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What are the Best Ways Fleet Managers Can Reduce Costs?

fleet managers

What are the Best Ways Fleet Managers Can Reduce Costs?

Effective fleet management can be expensive. To keep vehicles operational requires spending on labor, fuel costs, maintenance and telematics. Managers also must consider external factors — like driver behavior and weather — that can further impact fleet performance.

When facing tight fleet budgets, it’s important to know how simple adjustments to vehicles and driver practices can reduce costs. These are some of the best strategies fleet managers can use tWhen facing tight fleet budgets, it’s important to know how simple adjustments to vehicles and driver practices can reduce costs. These are some of the best strategies fleet managers can use to do that.

1. Track Driver Behavior

How drivers use fleet vehicles can have a significant impact on fuel economy and vehicle lifespan.

Many modern telematics systems make it easy to track events like harsh braking and idling — practices that can increase vehicle wear and tear and fuel consumption. They can even put drivers in violation of certain city ordinances. These systems can help any business reduce unsafe and wasteful driving practices.

2. Keep Vehicles Maintained and Road-Ready

Proactive vehicle maintenance ensures vehicles are ready for use and less likely to break down on the road — reducing potential downtime.

The correct care can also have a significant impact on vehicle handling and the longevity of different components.

Properly inflated tires, for example, can make many vehicles easier to control and can also help tires last longer. Under-inflated tires tend to run much hotter, according to studies on tractor-trailer tire performance, and just 20% under-inflation can decrease tire lifespan by 30%.

Because tires naturally deflate over time — and because tire pressure can increase or decrease as temperatures change — it’s not unusual for vehicle tires to become under-inflated.

The right grade of motor oil can provide similar benefits for lifespan and fuel economy.

Preventive maintenance is more expensive than repairing vehicles as problems arise, but it can help fleet managers drive down overall upkeep costs in the long run.

Advanced telematics systems can provide fleet managers with instant notification on unusual performance or behavior, allowing them to schedule inspections or repairs as quickly as possible.

For example, networked tire pressure sensors can provide managers with a real-time view of fleet-wide tire pressure readings. Data from engine control units or similar onboard sensors can alert managers when components begin to fail or flag warnings.

In the near future, these systems may also enable predictive maintenance, a maintenance strategy that uses vehicle performance data and AI algorithms to determine when care will be needed.

3. Shop Based on Lifetime Costs

It’s not unusual for a fleet manager to primarily base purchasing decisions on a vehicle’s sticker price. While price will have a major short-term impact on budgets, it doesn’t always reflect how much it will cost in the long term.

Maintenance and fuel costs, downtime, taxation, and insurance can significantly impact a vehicle’s lifetime and recurring expenses. Opting for vehicles that are more expensive but reliable and cheaper to maintain can reduce fleet costs significantly.

When buying a new vehicle, consider reviewing weight and size, vehicle maintenance schedule and customer reviews. Owners may also want to investigate the possible savings alternative fuel vehicles may provide by eliminating the need for gasoline and diesel.

Adopting a forward-looking approach to vehicle and equipment purchasing can help in other ways, as well.

For example, the construction industry currently faces rising demand for almost every type of equipment as the economy recovers from COVID-19. Demand significantly outpaces the industry’s current workforce capacity and supply of resources and heavy equipment.

After a weak year, demand for heavy machinery recovered and then hit record highs in 2021. Many machines are in especially high demand as both residential and non-residential construction starts continue to trend upwards to pre-pandemic levels.

Demand for concrete pumps is expected to rise to meet the need for new foundations and infrastructure investments. At the same time, tight supply has already caused significant price increases for skid steer loaders, tractors, earthmovers and other types of construction equipment.

Considering the state of the market and likely future demand will help managers make additional purchases in the future, when prices are higher and vehicles are harder to come by.

4. Optimize Driver Routes

Efficient route planning is one of the best ways to reduce fuel costs and keep operating expenses low. Many modern fleet scheduling and management solutions offer tools that help managers find the fastest possible route for each given job.

The tool uses information like vehicle location, fuel economy, traffic and even weather conditions to automatically schedule routes so drivers reach jobs as quickly as possible, with minimal fuel consumption.

Savings from optimized routes can add up over time, helping teams cut down on one of the most significant fleet expenses.

5. Know How and When to Right-Size

Fleet right-sizing is the process of purging underutilized or overly specialized vehicles from a fleet. These vehicles are likely not necessary for operations or can be replaced by more useful models. They can significantly increase maintenance, storage and fuel costs while they remain with a business.

The right-sizing process typically follows a few steps, some of which can help managers identify underperforming vehicles in any fleet:

1. Break the fleet down into major vehicle groups or classifications.

2. Calculate average utilization for each vehicle or machine (often a measure of business mileage over a year-long period, or hours in use).

3. Identify vehicles with particularly low utilization — typically in the bottom 25 or 50 percent.

4. Identify low-utilization vehicles that are still necessary for operations.

5. Create a list of nonessential vehicles and right-size.

Other important metrics to use alongside utilization may include fuel consumption, maintenance costs and average hours in use. These metrics can be useful when the miles traveled metric does not accurately reflect the utility of a fleet vehicle.

