equipment metrics and benchmarking - map your sho metrics...learn about the complexities of metrics...

1 1

Session W46

WEDNESDAY MARCH 5, 2014. 8:30 - 9:30am

Learn about the complexities of metrics and benchmarking

in the world of equipment management where few

universal definitions, norms and standards exist.

C.E.M.P. Central Inc.

Mike Vorster. CEMPCENTRAL, Inc . [email protected]

www.cempcentral.com

www.conexpoconagg.com

Equipment Metrics and

Benchmarking

2 2

How do we define norms and standards.

How do we measure success.


Benchmarking

3 3

Chapter 9 Performance Measures

Chapter 12 Budgets and Budgeting

To confirm what we will say and for more

details:

www.cempcentral.com


Benchmarking

http://www.cempcentral.com/

4 4

1. Standards.

What standards do we have, who defines them

2. Data, information and graphics.

How do we turn data into actionable information

3. Deployment, availability and utilization.

Surely these are the basics, how do we define them

4. Cost benchmarks.

How do we define benchmarks and present cost information

5. Fleet age benchmarks.

Are there standards, how do we track them

6. Some ideas.

Lets get outside the box

What I want you to take home


Benchmarking

5 5

1. Standards

100,000$

Less Direct Job costs

Labor 45,000$

Equipment 18,000$

Materials 15,000$

Sub contractors 5,000$

Job indirect 2,000$

Total 85,000$

Profit on operations 15,000$

Equipment costs

Depreciation 4,600$

Leases, loans 2,300$

Lisc insurance, tax 1,000$

Owning costs 7,900$

Labor 3,300$

Parts and supplies 3,700$

Fuel 5,000$

Operating costs 12,000$

1,000$

20,900$

1,200$

19,700$

18,000$

(1,700)$

13,300$

SG&A Costs

Estimating and job planning 4,000$

Human Resources 1,125$

Administration 900$

Facilities 1,100$

Finance 800$

7,925$

Operating Income 5,375$

Other income and expenses 1,500$

Nett income before tax 6,875$

Tax due 3,555$

Income after tax. 3,320$

Revenue

Total equipment costs

Equipment charged to jobs

Gain/(loss) on sale

Gross profit from operations


Total SG&A

Un recovered equipment costs

Equipment indirectGenerally Accepted Accounting Principles.

International Accounting Standards Board

Financial Accounting Standards Board

Who sets their standards

Who sets our standards

6 6

1. Standards

Or, are we all very, very different.

Corporate

Business Unit

A

1 2

Business Unit

B

3 4

Business Unit

C

5 6

B AV A

Equipment

Group

Corporate

Business Unit

A

Business Unit

C

Business Unit

B

1 2 3 4 5 6

Equipment

Business Unit

B AV A

Everyone does it differently

Everyone has different requirements.

Corporate

Business Unit

C

Business Unit

B

1 2 3 4 5 6

Business Unit

A

B AV A

7 7

1. Standards




http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=LKBpxLDGOGzMzM&tbnid=vLJc2CcLvPd6lM:&ved=0CAUQjRw&url=http://www.directindustry.com/prod/intensus-engineering/truck-cranes-52905-592578.html&ei=5nW5UrrOOoG3kQfAl4HIDA&bvm=bv.58187178,d.eW0&psig=AFQjCNEWNRwCIXqR6Z5Th76k80c-u8uGOQ&ust=1387972421089210


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=PSoCEA5kxQL1XM&tbnid=L3m79AdAwOFSLM:&ved=0CAUQjRw&url=http://www.cakechooser.com/600/minecraft-epic-medieval-castle-spanklechanks-world-tour-part-3/CAcHJvamVjdG04MC5jb20vbW9kdWxlcy9tb2RfbWFpbm1lbnUvdG1wbC9qY2ItYmFja2hvZS1sb2FkZXItdG95LWk1LmpwZw/&ei=gHW5UqirN5GlkQfOxYDoDw&bvm=bv.58187178,d.eW0&psig=AFQjCNF1XqUXaILtGX58-WaQo-GstV-2Sg&ust=1387972224913397


8 8

Scope of benchmarking group

Advantages Disadvantages

Internal to a company or business unit.

