SCORING WHEN THE GOALPOSTS MOVE

by Joe Sostaric

The great Bob Dylan released a song in 1964 called, “The Times They Are A-Changin.” The lyrics were about the big political and social changes taking place in the world. Although this song was written more than 60 years ago, we can still sing that song and apply it to what is happening in the business world. Not only is the business world “a-changin,’” but the rate of these changes is accelerating. As Brooks Hatlen said in The Shawshank Redemption, “The world went and got itself in a great big hurry.”

There are countless examples of companies that failed to adapt to changes and ended up failing. One of the biggest examples of this is Blockbuster. In 2000, Netflix met with executives at Blockbuster and offered to sell their business to Blockbuster for $50 million. At the time, Blockbuster was valued around $4 billion. Blockbuster executives declined to invest in Netflix, thinking that it was an internet fad. Today, Netflix has a value of $500 billion, and Blockbuster is out of business!

Business owners and managers must adapt to changes that take place in the market. Doing so will either create opportunities (like Netflix) or cause the business to fade into oblivion (like Blockbuster). In the case of Blockbuster, the market was changing around them and instead of adapting to the change, they stuck to their old business practices for far too long. The results were a death sentence. Blockbuster waited until 2004 to offer online rentals that would directly compete with Netflix. They also launched Blockbuster On Demand in 2009, but by then they were no longer the market leader, and so in 2011 they went bankrupt.

The concrete pumping business is not immune to market changes. The goal posts have moved, and the industry and individual companies must adapt to these changes if they are to thrive or even survive. Furthermore, the rate of change in the industry has accelerated. Until recently, the concrete pumping industry was very stable in how it operated: how a pump company hired operators; purchased, ran and dispatched equipment; and serviced and billed customers did not change much. But lately, more has changed. Here are some of the changes taking place in the industry and some ideas for opportunities to take advantage of these changes.

INSURANCE COSTS HAVE SKYROCKETED

Everyone I have talked to in the concrete pumping business talks about the unprecedented increases they have experienced with their insurance coverage. There are fewer insurance companies that are willing to insure pump companies due to the “nuclear settlements” and losses insurance providers have incurred. The pumping industry has a bad track record and must improve its safety performance if it is going to attract more insurance providers in the market. In the meantime, insurance providers are going to be more selective and demanding of their customers.

Opportunity: Work to be the safest and best pump company you can be. Don’t take unnecessary risks and build a safety culture in your organization that is second to none. Share with your providers and your customers all you do to make your organization best in class. Providers are being far more selective. Companies with poor safety records will not get competitive rates or will be denied insurance altogether. Also, your competition is facing the same problem, which puts pressure on all pump companies to pass along this cost of doing business.

Insurance can also serve as a barrier to entry for new companies wanting to get into the pumping business. In the past, it was very easy to start a pumping company: buy a used pump and you were in business. But a new business does not have a proven track record of safe operation. This means that you will have a harder time getting insurance at a competitive rate. If you can’t get insurance, it’s hard to go into business.

CUSTOMERS ARE MORE CHOOSY

When a pump-related accident occurs on a job site, the plaintiff’s attorney often attempts to pull owners, developers, general contractors and concrete contractors into the ensuing lawsuit. Exposure to litigation causes each of these parties to be more demanding of pump companies. This shows up in purchase orders and contracts that push the liability back to pump companies whenever possible.

Customers are also being more selective when choosing pump companies. Before accepting a bid, some customers require a pump company to go through a rigorous pre-qualification process and submit safety information, such as a pump companies’ experience modification rate (EMR) or other safety statistics. If you are an unsafe operator or a company that just experienced some unfortunate occurrences, you might not be invited to bid that customer. Once you get the work, safety doesn’t stop. Job-specific safety training, copies of recent boom inspections, and up-to-date operator ACPA certifications are just some of the ways that customers reduce their exposure to accidents by assuring that safety is a priority for you.

Opportunity: When customers have a pre-qualification process, this tells you safety is more important to them than price. Your lowpriced competitor who does not put the proper emphasis on safety might not be able to bid the work. This makes it easier to get paid a fair price for doing the job. If you have additional safety practices that you carry out, share that information with your customers. They might incorporate your practices in their procedures, which puts you in a better competitive position or, at a minimum, helps to raise the standards of your competition, which helps the entire industry.

FINDING QUALIFIED OPERATORS

The industry is not attracting operators like it once did. People were once drawn to the pumping industry because of the above average pay it offered, among other things. But nowadays, society puts more emphasis on work-life balance. If we are honest with ourselves, the basics of concrete pumping do not lend themselves to work-life balance. We most often do not tell our operators if/when they will be working until the day prior, and we tell them they will finish for the day “when the work is done.” If there were a poll of jobs that offer the best work-life balance, I can guarantee you that pump operators would not make the top 10.