The right disposal practices can help to make a business’s right-sizing more cost-effective. Selling vehicles as soon as possible after they are identified as being underutilized is important due to the high depreciation rate.

A formal disposal strategy that includes gathering users’ manuals and shop guides and cleaning and removing equipment can streamline the process.

How Fleet Managers Can Reduce Fleet Costs and Streamline Operations

Operating a fleet will always be expensive, but managers can use these practices to keep expenses within budget. Because driver behavior and maintenance costs are significant expense generators, telematics systems and procedures that track and minimize these expenses will typically be a good investment.

Management practices that take advantage of route optimization software and right-sizing strategies will also ensure minimal operating costs.

As alternative fuel vehicles become more common and practical, they may also be a good investment for fleet managers. The electricity these vehicles need is often cheaper than gasoline or diesel, and fewer moving parts can make for lower maintenance costs.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

trucking

WHY DO WE HAVE A TRUCKING SHORTAGE?

The truck driver shortage presents an ongoing challenge for the logistics industry.  However, many people understandably wonder why it’s still a problem. 

One often-cited challenge is that there are not enough new drivers entering the workforce as veterans retire. A recent study confirmed that there were more than 14 million truck driver job postings between 2019 and 2020. That tremendous amount details the extent of the issue and suggests it will take time to address.

The research also concluded that nearly 57 percent of all truck drivers are older than 45. Then, almost a quarter (23 percent) are in the 55+ age bracket. 

A paragraph in the study explained, “The workforce composition suggests that young workers are not being recruited at rates that will replace current workers as they exit the market due to age or disability. This issue is further compounded by a relative dearth of younger workers overall compared to the abundance of baby boomers.”

Finding Women to Fill the Driver Shortage

Some trucking companies have dealt with the issue by ramping up their efforts to recruit women, a historically underrepresented group in the sector. One excellent way to do that is to focus on safety. 

Ellen Voie, the CEO of the Women in Trucking Association, says that the females who speak to her about the industry often cite safety as their top priority. However, maintaining safe working conditions and environments benefits everyone. 

She clarified that safety doesn’t only mean addressing one aspect: “That [safety] includes the maintenance of the equipment, the perception of when a driver should or should not drive in inclement weather or in areas of civil unrest, and how safe the loading dock is for drivers. Is it well lit, secure or in a dangerous neighborhood? Those are all aspects of a carrier’s safety culture.”

Canada’s Skelton Truck Lines found that recruiting women became easier when more females filled leadership roles in the company. It currently has nine female department managers. It’s notable that more than 30 percent of its drivers are women. The company also offers team freight so that women could do runs with their spouses. 

Efforts to recruit more women in the industry won’t account for all the aging workforce issues. However, they help, while making trucking a more gender-balanced industry. 

Industry Turnover Rates Exacerbate the Driver Shortage

Some people who get trained and licensed as truckers ultimately discover that they don’t want to make long-term careers out of the endeavor. However, some recent changes in the industry aim to provide more flexibility, which could reduce turnover rates.

More specifically, the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) published new rules that went into effect at the end of September 2020. 

One of them is that drivers must take 30-minute breaks after driving for at least eight hours. There is no requirement that they are consecutive hours, and drivers can count periods when they are on-duty but not driving while calculating the eight hours. There is also an updated definition of what constitutes adverse driving conditions.

Pay Tops the List of What Keeps Drivers Committed

A 2021 study about truck driver retention showed some gender-based differences in what makes a person stick with the career and particular companies. However, the top concern for both men and women was that the company provided them with enough pay or settlement. 

Having a work/life balance was also more important for women, the study showed, as females ranked it as their third priority, and men chose it as their seventh. 

Carriers Mention Retention as a Pressing Concern

Another survey, this one published in October 2020, showed that trucking carriers brought up retention as their second most urgent problem. However, of the more than 1,000 drivers who responded, compensation was one of their primary concerns. 

Paying drivers more could be a vital step in making them feel that companies value them and their service. Moreover, it is ideal if compensation goes up according to a person’s experience level and reliability. Then, truckers should be more willing to stay in the career rather than looking for opportunities they perceive as more attractive. 

Another study indicated that 50 percent of drivers polled saw their current wages as uncompetitive. On top of that, many found that companies did not offer career paths for them. Data from that research also found that half of respondents did not feel safe on the road. If drivers struggle with feeling unsafe and realizing that they could earn more in other jobs, many will see what other possibilities exist. 

Obstacles Persist in Getting New Drivers Road-Ready

Getting more people interested in entering the trucking sector doesn’t solve the driver shortage. Industry leaders expect that COVID-19 restrictions could cause persistent backlogs that prevent new drivers from getting on the roads as efficiently as they otherwise might. 

