Ready mix production is a tough, real-time business. A couple dozen significant things can go wrong on any day, at any time, and in any order. No wonder we are just about the hardest working industry per EBITDA point (earnings before interest, taxes, depreciation and amortization) in North America.
|Craig Yeack has held leadership positions with both construction materials producers and software providers. He is co-founder of BCMI Corp. (the Bulk Construction Materials Initiative), which is dedicated to reinventing the construction materials business with modern mobile and cloud-based tools. His Tech Talk column—named best column by the Construction Media Alliance in 2018—focuses on concise, actionable ideas to improve financial performance for ready-mix producers. He can be reached at [email protected].|
EBITDA is the financial gold standard for profitable operation, and in our industry profitability is built on price, cost, and volume. There are many exciting new ideas to capture more volume or increase pricing power, but there are also a few reliable standby approaches that have been proven through the decades to reduce costs. With the benefit of modern technology, closer management of driver time can yield an outsized return.
Drivers are the face of the company and have a difficult job caring for and delivering a perishable, structural product. We expect them to show up, care, work hard, be courteous and not waste time. We also expect them to be efficient with time in the domains they control, but the producer must provide the structure to make this happen. There are three key areas of time management that a driver can significantly control. These can be measured against benchmarks in real-time: 1) clock-in to first-load, 2) leave-plant to arrive-job, and 3) last-load-arrive-plant to clock-out. Leave-job to return-plant can be a misleading benchmark, as it often includes washout or other mitigating issues.
Savings in start and end time are truly cut from the payroll, thus directly reduce costs and improve EBITDA. Our industry’s generally accepted target time for clock-in to first load, including driver inspection, is 15 minutes. The average time across the industry is much higher although there are often union rules or other contributing factors. A key to improvement is coordinating first-round driver scheduling with drivers’ first loads, and interlocking the time keeping system.
Improving performance requires only a few things, including: 1) the ability of the driver to clock-in on the truck’s tablet, which often runs the tracking software; 2) a real-time notification system for the driver as their first-round schedule changes through night or early morning; and, 3) an interlock between the dispatch system and the time keeping system to prevent clock-in prior to the allocated time. All of these tools exist today, in no small part due to the modern information technology architecture of web services and cloud-based applications. However, if the technology is too daunting, a pretty good second prize solution is to just run old-fashioned management reports on a daily basis comparing driver clock-in to first-load times.
Time to job
Implementing leave-plant to arrive-job benchmarks is easy for a modern dispatch or truck tracking system. The general idea is to make a call to a mapping program suitable for truck routing, and get the estimated travel time from the plant gate to the job geo-fence at the moment the truck leaves the plant.
Several versions of this benchmark are available on demand—for one or more drivers’ last load, a group of loads over any time, loads for a given customer, or even loads by similar geography. Drivers cannot control traffic lights and unforeseen road delays, but over time the pattern between the real-time estimate and the actual travel time will provide a score card which can be used by management to help drivers improve.
End of day
A reasonable amount of time for last-load-arrive-plant to clock-out is generally 20 minutes. Producers can track this metric the same way as drivers’ first round time: Drivers use the truck’s tablet to clock out and times are captured by time keeping software. Couple this with the arrive-plant time stamp from the truck signaling system, and average times are readily available.
Although valuable, saving time in transit is difficult to tie directly to dollar savings, given it does not always make the total day shorter. One approach for less tangible time savings is to introduce a bit of “gamification.” When drivers all have access to each other’s benchmarks, it’s amazing how competition drives results.
The bottom line: Consider a 100-plant company producing 5 million yd./year, 7.7 yd./ticket, 3.5 rounds, burdened driver pay of $55K/year (intentionally low to be conservative), approximate selling price of $100/yd. and a 10.4 percent EBIDTA. There will be approximately 185,000 first and 185,000 last loads. A time savings of five minutes per driver for first and last loads would be conservative and include locations that cannot cut time due to labor rules. The burdened driver cost is $0.44/minute, thus the annual savings would be roughly $410,000, which is 0.78 percent improvement in EBITDA.