As all construction managers know, equipment hoarding – intentional or not – is a common pain point on projects. It can happen when superintendents intentionally hang onto a piece of equipment and don’t alert other teams that it’s available - even if they’re not currently using it - to avoid the inconvenience of not being able to get it back promptly when they need it themselves. There are also situations in which superintendents are solely focused on the project at hand and they even forget that a piece of equipment is in their possession but not in use. Thus, the equipment hoarding is unintentional.
This results not only in delays and inefficiencies across the organization as in-demand equipment sits idle, but usually in higher costs as well, since teams will often turn to renting equipment externally to get what they need if their own company’s equipment appears to all be in use. Of course, it’s rare that all the equipment is actually being used to its maximum productivity, leading to wasted resources.
Here are two ways to reduce equipment hoarding:
1. Use an equipment tracking system
It’s impossible to prevent equipment hoarding if you can only guess at how much it’s happening. Equipment tracking and asset management systems give managers the information they need to minimize equipment hoarding as the software measures machine work versus idle time, helping management identify underutilized assets. Equipment management software tracks all small and heavy equipment pieces in one system so managers can view all equipment data in one place, even if that data comes from third-party and/or manufacturer-installed telematics systems. Construction equipment management systems can also monitor both on- and off-road rented and subcontractor equipment. This gives managers a view into when machines are running or not. If they note extended time when the machine isn’t being operated, they can reach out to the project manager about its status and discuss moving it temporarily to another site where there’s an immediate need.
2. Establish internal rental rates
Generally, if a team rents a piece of equipment from an external company, they’ll get billed for its rental period regardless of whether it’s being used the whole time or not. However, this typically isn’t the case for equipment supplied internally by your own company. Therefore, more often than not, there’s no financial incentive for managers not to hoard equipment.
Setting internal renting rates can help prevent it. Using financial calculations, a company can approximate that one day’s use of an excavator is the equivalent of $1,000, or one hour is $200. Actually “charging” property managers these numbers against their P&L (profit and loss statement) will incentivize them to return equipment when it’s not in use. With this process, not only are you preventing hoarding, but you will also be capturing a more accurate picture of utilization leading to more accurate bids and future equipment budgets.
How costly can equipment hoarding be, by the numbers:
Equipment hoarding – intentional or accidental – can potentially lead to a series of unnecessary costs. The following scenario* illustrates how a piece of untracked equipment can be costly for productivity and ultimately, revenue.
X Construction Company is currently working on a project that requires the use of a skid steer for a two-week period on Job Site 1. Without the skid steer, Jobsite 1’s 12-person team cannot proceed further. After spending 2 hours searching – onsite and calling other job sites, including Job Site 2, to locate the needed equipment – Job Site 1’s team is unable to find a skid steer not currently in use. Even X Construction’s equipment manager is unaware of where a skid steer could be – or if there is even one not currently being used. The skid steer is, in fact, at Job Site 2; it’s just out of site behind the onsite storage unit because it has not been used for weeks and was improperly parked there by an inexperienced employee.
To avoid further delaying the project, Jobsite 1’s superintendent decides to – unnecessarily – rent a Bobcat S630 skid steer from a nearby third-party rental service. The skid steer will not be delivered for two additional hours.
In this scenario, the following costs could have been avoided with equipment tracking software:
- $357.60** - 4 hours of wages for 12 workers unable to be productive
- $2,000.00*** - 2-week rental cost for a Bobcat S630 Skid-Steer Loader ($200.00 per day for 10 days)
- $2,357.60 - Total costs accrued unnecessarily
Based on how many different pieces of equipment can be used on any given jobsite – and across many job sites – it’s not unfair to assume that this type of scenario could be a regular occurrence for X Construction. Imagine the costs if this is frequent.
With equipment management software, Jobsite 1’s superintendent would have been able to locate an out of use skid steer in a matter of minutes, then arrange for it to be delivered and continue the project with minimal delay. Or, in a more ideal scenario, X Construction could have used the jobsite management software to plan ahead and have the unused skid steer already on Jobsite 1 to use when it is needed – entirely eliminating any downtime or delays related to equipment hoarding.
Construction equipment hoarding contributes to various types of waste on job sites that, over time, can add up to huge costs. Reducing it will not only ensure more efficient equipment utilization and use of workers’ time, but also money. In an era of razor-thin profit margins and competition for skilled laborers, that’s something construction organizations can’t afford to lose.
To learn how to boost equipment usage and jobsite productivity, please visit: Equipment Utilization
*This is a fictional scenario used only to illustrate the impact of the inability to track your equipment for easy access when needed
**Average hourly construction worker wage defined as $14.90 per hour
***Quotation for 2 week Bobcat S630 rental provided by LAX Equipment rental