Most businesses, particularly asset-intensive companies, utilize rental equipment. This rental cost category represents a notable portion of annual operating expenses, yet is typically reviewed at the end of a fiscal year. This is not the approach of an aware consumer.
To become an aware consumer and realize rental cost efficiency, companies can utilize the following levers:
1. Track utilization: Rental equipment for maintenance work is often ordered during planning to ensure that the work order is ready to schedule. However, not all planned work orders make it to an execution schedule. This means that the rental equipment begins too soon and accrues cost without any confirmation of when it will actually be used. Utilization is a key lagging metric that shows the ratio of the duration( s) of the task(s) on the work order that the equipment was needed for, versus the duration for which the equipment remained on-site. Tracking this lagging indicator and/ or tying delivery of the equipment to the scheduled execution date can allow for cost reduction.
2. Monitor late returns: Similar to the above scenario where equipment is brought in early, it can also be left hanging around after the work is completed. Including rental equipment as a designated line item within the work order, defining return due dates with set reminders and creating public visibility of rentals approaching their due dates (or that are overdue) are proven methods of effectively avoiding late return fees. Accountability for this must be shared between production and maintenance supervision.
3. Review contract terms: Rental equipment contracts include the base cost and detail additional charges such as late return or overdue fees besides all terms and conditions. The terms and conditions traditionally define service levels, maintenance requirements and any annual maximum cap on additional fees, along with the rights of the consumer to request removal of the equipment from site. Leveraging or renegotiating the response times for return requests must not favor only the provider. The contract must also ensure that the consumer is protected, and typically only charged for the period when an equipment removal request is made and documented. There should also be a clause to set up late or overdue equipment reminders to support monitoring.
4. Leverage synergies: Understanding and tracking rental equipment utilization can result in a low number, as items are often rented for single jobs. This could mean that a single item is rented multiple times separately for different jobs. Aligning work orders within the business area and also centrally across the site to identify synergies between similar jobs is an ideal approach to maximizing rental equipment utilization through centralization. For this to work successfully, the process must be coordinated and managed closely, similar to the logistics plan for turnarounds. Synchronizing rental requirements with the look-ahead schedule can help with cost efficiency, avoiding losing track of equipment and incurring cost overages.
5. Purchase to own: Many equipment rentals require the consumer to perform routine maintenance during the rental period. In this situation, the only benefit of renting is the flexibility of paying for only a portion of the total cost. However, for equipment like scaffolding materials, it may make business sense to own a base quantity. Rental contracts can then be used to add capacity when and where needed with a site master schedule.
Decisions are often made to rent backup power or cooling systems. These items come with a notable maintenance cost and must be tracked to prevent them from becoming a recurrent lease. When this is expected or discovered, the rental should be reviewed against the cost of purchasing outright.
Rental equipment optimization is a component of operational discipline and directly impacts bottom line profits. Close monitoring and increased visibility of utilization, spend and return compliance are some quick ways of eliminating unnecessary costs associated with the convenience of rental equipment.
For more information, visit www.tacook.com or call (281) 362-2716.
