Our customers in the NETA community reach out to us with two problems: people and assets. There are just not enough people and technicians to fill the demand in our industry. We consistently work on the people problem with our customers, but the other problem — assets — tends to get put on the back burner.
Assets and inventory are often overlooked while larger problems get addressed. In the rental world, assets and inventory are the most important part of our business. We constantly want to know that the assets we have purchased are producing good results. Many factors determine good results, so we ask ourselves these questions about the inventory we carry:
- Is the equipment durable?
- Is the equipment utilized?
- What is the shelf life of each asset we own?
The responses to these questions can include a long list of answers that require more analysis. If a piece of equipment is not durable, is it because of the equipment or the way the equipment is transported? If a piece of equipment is being utilized as intended, does the utilization rate justify additional purchases — and if so, in what quantity? How much use do we expect out of a piece of equipment before we start thinking about replacing it with a new piece of equipment?
Answering these questions is high on our priority list, but for our customers and for NETA companies, these questions sometimes get pushed down on the priority list. The costs also end up being somewhat hidden. For example, if an M4000 goes down for repair and is out of commission for 3 months, which leads to 2 months of a rental (roughly $10K), does anyone notice? If your inventory includes 10 200-amp ductors. but the utilization is 20%, is anyone pushing to sell off some of that inventory? Does it actually get caught? Should these questions be the priority, or should we look at coordination of outages going on at the same time? I believe the answer should be both, but assets often get overlooked.
When we assist customers, the starting point to getting these questions answered comes with a good software that can provide reports and analytics. There are free and paid programs that can connect various application programming interfaces (APIs) to provide reports tailored to your company and your needs. Microsoft Power BI is a great resource to help connect various reports in many different formats to provide a visual to help guide inventory and asset decision-making.
Investing in an employee to provide the training to effectively use any of these software programs is money well spent. Analytics will certainly begin to paint a picture of issues you may not know even exist. No company manages their capital expenditure spending perfectly as it pertains to assets and inventory. The key is to identify a bad purchase sooner rather than later since the equipment naturally depreciates. For example, if you purchase a Manta for a specific relay tech to use, and then the relay tech leaves for another opportunity, is anyone moving on to use that piece of equipment or does it sit on the shelf for a long period of time? How do you catch this in real time? These are all areas where good software (programmed so you can see what you want to see) combined with good people who can catch the things data and analytics miss can provide answers in real time.
These problems can go undetected because they are so easily masked. If software and personnel aren’t in place to analyze whether capital expenditure dollars are being spent wisely, the business is being set up for inefficient operation and potential failure.
Figure 1 is an example of our operational thought process using a report that provides a real-time snapshot of utilization by location for specific equipment. In this scenario, we’ve arrived at this report after noticing the utilization rate for two specific models was below the threshold of our anticipated target range. We began by asking, “Should some of this inventory be liquidated to maintain our target utilization?” Without using business intelligence analytics, the answer might have been a resounding “Yes,” but let’s see if that answer changes after we look at the data more closely. We can see here that one location (Reno) significantly underperforms with this equipment compared to the others.
Using aerial views like this helps us keep an eye on performance metrics to ensure all aspects of business operations, not just asset utilization, meet our target goal. They also provide a cue for your team to identify areas of the business in need of more granular analysis. Now that we’ve used this aerial view to identify the problem, let’s dive a little deeper to determine why it’s happening.
In Figure 2, with the report sorted to show only the equipment at the underperforming location, we discover that the lower-than-projected utilization rates for these two models as well as the underperforming utilization rate of this location appear to be a result of this specific equipment not being utilized effectively.
Now we can incorporate the human element and begin asking questions to determine why these specific units are not being utilized. By switching over to the lifecycle report, we can analyze whether a) technicians don’t trust their equipment, or b) the accessories are missing items that haven’t been replaced. To identify abnormalities, we can look at the time each asset spends in different stages of our internal processing procedure, including time spent in repair, to compare against other locations. Using these reports provides the ability to quickly spot areas of concern and dive deeper into the data to gain valuable insight. Without this combination of software and people, we might have acted on our initial question by liquidating the equipment rather than identifying and addressing the root cause, and we certainly wouldn’t have been able to arrive at these conclusions in such an efficient or effective manner.
Understanding these metrics and implementing an asset utilization process within your company is very important to efficiency and maintaining your inventory whether it’s in a few locations or spread out across the country. For rental companies, this is even more important. Spending wisely and having the proper systems in place to ensure an efficient inventory of equipment is critical to the success of the business.
Cody Richards is President of Protec Equipment Resources, a premier one-stop electrical test equipment rental, calibration, asset management, and training service for NETA companies. He has been with Protec for the past 11 years, leading sales and driving sustained annual growth, before being promoted to President in January 2020. Cody graduated from Texas Tech University with a bachelor’s degree in Business Administration. He has a passion for customer service and helping clients solve problems and is very proud of the Protec team and its accomplishments, including Protec being named to the Inc. 5000 List of America’s Fastest Growing Companies for the past 2 years.