by Craig Yeack
Ready-mix concrete production is not for the fainthearted. We are at the crossroads of design, engineering, material suppliers, traffic, weather, equipment failures and a host of other hard-to-control realities. Frankly it’s amazing we manage as well as we do. But it’s always possible to get better.
|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].|
Think about the people directly involved with ready-mix production and delivery: Salespeople, dispatchers, drivers, batchers, customers, etc. Now consider what each one can really control during the day. Then determine a reasonable performance benchmark for each item and how to track it. This methodology is the key to making long-term, incremental improvements.
Let’s start with customers and what they can control that affects both their costs and yours. If you can show a customer that their improvement in specific areas will ultimately reduce their costs, most will be eager to participate. Further, by evaluating customers in this light, you will know how to adjust future quotations to maintain post-margin over material (MOM) profit.
Truck on-job to end-pour (OJEP) time is mostly controlled by the customer, with exceptions such as traffic-induced surges or gaps and the unusual case of overshipping. Proper worksite preparation is required for a pour to begin at the scheduled time. The contractor must be able to place concrete according to the requested delivery spacing, and have the proper placement equipment ready, to keep trucks moving. OJEP has a direct correlation to the contractor’s payroll, from the start of the job to the finish, and keeping the total time within a reasonable range (by work type) reduces everyone’s costs.
Order volume accuracy (OVA) is the comparison of the volume requested for any given order versus the final volume delivered. For producers, significant underage will idle trucks that could be used for other profitable work. Overages will cause a scramble on busy days to find trucks and production capacity. The contractor also incurs a higher cost for on-job payroll.
Bump loads (aka plus loads, finish loads, etc.) are a special case of order accuracy and represent a huge cost for everyone—usually because the work crew could not use a tape measure and calculator. The need for a bump load is often not apparent until the last scheduled truck is pouring, and then it becomes a scramble for the producer to find a truck and production capacity. This inevitably results in a delay, during which the contractor has to keep paying the jobsite crew. One bump is commonly expected, but two, three or more significantly erode overall profitability for the entire job.
Days sales outstanding (DSO) measures the average duration between delivery and payment. During this time producers assume the unenviable role of being their customers’ bank and must fund the cash required from working capital. Pricing incentives can help keep DSO under control. For example, customers with a shorter DSO could receive far more favorable pricing with the opposite holding true for slow payers.
We now have four measures that affect the cost of concrete production and delivery, that are largely controlled by the customer: OJEP, OVA, bump loads and DSO. There are industry quasi-standards for each, such as minutes for OJEP or yards OVA, however it’s simpler to normalize each to 100. From there you can create a composite rating or “scorecard” for overall customer desirability.
Let’s consider OJEP for the work type of inside flatwork (for example, a warehouse) and set the desired benchmark at 15 minutes per truck. For a 100-load job, 1,500 minutes would be the benchmark. If that were achieved, the score would be 100. If more time were required, the score would proportionally go below 100, and for less time the score would increase. The customer’s scorecard for inside flatwork would be an average of all jobs, compared to the 15 min/truck benchmark. Since all jobs are not the same size, the overall score would be weighted by the yardage for each.
Customers who score well, that is in excess of 100 for a given measure, can be offered incentives such as pricing, preferential scheduling, quality control services, etc. Low scores would provide a great opportunity for salespeople to meet with customers and discuss improvements that can reduce mutual costs, thus “building a better customer.” The same process can apply throughout your organization, setting benchmarks and measuring performance to help build better salespeople, better dispatchers, better drivers, and so forth.
It is possible to create this framework in a spreadsheet, but it’s far more usable as part of modern CRM and dispatch systems. Producers should demand this type of analysis from technology partners, ideally on a mobile platform to empower people in the field. Ready-mix concrete is a NOW business, and the closer your people are to actionable information, the better your organization will run.