Optimize your resources to reduce the debt of becoming a least-hassle supplier.
When Albert Einstein was once asked to name mankind’s greatest invention, his answer was “compound interest.” While the federal funds rate was near zero, it made sense for businesses to load up on debt and pay virtually no interest. Now, with higher interest rates compounding the impact, it’s imperative to reduce financial debt to avoid paying lenders double and triple the cost of your investments. Companies that finance operations with debt rather than their own resources are more likely to fail.
In much the same way, while construction was booming and concrete in high demand, buyers were happy to get material at just about any price. Producers could focus solely on getting concrete to the jobsite, and not worry as much about offering competitive pricing or value-add services. However, today’s decrease in demand for concrete enables buyers to be much more selective. Producers need to reduce the friction in their operation to become a “least-hassle supplier” that attracts customers.
Typical ways for producers to become least-hassle suppliers involve investing in new accounting systems, online portals, end-user mobile apps, artificial intelligence and other technologies to offer value-add services. While worthy improvements, they may not bring immediate return on investment (ROI), thus adding to your debt. Buried deep below the customer-facing glitter is perhaps the most foundational—and financial—need for operational improvement: the plant.
FINE-TUNE PLANTS TO OFFSET COSTS
It is time for producers to optimize their plants as part of becoming least-hassle suppliers. Investing in plant automation will pave the way for a higher-quality product and more predictable logistics.
Vince Hagan Co. is doing just that for producers. I recently sat down with them to talk about their “smart plant” technology, which transitions plant operators from using reactive break-fix and costly preventive maintenance procedures to predictive maintenance. They are accomplishing this with a wave of new sensors and PLC logic coupled with machine learning for each plant.
Let’s face it, we live in an industry of constant outliers, be it material variation, logistics uncertainty or contractor behavior. The Vince Hagan team knows this because they live it every day with their customers. As such, they handle each plant differently based on geography, season, demand and raw materials. The result of their work has been higher batch tolerances and much fewer plant breakdowns, which consequently leads to faster batching, more reliable logistics and lower maintenance costs.
HOW SMART PLANTS WORK
A smart plant is connected to the industrial Internet of Things (IIOT) and can be set up in the office with on-the-go access via a mobile interface. Using features specific to Vince Hagan’s SmartVH™ Plant Monitoring System, the following are examples of issues smart plants can resolve. (All sensors mentioned are wirelessly connected—with no “configuration” required by the plant staff.)
Consider a typical failure point: conveyors. Loads change all the time, and belts are sometimes (gasp!) started under a full load. By placing sensors on all bearings to monitor both vibration and temperature, machine learning algorithms can accurately predict the future failure point of a bearing, thus preventing the super-high costs of logistics delays associated with a plant breakdown and the relatively high cost of preventive maintenance.
Extraneous factors matter. If a motor reset happens dozens of times over the last month, then it’s time to alert maintenance. The needed downtime for human diagnostics and repair can be scheduled when the plant is not in production.
Depending on where you do business, failure of the dust collector can be a huge liability. A smart plant can take maintenance decisions out of plant operators’ hands and tell them when something is wrong or when the bags need to be cleaned. With real-time visibility and repair records, producers cite that the EPA becomes part of the solution rather than being forced to act as the hammer.
Lubrication of the mixer has always been problematic in that plant staff often forgets about it. Sensors and logic can detect increased motor torque, and the PLC can automatically control the grease and lubrication system. Also, a smart plant system can detect if the drum is not being properly cleaned and alert the plant manager. This helps plant staff pay closer attention as dirty drums leave a wake of secondary problems, such as liability created by an improperly mixed batch.
Breakdown time represents the most expensive time. The Vince Hagan team likens a smart plant to the diagnostic systems on modern automobiles in that they can tell you both what is wrong and what is about to go wrong. By integrating sensors with IIOT and mobile visibility, motors, relays, gates, conveyors, turn heads, and everything else, we can now benefit from predictive maintenance that reduces unnecessary replacement costs and unscheduled downtime.
Becoming a least-hassle supplier through improvements in accounting and dispatch, while needed, is often expensive, risky and without a clear ROI. Alternatively, it’s worth considering the overlooked plant. Faster, accurate batching with reduced unscheduled downtime and its catastrophic impact on logistics is imperative. The overall reduced maintenance and logistics costs are all measurable and needed to remain competitive.
Einstein was clear: When you are getting compound interest, it’s great, but when you are paying compound interest, it’s not so great. Seize the day! You can start bottom-up from the plant with a tangible ROI and reduce the exposure of your business to the compound interest debt by becoming a hassle-free supplier.
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].