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43 For enterprises located in or near business centers, with established services available in the market, outsourcing deci- sions for noncore activities or processes may not be simple, but they usually involve straightforward considerations. Eco- nomics almost always plays a major role, along with perform- ance and quality management. Maintenance of state DOT fleets and equipment presents certain unique challenges that require outsourcing decisions to address additional and more complicated considerations. The maintenance facilities are usually deployed throughout all parts of the state (urban/suburban and rural). The vehicle and equipment fleets usually have similar basic components (light- and medium-duty trucks) and a variety of specialized light and heavy equipment, depending on the operational requirements in each area. Although the array of equipment is generally sim- ilar, the fleet mix varies according to work requirements and seasonal needs in each operating area. For specialized equip- ment that requires specialized maintenance capability, or for specialized repairs to the general fleet, scale economies are often an issue for in-house shop operations. The DOTsâ light-duty vehicles are used more often as plat- forms for work projects, supervision, or dispensing of tools and material. They are inactive for significant periods during day- to-day operations and tend to accumulate low mileage, yet they must be available when needed. In emergencies (e.g., snow), there is an urgent need to mobilize all available medium- and heavy-duty vehicles and equipment. For DOT fleet operators, concerns over vehicle and equipment availability and the pat- tern of needed use are important considerations when making outsourcing decisions. For vehicles that are interchangeable and for equipment for which operation can be reliably sched- uled, there may be less inherent concern or risk connected with outsourcing. However, for vehicles and equipment that can be in high demand at short notice, outsourcing maintenance work off-site is perceived to increase operations risk. This research report presents a practical, logical, and trans- parent framework for conducting systematic analysis and making decisions on outsourcing and privatization of vehi- cle and equipment fleet maintenance. The framework was designed to be flexible and scalable to address a full range of outsourcing decision alternatives, from outsourcing a single type of repair for a single vehicle on case-by-case and day-to-day bases at a particular location, to outsourcing all maintenance functions of the entire fleet at a particular loca- tion, to outsourcing all functions in all operating centers statewide. To ensure that the framework is widely acceptable and applicable across diverse assets and maintenance services, a commonly accepted typology of equipment type and mainte- nance types was defined. The seven equipment types proposed were developed with consideration given to the physical char- acteristics and gross vehicle weight of the fleet and equipment. The six maintenance types were developed with the intent of grouping like activities together and representing the common fleet maintenance and repair activities experienced by the state DOTs. A core three-dimensional decision variable that will serve as a common denominator to construct all possible out- sourcing alternatives was also defined. This three-dimensional decision variable takes into consideration three variable fac- tors: a particular equipment or equipment class, maintenance type, and organizational unit. This decision variable allows for systematically expressing the possible alternatives that are considered for outsourcing. To allow for a consistent platform for evaluating the insourcing and outsourcing performance, commonly used performance indicators or metrics in the fleet industry were also proposed. The outsourcing decision framework is presented as a step- by-step process flow with a description of each decision point, logical sequences, evaluation criteria, and necessary data com- putation. There are five processes in the decision framework. In Process 1, a set of internal and external conditions is eval- uated to decide on a set of potentially feasible and practical out- sourcing targets/scopes for further evaluation. In Process 2, the workload for outsourcing candidates is evaluated against C H A P T E R 6 Summary
the internal capabilities of the shop, characterized by staffing levels, staff skills and knowledge, and adequacy of the available infrastructure. In Process 3, the available external vendors are evaluated with respect to their service capabilities, service quality, and cost. Any outsourcing alternative must be able to demonstrate its cost-effectiveness and acceptance perform- ance compared to in-house alternatives, which Process 4 eval- uates. Finally, in Process 5 the results of the outsourcing eval- uation are assembled for managers to systematically evaluate, organize, and finalize the outsourcing decisions on fleet main- tenance operations. This research report also presents two case studies that demonstrate the practical application of the decision frame- work. In the case studies, tables and templates are used to conduct and document the outsourcing analysis and organize the results. The aim of the framework presented here is to guide the deci- sion maker through a series of logical and rational decision- making steps. The framework was designed to be highly flexi- ble to allow the decision maker to adapt the process depending on the scope and context of the outsourcing evaluation with- out affecting the integrity of the decision logic. It is highly recommended that before executing this outsourcing analy- sis, the state DOTâs management set the overall direction for making outsourcing decisions within the context of the orga- nizationâs strategic goals. 44