Definition of data and metrics is consistent and directly relevant.

Lack of input from others. Concern about industry standards and trends.

Among a select group of peer organizations.

Are able to compare best practices and measure performance within the peer group.

Data and metrics must be agreed within the group. Equipment applications and working environments may differ.

Across the industry as a whole. Large comparative data set. The comfort of knowing and having an “industry standard.”

Data, metrics, applications and environments can vary to the extent that results have little value.

Figure 9.1 Companies can benchmark internally, within a peer group or across the industry as a whole.

1. Standards

P 148

9 9

Without data you can do nothing

– Data is to information as bricks are to a house

– Data are the materials from which you build your house

– Know what you want and collect it

– Keep it simple

– Do it thoroughly

2. Data and information

10 10

Do we reason with data or do we

reason with rules ?

DATA DRIVEN RULES

We reason with data driven rules.

We need to use our data to

1. Set the rules

2. Calibrate the rules

3. Trigger action


11 11

Experience &

Observation

(Intuition)

Data & Information

(Analysis)

Decisions

Do we use Intuition or Analysis

Rules


12 12

Most systems are designed

to run “the business”

What about “our business”

Core modules

Application modules

Who designed them

Who built them

What about our input


13 13

A picture is worth a thousand data points

Edward Tufte


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=K5OYdEzmMM3OzM&tbnid=uQiAQtWuB3vqnM:&ved=0CAUQjRw&url=http://www.edwardtufte.com/tufte/posters&ei=nX65UsX-CMGmkQeMgIGQBg&bvm=bv.58187178,d.eW0&psig=AFQjCNEquc-ub4ekeAOTJzMjyS8XFfUWqQ&ust=1387974623501242


https://www.google.com/imgres?imgurl&imgrefurl=http://www.edwardtufte.com/tufte/books_vdqi&h=0&w=0&sz=1&tbnid=Ln4EfxiTAuAxcM&tbnh=237&tbnw=188&zoom=1&docid=wVJZMb1-pEqAVM&ei=GX-5Uvn1PM-dkAeI64CADA&ved=0CAoQsCUoBA


https://www.google.com/imgres?imgurl&imgrefurl=http://www.freenewsprojects.com/index.php/news/detail/free_news_projects_reccomended_reading_evisioning_information_by_edward_tuf&h=0&w=0&sz=1&tbnid=26p3NxfZrQ4XSM&tbnh=252&tbnw=200&zoom=1&docid=t5o3mxOQ8-BhcM&ei=GX-5Uvn1PM-dkAeI64CADA&ved=0CAQQsCUoAQ


14 14

PLT Map• How big is the

footprint?

• How “high” is the

peak?

• What is the

variation in

payload? Load

time?

• Are we wasting

time to get the

lights to change?0 .5 -0 .6 0 .6 -0 .7 0 .7 -0 .8 0 .8 -0 .9 0 .9 -1 1 -1 .1 1 .1 -1 .2 1 .2 -1 .3 1 .3 -1 .4 1 .4 -1 .5

0 .5 -0 .7

0 .7 -0 .9

0 .9 -1 .1

1 .1 -1 .3

1 .3 -1 .5

1 .5 -1 .7

1 .7 -1 .9

1 .9 -2 .1

2 .1 -2 .3

2 .3 -2 .5

N o rm a liz e d P a y lo a d

No

rm

ali

ze

d L

oa

dT

ime

C o n to u r P lo t fo r P a y lo a d v s L o a d T im e

0 .0 0 -1 .0 0 1 .0 0 -2 .0 0 2 .0 0 -3 .0 0 3 .0 0 -4 .0 0 4 .0 0 -5 .0 0 5 .0 0 -6 .0 0 6 .0 0 -7 .0 0 7 .0 0 -8 .0 0 8 .0 0 -9 .0 0 9 .0 0 -1 0 .0 0

L ig h t a n d Q u ic k

L ig h t a n d S lo w

H e a v y a n d Q u ic k

H e a v y a n d S lo w

Payload

Lo

ad

Tim

e

.75 1.25

2.25

.75

15 15

1. Standards.






4. Cost benchmarks.




6. Some ideas.




Benchmarking

16 16

Availability = Hrs capable of working / Target hours = (T- D) / T

Utilization = Hours Worked / Hrs capable of working = W /(T- D)

Target hrs, T

Hours incapable of

working when you want

it to work, D

W 1 W 2

Hours capable of

working, (T - D)

Idle D

24 hrs

What about downtime ?

