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E321 Fleet Management: W06 Acquisition and Lifecycle of Vehicles - Coggle…
E321 Fleet Management: W06 Acquisition and Lifecycle of Vehicles
Lifecycle of Vehicles
The journey of the vehicle through it’s lifecycle needs to be managed at every step to ensure that value is gained or retained
1) Planning & Budgeting
• First stage of the vehicle lifecycle
• In this stage, business case is made in relation to the acquisition of a new vehicle
Why is it required?
What will it be used for?
What is the proposed cost?
• Requires a thorough evaluation of what the organization needs from the vehicle acquired
Is the new vehicle for replacement of aging vehicle?
Is the new vehicle for expansion of business?
• Involves scheduling of exact acquisition timelines
• Involves allocation of budget for acquisition
• Other factors might affect the acquisition decisions:
Corporate culture
Funding availability
Organizational image
2) Selection & Acquisition
a) Defining of Vehicle Specification:
Engage the maintenance team and drivers to:
• Understand the requirement / features expected in the future buses
• Understand technical performance of different models of buses current in operation or trials
Research on the new technology available in market
Identify the regulation requirements
b) Selection of Vehicle:
Compare and evaluate:
• technical performances of the bus
• lifecycle cost of the bus models
Information can be obtained exiting models in operation or trials
Note: All critical vehicle specification should be met. Example: emission standard set by Authority
c) Acquisition of Vehicle:
Proper acquisition decision to ensure “Value for Money”
• Viability
• Feasibility
• Sustainability
Comparing options between purchasing and leasing
3) Placing vehicles in services
a) CERTIFICATE OF ENTITLEMENT (COE) FOR PRIVATE BUS
• A Certificate of Entitlement (COE) gives you the right to own and use a vehicle in Singapore.
• All Excursion Buses, Private Buses and Private Hire Buses require a Category C or E ("open" for any type of vehicle) COE to be registered
• School Buses are exempted from COE. However, no new School Bus licenses are available, and must be purchased from the resale market. Existing School Bus owners are allowed to register a replacement bus with the exemption of COE
b) Insurance
• Insurances purchased for buses to ensure adequate compensation can be made out to a passenger who is injured or killed in an accident due to the negligence of the person driving the vehicle
c) Vehicle marked for safety / License plate displayed
• Display approved license number plate
• All vehicles should be properly marked for
safety
d) Vehicle Modification Approval
• Modifications and betterments:
Modification to vehicular systems or parts of a vehicle, which is different from the original manufacturer’s specifications
Advertisement displays
• Approval has to be obtained from LTA for the modification before the bus can be put into service
4) Operation & Maintenance
• All fleet owners would be interested to know effective utilization and maintenance of fleet recourses
• Some of the areas tracked and monitored by fleet owners and managers:
Fuel Management
Fleet Management
Road Safety
Maintenance Management
• Technologies can be adopted to help tracking the vehicles’ condition
a) Fuel Management
• Fuel consumption and cost
• Monitoring fuel pricing trend
b) Fleet Management
• Tracking of vehicle location
• Driver’s log
• Vehicle utilization
c) Road Safety
• Driver behavior
• Accident rate
d) Maintenance Management
• Fleet failure trend
• Adherence to fleet maintenance plan
5) Decommission & Remarketing
a) The decision to decommission the vehicle depends on:
• The current condition of the vehicle
• The mileage operated by vehicle to date
• Age of the vehicle
• ‘Whole-life’ cost of owning the vehicle
• Environment targets
b) Method of disposal upon decommissioning:
• Retailing
• Employee sales
• Trade-ins
• Auctions
• Public tender
• Transfer to another entity
• Controlled/specialized disposal
c) Fleet owner may also have an option to extend the service of the vehicle by undergoing refurbishment
d) Advantages and disadvantaged should be weighted in making such decision:
Advantage
• Lower fixed cost
• No capital expenditure made to replace it
Disadvantage
• Higher maintenance costs
• Outdated technology -> Higher fuel consumption
• Lower driver morale
• Negative to the organizational image
Lifecycle Cost
• Estimated amount of money spent on a vehicle over the course of its useful life
• Also known as Vehicle Total Cost of Ownership
Purchasing vs Leasing
Purchasing - simply acquiring the vehicle by paying the price, either in the lump sum or via instalments
Leasing - allows you to use the asset for a fixed term, by paying lease rentals periodically
Factors for fleet manager to consider purchasing or leasing option:
• The length of time the vehicle will be used
• Monthly cash flow budgeted for the usage of vehicle
• Is the vehicle used for specific contract or can be used for other projects?
