Back to Basics: Fleet Management Strategies – Lease or Own Trucks?
Recycling columnists debate the best strategy for fleet management including leasing vs ownership, truck maintenance and tracking best practices.
By Clarence Leising & Dick Burns
When it comes to transportation, unless you have the business to justify a large maintenance staff, it is generally better to lease trucks instead of own them. The maintenance cost can be significant even for a large operation that can spread the cost over a large fleet of vehicles. One of the recycling plants we previously operated had 7-8 tractors at one point and 150 trailers. This recycler owned everything and had to pay a maintenance shop with about 4-5 guys just to keep everything in running condition. And it was hard for them to keep up even with a fairly decent size maintenance and mechanical staff.
Concerned about the costs of ownership, this company switched to a leasing agreement with a major truck leasing company. This decision made a big difference in one year. The recycler trimmed the maintenance staff in size and focus. Leasing completely eliminated down time because the leasing company provided an immediate replacement vehicle every time one went out of operation for repair.
If you are not set up to efficiently handle truck maintenance, you probably shouldn’t be doing it. Half of the guys we hired didn’t do it properly anyway. You’re not getting top flight mechanics for the rate we could afford to pay. There were problems getting spare parts. It just drew our focus away from our core business. Leasing eliminated a lot of our headaches and hassles while providing us better vehicles.
It is very common to encounter problems acquiring vehicle parts. You have all kinds of things that just draw everything out. And if you lease, you don’t have to deal with it. You simply hand those problems off to somebody else. You have to remember what business you are in because these sideline responsibilities can take up all of your time. And if you’re like us, you are in the pallet business not the truck business.
I have run across some recyclers that do all the maintenance themselves. And this requires them to either work 80 hours per week or to miss out on sales and business growth opportunities because they are too busy fixing vehicles.
Most pallet recyclers already have a large fleet of trailers that require basic maintenance. This can be enough to keep a small maintenance staff busy.
It’s all about finding the sweet spot. If you only have two tractors, you can probably handle the maintenance yourself. Then maybe it makes sense to own them. Anything more than that for a small-to-medium sized recycler and it probably will work out best to lease. And if you are a major pallet player with a large trucking operation, then it might be wise to own your fleet.
If you have a million dollar budget for transportation, one way or the other, you are probably going to spend that money. But you’re probably going to spend less with the lease approach and have fewer problems. You want to maximize the use of leased tractors. The more miles you put on them the better off your return on the lease. We actually cut back on the number of tractors we had because we ran them a second shift. When you split up your accounts that’s a big consideration you need to consider before you lease. Nine out of ten times if you have that many trailers parked all over the place you’re going to be able to do enough work at night to double run those tractors which is the way to maximize the whole thing.
By optimizing our use of tractors, we were able to do a lot more with fewer vehicles. And we didn’t need a fancy fleet management system to do this either. It was the responsibility of the dispatcher to manage truck flows. This can be done with a basic spread sheet, cell phones, Google maps, some basic knowledge of your customer routes and some common sense. You don’t need to pay someone to watch trucks move around on a little board. You don’t need to invest in putting GPS devices in tractors or trailers. We used radios to guide the movement of trailers on our yard. Having a good dispatcher makes all the difference.
When it came to trailers, we bought used units that were in good condition. Normally, we would buy three trailers at a time for $2,500 each. And you can buy them even cheaper than that now in many places.
The smart money rides on leasing and using your vehicles to the maximum benefit. You are paying for the unit whether it is sitting there or moving around hauling loads. You might as well make that lease or purchase work for you as much as possible.