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Motor Vehicle Retail Sales Installment Contract Spreadsheet - PDF

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Motor Vehicle Retail Sales Installment Contract Spreadsheet document sample

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									                        SPECIAL
                        FEATURE                                    By Ralph K.F. Stockmayer, Penske Truck Leasing




       Fleet & Distribution Outsourcing
      The Ins and Outs of Your Outsourcing Project
     P
              revious discussion focused around                                                                                                         they always are linked in the real world.
              the general nature of fleet and                 There are many details to learn
              distribution outsourcing where                                                                                                            Be sure to structure your analysis to
     some of the factors that have made it a                  when outsourcing your vehicles.                                                           anticipate the future of your business
     growing presence in the water quality
     industry and business in general were
                                                                Discover how outsourcing                                                                needs. A perfect analysis of today woudn’t
                                                                                                                                                        be very helpful. Ideally, your project should
     reviewed (WQP, April 2000). Listed were
     some basic questions that an owner or
                                                                can be the answer for you.                                                              include a computer spreadsheet or proforma
                                                                                                                                                        that will be able to show you the effects of
     manager of operations might ask himself                                                                                                            various potential levels of future activity.
     when contemplating whether outsourcing             (rentals), as needed                             availability and mileage reporting by a
     might make sense for his company. For            • Fuel Sales with volume discount                  lessor for a particular vehicle.               Gathering In-House Information
     the second installment of the discussion,                                                                                                          Depending on the level of outsourcing you
     some steps will be suggested to use in per-      ✔ Level 2 Options                                  ✔ Level 5 Option                               have selected for analysis, you now must
     forming such a process. They will include        • Installment Purchase: Available for              Contract Trucking: Provides specified          acquire information from your proprietary
                                                        truck, tractor, trailer or dolly, all or some.   number of loads/miles or freight volume        fleet operation. The accuracy of the infor-
     • setting the scope of your outsourcing          • Tire Leasing: Paid for by the mile,              and drivers at fixed rates to be directed      mation is critical for the analysis process.
       initiative,                                      usually in tenths of a cent/mile (mils).         by the shipper at will during specified        You will be choosing between continuing
     • prescribing project management                 • Driver Leasing: Can be paid for by               days and time periods. (Trucks would not       with your current in-house operation or
       guidelines,                                      the mile, the hour or a custom                   necessarily be dedicated to one shipper at     committing to an outsourced provider.
     • gathering in-house information,                  formula. Be careful to check liability           all times.) Also called Volume Tender.
     • conducting a competitive bidding                 and property damage insurance                                                                   First, acquire the vehicle operating data
       process,                                         coverage by lessor.                              ✔ Level 6 Option                               to include number of units, hours/miles of
     • performing an analysis of ownership            • Dock-Worker/Stevedore Leasing:                   Dedicated Contract Trucking: Includes          annual operation, hours the vehicle must
       vs. outside alternatives and                     Fully-burdened part-time or casual               all of Level 5 directed by carrier’s           be operational and periods of non-use.
     • making the decision and designing an             labor, usually paid for by the hour.             dispatch control, and equipment is             Find your vehicle specifications/designs
       implementation plan.                                                                              dedicated to the one shipper’s account:        and some recent capital costs for acquisition
                                                      ✔ Level 3 Options                                  specified and purchased/leased for that        as well as trade in or disposal recovery for
     If you follow these steps, you should be         • Vehicle Finance Lease (Closed End or             account, not useable by other shippers.        sale of old vehicles.
     able to manage the process through to              Walk-Away): Fixed rate with no
     win-win results for your company and               obligation at termination (but with              ✔ Level 7 Option                               Next, get your current cost/expense data.
     your fleet and distribution partner.               strict operating mileage limits and              Contract Logistics: Includes all of Level 6    The analysis of performance and cost is
                                                        penalties for excessive mileage and              controlled by the contractor on behalf of      always difficult to perform and, often,
     Define the Scope of the Project                    vehicle mechanical/appearance                    the shipper, but might include shipping,       certain cost components are ignored or
     Decide which areas and depth of fleet and          conditions), and conservative                    warehousing, inventory control, information    under-counted. The manner in which indi-
     distribution outsourcing initially make            (understated) residual values.                   processing, financial management and           vidual businesses account for their assets
     sense for your current operation. Consider       • TRAC (Terminal Rental Adjustment                 delivery, on-site installations, etc.          and expenses is highly variable, and the
     your perceived operational strengths and           Clause) Lease (Open End): Vehicle                                                               chart of accounts of one firm may not be
     weaknesses, both in operational service            lease with an estimated residual value           Project Management Guidelines                  easily translateable to another. Regardless,
     level and cost performance. Establish the          as close to fair market value as                 Consider the sensitivity of an outsourcing     the process must be approached in a
     improvement goals and objectives you               possible. At end of lease, vehicle is            decision process and insist on as much         comprehensive and rigorous manner so
     would like to achieve as a result of the           sold. Any amount above residual                  confidentiality as you feel is justified. In   that true relative value can be established.
     process. The choices range from simple             returned to lessee. Any amount below             some cases, off-site meeting locations         The following is a list of cost components of
     purchasing of fuel at a retail site up to a        residual to be paid by lessee to lessor.         might be appropriate. You don’t want to        the fleet, transportation and distribution
     complete supply chain logistics management       • Contract Maintenance: Includes a                 indirectly threaten the job security of        environment. Use it as a checklist to
     package. You have a wide range of choices          variety of different methods, which              those employees who might be affected by       verify that the various cost components of
     to make, and you must define the boundaries        include guaranteed programs with                 an outsourcing move untilyou’ve made           your operation are accounted for.
     of the project at the beginning of the process     fixed rates, modified guaranteed                 the decision and you’ve developed a plan
     or you will not be able to perform a proper        programs with some components not                for their employment transition.               ✔ Management, supervisory and
     analysis at the conclusion of your effort.         covered in the guarantee or pegged                                                                clerical/technical staff costs. Salaries
     The range of choices might be as follows.          rates (both parties set an estimated             Select a project team. In small                  and wages, employment taxes, employee
                                                        “peg” rate, then agree on a periodic             companies, such a team might be made up          benefits, business expenses/travel,
     ✔ Level 1 Options                                  basis to pay more or receive credit to           of the owner and his accountant. In larger       automobiles and utility vehicles
     • Licensing and Permitting                         adjust actual costs vs. the peg                  firms, it could include the vice president       supporting the offices.
       (legalization)                                   estimate) or simple sales and service            of operations, controller and human
     • Preventive Maintenance and Minor                 (burdened labor rate and marked-up               resources manager, but it should be as         ✔ Distribution/transportation/fleet
       Repairs, as needed                               parts and materials).                            inter-disciplinary as possible without           management facility costs.
     • Major Vehicle Repairs, as needed                                                                  compromising confidentiality.                    Rent/depreciation, taxes on buildings
       (i.e., engine rebuild, frame work,             ✔ Level 4 Option                                                                                    and properties, utilities on building
       body work, painting, etc.)                     Full Service Leasing: Includes vehicle             Set a finite time frame and specific goals       and property, maintenance of building
     • Road Service, as needed (emergency             acquisition/disposal, financing, all               for the process. Establish your expectations     and properties, facility services, service
       response, tire repair)                         maintenance and repair, emergency                  for the team to understand at the outset of      vehicles, insurance/liability/risk.
     • Environment Cleanup Response                   services, spare vehicle replacement,               the process. Establish quantitative and        ✔ Driver labor costs. Wages and
     • Replacement or Additional Vehicles             safety programs, all legalization, fuel            qualitative goals simultaneously, because        benefits; indirect labor costs; employee