3. Deployment, availability and utilization

17 17

Deployment =The time a machine is on site and required to work

The total ownership period

Availability = The time a machine is required and able to work

The time a machine is on site and required to work

Utilization = The time a machine is actually usedThe time a machine is required and able to work

Figure 9.2 presents the definitions graphically and highlights the following three periods of wasted time:


P 149

18 18

Figure 9.2 U, time not deployed on site, D, on-shift downtime, and I, idle time, reduce the total ownership period to a very much shorter period of effective working time.

T- DRequired and able

to work

Utilization

Availability

E Ownership period

T Target deployment on site

Deployment

Working timeW

I Standby time

D On-shift downtime

F Off-shift down time

Un-deployed “Off site” U


19 19

Asphalt trucks.

162,483 hours recorded for 62 units = 2,620 hours per unit.

50 hours per week for 52 weeks per year = 2,600 hours per year.


Total ownership period: 162,483 hours. 62 units, 50 hours per week for 52 weeks in the year

Deployed on site: 115,000 hours Off site: 115,000 hours

DownDeployed on site and available to work: 100,500 hours

Worked on site: 81,100 hours Stand by

Deployment = 115,000 ÷ 162,483 = 70.7%

Availability = 100,500 ÷ 115,000 = 87.4%

Utilization = 81,100 ÷ 100,500 = 80.6%

Overall = 81,100 ÷ 162,483 = 49.3% of a 50 hour week, 52 weeks per year.

D

A

U

20 20


And, what are good values:

Deployment = 70.7%

Availability = 87.4%

Utilization = 80.6%

Overall = 49.3% of a 50 hour week, 52 weeks per year.

Total ownership period: 162,483 hours. 62 units, 50 hours per week for 52 weeks in the year

Deployed on site: 115,000 hours Off site: 115,000 hours

DownDeployed on site and available to work: 100,500 hours

Worked on site: 81,100 hours Stand by

D

A

U

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=ygvpyHIliG7YiM&tbnid=64Z3L38zEmLw-M:&ved=0CAUQjRw&url=http://www.skywatchweather.com/Services/newspapers.html&ei=Tay5Uv_OLcfMkAeNpYGwCw&bvm=bv.58187178,d.eW0&psig=AFQjCNG4YQZRlMyuKMpc2dg3j7yLL64vNw&ust=1387986290517152






21 21

P 157

Activity metrics: - How active is the machine? How much is it needed and used?

Deployment = T E

Percentage of time the machine is actually deployed on site and required to work relative to the total ownership period

Utilization = W T - D

Percentage of time the machine is actually used relative to the time it is on site and able to work

Net Utilization = W T

Percentage of time the machine is actually used relative to the time it is deployed on site

Input metrics: - What resources do I use to keep the machine up and running?

Labor Factor = RMh W

Repair and maintenance labor hours spent on the machine per hour worked by the machine

Repair cost = Rpl W

Direct cost of repair parts and labor per hour worked by the machine

Output metrics: - What do I achieve through the use of these resources?

Availability = T – D T

Percentage of time the machine is able to work relative to time on site

Down Ratio = D W

The ratio of a machine’s down hours per hour worked by the machine

Reliability = V x 100 W

The frequency with which the machine breaks down and disrupts production

Data

E = Total ownership period V = Number of times a machine breaks down and disrupts production

T = Time the machine is on site and required to work

RMh = Repair and maintenance labor hours spent on the machine

D = Time the machine is down and incapable of working when it is required to work

Rpl = Direct cost of repair parts and labor spent on the machine in the period

W = Actual hours the machine worked during the period

22 22

The owning cost are, by and large, fixed.

They occur on an annual basis and the RATE is therefore very sensitive to hours worked in a given month.

The operating costs are, by and large, variable.

They occur on an hourly basis and are proportional to the hours worked. The RATE is thus not all that sensitive to utilization.

Who takes the rewards from over utilization and

who carries the risk of under utilization.


