Rod Sutton, Editor in Chief | September 28, 2010

Rod Sutton, Editor in Chief
Rod Sutton, Editor in Chief

A recent newspaper article blames productivity gains over the past few years for the increase in stress among workers. Fewer folks to do the same tasks have stretched workdays, shrinking the amount of time left for home life and other activities.

Similar stresses lurk in equipment fleets. Construction Equipment's Universe Study indicates that users are keeping many machines for longer periods of time. As we reported in August, some of this is due to technological advances in componentry that improve productivity and lifespan. Yet there's little doubt that fleet managers have delayed some purchases this year, mostly due to uncertainty surrounding the continued highway-funding debate in Washington.

Managers mustn't let uncertainty cloud sound judgment, however. A manager who carries a machine too long might save capital, but he'll toss more money into the repairs bucket and field a weaker fleet. The trick, according to Mike Vorster in next month's Equipment Executive, is to find the "sweet spot" for machines.

This sweet spot is the magic point at which a machine's owning-and-operating cost is at its lowest level. The machine is old enough to have adequately spread out fixed costs such as depreciation, yet young enough to have not built up annual repair costs. Fleet managers who find those sweet spots maximize fleet life and performance.

This isn't an easy task, nor is it easy to explain to management why a new acquisition is better in the long run than ongoing repair. But accurate historical data and solid support for the sweet spot will provide serious justification. Many fleet managers have successfully done this, based on recent equipment shipments reports. Through March, shipments were up 37 percent over the past year, regaining about 80 percent of the decline during the recession, reports our economist, Jim Haughey. Individual manufacturers tell us that backlogs are beginning, too, further supporting a movement to replace aging machines.

So don't let capital spending guidelines blindly rule machine-replacement decisions. Take a hard look at machine life, find the sweet spot, and make the case for replacement in terms the financial team will understand. Ultimately, fleet productivity hinges on the right choice.

Author Information
Rod Sutton, Editor in Chief, 630-288-8130, rsutton@reedbusiness.com