Improve Fleet Management to Increase Profits

Today the construction industry is in essentially the same place as the U.S. manufacturing industry was in the early 1990s—trapped between the declining margins of a competitive environment and a lack of the efficient processes needed to grow. In the early 1990s, manufacturing used the same basic methods and processes for planning, tracking, producing, shipping and selling products that had been in place since the 1960s. Paper and human reporting were everywhere. Critical data arrived to decision makers desks too late to be useful. Operational control was more black magic than science, and communications was glacially slow.

Then, in the mid 1990s, manufacturing companies began to make investments into computer-driven data and communications systems, and the industry’s “Information Revolution” began. Efficiency increased as did productivity and profit margins. Capital and operational expenditures were leveraged by enormously scalable technology solutions, and variable costs fell dramatically. Today, with the right choice of technology and process change, construction companies can experience similar increases in efficiency, productivity and profits. It all starts with effective fleet management.

Objectives of Fleet Management and Technology Adoption

In general terms, fleet management is the process of maximizing the return on investment construction companies make in their equipment. In practical terms, this means getting as much production as possible from the equipment, at the lowest per hour cost, over the longest period of time, while obtaining the highest sales value at end of life. In order to do this, an owner has to monitor and manage the following activities:

 

•     Vehicle tracking: Just as it sounds, vehicle tracking is the process of knowing where a piece of equipment is at a specific time and date, or where it has been over a period of time. Functionally this means answering questions as diverse as “are they where they can be the most productive?” and “where did they go today?”
•     Theft mitigation: Closely related to traditional vehicle tracking, theft mitigation allows a construction company to know if a piece of equipment is being stolen. Data gathered for theft mitigation includes when a piece of equipment is started outside of normal working hours, when a piece of equipment is moved (with or without engine start), when the equipment is being transported and where the equipment is at any time.
•     Productivity: Managing productivity means being able to understand when and how much a piece of equipment is running, idling, working, moving, etc. This information should be specific to the tasks the piece of equipment is performing as well the project on which it is working. For example, a backhoe might be working but not moving about the job. The system needs to account for this.
•     Maintenance: Knowing how much a piece of equipment has been running, idling and working allows a construction company to know an equipment’s hour meter reading very accurately and in real-time. In addition, sensors on the equipment can identify when and measure how long or how far a piece of equipment is being run in reverse, how many lifts or dumps have been made and a host of other activities. This knowledge makes it possible to accurately employ a very effective preventive maintenance program.
•     Operator behavior:  While you can’t directly measure operator behavior, you can infer it from other data collected while the operator is using a monitored piece of equipment. Knowing when a piece of equipment is started in the morning, how much time the equipment runs during the day how much time the equipment idles during the day, how much time the equipment moves during the day and how much it worked can be interpreted to get a reasonable view as to operator behavior. This is particularly powerful when management has the ability to look back over months of data and identify trends. 

Keeping paper records and manually entering data is the norm. While it’s simple, it’s also very time consuming, inaccurate and routinely inconsistent.

At the other end of the spectrum, advanced technology provides a complete end-to-end solution with remote, electronic collection of data, wireless transmission of that data to a back office and a readily available application that converts the data collected into information. Some companies are perfectly well served by using simple technology, and others will benefit greatly from the advanced technology once it’s available. It all depends on the company, its goals and its environment.

In that same vein, not all construction companies can benefit to the same degree from technology or, more accurately, not all construction companies are ready to adopt technology. Companies adopt technology in essentially the same way no matter what technology we are discussing. When computers or two-way radios were introduced to the workplace, they followed a technology adoption process. Fleet management technology is no exception. For construction companies, fleet size and company management methods combine to determine how, or if, new technology is adopted into a company’s operations.

 

Not Simply Technology, But Process Change

While it makes sense, you’d be surprised by how many companies violate the old rule: don’t buy technology for technology’s sake. In other words, just because something looks great and does some amazing things it doesn’t mean that it will make your business better. Technology by itself is basically useless. You can collect all of the data you want. You can print and review enough reports to fill your office, but if you don’t have a way of acting on that data or of interpreting those reports, you are no better off than if you had simply taken the day off. For technology to add value to a company some of that company’s processes and/or methods need to change. This change does not have to be extreme in order to get a significant amount of value out of a new technology. In fact, the best way of adopting new technology is to employ a three-step plan for process change. Each step is incremental and allows a company to integrate the new technology when and where most appropriate. The process change steps are:

 

•     Step One: Use technology to increase the efficiency, accuracy and usefulness of existing processes. For most companies this is an easy first step. No one in the organization has to fundamentally change what they do nor do they have to learn new processes. They simply use the new technology to help them speed up and improve the existing ways of doing things. E-mail is a classic example of this. When e-mail first started rolling out in the workplace, it didn’t change the basic process of written communications; it just made it more efficient and more rapid. With fleet management, a simple example is recording hour meter readings. Most construction companies collect hour meter readings to manage maintenance, cross reference with reported work time and a number of other functions. Historically these readings have been collected by hand and reported on paper. A fleet management solution can provide company management with real time hour meter readings delivered right to the desktop.
•     Step Two: After becoming accustomed to the technology introduced in Step One, the organization modifies old processes to take better advantage of the technology. In this step an organization has to look at its existing processes with a critical eye towards improvement. For example, all organizations monitor how much their equipment works during the day. These measurements are used to cross reference job costs, payroll costs, performance to bid, etc. Again, this is generally recorded by hand and reported using paper documents. Some fleet management solutions provide the ability to monitor equipment and measure, again in real time, exactly how much time it spent working and not working. Depending on the technology, a fleet management solution can calculate “working time” to eliminate the time spent running but idling, while including the time spent working but not moving. A classic example of a piece of equipment that works but doesn’t move (much) is an excavator.
•     Step Three: Eliminate many older processes and methods, then create brand new processes and methods that rely exclusively on the new technology. Implementation of this step is dependent almost exclusively on an individual company’s culture, overall business methods, communications methods, management strategies and business environment. Usually taking this step involves engaging a consulting organization to assist the construction company. Companies bring in consultants, not because the construction company can’t perform the work themselves, but, because the construction company is generally too close to the problem. Implementing this step of process change will allow the construction company to realize all of the value from the fleet management solution. That having been said, this step is also the most difficult on the organization, and to succeed it must have buy-in from all levels of the company.

Construction companies are poised to experience increased efficiencies and increased profits similar to those experienced by manufacturing companies in the 1990s. The majority of these increases can be obtained through the implementation of new fleet management methods or the enhancement of existing fleet management processes. To one degree or another, construction companies can more readily achieve these increases by implementing and wisely using new wireless and software technologies already in the marketplace. While not all construction companies can benefit to the same degree from fleet management technology, and different companies will require different solutions, in general, technology can assist construction companies in achieving their goals.

Construction Business Owner, March 2008

John Hinds is the chief technology officer for Earthwave Technologies, a company that provides telematics solutions to the construction industry. Hinds can be reached by phone at 317.257.8740.