For example, many Department of Motor Vehicles facilities delayed certain services during COVID-19 lockdowns and enforced social distancing rules that limited the number of people a location could serve in a given day. That affects all people who drive vehicles, including those who need to get their commercial licenses to operate trucks for the first time. 

Relatedly, some driver training centers had to close or hold smaller classes to abide by the applicable COVID-19 restrictions. Some people who were eager to get the necessary education may have found that they had to wait longer than anticipated to meet that goal. 

Drug Testing Crackdowns May Make Potential Drivers Wary

Another recent development related to the truck driver shortage is that the FMCSA’s Drug and Alcohol Clearinghouse took effect in 2020. It has already kept thousands of drivers from staying on the roads. 

New rules require all trucking companies to register in a database and conduct yearly queries on each driver. During 2020, the Clearinghouse system caught more than 56,000 violations, although just over 1,200 were alcohol-related. Marijuana was by far the most common drug found among drivers’ substance usage. Some people familiar with the matter attribute that statistic to the growing number of states that have legalized it.

When speaking about the 2021 driver shortage outlook, analyst Avery Vise noted that the Clearinghouse has “culled another 40,000 or so drivers directly from the market, and probably thousands more have exited because they think they might not pass a drug test.”

Other parties who specialize in driver recruiting noticed a decrease in new applicants. The tighter regulations for drug testing were not likely the sole reason for that trend. However, it could prove an important factor. For example, a person who uses legal drugs recreationally during their off-time might worry about getting called for a surprise drug test and not passing it because of their recent usage. 

That’s one example of how stricter regulations could worsen the driver shortage. If a trucker tests positive for marijuana, that does not necessarily mean they were smoking it while on duty. A person who keeps their legal drug use out of their work may ultimately decide that trucking is not an ideal industry after all due to the drug testing aspect. If they worry about their downtime choices affecting their careers, people may investigate other work opportunities. 

A Multifaceted Issue That Needs Strategic Solutions

This overview emphasizes that the industry could not target only one area to end the truck driver shortage. It’s an ongoing challenge that COVID-19 and other recent events negatively affected. 

However, one excellent starting point is for trucking company representatives to research the top things that their current drivers like and dislike about their jobs. That way, it’s easier to determine what to address first. If most people say that they enjoy their schedules but don’t get paid enough for what they do, that’s valuable information that could shape positive changes. 

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry. Learn more at revolutionized.com.

shipping costs

Why Do Global Shipping Costs Continue to Skyrocket?

Global shipping costs are reaching rarely seen levels, putting strain on logistics teams and product purchasers alike. Here’s a closer look at some of the reasons for this phenomenon.

Worsening Container Delays Create Bidding Wars

Port backups were among the issues of the early days of the COVID-19 pandemic. Unfortunately, they persist now, limiting the number of containers each port can efficiently accommodate. Relatedly, the shipping customers outpace the available space in each container. That problem makes prices rise so high that some entities lose out because they cannot afford to pay them.

Port Backups Cause Headaches

Some port backups are so severe that ships arrive unable to dock. That’s an ongoing situation at Washington State ports in Tacoma and Seattle. U.S. Coast Guard representatives helped redirect some vessels as they waited days or weeks to unload. Some ended up in unusual locations, such as off the Puget Sound. The offloading delays also cause a container shortage that affects new freight.

HMM, South Korea’s top national container carrier, recently reported severe vessel berthing congestion at most of its port calls, as well as related yard and gate issues. Other providers reported similar disruptions. However, the affected parties disagree about what’s to blame. The carriers often assert that ports are not sufficiently well-managed, which causes the delays. But port managers respond that carriers have not met their berthing window requirements.

Bids Can Reach the Tens of Thousands of Dollars

In any case, these slowdowns have made it exceptionally challenging to keep goods moving. Desperation makes some parties engage in bidding wars.

Philip Damas, head of the supply chain advisors practice at Drewry, a maritime research consultancy, explained, “Everyone is spending much longer on round trips. Containers are sitting on the water for much longer periods of time, containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.”

He continued by clarifying that freight indexes that track the changes in shipping costs usually gather the associated spot booking prices that get offered about a week before a ship departs. However, some ocean carriers offer available slots in shorter timeframes once the vessels are already at terminals. By then, there are plenty of customers eager to get goods on board at the last minute.

“Now everything is overbooked,” Damas said. “Shippers are desperate to book tomorrow. It’s more a bidding war than it is a traditional tariff, and this bidding war is accelerating. Some of these $23,000, $24,000 prices include the inland distribution cost, and that can easily add far more to the final cost.”

A combination of factors means many shippers decide there’s no choice but to pay those high prices. One longstanding issue is that carriers have cut capacity on major routes. Plus, the container shortage caused by backups escalates the problem. Shippers often realize they have to pay higher prices or leave the overseas markets.

Increased Demand From Customers Exacerbates the Issue

Company leaders usually appreciate when their products are in high demand, but the matter becomes more complicated when shipping costs are so high. In such cases, it’s necessary to either invest massive amounts of money to alleviate the shipping struggles or face lengthy delays that could upset customers.

