Development of a fleet vehicle replacement strategy

Abstract

Change is the only way to stay ahead in a competitive environment. That is why company ABC has adopted a new focus on supply chain and is moving away from old warehouses to new, leaner, central warehouses. The company has decided to consolidate 240 of their warehouses into 5 new warehouses. Along with the warehouse centralizations, company ABC also needs to assess the productivity of their fleet. It must also be determined if the current fleet will be able to meet the requirements of the new supply-chain network. In this document, a study is performed to establish the optimal service life of a vehicle. As with any company, ABC also has some vehicles in their fleet that is nearing the end of their Economic Service life. The plan is to replace these vehicles over the next few years in the most cost effective way possible. Secondly, a study is performed to establish the optimal fleet mix. Warehouse centralizations have numerous advantages as a result of fewer facilities that need to be maintained and run. Another advantage of warehouse centralizations is the possibility of the fleet to perform milk-runs. This ability to perform milk-runs could result in larger loads that need to be transported. Subsequently, the possibility of using different vehicles with different capacities must be considered. This is the reason why it is necessary to calculate the optimal fleet ratio of one-tonner to four-tonner vehicles. Lastly, a study is done on the current fleet to establish how the fleet will be transformed in the most cost effective way. This is done by using the results of the Economic Service Life and fleet mix study. The deliverables form the aforementioned study is used as a guide to decide which vehicles need to be replaced at what stage. At this stage of the study, it could also be beneficial to consider various brands of vehicles to see if there could be vehicles that are more cost effective to run than the current models. This document concludes with a summary of the cost savings, should the abovementioned results be employed.