Many opinions on equipment utilization – What does the utilization number represent?
Everyone agrees that equipment utilization is a Key Performance Indicator (KPI). Fleets prioritize utilization differently on the list of KPIs, but generally keep it near the top five analysis priorities. High utilization is a great indicator of a high revenue, low cost per mile, and a healthy bottom line.
However, even fleets that understand the importance of the utilization number eventually wonder “What does the utilization percentage number actually represent?”
Fleet Utilization Trend for 10 days
The premise appears simple – vehicles are utilized by moving and pulling a load, and vehicles are not utilized while sitting idle in the yard – but does everything fit cleanly into those two categories?
In this post, we will discuss utilization based on miles, in terms of miles driven per day. In another post we will discuss utilization based on hours and revenue.
We find that a majority of fleets measure utilization based on miles. For example, your fleet may set a goal of 3000 weekly miles as a 100 percent utilization threshold. Meeting or exceeding that goal counts as 100 percent utilization, and anything below your goal is calculated as a proportionate percentage of your goal, all the way down to zero miles, or zero percent utilization.
So far, so good, and very simple. However, there are varying approaches to how to count miles. Some fleets consider it adequate to calculate utilization based on all miles. If the truck is moving, then dispatchers cannot use it elsewhere. The truck is utilized.
Weekly Utilization Trend for a vehicle
Other fleets prefer to discount empty miles from the calculation – if there is no revenue generated per mile, then the truck is not utilized. Empty miles can skew utilization metrics. For example, you may send a Milwaukee-based truck to pick up a load in Chicago, ninety miles away, then take the load to Grand Rapids, bring another load back to Chicago, and then send the truck home, to Milwaukee. The truck has a 580 mile day with 400 revenue miles. If the utilization percentage is based on all miles, with a goal of 600 daily miles as 100 percent, then the truck is utilized 96 percent. That looks great, but is potentially misleading. If the empty miles are discounted, this truck is utilized only 66 percent. Big difference! Of course, if the rate per mile is high enough, then a fleet can make a case for counting empty miles.
Larger fleets profit from further refinement of utilization calculations, and may introduce weighted categories into the equation. For example, one fleet’s utilization calculation might count only 50 percent of the stem miles, but 75 percent of the deadhead miles that occur between two loads. Another fleet may count 100 percent of miles for headhauls, but only 95 percent of miles for the backhauls.
Fleets can also count the revenue per mile as a weighted factor in the utilization calculation. For example, the miles on a fronthaul at $2.49 per mile would account for a higher utilization percentage than the same miles on the way back at $1.99 per mile.
Daily Utilization by Hour for Five Units
So, which is the best way? That depends on a few factors. If your fleet does not use a dispatching software able to connect to on-board devices, your only option may be a simple ‘all miles in’ approach. If you run a dispatch software as a part of your transportation management system but lack personnel and time to interpret sophisticated weighted parameters, you may benefit most from the revenue miles utilization schema. Arguably, you could achieve the most accurate results with the comprehensive approach that uses weighted parameters.
Increasing the relative precision of a utilization calculation has a trade-off. As you introduce more factors into the calculation of a number, that number becomes harder to understand. When the calculations are too obscure, the information itself may become less actionable. What do you actually need to fix if you see a problem?
We would like to hear your opinion. What is utilization to you? What method do you use, and why? If you are a LoadTrek Software customer, what methodology would you like us to use as a default?
Please leave a comment on this post! We will read the comments and consider your suggestions for our next software release.
Written by: Egor Korneev
Edited by: Dushan Yovovich
In September ATRI released the findings of its 2015 update to An Analysis of the Operational Costs of Trucking. Using financial data provided directly by motor carriers throughout the country, this research documents and analyzes trucking costs from 2008 through 2014 providing motor carriers with a high level benchmarking tool, and government agencies with a baseline for future transportation infrastructure improvement analyses.
The average marginal cost per mile in 2014 was $1.70, an increase from the $1.68 found in 2013. Despite falling fuel prices, the rise in average operating costs in 2014 is attributed to an increase in equipment purchases, as well as driver wage increases driven by the ongoing driver shortage and the need to retain the industry’s most experienced professional drivers.
“ATRI’s release of its annual Operational Costs of Trucking research is among our association members most eagerly anticipated. They understand and appreciate the value of ATRI’s operational cost analysis to their own fleet benchmarking and as such, are always willing participants when ATRI issues its call for cost data,” said Brenda Neville, President and CEO of the Iowa Motor Truck Association and a member of ATRI’s Research Advisory Committee.
