On this episode, Clue CEO, Oded Ran, speaks with Professor Mike Vorster, , a world-renowned expert in construction equipment management and the author of Construction Equipment Economics, talking about the four things every construction company owner, fleet manager and equipment manager need to have in mind in 2021.
Mike on Construction Equipment Management (CEMP)
Oded Ran (Clue) (00:01):
Hello, and welcome to another episode of The Full Scoop brought to you by Clue. My name is Oded Ran and I'm co-founder and CEO at Clue Insights. And today at the last episode for this year for 2020, I'm really pleased to have with us Professor Mike Vorster. It's not often that we have someone like Mike on the podcast who literally wrote the book on lots of the areas and topics that most people listening are concerned about. Mike, it's fantastic to have you with us.
Prof. Mike Vorster (CEMP) (00:37):
Oded, it's a pleasure to be with you and a pleasure to be with everybody out there who's listening to this and watching this. It really is an honor to share thoughts with you who are passionate about our business.
Oded Ran (Clue) (00:48):
Some of you may have not seen Mike but you may have read his book. So just to connect the face to a name, Mike, I think you've got your book next to you. Anyone who has anything in construction management, equipment management: if you do not already have this book that Mike, you have it next to you there - get it.
Prof. Mike Vorster (CEMP) (01:04):
Yeah, there's a copy on my desk because I'm going through it very carefully to to develop a second version. I don't want to say a second edition because it's going to be very different, but a second version of the book. So it's kind of kicking around on my desk here, but this is, this is what it looks like for now.
Oded Ran (Clue) (01:25):
Fantastic. So we already have a scoop straight at the beginning! There is version two coming up or a second version. So today we're going to be speaking with Mike really about his view, about the evolution of construction management and production of construction companies, telematics and more, and Mike, you really spent your career working with pretty much every single large construction company in the US and beyond. What are your thoughts about where things are going and what has changed dramatically since you first started in this industry?
Prof. Mike Vorster (CEMP) (01:58):
Well, at my age, since you first started, it was shortly after the invention of electricity, right? :-) It's, it's almost impossible to talk about what's changed through my career because so, so very much has changed. It's just being a complete revolution of information of sensors, sensor technologies, and a complete revolution in what we can record autonomously, as opposed to, you know, recording at the old style way with with a pencil and paper, that's been the huge revolution,
Oded Ran (Clue) (02:38):
You like to speak about how construction management and telematics is literally putting someone in the cab. Let's talk a bit about how you view this progression from someone just operating an excavator with no data whatsoever, but what they're doing to where we are today,
Prof. Mike Vorster (CEMP) (02:57):
Originally, when folks started putting sensors and instrumentation on machines, it was done so by the mechanical engineers who wanted to understand the machines in the field, understand the job performance a whole lot better: what were the, what were the power requirements? What were the pressures? What were the speeds? What were the RPMs? What were the loads and all those sorts of things. So they put what I call a mechanic in the cab.
Prof. Mike Vorster (CEMP) (03:32):
And we started reading fault codes on engines and overheats and overspeeds and so on and so forth. It didn't take us long. And indeed, this was the sort of mid-80s. When we started saying, is there any way we can put a production engineer in the cab? Is there any way we can use these senses and this intelligence about what the machine is working to? Not only draw inference on how the machine is doing mechanically, but also to draw inference on the productivity and the production of the machine. And so we started by putting mechanics in the cab or design engineers or mechanical engineers in the cab. Now we are using that technology to assess the productivity of the machines, to assess the ownership and the utilization of those machines, by if you wish putting a production engineer in the cab.
Oded Ran (Clue) (04:33):
You mentioned that these things and systems have been around for the last 10, 15 years already, right. And including even GPS. I remember from one of our conversations, you were doing one of the very first GPS experiments on an equipment back in, you know, 17 years ago. Right?
