If you asked 10 fleet managers to define fleet utilization, you’d probably get 10 different answers. That’s ok. Each fleet is different and fleet managers need to look at utilization in a way that makes sense for their organization. Utilization is generally expressed as a measure of demand compared to some type of capacity or threshold. The value is often expressed as a percentage. For example, if 5 out of 10 vehicles in a fleet are used in a given period of time, we might say our utilization rate is 5/10 or 50% for that period of time. Similarly, if we have a target utilization rate of 1,000 miles driven in a month and we only travel 500 miles, we might say our utilization rate is 500/1,000 or 50% for that month.
Utilization is often a comparison of “demand” to “capacity”
So, to a newcomer to the discussion on fleet utilization, it might seem straightforward to calculate, for example, utilization rates of a passenger vehicle fleet on a daily basis. Logic would dictate that you’d calculate capacity by counting the number of passenger vehicles in the fleet, i.e., Capacity. Then you’d count how many of those vehicles were used each day, i.e., Demand. Then you’d simply do the math of demand divided by capacity. As straightforward as calculation of utilization may seem, there can be many variables to consider. Here are some nuances to think about:
- Are you accurately counting the number of available vehicles as they enter (new vehicles) and leave (disposed) the fleet?
- Capacity may change daily. If a vehicle is out for service/maintenance, do you alter your capacity?
- If a vehicle is awaiting a routine inspection before its next use, does it count toward capacity since it may not truly be available for use?
- If you augment your fleet with outside rentals, does your capacity increase?
- Does the use of an outside rental vehicle count against demand?
- Does the use of a personal vehicle count against demand when a fleet vehicle is not available to fulfill the mission?
- When I take a vehicle out of a fleet for service/maintenance, do I count that as “use” of the vehicle?
- If I drop keys in a manual key-drop box and keys remain there until the next morning, am I still “using” the vehicle?
Removing vehicles from service for preventive maintenance or augmenting the fleet with outside vehicles also impacts utilization. However, keep in mind that while important to understand in the long run, variables like this do not need to be considered on day one of your fleet utilization initiatives.
How should a vehicle that is out of service impact daily utilization rates? Should additional vehicles be used to meet demand be included in utilization calculations?
Capacity and demand can change from day to day
It’s easy to see that calculating utilization can be confusing. But, it doesn’t have to be. A word of advice on where to start relative to utilization calculations is: Just start somewhere. You’ll always be able to refine your utilization calculations as your fleet and fleet technologies mature. The key is to start understanding utilization even at the simplest level. Understanding different approaches to calculating utilization and understanding different approaches to measuring your capacity and demand will likely change over time.
For more in-depth information about understanding your fleet’s vehicle utilization, download our new e-book that we developed in cooperation with NAFA Fleet Management Association: Ultimate Guide to Understanding Fleet Utilization & Achieving a Right-Sized Fleet. Or reach out to our fleet experts for a free, private consultation to discuss ways to improve your fleet’s utilization.