How Can You Measure Success for Your Fleet? A Full Breakdown of Cost per Mile, Cost Per Gallon and Cost Per Usage Day

Gretchen Reese (00:06):

Hey there. Welcome to Fleet FYIs, the weekly podcast by Utilimarc that reveals how you can make the most of your data for smarter fleet management. My name is Gretchen and every week you'll hear from me and some of the industries finest in candid conversations that will shed some light on not only two decades worth of data insights, but some of the industry's hottest talking points and key metric analysis with the aim to help you better understand your fleet from every angle.

Gretchen Reese (00:33):

But before we begin, if this is the first time you've heard our show, thanks for stopping by. I'm so glad you decided to come along for the ride with us. But I've got a quick favor to ask you. Once you've finished today's episode, if you could take a few minutes to leave us a review on your favorite podcasting platform, we would really appreciate it. Give us a rating, five stars I hope or tell us what you liked or leave us a comment or a question about what you've heard in today's episode. But if we haven't yet covered a topic that you're interested in hearing more about, let us know. We would be happy to go over it in detail in a later episode. If that sounds good to you, let's get back to the show.

Gretchen Reese (01:17):

Hello everyone. And welcome back to another episode of the Fleet FYIs Podcast. Today, we're back with a very familiar voice. I was going to say familiar face, and then I realized I was talking to a microphone and not a camera. So that wouldn't make sense. But anyways, we're back with a familiar voice, Mr. Paul Milner, a senior analyst here on the Utilimarc team. Paul has been with us for a few episodes now on and off again, speaking in depth on analytics, the importance of strong data management, and custom reporting. And on our end is in charge of all of the custom projects and even deeper analyses requests that we receive. So basically in short, he's one of the smartest people that I know. But anyways, today, Paul is back on the podcast to talk about a couple of metrics that perhaps you may know a lot about, or maybe you're just vaguely familiar with, cost per mile and cost per gallon, what to use them for, when to use them, so on and so forth.

Gretchen Reese (02:13):

He's also going to speak to an end metric that we've been using a lot lately and one that our customers have been finding a lot of value in which is cost per usage day. It's a bit of an evolved metric actually, branching off of simple using cost per mile or cost per gallon only as fleets are always evolving and technology's always changing. Especially if your fleet operates in multiple regions. But before I keep going on about this, let's bring in the real expert on the topic Paul Milner, because I'm sure he can speak to it a lot better than I can. Let's dig in.

Gretchen Reese (02:55):

We are back again with none other than the one and only Paul Milner. How are you Paul?

Paul Milner (03:02):

I'm doing good. How are you Gretchen?

Gretchen Reese (03:04):

Doing good. Thanks. Okay. So I wanted to start this next series of the Fleet FYIs Podcast out on a pretty strong topic, which I think for you, you'll probably enjoy this one. And along those lines, I think that the need for successful fleet management is stronger than ever, especially as we're coming out of a really strange pandemic year. So Paul correct me if I'm wrong, but when it comes to measuring success for your fleet, or even just a portion of your overall success metrics, it can be done with a few key ones, like for example, cost per mile or cost per usage day, right?

Paul Milner (03:42):

Yeah. So I think when you talk about kind of what success means for the fleet organization, most managers are going to look at kind of three categories and maybe even in this order. The first is going to be safety for drivers and for the mechanics working on the appointment. The second is going to be availability of the equipment for the crew. And the third would be making sure that you're doing that cheaply or at a good cost. So cost per mile has been kind of the go-to metric for managers in terms of performance in that cost category. And it's kind of well suited for the job, I think primarily because it's pretty easy to calculate. Today telematic systems are really good at tracking that accurate mileage, but even the odometer readings on the work orders, when the vehicle comes in for a PM are usually going to give you a pretty accurate or accurate enough picture of your usage to come up with a good cost per mile calculation.

Paul Milner (04:42):

And then kind of secondly, it's a really responsive metric to kind of both where you're putting your dollars and also how that vehicles being used. So it's not going to really matter how well you're negotiating with your suppliers if at the end of the day, the folks aren't driving the equipment around. So I think for those two reasons, it's been kind of a frequent performance metric for a lot of folks in the industry.

