What to Expect in the Fleet Maintenance Industry This Year
- The pandemic created major disruptions in the fleet industry, the greatest being the shutdown of the automotive production ecosystem, comprising of OEM assembly plants and their components
- Issues in supply chain led to soaring parts prices in 2020 and 2021. Shortage of technicians coupled with inflation led to a further increase in maintenance cost
- In 2022, maintenance costs are expected to rise at an average of 3-5%. Another likely trend will be the expansion of electric vehicles in fleets, owing to their lesser long-term maintenance costs
The sudden shift to a work-from-home setting in 2020 led to a widespread reduction in vehicle utilization. Subsequently, fleet maintenance costs declined as businesses aggregated fewer miles. From a supply chain perspective, manufacturer shutdowns meant shortages in supply of parts and OEM equipment, resulting in increased costs.
With economies opening and normalcy returning, the demand for vehicles, and their maintenance, have been on the rise. The recovering economy led to an increase in the total miles driven in 2021. With the increase in miles, the demand for maintenance of vehicles increased. The maintenance prices have shot up due to the mismatch in maintenance demand and supply chain shortage, primarily in parts and labor.
What’s the impact of preventive maintenance costs on fleet maintenance?
Fleet maintenance spend has increased in preventive maintenance (PM). The contributing factors to this include upswing in the economy, the opening of states and businesses, labor shortages, extended vehicle lifecycles, increased utilization of mobile repair services and pandemic-related servicing costs. In 2021, PM cost increases were due to three reasons:
1. Microchip shortage leading to extended service lives of unreplaced units
2. Widespread OEM adoption of expensive synthetic motor oils
3. Rising rates in a tight labor market
Of these, the requirement by OEMs to use synthetic oil has been biggest determinant for the rise in PM.
It is estimated that labor rates will continue to rise in 2022. The shortage in parts is not expected to change anytime soon either. Many fleets will also look to replace ageing models that they could not get rid of in the previous year. All these factors combined with inflation could mean a further increase in maintenance costs.
What measures can fleet managers take?
Fleet managers will need to use assets more strategically. Assigning vehicles based on usage will help extend their lives. Making sure fleet vehicles age evenly will enable spending on preventive maintenance rather than repairs and help cut costs in the long run.
Prioritizing critical assets:
To avoid downtime, fleet managers must segment fleets based on their importance and ensure that the parts of such vehicles are at hand.
Use of data analytics:
Fleet managers can simplify their decision making by accessing data to determine vehicles and components prone to imminent failure, failure rates, time to failure etc.
Fleet managers can gain greater market visibility by working closely with OEM representatives. This will ensure they maintain optimal inventory levels and are ready to face supply chain shocks. OEM vendors can also help prioritize spare parts.
Companies can move from time-based preventive maintenance to usage-based preventive maintenance program to save costs. Growth in telematics and data analysis gives usage-based preventive maintenance an advantage. For example, a Fortune 500 energy company cut costs by shifting to usage-based predictive maintenance. The program helped the company flag problems prior to major equipment failures, reduce unplanned spending and refocus technicians on diagnostic work instead of lengthy repairs.
Mobile maintenance vendors:
The use of mobile maintenance vendors has been on the rise since the outbreak of the pandemic. It helps by minimizing downtime and the burden of taking vehicles to a repair shop.
Learn more about the what’s in store for the fleet maintenance industry in the GEP Spend Category Outlook 2022.
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David has over 20 years of experience in leading several large-scale consulting and sourcing engagements for transport and logistics at Fortune 500 companies.
A recognized leader in supply chain management and logistics, David plays a critical role in the design, sourcing and implementation of supply chain improvements to GEP’s global clients.LET'S TALK