successes may never have been realized.

If quality and efficiency are the key factors of any effective maintenance program, what does an exception-based tool for over-the-road breakdowns have to do with it? For any fleet operating over the road, one of your key costs is bound to be breakdown repairs. You lose utilization of that equipment, and you are often paying inflated rates for those repairs. Have you ever been held hostage by a vendor wanting to charge exorbitant rates to get your equipment back on the road? How many times are you repeating the exact same repairs on equipment due to poor quality on the previous repair or misdiagnosis? Understanding and managing breakdowns helps identify key issues with your preventive maintenance program. Once you understand what is failing, you can adjust your preventive maintenance routine to help minimize equipment failure exposure. If you effectively measure both scheduled and unscheduled maintenance costs, the quality and efficiency of your maintenance program becomes clearer.

Driving the Right Behavior

Once you have a handle on scheduled and unscheduled maintenance, you will want to know who your top performers are. Mix in some performance scorecarding to compare shops, managers, technicians, and vendors to their peers, and you will begin to drive the right behavior and move the needle in the right direction. Comparative measurement generates competition and has proven to be highly effective at driving changes in behavior. Just make sure you measure the right things in the right way to get the right results. How do you know if you are getting the right results? A very effective way to do this is via an executive dashboard. An executive dashboard displaying key performance indicators (KPIs) will allow executive leadership to see at a glance how your maintenance organization is performing. If you want the right answers, you have to ask the right questions. The executive dashboard should be designed to make the right questions stand out.

Identify the Opportunities with Business Intelligence

Regardless of how you manage fleet maintenance today, all signs point to a more challenging environment ahead. You can accept that this is just the cost of doing business and concede that aging equipment and rising costs are inevitable. Or, you can leverage business intelligence to help find new opportunities to drive greater efficiency and minimize these increasing costs. It can be easy to become overwhelmed, especially in a subject matter area that many individuals do not really understand. How critical is fleet maintenance cost to your organization? Can you afford NOT to find new ways to mitigate these rising costs? Fleet owners are facing a dynamic world of economic challenges. Dynamic solutions are needed. The question is, do you have the business intelligence you need to identify the opportunities? If not, you may be leaving a lot of money on the shop floor.
  • James LangleyJames Langley
    James is the Vice President of Business Analytics at TMW Systems, Inc., the leader in software solutions for the trucking industry. He has more than 18 years of experience in business intelligence, logistics engineering and operations management. He has served in key senior management roles for both billion dollar institutions and small businesses. Leveraging real world experience with an analytical approach, he has spent his career bridging the gap between business and technology.
     
    His experiential expertise includes transportation and logistics management, fleet maintenance, and prepaid financial processing. His approach to achieving business objectives is working directly with business owners to identify areas of strategic opportunity, developing an understanding of the existing environment through process and data analysis, collaborating with the business to design a plan of action, and helping to operationalize the plan within the organization to actualize the ROI.
     
    His ability to overcome data quality challenges, convert business intelligence into actionable processes, and implement strong data stewardship accountability and initiative measurement standards has proven to be a catalytic mechanism for businesses striving to adapt in an ever-changing environment.

    Editor's note: More transportation articles, resources, news and events are available in the BeyeNETWORK's Transportation Channel. Be sure to visit today!

Recent articles by James Langley



 

Comments

Want to post a comment? Login or become a member today!

Posted August 3, 2010 by Anonymous

This all makes sense.   What do you do when this data is in various software package databases, ERP systems, etc?  

Is this comment inappropriate? Click here to flag this comment.