What do you do to cope with the volatile economic times in which we are operating? It wasn't long ago that the pump price for gasoline was over four bucks a gallon. We certainly didn't expect that a year ago. After the savings and loan crisis, who would have predicted it would be followed by the current banking fiasco? Running a business in these times can be more than challenging.
When your business depends on the use of equipment, the management of that equipment becomes critical to profitable survival. Construction is an equipment-driven business. No matter what type of construction you are engaged in or how large of an operation you have, your equipment selection will influence the success or failure of your operation — the amount of profit or loss from a job.
You start managing your equipment fleet by knowing as much as you can about each piece in the fleet, including all of your trucks and all of your tools. Equipment record keeping is a lot easier today than it was years ago. There are a number of equipment management software programs available from a variety of different sources. Many of the equipment manufacturers have such programs and they are designed to work with any brand of equipment. Additionally there are a number of software producers that cater to our market and have equipment management programs. If you're not using one, you need to start as soon as possible.
Information is the key ingredient in a good equipment management program because it can help you make some tough decisions. Should you buy, lease or rent? When should you rent? What should you rent? What should you buy? These are all good questions, but what if you already own equipment? When is the right time to sell? Is there a time when you would be better off parking some of your machines and renting others instead? In the current economic environment, with diesel fuel running over $4 a gallon, you might be smarter to rent than to run what you have.
To solve this puzzle you have to know your fuel consumption rate and the production capabilities of the machine. What is the production cost per hour per cubic yard of material moved? Sizing the machine to the job becomes a vital factor in your profit equation. Too small of a machine will result in lost productivity. It will take you longer to get the job done and you will be running the machine at its maximum fuel consumption level. The fuel costs, at today's prices, can chew away at your profits.
If the machine is too large, you could be wasting fuel. Fitting the machine to the job is important. If you don't have the right size machine, it might be smart to rent the right one.
The consideration needs to go beyond the size. You also need to look at the specific job each piece of equipment will be doing. Is it the right choice? Would you be better off with another machine or combination of machines? If distances are involved, the choices can change again.
Let's take look at earthmoving as an example. You have several choices of equipment that can be used on an earthmoving project.
Track-type tractors are one of the most common earthmoving tools. Equipped with different blades, they can do a lot of different types of work, especially when they are equipped with GPS and machine control systems. Dozers shouldn't move material beyond 325 feet, optimally with 375 feet being a maximum haul distance. Dozers are used primarily for pushing, clearing and with GPS and machine control finishing. They can be expensive to operate.
Excavators are a digging and loading tool in an earthmoving operation and are usually matched to some type of hauler, dump truck, articulated hauler, or rigid frame hauler. Basically you want to be able to fill the hauler in three to five passes. Scale the excavator and hauler to the size of the project.
Wheel loaders are another loading tool, although they can be used to move material over a short distance. Wheel loaders will work best in a range from 200 to 450 to 490 feet optimally and 500 feet as a maximum distance. Using them for shorter hauls can get just as costly as going beyond the recommended range. Again, you need to match the wheel loader with the haul truck and watch the haul distances.
Track loaders can be used as a loading tool or for some application and excavating machine. They're great for digging swimming pools, basements, foundations, and the like. Because they are capable of navigating rough underfoot conditions, they are a good choice for a lot of earthmoving projects. Because of their versatility and digging capabilities, they can do a lot on an earthmoving project that can't be done with a wheel loader. Travel distances should be on the short side like a track-type tractor dozer.
Scrapers are available either as self-propelled machines or pull-type attachments. Self-propelled scrapers have the power, traction and speed for reliable output in a variety of earthmoving applications. In addition to the open-bowl type, there are elevating scrapers and tandem-powered scrapers. The latter have twin engines and are designed to handle steep grades and poor ground conditions. These machines can operate independently or with the help of a pusher dozer. Cat also offers an auger loading arrangement for its scrapers.
Scrapers can be equipped with a push-pull arrangement using a hydraulically actuated bail and cushion plate on the front of the tractor and a hook attached to the rear of the scraper. The arrangement allows a pair of scrapers to link together when loading, with the rear scraper pushing the front scraper through the cut. As the front scraper emerges from the cut, it pulls the rear scraper through the cut.
In recent years pull-type scrapers have become more popular as more manufacturers have entered the construction arena. There can be economic considerations. You can pull these with either a large agricultural or industrial tractor or a crawler tractor, depending on the terrain. Scraper trains of two pull-type scrapers have been used successfully on earthmoving projects.
Scrapers are available with bowl sizes ranging from 5 cubic yards to 26 cubic yards and cut widths from 84 inches to 192 inches. As with other earthmoving equipment, there is an optimum distance for scrapers. Consult with your equipment supplier to find out what that distance is.