Prof. Mike Vorster (CEMP) (04:55):
I can tell that story because it's pretty interesting story. And that is that at roundabout 1985, when I first started my academic career at Virginia Tech, I put a proposal into the National Science Foundation, which said, well, we can now produce electronic drawings of the things we want to build. My buddies in Mechanical Engineering are using these to do machine control to machine shafts and bushings and things like that. What would happen if we used electronic CAD drawings to define an earthworks operation. And then if we put the machines on that drawing and we could direct the machine to produce that cut or that full, and I put this proposal into National Science Foundation and they said, yeah, well, I think we should be able to control machines to produce cuts and fulls, but how are you going to define the location of that? And I said, well, I've got some friends who fly airplanes and they use a Lorraine radio positioning to position their airplanes.
Prof. Mike Vorster (CEMP) (06:07):
And I think we could use that. So they said on what's the accuracy of that? And that of course was the issue because, you know, we were kind of looking for something we could use to locate the machines so that we could position the machines on this drawing of the cuts and folds we wanted to produce. And of course, GPS came along and solved that problem for us. And so, yeah, we've been thinking about position control of machines, if you wish from the days almost before GPS. Okay. So that's 1985 and that's how quickly things have changed over the time. It's almost when almost doesn't think about position as a problem anymore, it's there. Okay.
Oded Ran (Clue) (06:52):
Are there problems, even though we're in 2020, you know? As in you and I can have video calls, I can put literally fast internet access in most places in the US and yet: what are the things that you look and say, you know, this is still very suboptimal? What are the things you're surprised that 20, 30 years after what you described, we still are doing a fairly poor job at?
Prof. Mike Vorster (CEMP) (07:17):
I think we're still doing a fairly poor job at using sensitive data to infer production, productivity and operating status. Okay. We can use sensitive data to define in many ways, fairly accurately, the mechanical status of the machine. What's the RPM on the engine. What's a tip pressure in a hydraulic system. What's the temperature in the oil that's mechanical status, and our sensors are fairly good at doing that. And the algorithms we use to take the sensor to infer mechanical status from the sensor data of fairly good and fairly sophisticated, however, production status is something different. All right. Yes. What is the relationship between the pressure and a hydraulic system and the productivity or the production of the machine, or what is the relationship between the RPMs on the engine and the productivity and the production of the machine? Now, we've got pretty good at measuring the pressure in the suspension struts and saying, ah, that's the load on the machine?
Prof. Mike Vorster (CEMP) (08:31):
And so can we combine the time the machine spins within three meters of a loading unit, and the fact that pressure is growing in the suspension strap, can we write an algorithm that reasonably in first, the machine is being loaded? I think we can, can we write an algorithm? Which says the machine is 10 meters from alerting unit. The velocity is zero to pressuring. The suspension. Stress is not growing. The machine is waiting to be loaded. We can gather all those sensor outputs. Can we write the algorithms that enable us to with reasonable accuracy and see what's going on in the life of that machine from a production point of view? That's where I think is the, is the current frontier and the, and the new frontier, if you wish.
Oded Ran (Clue) (09:30):
Have you seen any company or any from I, should I call it future-looking company, a construction company already starting to do these things, or is this still people are still spending most of their time battling these battles of maintenance and downtime and, you know, the same type of battles that you've seen in throughout your career?
Prof. Mike Vorster (CEMP) (09:51):
Well, yeah, the use of sensors and sensor data and getting really involved in and using them to put a production engineer in the cab, that art is very badly developed. We've done a couple of research studies on it and found a huge opportunities for improvement. A couple of companies have embraced that and effected huge opportunities. The mining industry in general has, has gone a long, long way, but the general construction infrastructure construction industry has a lot still to learn from the mining industry. Okay. Bearing in mind that, you know, they are not a lot of construction operations that run from 7:00 AM to 5:00 PM. In mining, you run essentially the same operation from 7:00 AM to 5:00 PM. So you can really can optimize it and get it to be and fine tune it. But an infrastructure construction, you know, there's so much out of sequence work. There's so much delayed work. There's so much rework, there's so much change in position that perhaps the fineness of the productivity and productions studies in the classic work study sense, perhaps that's a, another order of magnitude for the performance improvements we can effect by just making things more simple, more routine.
