I had a lot of arguments when I earned my living as a hard-riding, fast-shooting construction engineer. The one I remember most was about cost and the need to reduce cost. Of course it is important to reduce and manage cost. No argument there. But you do not improve cost by agonizing over the past; you must look to the future.
It used to annoy me when people referred to the equipment division as “the shop.” That does not bother me now because equipment management is a serious business. It has a huge impact on the company as a whole, providing the tools needed to produce work on time and on budget. Without an effective equipment operation you are not going to get it right.
Measuring and managing utilization is difficult. It is easy to know exactly where the heavy iron is located and to record hours worked. It is a much more complex problem when it comes to the 4-inch pumps, trench rollers, and variable message boards that are moved informally and work intermittently.
A work order system must be more than a way to charge time and cost against a machine. It must be an effective way to plan work and improve efficiency.
If yours is not, you need to think again.
It is rate-setting season again. We know about last year, this year is well under way, and we are thinking about the rates we need to change to be successful next year.
We are too focused on cost when it comes to thinking about equipment replacement. It certainly is important to know what it will cost to own and operate a unit in the year ahead and to make wise replacement decisions when the old unit—the defender—is likely to cost more than the minimum lifecycle cost you can expect from a new unit—the challenger.
Most conversations about overhead turn out to be complicated and emotional. People are confused about how it is defined, how it is calculated, and above all, how it is recovered. Everyone does it differently, and no one is happy.