23 23

T = Target number of hours per month used in the rate calculation.

W = Number of hours worked in the month

$N/hr = Annual owning costs/target hours = Owning rate

$P/hr = Operating rate

Owning $N/hr

Operating $P/hr

W hrs T hrs

1. Charge ($P + $N) times W hrs - bill to job work phase codes.

2. Charge additional (T – W) times $N – debit to equipment utilization phase code.

Equipment account receives $N times T + $P times W


24 24



$N/hr = Annual owning costs/target hours = Owning rate


Owning $N/hr

Operating $P/hr

T hrs W hrs

1. Charge ($P + $N) times W hrs - bill to job work phase codes.

2. Give a discount of (W – T) times $N - credit to equipment utilization phase code.

Equipment account receives $N times T + $P times W


25 25



$M/mo = Annual owning costs/working months in the year (time in the shop)


Owning $M/month

Operating $P/hr

W hrs

1. Charge $M plus $P times W hrs - How do you bill M to job work phase codes.

2. Charge $P times W – bill to job work phase codes.

Equipment account receives $M + $P times W


26 26

And, how do you do it.

How does it affect your jobs.

How does it affect your equipment account.

Owning $N/hr

Operating $P/hr

T hrs W hrs








27 27

1. Standards.






4. Cost benchmarks.




6. Some ideas.




Benchmarking

28 28

Actual cost relative to budget is the most widely

used benchmark.

It is a three step process

1. Establish your benchmark rates

2. Collect your actuals

3. Produce actionable information

4. Cost benchmarks

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=pi-BipmVnMEj8M&tbnid=crtPoL2-oi4jiM:&ved=0CAUQjRw&url=http://www.bocahomecareservices.com/blog/caregivers-seniors-tight-budget/&ei=6dC5UqvzOo6gkQeXwICICQ&bvm=bv.58187178,d.eW0&psig=AFQjCNGoqLWOUaByxPmNsyHqwF7taam5Cw&ust=1387995404234828


29 29

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs

Theoretical Calculations

The

Construction Market

The

Business Climate

Calculation or Calibration

4. Cost benchmarks

Standards reflect the expectations

Actual costs reflect reality.



30 30

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate

P 60


4. Cost benchmarks



31 31

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate

P 60


4. Cost benchmarks



32 32

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate

P 60


4. Cost benchmarks



33 33

$- $40.00 $80.00 $120.00 $160.00

22-3

22-4

26-1

26-4

26-6

32-1

32-5

45-5

45-7

45-8

Rate Class

Our rate Blue Book Rate

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate



Calculation or Calibration – OK, HOW

4. Cost benchmarks

Why?

34 34

4. Cost benchmarks

Actual cost relative to budget is the most widely used benchmark.


1. Establish your benchmark rates



It is not as easy as it sounds:

Collect actual costs – that is the easy part.

Collect the hours worked to generate the earned value budget

THAT IS THE HARD PART



35 35

Actionable information - The curse of the one liner

Hours Revenue Cost G/L Hours Revenue Cost G/L Hours Revenue Cost G/L

Z 225 7,852 392,600$ 422,016$ (29,416)$ 458 23,358$ 15,489$ 7,869$ 80 4,160$ 1,600$ 2,560$

Z 238 3200 160,000$ 227,000$ (67,000)$ 678 34,578$ 56,200$ (21,622)$ 120 6,240$ 35,000$ (28,760)$

Life to date Year to date This monthUnit

What does this all mean.

Age (too young, too old)

Utilization

Application

Operation

The so what barrier.

4. Cost benchmarks

36 36

B C D E F G H I

1 PERIOD

2 EX M

3

4

5 Budget Actual Act/Bud %

6 $13.78 3,721 $51,275 $60,200 ($8,925) $13.78 $16.18 117.4%

7 $24.97 3,721 $92,913 $88,600 $4,313 $24.97 $23.81 95.4%

8 $14.87 3,721 $55,331 $60,750 ($5,419) $14.87 $16.33 109.8%

9 $2.80 3,721 $10,419 $11,461 ($1,042) $2.80 $3.08 110.0%

10 $56.42 $209,939 $221,011 -$11,072 $56.42 $59.40 105.3%

A

G/L on

Budget

Actual

Cost

Earned

Value

Budget

Hours

Worked

Budget

Rate

Life to date EQUIPMENT COST REPORT SUMMARIZED BY PRINCIPAL COST TYPE

Rate per hour

TOTALS

Equipment Category/Class

Unit 0703

Owning costs

Operating costs

Fuel

Contribution to overhead

Generate earned value budgets for at least 4 principal cost types.