Oded Ran (Clue) (11:24):
Right. So I'm going to ask you something a bit, a bit difficult, you know, lots of the equipment managers and fleet managers that we speak with at Clue, have a very difficult job. They're, they're very busy to say the least. So even when we recommend to them to get your book 250 pages long, and it takes time to concentrate, I worry sometimes that they're not getting, getting to it. So if you had to summarize the 10 Mike Vorster Commandments to the equipment manager or the fleet manager, it could be fewer than 10, as many as you want, what would they be? What would be the key things you would say, you might have been doing your job for 15 years, please make sure you are abiding by these commandments?
Prof. Mike Vorster (CEMP) (12:12):
Okay. yeah, it is in my opinion, a lot less than 10. And I think I'll cut it down to 4. How about that? I think one of the things, maybe five, I think one of the things that I would tell them to do, and this is very controversial. And in my career in field construction, I wouldn't say it got me into trouble, but it was very controversial style that I had in my field construction career. And that is, I believe that cost was the end result of performance in the field. And that costs was the end result of all your decisions and that sort of thing. And that you wanted to not attack costs, but attack the causes of cost. So I think commandment number one or recommendation number one is don't waste too much time mulling about cost. Spend your time looking at the things that caused those costs and the byword. There is a, you can't manage money. You've already spent so focus on the causes of it.
Oded Ran (Clue) (13:25):
Let's make this actionable. So what does it mean to me right now? What should I do differently when you say causes of costs?
Prof. Mike Vorster (CEMP) (13:33):
Well, those are then commandments numbers, two, three, and four.
Oded Ran (Clue) (13:38):
Okay. These are linked commandments!
Prof. Mike Vorster (CEMP) (13:42):
Because I think there are some lead indicators of cost and in my world, there is no, absolutely no doubt that utilization is a lead indicator of cost. And here the byword is that a machine is only an asset when it's working and all other times, it's a liability. Okay. So if you get utilization, right, the chances are, you're going to get the owning cost, right? And the more utilization you can get, the more working hours you can get, the more production you can get out of a machine, the cheaper, the lower, the lower you're going to get the unit rate from an owning the asset point of view. So if you're going to attack the causes of costs, first cause of cost to attack, or one of the causes of cost to attack is, is utilization.
Prof. Mike Vorster (CEMP) (14:42):
The second cause of cost in my book that you need to attack - because it's not in the book, it's got to be in the second edition of the book - the second area that you've got to attack is reliability. Every down event is a cost event. And if you can reduce the number of down events, not necessarily the duration of the down events, but the number of down events, you are going to reduce the number of cost events. And so you are going to really attack the causes of your operating costs, repair parts and labor costs because every down event is going to involve some repair parts and labor. And if you've got a lot of little ones, it's only a matter of time until you get a few very big ones. And so if you can manage reliability and if you can get your maintenance and your condition-based maintenance and your inspection programs and your operator training programs and the way you apply the machine, if they can all be focused on eliminating down events. And I do believe that you can eliminate down events to pretty close to zero. Remember the old days when we said we couldn't reduce accident, frequency rates in construction to pretty close to zero. Well, look what we've done with safety in construction. I think we can do something very similar with reliability in our equipment.
Oded Ran (Clue) (16:17):
So that's interesting because there are companies that we see that the first problem is they just don't measure it. Right? You ask them how many down events they actually had in the last 30 days. They probably remember the last few if it's fresh in their mind, but they don't measure it. They don't write it down. They don't document it, not digitized. That's one thing we see at Clue, but you're saying after you hit that prerequisite, you should know what percentage of your time and money you spend. And for anyone who is listening and they want to benchmark to know, are they getting an A+ or F minus? What would you say is, is good enough top quartile in terms of down events, both in terms of percentage of total events, or maybe it's percentage of money spent, whatever KPI you feel is the correct way to measure?
Prof. Mike Vorster (CEMP) (17:06):
I really don't have enough data to talk about benchmark values for reliability, because as you say, a lot of companies don't measure it, the companies that we work with, we're only just starting and we're really learning about down events. The interesting thing about down events is those sort of, sort of binary. They either happen, or they don't, and you're not fussing with recording the duration of a down event. You're just recording the fact that somebody got on a, on a, on a radio, somebody got communicated with somebody and said, this machine is supposed to be working and it's gone down. Don't fuss about the duration. This machine has caused us this disruptive event in the smooth flow of the construction operations, right? With regards to benchmarks, with regards to cost, I have seen companies that are spending less than 15, something like about 10 cents in every dollar that they spend on repair and maintenance on repair after failure.
