Equipment Type

Henkels & McCoy: Change, for the Better

Henkels & McCoy’s Pipeline Division has changed its business model and taken a deep dive into telematics

June 22, 2016

When Gil Gilbert, CEM, became fleet director for Henkels & McCoy’s Pipeline Division four years ago, he scrutinized the firm’s work.

He noted it was largely seasonal, as far as equipment operations, and that long-term lease contracts were common for the heavy equipment fleet. He also saw the problems inherent in the remoteness of far-flung job sites on rough terrain. Gilbert then started his fleet on a journey of change that continues today, with better cost-control, operator training, and fully integrated telematics.

Henkels & McCoy Pipeline Division is the large-fleet winner of the 2016 Fleet Masters Award. The awards are presented each year by Construction Equipment and the Association of Equipment Management Professionals (AEMP), and are judged on categories such as finance (financial management, acquisition, warranty, and performance guarantees); information management (benchmarking, life-cycle costing, specifications, and technology); policies (safety, employee training, environmental, and human resources); and controls (outsourcing, parts management, preventive maintenance, and shop and facilities management).

The Henkels & McCoy Pipeline Division, in Birdsboro, Pa., has an owned fleet of 980 to 1,000 pieces. “During our peak load season, like last year with rentals, we were up to 2,800 pieces of equipment,” Gilbert says. In short, a lot of equipment to track—and a lot on the books.

“When I first got here, the company had a lot of long-term lease contracts with heavy equipment,” Gilbert says. “In this business, it almost dies down to nothing between Thanksgiving and about March 1 before everything gets really smoking. The problem with all this leased equipment is that you’re paying every month for that equipment, so I worked a deal with our OEM vendors and some of their leasing programs to do customized rolling leases.”

The rolling leases are meant to do a better job mirroring the company’s seasonal cash flow. Gilbert has also acted to reduce the number of owned pieces, further strengthening its financial position.

“At one time, there were almost 150 excavators; now we’re down to maybe 15 of them,” Gilbert says. “We rent a majority of those now. We’ve changed our business model in that anything that is a basic piece of construction equipment, such as a backhoe, excavator, or standard dozer, we don’t really retain that much anymore. We retain enough to supply our quick-fill anomaly jobs and emergency projects. On bigger projects, as soon as we know what we need, I start negotiations with OEMs saying, ‘I’m going to need 40 of these excavators, and 20 dozers.’ We do almost all of it specific per project.”

Henkels & McCoy works at a national OEM level to acquire much of the equipment it needs. “We try to reduce our rental cost,” Gilbert says. “And by reducing the size of our fleet, we of course reduce our fixed cost. We also eliminate the higher-hour, higher-mileage equipment to reduce our operating cost. So when we bring in rental equipment, especially if it’s a rolling lease-type program, we’ll get brand new equipment out of the factory. Then we’re also meeting Tier 4 and Tier 3, and all the compliance issues go away.”

Gilbert has also gained a marketing benefit from the fresh iron. “There’s the visualization aspect from our client,” he says. “When we roll on site and we have 30 new machines lined up and ready to go to work, it’s impressive.”

That’s if the client can even get to the site. Many of Henkels & McCoy’s sites are in remote areas where even four-wheel-drive pickups are severely challenged to gain access. Some job sites can span 50 linear miles. Operators are in the middle of proverbial nowhere, often without proper service manuals. Also, they may not be well versed in walk-around inspection procedures, and superintendents can’t be everywhere to help advise and train. These situations led Gilbert to a unique solution.

“We use QR codes as [on-the-spot] training and for effective communication,” Gilbert says. “Trying to get operators information on the use of their equipment on some of these sites is very difficult.”

The codes are on stickers on the side of machines and/or in the cab. An operator with a smartphone need only scan the code to find needed information.

“We don’t have them on everything yet, but we’re working on it,” Gilbert says. “What we’ve done is link these QR codes to different documents and things that operators need. If they wanted to know maintenance intervals on a D8T, they can scan the code with their phone and bring that documentation up. It can also take them right a YouTube video so they can watch the proper walk-around for the machine. They can’t say ‘Nobody showed me how.’”

