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FMI Quarterly/September 2014/September 1, 2014

Chief Equipment Officer or Firefighter?

Industry16_imageMaximize equipment value over the long term with strong maintenance programs.

As the industry heads towards a steady recovery, many equipment-intensive companies are getting blindsided. The equipment they have been emotionally invested in is no longer as reliable as it once was. Several forces at work here combine to create a perfect storm of sorts for construction companies.

These forces include:

Too Lean: In order to preserve working capital and get lean, during the downturn, many companies minimized their investments in equipment repair and replacement.

Seeing Red: Many fleets are in the red zone as far as their useful lives are concerned. Five years of recession is a long time to postpone equipment investment and can result in an older average age of equipment. As a company’s entire fleet reaches the red zone, repair costs exceed the value of the equipment, and unplanned breakdowns become the expectation of the field.

Detached: The equipment manager has not been part of the company’s future planning sessions, doesn’t hold a place at the table with company leadership, and isn’t resourced effectively to run the shop and maintain data tracking and information gathering that many companies use to raise maintenance program standards.

War on Talent: The labor shortage widely affecting the construction industry is even worse for mechanics who, on average, get paid less than typical craft personnel wages. These technical experts are the first line of defense to keep equipment running and improve project productivity. While spread thin, they can become task-oriented and lose sight of their customer service orientation, creating a blame-laden culture.

Data: Most companies have not invested in a maintenance management system or implemented it well. They have little or no data, cost history or predictive analysis ability. In the future, smart companies will use data analysis to proactively manage equipment and its costs.

Proactive: Lack of planning at the superintendent/foreman levels leads to a very reactive shop and compounds the issues above. In such instances, emergency calls for equipment greatly outnumber the planned calls within the shop each week.

Silos Exacerbate the Problem: Conflicting Demands

Equipment management can be challenging. Each C-level executive wants equipment managed for a different purpose, often creating confusion for the equipment manager and staff (Exhibit 1). Equipment acquisition and management are both critical and cultural; and often a tone set by the founder (sometimes three generations back) continues to drive the approach.

2014q3_ceo_firefighter_ex1

Indeed, all of these demands are important. Managing these critical company assets, making effective decisions and driving business value require a strategic mindset. Without this mindset, companies will be hamstrung by constantly changing market conditions and high operational tempos. Equipment managers of the future must balance company needs and demands of the leadership team while holding the best interest of the company in mind. Many equipment managers get caught attempting to satisfy too many bosses without clarity about overall priorities.

One of the equipment manager’s most effective roles involves providing clarity and bringing the leadership team together to discuss company equipment priorities and optimize support to operations while minimizing long-term costs. These are often difficult, detail-laden conversations. Connecting the silos, finding common ground and resourcing become top priorities for the chief equipment advisor. Since every company needs a clear and distinct set of priorities to support the company strategy, one starting point for companies is to objectively assess areas like:

Fleet: Consider each piece of equipment, its utilization and its repair and salvage costs. Consider how these factors tie into company strategy. Would $50,000 be better spent helping the company achieve improved profits when invested in a different asset?

Management systems and processes: Do we have a clear efficiency map? What data do we need to make the right decisions? How can we efficiently begin collecting that information? What is the amount of unplanned downtime we have each month? How can we reduce that and share this information?

People: Equipment management requires customer-service-oriented technicians who plan effectively and regularly adjust those plans. This is a high bar to hurdle. Having great motivation and team morale in the shop can help inspire extra effort when needed, retain strong players and attract new talent. Strong leadership and communication within the shop can make all the difference.

2014q3_ceo_firefighter_ex2Relationships across the company: Are equipment acquisition, planning and maintenance natural parts of operations or just activities that must be endured? Is the equipment manager regarded as a strategic partner and businessperson or simply a lead mechanic? How effectively does operations proactively plan and coordinate? (Exhibit 2)

Value-Added Roles

While every company has different equipment needs, the equipment manager can be one of its greatest assets by bringing the following benefits to the company:

Climb the ladder to improve maintenance posture. One of the most important roles of the equipment manager is to help the business climb the ladder from reactive to proactive maintenance posture. In a sense, the maintenance management system becomes a machine of its own, set in motion and improved regularly. (Exhibit 3)

2014q3_ceo_firefighter_ex3

Know strategy and ensure company is connected. Shifting from public to private work or into more foundation or underpinning work, for example, will require a different fleet management.

Make the fleet more efficient through technology. The modern equipment fleet continues to evolve rapidly. Komatsu partnered with Rio Tinto to develop 120 autonomous dump trucks to operate a mine 24 hours a day for seven days a week continuously for the past two years. The technology is already developed. Equipment manufacturers have spent tremendous energy identifying needs of the workforce and tailoring the design and functionality to meet those industry needs (BIM integration, GPS, etc.). Operations must have an inside track on the opportunities and unique applications needed to make the fleet more efficient, given the rapid changes of the industry.

Integrate the asset management program with operations. A great asset management program relies heavily upon interaction with operations. We typically see companies with great operations take responsibility for the care and use of the equipment, plan better and be more efficient in their equipment needs. See Exhibit 4 for common tools that should be integrated with maintenance management.

2014q3_ceo_firefighter_ex4

Conclusion

As the market continues to improve, companies are beginning to remember the value of strong maintenance programs and of dedicated chief equipment managers for maximizing equipment value over the long term. This complex role requires an equipment expert and a strong company leader. A best-in-class equipment program’s downstream results include improved safety, better morale and quality; as well as successful winning and execution of work. Companies can no longer stand by the cultural and emotional equipment decisions they made years ago. In this new market and economy, smart companies recognize the importance of their assets and invest properly.

 

 

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