Opportunity: If you are trying to attract operators by offering them more money, you are often missing the mark. Even many of our current operators do not want to work overtime shifts or operate bigger booms (because of the long hours associated with them), as they perceive this as impacting their quality of life. Extra efforts need to be made when scheduling operators for work. The old-school method of dispatching a single operator for a job without any thought to how many hours they are working needs to change. DOT regulations are making this mandatory in many markets, but if you want to retain good operators, you must go above and beyond. The right dispatch software can make this easier to manage, but, more importantly, it needs to be a priority within the company, as operators who enjoy what they are doing are less likely to leave a company or have accidents, which will save you money.

RESALE VALUE OF USED EQUIPMENT

In the past, you could purchase a pump for a specific job and sell it at a decent price when the job was completed. Back then, there were defined buyers who were always interested in used equipment. Today, some of those markets are looking elsewhere, including markets where they now purchase new pumps. If you can count on resale value, that makes it easier to buy equipment. With more uncertainty in the resale market, pump companies must be more strategic in their purchases.

Opportunity: All companies are faced with this dilemma. This means it is less likely that markets will be flooded with excess equipment. For a pump company, tracking utilization and uptime of equipment becomes more important, and the companies that do it best will experience lower fixed costs than their competitors.

ESCALATING ADMINISTRATIVE DEMANDS

There are more jobs that require certified payrolls and prevailing wages. Not only do you have to submit paperwork to your customers, but you also must often process payroll differently. Other jobs require safety forms, OCIP/CCIP submittals and other documentation. Dispatchers must also keep track of additional information, such as hours of service (HOS) and job-specific training by employee. Inventory of system and placing boom equipment must be tracked, along with maintenance of all mobile equipment. This leads to an increase in overhead when pump companies must manage all these tasks.

Opportunity: Adopting technology can significantly aid a pump company in improving process flows and accuracy while reducing the overhead required to run a business, making it more competitive. The construction industry has been notoriously slow to adopt technology, but that has been changing. Our customers are adopting technology to perform such tasks as bid estimating, volume takeoffs, and elevation and site layouts. They have also been performing tasks like placing orders online. An example of this is scheduling inspections for structural concrete. Not long ago, a contractor called the building department to schedule an inspection. Now, most municipalities mandate that inspections be scheduled online.

THE ANSWER: ADOPT TECHNOLOGY

There are many ways that the pumping industry could incorporate more technology into their processes that would improve efficiencies for both the customer and the company. Here are some of the focus areas and ways that technology can help all parties:

1. Customer apps that allow them to take control of the dispatching process by placing, changing and tracking orders. A well-built, highly functional customer app will free up your dispatchers by eliminating mundane tasks, such as confirming orders, tracking the location of the pump that is servicing a customer’s job, or relaying information to the operator from the customer. Customers like it because an app can allow them more confidence that an order will be fulfilled in a manner that meets their expectations. It can also save them time.

2. Employee apps that provide operators with detailed order information so that miscommunications and unnecessary phone calls are avoided. This can also make them better prepared to pump a job, which improves safe performance.

3. Automated billing systems that can facilitate a pump company’s ability to bill customers on the same day services are provided. Electronic tags offer pump companies all pertinent billing information to bill a customer (yardage pumped, times, extra products used and customer information) before the end of day. Same-day billing without billing clerk intervention reduces overhead needs and improves cash flow.

4. Automated payroll systems that provide real-time feedback on operator productivity and payroll processing. Systems can also be constructed to automatically calculate premium pay rates and prevailing wage rates, reducing manual payroll processing.

5. Telematics systems that provide hours of service (HOS) information for DOT compliance and integrated billing times. Telematics systems can also give real-time truck and driver performance when tapped into the truck’s electronic control module (ECM) for such information as speeding and seatbelt violations by the driver, and engine fault codes generated by the truck. For pumps equipped with an onboard computer, it is also possible to receive real-time information regarding pump and operator performance. This information can be used to monitor and assist operators when troubleshooting issues or detecting substandard operation practices.

6. Reporting systems that provide real-time profitability metrics on customers, operators, projects and orders. Sales reporting alone does not provide enough information to evaluate profitability. Importing cost data will provide pump companies with better feedback to improve profitability.

This is just a partial list of areas where pump companies can implement technology designed to make them more efficient. It is important for pump company owners and managers to stay abreast of improvements being brought to the industry, as they have the potential to significantly improve an operation.

KEEPING UP WITH CHANGE

The industry is changing, the goalposts are moving, and companies must adapt to take advantage of all opportunities. Remember a couple of adages: “If you always do what you always did, you will always get what you always got,” and “The definition of insanity is doing the same thing and expecting different results.” Change may be hard for companies, but not changing (as in the case of Blockbuster) can be deadly. If you would like to comment or discuss more, please email me at joes[at]toughcommerce[dot]com.