Foundations for Decisions

Rod Sutton, Editor in Chief | September 28, 2010

Construction fleets vary tremendously, and it is on the edge of impossible to cast broad conclusions about their management. Yet as much as the subscribers to Construction Equipment vary, we believe certain core principles benefit an equipment manager whether the fleet operates in a mine, works under public control in a government agency, or labors in the hands of an entrepreneur who uses a few machines.

As we've talked with equipment managers during our Construction Equipment Institute or in presenting any of our research reports, we're struck by the diversity in the levels of sophistication among managers when it comes to tracking machine data.

Recently, a discussion of rental brought this idea of data collection into stark relief. Rental is a viable option, with nearly one-quarter of the machines in the equipment universe on short- or long-term rental. Among the 28 machine categories we've tracked over the years in our Universe Study, this percentage has stayed between 20 and 23 percent.

According to Construction Equipment's Rent/Lease/Buy research, almost 90 percent of rentals are executed to meet a short-term need. Rental can provide a cost-effective and efficient method of accomplishing an operation's goals. The equipment manager is charged with deciding which acquisition method suits the situation.

Sophisticated managers recognize the options: outright purchase of new or used machines, leasing arrangements, or rental agreement both short- and long-term. The correct decision directly affects the operation's bottom line, whether it is measured in tons of coal per hour, effective use of tax dollars, or year-end profits.

To make the correct decision, equipment managers need three pieces of information, and each depends on the one upon which it stands. First, the fleet operation must track data over time. Second, this historical data must be configured into owning and operating costs. Finally, management must mold these costs into equipment-acquisition strategies that best serve the organization's financial goals.

Equipment that is not managed in the context of this information could potentially become a liability rather than an asset. Equipment that should be used to contribute to the goals of the organization will instead become an impediment to those goals.

Managers, small fleets and large, private and public, must know these measures. If they don't, they should make 2006 the year they learn them.