Thousands of businesses operate vehicle fleets . And for most of them, service management is high on their list of headaches. For many, the challenge is deployment: putting the right parts and the right people in the right place at the right time. For others, it's the struggle to calculate and reduce total cost of ownership. There's also the issue of fuel costs. When prices spike, fleet operators often must tighten their belts in other areas—and do it without hindering service or vehicle integrity. Furthermore, while more complex vehicles usually mean better reliability and fuel economy, they also can be costly when it comes to diagnostics and maintenance.

Given these challenges, how can logistics professionals improve their fleets' performance? As outlined in the following three examples, organizations can benefit by adopting more sophisticated fleet management approaches and implementing leading-edge technologies that enable them to do more (improve service, safety, reliability, and longevity) with less (dollars and resources).

1. Raise the bar in planning and forecasting

Fleet service organizations seldom leverage advanced planning and forecasting processes and technologies. In many organizations, in fact, plans and forecasts are primarily based on experience, hindsight, and intuition. As a result, procurement is insulated from the overall service management process. The deployment of people and materials is generally unsynchronized and nearly always more costly. And unless an observable pattern of breakdowns has already occurred, there is little opportunity to anticipate out-of-the-ordinary maintenance events.

More sophisticated demand forecasting allows fleet managers to pre-position maintenance assets to more efficiently meet demand. This also paves the way for real-time planning, which makes it easier and more economical to dispatch the right technicians with the right parts to the right job. The net effects are reduced waiting time for parts and work assignments; fewer duplicate or aborted jobs; less overtime because technicians are being scheduled more efficiently; and lower contractor costs because workload spikes are less frequent and better anticipated.

2. Reduce inventory costs by segmenting parts

Most fleet management organizations have huge inventories of spare parts. How can they ensure that they have enough of each item to reach desired service levels, but not so much that inventory costs are inflated unnecessarily? Organizations that segment their inventory according to like criteria and then manage each segment in whichever way is most cost- and service-effective, often enjoy higher rates of vehicle uptime and lower inventory levels.

To apply this principle, let's look at starter motors. Most fleet operators would categorize these as "critical" parts, since a certain number must be readily available to resolve breakdown problems. Motor oil also is important. But its characteristics differ from starter motors because its use is more predictable. Thus, a just-in-time oil-delivery program might help keep oil inventories to a minimum. Then there are items such as floor mats and paint. Both are important, but since their use is generally "planned" it might be possible to keep few, if any, SKUs on hand. These examples represent three categorizations: "criticality of use," "regularity of use," and "planned versus unplanned demand."

Once the right categories have been formed, fleet organizations must formulate inventory targets for each one and then determine how to effectively reach those targets. Often, targets are based on "fill rate," although the highest possible fill rates are not always desirable. Near-100 percent availability for starter motors is probably good, but similarly high rates for seat covers may indicate excessive carrying costs. The trick is to assign the right fill rate for each category and then meet it.

3. Get ahead of the curve with predictive monitoring

Meeting their fill-rate goals requires fleet managers to master a variety of supply chain skills, such as modeling the service network (including warehouses, parts depots, dispatch centers, and contractor locations); rationalizing supplier relationships; and leveraging field-communication technology. However, another leading-edge activity is attracting attention. Predictive monitoring—that is, using technology to pre-empt equipment failures—can significantly reduce maintenance costs and improve maintenance-related business processes. Unlike most equipment maintenance, which is either conducted reactively (after a costly failure occurs) or routinely, predictive monitoring collects and analyzes information from real-time vehicle sensors and enterprise data. In this way, fleet managers can predict maintenance problems and initiate service long before a problem occurs. As a result:

• Equipment can be replaced before more costly in-service failures occur.
• Demand can be forecasted with greater efficiency and accuracy.
• Maintenance and labor schedules are optimized to provide repairs only when needed.
• Parts-performance databases can be built to help ensure continuous improvement in cost management and vehicle uptime.

Down the road, fuel prices could abate and more organizations may opt to overcome their fleet management challenges by outsourcing. But there will always be entities for which private fleets are preferable. For those organizations, integrated approaches to process and technology innovation could accelerate their drive to high performance.