Since its original publication in 2008, ATRI has received nearly 10,000 requests for its Operational Costs of Trucking report, which continues to be among the most popular of ATRI’s research studies. In addition to average costs per mile, ATRI’s report documents average costs per hour, cost breakouts by industry sector, and operating cost comparisons by region of operations.
A copy of the white paper is available from ATRI’s website at www.atri-online.org.
It’s here. Government agencies have been talking about an electronic log mandate since 1999. Electronic logs have been allowed since 1988. It’s not new – but is it a big deal?
Let’s break down the 516 page “pre-publication” rule released this week.
Does your fleet have electronic logs that meet the AOBRD specs as defined in 1988’s CFR 49 Section 395.15? Your deadline is December 17, 2019. This is on a truck by truck basis. If your fleet is partially equipped, those same trucks have a 4 year deadline.
If you do not have AOBRDs, your deadline is December 17, 2017. This includes GPS only devices, phone-only or tablet-only devices. An AOBRD is required to be integral to the vehicle. This has been defined throughout the years through enforcement actions and interpretations as; attached to the vehicle, powered from the vehicle, and obtaining odometer from the vehicle. GPS-based distance measurement is not allowed.
Who needs to move to an ELD? All drivers who must complete paper logs today must move to ELDs. However, there are a few exceptions.
Exception 1; Part time drivers. If a driver drives no more than 8 days in any 30 day period, he/she can continue to use paper logs.
Exception 2; Driveaway and towaway operations. If your job is to deliver other’s vehicles, you do not need an ELD. It is assumed that it’s not feasible to install an ELD in these vehicles. Examples are dealer deliveries, and third parties that move equipment for others.
Exception 3; Local drivers who operate in the 100 air mile radius are not required to do logs today – and they are not required to move to ELDs. In lieu of a log, these drivers may optionally use timecards to document time.
Exception 4; Vehicles manufactured prior to 2000. Even though it’s possible to connect an ELD to any vehicle – the FMCSA decided to grant an exception to drivers of vehicles manufactured 1999 and older. The reason, it can be difficult and more expensive to install an ELD on these older vehicles. Some of these older vehicles require sensor installations. Many of today’s less expensive ELDs cannot read anything other than a Electronic Control Module data stream (J1708, J1939, CAN, or OBDII).
Support documents are required.
ELDs are a new method of record-keeping, and with that comes a new supporting documentation requirement.
Support documents are used to verify ELD records. If an ELD is defeated or disconnected, or if a driver simply drives without logging on – supporting documents create an audit trail.
Requirements for Support Documents must include;
- Required information; driver, date, location, and date/time.
- Bills of Lading; Itineraries, schedules, documents including origin(s) and destination(s).
- Dispatch or trip recordsText messages, emails, instant messages, or any electronic communications through a fleet management system
- Driver payment record
Fleets may maintain up to 8 Supporting Documents for each 24 hour period.
If a carrier has more than 8 documents to choose from, must maintain those nearest to the beginning and end of the tour of duty. Drivers are required to submit Supporting Documents within 13 days. These documents must be presented to law enforcement upon request, and maintained in a manner where they are easily matched to logs.
Roadside Inspections. Logs can be transmitted electronically using a wirless web service, local BlueTooth, or USB. Or, drivers can show the device itself with a graph/grid display, or a log printout.
Log edits are now a two-step process. Either the driver initiates an edit and the office approves, or vice-versa. Edits cannot overwrite the original record.
In the event of an ELD malfunction, fleets have 8 days to correct the problem. The driver is required to begin paper logs, and to be able to show the previous 7 days’ logs – paper, or electronic.
Personal Conveyance. If a driver uses a truck for personal conveyance in accordance with existing regulations, it is to be recorded as Off Duty.
Yard moves. All CMV work in a closed facility with restricted access is to be recorded as On Duty Not Driving.
Harassment. Carriers, shippers, and consignees are prohibited from pressuring drivers to violate regulations. Drivers must be able to mute volume so that messages or alerts from the ELD will not disturb rest. Locations as reported to law enforcement requires a precision of 1 mile during On Duty periods, and 10 miles during Off Duty periods. Locations are updated every 60 minutes or at every change of duty status. Fleets may use more precise locations for their internal uses.
Certification. The FMCSA will create a public web registry of compliant devices.
Find out more about ELDs here.
