Equipment Type

Construction Equipment Executive Institute

Learn the fundamentals of fleet management from our collection of articles and videos. The best in asset management for the construction equipment professional.

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Equipment Executive Articles

We work in a very capital-intensive business with razor-thin margins. Ever wondered how it works? Ever wondered whether it was more important to make a profit than to reduce the amount of capital required to accomplish the job?

The intersection of cost (red line) and revenue (green line) is the break-even point for the equipment account.

We spend a lot of time discussing what it costs us to own and operate a particular machine. There is no doubt that this is important, but from a company and strategic level, it is not the final word. We absolutely need to know what it costs us to “own and operate” the equipment account as a business on its own and as a critical part of the company.

Following the logic in the diagram, from top to bottom and from left to right, reveals principles of cost analysis that expose root causes.

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.

Waste within each of these three equipment metric builds, cutting into overall fleet and operational usefulness.

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.

Historical data coupled with solid estimates of upcoming work provide the best opportunity to set accurate hourly rates.

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.

C.E.M.P LEARNING MODULES

Session M/2 explains the principles and strategies of maintenance.

Session E/2 explains what is included in the hourly rate calculation, and how to do the actual calculation.

Session O/2 explains what role the hourly rate plays in an equipment-using company, and how the rate should handle transactions.

Learn how to understand and use activity metrics.

How to make your organizational structure work for you.

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