Organizations with transportation fleets have adjusted to a new normal where change and uncertainty have defined everything from the broader economy and operational costs to the political and regulatory environments. This was certainly true with the relaxing of the California Air Resources Board mandate, specifically the Advanced Clean Fleet regulation, which would have required these organizations to gradually add zero-emission vehicles to their fleets.
Today’s need for tariff readiness
With the new global tariffs heavily dominating the headlines, these organizations must stay informed and agile to adapt to the uncertainty around the shifting microeconomic changes, constantly revising financial forecasts and procurement strategies. Effective financial planning involves weighing immediate costs against long-term savings driven by accurate data analytics that balances long-term planning with short-term adjustments.
Strategic flexibility is a boardroom initiative today, allowing organizations to pivot quickly in response to new tariff information or market shifts and maintain operational efficiency. The decisions made today could end up saving or costing these organizations millions in the short term.
Prior to the implementation of tariffs and the changes in CARB regulations, many of these organizations were already operating without a long-term procurement strategy.
In a recent survey presented to 3,000 transportation fleet executives, 71% said they’re currently operating trucks more than five years old. When asked how many trucks in their fleet are model year 2019 or older, more than half (62%) said as many as 50 trucks in their fleet fall into this “higher aged” category.
Even though the majority say they are running a five-year-or-more life cycle, 68% also admit they feel it is necessary to replace as much as 50% of their fleet over the next two to three years, which means they are now looking to shorten their life cycle. When asked what percent of their fleet they are actually planning to replace, approximately three-fourths of respondents said they actually plan to replace as much as half of their fleet over the next two to three years.
While 36% said they had a prebuy procurement plan in place due to the mandates, nearly half (64%) said they either do not have a plan or are unsure if their organization has a plan. Even with CARB now relaxed, this is an alarming revelation that illustrates many fleets are unprepared and could face dire financial consequences in the coming years, regardless of the environmental or legislative environment shaping the industry.
Before the recent rollback of CARB, most of the discussion centered on what the rush to procurement would do for equipment costs. These concerns are growing even now over the possibility of tariffs. According to the American Trucking Associations, a 25% tariff levied on Mexico could see the price of a new tractor increase by as much as $35,000. That is cost-prohibitive for many small carriers, and for larger fleets, it would add tens of millions of dollars in annual operating costs. The potential for these types of costs further underscores the necessity of having a strategic procurement plan.
Where does a multiyear procurement plan fit in? Why five years?
A strategic five-year procurement plan acts as a guide for executives, directing all aspects of equipment acquisition, maintenance, replacement, and lease surrender/remarketing. It allows organizations to anticipate and prepare for future needs, technological advancements, and additional regulatory changes. By taking a long-term view, these companies can optimize their fleet makeup, reduce operational costs, and enhance overall performance.
One of the primary benefits of a strategic five-year procurement plan is its ability to align fleet operations with broader financial and organizational goals. “Supply chain leaders will need to remain agile to adapt to fluctuating prices and changing demand,” Jenna Slagle, senior data analyst at Project44, said prior to the tariffs taking effect.
Ensuring alignment means that every vehicle acquisition supports the company's goals, whether it's boosting sustainability, enhancing customer service, or increasing profitability.
See also: ACT says Trump trade policies create 45% chance of recession
Planning for the right financial outcomes
Incorporating financial planning into a long-term procurement strategy is essential. By anticipating fleet needs over a five-year period, organizations can optimize capital spending and mitigate unexpected financial pressures. This approach allows for more accurate budgeting and can help secure favorable financing terms. Moreover, a comprehensive total cost of ownership analysis for each vehicle type enables companies to make informed decisions that balance upfront costs with long-term operational expenses.
Furthermore, a five-year plan equips organizations with the ability to adjust as needed, acknowledging that mandates, regulations, customer portfolios, and financial targets will shift over time. Having a plan in place allows these companies to make modifications, both big and small, paving the way toward increased business agility.
This type of long-range planning also allows finance professionals to align with their fleet operations teams and review their procurement strategy and finance options more frequently. The following are key financial metrics that should be taken into consideration:
- Lease vs buy
- Sales tax analysis
- Lease type analysis (FSL vs. UBL, TRAC, FMV, etc.)
- Comparative cost analysis to determine the optimal time to upgrade equipment
- Diesel vs. EV comparative cost analysis
- Per unit P&L
- OEM equipment cost tracking
- SWAP rates
- Residual values
Building a five-year plan starts with an asset management partner conducting a thorough fleet assessment, identifying areas for improvement, and setting clear objectives such as reducing costs and improving fuel efficiency. A holistic modernization plan, including a fleet list with vehicle in-service and out-of-service dates, determines the optimal number and type of vehicles needed, aligning procurement strategy with business goals. Developing a strategic timeline with key milestones is essential, and organizations must monitor regulatory changes to avoid significant cost increases.
It's important to monitor upcoming and any additional regulatory changes to Environmental Protection Agency regulations, which may lead to extra cost increases for new trucks. Planning for a potential “rush” on certain types of high-demand units can help organizations avoid higher costs. This proactive approach ensures that organizations are well-prepared for future challenges and can manage their budgets more effectively.
Financial assessments are another important component of the procurement process. Conducting a total cost of ownership analysis, leveraging in-service dates and utilization data for each vehicle, helps organizations understand the full financial implications of their procurement decisions. This includes factors such as purchase price, fuel costs, maintenance, and depreciation.
The right asset management partner can also help establish strong relationships with reliable suppliers and OEMs to negotiate long-term contracts. A thorough lease versus purchase study can help organizations determine the right type of financing for their equipment as well as a thorough analysis of various lease types, such as full-service or unbundled leases.
Lastly, organizations should develop a clear and detailed outline of the procurement plan for stakeholders, showcasing the benefits for each internal group. Instituting a change approval process for any updates to the five-year procurement plan ensures that adjustments are thoroughly reviewed and aligned with the company's overarching goals.
Organizations would also be wise to work with their asset management partner to regularly review and update the five-year procurement plan based on market conditions and fleet performance. This approach allows organizations to adapt to changing business needs and economic conditions, ensuring the long-term success of their operations.
A five-year procurement plan will position companies to become the leaders of tomorrow as the industry continues to undergo more change and uncertainty in 2025 and beyond.