For example, Amazon manages its own logistics system with extraordinary efficiency. However, that decision means building huge distribution centers as close as possible to the people who place orders. The company even began purchasing jets in early 2021 to exert more control over its air shipping options. However, most other brands don’t have such gigantic resources. Plus, the strategy may not pay off forever.

In the second quarter of 2020, Amazon showed a 68% increase in money spent on shipping. The e-commerce giant has yet to raise shipping costs for consumers, but other brands have already taken that approach. The rise in global shipping costs could even cause long-term stock shortages.

A Luggage Brand Goes to Great Lengths to Receive Goods

In one case, a global luggage company usually receives 11 container deliveries annually by August. That scheduling gets the goods to the merchant in time for the holidays. But, this year, it has only received three of the 11 so far, and not without significant expense.

The company normally pays $2,500 per 40-foot container. But representatives got an offer from an entity promising to get the container onto a ship in Thailand for $15,000. However, people at the company had to first get the goods to the vessel from Myanmar — a challenge in itself due to a trucking shortage affecting Asia. The brand eventually secured the necessary trucking assistance for $3,000.

In the end, the brand paid $18,000 to have its goods shipped. This example shows how much the global shipping crisis can quickly eat into profits. Another downside is that the container’s goods had a $30,000 value, so sending them cost more than half that amount.

The company reported that consumer demand was up, which is usually a positive thing. It’s probably in large part because of how people are starting to travel for pleasure more with the air travel industry beginning to recover and offer more routes.

Fewer Overall Affordable and Available Transport Options

A lack of choices to move goods also contributes to soaring global shipping costs. Some parties may get their products shipped by train and air when possible, but capacity limits exist there, too. The rush to get goods shipped causes a crunch that requires scrambling for any available slots offered via any kind of transit. Plus, air shipments are much costlier than those sent by sea, with some estimates saying that method is at least five times more expensive.

Severe weather can wreak havoc, too. In July 2021, a typhoon hit China and closed the country’s air, sea, and rail hubs. Earlier in the year, snowstorms forced some rail freight operators to temporarily cease running some routes. These challenges mean some customers decide they must cope with the tremendous shipping costs because there aren’t many other viable options.

Some brands are also trying to cope with delays within the supply chain by making up time at other points. One way to do that is with drones. Supermarket chain Tesco carried out a trial where some customers in Ireland received grocery orders only 200 seconds after the goods departed the store property.

In another instance, DHL partnered with a cargo drone company. The agreement involves using and managing several thousand drones to give customers same-day deliveries. Drone deliveries are not yet widespread options. However, they could become more popular, particularly as shipping professionals look for feasible ways to cut costs while keeping customers happy.

No Short-Term Price Easing

Analysts believe the global shipping costs will not return to more manageable levels during 2021. There are certainly not any quick fixes to the problem. Thus, the parties affected by it must decide on the most appropriate ways to deal with it, even if that means accepting astronomical prices or restructuring supply chains to avoid long-distance shipments as much as possible.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

oversized loads

6 Safety Tips for Transporting Oversized Loads

Stepping behind the wheel of a transport vehicle is dangerous enough, but when oversized loads are added to the mix, the risks are exponentially increased. Hauling these, whether across long or short distances, is no joke. It’s difficult and stressful, and there are many elements to consider, including traffic, road hazards and weather conditions.

That’s why it’s important that every driver understands, and is armed with, some safety tips to improve the experience. Here’s what every truck operator should know before hitting the highway with an oversized load.

1. Plan the Route Ahead of Time

Planning the route is a no-brainer, and modern technologies can be used to do it smarter and better. Logistics and route-planning tools can be used to research traffic, hazards, weather conditions, construction and any other encounters one might come across on the open road. Most importantly, drivers should always have a set of contingencies handy that allows them to choose alternate routes or roadways because there’s no telling what may happen.

Whether it’s the primary choice or an alternative, every route plan should include information about travel times, delays, fueling locations, and break spots. It’s important to think about every possible factor when planning the route. Not having a stringent refueling plan in place can balloon transportation costs, as drivers are forced to go out of their way or choose fueling stations that are less than ideal or overpriced.

2. Know the Weather

It doesn’t matter whether drivers use their smartphones or listen to the radio — they should always have a beat on the local weather and any upcoming changes. The entire forecast should be referenced and recorded before the drive. Any updates or changes should also be monitored throughout the journey. Some loads cannot be exposed to inclement weather, so it’s vital to avoid rainy, overcast or muggy areas.

Hauling oversized loads should never happen in extreme weather conditions, except in rare circumstances, such as a major emergency. If possible, find a rest stop to wait out the storm and hit the road when it’s safe to travel again.

3. Reference the Laws

There are rules and regulations about hauling oversized loads or items. Drivers and their sponsors must abide by those laws at all times. Nearly every state, province, and country has custom and defined dimensions for what constitutes an oversized load. Most describe it as anything wider than 8.5 feet, which takes up a substantial portion of the driving or travel lanes on roadways. Weight and height limitations may also apply, and it’s up to the drivers to know them.

