Read the article in Construction Today magazine - Vol. 17, Issue 4A (July 2019)
Technology drives contractors to hold onto more revenue
by driving supervisors to hold onto less equipment
Product Manager - B2W Software
The old saying ‘possession is nine tenths of the law’ is evident on many heavy construction jobsites, where the practice known as equipment hoarding threatens profitability. Owning or renting more assets is one solution, but construction fleet management technology is a better one, allowing contractors to schedule more effectively and minimize idle equipment.
1-MINUTE VIDEO: Take a humorous look at the serious threat posed by equipment hoarding.
A costly problem
Construction equipment either earns money or costs money, and the stakes are high. When billing rates are accurate and utilization targets are met, owning and operating a piece of equipment should be profitable.
Hoarding, or keeping idle equipment on a jobsite unnecessarily in case it may be needed, undermines that profit potential. The direct impact of not hitting planned production hours is only part of the threat. To compensate, contractors often own more equipment than they actually need. Renting to meet requirements for one site when the same asset is idle at another site is also an all-to-common and costly trap almost every contractor has fallen into.
A company with a supervisor that answers ‘yes’ automatically when asked if a dozer is still needed on his project could spend $50,000 to rent another one for a separate six month-project. Knowing whether the owned asset is actually being used without having to ask the supervisor, might allow the company to cut that rental cost in half and drive $25,000 to the bottom line. The potential to save is multiplied by the number of assets being held by chronic hoarders across jobsites.
Causes of equipment hoarding are practical and linked to perspectives and incentives that may not always align across workflows. Construction executives are focused on the overall profitability of their combined portfolio of projects. Those executive, along with the schedulers and dispatchers in the office, know that optimizing equipment across jobsites is critical and that idle assets are a financial liability.
The primary incentive for jobsite supervisors, however, is to keep projects running on schedule. Having the right equipment on standby at all times serves that goal. From their point of view, retaining equipment “just in case” may seem like a smart insurance policy against the risk of delays or work stoppages due to not having what they need when they need it. This also allows them to avoid the administrative headaches and potential delays in getting a piece of equipment back once they let it go to another site.
Accounting practices play a role too. Many contractors do not cost equipment ownership and maintenance expenses to their jobs. This limits their ability to assess the true profitability of those jobs and it can take away some of the incentive for supervisors to utilize equipment as efficiently as possible.
A software solution
Specialized software for maintenance management, scheduling and dispatching, and field tracking plays an important role in preventing hoarding, especially when the solutions are unified. Real-time visibility and reliable data are the big advantages.
Knowing where equipment actually is at a given point in time may seem like a no brainer, but it can be a challenge for companies managing sizable fleets with paper based processes or offline spreadsheets and whiteboards.
Software solutions can collect and aggregate data from that fleet, providing not only enterprise-wide visibility into where assets are, but also an accurate picture of how much each piece of equipment is being used on a daily basis. The data can flow directly from GPS and telematics devices. Hours of operation can also come into the maintenance software from daily field logs completed with the field tracking software to supplement or validate telematics data.
Contractors could try to track this information down through the individual GPS or telematics systems or by manually pulling it from the field logs into a reporting structure, but software automates the process and makes the information available in one place and in real time.
With accurate data, executives, project managers, schedulers and equipment managers are no longer dependent on outdated spreadsheets or overlapping phone calls and text messages to determine where a piece of equipment is and whether it is necessary on a site. Instead, they can make more informed, cost-effective decisions about deployment.
Software delivers one additional way to prevent equipment hoarding, providing current and historical data necessary to cost construction equipment to jobs. Without it, contractors struggle to determine the maintenance costs and therefore the rates to charge for each individual piece of equipment. As a result, they often resort to averaging those costs across jobs or charging them to a central maintenance account. Those methods may be easier, from an accounting perspective, but they do little to encourage supervisors to release equipment they may not need.