Another example is trenching. As with earthmoving, you have a variety of equipment choices for a utility trenching operation.
Excavators are at the top of the list due to their versatility and the fact that a variety of buckets and attachments are readily available. Excavators are available as track mounted or rubber tired machines. They come in all sizes, from very small minis to very large mass excavators or mining shovels, and are available in a variety of weight classes and dig depths.
Backhoe loaders are another common trenching tool and are also available in a wide range of sizes. Because of their combined loader-excavator functionality, they can be a good choice for a lot of trenching applications.
Trenchers were designed specifically for this type of work, so there are jobs where dollar for dollar you simply can't beat the cost effectiveness of a trencher that has been sized for a specific application.
Today, when you bid the job you need to factor in all the advantages you possibly can and that means determining which machines you will be using. It wasn't too many years ago that fuel was not a critical factor, but those days are long gone. Do you now need to factor in use of equipment that will give an economic advantage due to fuel consumption? No. You can't go out and buy new equipment, but you can rent the machine or machines that will give you the productivity and fuel efficiency that will keep you profitable.
It may be necessary to change your thinking about equipment rental, which should be one of the tools in your equipment management strategy. When you think rental, don't think in terms of minis or compact machines. Think of what you need to get your job done effectively, profitably and with fuel efficiency. Rental isn't just about compact excavators, skid-steer loaders or aerial work platforms. It's about production machines that better fit and fill your job requirements than the equipment you currently have in your fleet. Work with your equipment dealers and rental houses to make the right choices. Maybe it's time to rethink the composition of your fleet.
Annually we do a Buyers' Intentions Study surveying you on your plans for the coming year. As part of the survey we ask some rental-related questions. The answers tell us, and you, about what you are doing with your equipment rentals. In this year's survey we learned that nearly half (47 percent) of the participants rent equipment and that 11 percent of their equipment fleet is rented. From the survey six years ago to the survey this year, the percentage of fleets rented has increased from 11 percent to 20 percent; however, the rental factor has remained at the 20-percent level for about three years. The rental percentage of the fleet has stayed around the 11-percent level with some fluctuation in 2003.
We asked our survey participants what they plan on renting in the coming year. From the results, as illustrated in the three charts, there is ample opportunity for you to adjust your thinking and take advantage of the flexibility and cost savings that renting offers you.
|• Aerial work platforms||31.0|
|• Forklifts, high reach/rough terrain||24.0|
|• Cranes, hydraulic||27.2|
|• Cranes, truck-mounted||7.5|
|• Crawler dozers||24.5|
|• Loaders, rubber tired||19.3|
|• Loaders, skid-steer||19.6|
|• Concrete pavers||11.4|
|• Asphalt pavers||11.2|
|• Curb and gutter machines||15.2|
|• Trucks, light to medium (up to 26,000 GVw)||5.3|
|• Trucks, heavy-duty (more than 26,000 GVw)||9.1|
|• Trucks, off-highway||12.8|
|• Concrete pumps||32.5|
|WORKSITE EQUIPMENT AND PRODUCTS||Rent|
|• Light towers||29.4|
|• Security fencing, cameras & systems||25.5|
|• Trench boxes||23.3|
|• Erosion control & geotextiles||7.2|
|• Safety netting and materials||11.4|
|• Compressors and generators||16.5|
|• Pressure washers||9.4|
|• Pumps, watering/dewatering||17.6|
|• Welding equipment||9.0|
|• Mobile offices/strongboxes/toolboxes||19.0|
|• Safety - clothing, training & apparatus||2.3|
|Push to talk phones/PDAs||2.9|
|Machine control software and hardware||3.0|
|Estimating/bidding/cost management software||0.8|
In one major change, we asked participants where they purchased their equipment. They indicate that they will continue to acquire their construction equipment from dealers/distributors (91 percent). However, the majority also acquire equipment from rental chains (55 percent), used equipment dealers (53 percent) and directly from manufacturers' reps (53 percent). In previous surveys far fewer contractors purchased equipment for rental operations - 29.4 percent.
In the survey we asked about Internet activity, and as you well know it has increased radically. According to our survey results, three of four construction industry professionals are now going online more than once each day for work purposes ... spending an average of nine hours online each week for things other than e-mail - activities such as researching new equipment, visiting manufacturers'/distributors' websites, and reading industry news. Eight of 10 have made construction-related purchases online ... with a third placing orders for new or used equipment. We didn't ask if any were doing or had done online rental.
In today's world of fast and constant change, you need to be as flexible as possible but you also need to be equipped with as much information as you can gather when making equipment-related decisions. Collecting and storing information has gotten to be relatively easy. There are software programs, Internet sites, dealers and manufacturers ready to help you make the right decision. Even with years of experience, there's always room to learn a little bit more.
Adding rental to your thinking is fuel for thought that might help you save on your fuel costs.