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To outsource, or not
to outsource? That’s the question you face when deciding who
is to do the various maintenance and repair tasks needed to keep
the fleet up and running. Most contractors we talked to say they
are outsourcing more fleet work, or at least the same volume, as
they did five years ago.
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PHOTO: BLYTHE CONSTRUCTION |
But the decision is not
simple. The goals: to hold hourly equipment costs to the lowest
levels possible—and to maximize uptime. “There’s
no one cookie-cutter concept that fits every scenario,” says
Michael A. Bates, equipment services division manager at Cajun Constructors
Inc.
“You’ve got
to do the math every time,” Bates says. “And doing the
math includes factoring in the cost of downtime. You may save $2,000
doing it in-house, but spend several thousand dollars in downtime—in
labor, transportation, and more.” Based in Baton Rouge, LA,
Cajun Constructors is a heavy-construction contractor with a fleet
worth an estimated $18 million in replacement value.
“We sub out component
remanufacturing,” says Bates, and most of the eight contractors
we interviewed do the same. Cajun doesn’t rebuild starters,
hydraulic pumps, transmissions, boom cylinders, and most components
of similar complexity. For major components, the firm either does
an exchange or has them rebuilt.
At K-Five Construction
Co. in Lemont, IL, Shop Administrator Dave Gorski knows well that
downtime can get expensive. “If an asphalt paver goes down,
that’s $4,500 an hour,” Gorski says. “A concrete
paver going down can run you up to $18,000 an hour. Because K-Five
has a shop that employs 16 mechanics and eight more welders and
tire repair people, the firm can often handle repairs in-house.
But it’s not a given.
“I don’t do
something in-house just to say I can do it in-house,” says
Gorski. “It all depends on what is going on at the time. My
tendency is to do what’s most efficient for the company. Not
always can outsourcing get the job done faster.”
In 2003, K-Five’s
mechanics were fully occupied doing other things when oil analysis
showed an alert on the transmission fluid in a Cat 988B wheel loader.
Gorski outsourced the repair, which turned out to be a gear showing
premature wear. The repair cost just $7,500—far less than the
$30,000 or more that a catastrophic failure would have cost. “We
needed the machine,” says Gorski. “It was used for charging
a rock crusher.”
Light Vehicle PM
Like many contractors, Cajun outsources the preventive maintenance
(PM) work on light vehicles and pickups. The firm operates some
110 pickup trucks and about 20 cars and SUVs. Of those, about a
fourth are leased vehicles, and the rest are owned. The leased deals
include maintenance. “Leasing affords us a fixed cost scenario
and a closed-in time frame,” says Bates. “We know exactly
how much those vehicles will cost us.”
Other vehicles are maintained
through the Ford Quality Fleet Care Program, a nationwide plan.
Local Ford dealers do the maintenance at various locations and then
submit bills to Ford, where they are consolidated and sent to Cajun.
Costs for repairs, oil changes, and lube jobs are set at fleet rates
that vary somewhat with labor scales across the country.
“We’re very
happy with it,” says Bates. “The warranty travels from
state to state. If we have a brake job done in Georgia, and the
pickup’s brakes fail in Kansas, the warranty travels. Plus,
the dealers all submit paperwork to Ford, and Ford gives us a consolidated
bill. We don’t have 25 dealers billing us for their work.”
Another plus for the
program is that the first burden of approval for repairs, tires,
or accessories falls on the dealer. If a Cajun foreman pulls into
a Ford dealer and wants four new tires, the dealer will pull up
the vehicle identification number on his computer—and must
get approval from Cajun’s Equipment Services Division to sell
the tires.
Outsourcing Small
Machines
“We aim to be the lowest-cost provider of safe, reliable
equipment to our company,” says William White, equipment division
manager at Blythe Construction Inc. of Charlotte, NC. The company
annually places some 150 million dollars’ worth of heavy construction,
including earthwork, asphalt paving, and bridges.
“We go to great
lengths to measure all our costs,” White says. “And the
things we are outsourcing today are things that we have measured
and that we can obtain at a lower cost by outsourcing.”
