Like it or not, truck operators of the future will hardly have a can of oil on their premises if current trends are anything to go by. This is because while South African vehicle fleet operators are traditionally slow to respond to the latest international trends, they are inexorably moving towards outsourcing vehicle maintenance functions to outside contractors. Andrew Parker investigates this trend.

While some operators may fret over the decision-making process to outsource, they must understand that it is technology that is driving this development. Modern technologically advanced diesel engines require technologically advanced and expensive computerised, electronic diagnostic and calibrating systems to ensure they operate at optimum performance levels.

While tools and equipment are expensive, so too is the training of workshop personnel. Add to this the shortage of technical skills in South Africa and it becomes quite obvious why outsourcing is becoming an attractive option. Allan Dunn, technical manager for the fuel and chemical division of Unitrans, confirms this.

"In the recent past, Unitrans found that as new vehicles were brought into operation, we were finding that the service and maintenance requirements were beyond the technical capability of the company's existing workshop infrastructure - particularly in areas of electronic engine and fuel management systems and diagnostics.

"Getting to grips with the new technological demands is prohibitive in terms of equipment and training of workshop personnel. The only answer was to outsource the maintenance and repairs." 

Negotiating a maintenance contract, Dunn explains, is akin to forming a tripartite alliance. It involves the OEM, the dealer network and the customer. Operational parameters and conditions must be carefully examined and the final service maintenance requirements negotiated between the three parties.

"This is the only way to go to get accurate costing forecasts and logistical aspects in place from the start," he reckons.

While in-house workshops are maintained to service the older vehicles, operations such as engine rebuilds are also contracted out. Dunn believes while this approach means paying a premium, the refurbished engine is supplied with a warranty and can be returned to active service within a matter of days thereby minimising downtime.

"Of course it is nice to have independence but the reality is that you need a really big fleet to off-set the cost of the equipment required for today's vehicles."

Limiting factors
Dunn goes on to say that there are some limiting factors in going the outsourcing route. These are largely dependent on where the vehicles are being operated. Unitrans, for example, maintains comprehensive workshops in remote areas such as Namibia and Botswana where it is not always possible to find the required levels of service, technical skills and parts.

Then again, there are exceptions to every rule and while Unitrans has identified the benefits of outsourcing, the company maintains strict control over its fleet of tankers. "There are extremely strict safety requirements and procedures involved in repairing chemical tankers," explains Dunn.

Even here, however, depending on the complexity of the job, some tankers are sent out to approved workshops or the original manufacturer. Tyres are another critical cost centre that is contracted out as are service and repairs to vehicle braking systems.

Paradigm shift
Commenting on the notion that operators lose control over critical elements of fleet management, Dunn says this is an old fashioned way of looking at a modern reality. "Modern fleet operations have gone through a paradigm shift and one has to shift and adjust in tandem with this.

"For many years, fleet operators ran their own workshops simply because that was the way things were done. Now, it is more practical and economical to outsource so that is what we are now doing. It is not an entirely new concept. Tyre management procedures and repairs to high-tech air braking systems have been contracted out for some time. It is easier to let the experts handle what they know best. You get peace of mind and you know the job is being done correctly."

Dunn goes further and advises operators to exercise extreme caution when selecting outside contractors. This entails visits and examination of a potential contractor's workshops, checks made on track records and levels of quality and competency. "If operators don't like what they see they should simply walk out the door," Dunn recommends.

To this he adds that contracting actually enhances operator responsibility rather than relieving it. "If problems occur, you have to deal with them immediately. It is very true to say that when you pay for something, you become more far more analytical than you would if you did it in-house. In short, you really have to manage and monitor the contractor's performance on an on-going basis.

"At the end of the day it is a team effort. Everyone shares in the pain and the glory."

Vehicle Suppliers
Let's hear now from the vehicle suppliers who, according to Johnny Marx, fleet sales manager at Nissan Diesel Truck Division, offer a range of products and services designed to assist customers in overcoming the affordability problem.

Despite this, he reckons that when it comes to maintenance, apart from the standard services required for warranty purposes, most trucks are still sold without any form of maintenance contract at all. This, in his opinion, should change.

"An obvious benefit of maintenance contracts is that it allows suppliers and customers to develop mutually beneficial relationships. This is particularly important not only in terms of vehicle and parts supply but in other service areas provided by suppliers such as vehicle selection, fleet consultancy, driver training, provision of finance and so on," says Marx.

Adding to this, he says vehicles falling under maintenance contracts are generally better maintained than they are at private workshops - particularly in terms of regular maintenance being carried out and the use of genuine spares. Altogether, this results in more control and ultimately enhanced residual values. 

Contrary to Marx's observations, Barry Ferreira, dealer principal at Freightliner Truck Centre, Zandfontein, says he knows of some large fleets which have opted out of in-house maintenance altogether and prefer to outsource everything from normal servicing through repairs and even fuel and tyre management.

"Around 50% of the inquiries we receive for new trucks ask for a quote that includes a full maintenance or service contract. Between 25% and 30% of these actually take up the maintenance option," he says.

Government sectors
Henk Maree, director of Toyota SA Trucks, has also noticed an increase in the trend to outsource saying this move has gained substantial ground in the recent past, especially among the government sectors of the economy.

"Often this outsourcing has been in terms of the entire fleet management function, from procurement to disposal, which therefore includes maintenance or the control of the maintenance function. However, it is difficult to make an estimate of the number of vehicles sold with maintenance packages in some form or the other as there are many different options available to customers these days - from extended warranties to fully fledged maintenance management products. 

His bottom line is that while he believes South Africa is lagging behind Europe, he sees FML and outsourcing of commercial vehicle maintenance as definite growth areas in this country.

One of the driving forces behind this trend is the fact that where a finance house carries the risk of ownership, it is obvious they would insist on having some control over the condition of the vehicle when it is returned to them under a guaranteed buy-back arrangement. "If there is a residual value or guaranteed buy back involved in the initial sales agreement, the banks insist that a maintenance contract is put in place which is carried out through our dealer network.," says Maree.

DEALER NETWORK Maintenance done through a dealer network provides high qulaity work and genuine parts.

As to the question of who is responsible for the maintenance, Maree says there is often more than one party involved depending on who the suppliers or service providers are.

"If it is a fleet management company such as SuperFleet or Imperial Fleet Services, they would be responsible for the maintenance functions once the warranty period has expired - if they operate workshops that have been accredited as approved workshops by the relevant suppliers." He adds that they would then also control the maintenance functions from a management and financial point of view.

An interesting trend noticed by Maree is that some companies have 'privatised' their own workshops as separate entities. In other words, the workshop staff have taken them over and run them as separate companies.

Form of discounting
Maintenance contracts are also a useful and powerful marketing tool that, in some instances, have been used as a form of discounting. However, suppliers have to be very circumspect in this area as discounting maintenance costs can lead to serious repercussions for all parties involved. 

Maree says that in trucking, the use of maintenance contracts instead of discounts is definitely an option, especially where bolt-on maintenance products are offered. 

"However, the use of this as an option would depend on many factors such as the actual discount offered, the operating condition that the vehicle will be subjected to, the requirements of the customer, the credit requirements of the financial institution in respect of their risk compared to the value of the vehicle - and other factors."

If it is a true FML, the customer is probably only interested in the monthly rental/lease and most often does not have insight into the discounts, the interest rates, the maintenance portion, admin fees etc.

"At Toyota, we have not found this to be a preferred option by customers - especially those who finance their vehicles as they then pay interest on an increased amount."