Prof. Mike Vorster (CEMP) (18:17):
In other words, or, or repair in my world or repair, or you have to have a failure before you can have a repair. If you don't have a failure, it's a maintenance action. Maintenance actions are designed to preempt failures, repairs are designed to fix failures, right? So 15, 10 to 15 cents in the dollar would be, I think, pretty, very, very good in terms of 15 cents in the dollar that you're spending on repairs compared to your total spend on repair on maintenance and repairs, right? Because you then spending 85 cents on prevention and 15 cents on repairs. That would be a very good level to arrive at.
Oded Ran (Clue) (19:02):
Perfect. That I'm sure that's very helpful to anyone who was looking for some numbers around that. Great. So, that was really one thing around that repair and utilization.
Prof. Mike Vorster (CEMP) (19:12):
Okay. So the third area in which you can attack cost is the average age of your fleet. All right. We do know that there's a relationship between the cost of owning and operating a machine. And the age of that machine. We do know if you keep the machine to shorter period, you're going to spend a lot of money per dollar per hour on the amortization, on the depreciation, on the loss, in value of that machine. If you keep it too long, you're going to be selling your sole over the parts, counter on repairs and parts and labor. And so we do know that there's a point an optimum ownership period, or whatever you want to call it where you can minimize the total of the owning and operating costs of the machines. And I think that we really need to get very much better at managing our, our build replace decision around that point.
Prof. Mike Vorster (CEMP) (20:16):
Because if we do that, then we'll know we're not throwing good money after bad. Okay. I, it just breaks my heart to see companies spend a lot of money on machines. When they're worn out, they're done, they've served their purpose. They've lived their their optimum ownership period. And it's now just a throwing good money after bad. And if, if you can stop yourself from throwing good money after bad, or if you can have the knowledge that enables you to take decisions that stop you from throwing good money after bad, I think you will save yourself a lot of money or attack the causes of cost.
Prof. Mike Vorster (CEMP) (21:00):
So in, if I say rule number one is attack the causes of cost, and I'll say it, and tech the causes of cost by focusing on on three things. First one is focus on utilization because a machine is only an asset when it's producing work, track the cost, which you incur when the machine is sitting predominantly off the site. All right. Attack the causes of costs that arise when the machine is just breaking down too often, attack the costs that arise when the machine's too old, that's three simple ones, right? That's a lifetime and take your lifetime to do those things. All right.
Oded Ran (Clue) (21:48):
And before we get from you a bit of a preview into the update of the book you're working on. Let's talk a bit about the work that I've been doing a lot with companies, just to describe it in terms of type of workshops, how does it work? A company would contact you and then you would sit with them for the whole week with the owners, with the owners and the executive team, or what would typically engagement be? And I guess some of the people listening, wondering if I want to get you right now to come and help our company get from F to A, you still do these things?
Prof. Mike Vorster (CEMP) (22:22):
It's less of it, unfortunately than I used to, because, you know, the passage of time has such that a four or five day eight hours a day workshop is, is pretty heavy sledding because for a number of years, I did once or twice a year, a five day in residence, equipment management workshop that the, at the Georgia Tech Hotel and Conference Center, they did such a good job of hosting the workshop. And right now, of course, with COVID and where we are, I'm doing a couple of workshops and continue to do them on zoom and online and gathering some quite good experience on how to do that and how to do that in a way, which maintains the, keeps up the sort of involvement and attention of folk who are studying the material or listening to what I have to say on zoom or remotely.
Prof. Mike Vorster (CEMP) (23:19):
And there are some techniques that have kind of come to the fore to to do that. So yes, very much lesser extent that I used to, I am still doing workshops in the, in the fleet management things. Okay. But let me say this about those workshops. And I've just kind of had a conversation with a company that I'm working with on the subject. And that is my of equipment management has got very, very little to do with oil and grease and nuts and bolts and lefty-loosey righty-tidy with shops and mechanics and filters and bearings and bushings, and those sorts of things. My definition of equipment management has a lot more to do with the dollars and cents and the repaire- replace decision. And so what works very, very well. And what I would recommend anybody does you enter as this sort of arena is make sure that you include the folk who focus on oil and grease and lefty loosey righty tidy.