The program is also expanding to the company’s on-road fleet, where stickers related to the Henkels & McCoy driver safety program will be found on vehicle dashboards. Gilbert likes the results so far.

“I can tell you that it has saved us on training. They have the information right there in front of them. It has saved time and a lot phone calls and emails.”

Another area of change for Gilbert and Henkels & McCoy has been in telematics, where the ongoing efforts have already started to produce results.

“We take advantage of everything we can with telematics,” Gilbert says. “We use three solutions: two OEM solutions, VisionLink and JDLink; and then we use a third-party vendor, Zonar. They offer both an on-road and off-road solution for us. We use their on-road on all of our pickups and rolling stock, and we use their construction, or their ‘rugged’ model, on all of our older tracked equipment and some of our support equipment. Then we use a battery-powered tracking device for all of our trailers.

“By the end of April, we’ll be what I call 100 percent hot—every piece of equipment we own will be wired,” Gilbert says.

Henkels & McCoy uses the data in a number of different ways. “Each week, we run reports on utilization, fuel burn, idle time, and any kind of diagnostic problems,” Gilbert says. “We also fully integrate geofences. In the pipeline world, we may have a job that’s 50 miles long. Those 50 miles may have one or two spreads in there, working at the same time. Sometimes, those guys will swap equipment.

“Well, it’s different charge codes. In the past, they would have to send in a transfer,” Gilbert says. “They’d list out that the piece went from here, to here, to here. Our goal by the end of the year is that this is all automated. The notice we get that equipment goes from one geofence area into another eliminates all the paperwork—it’s already billed that way in the system.”

Gilbert also uses telematics to verify motorist observation reports, as all of the company’s vehicles have 1-800 numbers to report driver behavior. “If we have a complaint come from the outside, we can pull that vehicle up at that specific time and either validate or invalidate the complaint. We also use it for mitigation purposes. If we’ve been told we’ve done something with a certain piece of equipment, we’re able to validate that it happened, or if [that piece] wasn’t even close,” he says.

Then there is fuel savings on two fronts: measurement and idle time. Henkels & McCoy as a whole (there are other divisions besides Pipeline) has a policy of using all on-road fuel.

“That gets pretty expensive when you’re dealing with a lot of off-road equipment, especially in this division,” Gilbert says. “Working with our provider, we took their hand-held device, customized a program for that, and put identifier pucks with RFID tags on every piece of equipment on every spread. When our fuel trucks go out and fuel, they would use the hand-held device to scan the puck, they would scan the truck it’s coming out of, key in how many gallons of fuel they put in that piece of equipment, verify it, and the minute that gets docked, it’s all automatic.

“Out of all of our fuel on three projects last year, 600,000-some gallons of fuel, we were able to accurately track over 98.5 percent of it, which added into an almost $400,000 tax credit,” Gilbert says.

The company has no formal idle time policy, but that doesn’t mean they’re not measuring it and using the telematics data to foster awareness. “We’ll take idle time reports and inform the superintendent of a project on a weekly or monthly basis on their idle time,” Gilbert says.

“We’ll point out, on average, this is what your idle time was last week, and if you converted it into dollars and cents, this is how much your cost would be, and we forecast that out for them. If your project is 8 months long, at this rate, idling this much, at the end of the project, you’re going to waste $175,000,” he says. “We don’t dictate how they use [equipment]. So many people are talking about Operations versus Support [Fleet] because we cost a certain dollar amount; it costs them to keep us. But I look at us as margin leaders. I try to educate our Operations people that our job is to truly make their margins better.

“We’re working to give you efficient, safe equipment. We’re showing you ways to save money, and it’s only going to increase the margins on your job. That’s the way we try to present.”

 Telematics is playing a bigger role each year in helping Gilbert make his case and fine-tune the company’s asset acquisition and disposal. His goals include using the upcoming ISO standard to assist in bringing his three solution providers into a one-platform resource, improving the company’s tracking of rental equipment, and integrating data into a maintenance program.

“We look at it as being our virtual eyes,” Gilbert says. “Telematics truly helps us monitor the things we need to monitor. The data’s been that good. I think it’s come a tremendous way in the last 5 years and I’m excited to see where it goes in the next 5.”

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