Telematics for Construction in Today's Economy: A Dollar Saved Is More Valuable Than a Dollar Earned

Wireless Asset Tracking & Management in today's economy: A dollar saved is more valuable than a dollar earned

Return on Investment (ROI) has been on the tip of every company's tongue since the economy began its downward spiral. Whatever you purchase has to save you money or make you money in a calculated, measurable timeline or you don't buy it - bottom line. Contractors fighting fierce competition, plummeting profits and increasing costs need all the help they can get. On first glance, wireless fleet management can seem like a costly addition, and one that's difficult to justify. It's not a machine you can put to work or materials you can use on the jobsite. It's information for intelligent business decisions. It's how your machines are working on the jobsite. It's about increasing efficiency and cutting costs. And in this challenging economic climate you have to cut to increase profits.

The Challenge: you can't manage what you don't measure... correctly

Contractors face an interesting conundrum: equipment usage (from hour meter readings) is used for job billing, service scheduling, budgeting equipment purchases and estimating work. However, almost every contractor I have worked with will quietly admit that this information is inaccurate and out of date. Inaccurate in that the information is manually collected in the field and subject to a variety of "mistakes" such as fudging, hoarding practices, timecards and other gamesmanship. Out of date in that at best this manually collected data is delivered 1-2 weeks behind real time. So how can a contractor efficiently bill, maintain equipment, make buying decisions and bid with such erroneous, stale data? This article focuses on how contractors can, have been and will, leverage wireless asset monitoring systems that deliver the real time data necessary for increased fleet efficiency and containment of operational costs.

These savings come about from increased fleet utilization and optimization, more accurate jobsite billing, reduced equipment idling, real time asset reallocation, decreased service and repair costs and reduced insurance premiums. Let's take a look first at how the technology works and then the average savings a typical customer will realize in the first year after implementation.

How asset tracking and monitoring works

Wireless asset monitoring involves three basic components:

1. A transponder unit mounted on the asset to collect data
2. A communication medium to transmit the data
3. A user interface, normally an Internet software package, where the manager views the data and converts it to useful information and reports

The transponder unit is typically about the size of a large ashtray and houses the GPS receiver and wireless radio. Wireless networks, the same used by mobile phones, provide communication between the transponder on the machine and the manager at the computer. The unit literally "calls" information such as: location, on/off status, usage data (on vs. working vs. idle time), and critical updates pertaining to machine health and unauthorized use directly from the asset to the software, cell phones, PDAs and email in real time. Additionally, the manager may "call" the unit from the software and request an update of this data, or other functions such as remote disabling of the asset, anytime with a click of the computer mouse. It is almost as if the machine has its own cell phone, from which it can call you and vice versa.

The Solution: what gets measured correctly gets done

Right sizing your fleet, a fleet size decrease of 5%-10% while maintaining the same level of work. Running an analysis quarterly, monthly, annually or whenever your budgeting needs arise of utilization by asset type based on actual run time makes it easy to see where your fleet has an excess and where you may need to add a machine. For example, you have 30 dozers in your fleet and requests are coming in for additional ones. A quick utilization report shows you have 15 dozers running at 80% utilization for the last quarter, 10 dozers at 50% utilization and 5 dozers at 20% utilization. The reality is that you don't need more dozers, in fact, you can shed a few to bring up the overall production of that asset class within your fleet - which also frees up the capital you had tied up in non-productive machines. I recently spoke with a customer of ours doing a round of "right sizing" and shipping underutilized assets off to auction, with an anticipated yield of $1-$1.3 million in cash. Formerly, those high value fixed assets were all sitting on their books and tying up capital and ownership costs, but with a few quick reports the fleet has become streamlined.

Improved jobsite billing of 10-30%. Some wireless fleet monitoring systems will empower you to designate boundaries on their mapping software which you label as your jobsites. As assets move into those areas, they are assigned to the job and as they move elsewhere they are reassigned automatically without manual entry. This allows you to run jobsite reports to see how much your assets are actually working, which in turn creates accountability at the jobsite level. No longer can machines be hoarded on jobs, while a similar asset is rented on a project down the road. Now you simply reallocate the machines within your own fleet first, before looking to rent another machine. Additionally, the any usage "fudging" is brought to light and the job is billed properly for the actual work performed by the equipment.