Gretchen Reese (05:09):

Okay. Fair enough. So can we break this down a little bit. And maybe for people that are either perhaps they've heard of cost per mile and the other metric that we've spoken about cost per usage day, or even cost per gallon. Maybe they've heard of it, but they haven't either dealt with it largely on a daily basis or maybe they just like a refresher. Can you tell me a little bit more about each of them?

Paul Milner (05:33):

Sure. So ultimately you're just really changing the denominator of the equation on the top. You're going to have, whether you just want to focus on maintenance or total cost of the app that I think usually it folks are looking at. Well, they might look at either just maintenance or total costs per mile, depending on what they're looking at. Cost per mile is certainly the most ambiguous of the terms. I think that's partly because most fleet activity across the United States at a very high level is about transporting goods from A to B. But I think it also has to deal with the fact that your and my personal vehicles, our PM schedules are all written in terms of mileage. So people just kind of generally think of vehicles in that distance parameter. But if you're doing a cost per gallon, you're effectively just substituting out that mileage for your fuel consumption. Cost per usage day winds up being a little more complicated simply because you have to kind of come up with a precise definition of what it means for the vehicle to be used.

Paul Milner (06:35):

So this pretty much becomes dependent on the telematics data. And that's really kind of what started the interest in developing at least on our end, a cost per usage day metric, is the more and more wide deployment of telematics devices out in the field. So for a lot of the clients that we work with today, we kind of set that threshold essentially that says, if the vehicle drives more than five miles on a given day, then we consider it used. And that threshold is just to establish, we don't want to consider it used just because some guy drove it around the parking lot to refuel the gas. We want to make sure it actually did go out into the field on that day. But then ultimately, we don't care how many miles it actually put on it during that day, as long as it was doing its job for that shift. You could get more complicated than that though too, whether or not you're using engine hours, which the telematics devices would also pick up.

Paul Milner (07:28):

If you want to get really fancy, you could set geo-fences up. So you could see if the vehicle left the garage for the day. Sometimes folks do that with like wireless connectors too. So the vehicles connect to the wifi as the vehicle comes in and out of the shop. And that's how they determine whether or not it left for the day as well. But ultimately, you kind of have to come up with whatever, whether it's by specific class of vehicles or for the entire fleet, what that usage day definition means. But then ultimately it's again, just kind of subbing it into the denominator of that equation.

Gretchen Reese (08:04):

Interesting. So can you tell me why somebody might say use cost per usage day over something like a cost per mile or cost per gallon? Because I know there's benefits and cons to everything, right? Everything that you measure. But why would someone want to go for cost per usage day over the other two?

Paul Milner (08:23):

Sure. So starting with cost per mile, I think the biggest thing is its just easy to calculate. And again, it's kind of the one that's been most associated with fleet organizations for quite a long time. A lot of the folks that we deal with will look for cost per gallon, precisely because they feel that the kind of the mileage commitment biases a little bit and there's kind of two ways that this could bias. One is the sense that depending on where you are, I think we all have this concept that not every mile is equal, right? So if you're driving in an urban environment in the city, you're going to have more and longer and tear on the vehicles associated with the stop, starting and stopping, more potential for accidents. And you're not covering as many miles as if you were to drive on the freeway or in a more rural environment. So there's a question of bias there.

Paul Milner (09:18):

The other question surrounds kind of the use case, especially for us focusing on utility municipal construction fleets. A lot of this equipment, their job isn't moving from A to B, they're more like tools that you bring to the job site and then are being used for construction purposes or whatever they got going on. So in that case the vehicle might be idling, but that doesn't necessarily mean it's not being used. It might be powering some other equipment, or a PTO, or putting a boom up in the air. So in that case, mileage kind of misses the usage of that equipment. And then the fuel gallons would be better at actually accurately depicting that usage.

Paul Milner (10:04):

So, I think if we're kind of moving away from cost per gallon to cost per usage day, the usage days is basically trying to handle that same type of bias that mileage introduces and says, we don't really care how many miles you're driving, because it doesn't matter how far away the construction site is for the day. We just want to make sure that we know that you were working on that day and if you were working, then we count it as being used for that day.

Paul Milner (10:36):

So I think it has the potential to be something that's really accurate for the utility industry in particular, when they're out and going and putting up those power lines. I also think there's value associated with kind of how easy it is to understand for the general audience, what I'd call explanatory value associated with that metric. So if I go to kind of a random guy on the street and say, a pick up truck costs 50 cents per mile to run, he's going to kind of scratch his head and have trouble actually relating that to anything concrete.

