Raising red flags

by Allan Heydorn
Created: October 17, 2008

C&L Sweeper Service and Contract Sweepers & Equipment share job costs to improve bottom line.

"We've always felt that you can't manage what you can't measure, so we've made a real effort to track our costs," says Gerry Kesselring, Contract Sweepers & Equipment. "It's really not difficult...
"We've always felt that you can't manage what you can't measure, so we've made a real effort to track our costs," says Gerry Kesselring, Contract Sweepers & Equipment. "It's really not difficult. You start simply, and as you go you'll get more and more detailed. Job costing just becomes a way of running the business. It's a matter of having the discipline to do it. You have to be dedicated and you have to make sure you're putting your costs in the right spots."
"Cash flow is very important; but people mistake cash flow for profit, and they are two completely different animals," says Gabe Vitale, C&L Sweeper Service. "The bottom line is the bottom line, and...
"Cash flow is very important; but people mistake cash flow for profit, and they are two completely different animals," says Gabe Vitale, C&L Sweeper Service. "The bottom line is the bottom line, and keeping track of your costs is the first step in improving that bottom line. We now better handle our bottom line, there's no question about it."

?We have a little more time between stops because of the type of market we?re in,? Vitale says. ?Plus, if we?re working on expanding into an area where we don?t have many accounts our fuel cost will be higher because we?re spending some money to try to expand into that area. But we know that, and that explains why our fuel cost is higher.

#2. Route density. Kesselring says knowing the cost of a particular job also helps Contract Sweepers focus its marketing efforts. ?If our operators are passing some properties that we aren?t sweeping, let?s go after those and see if we can cluster our business,? he says. ?Windshield time costs money.?

And C&L Sweeper has worked to improve its route density. ?Contract Sweepers has much more dense routing than I have and Gerry really challenged me to increase my route density,? Vitale says. ?I work in a rural area so there?s quite a bit of distance from one job to the next so that was a challenge for me, but it?s an effort we?ve made based on comparing job costing information.?

#3. Labor costs relative to the revenue generated from a specific job. ?I thought my company was operating pretty much as it should be, but it wasn?t. What I thought was efficient, wasn?t,? Vitale says. ?By looking at Contract Sweepers? numbers and comparing them with my numbers we realized there was a substantial difference there that we needed to take a look at and at least be able to explain.?

Part of the explanation is that C&L Sweeper pays prevailing wage on some jobs, but the labor costs also caused Vitale to reexamine his GPS system ? a passive system that was providing information but not necessarily the type of information he needed to make some important decisions. So he switched to an active GPS system, which he says has been a ?big, big tool in helping us get better control of our costs.?

In the end, using information generated through the new GPS, Vitale was able to reduce labor expenses by as much as 15%, which brought him much more in line with Contract Sweepers? job costing numbers.

#4. Getting better information. C&L Sweeper?s use and switch to an active GPS system, and the impact the switch had on its operation, caused Kesselring to take a more aggressive look at GPS for his company. Kesselring says Contract Sweepers had been considering GPS for some time but had always been looking for ?the perfect, perfect system,? he says. ?But there isn?t one.?

But Vitale?s insights encouraged Kesselring to install a GPS system last January, and Kesselring says the system will pay for itself in less than 12 months. ?When you start reducing inefficiencies that impacts fuel savings, and that can be significant,? he says. ?When operators start to realize there?s someone there looking at them, their behavior changes. Let?s face it ? if you?re saving a half-hour per night for one operator that?s 180 hours of operating hours. And if you?re operator costs you $20 an hour that?s $3,600 in savings on one truck.?

#5. Target times for jobs and routes. ?If you?re running a number of trucks you can?t look at each job or each truck each day,? Kesselring says. ?But we can look at exception reports every day. We can say ?I want to see all the jobs where the operator was +/- 15% of time on those jobs.? If he?s spending less time we might have quality issues; if he?s spending too long, why??

He says establishing a route time and being able to track individual sweepers via GPS has already resulted in some nightly savings. ?We had an instance where an operator was arriving back at the shop at the end of his route 30 minutes later than we thought he should have,? Kesselring says. ?We took a look at the GPS information and discovered that instead of driving the highway back to the shop he took surface roads. Why? Because he wanted to, but there?s your half hour right there, and we might never have been able to figure out where that half hour was without the GPS.?

#6. Too many employees. C&L Sweeper had two operators who were on the payroll just in case they were needed. ?Now we?ve cross-trained our mechanics as operators and told them if we need them to drive they?re going out there. It helps them keep their jobs and helps us not have to employ two extra people,? Vitale says.