24        Water Quality Products                                                               www.waterinfocenter.com                                                               March 2001
                                                                                                  constant cost of capital and expense        demand a written document. Allow a
                                                                                                  over the true projection of the life of     reasonable period for questions and
                                                                                                  the asset(s), (i.e., a Discounted Cash      answers and be accessible for additional
                                                                                                  Flow (DCF) analysis.)                       questions from the bidders as they might
                                                                                                                                              come up. Set a specific date and time for
                                                                                               ✔ Effective tax rate. Be sure to consider      the deadline for bid submittal. You may
                                                                                                 the tax implications of inside vs. outside   wish to visit the company’s facilities, and
                                                                                                 alternatives. Individual cost and invest-    you should request a list of current
                                                                                                 ment components of either alternative        customer references for whom similar
                                                                                                 have different tax consequences that         services are being performed.
                                                                                                 will affect the economics of the decision.
                                                    the pure out-of-pocket costs of the          Alternative Minimum Tax (AMT) and            Performing Your Analysis
                                                    repairs involved. Consider that each         Modified Accelerated Cost Recovery           Use an interdisciplinary team to review the
   benefits/ labor burden; maintenance              breakdown has a service cost to you          System (MACRS) must be considered.           submitted bids. Assemble the materials you
   of DOT-required files and                        and you customers. Poor service                                                           have developed and create a matrix for
   documentation; administrative costs;             eventually can lead to lost accounts       ✔ Consumer Price Index (CPI)                   comparison. Establish your current and
   hiring, training, education and                  and revenue. Your potential new              Applicability. Verify the contractual        future in-house performance levels and
   employee turnover; direct cost of                customer’s perception of the condition       obligations for CPI applicability to any     costs as your baseline, making allowances
   hiring new employees; training of new            of your fleet, if poor, may prevent you      negotiated rates. Conversely, be             for expected changes in the future.
   employees; re-training and continuing            from gaining new business as well.           realistic about the effects of anticipated
   education of existing employees, direct                                                       inflation upon any proprietary operation     Compare the services and rates submitted
   costs, downtime, termination of               ✔ Shuttle/hiking costs. Which costs must        being compared.                              by each competitor for best value. Be sure
   existing employees; cost to document;           be incurred for getting the fleet                                                          not to confuse true long-term value for
   potential liability and replacement             equipment from where it is normally         ✔ Return on assets (ROI) measurement.          lowest commodity price. Consider the
   requirement; liability exposure; motor          domiciled to where it must be serviced        In ownership, vehicles are reflected as      proximity of facilities and the remote
   vehicle accidents;                              or repaired? Determine the distance           assets on the balance sheet. The more        service/emergency response and support
   and supplies and equipment.                     and time, frequency and burdened              owned vehicles, the lower the ROI.           capabilities each vendor presents. Assess
                                                   labor cost. Identify who will incur this      Many investors consider ROI to be a          each bidder’s experience and core compe-
✔ Vehicle Costs. Acquisition costs, vehicle        cost—the operator or maintenance              major factor in assessing the relative       tencies in light of what you require from
  financing costs, legalization, vehicle in-       provider. If service is provided on site      value of a company.                          him. Call or visit with the bidder to clarify
  service costs, vehicle disposal, residual        by a mobile unit, what is the upcharge                                                     any ambiguity, omission or other question
  obligation, if any, and vehicle lease costs.     for this service?                           Conducting a Competitive Bid for Your          regarding the bid that you may have.
                                                                                               Fleet/Distribution Business
✔ Vehicle Fueling Costs. Fuel cost               ✔ Value of alternative use of facility and    From the in-house analysis of your             Finally, compare the best of the outside
  including all taxes, fueling labor, fuel         contiguous property. Many                   operation, you can put together a              bids with your in-house assessment.
  inventory cost (cost of money), fuel             individuals ignore or under-value the       description of what you might need from        Be sure to place a value on various
