Utilization: The Route to Profitability
Getting utilization right in your rental business is the key to driving better profits but finding the correct utilization level is sometimes easier said than done and requires a holistic view of your equipment fleet.
How can you make sure you’re utilizing your equipment efficiently and making the most of what you’ve got? Here’s a concise guide that offers 7 steps to getting it right.
1. Visibility is the key
For optimum utilization, you should have the clarity you need to see across your business, with the information broken down the way you want. You should be alerted to any equipment shortfalls so you can decide whether to rehire to fill an order and then, if necessary, replace it with your equipment when it becomes available. This transparency will also help you determine if your assets are in the best location to maximize your utilization returns and highlight problem areas, such as when branch managers are unwilling to share their new assets with other branches.
2. Setting realistic targets
For achievable utilization, the more you know about your equipment, which is the lifeblood of your business, the easier it is to set target utilization rates for each equipment item or category. Setting realistic goals for different lines is necessary – 80% utilization might be an achievable target for some of your fleet. Still, seasonal stock items such as heaters or air-conditioning units may have a much lower acceptable utilization in the low season and a high season utilization rate of over 90%. You should be able to report on current and historic utilization levels that can help you review and set target rates.
3. Maintenance – Know where your kit is
For maximum utilization, you need an accurate, up-to-date picture of what items are in or due to go in for repair or servicing. You need to know which assets will soon become available, how long assets have been in the shop, and if their planned service schedule has been exceeded due to overuse and poor stock rotation.
4. Downtime – It’s not earning its keep
Looking closely at what your equipment is doing when it is not earning money can allow you to make easy changes to your company’s profitability and utilization. Aside from down equipment needing repair, other issues can hurt rental revenue. Some of these issues include delays in picking up equipment once it’s called o‑ from rent, inefficient branch transfers, and poor shop processes. If your equipment isn’t on rent, it’s not paying its way.
5. Rotate your stock
Effective utilization relies on ideal stock efficiency. More often than not, the most conveniently located item may be the most overused item on your hire contracts. If you rotate your stock efficiently, the result will be a more reliable fleet, receiving regular maintenance and being used at an even rate, which will help improve utilization.
6. Purchasing – Be informed
Identify product gaps to see when to purchase new stock for effective utilization—enabling you to make buying decisions based on your fleet’s reliable data and predicted utilization levels. How often you need to purchase new equipment will be linked to how well stock is rotated and maintained and how your customers treat it when it’s on hire.
7. Profitability – The ultimate goal
Survive economic downturns by making the most of your existing inventory to draw the maximum revenue. Understanding when equipment is over-utilized and knowing when there is a need to buy in more equipment to satisfy demand is the key to driving profits in your rental business.
At MCS, we tailor our software to meet your needs. With powerful rental software solutions, you can have the flexibility to grow your business the way you want, and we’ll be there every step of the way to support your growth. Get in touch, and let us work with you to achieve your goals.
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