Prof. Mike Vorster (CEMP) (24:30):
And the folk who visited, who focus on dollars and cents and the lease decision and the borrow decision and the investment decision and the Capex decision and their return on investment decision. And also include the folk who focus on the pulling and pushing aspects and the production and the productivity of the machines. Okay. And so to me, and the best workshops I've ever run, many of the, this was the situation in many of the Atlanta workshops. The class was made up of about a third of the folk who were, whose genes were all about new skills and knowledge were all about oil and grease. Who's an, a third of the folk whose genes were all about dollars and cents and investments and return on investments. And about a third of the folk whose contribution was, and theirs genes were all about pulling a pitcher and producing, completed work, develop a common language and a common understanding about what the hanging equipment is all about. Okay. And that's, that's really, I think the workshops I've done have have been able to achieve,
Oded Ran (Clue) (25:46):
Right. And translating that into the, really from a system perspective, I guess, where you're saying is that to achieve the optimization, you cannot just look at the equipment managers, just the operation people, or just the finance people. You literally have to connect them all to work and speak the same language, which historically, and from the experience we've had in the last year at Clue, it means a real change in shift, right. In thinking it takes strategic thinking from the owners or the president to want to bring it together. Otherwise they would create silos within their organizations. And there'll be very difficult to achieve this level of optimization. Is that how you view the world?
Prof. Mike Vorster (CEMP) (26:27):
Yeah. And you put your, you mentioned exactly the right word and that is, you know, sort of strategic thinking on the subject. I don't remember, but a whole lot of tactical decisions altered end on end and not make a strategy. Okay. And you need an overarching strategy across your company as to how you're going to manage this investment in your equipment assets, and how are you going to keep them as assets, not liabilities. I remember that for many, many heavy civil infrastructure companies, about a third of the left-hand side of the balance sheet is, is represented by PPE. Right.
Oded Ran (Clue) (27:09):
Right. So a third of construction company's balance sheet will be in, in equipment or like, I love your quote from earlier. If the equipment is working, it's an asset, but if it's not working, it's a liability.
Prof. Mike Vorster (CEMP) (27:25):
There's another thing that I think that I would like to share with our listeners. And that is that where would your company be if the only person who was interested in cost was the financial manager, the CFO, the only person who was interested in production was the production manager or heaven forbid the only person who was interested in safety was the safety manager. Right. We were all involved in all those things. And the only person in your, if, if you, if the only person in your business who's interested in equipment is the equipment manager you're on a beating to nowhere, right. Because we're all involved in equipment management one way or the other. Okay.
Oded Ran (Clue) (28:14):
I love the analogy to safety because you're right. No one in 2020 would dare think that safety is only the responsibility, but, you know, everyone should be losing sleep on that or caring about that. Right. So yeah,
Prof. Mike Vorster (CEMP) (28:26):
Good companies, in fact have this safety manager, as the, as the champion of the cause as the standard bearer, as the, as the lighthouse towards which everybody can travel as they do this better and better and better. And I think your equipment manager is the same, right? You're not the only person in your business that was interested in people who was the personnel manager, wait, but nothing would work exactly the same thing with equipment. We're all involved in. It were one way or the other. And then before I stopped this little theme, the person who is more involved in equipment management than anybody else in your business is of course, the person who sits in the seat because there's nobody, who's responsible eight hours a day for the management of a piece of construction equipment more. There's nobody except for the operator. Right?
Oded Ran (Clue) (29:32):
With that in mind, I'd want to spend the last few minutes giving a bit of a teaser about the chapter you're working on now and the update you're working on. I know it's still a work in progress, but give us a bit of a teaser to what you're working on. And I'm thinking in 2021 we'll do this again. Once the chapter in the book is ready for, for the next next stage.
