In the world of fleet management, the issue of the centralization vs. decentralization raises its head cyclically.
Over the past couple of decades many municipalities have centralized support services, including IT, procurement, finance and accounting — even facilities. Fleet has not escaped the trend.
That centralization can happen in the form of policy, procedures and/or organizational structure. During an address to fleet managers at the National Association of Fleet Administrators conference in April, Randy Owen, CAFM, senior vice president at Mercury Associates and a fleet management consultant, discussed the process and noted that even large fleets that have not centralized organizationally may have centralized procedurally, most likely in their reporting responsibilities or policies.
Historically, Owen noted, three main rationals are employed when organizations opt not to centralize:
• Within a small department, a decentralized fleet service can be customized to meet the particular needs of that department.
• Fleet mechanics will come to know the department-specific user base, the vehicles and functions they support and the culture of that particular organization. This will result in a higher quality of services
• The head of a decentralized department can set the level of staff and resources on his own; he can decide what the level of funding and staffing should be, thereby setting the service level at exactly where he or she wants it and avoiding any kind of priority conflicts.
“I think while all of these have merit … they ignore the trend toward economies of scale that have happened in capitalist economies,” he said.
Henry Ford’s revolutionary production line was among the first to lay out the advantage of paying attention to economies of scale. Ford demonstrated that there are cost advantages, as organizations scale up and get larger, that drive down the unit cost of output and the cost of each labor hour, making organizations more productive on a cost basis because of the ability to spread fixed costs and overhead costs over a larger volume of services or a larger production of output. It has become a tenet of modern economies and industry.
Application of the economies of scale paradigm to fleet translates into a potential to reduce overhead. In cities where, for example, there’s a separate code enforcement, public works, fire and police fleet, there are likely four fleet managers, systems managers, data analysts, spec writers, shop supervisors and parts people. These positions, to a greater or lesser extent, comprise a duplication of overhead. In a centralized organization, cost savings also result from the sharing of expensive resources such as shops, fuel sites and fleet systems.
Formerly, as fleet manager for the Los Angeles County Public Works Department, Owen worked on a centralization project that involved pulling together a flood district, road department, county engineer, waste management district and airport district. One of the first orders of business under the new organizational model was to close redundant fuel sites.
“As silly as this sounds, if you worked for the road department, and across the street was a flood control district yard, you could not fuel at their station and they could not fuel at (yours). And there might have been a city of Los Angeles yard on the opposite corner, but the county couldn’t fuel there and the city couldn’t fuel at our sites.”
Beyond the sharing of resources, centralization lends itself to a reduction in duplication of effort, the sharing of knowledge and best practices and a shared focus on the core mission.
Leaving fleet management to a fleet professional also tends to mean leaving it in the hands of someone who is trained, qualified and able to focus exclusively on fleet-related needs. In contrast, when fleet services are decentralized, there is a danger that any given department head is spending more time managing the support service than on-core mission function.
When it comes to management systems, Owen readily admits to believing bigger is generally better: in part because a city with one large fleet organization instead of three small ones will probably be more successful at obtaining a sufficient budget and resources and setting policy.
“It’s a larger organization, supported by its customers, making the business case to the city or country manager or elected officials that we need this kind of budget to replace new vehicles, we need this kind of shop, we need a fleet system. That larger organization is more important and is generally, I think, better able to obtain the investments that it requires to support its customers and become an effective fleet organization.”
Because centralized operations are more capable of managing changes in work flow, centralization saves money during the occasional low tide by shifting employees to projects that
have come in from another department.
Another way to realize the cost savings of centralization, while preserving the customization features of department-specific fleets, is to customize services by customer base.
“One size does not fit all. The parks department needs something different than the police department does … Some organizations have spares, some organizations have no spares. So the service level commitments to an organization that has spares ought to be different than to a customer who only has one hydrovac sewer truck, for instance. That becomes a much more important vehicle than if there’s a backup.” Service level metrics must be measured and tracked in this scenario so it can be reported that the centralized structure is maintaining or even increasing the level of service that the department enjoyed previously.
“As long as we can agree on what service level you need, and I have the resources and the managerial capacity and talents to meet those service levels, then the customer organization should be OK,” is Owen’s mantra.
Tactics for making centralization work
• Have specific mechanics assigned to large customers. When Charlotte, N.C., took over the fire department fleet under Owen’s watch, one of the ensuing initiatives was to transfer over one fire department mechanic and have a few other mechanics retrained, ASE-certified and specifically designated to work on fire vehicles. They got to know the apparatus operators, the captain and the equipment well so the fire department did not feel like it was losing the ability to talk to a mechanic about what was wrong with an apparatus.
• During and after consolidation, an important step for the manager of the centralized fleet to take is to establish a group or committee of fleet stakeholders, managed in an inclusive way.
“Don’t let the fleet manager act as the ‘car czar,’ dictating to customers and ticking them off because eventually the water cooler complaints will work their way up the chain of command and undermine even noble efforts,” Owen said. “It doesn’t take a lot of effort to have even quarterly meetings with your customers.”
He added, “Even if you have to dig into your own pocket and buy some pizzas, your attendance at quarterly meetings will triple. Of course you’re still going to hear some moaning and groaning, but I’d much rather have customers at the table and engaged, passionate enough to tell me what’s going wrong, rather than telling me everything is OK but telling the city manager that I need to go.”
• Owen believes that a triggering event is required for centralization to take hold, such as a new city manager, major vehicle-related incident or a key retirement. Centralization is hard: it’s emotional and political. A trigger that comes from outside the fleet departments, from someone who doesn’t have a dog in the fight, usually improves reception of the idea among stakeholders.
• Understand and accept that during centralization, the programs that will be combining will inevitably feel as though they have lost a fight. Take the extra step to make sure those programs have a seat at the discussion table and their voice is heard. “I think you’ll find that they’ll cooperate more, and that you’ll have a more sustainable organization if you do that.”
• Budgets and finances must be carefully scrutinized. In small organizations, things sometimes fly under the radar that perhaps shouldn’t; these are likely to be discovered during the centralization process. Know in detail what the costs are of any organization that’s going to be merged in, and what those costs are going to mean for the new budget.