  consumption rates, tank and pump costs,          alternative uses for which their fleet      an outsourced supplier. Whether you put        intangible components of each case
  and liability for any spill or leakage.          facilities might otherwise be used if not   together a simple one-page description of      and make your decision. If you decide
                                                   occupied and used as a vehicle service      the operation along with some operating        to select an outsourced proposal,
✔ Vehicle Maintenance Costs.                       operation. Interests within or without      statistics or you create a full-blown and      inform the winner and the unsuccessful
  Preventive maintenance services, labor           the firm may see the property in an         detailed request for proposal (RFP)            bidders in writing as a courtesy. If you
  hours for each service (fully burdened),         entirely different higher and best use      package, you will be asking potential          should decide to remain with your
  parts and supplies, space in your                if the availability of the property         suppliers to bid on your business as           proprietary operation, you also should
  facilities, vehicle downtime for service,        were considered.                            defined by this document. Ideally, you         inform the bidders in writing of
  tires (include cost of replacement rims                                                      will receive responses that allow you to       your decision.
  and wheel weights, recap recovery              ✔ Substitute vehicle costs. One doesn’t       compare apples to apples. In each case,
  rates), road service expenses (include           always require a replacement vehicle        share the detailed truth of your operation,    Implementing an Outsourced Fleet
  time, labor and mileage for service              when maintenance or repairs deadline        but you can insist on confidentiality.         or Distribution Partnership
  vehicle), add-oil, other fluids and              a vehicle, but when a replacement is                                                       If you have decided to make a commitment
  supplies, powertrain adjustments/                required, the cost is significant, not      There are many firms that would like to        to an outsourced partner, sit down with
  repairs, major components (cost                  only for the vehicle itself but for the     do business with you. If you look in the       the sales and operating representatives
  and expected life), federal and state            logistics/hiking to get it to where it is   Yellow Pages, you’ll find thousands of         of the firm and review the contract(s)
  inspections, towing/road service,                needed. Additional spare vehicles, even     companies involved with vehicle main-          and various obligations of the parties.
  and vehicle washing.                             though completely depreciated, are not      tenance and repair services and hundreds       Establish a reasonable implementation
✔ Internal Shop Costs.                             free but require maintenance, insurance     who want to sell or lease vehicles to you.     timeline and establish responsibilities.
                                                   and legalization. Such typically older      Clearly, you cannot speak to all of them.      Don’t set a schedule that is beyond either
✔ Tools and equipment.                             vehicles also perform with poorer fuel      Use judgement in selecting those firms you     party’s ability to meet. Include a reasonable
                                                   economy and longer trip times.              might like to ask to participate in your bid   cushion for unanticipated events.
✔ Cost and maintenance of office                                                               based on local word-of-mouth reputation,       Further, recommendations including
  equipment.                                     ✔ The cost of invested money. A               trade press materials, references in your      the following.
                                                   company may have a more attractive          personal business community or the
✔ Direct Shop Facility Costs. Depreciation         opportunity to use the capital funds        Better Business Bureau. If you currently       • Describe the disposition of all
    or rent, taxes, utilities, building main-      that may be tied up in the value of fleet   have a favorable business relationship           vehicles, facilities, personnel,
    tenance, service vehicle(s), uniforms,         equipment and facilities currently          with a fleet service or truck rental firm,       equipment and supplies. Identify all
    shop towels, rugs, shop supplies, disposal     associated with proprietary fleet           you might invite them to bid for a higher        new or used equipment that will be
    costs (non-hazardous and hazardous),           ownership, operation and repair. The        echelon service. In any case, select no          brought in, and verify specifications
    recovery of funds from sale of scrap.          return on such invested assets may be       more than three or four competitors              and availability. Be very sensitive to
In addition, you should consider the               superior, and more in keeping with the      for your bid.                                    any unresolved hazardous materials
following costs and opportunity costs.             firm’s core competency and essential                                                         liabilities in your existing facilities.
                                                   value-added. A given bank line of           You can present your bid individually or       • Define the logistics of the relationship
✔ The cost of downtime. When your                  credit amount will be available for use     in a group, but be sure to provide the           (i.e., where will thevehicle(s) be parked,
  vehicle cannot perform its intended              in greater profit-producing applications.   same access of information to all bidders.       serviced, fueled, etc.). Who is responsible
  delivery and service function, the cost          Also, be sure to use a Net Present          You either may accept a verbal commitment        for their movement in these processes?
  of downtime often is far greater than            Value process to evaluate the real and      for confidentiality of the process or          • Identify the key personnel from each