For example, Blythe currently
has two projects that are more than 50 miles from Greensboro, NC,
or Greenville, SC, two centers of operation for the company. And
Blythe chooses to outsource fueling services for those two projects.
“It pays for us to have an independent fuel company take a
tanker out there, keep those machines topped off, and take the hour
meter readings,” says White. Fueling costs, he emphasizes,
must include the driver’s time, liability insurance, taxes,
depreciation on the truck, and more. If all of those costs total
$2.50 per gallon (not a real number), but an outsource company can
do it for $1.00 per gallon, then outsourcing is the obvious choice.
Moreover, Blythe has
found that renting small equipment and some tools is more effective
than owning machines such as pumps, compressors, small rollers,
Bobcat skid-steer loaders, and the like. “We’ve partnered
with Rental Service Corporation [RSC],” White says.
“We have a single
point of contact with RSC,” he explains. “We can call
our RSC man in Charlotte and say we need a plate tamper and a compressor,
and they’ll deliver the equipment to any location in the Carolinas.”
White credits John Sharp, his equipment support manager, with helping
set up the rental program.
There’s more. RSC
consolidates all Blythe’s rental bills and sends in one monthly
statement. And Blythe can go to a password-protected location on
RSC’s Web site and gain access to daily updates on equipment
being rented—and its cost. “At any given time we may have
20, 30, or 40 pieces on rental, all scattered around on 15 jobs,”
says White. “We can go to that Web site and see it all—real-time
information as to what we have on rent every day.
“One call does it
all: the real-time Web site, the consolidated billing—all those
things have made this partnership cost-effective for us,” says
White.
Doing It Yourself
Dave Dingey is maintenance manager for Excavating Unlimited,
a Columbus, OH, contractor that owns 125 to 150 pieces of mobile
equipment, including 18 excavators. The firm employs five mechanics
and practices a detailed PM program that is performed in-house.
As a result, the company succeeds at keeping costs low. “We
look at the manufacturers’ guidelines of costs per hour, and
usually we’re under the costs that Caterpillar publishes for
its machines,” says Dingey.
If dealer support is
not up to par for a given brand of equipment, Excavating Unlimited
takes on the job in-house. Currently the company is tearing down
and rebuilding one twin-engine scraper, and plans to rebuild a second
one as well. “We have a good mechanic who can do the work,
and we don’t have the dealer support from some manufacturers
that Caterpillar or John Deere provides,” Dingey says.
He will send out each
scraper’s two engines and two transmissions for rebuilding.
“We bought the two used scrapers recently, and we’ll totally
rebuild them this year,” Dingey says.
“We can overhaul
engines if we choose, but we don’t do it very often, because
there’s no warranty when we do it,” says Ervin Yahr, shop
superintendent for Fred Carlson Co. LLC, a Decorah, IA–based
contractor with an estimated $50 million fleet (replacement value).
“We outsource the repair and rebuilding of transmissions, rear
ends, hydraulic pumps and motors, starters, and alternators.
“We used to do a
few engines ourselves, but now we outsource them all,” says
Yahr. “We just don’t have the personnel with the expertise
that engine rebuilding requires. Plus, outsourcing allows us the
time to do the things we really know how to do.”
“We do a lot of
outsourcing of components,” says Rex Davis, vice president
of equipment at RMCI Inc., an Albuquerque, NM, contractor with three
full-time mechanics. “We don’t do in-house engine rebuilds
or components, and many times we outsource the labor of removing
the component to the dealer. We have the ability and the expertise
to do the removal and replacement—it’s just more economical
to job them out.”
Besides freeing up mechanics
to keep other equipment running, outsourcing components means that
RMCI’s mechanics don’t have to become experts in several
brands of equipment. “It becomes overwhelming to have to know
all about a Cat loader, a Volvo loader, and a Komatsu loader,”
says Davis. “Even if you’re just replacing an engine,
there are certain techniques you use on one that you would not use
on another.”
