This is Part 3 of "Shifting Profit Drivers," a periodic collection of essays
Builders tell me that the most important thing my lumber dealers can do for me is: “Deliver my materials to my jobsite when they promise to do it.” If follows, then, that if you want to meet your builders' expectations, it's essential you have:
- A well-functioning yard management system; and
- A fleet of trucks and lifts that do not breakdown regularly.
Delivery trucks and forklifts are not like wine; they do not get better with age. Nor do they become collector items like Jaguar XKEs.
All professional trucking companies--and you are a trucking company--have fleet maintenance and replacement schedules. When I ask dealers about their fleet replacement schedule, most do not have a plan. I often hear, “We run them until the wheels fall off.”
That plan once worked. Builders had few choices for materials, so either they picked them up or they waited a couple days while the dealer fixed his truck. There's no chance that plan will work in today’s environment. Nowadays, when a truck or lift is down, everyone goes into Superman mode to make the delivery.
In that delivery-crisis moment, repair costs or overtime hours are not an issue. They will, however, likely become an issue later.
Here's another problem: by “running them until the wheels come off," most of your fleet could age out at about the same time and have little resale value. Replacement requires a huge amount of cash to be invested in a short period of time. By waiting until the last possible moment to purchase new equipment, lead times become an issue. The dealer is left without a vehicle for additional time or the purchase of a “stock” vehicle outside the preferred specifications. Expensive short-term leases sometimes can be seen as a quick-fix option as well.
Here are two actions you can take to avoid an equipment crisis:
- Set a replacement schedule.
- Test an oil sample from engines and transmissions at least every other oil change.
I’ve heard more than a few dealers say, “I knew I should have sold or traded that truck, but decided to wait six months and then blew the engine in four months.” Now the cost of repair is more than the truck is worth, so it is junked.
A $50 solution to this situation, in most cases, is having fluids analyzed. This is a service oil suppliers will provide when you ask. If there is water or metal parts in the oil sample, the analysis will reveal the problem earlier than any other method.
As for replacement schedule for trucks, I recommend you budget to replace 20% of fleet each year. For lifts, budget to replace 10% each year. If you have 10 delivery trucks, plan to replace two each year. This eliminates unplanned cash outlay for three or four trucks in one year, or worse paying expensive short-term leases.
There are exceptions to this rule of thumb. If we are in a recession, replacements can be postponed. And if the fleet is in really great shape, you an skip skip a year. By renewing your fleet every five years, vehicles being replaced will have more than salvage value. You will have less expensive repairs and deliveries will be made on time.
Previously in this series:
1. Want Higher Profits? Start Thinking More About Logistics.
2. How Efficient Is Your Operation? Find Out With These Benchmarks.