Profiting from Producing

In areas where jobs are considerable distances apart, a portable plant would be the best choice. Some markets experience minimal growth and have a small population density, while others may see workloads shift from one area to another due to seasonal factors.

A portable plant would be the most sensible in these types of areas as well. Also, it's typically easier to get a permit for a portable plant's locations than for a stationary unit.

To avoid any surprises down the road, explore restrictions and permitting fees early in the process. When it comes time to look into the actual purchase, cost factors will first need to be considered.

Looking into costs

With prices ranging from $500,000 to $4 million, an asphalt plant is a serious investment for any company, small or large. While it is necessary to compare plant prices, don't forget to also look at operating costs and production capacities.

A plant may cost less initially, but if it isn't fuel-efficient or doesn't produce enough tons per hour for efficient operation, it will cost more over the course of its lifetime.

Also, look at how much will need to be invested from the start, such as the cost of the mix components. This will help one calculate how much to charge per ton to turn a profit, while still keeping the price fair.

Finally, a first-time buyer will often make the mistake of letting the price of the plant dictate the decision. Once a company has control of its own asphalt supply, it will be able to sell hot mix and lay down considerably more material. Purchasing a plant that is too small will not be able to effectively support the demand and therefore would not be efficient.

On the other end of the spectrum, purchasing a bigger plant won't necessarily be the right decision. A plant with a capacity that greatly exceeds demand would be wasteful and unprofitable. While price is certainly a large factor in choosing a plant, don't let it influence the decision too heavily. Stay focused on what type of plant makes the most sense for the present situation.

What to expect with ROI

ROI scenarios vary from one plant to another, but the majority of new asphalt plants will realize a return in three to 10 years. A paving company moving into asphalt production will gain greater efficiency upon controlling its own asphalt supply. Add in the fact that the company is now producing a product to sell, and the ROI typically will occur quickly.

A number of money-saving factors contribute to bring about a relatively fast ROI. For instance, the excessive downtime truck drivers and paving crews experience while waiting for the hot mix is costly.

Trucks will no longer have to wait in long lines and the paving crews won't be held up waiting for the truck to return. Contractors will be able to lay more asphalt, faster allowing them to complete more projects, faster.

Less transport time will also contribute to increased efficiency in some cases. Rather than having to commute to a competitor's plant, a contractor with a portable plant can place it where it's most convenient for him.

Shorter hauls also mean fewer trucks will be needed to get a sufficient amount of asphalt to the crew. The combination of these factors usually results in at least 50% better truck utilization for a paving contractor who enters the production market. That can easily add up to $1,500 per day when figuring average truck costs of $70 to $75 per hour.

Also, a paving contractor who produces his own asphalt will no longer be forced to comply with competitors' asphalt prices or have to accommodate to their schedules.

The benefits are measurable and clearly show how much productivity can increase and costs can decrease by owning and operating an asphalt plant.

To upsize or not?

For the contractor already in the asphalt production business who may be considering a newer, larger capacity plant, costs and potential savings should be examined.

A more efficient, larger capacity plant will allow a company to take on more projects and bigger projects. And a newer plant will reduce maintenance costs and emissions, while offering a better mix consistency.