Paul Milner (11:08):

But if instead you go to someone and say, hey, it's going to cost you $150 to drive this vehicle today. I think that's much more relatable for somebody whose outside of the fleet organization to kind of interpret and conceptualize. And then ultimately it kind of has value from a financing perspective as well. A lot of folks have charged back methods where fleet will be funded by charging the using department a certain rate based off of that vehicle. And if you can do that on a daily basis, you can kind of clearly demonstrate to the using group, what the true cost of operating that equipment is. So you kind of get your performance metric, but you might also have kind of a financially useful metric in terms of that cost per usage day.

Gretchen Reese (11:56):

Gotcha. Okay. And, even though we've just gone into cost per usage day and the benefits of that, are there still primary benefits to actually using the cost per mile metric or cost per gallon now that you're starting to shift over to this more, I guess the best way to phrase it as almost a big picture view of what your usage day could look like?

Paul Milner (12:18):

Yeah. I think, the cost per mile and cost per gallon too are both still useful metrics. It just might be kind of more on a case by case basis. Right. If you're a fleet that your primary objective is to kind of move from place to place, that that mileage is, or that type of metric is still valid. A lot of folks are still relying, I don't think we're actually going to see that requests for a cost per mile or a cost per gallon really to go away. But some of the other equipment I think, that cost per usage day is going to be a lot better. And really, I think it'll kind of depend from organization to organization and being able to represent each of the different metrics kind of quickly, will be useful to folks in the long run.

Gretchen Reese (13:06):

Sure. And let's flip the switch a little bit here because I feel like most of this information, it surrounds internal combustion vehicles or ICE vehicles so to say, if you want to add in an acronym, which we all know, I like. But what if an organization has a fleet primarily made up of EVs? Because you and I both know that EVs are increasing in popularity, both on the consumer and the fleet front. And I could definitely see how a cost per mile metric would work with that type of technology, but I'm not seeing the equivalent of cost per gallon, or at least you can't measure cost per gallon if they're not a hybrid vehicle where you still are adding traditional fuel in. Is there a viable alternative that you've been working with as of late?

Paul Milner (13:50):

Yeah. So the EVs really do present a problem with the cost per gallon. So I think what some folks start to do is say, okay, well, we're going to do some sort of conversion factor and come up with a fuel gallon equivalent for the kilowatt, the energy that's being put into that electric vehicle when it's charging. I think part of the problem with that is that even if you are able to do that conversion, which can get a little complicated, the power plan is just physically more efficient with that energy than the combustion engine is going to be. So even if you are doing your conversion to the best of your ability, the EV is still going to get a better miles per gallon than the ICE vehicle, just because of that efficiency of the grid.

Paul Milner (14:42):

And kind of the weird thing about cost per gallon and we see that sometimes with or, I think we will see this with electrification. We see it sometimes with idle mitigation efforts as well, is that improving the MPG of your vehicles actually hurts your cost per gallon performance. Even though you're probably better off overall with your organizations since you're not wasting that fuel, but again, it's kind of the metric starts to look worse simply because your fixed costs associated with purchasing the vehicle, licensing the vehicle, supporting the vehicle are still the same. But you're running fewer gallons because of that idle mitigation or the EV vehicles. And that winds up actually increasing your cost per gallon. So it'll be interesting to see how folks kind of understand that as we move forward with EVs, the cost per usage might actually start going up even though the fleet itself is in some sense, getting more efficient.

Paul Milner (15:43):

So I think that's also kind of some of the motivating factors around using that cost per usage day metric. Because that's somewhat agnostic to the fact that we don't really care if you're using EVs, or fuel, or bio diesel, or whatever kind of technology that you're using, there's no conversion that's necessary. We just need to figure out, was the vehicle driven on this day? Was it doing its work? And if so, we're going to go and we can move on with our metric from there. So I think that's kind of an opportunity for that cost per usage day metric to alleviate some of those concerns.

Gretchen Reese (16:18):

Interesting. So when we look at this from a data management perspective, just because, you mentioned measuring the different pieces of EVs and some metrics might be harder to track. Is there something in terms of data management that might make tracking EVs overall easier, like trying to combine it into an analytical environment? Or what do you think there?