Winter Maintenance
Carlson shuts down construction during the winter, brings the
equipment inside, and puts the operating crews to work repairing
and maintaining machines. “In the winter we’ll have 40
guys wrenching,” says Yahr. “They’re foremen and
operators, and they each have their own expertise. Some guys work
on Caterpillar equipment, some work on concrete paving equipment,
and some work on asphalt paving equipment.
“For the most part,
foremen and operators work on the equipment that they run,”
Yahr says. “They need to know how to repair it during the construction
season as well.”
Today’s computerized
equipment does require more maintenance to be dealer-performed,
Yahr says. “The Mack trucks are all computerized, and so are
the more recent Caterpillar machines,” he says. “We haven’t
bit the bullet to buy the computer to do the diagnostics on Mack
trucks or the Caterpillar stuff. It’s hard to justify buying
a computer for two out of 20 bulldozers.”
Yahr is not alone. Todd
Fulsom is shop manager at Kelpe Contracting Inc. in Wildwood, MO,
which operates a fleet with a more than $10 million replacement
value. “If you only have a few computerized machines, you can’t
afford to buy the computer to analyze the codes,” he says.
However, some machines—such as one Komatsu excavator owned
by Kelpe—have specific fault codes that come up on a display
and enable a mechanic to troubleshoot the problem. “You can
look up the code in the manual,” says Fulsom.
Other machines have fault
codes that are less specific. “We have some New Holland excavators
that have codes to point you in the general direction, but you still
need detailed diagnostic equipment for them,” says Fulsom.
Yahr says he keeps spares
for components that are likely to break down with any frequency.
“It’s pretty much a guessing game as to which components
to keep on hand,” Yahr says. “If something breaks down
every year or year and a half, it makes sense to stock that component.
We keep a couple of rear ends for certain trucks, and we keep starters
and alternators on hand for all our equipment.”
Pittsburgh contractor
P.J. Dick/Trumbull found it much less expensive to outsource the
rebuilding of six Caterpillar D8N dozers than to buy new D8R machines.
The dozers, which had some 20,000 frame-hours on them, went back
to the dealer for rebuilding. “The rebuilds cost us $220,000
apiece—about half the cost of a new dozer,” says Robert
Decker, corporate equipment manager for the firm. “We rebuilt
everything—the frame, wiring, hoses, all components were rebuilt—the
works.”
Decker and his mechanics
have set up GearWatch software (by Profitool Inc. of Centennial,
CO) on a network of laptop computers that enables the company to
manage equipment maintenance in-house—with no paper. Mechanics
log onto the Internet, go to the company’s system site, enter
hour meter readings, and within 24 to 48 hours, PM work orders are
created. When the work is complete, the mechanic enters the work
completed and the hour meter reading again.
“Each of our 15
mobile mechanics has a laptop,” says Decker. “We’ve
used this system for about two years now, and the laptops have considerably
improved the level of our maintenance. Why? There’s no paper.
The mechanics use the laptops for diagnosing machines and for e-mails,
and all parts and service manuals are on the laptops. We’ve
eliminated buying the big, thick parts books.”
For oil analysis, the
contractor turns to WearCheck, an international firm based in Cary,
NC. Across the contractor’s $30 million fleet, engine oil,
final drive oil, and transmission and hydraulic fluids all get sampled
for oil analysis. And three times a year, coolant is sampled as
well. The cost is about $10 a sample, and P.J. Dick/Trumbull runs
about 2,000 samples a year. Decker figures it’s money well
spent; probably 30% of the samples indicate problems ranging from
abnormal to severe.
At K-Five, Gorski says
oil analysis is inexpensive insurance. His company spends about
$10,000 a year to have samples analyzed on a $70 million fleet.
Only a small percentage of oil samples indicates problems. Often,
he says the problems turn out to be housekeeping errors. Somebody
may have used an old antifreeze jug to hold engine oil, and then
topped off the engine from that container.
In summary, outsourced
tasks need to strike a balance with the work you’re doing in-house.
That balance point will be different for every contractor—and
much of the decision depends on the situation at the time.
Daniel C. Brown is
the owner of TechniComm, a communications business based in Des
Plaines, IL.
GEC
- July/August 2005
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