Why fleet managers need digital dealers to rise up

Luke Powers, Gearflow CEO and founder

Technology moves slowly… until it doesn’t.

For decades, business travel required taxis to get around our major metropolitan areas. But this transportation method often provided little flexibility, unclear pricing, and uncertain availability.

Now, you can book a ride with a well-reviewed stranger in seconds on Lyft’s app.

Technology’s acceleration requires a timely convergence of software development, creativity and unlocked supply and demand forces. In Lyft’s case, tech tapped into a mass of drivers desiring extra income, and riders that sought a transparent transaction.

Just as technology has evolved to bond our physical and digital worlds on the consumer side, the time is right for it to make the same impact in the construction industry.

In the future, fleet management will depend on digital dealers who learn from macro technology trends and apply them to construction.

Why is this necessary now?

Because today’s construction equipment has evolved into increasingly intricate systems of components and automation, with embedded chips and a burgeoning parts list. Fixing these machines has become a more complicated exercise.

And so much depends on the uptime of fleets on job sites.

According to Alec Thomson, a former Skanska USA foreman and cofounder of Riskcast Solutions, the company routinely tells their employees that downtime for any given machine costs the company $90K a day per machine, when accounting for idled labor and job site delays.

Construction’s digital revolution is overdue

When a machine goes down, part of the job or even the entire job can shut down. Contracted laborers end up standing around while on the clock with nothing to do.

This creates a ripple effect, where subsequent deadline-dependent work has to be pushed back. People are upset. And the more downtime there is, the less profit can be made.

Since the dawn of civilization, construction has been — and always will be — a cornerstone industry. In fact, according to Associated General Contractors of America, the construction industry builds $1.3 trillion dollars’ worth of structures each year in the U.S.

And yet, construction has a chronic productivity issue. The global construction industry is a $10-trillion market that employs one in 14 workers globally. Despite this, it has seen a decrease of 23% in gross value added per hour worked since 1990.

Gross value added per hour worked, as defined by the Organization for Economic Cooperation and Development (OECD) in Paris: “Labor productivity per hour is defined as real output (gross value added) divided by total hours worked by all persons in employment.”

As a comparison, here’s how manufacturing and agriculture have performed over the same time period:

Source: Foundamental

In fact, the productivity gains from the aggregate U.S. economy from 1980-2012 were +309% — and an astounding +675% from the end of WWII to 2012.

Source: U.S. Bureau of Labor Statistics

Meanwhile, the construction industry is going the other way.

Source: ResearchGate

According to the graph from the U.S. Department of Commerce above, construction productivity is roughly 25% less than in 1964 — an even more dramatic stat than measuring from 1980. The effect is higher-than-needed construction costs, which is a major factor in our aging infrastructure.

It does not seem logical that the industry is physically doing 25% less than it did in 1964. Where are those hours of lost efficiency going?

It turns out that the process of running a contracting business and working onsite has become more and more cumbersome. Today, foremen and contractors spend three to five hours every day on manual, repetitive communications.

There are numerous reasons for these lost communication hours everyday — safety protocols, approval processes, waiting for other work to finish, material delays, equipment downtime, etc. Meanwhile, the cost of digital communications has fallen dramatically.

Consider the plummeting cost of computing over the same time period.

Source: NBT Ventures

Rapidly falling computing costs are the foundation for the explosion of communication productivity companies, such as Yahoo in the ’90s, Google in the 2000s, and Slack today. These communication tech companies have in turn enabled the emergence of marketplaces, social networks, and advanced research tools.

These factors have fueled the digital revolution that allows consumers to research at home at any time, buy any retail item online, and connect with anyone in the world. This is what drove the 309% gains in productivity across the entire U.S. economy from 1980-2012.

In a world of communication abundance, the construction industry is underserved. And what’s making it worse is that construction companies cannot find the labor they need.

This labor shortage is not for lack of opportunity in the industry. Consider this: The global construction industry needs to build 13,000 buildings each day between now and 2050 to support an expected population of 7 billion people living in cities (10 billion worldwide).

Two negative trends cannot equal a positive without dramatic change. The disparate macro forces at play are so strong that it is reasonable to infer that technology wants to inject itself.

Just as other industries have done, construction needs to better leverage software to organize information and help reduce supply chain bottlenecks. Technology will also guide the shift from a reactive approach to a proactive process of anticipating contractor needs.

For fleet managers, this must start at the dealer level.

Dealers need to lead the charge

Construction equipment dealers have accumulated decades of knowledge about their specific equipment and components. This knowledge is extremely valuable to a fleet manager when deciding which machine is right for the job or what is needed when a machine breaks down.

However, this knowledge today is primarily living in the heads of thousands of experts such as service technicians, parts counter reps, territory reps, branch managers, and shop managers. This information should be known to the world, making the experience of owning, managing, and maintaining equipment much more seamless.

The dealers who will win the future understand this. The expertise of their teams should not depend on customers calling them, but how they proactively help a customer with uptime before a piece of equipment breaks down. Through technology, fleet managers should have instant access to the experts behind the counter who know how to diagnose the issue and help.

As the macro trends of the skilled labor shortage, national infrastructure demands, economic growth, and productivity headwinds converge on the construction industry, what worked in the past for fleet managers and their dealers will not work in the future.

Fleet managers should be able to view the equipment they’ve sent to their dealers for service, track work orders, automatically schedule needed parts, and view their dealer as a true partner.

Transparency around equipment repairs and costs will enable contractors to make better business decisions about how much an hour of utilization costs per machine, average maintenance costs per equipment brand, and the appropriate time to buy or sell a machine.

This is the path that will pave the way for increased productivity in construction — and, in turn, provide an opportunity for higher profitability.

Luke Powers is co-founder of Gearflow.com, an online marketplace that connects equipment buyers and rental companies across the country where they can research, communicate and transact seamlessly on one platform.