If you ever felt that you are not getting your just returns despite putting significant effort into your work, you are not alone! In fact, this phenomenon, called the Pareto Principle, emphasizes that nothing is evenly distributed. This was never more clear than during the COVID-19 pandemic, where seemingly minor supply chain delays led to global shortages of essential goods. For example, according to Lloyd’s list data, the seemingly minor disruption of the Suez Canal blockage in 2021 cost about 12% of worldwide trade and slowed trade worth more than $9 billion per day. This translates to $400 million in business per hour or $6.7 million per minute!
Clearly, the Pareto Principle or the 80/20 Principle is a powerful method for fleet owners and operators to identify imbalances in their systems and processes and rectify them. This article looks at how the 80/20 principle is important for fleets and trucking companies.
The story behind the Pareto Principle or the 80/20 Rule
The term was coined by Italian economist Vilfredo Pareto, who noticed in the late 1800s that around 80% of the land in his home country was owned by 20% of the people. Further investigation revealed that this rule was also applicable in many other countries. When it became clear that Pareto’s principle was a smart way to analyze business results and figure out where to focus priorities, it was popularized and adapted for the business world in the 1940s.
What is the 80/20 Principle?
According to the Pareto Principle, around 20% of any process is responsible for 80% of the results. In manufacturing, for example, it is said that about 20% of the defects in a product are responsible for about 80% of the problems. Simply put, the 80/20 Principle states that 80% of the impact can be attributed to 20% of the causes.
Similarly, for fleets, 20% of defects in vehicles, processes, or systems, could be responsible for 80% of problems like delays, idling, downtime, dwell time, accidents, and more.
How does the 80/20 Rule apply to fleets?
The Pareto Principle can help fleet owners figure out problem areas in their business. For instance, if fleet owners dedicate 80% of their allocated budgets and time to preventive maintenance, they may experience unexpected failures only 20% of the time. Likewise, spending 20% more on OEM (original equipment from the manufacturer) replacement parts may result in an 80% reduction in complications. The Pareto Principle can also be applied to driver behavior. It is commonly known that 80% of accidents, for example, are caused by 20% of the same drivers.
How does the 80/20 Principle apply to fleet maintenance?
The 80/20 Principle, when applied to fleet maintenance, states that 80% of equipment breakdowns are caused by 20% of the possible faults. Furthermore, just 20% of your maintenance effort can result in an 80% reduction in your vehicle’s operating costs. This means that not all maintenance tasks are created equal. It also means that significant improvements in machine reliability and cost savings are simple to achieve if you understand your fleet requirements well.
What problem areas can fleet owners analyze and address using the Pareto Principle?
There is a delicate balance in all the processes and operations of your fleet that you need to study thoroughly to understand possible problem areas. Here are a few aspects you can look at:
1. Preventive Maintenance:
As previously stated, preventive and reactive maintenance work in tandem. Being reactive will force you to be proactive. As a result, devoting more time (80%) to preventive maintenance may result in a 20% reduction in reactive maintenance.
2. Outsourcing Maintenance:
Another excellent example is outsourcing maintenance. Handing off 20% of your vehicle’s maintenance to experts could save you up to 80% on parts and equipment inventory costs.
3. Equipment Maintenance:
The Pareto Principle is at the root of equipment longevity. For example, keeping up on 80% of equipment and vehicle maintenance tasks could drive as much as 20% longer functional lifespan in vehicles.
4. Rooting out Maintenance Issues
Finally, it is critical to investigate the source of your maintenance issues. 80% of problems are likely to be caused by 20% of your fleet or equipment. Knowing this allows you to concentrate on corrective action and provide targeted service.
The 80/20 rule is widely used by industry. The numbers may not always add up to an even 80/20 split, but the premise remains the same. A Pareto chart, for example, gives business owners an idea of how different factors are impacting their fleet operations. The 80/20 rule empowers fleet owner-operators to understand the imbalance in their operations and try out corrective measures. It can be applied to various systems and processes. Small fleet operators, too, need to look for examples of this balance and work to increase their investment in the positive side of the equation.