Many construction companies have a blind spot around equipment utilization—one that is costing the industry billions of dollars. A Texas A&M University study found that 82% of survey participants believed increasing equipment utilization could increase ROI, but nearly half of those same respondents did not track or measure it.
what isn’t managed can’t be measured
Construction executives need to ask themselves and their teams, “How much equipment does the company currently have? Where is it? How much is the company paying for the equipment? How often is each piece used?”
Many executives can’t immediately access answers to these questions and, as a result, can’t effectively manage their fleets. The companies overspend by keeping rental equipment longer than needed. But unless they are carefully tracking their consumption, the companies don’t even know it.
For example, a boom lift that rents for $1,800 per month becomes much more expensive the second it is returned late. Keeping the lift one day past its estimated return date could incur $200 in additional rental fees, or 11% of the estimated rental cost. Three days past due incurs $600, or 33% of the estimated cost. In fact, 24% of rental equipment is returned 15 days late. The extra days add up into money that erodes project profitability.
Equipment over-consumption isn’t the only issue facing contractors. Under-utilization also threatens the bottom line. Companies need to be asking how often are they using that excavator, generator or aerial lift. Is a piece of equipment sitting idle longer than it should and therefore wasting money?
Forward-thinking construction companies are leveraging digital tools to close the fleet management efficiency gap. Low-cost sensors embedded in equipment, combined with GPS, telematics and high-powered, cloud-based software and services, are helping improve their bottom line by providing critical insights into consumption and utilization.
These insights enable companies to do more with less equipment and even help them reduce their spend on rented equipment by prioritizing owned equipment.
Benchmarking Discovers Opportunity for Improvement
While the information provided by digital equipment fleet management is enormously valuable, it is primarily internal facing. Companies often want to also know how they’re performing compared to industry peers. This method provides a path to attaining best-in-class performance in the very competitive construction marketplace.
Questions to address in this discovery process include:
- How does equipment utilization measure against the industry average?
- Where does the company rank compared to the competition in returning equipment on time?
- What is the positive dollar impact the firm can achieve by modifying its equipment practices?
The answers to these questions can move any benefits created by fleet management improvements to a higher level. The process of scoring equipment utilization against industry benchmarks can identify areas to enhance efficiency and calculate the financial gain that can be realized.
Any equipment rental supplier should be able to provide a contractor with data about how its equipment is used by market segment, job type and equipment specification. The first step in benchmarking is helping a company comprehend where any utilization differences are located. Armed with this information, a contractor can take remedial actions that modify operational behavior and produce stronger financial outcomes.
Benchmarking Connection to the Bottom Line
Benchmarking provides an avenue for companies to rank every piece of rental equipment across their projects and jobsites—gauging utilization and days past due against industry norms. Contractors can view equipment performance holistically or drill down and focus by jobsite, by product type or even by individual piece of equipment.
This exercise can provide meaningful comparisons, showing how a company’s asset management stacks up against the competition. It can identify where equipment utilization practices fall among best-in-class, industry average and room-for-improvement performance metrics. These utilization measures can be aligned with equipment spend to add identify any equipment which may be reducing project margin through overspending.
At its heart, benchmarking provides an opportunity for an enhanced bottom line. It identifies areas where a contractor’s performance can be improved to peer level along with the financial upside that can be gained. The remedy for improving equipment utilization and reducing overspending begins with understanding the problem and then making informed decisions that produce corrective actions. That’s the best way to drive sustainable changes in operational behavior that can improve the bottom line.
