Let's begin module two, fleet management. The greatest responsibility of a rental manager is the task of managing the rental fleet, which in most cases is a multi-million dollar investment that must be carefully maintained, monitored, and effectively deployed to achieve the desired results. On behalf of the dealership, you are probably one of the primary asset managers. This is a great responsibility and you need to have in-depth understanding of all aspects of fleet management. In this module, we're going to introduce you to three key components of fleet management. The first of which is the machine lifecycle, understanding the three phases of acquiring the machine, owning and operating it, and then deciding when to roll out the machine and what happens in each of those phases. We're going to talk about measuring the performance of the fleet while it's in your control and you're renting the equipment out and maintaining the fleet, how to measure the performance and see whether you're doing okay. We're going to introduce you to some different forms of measurement. Then finally, the analysis. As you're measuring things, some of the items are going to turn up as being good performers and some not so much. You've got to figure out a correct way of identifying the winners and losers and then what do we do about the ones that are underperforming. Let's start first with the acquisition phase of putting a machine into the rental fleet. For most of you, that means your primary machines in your fleet are going to be the brand that you represent or the brands that you represent. The cost of that item coming into your rental fleet, you probably will not have any control over that whatsoever. It's at the dealer net. That's what the dealership pays for the machine direct from the manufacturer. However, there are some additional charges that can go against that machine to increase the price of the machine as it comes into rental. Again, you probably will not have any influence over this. Those additional items are the service department typically does a pre delivery inspection. They generally get paid for their time and labor expense and maybe any additional items that they put onto that machine to make it complete. Those things usually get charged and capitalized, which means they get added back to the value of the machine. It doesn't come on as an expense against the machine. And then depending on your dealership, there's a possibility that the sales department may even take a slight margin on that machine transferring from the sales inventory into the rental fleet. So transfer of price is what I mean by the difference between dealer net and potentially what it goes into the rental fleet for. It's possible that a margin could be taken there. It kind of depends on where do you want the profits to show up at. And then lastly, extended warranty. So anytime we put a new machine into rental, and let's just say you were thinking about rolling this machine out in two or three years, it might be a good idea to have an extended warranty already on the machine at the time that you're going to sell that used machine. It'll make it more attractive. So an extended warranty is something that generally can be purchased at the beginning of the life cycle of the machine during the acquisition phase, or you may be able to add it later, maybe near the end when you get ready to roll the machine out. Extended warranty is another potential added cost to the machine as it comes into your rental fleet. So now let's look at the next phase, which is owning and operating. So this is the duration that this machine's in your control to try to make as much profit as possible. I mean, that's the whole purpose of getting machines into a rental fleet is to make money. You want to influence market share, and we want to create used machines. But in the interim period, what we're really trying to do is create profit. So we have rental income, and then the items that I'm about to describe are things that are costs or expenses against that machine. And the biggest one, and we're going to spend some significant time talking about this one, the largest expense that you will have against any of your machines during the time it's in rental is your depreciation cost. And most likely, you won't have any influence over this particular decision. This is generally something that is made by the CFO or your finance officer, and it should work in concert with when we expect this machine to roll out of our fleet. And so those are some decisions that are strategic. And we'll talk in a little bit more detail so that you'll know and understand what the largest expense against owning and operating equipment is. Next, you've got maintenance and repair. And this is something that you do have a lot of control over. And so it's the next most expensive maintenance cost that you've got to have oversight over. Then we have interest costs on the fleet. So generally, people finance equipment that they put into the rental fleet, and interest costs are a significant part. Then you've got your overhead to help contribute towards paying the light bill. And for the space that you occupy in the yard, you've got sales commissions that you're paying either to the sales staff or maybe to your rental sales force. And then finally, damages. And damages can be offset by charging them back to the customer, but if they're not, then they end up being an expense. So as you can see, there is a lot of things going on in terms of income and managing expenses during the owning and operating period. The last phase that we want to talk about is disposal. So the question that always comes up is, when should we sell the machine? What I'll tell you is that not all the machines should be sold on the same cycle. In other words, it should not be automatic that everything that goes in our rental fleet comes out in 24 months or everything that goes in comes out in 36 months. Because what we really should be trying to do is match market demand for used machines to the rollout cycle of our fleet. So I believe the very first thing you should do as a rental manager is sit down with your used equipment sales manager and talk about the kinds of machines that you're going to put in the rental fleet and what is the demand for used machines. And when we talk about used, how used, is there a strong audience for machines that are three years old, about four years old? What's the hours that people are looking for? Could I sell real easily machines that have 2,500 hours? Or do most people want more like 5,000 hours? And so the cycle or the time period that machines are in the rental fleet has everything to do with trying to match it up with market demand. So when we get ready to sell this machine, we've decided that it's time to roll this unit out. We have some preparation costs. And this can be everything from a new paint job, it could be new tires, repairing seats, mirrors, whatever it might be. And so we have to decide what are we going to do with those costs? Are those costs going to go back against the machine and against all the rental revenue? Or are we going to potentially capitalize these expenses, sort of like we did with the pre-delivery inspection, and these costs just get added back against the machine? So when we get ready to sell the machine, we've actually got a little bit higher book value because of the preparation costs. Then we've got disposal costs. And those would include things such as advertising and marketing. Maybe you list this stuff on some type of used equipment site, or maybe you're going to auction, and maybe you're going to have to pay some type of a fee to sell the equipment. And so disposal costs are associated with the marketing expense and potentially any service that you might use for listing fees or anything like that. Sales commission, straight up, who's going to get the reward for the used machine that we're selling? And typically, that's going to come out of the sales side of the house, and those commissions are going to come off of the profit. So there we have the three cycles that we're going to spend more time on, acquisition, marketing, and operating, and disposal.

fleet management

rental manager

machine lifecycle

fleet performance

analysis