Last month we discussed the need to know how equipment-related transactions flow through the organization and detailed a process for operating costs. We introduced a diagram of how charges flow from the job accounts to the equipment account.
This article details a process for owning costs and…
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You have heard what people say: If you want to know how something works, just follow the money. Equipment management is no different, and it is useful to trace the flow of funds through an organization in order to understand and communicate how things work.
This is the first of two articles that…
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A construction company is an exciting place to work. Every day is different, and change seems to be the only constant.
All this excitement, change, and turbulence comes about because construction companies continuously bid for, build, and complete unique projects: discrete well-defined…
What must we do to be a world-class equipment-management organization?” It is a question you should ask yourself, and it is a question you should be prepared to answer.
Your answer can be long and complicated, or it can be so broad as to be of no value. Here are four critical success…
Much time is taken to define and measure what is spent on maintenance. But how much time is spent to define and measure what is returned or, even, what to expect in return?
An equipment executive expects compliments for looking after the company’s assets. They expect longer lives and…
The best thing about my job is that it gives me an opportunity to spend time with the best and the brightest in our business, work on real problems, and, one way or the other, come up with a solution. These articles—this is No. 145 stretching back to October 2003—are the result of being able to…
The proponents of lean manufacturing have taught us two things. First, be clear in your definition of contributory work, the activities that add value and contribute to the final result. Second, focus on waste: define it, measure it, and have clear strategies in place to eliminate it from the…
Questions arise over the benefit of including residual market value in a rate calculation and the analysis done to set the economic life of machines. My answer used to be: “It is not a big deal, leave it out, you do not have good residual value data, and there is nothing wrong with being…
The equipment rate—the estimated cost to own and operate a given machine for a given period of time—is not a simple number. It is a complex, high-risk estimate that plays a major role in many aspects of the business.
There are three things to understand about equipment rate: the risks…
Job costing can be described simply as charging each job or each phase code for the resources they used to produce work, and crediting the job or job-phase code with the budgeted value of the work done.
The labor portion of a given job phase code is accurately and quickly known through…
Every dollar received in a capital expenditures (capex) budget must be returned to the company treasury one way or another. In “The Depreciation Cycle,” we described that process.
Above: This…
Equipment fleets represent a large and special kind of capital investment that does not last forever. Machines wear away in the production of work, so there is a constant need for replacement—of both the unit itself and of the capital investment it represents. Maintaining a well-capitalized…
Everyone agrees that downtime costs money in terms of lost productivity, impacts on other operations, and the cost of returning the machine to work. There is, however, little agreement on how to quantify the impacts and include them in the equipment cost calculation. It is a controversial…
Last month, we introduced lifecycle cost as a subject that many people talk about but few people really understand. We devoted Part I to two things: the calculation of the hourly operating cost for an example…
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