Improve heavy highway equipment usage with the right KPIs
Heavy highway and civil construction companies rely on their equipment every day to get the job done, but they don’t always maintain or manage their fleet as effectively as they could. This article summarizes key elements every construction company should consider to optimize the return on investment in equipment.
Effective equipment management
Heavy highway construction companies love their equipment — the bigger and more powerful, the better. Yet, they don’t always maintain or manage their fleet as effectively as they could.
Why equipment and fleet management is so important
Equipment investments form a significant portion of any heavy construction company’s balance sheet. On the jobsite, equipment-related costs can be the largest job cost category — especially when there’s a breakdown or equipment doesn’t arrive at the site on time.
Fleets are revenue-producing assets: They have to be ready to work when they’re needed. With tight time frames, early-delivery incentives, and late-delivery penalties, lost time on a job can be very costly. When critical equipment isn’t available, it can lead to rising costs, delays, and dissatisfied customers.
Key elements of effective equipment management
An optimized replacement strategy
Operating a cost-effective fleet requires careful management of equipment age and quality. Simply maximizing a piece of equipment’s useful life gives companies more time to recoup the purchase cost at a rate the market will pay. But as equipment ages, maintenance costs and lost jobsite productivity can become excessive and even more costly then investing in a new machine.
Ideally, companies would retain equipment for as long as possible and sell it just before it requires major maintenance or suffers a big breakdown. Traditionally, fleet managers have relied on experience and input from operators and maintenance teams to get the timing right. Today, however, managers can use data analytics to ingest and analyze equipment utilization, maintenance, and other relevant data to not only maximize equipment use, but zero in on the optimal time for replacement.
Timely preventive maintenance
The importance of an effective preventive maintenance (PM) program can’t be overstated. It lowers overall maintenance costs, extends equipment life, and — crucially — reduces the risk of jobsite breakdowns.
Here, too, heavy construction companies can capitalize on equipment data and data analytics to make better maintenance decisions. Tracking utilization, such as mileage and hours, against maintenance intervals can help companies identify or predict when it’s time to bring a piece of equipment into the shop. Mechanics can be lined up, parts can be ordered, and dispatch schedules can be adjusted well in advance.
Effective equipment dispatching and tracking
Effective equipment dispatching is all about knowing where equipment should be and when — and then making it happen. It leads to better equipment productivity, improved on-time project delivery, and lower project cost.
Yet, when there are dozens — or even hundreds — of units in a fleet and several projects on the go, the task becomes incredibly complex, and dispatching and tracking software is a must. GPS systems are invaluable in this regard, and companies can often see immediate productivity improvements once operators know their vehicle is GPS-equipped. Add telematics devices to the mix, and fleet managers can track and plan equipment locations as well as keep an eye on equipment performance, maintenance alerts, and more.
Allocating equipment costs to the job
Accurate job costing requires companies to ensure they charge equipment to jobs based on actual equipment hours used and the right cost rate per hour for each piece of equipment. These hourly cost rates are typically established by equipment category, and they should include: the initial capital investment or replacement cost, amortized over the asset’s useful life; the costs of financing the equipment purchase; and the costs of fuel, supplies, maintenance, insurance, and more. The hourly rate should be based on a reasonable utilization target that takes normal operations as well as downtime into account.
Companies might want to establish different rates for equipment runtime and standby time, which would enable equipment to be charged to a job when it’s on the jobsite but not operating. Levying a “move charge” each time a piece of equipment is moved to a jobsite is another possibility. Fees such as these can discourage equipment “hoarding” and moving equipment off the job site during those brief times when it’s not in operation.
Managing such an array of cost rates across a typical heavy construction fleet can be highly complex and time-consuming. Integrating equipment utilization data with the company’s financial tracking software can automate much of this work and help fleet managers ensure equipment costs are being accurately tracked and allocated.
Effective equipment management always pays
A well-maintained, properly managed fleet is critical to being competitive and profitable in today’s construction industry. Take a good look at your equipment management practices: There’s likely plenty of room for improvement — and harnessing data and analytics can help.