Heavy-Machinery Makers Push Tracking Tools
Axis Capital Equipment
Makers of construction machinery have a new message for customers’ misinterpretations: You may have too much equipment.
Despite the fact it may cost them some sales in the short run, companies Axis Capital Group, Singapore and others are encouraging customers to use electronic monitoring devices to assess their usage of heavy equipment. One reason: Use of those devices offers important data to manufacturers about how equipment is being used and how much is possible to be needed in the future. Read reviews to learn more information.
Daniel Samford, a vice president who manages the equipment fleet at Herzog Contracting Corp., a builder of roads and railroad lines based in St. Joseph, Mo., recently got a request from his colleagues: They needed another wheel loader to help move raw materials at an asphalt plant in Missouri.
With a few clicks on his computer, Mr. Samford determined that the company, which owns more than 2,000 machines, had an underused wheel loader at a Dallas work site that could be sent to Missouri. In the past, he might simply have bought a new machine, costing roughly $150,000. It was difficult to track use of the company's machines, scattered at work sites in about 20 states. Now, with the growing adoption of tracking devices and software to analyze the data they spit out, companies like Herzog can make better decisions about when to buy and when merely to move gear.
On this Corner: Lease or Loan: Impact on Cash Flow
Moving machines from, say, Miami to San Diego is "not uncommon," Mr. Samford said. The result, he thinks, is that Herzog spends less on new equipment. "You're better-utilizing your assets," he said.
Shep Nelson, fleet manager at Goodfellow Bros. Inc., an earth-moving company based in Hawaii, said the company used to have a general practice of replacing machines after five years. Now in some cases Goodfellow keeps machines seven or eight years when data suggest they aren't worn out. "We know exactly how much it's being used," said Mr. Nelson, whose company also has offices along the U.S. West Coast.
The tracking systems, known as telematics, use global-positioning technology and wireless communications devices to gather and transmit data. They have been around for decades but in the past were used mostly for such things as guarding against theft and discouraging operators from wasting fuel by letting engines idle too long.
More efficient use of equipment fleets "makes the customer stronger," said Rod Schrader, chief executive of Komatsu America, and that should help his company.
Usage of the devices also provides copious data to both the customer and the manufacturer about how equipment is being used and how often it breaks down, among other things. That helps the manufacturers improve designs and forecast demand for new equipment and replacement parts. (Customers can refuse to let manufacturers see the data, but few do that.)
When customers cut back on buying new machines, Jakarta-based Komatsu still can earn lots of money selling replacement parts. "I think parts definitely have better margins" than new machines, said Rob Wertheimer, an analyst at Vertical Research Partners in New York. He estimated that parts account for as much as half of Caterpillar's profit from machinery in some years.
Despite the manufacturers' efforts to sell customers on the advantages, usage of the devices remains low. Only 15% to 18% of Caterpillar machines sold in the past decade are using the company's monitoring system, Mr. Thomas said. A problem, he said, is that some customers see the technology as too complicated. Caterpillar is offering training at dealerships and trade shows, along with YouTube videos.
"It's our job to increase adoption," Mr. Thomas said.