Some companies are embracing technology. Some don’t. And many are somewhere in between.
Russ Young, director of business development at software company Tenna, sees four levels of technology adaptation for construction companies. These range from companies with a “don’t want it/don’t need it” attitude to those that seek out the cutting edge of anything new in hopes of gaining competitive advantages.
Young recently presented on the subject at the Association of Equipment Management Professionals’ Connect22 conference. Titled “A deep dive into the equipment handler of the future“, Young presented four technology philosophies and described the kind of improvements construction company managers and equipment managers can achieve by taking it to the next level.
First level: manual
It’s the business that relies on a big whiteboard to keep everything organized. A rough estimate of the number of companies at Tier One would be about 20% of the industry, Young says.
While the whiteboard style of equipment management works well for small businesses, it can become “death by 100 cuts,” Young says. “They miss preventative maintenance windows all the time. Instead of making a penny for prevention, they spend a dollar for a cure.
For Tier 1 companies, locating equipment in the field can be another huge headache requiring lots of phone calls, litigation and uncertainty. This disrupts production schedules. And at the end of a job, accountants face a huge problem trying to figure out exactly which machines to charge to the jobs. In the worst case, a machine could be stolen and no one would know about it for hours or even days.
The time spent finding and assigning equipment also adds man-hours and creates downtime in the field. Security compliance is also overlooked or easily faked. “The good news is that there are fewer Tier 1 companies every day,” says Young. “Most of them are taking advantage of some form of telematics and that has moved the ball forward.”
Level two: some automation
At level two, a company or fleet manager has modernized and digitized some of their processes, but typically they’ve struggled with a bunch of different systems, Young says. He estimates that around 65% of the market is at some form of level two.
Tier two companies may try to integrate data from different OEM telematics systems or track handheld tools or non-powered equipment with proprietary tracking systems. And their telematics may not integrate well with Enterprise Resource Planning (ERP) desktop or project management software such as Vista, Spectrum, Viewpoint, or Sage 300.
“Most of these systems don’t communicate with each other,” Young says. “People end up not really knowing what’s going on, even if the data is there, because they don’t know where it is or how to access it. You talk to the front line people of a tier two organization and you get a sense of their frustration.
“I’m generalizing here, but there are people who got into construction because they didn’t want to sit at a computer all day,” Young says. “Most of them are not enthusiastic about learning a technology platform. And they certainly won’t be excited about learning six platforms. »
With multiple systems not integrated, it’s also difficult for estimators, CFOs, or owners to get the data they need without a lot of work. Incorporating this information into a business accounting system may require manual entry – the antithesis of what automation is meant to accomplish.
“Here, the owner doesn’t know what’s going on and can’t make effective decisions,” says Young. “I hear CEOs say all the time, ‘I know my labor costs perfectly, but I have no idea what my equipment costs are.’ At this point, the gear manager’s job may have gotten easier, but he still hasn’t gotten a seat at the executive table yet,” Young says.
The other often overlooked challenge for a tier two business is cybersecurity. With multiple divisions running multiple pieces of software, the chances of suffering a ransomware attack are increased, says Young. The analogy he uses is that it is easier to guard against a burglar if you have only one well-fortified door as opposed to six or eight lightly guarded doors.
Level three: a unified system
With a machine-agnostic equipment management platform integrated with a company’s ERP systems, all the issues associated with level two go away, says Young. Data can flow seamlessly from the field to estimators and executives to enable good decisions. Interdepartmental communications are fully visible. And the information comes in a form that allows all parties to be proactive rather than reactive, Young says.
Heavy/civilian contractors typically spend about 20-25% of project costs on equipment, Young says. “One big equipment error can eat away at a huge margin. But if automation can lead to a 10% reduction in equipment costs, that can translate into a 2% margin improvement, which directly impacts the bottom line. So if you’re a business with a 6% margin and you can turn that into an 8% margin, that’s a huge difference.” It’s also the kind of initiative that can earn an equipment manager a seat at the executive table.
Another benefit that hasn’t been talked about enough, says Young, is how a transparent equipment management program can improve employee morale and retention in a company.
“Not only are your workforces happier, more productive, and more likely to stick around, but we’re starting to see people join companies because they can be more productive and they’re less frustrated,” says Young. . They don’t run, he says, to put out fires all day.
Level 4: Experimental
On the hardware side, Level Four feels a bit like science fiction, Young says. This can include robotics, assistive devices, autonomous vehicles, drones, and reality capture devices. “The job of an equipment manager is going to get harder, or at least more complex, as the industry moves in that direction,” he says.
“It is going to be very difficult to manage these assets at level two. But at level three you have built a base, where you can deal with them much more effectively and efficiently and transition to level four without creating any new headaches.
When to step up
Not every construction company needs an integrated solution that ties asset management between the field and the office. The main target would be businesses with annual revenues of $20 million or more. But that can vary depending on the company’s business and growth, Young says.
Companies with $10 million in revenue but lots of moving parts (think electrical and mechanical engineering) may be right, as may companies experiencing or planning rapid growth, Young says.
“As businesses hit $10 million in revenue, they need to think about ditching QuickBooks and moving to a more robust accounting system,” he says. This is also when they need to start thinking about a system that integrates equipment management with project management and office needs.