Five Tips to Right-Size Your Fleet

Before 2008, many construction companies beefed up their fleets to meet increasing demand. Then, as annual construction spend plummeted, federal stimulus monies evaporated, and local budgets for infrastructure projects shrank, those same companies started taking a hard look at fleet efficiency. Is your fleet the right size? Consider these five suggestions:

1. Accurately track your equipment costs.

When you create an estimate for a project, you include a rate for each piece of equipment—with the goal to recover all of the equipment costs through those charges. In a competitive bidding environment, accuracy is vital. If your equipment costs aren’t complete, you may win the bid but lose money on the project. If your costs are too high, you may be overpriced and lose the work. Be sure to track these key operating costs for each piece of equipment in your fleet:

  • Depreciation
  • Insurance
  • Fuel
  • Lubricants and maintenance products
  • Shop labor
  • Repair parts
  • Tires
  • Undercarriage
  • Work tools

2. Analyze the cost per hour utilized.

Not only do you want to understand total costs, but you also want to look at them in a systematic way. Tracking utilization—typically a percentage of the number of hours the machine was available compared to the number of hours it actually worked—along with costs provides a direct indication of the efficiency of the equipment allocated to a particular job. In more lucrative economies, additional machines sometimes were “held” on jobs just in case. From a fleet efficiency point of view, it makes more sense to move an idle piece of equipment to a job where it can add to productivity.

3. Evaluate operating cost and utilization to right size your fleet.

As a regular part of business planning, you want to evaluate the cost and utilization of each piece of equipment. Looking at this type of tracking over several projects or an entire year gives you a clear snapshot of fleet efficiency and what projects are the most profitable.

If your entire fleet is below 80% utilization or you have specific machines below 50% utilization, it’s an indication your fleet could be smaller and still complete the same amount of work. In other words, you’d have fewer pieces of equipment, but they’d be used closer to 100% of the time.

Here’s an example: A company’s fleet has six dozers of similar age and configuration. The owner is considering purchasing another. The utilization report shows three dozers running at 80% utilization for the last quarter, two dozers at 50% utilization and one dozer at 20% utilization. The reality is he doesn’t need another dozer. In fact, he could eliminate one dozer and bring up the overall utilization of dozers within his fleet—which also frees up the capital tied up in an under-utilized machine.

4. Consider rental equipment.

Equipment rental is on the rise as companies realize the cost and efficiency benefits it can bring to projects. If you have a piece of equipment that’s consistently under-utilized, consider eliminating it from your fleet—along with its associated costs—and renting that machine on an as-needed basis. Depending on your business, using more rental equipment may also help free up additional credit and capital.

5. Use technology to increase accuracy and efficiency.

Telematics make near-real-time data such as machine location, idle time and fuel consumption available, typically in web-based reports. Having constant access to this data can help you increase the accuracy of your information and the overall efficiency of your fleet.

For example, the hour meter is one way to look at how much a machine works, but it doesn’t differentiate between “on time,” “working time” and “idling time.” Telematics systems can provide this kind of information—and the more information you have, the better your business decisions will be.

Accurately tracking costs for each piece of equipment—then analyzing them along with that machine’s utilization rate—can help you determine if you need to right-size your fleet.

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