According to the American Rental Association’s (ARA) current forecast, construction equipment rentals will remain strong through 2018. Rental fleet owners will need to manage their inventory efficiently in order to meet the renters demand. Investing in fleet technology can make profiting from the demand easier and stronger. Let’s look at three ways to keep your operations humming at full capacity.
The demand for renting is currently buoyed by the talk of infrastructure spending and possible tax reforms, per the ARA. Manufacturers scaled back production due to the downturn in the oil and gas industry. A warm winter allowed projects to (re)start earlier than expected. All of this activity means that equipment may become unavailable. This scarcity provides opportunity.
Let’s take a look at an example company to get a better idea. Bob and Judy Smith own a three-branch rental operation, Cyclone Rentals, near the Quad Cities in Iowa. They have a mixture of farm and traditional construction equipment. The agriculture assets are idling after planting season so the couple schedules regular maintenance before the fall harvest. Construction equipment is moving off the lot, sometimes for an extended period of time. The Smiths are experienced though. They know how to balance their inventory, manage their margins and encourage clients to take proper care of their rentals to keep from running out of stock.
Balancing Inventory
Bob isn’t keen on buying new heavy equipment. It is a huge investment for Cyclone. They had to finance a couple of emergency purchases and it was expensive. After those situations, the Smiths put plans in place to reduce that risk. If one lot gets down to one or two of an asset, they may float inventory between locations. A trend of a regular low supply of a certain cat class, or category / class, might mean a new purchase is in the near future. Or, if a class of machines are not being utilized, cycling fleet out will be important. This data is critical to maximizing profits and keeping the right machines in the rental fleet to satisfy the market efficiently.
Preventative and predictive maintenance is another way they reduce low inventory. It ensures that their assets last longer and that they’re able to schedule upkeep when it is more convenient. The Smiths use the telematics solution because it c data from the CAN bus which provides access to direct engine hours and diagnostic data vital to machine health. Fuel levels, service interval indicators, hydraulics and other key usage information are no longer a manual or reactive part of the business with today’s technology. Judy knows when a piece of equipment is ready to be sold as used or near end of life by leveraging key fleet management reports that do the heavy lifting for her decision making.
Manage Margins
While raising rates is never easy, Bob and Judy know that it makes sense when they have a limited amount of inventory or particular assets are in high demand. A For Construction Pros article noted that rates could rise between one and four percent “depending on equipment type and location.” A higher fee could help get equipment back on your lot faster too. The Smiths’ telematics system lets them know when an asset has been underutilized (based on ignition on/off). They like to reach out to the client to see if they still need the equipment. It could save the client money and allow the branch to re-rent it elsewhere. Bob and Judy are focused on reinvesting in the business, including more inventory when all indicators prove this growing business can be even more successful.
Discourage Abuse or Theft of Service
The Smiths know that accidents happen. Construction and agriculture are dangerous industries. Still, equipment that is damaged or not returned promptly can put a strain on their operations due to extra time necessary to repair or retrieve assets. A Rental Management Magazine article states that damage waiver fees typically range between eight and fifteen percent of the rental fees. The Smiths’ asset telematics alerts them to excessive usage per rules they’ve defined. The documentation has helped them enforce their damage waiver clause and process insurance claims faster a few times. Real-time utilization reports also help them optimize billing and reduce disputes.
In regards to theft of service, Cyclone Rentals can use Esri-based mapping, like the option included with CalAmp, to locate a late return. The breadcrumb detail allows them to see the daily activity if they suspect the machine is being used at a different site. They setup a geozone around their lot so an alert will be sent when a piece is dropped off, even after hours. Their system even integrates into their ERP system giving them an edge on communication to all branches and data accuracy. Not to mention the savings in taking out administration duties to spend time on real business. An additional layer of protection the Smiths could employ is a theft recovery solution if they’re concerned about assets being stolen.
Summary
As you can see, Bob and Judy have a good handle on keeping inventory available for rent. They use their rental management system and telematics solution combined with years of experience to increase rental revenue at Cyclone Rentals. The Smiths spot trends and adjust their business accordingly to stay competitive. Their success is an example of how to leverage technology to increase the bottom-line in this new economy. What processes or tools are you using to manage your equipment assets?
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