Compare these with actual costs in each principal cost type.

Look deeper. Understand the variances. Act to rectify.

P 212

4. Cost benchmarks

37 37

Generate earned value budgets for at least 4 principal cost types.

Compare these with actual costs in each principal cost type.

Look deeper. Understand the variances. Act to rectify.

P 213

4. Cost benchmarks

Figure 12.6 A concise standardized and well understood cost report facilitates a review of budget performance. It should give dollar values to show the magnitude of the issues as well as hourly

rates.

B C D E F G H I

1

2 EX M PERIOD

3

Budget Actual Act/Bud %

5 $13.78 3,721 $51,275 $60,200 ($8,925) $13.78 $16.18 117.4%

6 $24.97 3,721 $92,913 $88,600 $4,313 $24.97 $23.81 95.4%

7 $14.87 3,721 $55,331 $60,750 ($5,419) $14.87 $16.33 109.8%

8 $2.80 3,721 $10,419 $11,461 ($1,042) $2.80 $3.08 110.0%

9 $56.42 $209,939 $221,011 ($11,072) $56.42 $59.40 105.3%

4

Life to date

Rate per hour

Owning costs

Operating costs

Fuel

Contribution to overhead

Actual CostG/L on

Budget

TOTALS

Budget

Rate

Hours

Worked

Earned

Value Budget

A

EQUIPMENT COST REPORT SUMMARIZED BY PRINCIPAL COST TYPE

Equipment Category/Class

Unit 0703

38 38

Unit level cost information

4. Cost benchmarks

39 39

Class or category cost information

4. Cost benchmarks

40 40

Figure 12.7

Units above the line have a positive owning cost variance and are well utilized. Units to

the right have a positive owning cost variance and are operating within budget.

($12,000)

($8,000)

($4,000)

$0

$4,000

$8,000

$12,000

($12,000) ($8,000) ($4,000) $0 $4,000 $8,000 $12,000

G/L

: O

wn

ing

Co

st

Bu

dg

et

G/L: Operating Cost Budget

Category EX : Class M

EX M

0605

0701

0702

0703

0801

0802

0803

0804

Well utilizedExpensive to operate

Under utilizedEconomical to operate

Under utilizedExpensive to operate

Well utilizedEconomical to operate

4. Cost benchmarks

P 215

Benchmark owning and operating costs

41 41

Will you have a safe flight if you manage:


4. Cost Benchmarks

http://www.google.com/url?sa=i&rct=j&q=flight+instruments&source=images&cd=&cad=rja&docid=gE6E867XaI7D5M&tbnid=J1Vak82FRNb1lM:&ved=0CAUQjRw&url=http://commons.wikimedia.org/wiki/File:Six_flight_instruments.JPG&ei=h1btUYn-E47K9gTfroDYCQ&bvm=bv.49478099,d.eWU&psig=AFQjCNFPAF_8ZcGY5yDnK2u-zf6nOBBdiQ&ust=1374594997178806


42 42

$ per hour for owning costs.

How do I recover the fixed costs

of ownership.

Depends on utilization and life

$ per hour for operating costs.

How do I recover the costs of

running it and fixing it.

Depends on day to day field

decisions

4. Cost Benchmarks


http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=a30ymSd5LBNTjM&tbnid=GP-PgxtKKqKnlM:&ved=0CAUQjRw&url=http://www.daviddarling.info/encyclopedia/A/air_speed_indicator.html&ei=GlrtUYH0E4Xg8ATUrIGgDg&psig=AFQjCNFAqj3RWmd3j4oOdnm4oCTLM9sTAg&ust=1374595883571973


http://www.google.com/url?sa=i&rct=j&q=flight+instruments&source=images&cd=&cad=rja&docid=HYQ3-GSEGatWUM&tbnid=9iVFdZqNpJGMTM:&ved=0CAUQjRw&url=http://www.nappf.com/nappf_flight_instruments.htm&ei=U1ntUYviDobo9gSyh4GYCg&bvm=bv.49478099,d.eWU&psig=AFQjCNFPAF_8ZcGY5yDnK2u-zf6nOBBdiQ&ust=1374594997178806




43 43

1. Standards.






4. Cost benchmarks.




6. Some ideas.




Benchmarking

44 44

Age benchmarks are critical. There must be a formal

process of defining and measuring where we are

relative to fleet average age.


