“When the yellow iron runs, we make money,” is a well-known adage in heavy construction, but let’s dig deeper into what it takes to maximize equipment uptime and the true financial implications of downtime.
Ideally, a construction company sets rates based on the annual ownership cost and the planned utilization of each asset. Meet the utilization plan, and that piece of equipment can pay for itself. This assumes the maintenance and operating costs are also covered, but that’s a topic for another post.
In this example below, the contractor plans to run a dozer for 1,200 billable hours in a year at a rate of $30 per hour. That would more than cover the annual ownership cost of $34,200.
The profit killer lurking for many contractors, however, is unplanned downtime. This is the time, outside of scheduled maintenance, when breakdowns or emergency repairs knock a machine out of service. The major culprit is deficient equipment maintenance management. Equipment that is not in working order cannot be used according to plan, and companies without a proactive preventive maintenance approach and the heavy equipment maintenance software to drive it struggle with high rates of unplanned downtime.
How high? Unplanned downtime rates of 20-30 percent are not uncommon in heavy construction. Going back to the example, a contractor that could hold unplanned downtime to five percent (60 hours) could essentially break even. However, at 30%, the dozer that was supposed to run for 1,200 hours is only available for 840 hours. The recoverable cost shrinks to $25,200, creating a loss of $9,000.
This lost opportunity to recover costs might not seem catastrophic, but it’s compounded by the cost of replacing the equipment that is unavailable and the cost of interrupted productivity in the field. Renting a dozer for the 360 hours lost to downtime at $80 per hour would cost $28,800.
Construction project costs associated with delays, disruptions and idle crews on the jobsite are harder to generalize. They vary according to the specific circumstances of each job, but they are always substantial. Let’s be conservative in the example and put the disruption costs for unplanned downtime for this dozer at $20,000. Now the total loss jumps to $57,800.
There is a multiplier too because these losses extend across the fleet. Using the example, unplanned downtime could cost a contractor with 50 similar assets close to $3 million annually. A contractor with 150 assets could face a hit of almost $9 million to the bottom line every year.
Changing the Equation
Contractors with best-in-class maintenance processes supported by construction equipment management software like B2W Maintain can change the equation by taking unplanned downtime rates to five percent or lower.
The software streamlines maintenance processes, standardizes them across the company and connects the shop with the field in real time. Most importantly, fleet maintenance software is the only way to automate preventive maintenance. The work can be triggered from meter readings, telematics or calendar dates rather than spreadsheets, pieces of paper or someone’s memory.
As a result, more work is completed proactively, according to the preventive maintenance intervals and at the most convenient and efficient times. This is a proven formula for minimizing breakdowns, unscheduled repairs and, ultimately, the amount of time an asset is out of service.