As firms take on more projects, the need to optimize the management of resources grows. Similar to managing the work force, executives need to have a firm handle on the location and status of the company's equipment. Every moment a piece of equipment is left to idle or in the shop is a drag on profitability. In addition, a major trend for large general contractors is to rent their equipment in a similar fashion to a car rental agency. Though this venture can be very profitable, it raises a host of scheduling and maintenance issues. To maximize the productivity of a piece of equipment, an organization can rely on an integrated software solution to deliver accurate information in time to make crucial equipment management decisions.
Good equipment management is attained through proper equipment selection, which means selecting the right equipment for the given job conditions that produces the lowest total cost. Lowest total cost is an amalgamation of lowest investment cost, highest production and lowest operating cost. In general, total cost is best expressed as per unit of time or per unit of production, and since most jobs are bid on the basis of yards of dirt moved, pounds of steel erected or yards of concrete placed, the most meaningful cost for the selection is based on production units. Certain risks are involved in purchasing a new piece of equipment:
- Will it perform to specifications?
- Will it spend more time in the shop than in the field?
Having an integrated system between customer relationship management (CRM), project management and financials grants a firm the ability to develop a potential profit and loss for all new investments and ensures that the right equipment purchasing decisions are made.
Maintenance is essential to proper equipment management, and averting any maintenance issues before they occur will positively affect the bottom line. There needs to be a way to accurately produce and track maintenance records that clearly establish the equipment's productivity, problem areas and repair costs. The right software solution should deliver this information to the right people to prevent any potential maintenance problems and keep the equipment in optimum condition.
Once the equipment is in the field, the company needs to make sure the right people are using it. Having unqualified or insufficiently trained employees operating expensive pieces of equipment raises the risk metric and threatens profitability. A firm's software solution must track who is operating the equipment most efficiently and who is maximizing billings. A system with integrated human capital management (HCM) can provide the information to determine who has the necessary skills to best operate equipment. The best equipment decision may have been made, but that becomes irrelevant if the equipment is sitting idle because there is no one to run it.
Another aspect of equipment maintenance is permit and compliance requirements. Moving equipment can be a logistical nightmare, and a company's software solution should provide the information to make decisions on the easiest way to move equipment and what permits are required.
It is not enough to simply have a software solution that helps with equipment management. Firms need to have a totally-integrated system that provides accurate information in real-time to key people in order to make the best equipment management decisions. This system also needs to have single-data entry and be designed with the unique needs of the architectural, engineering and construction industries in mind.
To illustrate the need for such a system, let's focus on ABC Construction Company, a proto-typical construction company that possesses its own equipment fleet. Listed on ENR's Top 100 General Contractor's list, ABC also performs construction management and design-build services. ABC Construction Company has been employing a hodge-podge of project management, financials and CRM systems to handle its business operations. Using its current systems, an average equipment management procedure for ABC takes thirteen steps. First a project manager at the jobsite enters the request for equipment, which is then reviewed and the availability is confirmed. Next cones the equipment inspection, followed by the decision to either rent or buy the equipment. When the equipment is purchased, the information is kept in hard copy in a folder and the funding is determined, then the receipt entered and the invoice is received and manually approved. Next, accounting personnel scan and process the invoice and wait for CFO review. The capitalization summary and data replication occurs in other systems, followed by the invoice generation and check production. A maintenance work order is created on meter readings and then a reverse work order with a real order. The accounts payable invoice is processed on the corporate system and manually re-entered into another application. The work order is closed and an invoice generated, and the job is tracked by a spreadsheet.
In contrast, using an integrated system takes only eight steps. The request is reviewed for availability and is entered into the system, and, at a push of a button, the request can be confirmed. Then there is the equipment inspection followed by the processing of the accounts payable invoice to charge the job. After that, the receipt is issued and recorded, and the accounts payable invoice is generated and automatically routed for allocation, depending on approval, using an imaging and workflow solution. Next the accounts payable check is processed, and the work order is automatically generated based on schedule rules. Finally the work order is closed and the actuals are recorded. (See Fig 1.1)
A firm that is going to continue to be successful in getting new jobs and executing them must have a well-planned equipment management policy. As fuel costs continue to be unpredictable and as equipment ages and becomes obsolete, executives need to use every resource available to optimize the management of their equipment fleet. An integrated software system is the best tool on the market to make equipment management run smoothly, and, more importantly, profitably.
Construction Business Owner, January 2009