Furthermore, hauling oversized loads requires a permit, which details the origin of the shipment and its destination. Driving without one can result in severe fines and sometimes other penalties and may even come with a license suspension for the driver. It’s important to keep all documentation updated before, during and after a haul.

4. Use the Right Securement

When hauling loads of any size, it’s critical to keep the pieces, items or components locked down and secured. There are many different types of fastening devices, from ropes and straps to friction mats and binders. They’re not always interchangeable, and sometimes those devices are not ideal for certain loads or gear. It’s up to the drivers to know which securement tools are best for a particular load. Using the wrong devices can have major repercussions and may or may not lead to the heavy load falling off the trailer or transport.

What’s more, those devices should be inspected regularly to ensure they’re in proper working order and have not been damaged in any way. This should be done before and after a haul, and any broken or failing items should be replaced right away.

5. Drive Defensively

It’s important to drive defensively and safely when hauling oversized loads. This is not to be confused with going slowly. It can seem safer to maintain slower speeds, but that’s a misconception, more so on highways and major roadways. It’s best to drive at the recommended speed limit and to remain in lanes that are expressly labeled for trucks — sometimes, there are dedicated lanes you must stay in with an oversized haul.

Drivers should make a habit of checking their speed regularly during a trip. They should also maintain a safe stopping distance that’s far enough away from vehicles and other cars nearby.

6. Proactive Maintenance

The last thing anyone wants during an oversized haul is for the truck to malfunction or break down. It’s important to carry out proactive maintenance on a vehicle or fleet before a big trip to prevent that from happening. Fluids should be topped up and monitored, the tires should be checked, spare parts and gear should be added to the truck, and basic maintenance should be handled.

Another facet of this is to have a service plan at the ready if and when something does happen. Drivers should always know who to call and where to go to get their vehicles serviced or where the much-needed support is going to come from. That can be something researched when building the initial route plan, or it can be information that’s gathered and recorded over time. Either way, every driver should know what to do if their truck breaks down.

Be Safe When Hauling Oversized Loads

Proper planning is crucial to a successful trip. It’s vital to plan the route and situational factors, research local weather conditions and work around them, drive defensively, and use the correct securements. It’s also important to know and understand the laws and keep all permits and documentation up to date. Proactive maintenance should be followed to keep the trucks or fleet in tip-top shape. Every driver should have a plan of action if and when their vehicle breaks down or malfunctions.

By knowing and adhering to these safety guidelines, drivers can secure their health and success while hauling oversized loads. That assurance alone is worth its weight in gold.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

MRO

5 Promising Ways to Reduce the Impact of MRO on the Supply Chain

Supply chain managers and procurement specialists often must reduce the effects of maintenance, repair and operations (MRO) expenditures on the supply chain. That’s not always easy, but these five tips should spark meaningful and measurable progress.

1. Understand the Impacts of Poor MRO Management

MRO encompasses essential items that are not part of the finished products — sometimes referred to as indirect costs. For example, the category might include lubricant for a machine, safety goggles for workers and scheduled maintenance appointments for equipment.

MRO expenditures typically account for 5 to 10% of the cost of goods sold. Some people initially view that percentage range as small and do not manage MRO procurement as well as they should or at all. However, that’s a mistake, because running out of critical items or failing to stay on top of maintenance could bring knock-on effects.

For example, if a production line machine runs out of an essential chemical, its output could completely stop until someone re-supplies. Alternatively, running out of safety gear could put lives at risk and expose a company to scrutiny from regulators if accidents happen. Weighing the consequences of inadequate MRO management should provide the encouragement any company needs to take it more seriously.

2. Determine How to Mitigate Climate Change-Related Effects

Many leaders across all industries are paying more attention to how climate change could affect MRO expenditures. For example, some scientists believe climate change makes hurricanes more severe, causing more rainfall than past storms did. In that case, maintaining a building may involve purchasing and installing flood barriers or changing a warehouse layout, so the most valuable items stay out of the reach of rising water.

Imagine an area starts experiencing more severe winter storms. In that case, a company’s MRO budget may include more salt and other de-icing products to keep loading bays and other regularly used areas safe and accessible. Alternatively, business leaders may need to invest in cloud software that lets some people work from home if they can’t reach their workplaces due to icy roads. When companies take preventive measures like these, their overall weather-linked MRO costs should decrease due to better preparedness.

Inclement weather’s effects on the supply chain are not merely hypothetical. A report showed that the 2011 floods in Thailand affected more than 14,500 entities that used Thai suppliers. Those weather events resulted in billions of dollars worth of losses for the companies that had operations disrupted. Thus, inclement weather could raise operational expenses if a business ramps up production to meet the needs of clients affected by production stoppages from other suppliers in hard-hit areas.

3. Create an Effective Preventive Maintenance Program

When maintaining the equipment that helps the supply chain run smoothly, there are two primary approaches to pursue — reactive and preventive care. The first type centers on addressing problems once they appear. Conversely, proactive maintenance is all about having technicians assess machines often enough to catch minor issues before they cause significant outages or require total machine replacement.

