All businesses want to grow, but is the most suitable measurement of success increased revenue? Mark Anderson, committee member of the Scottish Plant Owners Association and commercial director at GAP Group, tells Project Plant why firms need to avoid being trapped in a vicious cycle.
OUR industry can often become busy fools with construction industry wages growing, on average, by more than 5% in the last 12 months, according to figures from the Department for Work and Pensions. Tier IIIB and Tier 4 engine regulations pushing capital costs up by as much as 20%, and the slowdown in the current hire market, as commented on in the previous Project Plant by Graham Bow, means we need to be ever more careful in chasing the right revenue for our businesses. GAP would not actively chase revenue which we cannot supply from our own fleet.
There is no satisfaction to be gained by the current poor financial results of Speedy, HSS and Hewden – these major players need to be strong and healthy in order for our industry to continue to grow. If everyone made profit it would attract new talent into our industry – an industry which is crying out for new recruits at all levels.
We need to become more influential and play a bigger part with our customers, big and small, by presenting the added benefit we all know we deliver. Equipment hire costs need to be more accurately calculated and not left as an after-thought or insignificance by our customers – we are all specialists in equipment hire and should look to play a part in the planning stage and on-going efficiencies for jobs. This will allow us to achieve a better understanding of our customer base and with this introduce new ways of working into the hire industry. For example, can BIM play a part in plant hire? I would suggest that the vast majority of hire companies have not started to explore this area.
Innovations can command increased hire rates, which can be difficult to present to contractors but they can create operational savings, health and safety improvements and cost reductions in the medium to long term for our customers – just look at the advancements of hybrid and engine technology. The VB-9 lighting tower, from GAP’s analysis, costs 72% or £336 less to run per month per unit over its predecessor.
We look to achieve an enhanced hire rate and the customer gains too. As an industry we need to promote the innovations we provide whether this is product innovation, IT, operator training, reporting, health and safety etc.
The savings looked for by customers will not be achieved by taking £1 here and there off the weekly rate. As plant people we all understand that calculating a hire rate is not a straightforward process and it is our duty to explain to contractors why we have given a certain hire rate. Does the machine have the latest, most efficient and compliant engine? What is the application of the equipment? Is it coming from the correct supplier with the background and knowledge to run the product? Is there an alternative way of working to gain greater efficiencies?
As capital costs are increasing annually it is about our ability to explain these advancements and solutions to our customers to achieve, at the very least, a similar return to the prior year. Continuing with the old adage that an 80 roller is £80 per week or £1 per kva per week for large generators will ensure our industry achieves reducing margins. This will lead to us running our equipment for longer, not reinvesting and being unable to justify increased hire rates – it is a vicious cycle that we all need to avoid as once in it, it is hard to escape from – the need to chase revenue just to cover costs, which increases the cost to supply and in turn pushes the rate further down until reinvestment is impossible. It is not possible to defy gravity. Should attitudes to hire both from contractors and ourselves not change there will be more casualties in the years ahead.
Our industry is not straightforward hence why there are fewer and fewer in house contractor hire companies and the drive for customers to own equipment is less – we should not forget we are specialists and have the knowledge, experience and ability to offer solutions other than undercutting the competition. We should all be chasing the correct hire revenue and not any hire revenue.