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Construction projects are often compared to manufacturing assembly line operations—insomuch that they are nothing alike. The typical construction project has so many moving pieces being assembled in unique ways and in different locations each time that no two projects are exactly the same.

Yet, there are aspects of the construction process, such as aggregate and material hauling operations, that can be run more like an assembly line. It means looking at these operations a bit like a manufacturer would—managing repeatable processes and defined workflows. From bulldozers and backhoes in the pits to the crushing and processing machines in the plants to the haulers and trucks rolling in and out of the scale houses, equipment keeps the materials cycle moving. If any one link in this chain breaks, however, that whole cycle—and the construction projects it services—can come screeching to a halt.

Contractors’ success in keeping these operations constantly humming depends on the quality and timeliness of the data and information they have on hand. That data influences the overall health of the equipment itself to keep it moving and operating at peak efficiency. That equipment health influences both the output of the aggregate plants and pits and the fleet of material hauling trucks. Meanwhile, accurate data (quantities, weights, usage, etc.) collected on the materials themselves can have positive impact on the bottom lines of the construction projects they are being used to build.

Thankfully modern technology solutions are aiding in keeping these virtual assembly lines rolling by generating real-time data and producing critical business intelligence that allows material and equipment managers to stay on top of their machine maintenance and material costs, avoiding costly delays, equipment breakdowns, inefficient use of equipment, lost or damaged materials data and much more.

A methodology to hitting the equipment management sweet spot

The way to keep a fleet working efficiently is to find the equipment management “sweet spot.” Dr. Mike Vorster, the David H. Burrows Professor Emeritus at Virginia Tech where he has taught in the Construction Engineering and Management Program since 1986, has been a long-time advocate of contractors taking a harder look at their equipment life cycles and measuring efficiency. In his teachings, he has urged equipment managers not just to capture equipment usage and maintenance data, but to have a working plan in place and know how to put that data into context so that it drives action. Here are three key takeaways to maximizing equipment efficiency that Vorster has noted over the years:

  • Capture and understand BOTH ownership and operating cost data. Many ownership costs, such as interest, financing and lease payments are incurred every month regardless of whether a ma­chine works or not. These are considered fixed costs, or ownership costs. Others, such as de­preciation charges, overhead and indirect labor vary a little from month to month but can, for all practical purposes, also be con­sidered as fixed. Variable, or operating costs, represent costs like fuel, ground engaging tools, field labor, repairs and routine maintenance. The majority of these costs are proportional to the number of hours each piece of equipment works.

The more hours worked, the more revenue is ultimately generated though completed projects or partial payments. However, more hours worked also means more variable costs. There is a break-even point where revenue produced from jobs covers fleet expenses. If equipment costs are higher, then more work will be needed to reach that break-even or profit mark.

  • Apply all equipment costs to jobs for accurate, up-to-date job cost information. There is more to generat­ing revenue than simply doing more work. Equipment managers (and in many cases project managers) need to be ac­tively involved to ensure that the jobs are properly billed for the equipment assets they use. To do this, managers need to stay on top of all of the data collected and ensure that it is entered correctly into software systems so that they accurately reflect all the fleet rev­enue due. Nothing is gained by having equipment revenue go unrecorded. Surprisingly, many contractors today still are not capturing all relevant equipment costs on jobs, and it impacts jobs cash flow and the organization’s bottom line.
  • Create performance benchmarks to guide equipment use and understand true equipment lifecycle. To gain true control of equipment costs, managers must know when equipment assets—whether old or new—have the potential to negatively impact the bottom line. Vorster has suggested investing wisely in new equipment to make sure the average age of a fleet is well balanced. Too many new pieces and contractors have to account for extremely high fixed costs. Rely too much on older equipment that constantly needs repairs and extra maintenance to keep running, and it will lead to high variable costs.

The sweet spot is achieved when the bulk of contractors’ fleets are operating at peak performance levels, yet are not burdened by high capital expenses. That means performing regular maintenance, keeping equipment in regular use, not pushing machines beyond their limits and constantly assessing the data produced.

Thankfully, the days of not knowing or accurately collecting costs per hour for a piece of equipment, classes of equipment, and entire fleets are (or should be) long gone. Many of today’s construction ERP software platforms come with powerful equipment management tools to ensure data is easily collected and that detailed analyses can be extracted with ease. These solutions range from full-scale equipment management solutions to handy mobile apps that can capture fuel consumption, detailed meter readings, maintenance logs and more.

With fluid integration between equipment management, project management and accounting in ERP platforms, and with these functionalities operating in the cloud for instant access to data, contractors can find that equipment management sweet spot and maintain it in real time.

Maximizing material management

While heavy equipment is among the costliest expenditures contractors have, materials are also expensive yet vital components of the construction process. Materials collected from pits or quarries need to be processed for quick use in projects. Overproduction due to imperfect project data or forecasting can lead to wasted materials, while underestimated material amounts or errors in material collection can lead to project delays. Either of these cases can negatively impact the contractor's bottom line and overall profitability.

Most quarries and aggregate plants have strict processes and workflows in place that help them process materials in an efficient, assembly line-like fashion—from digging raw materials out of the ground, to processing them into usable materials like concrete or asphalt, to transporting materials to scale houses and loading them into trucks for delivery to jobsites. It is this latter part where material tracking and costs can sometimes go awry, and the biggest culprit is the traditional method of issuing paper material tickets in scale houses.

While the concept of scale house material tracking is fairly simple—haulers drive their empty trucks onto scales, weigh them, then fill with materials and re-weigh upon exit to determine the amount of material issued—the issuing of paper tickets accounting for weights and quantities can cause problems. Oftentimes, a single truck load of materials can result in multiple tickets for varied quantity measurements. These tickets have to be collected, transported and maintained until they are checked against again upon delivery to the jobsite. Contractors’ accounting departments also need to cross-check these tickets to ensure accurate material usage and costs on projects are being recorded.

Danita Owens, CFO at mechanical contractor Brislin, Inc. noted the “human factor” with paper tickets is also a challenge. Handwriting on paper tickets can be hard to decipher and the tickets themselves can get lost or damaged, leading to errors and inaccurate material costs being recorded on projects. “In my experience with paper tickets you have a lot of opportunity for human problems—losing the tickets, ‘dog eating ticket excuses’ and just human error in the process of completing the paper tickets," Owens said.

Luckily, modern-day technologies are helping to streamline materials tracking and ticketing as well. Leading-edge construction ERP platforms feature full-scale, integrated material management solutions that provide real time data input, document imaging for material tickets and enhanced reporting tools to ensure accuracy and timely billing. This keeps the material “assembly line” moving efficiently.

New cloud-based scale house and mobile ticketing solutions are also increasing efficiency. These digital portal solutions sync with construction management and ERP software to automatically update data in real time in those systems when tickets are issued. This dramatically reduces human error and provides material and inventory data to accounting departments and project managers in real time, so they always know the amounts or quantities of materials being worked with at any given moment.

When combined—especially though a single ERP platform—equipment and materials management technologies can provide much more streamlined, accurate operations, improving projects’ bottom lines and reducing excess capital expenditures for the construction organization.

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