One survey showed that 80% of maintenance personnel preferred preventive maintenance. The respondents found it especially valuable as part of a multidimensional maintenance plan. Such an approach lets companies avoid the costliest or most time-consuming repairs. That’s because technicians notice most issues while the abnormalities are still small and simple to address.

Business leaders may not immediately associate some MRO expenditures with preventive maintenance. For example, one professional accepted a position as the maintenance manager of a fully automated warehouse. Soon after assuming the role, he assessed how cleanliness supported preventive maintenance by showing more details about functionality. He gave the example of how it’s more challenging to spot a machine leak when the floor below the equipment is dirty.

4. Set Relevant Key Performance Indicators

Many company leaders — especially those who recognize data’s value — set key performance indicators (KPIs) to track whether improvements on particular metrics occur over time. If they do, that generally means the business is moving toward its goals. On the other hand, if KPIs get worse or stay static despite employees’ best efforts, it’s time to assess what’s going wrong and make the necessary alterations.

Specific KPIs are exceptionally valuable for decreasing MRO’s impact on the supply chain. For example, measuring the percentage of slow-moving inventory and keeping it under 10% is a suggested ideal. Achieving that aim shows company leaders are not making the common mistake of buying a product that falls under their MRO expenditure umbrella, but finding it expires before they can use all or even most of it.

Inventory accuracy is another worthwhile KPI to track. An ideal is 95% or above. Incorrect MRO product counts could prove disastrous — particularly when many purchasing representatives buy PPE to keep supply chain workers safe. Imagine a scenario where a computer system says a company has 1,000 masks, but, due to human error, they only have 10 in stock. That’s an extreme example that illustrates the importance of staying on top of inventory counts.

5. Assess and Tweak the MRO Budget

Some people make the mistake of treating the MRO budget as a static entity. However, doing that could cause them to miss out on money-saving opportunities. For example, using one MRO supplier instead of several can reduce transactional overhead. In addition to saving on shipping, they may also become eligible for volume discounts.

Regularly scrutinizing the MRO budget can also illuminate whether businesses may be reducing costs in the wrong ways. Maybe they switched to cheaper cutting tools to minimize spending. These may have a lower upfront cost, but add more expenses to the overall budget. Perhaps employees complained and said the tools broke often or quickly became dull during typical use. Thus, managers would probably buy more of the items than before while trying to accommodate those shortcomings.

Making MRO Spending Reductions a Priority

These five tips show how businesses can act strategically to limit MRO spending’s adverse effects on the supply chain. Doing so can keep a company within its budget, plus make it more responsive to marketplace changes that may require operational changes to meet demands.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

procurement

How to Optimize Your E-Procurement Process

While modern technology generally vastly improves procurement operations, there still is a right and wrong way to establish an e-procurement program. Behind-the-scenes is where things can go very wrong. Inexperienced managers using ineffective strategies can significantly increase risk. Some things that may happen include data inaccuracies or failure to collect it, improper supply or shortage issues, poorly chosen vendors, and something known as dark purchasing.

To avoid these problems and streamline the e-procurement process, it’s necessary to optimize various aspects of the operation.

Tips to Optimize Your E-Procurement Process

You should already have a strong e-procurement system in place, utilizing various tools, applications, and professionals to ensure the operation is carried out smoothly. You may have had this in place for years, or maybe you’re just starting. In either case, you’ll want to focus on optimizing those programs.

Here are some ways to ensure procurement optimization is happening well and delivering value.

1. Conduct Market Research

Even with digital support, due diligence is necessary. Procurement teams must carry out market research to understand product fulfillment times, vendor or supplier performance, supply chain bottlenecks, and similar factors within the organization. Using tools that specialize in e-sourcing, e-tendering and e-informing practices will provide the most benefits. Most e-procurement solutions centralize supply management — including obtaining and comparing supplies — and aid in the order approval process.

The research also provides the type of information that can be applied to optimize the process. Start by building a comprehensive picture of what each supplier will be doing, how orders will be filled and how reliable the various channels are. It’s also the perfect time to develop risk assessment strategies, so there’s a way to deal with each potential challenge or obstacle.

2. Focus on E-procurement Planning

Acquisition and procurement teams must have strategies in place for e-sourcing, e-tendering and e-ordering. How can the team make sure the inventory is accurately monitored and new supplies are coming in regularly? What’s the plan to deal with damaged, missing, or counterfeit goods?

E-procurement solutions can be used to optimize every stage of the procurement cycle, including:

-E-sourcing

-E-tendering

-E-ordering

-E-reverse auctioning and contracting

-Web-based ERP

-E-informing

Acquisition teams should utilize the tools to plan for the initial stages of procurement and beyond. For example, e-ordering includes support to monitor deliveries, which aids receiving practices. Having that information is always beneficial, but a proper plan will detail how it should be used to inform future events like inventory management, order fulfillment or pass-through shipping to other businesses.