1. Establish your benchmark ages



5. Fleet age benchmarks

45 45

1. Establishing benchmark ages


Intuition Analysis

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Co

st

pe

r h

ou

r

Hours Worked

Cost per hour - Life to Date

Total

Operating

Repairs

Owning

It does not matter how you do it – you must know:

HOW LONG YOU PLAN TO KEEP IT

WHEN IT WILL BECOME PROGRESSIVLY MORE COSTLY

WHEN IT WILL BE DONE

P 109

46 46


Age benchmarks are critical. There must be a formal process of defining

and measuring where we are relative to fleet average age.





Again, it is not as easy as it sounds:

Collect the hours worked to generate the earned

value budget and drive the fleet age system – You

can mess them both up.

47 47








16,000 18,000 22,00020,000

Age Hours in Inventory

48 48

P112

A B C D E F

Now +1 Now + 2 Now + 3 Now + 4

7002 18092 Se ll

7003 15304 < 2

7001 13326 15126 < Se ll 1

7004 12317 14117 15817 < Se ll 1

7022 10374 12174 13874 15574 < Se ll 1

7150 7156 8956 10656 12356 14056

7161 6182 7982 9682 11382 13082

7157 4921 6721 8421 10121 11821

7160 4875 6675 8375 10075 11775

7152 4588 6388 8088 9788 11488

Buy 1700 3400 5100 6800

2 > 1700 3400 5100 6800

Buy 1 > 1700 3400 5100

Buy 1 > 1700 3400

Buy 1 > 1700

Unit number Current ageExpected age at end of


49 49

(40,000)

(20,000)

-

20,000

40,000

60,000

Date

Hours in inventory - Five units - Rate class 22-3


Living off the new fleet

Buy one

Quiet year

Rebuild one

Buy two

Busy year

Rebuild one

Maintaining the fleet

50 50

There are, in fact, THREE benchmarks

$ per hour for owning costs.

How do I recover the fixed costs

of ownership.

Depends on utilization and life

$ per hour for operating costs.

How do I recover the costs of

running it and fixing it.

Depends on day to day field

decisions

Hours in inventory.

How do I know when I am in the

“red zone” and LTD cost is

increasing with each hour

worked.

Depends on a combination of

owning and operating cost,

reliability and productivity.


http://www.google.com/url?sa=i&rct=j&q=flight+instruments&source=images&cd=&cad=rja&docid=Apk_UvZNMNX6UM&tbnid=wa7nzb9ep0Y_eM:&ved=0CAUQjRw&url=http://www.chiefaircraft.com/st-4000hr.html&ei=DlntUbv4NIOE9gTjioD4BA&bvm=bv.49478099,d.eWU&psig=AFQjCNFPAF_8ZcGY5yDnK2u-zf6nOBBdiQ&ust=1374594997178806

http://www.google.com/url?sa=i&rct=j&q=flight+instruments&source=images&cd=&cad=rja&docid=Apk_UvZNMNX6UM&tbnid=wa7nzb9ep0Y_eM:&ved=0CAUQjRw&url=http://www.chiefaircraft.com/st-4000hr.html&ei=DlntUbv4NIOE9gTjioD4BA&bvm=bv.49478099,d.eWU&psig=AFQjCNFPAF_8ZcGY5yDnK2u-zf6nOBBdiQ&ust=1374594997178806





51 51

1. Standards.






4. Cost benchmarks.




6. Some ideas.




Benchmarking

52 52

6. Some ideas

Owning cost$ per hour to have the

machine in your fleet.

Operating cost$ per hour to put it to

work and keep it working.

Hours in inventoryFleet average age relative

to “the sweet spot”.



