How to Reduce Construction Fleet Management Costs
Construction fleet management is used to reduce costs by evaluating capital expenditures, operational expenses, and asset utilization. This article explores the proactive strategies that are effective and the technological solutions that help to reduce costs.
Investing Capital Wisely
Construction fleet equipment may be purchased, leased, or rented. Effective capital deployment compares the options for each piece of equipment.
Buying equipment usually involves significant capital investment up front. Other considerations include the financing costs and any possible tax benefits, which should be discussed with tax advisors. There is also the opportunity cost of investing in equipment, if this same money may be more effectively used for other things needed by the business.
For many construction businesses, leasing is attractive because it requires less capital investment up front. Leasing expenses can be allocated over the useful life of the equipment. The equipment can be replaced more frequently when it is on a leasing program. To save money on leases, it is beneficial to have multiple sources of funding for equipment acquisitions in order to get the best deals.
If the equipment is used infrequently, it may be a better decision to rent it on a short-term basis.
Lowering Operational Expenses
In addition to the labor cost of drivers, operational expenses include maintenance, fuel, and insurance costs.
Maintenance is made more effective and cost-efficient by using technology to monitor vehicles and schedule regular, preventative maintenance.
Maintenance management systems provide the following:
- Complete vehicle monitoring that includes the drive train, fuel supply, engine heat, oil pressure, tires, and electrical systems.
- Automatic alerts to the driver and the company for any engine trouble or vehicle malfunction.
- Regular diagnostic reports.
- Reminders for preventative maintenance such as tune-ups, oil changes, and filter changes.
- The complete history of the vehicle maintenance performed.
Buying fuel at wholesale prices under long-term contract and using fuel cards helps companies reduce fuel expenses. Fuel reports and mileage tracking are used to calculate fuel-efficiency.
Fleet insurance is highly competitive. This insurance should be subject to regular reviews. Annually, it should be put out for bid with multiple insurance carriers that have similar financial ratings.
Improving Asset Utilization
Maximizing asset utilization increases the overall productivity of the company, ensures accurate billing for asset usage, and improves profitability.
It is critical to use a sophisticated asset-tracking system for construction fleet management. Having this data allows comparison with performance benchmarks and provides management with the information it needs to make better decisions.
Asset tracking includes the following:
- GPS Location Tracking: This allows the company to know exactly where all equipment is located at all times. This shows any unauthorized use of the vehicles, improves routing, and helps with theft recovery.
- Fuel Usage: Better routing to job sites reduces fuel costs. Vehicle idling time is monitored to reduce fuel waste and employees are taught to avoid idle time.
- Driver Behavior: Drivers are monitored to prevent aggressive driving such as rapid acceleration in unnecessary locations, hard cornering, and overly harsh braking. Text messaging and mobile phone use is monitored to avoid distracted driving. Speed alerts and maximum-speed governors are used to prevent traffic violations. Key locks are used that will not operate except during work hours or if the driver is intoxicated.
Renting Equipment Out
Many construction firms find it very beneficial to offset some of the costs of owning and maintaining equipment by renting it out to other firms when the equipment is not scheduled for work on a company job.
Selling Under-Used Equipment
Review the asset management reports to determine if a piece of fleet equipment is under-utilized. Determine the total costs of owning, maintaining, and operating the equipment and the number of productive work hours it was used. Calculate a cost per hour for each piece of equipment that is owned. Compare this internal hourly rate with the cost of renting a similar piece of equipment for any short-term needs.
If renting the equipment when needed on an occasional basis is less costly, then this piece of equipment is a good candidate to sell in order to deploy the limited capital resources of the company more effectively.
By following these best practices in construction fleet management and using sophisticated technological solutions, which are now available, companies will operate more efficiently and experience a positive impact on their bottom line.