Reducing equipment idle time saves big $$$.
Effectively, if you aren't actively managing equipment idling, that's exactly what's going on. Today, off-road diesel is around $2.25 a gallon but it wasn't long ago that it was at $4 per gallon (and the price of fuel is expected to steadily increase again over the next two years). At $4 a gallon, letting a piece of equipment idle for an hour is just like burning a $10 bill. Excessive idling is an expensive and wide-spread problem, but there are things you can do about it.
An analysis of idle time
While there are a lot of factors that contribute to a job's cost, excessive idling is the one pervasive, significant cost that you can immediately control. Actively monitoring and, ultimately, managing when and how long equipment idles can have a dramatic impact on the overall cost of operations. Idling costs money not just in fuel, but it also increases the cost of maintenance by piling on non-productive hours. While we all know "in our gut" that excessive idling is costly, calculating the cost associated with idling can be rather subjective. Calculating the cost is made difficult because there are lots of variables that can be used in the calculation, all of which are up for interpretation. The easiest way of calculating the cost of idling is to focus on a few major variables including:
* Amount of idle time per day;
* Amount of diesel consumed per hour of idling;
* Cost of diesel fuel;
* Number of days of operation per week;
* Number of hours between preventative maintenance activities; and
* Average cost of each preventative maintenance activity.
As you can imagine, the values for each of these items vary greatly from equipment to equipment, region to region, and even site to site. Let's simplify things again and use values that we have, through research, found to be representative of equipment fleets around the country. A word of caution --if you have a fleet that's composed of lots of large haul trucks and excavators your numbers are going to be bigger/more costly than if your fleet was made up of smaller equipment.
We all know equipment idles a lot, but we are just now learning how much. Think about how many times you have gone to a jobsite to find equipment sitting and idling. The questions that have not been answerable, until recently, include how long had it been idling and how often does that happen? What we have found from extensive experience is that the average piece of heavy equipment idles for about two hours a day. That sounds like a high number but we have found it to be the case. We have also found that, on average, equipment burns about 2.5 gallons per hour when idling. Larger equipment burns a lot more than that and smaller equipment burns less. For example, a 627F scraper can burn 10 gallons an hour while idling and a D6 can burn eight, while a small backhoe or skid steer loader will burn 1.5 gallons or less.
We find that on average construction companies work, excluding holidays, about 40 weeks a year (in the southern part of the country it can be as high as 50 weeks a year) and they work, on average, five days a week. To calculate, let's set the fuel price at $4 per gallon, assume a 300 hour preventative maintenance interval (again some higher, some lower) and each preventative maintenance event runs about $600. One last thing before we calculate costs. Not all idling is bad and some amount of idling is necessary and unavoidable, such as warming up in the morning or jumping off to check a stake or a call from mother nature. Of those two hours a day that the equipment is idling, we estimate that 60 minutes of it is justified. This is an average across all equipment. Our experience shows for instance that idle time on excavators is lower than that average, while loaders and haul trucks are higher than average as they legitimately have to "wait" in their normal daily operation.
Here are the numbers we are going to use in our calculation:
* Equipment works an average of five days a week;
* Equipment works an average of 40 weeks a year;
* Cost of fuel = $4.00/gallon;
* Fuel burned while idling = 2.5 gallons/ hour;
* Maintenance interval = 300 hours;
* Average price per preventative maintenance service = $600; and
* Reduction in idle time per day = 60 minutes.
Hard costs of idle time
The results are staggering: 60 minutes a day = 5 hours per week. That doesn't sound like a lot by itself. But multiply it times 40 weeks and now it adds up to 200 hours. That equates to $2,000 in fuel costs and 2/3 of a preventative maintenance or $400 totaling $2,400 per piece of equipment in a 40 week year. With a fleet of 100 pieces that totals $240,000. Additionally, in five years, that equipment has hundreds of more hours on it than it should have which dramatically changes its value. Cut these numbers in half and they are still large. You may think that we're too aggressive here but many customers can testify that these high numbers are valid. Idle time is a cancer to the industry and to your business.
If you are wondering where the profit margins you were achieving in the 90's went, look no further.
If you would like to do your own calculations about how much idling is costing you and your company, this calculator could help you: www.earthwavelabs.com/calc/idlecalc. In an effort at full disclosure, note that this is an application developed and hosted by my company, but this page with the calculator has no sales or marketing emphasis.
Before we go into detail about an approach to managing idle time and its associated costs, we have to address an important point about idling. When reading the term "reduce idling" many people's first thought is simply turn off the equipment that is running. While this is valid and it will keep you from losing money, it's also perfectly valid to reduce idling by getting the equipment to work more. For example on utility crews turning off equipment may be more applicable, but on a grading crew where the equipment should be running and working all day, increasing productive time is a more valid and profitable method of reducing idle time. In any event, the "cost of idle time" is the same. If it is sitting idling and it should be turned off or should be working, that hour's cost is still the same. The difference is that when the equipment is working it is also making you (more) money.