• Upfront cost of vehicle acquisition
• Administrative tasks involved
• Size of fleet acquiring
• Risk profile and culture in the company
Types of Leasing Arrangement
Open-ended lease
• Fleet managers have greater control of vehicle utilization and disposal
Carry no mileage restrictions
Can terminate the agreement at any point after the end of the minimum fixed term (typically fixed term of 12 months)
• Lessee assumes responsibility for remarketing decisions, including the risk or reward involving resale value
If the proceeds of the sale are greater than what was calculated in the agreement, the lessee receives a reimbursement
If the vehicle is sold for less, the lessee must reimburse the lessor for the difference
High-mileage vehicles will depreciate faster and may have lower resale value
Closed-ended lease (Predictable Outcomes)
• Lease term is typically set
• Monthly payments are based on the estimated residual value of the vehicle at the end of the term
Preset and agreed expectations on fixed mileage and wear
No additional cost at the end of the lease if the vehicle didn’t exceed the maximum mileage or wear-and-tear parameters
• Lessor sells the vehicle and assumes responsibility for any profits or losses caused by fluctuations in market value
• More certainty to fleet managers who worry about the future of the used-vehicle market
Evaluation Metrics for Vehicle Finance Options
Cost-Benefit Analysis
• a systematic approach to estimate the short and long term consequences
• Measuring all costs and all possible profits and benefits from an investment project proposal
• Taking into account both quantitative and qualitative factors
Payback Period
• The time required for positive project cash flow to recover negative project cash flow from the acquisition and/or development years
Internal Rate of Return (IRR)
• The discount rate that makes the net present value (NPV) of a project zero
• If IRR is greater than a company’s minimum acceptable rate of return (MARR), the investment is good
Return-on-Investment (ROI)
• Directly measure the amount of return on a particular investment, relative to the investment’s cost
• The benefit (or return) of an investment is divided by the cost of the investment and expressed as a percentage or a ratio
Net Present Value (NPV)
• The difference between the present value of cash inflows and the present value of cash outflows over a period of time
• It takes into account all revenues, expenses, and capital costs associated with an investment
Decision Matrix for Evaluation on Vehicle Types
Vehicle acquisition decision is not purely based on “$” value.There are other factors to consider:
• Ease of maintenance
• Driver’s comfort
• Vehicle design
Weighted decision matrix
• A tool used to compare alternatives with respect to multiple criteria of different levels of importance
ISO 55000: Asset Management
• Fleet lifecycle management can also be affiliated to Asset Management
• International Standard for Asset Management
• Helps to organisations effectively manage their assets to optimize their lifetime value
• Benefits of adopting ISO 55000:
Improve Financial Reporting
Increased resilience and system reliability
Significant Cost Saving
An enhanced reputation
Improved regulatory compliance
Technologies for fleet asset tracking
• Adopting technological systems will help fleet owner to track their vehicles and it’s performance
• Examples of technologies for tracking:
Radio-Frequency Identification (RFID) tags
The tags contain electronically stored information
Sensors
Wireless modules for devices
• Data Management Systems:
An integrated asset management database and software will provide the convenience for the staff to monitor the vehicles
Example of such systems:
Maximo
