IN PRINT — Rent a Wrench: deciding what to outsource
Posted: July 25, 2017 by Eric Berard
Maintenance is a fact of life whether it involves a preventive oil change or roadside repair. But the question of whether the work should be completed in a fleet shop or by a subcontractor will be a matter of careful number crunching and personal preference.
“Peace of mind has a price,” admits Christian Wafer, fleet management consultant and president of Flotte-Expert in Montreal. “Absence of trouble comes with a price. If you want to transfer that burden [to] someone else’s shoulders, you’ll have to pay for it.”
One of the biggest reasons to embrace full-service leasing or outsourced maintenance contracts, however, is the promise of a predictable budget for such costs.
“You kind of flatline their costs. It allows them to predict their costs, to do budgeting and to know what they’re going to spend,” says Jim Lager, Penske Truck Leasing’s senior vice president – sales.
Leasing companies are not the only sources of such support, of course. Such contracts are also offered through truck dealerships. And both types of businesses will want to ensure that service bays remain active. Some third-party providers will even conduct the maintenance in a fleet’s existing facilities, whether it involves filling now-idled service bays or parking mobile units in a fleet yard.
Know your costs
Wafer doesn’t have any problem with the concept of outsourcing maintenance, but he insists that fleet managers have to carefully crunch their costs before deciding to hand over the work.
“Often times, people have the impression to save a lot of money by maintaining their vehicles themselves,” he says. “The sad part is that they’ll also often make a decision to outsource maintenance, or not, on skewed parameters.”
The costs certainly involve more than hourly wages alone. “Let’s say you find a supplier is too expensive because he charges you $100 an hour for a job that you can do in house for half that amount. Are you sure your $50 amount is accurate?” Wafer asks.
When work is conducted in a third-party shop, every hour is spent on a task. In contrast, the $50 per hour paid to an in-house mechanic also has to account for vacations, public holidays, or when completing other job-related activities like washing up and storing tools. Even if a mechanic spends just 15 minutes a day on the latter activity, that lost time is multiplied by every person on the shop floor. Those minutes become hours, and the hours become lost days over the course of a budget year.
“It’s not a bad thing in itself, but you need to calculate this loss of productivity to get the real picture of your hourly costs. Because the rate that the outsourcer charges you takes all these details into account,” Wafer says.
The hidden costs don’t end there. Hourly rates paid to third-party shops also cover overhead costs such as heating, lighting, and upgrading the tooling needed to repair evolving technology. Human resources matters such as hiring and training technicians are also transferred into someone else’s hands – and those costs continue to rise in the face of skills shortages and increasingly complex equipment.
Meanwhile, any capital that would otherwise be spent on land and shop space can also be unleashed for core business activities. Like moving freight.
“There are many, many aspects I think most customers overlook because it’s [maintenance] not their core business. It’s not their area of expertise. And while they focus on an hourly labor rate or whatever it might be, they are really losing sight of the big picture,” agrees Penske’s Lager.
Outsource what you seldom do
Few fleet shops can be experts in body work, engines, transmissions, air conditioning units, trailer doors, and the various other systems on a truck. “You need to choose your battles. You can’t do everything by yourself and be good at it at the same time,” says Wafer. It’s why he suggests a good place to start is by outsourcing maintenance jobs that are rarely seen.
“You’re not saving any money if your technician loses valuable time trying to figure out what’s wrong with a turbo because it’s not his specialty, contrary to your dealer’s technician who might be doing this all day long,” he says.
Penske’s Lager says this is especially true when it comes to the components on late-model engines, which come with evermore-complex emissions systems.
“You have all this electronics and all this technology on trucks that become very complex. And I think many fleet operators who were able to do it -themselves in the past, or manage it themselves, simply find themselves not able to anymore,” he says. “They don’t have or are not willing to make the investment in the diagnostics equipment or other equipment that’s necessary to keep a fleet operating efficiently and up and running.”
Even if fleets outsource maintenance activities, they still need to monitor the work that is being completed, and that’s where a shop’s Service Relationship Management (SRM) platform comes into play.
“Most communications today are done by e-mail, phone and even by fax, and there’s a whole bunch of other information that is captured in paper documents or siloed applications,” says Michael Riemer, Decisiv’s vice president – product and channel marketing. “What we do is we add a layer of communication and collaboration so that all of that information can be available to the parties that are engaged in a service event, so that information can flow seamlessly back to the systems of records at those same business entities.”
It helps to establish a level of trust between the fleet managers and the third parties that conduct outsourced repairs, he says. “We need to ensure that level of transparency and visibility – and do it both in real time to alert you of potential issues, but also give you reporting after the fact to be able to look at things you might want to change from a process perspective.”
Wafer still stresses the value of personal contact, however. Unscheduled spot checks can ensure that suppliers are complying with specific clauses in the service agreement. Just remember that there are limits to how often you’ll want to stop by.
“Trust is a two-way street,” he says. “You want to be fair with your suppliers.”