53 53

6. Some ideas







Technology gradientAre new machines safer,

more reliable and more productive.

Red work ordersNumber of “red work orders”

per operating hour.

Labor factorLabor hours spent on the

machine per operating hour.



54 54

6. Some ideas

55 55

6. Some ideas

(40,000)

(20,000)

-

20,000

40,000

60,000

Date


Past Future

The replace

decision

depends on

current

inventory

and future

activity.

56 56

0

50,000

100,000

150,000

200,000

250,000

0 20 40 60 80 100 120 140

Miles t

rav

elled

Number in the fleet

Ford F150 milage travelled

Now 2 years time

6. Some ideas

57 57

Labor Factor

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0.22

0.24

0.26

0.28

Bro

oms

Pan

s

Com

pac

tors

- A

sphalt

Track

Drills

963'

s

Rubber

Tire

Load

ers

Trench

Rolle

rs

Trucks

- Dum

p

Com

pac

tors

- D

irt

Doze

rs

Exc

avato

rs

Trucks

- Fuel

Artic

s - V

olvo

Wheel

ed Exc

avat

ors

Trucks

- Tra

ctors

Bac

khoe's

Gra

ders

Fleet

Re

pa

ir a

nd

Ma

inte

na

nc

e H

ou

rs p

er

Ho

ur

W o

rke

d

6. Some ideas

58 58

y = 0.004x2 + 19.346x + 1,418,872.556R² = 0.912

R 0

R 500,000

R 1,000,000

R 1,500,000

R 2,000,000

R 2,500,000

R 3,000,000

R 3,500,000

R 4,000,000

R 4,500,000

R 5,000,000

Cu

mu

lati

ve

Co

st

Life (Hours)

Mitchell Curve Category

Bell B30D - Discard Application 2009 Rate Poly. (Bell B30D - Discard Application)

6. Some ideas

59 59

y = 0.004x2 + 15.723x + 1,663,942.969R² = 0.954

R 0

R 500,000

R 1,000,000

R 1,500,000

R 2,000,000

R 2,500,000

R 3,000,000

R 3,500,000

R 4,000,000

R 4,500,000

R 5,000,000

Cu

mu

lati

ve C

ost

Life (Hours)

Mitchell Curve Category

Bell2706 - Coal _(Machines now at Manganese site)

6. Some ideas

60 60

6. Some ideas

61 61

6. Some ideas

0

10

20

30

40

50

60

0 to 60 hrs 60 to 120 hrs 120 to 160 hrs Over 160 hrs

% of fleet reporting

Hours worked in last 4 weeks

Fleet Utilization

Production

Support

On road

62 62

6. Some ideas

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

Age in hours worked LTD

Age in Years LTD

Z15 Class Excavators - age, utilization and cost LTD

63 63

P 159

y = 0.5804x + 720830R² = 0.7517

y = 0.0944x + 625167R² = 0.2742

y = 0.2226xR² = 0.5837

y = 0.1636xR² = 0.5994

y = 0.0999x + 95663R² = 0.3358

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000

Cost

Equipment revenue

Total cost

Owning costs

Operating costs

Fuel costs

Overhead costs

6. Some ideas

64 64

1. Standards.






4. Cost benchmarks.




6. Some ideas.




Benchmarking

65 65

1. Standards

100,000$

Less Direct Job costs

Labor 45,000$

Equipment 18,000$

Materials 15,000$

Sub contractors 5,000$

Job indirect 2,000$

Total 85,000$

Profit on operations 15,000$

Equipment costs

Depreciation 4,600$

Leases, loans 2,300$

Lisc insurance, tax 1,000$

Owning costs 7,900$

Labor 3,300$

Parts and supplies 3,700$

Fuel 5,000$

Operating costs 12,000$

1,000$

20,900$

1,200$

19,700$

18,000$

(1,700)$

13,300$

SG&A Costs

Estimating and job planning 4,000$

Human Resources 1,125$

Administration 900$

Facilities 1,100$

Finance 800$

7,925$

Operating Income 5,375$

Other income and expenses 1,500$

Nett income before tax 6,875$

Tax due 3,555$

Income after tax. 3,320$

Revenue


Equipment charged to jobs

Gain/(loss) on sale

Gross profit from operations


Total SG&A

Un recovered equipment costs

Equipment indirectGenerally Accepted Accounting Principles.