March 2001                                                          www.waterinfocenter.com                                                           Water Quality Products                  25
       party who will make the process         • Define the procedures to be followed      quality products and services. That’s       prospective customers and control fleet
       function, and who will be responsible     in the event that there is a problem      your reason for being in business, and      costs. You owe it to your business future
       for essential communications and          that cannot be resolved by the key        you’ve sustained your business by           to take a serious look.
       adapting the process during start-up      personnel from each party. Who is the     doing it better and smarter each year.
       and thereafter.                           individual from each party that can be    You’re not too interested in trucks or      About the Author
     • Discuss the quality management            approached for the appeal process.        transportation—it’s a necessary evil. But   Ralph K.F. Stockmayer is the industry
                                                                                                                                       development manager for baking and
       processes that will be employed for     • Agree on a schedule and method            consider that virtually everything you do   snack foods at Penske Truck Leasing in
       continuous improvement of the             to inform all interested parties in       requires a truck. A truck that can carry    Reading, Pa. He handles the coordination
       relationship and service performance.     each company as to the outsourced         the product or deliver the service,         of the company’s sales efforts and unique
     • Establish key performance indicators      decision and any transitions that         efficiently and dependably. Take stock      product developments in these business
       that will be used to measure the          will be accomplished.                     of how well your trucks perform for you     sectors. He also is a certified as a tr-
                                                                                                                                       ansportation professional by the National
       partnership status and expected                                                     and at what cost. Consider outsourced       Private Truck Council.
       improvements throughout the             Conclusion                                  fleet and distribution alternatives as an
       relationship. Agree on the frequency    You’ve got a business to run. And it’s a    opportunity to improve service to your      For more information on this subject,
       and distribution of them.               business that serves customers with water   customers, enhance your fleet image to      write in 1017 on the reader service card.




26       Water Quality Products                                                    www.waterinfocenter.com                                                        March 2001

								
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