Avoid Technological Obsolescence with Leased Equipment
With technological advances coming at a dizzying rate, obsolescence is always a danger for any fleet. Frank Bussone forwards the argument that the best way for companies to avoid this problem is to lease their equipment, instead of purchasing it outright, giving them the opportunity to update as needed.
Technological changes are occurring at a dizzying pace. It’s now at the point where it seems like everyday there is some new development that fleet managers have to learn about to determine if it makes sense for their operation.
In many cases, those changes are good, especially the advancements that are making trucks safer or allowing freight to be shipped more efficiently and for less money.
In addition to new products coming into the market in a steady stream, there are lots of technologies looming on the horizon that may change how trucks are powered. I am talking about things like electric, hydrogen-electric, fuel cells, diesel hybrids, etc.
Unfortunately, many of these new developments come with high price tags and it may take longer for a fleet to see a return on its investment from these technologies.
Deciding which of the myriad new technologies to invest in can be a daunting task. It can be especially difficult to make the right choice when it comes to some of the emerging technologies like electric trucks. There will be many cases where certain technologies do not fit an application and therefore should not be utilized.
That said, sitting on the sidelines waiting for a technology to prove itself might not be your best, or smartest, option. If a fleet invests in a technology that allows freight to be hauled more efficiently, it will gain a competitive advantage over a fleet that takes a wait-and-see attitude. But problems can arise if a fleet chooses a technology that ends up having a higher total cost of ownership (TCO) than anticipated or one that does not deliver on its promise.
Because technology is changing so rapidly, technological obsolescence is a big risk, especially for fleets that tend to keep their trucks for longer periods of time. The Business Dictionary defines technology obsolescence this way: “When a technical product or service is no longer needed or wanted even though it could still be in working order. Technological obsolescence generally occurs when a new product has been created to replace an older version.”
Fleets are stuck between the proverbial rock and a hard place when it comes to investing in technology. Invest too soon and they risk a poor ROI; wait too long and they run the risk of operating vehicles with obsolete technology which will render them inefficient.
One way for fleets to best leverage technology is to consider leasing. When it comes to technology, leasing allows fleet managers to dip their toes into a technology by “test driving” it on a few vehicles at a time to see how that technology performs and how well accepted it is by drivers and technicians. If the technology proves itself in that duty cycle, the fleet can go all-in and spec it on all the vehicles it orders in the future.
However, the fleet has to make sure to find the right leasing partner, one that takes a consultative approach to specifications, fleet planning and optimization. A leasing company that offers flexible financing is a good choice in an industry that is undergoing significant technological changes. What the fleet is looking for is to manage the assets and the costs associated with them in order to keep them operating at the lowest cost of ownership. It means moving assets in-and-out of operation at just the right time in order to avoid technological or economic obsolescence.
When a fleet leases with a firm that offers flexible financing, it can review asset performance before the end of the lease term to determine whether to run that asset for the entire term of the original lease, exit the lease early or hang on to the equipment for longer than the original lease period.
This type of flexibility positions fleets to adapt to market changes while keeping TCO in mind. In some cases, a new technology may come out that is so superior to prior technology that the fleet would be wise to get into it as soon as possible. In other cases the next iteration of a technology may be six to 12 months on the horizon so waiting makes sense.
Leasing allows fleets to maximize their investments in technology and avoid technological and economic obsolescence by positioning them to be nimble in the market.
Frank Bussone, CTP, is vice president of Data Science and Analytics, Capital Equipment Solutions at Corcentric. He has more than 20 years’ experience in business analytics and business intelligence. In his role, Bussone works with the data associated with fleet operations in an effort to find efficient and lower cost solutions for truck fleets across the country. He earned his graduate degree from Florida Atlantic University. He is a Certified Transportation Professional designated by the National Private Truck Council. His office is in Coral Springs, FL.