International Accounting Standards Board

Financial Accounting Standards Board

Who sets their standards

Who sets our standards

66 66

1. Standards








67 67

Most systems are designed

to run “the business”

What about “our business”

Core modules

Application modules

Who designed them

Who built them

What about our input


68 68

A picture is worth a thousand data points

Edward Tufte








69 69

P 157

Activity metrics: - How active is the machine? How much is it needed and used?

Deployment = T E

Percentage of time the machine is actually deployed on site and required to work relative to the total ownership period

Utilization = W T - D

Percentage of time the machine is actually used relative to the time it is on site and able to work

Net Utilization = W T

Percentage of time the machine is actually used relative to the time it is deployed on site

Input metrics: - What resources do I use to keep the machine up and running?

Labor Factor = RMh W

Repair and maintenance labor hours spent on the machine per hour worked by the machine

Repair cost = Rpl W

Direct cost of repair parts and labor per hour worked by the machine

Output metrics: - What do I achieve through the use of these resources?

Availability = T – D T

Percentage of time the machine is able to work relative to time on site

Down Ratio = D W

The ratio of a machine’s down hours per hour worked by the machine

Reliability = V x 100 W

The frequency with which the machine breaks down and disrupts production

Data

E = Total ownership period V = Number of times a machine breaks down and disrupts production

T = Time the machine is on site and required to work

RMh = Repair and maintenance labor hours spent on the machine

D = Time the machine is down and incapable of working when it is required to work

Rpl = Direct cost of repair parts and labor spent on the machine in the period

W = Actual hours the machine worked during the period

70 70

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate

P 60


4. Cost benchmarks



71 71

$- $40.00 $80.00 $120.00 $160.00

22-3

22-4

26-1

26-4

26-6

32-1

32-5

45-5

45-7

45-8

Rate Class

Our rate Blue Book Rate

THE RATE

Existing

Company Rates

Published Standards

Current

Equipment Costs


The

Construction Market

The

Business Climate



Calculation or Calibration – OK, HOW

4. Cost benchmarks

Why?

72 72

Unit level cost information

4. Cost benchmarks

73 73

1. Establishing benchmark ages


Intuition Analysis

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Co

st

pe

r h

ou

r

Hours Worked

Cost per hour - Life to Date

Total

Operating

Repairs

Owning

It does not matter how you do it – you must know:

HOW LONG YOU PLAN TO KEEP IT

WHEN IT WILL BECOME PROGRESSIVLY MORE COSTLY

WHEN IT WILL BE DONE

P 109

74 74








16,000 18,000 22,00020,000

Age Hours in Inventory

75 75

P112

A B C D E F

Now +1 Now + 2 Now + 3 Now + 4

7002 18092 Se ll

7003 15304 < 2

7001 13326 15126 < Se ll 1

7004 12317 14117 15817 < Se ll 1

7022 10374 12174 13874 15574 < Se ll 1

7150 7156 8956 10656 12356 14056

7161 6182 7982 9682 11382 13082

7157 4921 6721 8421 10121 11821

7160 4875 6675 8375 10075 11775

7152 4588 6388 8088 9788 11488

Buy 1700 3400 5100 6800

2 > 1700 3400 5100 6800

Buy 1 > 1700 3400 5100

Buy 1 > 1700 3400

Buy 1 > 1700

Unit number Current ageExpected age at end of


76 76

(40,000)

(20,000)

-

20,000

40,000

60,000

Date



Living off the new fleet

Buy one

Quiet year

Rebuild one

Buy two

Busy year

Rebuild one

Maintaining the fleet

77 77

6. Some ideas

(40,000)

(20,000)

-

20,000

40,000

60,000

Date


Past Future

The replace

decision

depends on

current

inventory

and future

activity.

78 78

6. Some ideas







Technology gradientAre new machines safer,

more reliable and more productive.

Red work ordersNumber of “red work orders”

per operating hour.

Labor factorLabor hours spent on the

machine per operating hour.



79 79

How do we define norms and standards.

How do we measure success.


Benchmarking

equipment metrics and benchmarking - map your sho metrics...learn about the complexities of metrics...

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