Effective Equipment Management Is Critical To Profitability

Successful Construction Companies Use Business Management Software to Manage Equipment and Ultimately Reduce Expenses, Improve Utilization, and Minimize Downtime.

Effectively managing heavy equipment can make the difference between a profitable company and an unprofitable one. Successful construction companies are always looking for ways to increase profits, reduce maintenance and operating expenses, optimize utilization, and minimize downtime. This can be achieved through better equipment asset management.

Equipment Asset Management provides information to make decisions about rebuilding or replacing machines, balancing fleet average age, and adjusting fleet size and composition to meet changing company demands. In practical terms, this means getting as much production as possible from the equipment, at the lowest per hour cost, over the longest period of time, while obtaining the highest sales value at the end of life. This is achieved through the use of business management software to effectively manage equipment.

The equipment asset in a heavy construction company accounts for about one-third of total corporate assets, and the cost of owning and operating the fleet is frequently larger than any other expense. This makes it the largest expense in a construction project, more than labor and materials costs. This makes effectively managing heavy equipment even a more critical factor for project profitability. Equipment must be at the right place at the right time; it must achieve stated levels of reliability and uptime; and total owning and operating costs must be kept to a minimum, thereby giving the contractor a competitive advantage.

Common Challenges Before Using Software for Equipment Management

Prior to adopting software, most companies do not know what the hourly cost of a piece of equipment charged to a job really is. Therefore, they do not know if they are recapturing the cost of each individual equipment piece, which makes it difficult to make well-informed business decisions about investing in software to manage that aspect of the business.

Very small companies with only a few pieces of equipment might be able to get away with not knowing their equipment cost, fuel cost, and utilization information. But as a company grows, they have to use the best practices available to ensure they make money. One of the problems is that a job may be showing a profit due to incorrect equipment costing and rates, but this can negatively impact the bottom line.

Typically, companies that can benefit from the use of equipment management capabilities of business management software share similar conditions. These often include:

– Do not know if an individual piece of equipment is profitable or not and lack information to make repair-replace decisions.

– If software is being used to manage equipment, it’s not integrated with job cost information or the accounting system.

– There is no preventive maintenance scheduling or it is done manually.

– No ability to track parts inventory.

– Do not create purchase orders or they are written by hand, which inhibits workflow and accuracy of procurement, scheduling, A/P, and A/R.

– No tracking of utilization or equipment hours.

– It takes much time and effort to product reports for owners because it requires gathering information from various places and then more analysis to tabulate what’s needed. Equipment rates are set for a machine based on someone else’s price.

– Projects are charged the same no matter which equipment is used or brought to the job.

– Don’t track fuel used or burn rates for equipment or per projects.

Benefits of Using Software to Manage Equipment

Construction business owners interested in improving profitability by using software for better equipment management can anticipate positive improvements in a variety of areas. When evaluating software options, consider and compare these capabilities that your solution should include for optimum benefit:

Equipment Utilization

Nothing impacts the economics of equipment ownership more than utilization. The number of hours a machine works in a year determines the rate at which fixed annual costs are recovered. Underutilized equipment does not have costs accurately reflected in Job Cost while greater utilization increases revenue.

Invest in software that continually monitors the utilization of each piece of equipment and puts the equipment manager in a position to measure the impact of low utilization and to develop strategies to control and correct it.

Equipment Downtime

Equipment downtime is one of the most significant problems faced by construction companies that specialize in heavy and highway jobs. When a piece of equipment unexpectedly breaks down, not only is the project schedule disrupted and costing money, but multiple employees’ schedules are interrupted since everyone is in crisis mode. The company has to scramble to get mechanics on the job site and get parts delivered to fix the breakdown. An unexpected repair is much more expensive to perform than to monitor and schedule maintenance.

Identifying and predicting necessary maintenance is critically important for any equipment software solution. Invest in software that will provide the equipment manager with information to predict repairs, which helps avoid equipment breakdown and thus saves cost and ensures reliability.

Repair – Replace – Rebuild

The process of reviewing the equipment fleet; deciding which units to sell, replace, or rebuild; and developing a capital expenditure plan are the most important tasks an equipment manager performs. Frequently it takes days to gather the required information (from multiple places) to make decisions about Accounts Payable, Finance, Payroll, and so on.

Invest in software that automatically synchronizes the operational, financial, and mechanical history of each piece of equipment and makes the data easily available in one place, with the ability to drill down to the lowest level of detail. You will be confident that the information is always up-to-date and at the equipment manager’s fingertips, allowing intelligent and timely decisions.

Preventive Maintenance

Some companies view preventive maintenance as an investment as opposed to a cost. Effective preventive maintenance improves reliability and reduces future repair costs.

Be sure that your software choice includes preventive maintenance scheduling and you’ll be equipped to improve quality and consistency on every job.

Warranty Tracking

Many times a mechanic will unknowingly replace or repair a part that is still under warranty. Today’s software helps you track parts under warranty, which allows you to recoup repair costs and not spend money unnecessarily.

Fuel Tracking

The ability to analyze equipment fuel use can reduce fuel losses, resulting in major savings. This equipment management feature should be a component of your business management software.

Improve Profitability With Better Equipment Management

In conclusion, effective equipment management can dramatically improve the profitability of any construction company. With the increasingly competitive business environment, contractors must look at every opportunity to reduce expenses, optimize utilization, and minimize downtime. Software for equipment management has proven to be a valuable tool that can make the difference between being a profitable business or taking a hard financial loss.