Historically, construction company owners had very few options available to them if they wanted to manage excessive idling in their fleet. Truthfully when diesel was $.50 or even $1.50 a gallon, the cost of excessive idling was nothing compared to other operating expenses. Because of this, in general, idling hasn't been one of the activities monitored, tracked or recorded using time sheets or job costing software. This means there has been little, if any, data that could be used to benchmark, track or manage idling. Lack of this data means that the only options available to the construction company owner have been:
* Education of equipment operators about excessive idling;
* Establishing new company guidelines and rules regarding idling;
* Creation of new reporting processes and mechanisms to monitor idling; and
* Spot checks of project and job sites to evaluate the company's performance to the idling rules/guidelines.
All of these options have two things in common: they rely on people being motivated, conscientious, and consistent enough to make them work and using ineffective manual methods of observation and measurement, these objectives were impossible to manage and enforce.
It may be the case that most employees are reliable and motivated to make the company a success. However, no matter how motivated employees are, there is still the element of "human nature." People forget, get busy, have different motivations, get distracted and are resistant to change. Additionally, asking busy people to make time in their day for a new process that has limited immediate impact on a personal level is always difficult. In the past, management of excessive idling has been nearly impossible because of:
* The limited options available to the construction company owner;
* The fact that these options require the active participation of the company's employees; and
* The sometimes daunting task of instituting new processes.
All of this changes though when you introduce modern wireless technology or "telematics" to the mix.
Telematics is an integrated system of products including hardware, wireless communications networks, software, internet applications and user interfaces that monitor what is going on with equipment, relays that information wirelessly to some central location and then provides reports to relevant personnel. For heavy equipment contractors, a telematics solution should focus on the industry's unique needs and provide useful information. Ideally, a telematics solution should be able to monitor any piece of equipment and measure when that equipment is running, moving, stopped, parked, carrying loads, dumping loads, being transported and, most important to this discussion, idling or working.
While technology is great, without the proper processes, it is useless. In the case of idle reduction, a telematics solution would tell you every time a piece of equipment was idling for more than 15 minutes. But without being able to take action on that information, the information would not be beneficial. To take advantage of a telematics solution, it needs to be part of a broad idle reduction initiative that includes:
* Operator and field management education;
* Real-time alerts when equipment has been idling longer than you want it to be;
* Methods for contacting operators, foremen, and/or superintendents when excessive idling occurs i.e., instant feedback on performance; and
* Dedicated and focused reinforcement of the importance of reducing idle.
By making telematics a part of a comprehensive idle reduction strategy, a construction company may recognize several benefits:
* A company can accurately break down a piece of equipment's activities and determine, in detail, when it's running and working or running and not working. Having this information means that companies can greatly reduce idle by turning the equipment off (saving money) or by increasing its productivity (making money). Other associated cost benefits include reducing excessive wear and tear on the engine.
* Using technology to automatically monitor each piece of equipment in the fleet eliminates manual monitoring. This means management receives unbiased information about how well their fleet or individual pieces of equipment are performing relative to a company's idling guidelines.
* By implementing technology that collects and processes data in the same way across all pieces of equipment, a company can eliminate any variability associated with data collection and reporting. Using manual systems, information reports will vary. Using a common technology and method of processing the data gives a construction company a true "apples to apples" comparison of their equipments' performance.
* Go Green! By significantly reducing idle time, you reduce diesel emissions. This will help the environment and also enhance the goodwill of your company in the community and with state and local governmental agencies.
Technology has had a tremendous impact on the construction industry over the past couple of decades. From GPS grading technology to cell phones to more sophisticated software programs, advances in technology have benefitted the industry and upper management. That's what good technology is all about: improving processes, reducing time and human error and improving communications.
Telematics is really addressing the "last frontier" of construction technology. It is going where technology has not gone before: out into the field to help you manage the millions of dollars spent annually on equipment and payroll. Because telematics takes advantage of other, already adopted technology present in a company, the financial benefits provided can be huge.
We have seen how excessive idling of construction equipment is alarmingly expensive to the construction contractor, puts excessive wear on the equipment, wastes fuel and damages the environment. By implementing a telematics system that can be used to help reduce idling, a company can see dramatic cost and maintenance savings and become more "green." In addition, the company can get all the benefits a telematics system provides, but pay for it by reducing excessive idling.
It's not often that you can find a way to get a system that pays for itself and improves your operations, but telematics can do just that.
John Hinds is the chief technical officer for Earthwave Technologies which provides wireless fleet management systems for the construction contractor and heavy equipment owner. (317) 218-6135, email@example.com, www.earthwavetech.com
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|Date:||Apr 1, 2009|
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