Guy Gordon reduced costs by 42 percent at Insituform by applying a systematic, best-practices approach to asset management
Guy Gordon, CEM and director of asset management for Insituform Technologies, has a business philosophy that goes like this: “There are ways to do things fast, and there are ways to do things right.”
A strong believer in AEMP’s core competencies, you might say he is a best-practices practitioner. AEMP and Construction Equipment magazine named Insituform a 2011 Fleet Master at its Annual Conference in March.
Although best practices have now become a way of life for Gordon, there is one career accomplishment that he is proudest of: taking a fragmented fleet operation, pulling it together in a cohesive framework and creating an efficient, productive and successful structure. Although pleased with the end results of his efforts, Gordon, in typical fashion, credits the success to his entire team.
Here’s how it came about.
While serving as vice president for a Missouri construction company, he was asked in October 2005 to join Affholder, which at the time was an Insituform Technologies tunneling division. In July 2006, Gordon assumed responsibilities for overseeing the entire Insituform fleet operation. The company is international in scope, with operations in the North America, Europe and Asia-Pacific markets. The fleet is made up of approximately 1,800 specialty-built on-road vehicles designed for pipeline protection and rehabilitation, plus another 110 to 120 off-road units.
When he took on his new job, Gordon approached it with a methodology that allowed him to, first, thoroughly analyze the structure he had inherited.
“You can’t just assume what has to be done,” he says. “I don’t think coming in with preconceived ideas is an effective approach. So to find out what we had, the first thing we did was to conduct a thorough evaluation of the fleet and identify, then prioritize, the most pressing issues. By looking at the overall equipment operations, we were able to see what was working and what was not.”
Some goals had to be reached in a relatively short period of time. Other goals had less of a sense of urgency. One of the first things Gordon noticed was the way the company was charging equipment out to jobs.
“They were not charging equipment out to jobs at the unit level,” he says. “They spread the costs that were collected in the equipment accounting buckets out to the jobs.”
After looking at life cycle costs on the equipment and analyzing the data, Gordon’s team established rates to be charged out on a per-unit basis. Another first step was to implement the equipment-management module of the J.D. Edwards software system already in place. Hope Kemper, office manager, was instrumental in this effort, Gordon says.
“Within six months, we had the equipment operations organized and ready to go in a direction that we felt would be most impactful on the organization,” he says.
Gordon made sure each Insituform business unit “owned its equipment costs,” he says.
“We made an effort to help them understand what drove the various aspects of the costs in their individual operation. By doing that, I think it definitely helped us, not only to get buy-in from them on what we were doing, but to gain ownership and help us control the costs.”
This approach helped break down existing “walls between the various business units throughout the country,” he says. “Those walls started to come down, and we were able to share equipment across business unit lines. By sharing those costs, both utilization and efficiency improved.”
Gordon and his team changed the equipment department structure completely.
“There really wasn’t any centralized involvement or comparisons between the various business units,” he says. “We put some standardization in place to help with the comparison between the units. That gave us the ability to quickly see where efficiencies were and where the inefficiencies were. Then we were able to correct the problem.”
It drove the costs down considerably, Gordon says. “We saw a 42-percent decrease from where we started in January 2007 until now.” During the same time period, preventive maintenance compliance climbed from 75 percent to 97 percent. PM compliance, which tells Gordon how many units are within their PM schedules, is measured weekly.
Another step was to make sure that personnel had a thorough understanding of the new structure and where Gordon was going with it.
“I was very fortunate to have people who quickly understood where we were going,” he says. “In fact, two of them—Tom Burbank, area equipment manager for north, central and east regions, and Cliff Francois, area equipment manager for south, central and west regions—have now become CEMs. They were very motivated in making the transition.”
One of the biggest challenges Gordon faced regarding “going live” with the new structure in January 2007 was Insituform’s strategic decision to “disengage from the tunneling business.” That disengagement was announced in March 2007. That meant, while implementing the new structure, Gordon simultaneously had to dispose of more than 1,000 pieces of off-road equipment.
Working closely with equipment manager Andy Richter, Gordon organized auctions of equipment, making sure the logistics of those sales were completed. Equipment auctions were set up in St. Louis; Charleston, S.C.; Chicago; and in the California cities of Apple Valley and Sacramento.
“We ended up contracting with an auction company and structured the auctions to best fit what we felt would give us the greatest return on those assets,” Gordon says. The end result, he says, was very successful. “The disbanding operation ended up financially much better than we initially anticipated,” he says. Again he gave credit for that success to the efforts of the people in the organization.
Although closing down a business is never easy since people are involved, Gordon made sure “we had Insituform’s best interest up front throughout the whole process. In some places we didn’t even pull equipment out for auction until the last minute when the projects were finished. “
The company started seeing results almost immediately, and still is, Gordon says. For him, meeting the complex challenges of two major undertakings once again proved his business philosophy of “doing things fast or doing things the right way.”