By Don Kafka
It's doubtful that anyone would disagree that improving profitability is top of mind for most contractors. What's hazy is how to achieve it in today's economy, particularly given rising material costs and increasingly competitive bids from contractors hungry for projects.
Luckily, there may be light at the end of the tunnel from the American Recovery and Reinvestment Act (ARRA). An influx of government spending for construction projects, including highway work, could bring a resurgence in projects for the asphalt industry. At the same time, this means more firms are throwing their hat into the bidding ring than in the past. Does this mean it's necessary to come in with the lowest bid and work for low to zero profit margins? The answer is a resounding "no," if tools and equipment costs are managed effectively.
One area in which savvy asphalt producers and contracting firms can drive bottom-line results is by improving their tool and equipment management. According to a 2007 survey conducted by the National Equipment Registrar, contractors lose $300 million to $1 billion annually because of decreased productivity and business interruptions from lost or stolen construction resources. Effective tool and equipment management with sophisticated technology will help firms keep track of valuable resources and increase profit margins so companies come out ahead during the bidding process.
What can you control?
While certain costs, like steel, oil and concrete, constantly fluctuate, it's still possible to deliver measureable improvements on items that don't swing so much - namely tools and equipment. A serious drain on profits occurs when tools and equipment aren't managed properly.
Here's a case in point. ToolWatch, a technology company providing tool and equipment systems that track and manage resources throughout an entire construction organization, followed the trail of a misplaced $80 grinder. After incorporating time wasted looking for the tool, submitting a request for a new tool and tracking down an unused tool to send to the site, the cost came to a whopping $300 - almost four times the grinder's actual value.
Combine the actual cost of a missing tool with the possibility of increasing a project's timeline and budget, it's easy to see how quickly a low-cost tool takes away from a project's profitability.
Where to begin
While it can seem as if managing construction costs requires a financial degree and access to a crystal ball, it is possible to deliver measureable improvements with an effective tool and equipment management system. By implementing tool tracking technology to collect valuable data, contractors can reduce tool and equipment costs by 50 to 80 percent. An effective tool and equipment management system will:
- Decrease tool and equipment loss - Real-time data on where construction resources are at any given moment increases employee accountability, tool retention and productivity.
- Reduce new tool and equipment purchases - Effectively managing existing resources reduces the need to buy costly new tools and equipment before projects begin.
- Streamline maintenance activities - Automating the maintenance activities required boosts the lifespan on existing tools and equipment, reducing the need to replace them.
- Increase tool and equipment utilization - A systemized approach to managing resources lets managers know where and to whom tools are assigned, which reduces tool loss and hoarding while optimizing materials' mobility.
Steve Sciotto, equipment operations manager for Matrix Service Industrial Contractors, Inc., said that access to real-time tool and equipment data "increases utilization and reduces capital spending."
What types of technology are available?