There is also a regulatory component to the entire process, which means understanding the various laws and regulations and how they apply to certain situations. Compliance must be absolute. At least a small portion of the team should be focused on meeting compliance and regulatory requirements, with constant monitoring and revised plans.

The Federal Acquisition Regulations state that the acquisition process should always involve proper coordination throughout an operation using a dedicated procurement plan. Without one, operations could turn disastrous.

3. Master Vendor Research and Selection

Selecting a vendor or supplier is generally an involved process that requires assessing and utilizing various metrics. E-procurement solutions streamline this. For example, electronic catalogs can help with researching, selecting and interacting with vendors — specifically when bidding for orders.

E-cataloguing also makes the landscape more competitive, as suppliers are required to be more transparent and provide comparable quotes.

Above all, it leads to stronger supplier-management dealings through a more effective research and selection process. Proactive supplier development, adherence to approved vendor lists, real-time performance metrics, and up-to-date records and information are available through digital solutions. That makes it easier than ever to manage and keep up with relations.

It’s important to maintain strong management strategies for three major reasons. It helps build long-term relationships, enables a proactive quality management system and includes sub-tier contract flow downs through auxiliary vendors.

4. Incorporate Advanced Metrics and Automate

Leveraging e-procurement systems for active monitoring can go a long way toward improving performance and efficiency.

The best strategy is to have a more proactive approach, dealing with events as soon as you know about them, bracing for impact, and possibly even enabling alternate methods to mitigate losses. Fortunately, real-time data solutions and modern technologies, like IIoT, can make this much easier. Today’s e-procurement solutions also incorporate machine learning and mathematical modeling, both leveraging advanced forms of analytics.

First, you’ll need to ensure you’re working with vendors who have embraced Industry 4.0 and are actively utilizing their own forms of real-time data. Assuming real-time data implementations already exist across your operation, the next step is to unite those data streams and leverage an analytics platform that can identify mission-critical supply trends.

That incoming data can tell you what will happen, when it might occur and what that might mean for your business. Moreover, predictive modeling can help you strategize the actual events and build more successful solutions to the challenges. You can track expenditures, monitor risks new and old, reduce bottlenecks, predict errors, keep up with market demands, and much more.

5. Close Out Contracts for Good

Building long-term relationships is a valuable approach, but you will have temporary terms and contracts too, and there will be times you work with a supplier in a one-off transaction. By combining all necessary tools under a single user interface, e-procurement systems make it simple to deal with the many intricacies of vendor management.

Whether it’s a long-term deal or a temporary one, you should ensure the contract and the acquisition are truly severed at the close of a relationship. You may need to conduct exit interviews, greenlight inspections, double-check contract terms, count inventory or supplies, and so on. Digital tools should help facilitate these interactions and organize, store and recall the data later, especially during critical moments.

Every e-procurement strategy should have a phase or rule that deals with this close-out procedure. Streamlining the process can help sustain your forward momentum when moving to new relationships and beyond. It also provides valuable insights if you ever have to circle back.

Preparing Your E-procurement Teams the Right Way

As a procurement manager or executive, overseeing the operation can be challenging. There are many challenges that need to be addressed along the way.

To do that, you’ll need to conduct the right market research, strengthen planning and master the vendor selection process through deep analysis. You’ll also need to incorporate real-time operations and performance metrics in a meaningful way to power proactive responses. Finally, remember to close out contracts properly, which includes collecting and processing a host of vital information — like exit interviews, greenlight inspections and more.

By preparing your e-procurement crews, you’re ensuring your business can continue, streamlined and successful, even in the face of major supply chain disasters. Therein lies the true value of an optimized process.

batteries

Is There a Shortage of Lithium-Ion Batteries?

The wider availability of electric vehicles has played a major role in getting more people interested in them. However, analysts warn that a lack of lithium-ion batteries could stifle the surge in electric vehicle adoption.

Here’s a closer look at the matter and some details about the possible associated issues that could affect fleet owners.

Rising Electric Vehicle Usage Causes Elevated Materials Demand

The electric vehicle has experienced recent success that seems unlikely to wane. For example, a global electric vehicle report confirmed there were 2.1 million electric vehicles sold in 2019, which surpassed the previous year’s numbers by 6%.

However, the interest in those automobiles has been far more long-term. The report clarified that there were only 17,000 of them on the world’s roads in 2010. The total soared to 7.2 million by 2019.

Another section of the report goes into the materials required to make batteries for electric cars. The cars sold in 2019 required an estimated 65 kilotons of nickel, 22 kilotons of manganese, 19 kilotons of cobalt, and 17 kilotons of lithium.

However, the report estimates those amounts will rise substantially by 2030 due to ongoing interest in electric vehicles. More specifically, it could increase to at least 925 kilotons of class I nickel, 185 kilotons of lithium per year, 180 kilotons of cobalt, and 177 kilotons of manganese.

A Heavy Dependence on Imports

Most analysts agree that there is not an immediate shortage of lithium-ion batteries, but concerned parties should respond quickly to mitigate the possible effects. One reality is that many nations, including the United States, rely heavily on China to supply battery materials.