Prof. Mike Vorster (CEMP) (29:56):
The first thing is, thank you very much for your contribution to my thinking and for your contribution to, to chapter 12, or I'd add many other aspects of the book, because you know what I say to folks that I, I learn about things because I kind of rubbed shoulders with, with bright folk who do it and who think we think about it and then not have learned from them. And I just have maybe a talent to synthesize other people's thinking. So, first of all, thank you with regards to chapter 12, this is where I'm going to, where I am talking about utilization of your assets. What percentage of the time does the machine live as an asset? And then the, in the, you know, whatever's left, it stays over there as a, as a liability and from an equipment and equipment management point of view utilization really is what percentage of the machines life is it able to be utilized?
Prof. Mike Vorster (CEMP) (30:56):
Is it onsite and able to work? How much of it then is utilized by the folk who running the operations? Is that an issue which is hugely controversial and, but which is mine lodge out of the control of the equipment manager, right? And out of the equipment management function. And of course, as we get to this, and as I was putting this chapter together, I said, you know, you can't dock and pretend that telematics and onboard sensors and using onboard sensors to infer the production and productivity of the machines and the, and the operating status of the machines doesn't exist. And so I've kind of had a revisit some of the original work that we did in the late eighties and early nineties on using sensors to infer production and productivity status of the machines. And so chapter 12 and section 12, one specifically draws a difference between what I call the operational status of the machine. Is it onsite? Is it able to work? Is it being used? And then the sensor status of the machine: is there pressure in their hydraulic system? Is the engine running? Other suspension? Okay. And what we can infer from the sensors status of the machine to help us better understand the operational status of the machine. So there is a teaser for you. All right. That's fantastic.
Oded Ran (Clue) (32:40):
And for anyone who wants to learn more, it's very easy. There's a website called Google and you can put Mike's name, Mike Forster and construction equipment management, and find his website, CEMPcentral.com. Correct?
Prof. Mike Vorster (CEMP) (32:55):
Yup. Yeah. And get the information there.
Oded Ran (Clue) (32:57):
And we always finish with a question that is, you find out, give you as a Christmas gift, the ability to operate any assets, any every construction assets that you want to operate and have a field to date with it, which one would it be for you?
Prof. Mike Vorster (CEMP) (33:16):
A buddy of mine sent me a video the other day of an excavator. And this excavator, we see these funny videos, which I actually don't like very much because frequently they show very unsafe operations. And that upsets me that we sort of glorify unsafe operations. And this excavator, the operator was loading it up onto the truck to haul it away. And it was taken somewhere. It looked to me like in the Philippines and when the excavator was loaded on the machine, sort of a 10 or 11 year old young boy got out of the machine and everybody went and I sent it back to him. And I said, well, that wasn't very, to me, that wasn't very funny because I was about that age when I started operating equipment. Without a doubt, my favorite machine is the motor scraper because motor scrapers are incredibly busy. If you think that a motor scraper has got a complete, in order to make money, a motor scrape has got to complete about 45, 55 cycles an hour. What are you doing in those 50 cycles? And are you loading it? You're hauling it, you're dumping it. You're returning it. You're constantly busy and I've done, you know, four hour before lunch shift or a five hour before lunch shift on a motor scraper. And the guys see the rest of the other guys parking for lunch. And I say, wait a bit. We've only just started. And so, without a doubt in my world motor scrapers are the single most fascinating things to to operate.
Oded Ran (Clue) (34:59):
This is awesome. I'm going to, I'm going to make sure we will send this to every operator of a motor scraper, that they wear that as a badge of honor.
Prof. Mike Vorster (CEMP) (35:08):
No, they're not a lot of 78 year olds who spend their time in Southern California as earth movers!
Oded Ran (Clue) (35:19):
I picture every, every, every dozer operator that ever listened to was like, ah, I can't believe that he didn't choose my asset.
Prof. Mike Vorster (CEMP) (35:27):
It's it's motor scrapers. They just keep you're way too busy doing stuff.
Oded Ran (Clue) (35:33):
Fantastic. So Mike, it's been an absolute pleasure having you on the full scoop and of course, working with you I want to wish you and your family and everyone you work with. And everyone's listening to the show, a very Merry Christmas happy holiday season, happy new year. And I hope you return to 2021 that finds you peaceful and at ease and happy. Thank you so much for listening to the full scope in 2020. And we will see all of you back in 2021. Thank you very much. Again, Mike
Prof. Mike Vorster (CEMP) (36:03):
Greetings to everybody.