Leasing alliance slashes utility’s fleet costs: committing to a five-year partnership with one aerial-work-truck OEM delivers cheaper, more reliable, safer trucks.
Published in: Construction Equipment
Date: 11/1/2002
By: Stewart, Larry
Q: Why promise to buy all of your bucket trucks and digger/derricks from one vendor? Doesn’t a long-term agreement soften the vendor’s motivation to compete in price and quality service?
A: “We’ve been developing these kinds of partnerships with vendors for a while now, and we’ve found it always reduces our costs, allows us to offer more reliable service, and helps us become more efficient,” says Paul Kunz, director of fleet facilities at Orlando Utilities Commission (OUC). “Our alliance with Altec gives us most-favored-customer pricing, puts us at the head of the queue when purchasing vehicles, and we get the vehicles under 60-month lease agreements.”
Of the 60 aerial-work trucks in OUC’s fleet, 29 are leased under the alliance with Altec. The leased bucket trucks and digger/derricks are more reliable than OUC’s owned trucks, which is of tremendous value because the municipal utility applies its tag line, “The Reliable One,” to internal as well as external customers.
Leased trucks cost less to Kunz’ internal customers, OUC operating groups, than owned trucks. And leasing keeps these vehicles out of the utility’s transportation capital plan. Leases are expensed and paid by the operating groups in lieu of an internal depreciation charge that Kunz collects on owned machines. That leaves capital to purchase light vehicles and other equipment the utility needs to serve its community.
The lease expense on alliance vehicles is about the same as OUC’s internal depreciation charge. Operating groups save money overall because the leased vehicles are new, and repair costs are much lower.
“We’ve significantly reduced the average age of our aerial-tower fleet,” Kunz says. “The trucks we own, we used to keep 15 to 20 years. Now at end of 5 years, these trucks will be replaced with new ones. The operating groups are saving money on maintenance.”
OUC’s shop is seeing the benefit, too.
“We’re not doing the major cable replacements or replacing pins, bushings, baskets, doing the painting and gelcoat repairs and cab-and-chassis work on these alliance vehicles,” Kunz says.
Kunz points Out that the newer trucks are safer, which is a cost that’s not to be overlooked.
“With just a few years into the program, it’s still a soft cost’ he says. “But ultimately it will become a hard cost that we can measure as our accident statistics continue to change. One liability claim can be worth millions.
Standardizing with International chassis and Altec equipment has delivered significant savings on that portion of the fleet, too. The parts discount is deeper, Altec automatically doubles its one-year standard warranty, and free training is part of the OUC specification.
“Altec has provided 2,400 hours of hydraulic training for our mechanics at no charge, and they come to us,” Kunz says. “In the past, we would have had to pay someone for that training, and send our people to get it. That’s saved us over $10,000 this year alone.”
The partnership has rewarded OUC with free demonstrations of machines that Kunz would normally have to rent for specialized work. For example, a few times each year he needs an especially tall aerial truck for a week or two. Getting a demo unit for free or renting it at the discount stipulated in the agreement, Kunz estimates that OUC has saved another $25,000 this year.
“We still have the option to buy machines somewhere else if they don’t have a piece that we need or if we don’t feel they’re being competitive,” Kunz says. “We randomly check on parts prices and I have competitive vendors in here all the time, so we know what things cost. But this alliance is a true partnership. They’re doing a good job supplying what we need, and we’re working together to get competitive terms.”
Kunz says OUC has learned to ask for everything they need from an equipment partner.
“Include a lot of extras in your bid,” he recommends, “training, discounts on parts, rental discounts–everything that’s important to your operation. Altec has just bent over backwards to accommodate us with this kind of thing.
“As well as it’s working for us now, we hope to have an all-Altec aerial fleet some day,” Kunz says. “Of course, we’ve had such a hodgepodge before that I guess we could handle developing an alliance with another vendor, but it wouldn’t be the ideal result of the time we’ve spent with this partner.”
RELATED ARTICLE: PROFILE
Paul Kunz
Orlando Utilities Commission
Headquarters: Orlando, Fla.
Specialties: Municipal electric and water utility
Equipment Value: $15 million
Fleet Make up: 684 total units, including 60 aerial trucks for overhead work, plus 350 small-engine units
Support Staff: 29 total, including 24 mechanics
Facilities: Three shops, one satellite location, 1 mechanic’s truck, 1 tire-service truck
Market Range: 190,000 customers in Orlando and St. Cloud
FLEET INSIGHT
Relying on Shop Success
OUC’s shop keeps competitive by servicing outside fleets during lulls, in internal demand. New machines from the Altec alliance relieved some shop workload starting in 1999, and allowed OUC to take on a big external client. Income from external work has more than doubled, and it has improved service to OUC operating groups. For example, OUC couldn’t meet its reliability targets without having mechanics available at night, so Kunz added a night shift. Shop productivity remains at an all-time high, and the extra service is cost effective because of the increased shop volume.
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