Optimizing TCO by Effectively Controlling the Controllables

Key Takeaways

1. Focus on the controllables to optimize TCO. While factors like fuel prices and interest rates are outside your control, lifecycle decisions and stakeholder behavior can significantly influence fleet performance and cost.
2. Use data to guide acquisition and replacement decisions. Historical maintenance, utilization, depreciation, and resale data help fleets make more informed buy, replace, and sell decisions that support long-term cost optimization.
3. Driver and maintenance behavior shape lifecycle outcomes. Proactive driver coaching and consistent preventive maintenance help improve uptime, control costs, extend asset life, and protect vehicle value.
4. Align every phase of the vehicle lifecycle. The most effective fleet strategies connect acquisition, operation, maintenance, replacement, and disposal decisions, allowing each phase to inform the next and support broader business objectives

Fleet operators have spent the past several years navigating one challenge after another—persistent inflation, elevated interest rates, and economic uncertainty. With these conditions showing no signs of easing, many organizations are taking a more holistic approach to lifecycle management, because optimizing it remains the most reliable way to minimize total cost of ownership (TCO).

Throughout the vehicle’s lifecycle—buy, drive, service, and sell—there are countless variables affecting operating costs and performance, and they’re all connected. Some of them you can manage directly. Others, like fuel prices and interest rates, are simply outside your control.

At Holman, we advise our customers to focus on the factors they can control and effectively influence the behaviors of key fleet stakeholders who affect everything else. That’s what minimizes the impact of the uncontrollable variables, creates positive outcomes, and optimizes fleet performance over the long term.

Buy & Sell with a Long-Term Vision

Your acquisition and liquidation strategy is arguably the most important lever you have, and it should be aligned with your broader business objectives. But alignment only works if it’s grounded in something. It’s crucial to identify what optimal looks like—both short- and long-term—and align your lifecycle strategy to achieve that vision.

Building Your Acquisition Strategy

The vehicles you acquire, how often you acquire them, and how they’re spec’d shapes maintenance decisions, uptime, and what the asset returns at the end of service. That’s why acquisition shouldn’t be anchored to purchase price alone. A lower acquisition cost doesn’t necessarily lower TCO if it leads tohigher maintenance expenses, reduced uptime, or weaker resale value.

You need to see the full picture when building your acquisition strategy. That’s where data comes into play.

• Historical resale values show which models hold value and which depreciate rapidly.
• Fuel economy and utilization patterns reveal which vehicles perform efficiently and which drive cost without meaningful return.
• Maintenance history across similar units flags where a spec or model has created recurring repair exposure.

Upfit decisions deserve the same scrutiny within your acquisition strategy. Historical data can show which configurations retain value and which add cost without a return, allowing you to weigh resale implications as you upfit your vehicles.

Knowing When to Replace

Knowing when to replace an asset is just as consequential as knowing when to buy. Identifying the optimal window for removing vehicles from service allows you to avoid costly repairs late in the lifecycle, minimize downtime, protect resale value, and ultimately lower your TCO. It also shapes your capital expenditure forecast, which feeds directly back into your acquisition strategy.

As with the acquisition phase, data has a crucial role to play in replacement timing. Asset age, utilization, maintenance cost, and the depreciation curve can show when a unit has run its useful course. Establishing and adhering to these thresholds transforms replacement timing from an annual estimate into a systematic decision that aligns with your broader objectives.

Effective Behavior Management to Optimize Drive & Service

While you have significant control over the buy and sell portions of the lifecycle equation, your influence over the remaining areas—drive and service—is much more indirect.

Monitoring Driver Behavior

Driver behavior is among the most important variables affecting your fleet. Whether it’s their performance behind the wheel or the role they play in maintaining your vehicles, your fleet drivers have a profound impact on the condition and performance of your vehicles, influencing everything from fuel consumption to repair costs to resale value.

You can start by monitoring driver behavior through telematics. This powerful technology essentially puts you inside the vehicle with your drivers, allowing you to identify high-risk behaviors such as speeding, harsh braking, and aggressive driving. By proactively addressing these issues, you can mitigate the negative behaviors that reverberate throughout the vehicle’s lifecycle. Those same coaching conversations extend to maintenance, where your drivers play an equally important role.

Maintaining Vehicles Consistently

When it comes to maximizing the useful life of a fleet vehicle, it’s all about your preventive maintenance (PM) strategy. A comprehensive PM strategy helps you control costs, increase reliability, and minimize unplanned downtime, all while keeping your vehicles in top operating condition for as long as possible.

Regularly completing routine maintenance—oil changes, tire rotations, brake services, etc.—dramatically reduces the occurrence of costly, more significant repairs. Collaborate with your drivers and emphasize the importance of PM compliance, then leverage maintenance data to confirm they’re adhering to the service parameters you’ve established. That way, a pattern of missed intervals gets flagged while it’s still a scheduling issue rather than a repair order.

Aligning the Entire Lifecycle

Once you have insight into the controllables and a strategy for managing the behaviors that drive positive outcomes, you can begin aligning every phase of the lifecycle. When every phase informs the next, you stop viewing fleet as a cost center and start managing it as a strategic investment that supports your broader business goals.

This clear view of your fleet operations and how each variable interacts enables you to focus on the factors that are most critical to your fleet’s performance. And if your business has constraints or limitations in a particular area, you’ll have the insight necessary to adjust other aspects of your fleet operations accordingly. For example:

• If capital constraints limit your replacement cycles, focus on driver behavior and prioritize PM
  compliance to maximize uptime, control costs, and extend lifecycles.
• If your vehicles operate in harsh conditions and incur significant wear, replacing them at consistent intervals becomes much more critical.

There’s no one-size-fits-all approach to fleet management, and certainly no “quick fix.” Your fleet’s current performance reflects years of accumulated decisions and actions. Instead of seeking immediate results, leverage data to identify underperforming areas and prioritize the biggest opportunities for long-term improvement.

By taking control of the controllables and effectively influencing the behavior of key fleet stakeholders, you can improve performance across every phase of the lifecycle—and lower your total cost of ownership in the process.