Paul Milner (16:40):

Yeah, there's certainly a necessity to kind of have the analytics in the background in order to do these types of calculations, not really the calculations, but just getting this data sources to communicate with each other. So traditionally, if you're looking at cost per mile, part of the reason that was so easy to calculate is all the data's in the work order system, right? All your costs are already there. When the vehicle comes in for a PM, the mechanic just writes down the odometer reading and you just have that one kind of true source of information for that type of metric. Once you can go to cost per gallon, well now you're maybe pulling in a fuel card system in order to do it.

Paul Milner (17:23):

If you've got EV vehicles in your fleet too, you're going to have a separate data source associated with, the electricity that you're putting into those EV vehicles that you're going to have to combine with those other two data sources. So, cost per usage day, you're going to at the very least have to combine your telematics and maybe multiple telematics systems, depending on how many providers you have with that maintenance. So being able to get all these systems to kind of communicate with each other is definitely imperative moving forward.

Gretchen Reese (17:55):

You know you're turning into Mr. Huhn, right? With the EV vehicles.

Paul Milner (18:01):

Mike's a very nice guy, but I like being my own person, right.

Gretchen Reese (18:06):

Yes. But you do use the EV vehicles quite a lot.

Paul Milner (18:10):

Oh no, no and ATM machines. And yeah, it's the worst. We get all confused with our alphabet soup of acronyms so.

Gretchen Reese (18:21):

Got to love it. For those of you that don't know, EV vehicles is almost kind of a Utilimarc inside joke because technically you're saying electric vehicle vehicles. It's a good one. Oh, dear. But Paul is there anything-

Paul Milner (18:34):

It's more fun to say though, right? It's more fun to say EV vehicles.

Gretchen Reese (18:38):

Kind of.

Paul Milner (18:38):

Just EVs, eh, no.

Gretchen Reese (18:41):

EV vehicles, really spice things up. Add the extra V.

Paul Milner (18:44):

Yeah. Yeah. Definitely.

Gretchen Reese (18:46):

Got to love it.

Paul Milner (18:48):

How many V's do you get to use in your normal lexicon? There, I got that word out in there too.

Gretchen Reese (18:52):

Nice. I like it. As a word nerd, I appreciate that big time. Alrighty. Well, Paul, is there anything else you'd like to add before we wrap this episode up?

Paul Milner (19:04):

No. So I do kind of personally think it's interesting how like the algebra of the metrics that we kind of calculate can impact the perception of the fleet performance. And I might be alone in that respect, but at least I think it does demonstrate a little bit that you need to have kind of a variety of understanding, or a variety of metrics and an understanding of how those performance metrics kind of interact with each other in order to really kind of know where you're going or your performance as an organization where you're going so.

Gretchen Reese (19:44):

And I know I asked you this at the end of every single episode that we recorded together, even though I think it's maybe only been about four at this point, but where can people find you if they'd like to continue the conversation at a Fleet FYIs? Have you remembered your LinkedIn password yet?

Paul Milner (19:58):

I did. I did remember my LinkedIn password. At least I did a couple months ago. Don't ask me for it now. But you can also, email is a good way to reach me to at pmilner@utilimarc.com. I'm happy to respond to anybody's requests so.

Gretchen Reese (20:14):

All right. Sounds good. Well, Paul, again, thanks for coming on the show once more. I really appreciate it. And it's always great to have you.

Paul Milner (20:21):

Yeah, no problem. Look forward to next time.

Gretchen Reese (20:37):

If you're the type of person that loves analytics and data, as much as Paul does, then I really hope that this is an episode that you enjoyed. I'd love to know what you thought. Was there a point this episode that you wished that we delve further into these metrics? Do you have a metric in mind perhaps that you wished we could cover as well? Let me know, by sending me an email, our contact information, as well as Paul's is in the description of pretty much every episode. Well, mine is. Paul's is it the description of this episode. Or you can use the hashtag Utilimarc Fleet FYIs on LinkedIn. I check this hashtag consistently, especially so when we have new episodes releasing every week. But anyways, that is all from me this week. I'll look forward to being in your headphones again next week on Thursday. Ciao.

Gretchen Reese (21:22):

I think this is the time that I should cue the virtual high five because you've just finished listening to another episode of the Fleet FYIs podcast. If you're already wanting more content head over to Utilimarc.com, which is Utilimarc with a C. U-T-I-L-I-M-A-R-C.com for the show notes and extra insights coming straight from our analysts to you. That's all for me this week. So until next time I'll catch you later.