Asset utilization in the transport sector
What can an optimal asset utilization strategy for your organization? And what does asset mean? utilization in particular for the transport sector? The transport sector faces many challenges, sustainability is one of the themes that is becoming increasingly important. In addition, cost savings are a spearhead for many organizations. Both sustainability and cost savings can be achieved by working more efficiently, as it is estimated that 40 to 60% is driven empty within the transport sector. Efficiency is achieved by using the available assets as optimally as possible, an important indicator here is asset utilization. In this insight you will be included in asset utilization and it becomes clear what this key figure can mean in concrete terms for the transport sector.
Asset utilization as KPI
asset utilization is a financial and operational key figure that are closely related. First of all, asset utilization, also known as asset turnover, used in the financial world om express how much revenue is generated for each asset (activa) That owns a company. Herebyand the income of a certain period (usually 1 year) divided by the average assets of the same period. For example, a transportation company owns several trucks from January 1, 2019 to December 31, 2019 with a total average book value of $800,000. In addition, the company owned commercial premises that year with an average book value of €200,000. The average bookvalue of the present assets in the relevant year amount to €1,000,000. The revenue of the transport company iIn 2019 there were a total of €1,500,000, the asset turnover ratio is then: €1,500,000/€1.000.000 = 1.5. An asset turnover ratio of 1.5 means that $1.5 is earned for every dollar of assets. For logistics services, we see that the asset turnover ratio is often around 1.2, while for rail traffic it is even lower with an asset turnover ratio from 0.35 (CSIMarket, 2021). The asset turnover ratio of rail traffic in particular is low, but this can be explained by the fact that things are going well for a capital-intensive sector. This brings us to the operational application of asset utilization because by making efficient use of the assets, less capital is needed, which means that the financial asset utilization ratio increases, resulting in increased profitability.
Figure 1 Example elaboration of Asset turnover
Making asset utilization measurable
The operational application of asset utilization measures the extent to which an asset is used in relation to the theoretical maximum achievable. For example, a truck is theoretically available 24 hours a day, 7 days a week available for rides week and 365 days a year. However, the maximum capacity is never fully achieved due to various reasons. Figure 1 shows which factors influence the failure to achieve the maximum capacity and thus the failure to achieve the maximum capacity asset utilization. First of all, the total available time is displayed on the left, ie 24 hours a day, 7 days a week and 365 days a year. However, this full potential is never fully exploited because an asset is never fully operational. The reason for this is that an organization is almost never in operation for the entire year because there are days off such as Christmas and New Year's Day. What remains is the time available for operational activities, which is never fully utilized because of planned downtime, for example when performing preventive maintenance or when employees have to take a break. The remaining time available for transport is then never fully achieved due to unplanned downtime as a result of malfunctions that require corrective maintenance. Furthermore, the maximum performance is often not fully achieved because performance losses occur as a result of delays or because, for example, driving is empty. Finally, quality losses occur in every process. For example, accidents, incorrect or incomplete loading and unloading or other unforeseen circumstances can lead to lower customer satisfaction.
Figure 2 Asset Utilization Operationalization
Drawing up an effective asset utilization strategy
asset utilization offers the opportunity to take a critical look to the use of the assets within an organization. In figure 2 it became clear what asset utilization can mean for the transport sector and which buttons can be turned to achieve higher efficiency and thus more profitability. An asset utilization strategy can be drawn up on the basis of the various factors. An effective asset utilization strategy is drawn up on the basis of three topics, namely the optimizing the journeys, the optimizing maintenance and investing to safety.
- Optimizing the journeys. Optimizing the trips ensures that the available time like this efficient possible can be used. In order to optimize the journeys, for example, a planning system can be used that takes into account factors such as loading and unloading times, employee breaks, the total payload and minimizing empty runs. In addition to cost savings, optimization also ensures sustainability. By working more efficiently, the same goal can be achieved with fewer resources, which means that the environment is less burdened.
- Optimizing maintenance. When optimizing researchIt is important that maintenance takes place as preventive as possible and as little corrective as possible. Predictive maintenance offers a solution to carry out maintenance as preventively as possible. Supply Value recently has a white paper written about with an eight-step plan to implement predictive maintenance. By predicting maintenance as much as possible, the percentage of unplanned downtime decreases, which increases asset utilization. Optimizing maintenance also ensures that the assets are treated sustainably. By maintaining assets in a timely manner, the lifespan extended resulting in cost savings.
- Investing in safety. Accidents regularly occur within the transport sector with major consequences for the asset utilization. In 2019, 17 trucks were involved in an accident or broke down every day, as a result of which the delivery of goods cannot take place or is delayed (STIMVA, 2019). To prevent this, it is important that employees are well-rested behind the wheel and have the correct knowledge to drive a vehicle. In addition, well-maintained assets also contribute to a safe working environment that prevents accidents. Investing in safety on the one hand leads to more satisfied customers because goods are delivered on time, and on the other hand, cost savings can be achieved throughWhich the number of accidents is reduced.
This insight makes clear what asset utilization means for the transport sector and the opportunities that exist to more efficient make use of the assets resulting in cost savings. Do you have anyiDo you still have questions about this insight? Or do you want to know what asset utilization can mean for your organization? Please contact one of our expert consultants.
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