Reduced equipment idling by 1/3 on average. The hour meter is one performance metric, but it doesn't differentiate between "on time", "working time" and "idling time". Fortunately for you, a proper wireless monitoring system does. The obvious benefit: turning off the machine when it idles excessively, by implementing companywide idling goals and measuring them frequently. Reducing the idle time will dramatically cut your fuel bill in the short term and also give you a realistic usage barometer for that machine. Now you will schedule service not off the hour meter on the machine, but the true "working time" meter on the hardware unit- which means you will reduce the number of PMs required annually. Consider a service interval at 250 hours and a machine with 30% idle time, equating to 75 hours of idling per service. This means that every fourth PM is due to the idling hours alone, which is not a true indicator of usage. As you reduce your idling or simply schedule service off the actual "working" meter, you extend the P.M. interval and decrease the number required. Taking the example above, if you ran your service strictly off the true "working" meter then you would completely remove every fourth PM - and its associated costs.

Reduced service and repair costs of 15-40%: Using a wireless monitoring system provides a proactive service scheduling function (a report showing what is coming due) as well as a reminder if an asset is not serviced on time, thus preventing any from falling through the cracks. The result is fewer failures and thus less repair costs and equipment downtime.

Insurance savings of 20%-60%. Most wireless asset monitoring systems also double as theft protection systems with such features as nightly curfews, real time theft alerts, immobilization techniques, remote disable, geofences, etc. Ask your insurer what break they will give you for theft protection. If they can't justify it, then be sure to remind them that there is at least one underwriter out there offering at least 25% discounts on premium and a $10,000 theft deductible to contractors who invest in this technology

More bids, profitably. Armed with the real utilization information from previous jobs, your estimators will now map that to future bids. Rather than estimating, they are using actual numbers from identical work to make their bids more competitive and profitable.

Too good to be true? Consider the case of a customer coming up on their one year anniversary with our technology, having installed nearly 500 units on their equipment fleet a year ago. That investment has yielded a savings in excess of $3 million within 10 months from the exact same items discussed above, exponentially outweighing the cost to deploy. The investment today has paid for itself in the short term, and they are poised to be even more efficient and competitive as the economy turns around.

How to shop for and evaluate a wireless monitoring provider:

A quick Internet search for "construction equipment monitoring" or "equipment monitoring system" turns up dozens of results, so how do you select the right one for you? Here are some important factors to consider:

1. Provider background and support. Scary but true: consider that the ICUEE tradeshow in 2007 had 12 vendors selling this technology and ICUEE 2011 had only 3. Now more than ever, make sure your provider has been in this business for years and has the capacity to support you through the product's life. Is the product and company proven or are you one of the initial guinea pigs? Are you buying from the OEM, dealer, reseller or another channel? Always be sure to identify where technical support and/or training will come from, and if there is an additional charge for those functions.
2. Hidden Costs. The transponder unit will run between $300-$1200 USD and quantity discounts are often available. The monthly communication should be between $10-$40 per unit per month. Some manufacturers will levy an activation fee, annual maintenance fee, multiple user fee and/or software license fee so be sure to ask about these at the start.
3. Long-term contract. Most providers require an airtime contract extending from anywhere between one to five years, similar to a mobile phone agreement. There are a few "no contract" manufacturers who bill month to month, giving you the option to stop service at any time.
4. Automated delivery of reports. Most of the savings detailed in this article result from evaluation of activity reports, does this mean you need to log on and run these reports daily, weekly, monthly, etc or can you automate this process? A few systems empower you to setup delivery intervals and designate the person(s) to receive it as well as the time i.e. at 6 am Monday morning the shop superintendent will get the upcoming service report in his email inbox.
5. Fleet coverage: Even if you don't plan to track both your trucks and equipment initially, does the provider offer an integrated system for both? You may start with your equipment and find truck tracking to be a logical next step. Will the same vendor provide both systems or will you be using one vendor for equipment tracking and another for your on road assets?

Category: Tips and Tricks