A February 2021 executive order from The White House involves looking at current supply chain risks in the United States, then exploring measures to tackle those issues. Batteries were not the only goods mentioned in the document, but the content specified examining concerns associated with critical metals.

Estimates suggest that China accounts for between 70% and 77% of the world’s rare earth elements. Moreover, that country owns most of the processing facilities, even if the source material comes from other places.

As recently as 2019, people became particularly concerned about those realities when tensions rose between the U.S. and China due to a trade war. Experts suggest that building more battery factories in the U.S. is an actionable strategy for lessening the nation’s need for Chinese exports.

That approach would also mean the batteries could travel shorter distances. Shipping the batteries from overseas requires the appropriate risk mitigation strategies, such as transporting them in explosion-proof refrigerated containers.

Domestic manufacturing makes sense, but it’s also not a quick strategy. Since the anticipated lithium-ion battery shortage hasn’t happened yet, there’s still time to figure out what to do when it does. Building factories will likely become part of a multipronged strategy.

Electric Vehicles Make Sense for Fleet Owners, Study Suggests

Outside of the threat of a battery shortage, other factors may cause commercial fleet owners to balk at the prospect of upgrading to all-electric models. However, a recent Berkeley Lab study illustrated some of the potential payoffs.

For example, researchers used current battery cost data and calculated that an electric long-haul truck gives a 13% per-mile decrease in ownership costs compared to the same kind of vehicle that uses diesel. The team also confirmed that electric fleet owners could achieve a net savings of $200,000 over a truck’s lifespan.

They confirmed that aspects like battery price drops and more aerodynamic designs for commercial trucks could slash the per-mile ownership costs by as much as 50% by 2030. The researchers believe that a significant shift from diesel to electric-powered fleets would cause a major reduction in greenhouse gas and particulate matter associated with the transportation sector.

A Battery Shortage Could Increase Buyer Costs

Electric commercial vehicles are still in the minority. It could take a while before that changes, but adoption rates should rise as more decision-makers see examples of successful electric commercial vehicle usage.

Analysts point out that electric vehicles could become about $1,500 more expensive if nickel prices eventually reach a historic high of $50,000 per tonne, though. That possibility could discourage fleet owners if they don’t take overall cost reductions into account.

Elsewhere, a 2019 study of American adults found that 60% cited high upfront costs as a negative aspect of electric vehicle purchase. Relatedly, 84% did not know whether their state offers incentives to offset those buying decisions. Promoting the availability of such programs could make electric vehicles more attractive.

Manufacturers Grapple With Assorted Supply Chain Challenges

Recent coverage also indicates that dealing with lithium-ion battery shortages could be more complicated than it first seems. Contrary to popular belief, there is not a lithium shortage, but rather a surplus. More specifically, Australia, which is among the top producers of lithium, has approximately double the number of mines now as in 2015.

However, certain places — such as the United States — have a lithium shortage compared to other nations. While the U.S. has small lithium deposits in California, they’re much smaller than those in South America and Australia.

A cobalt shortage is a more pressing concern, especially since most of it comes from the Democratic Republic of Congo. Cobalt is one of the most expensive components in an electric vehicle battery, and research suggests there’s not enough mining and processing capability to meet growing demands for it. This example shows that a cobalt shortage could relate more to the capacity required to reach the resource rather than the scarcity of the material itself.

A Dramatic Scaling of Resources

Celina Mikolajczak, vice president of battery technology at Panasonic Energy of North America, noted that lithium-ion battery technology features in numerous consumer devices. However, it’s not at the level required for electric vehicles.

She pointed out that whereas a laptop battery has a dozen cells, one for an electric vehicle has thousands. “How do you quickly scale an industry by 100 times?” she asked, before clarifying, “You need more raw materials, the skilled talent, and machines to extract the raw materials, the factories to process the raw materials into cell components, and then the factories to turn those components into cells.”

A related issue is that the parts required for a car with an internal combustion engine are not the same as those for an electric automobile. Electric vehicles have fewer parts, and the differences mean that a manufacturer could not swiftly pivot to making them after formerly producing autos with engines.

A strategy deployed by companies like BMW and Volkswagen is to invest in battery technology companies. Doing that could give them better access to emerging technologies compared to competitors that didn’t provide such support. That could prove crucial for business models concerning batteries made with more widely available resources. Tesla took another approach by entering long-term agreements with suppliers. Such arrangements allow better pricing.

A Complex Matter

A lithium-ion battery shortage could affect consumers and manufacturers alike, albeit in different ways. The main takeaway for the present is that it’s not a current crisis but a looming one. Plus, there’s no single, straightforward way to tackle it.

Thus, fleet owners who are interested in future electric vehicle investments should plan for the possibility of increasing their budgets to accommodate increased upfront costs. Relatedly, it’s wise for them to stay abreast of the manufacturers that have taken proactive steps to cope with a future battery shortage. Planning now should reduce the possible ramifications later.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.