With the growing popularity of renting among contractors, the construction equipment rental market is expected to have a 4% CAGR from 2023 to 2032. Construction companies are looking to take up big contracts for a long duration on multiple sites.
Depending on the nature of your business, you could be working on residential, private, industrial, commercial, infrastructure, or civil projects. But is your construction business equipped to handle change in a highly competitive market?
We have seen the evolution of the construction equipment rental market over our 18 years of experience in the industry. During this time, we have helped several construction rental companies address challenges around siloed systems with rental software embedded in Microsoft Dynamics 365 Finance and Supply Chain Management.
This article shares the top 10 challenges the construction equipment rental industry faces today and how to address them.
What are the challenges of construction equipment rental companies?
Challenge 1: Having an end-to-end overview of the construction project
Construction rental projects take multiple years to complete on average. With an extended project period, a detailed and structured breakdown of the project deliverables, the planning, and equipment reservations are crucial to ensure you have the right rental objects as planned.
Every step of what needs to be done, which teams must be involved, and the respective budgets and timelines, must be well documented. This includes all pre-construction activities, such as clearing the land and demolishing existing structures to the project closure with the final changes.
Solution: Use a software solution that can manage lengthy, complex projects. It should be able to define the work breakdown structure (WBS) on the rental project, so you can allocate the rental to the specific WBS activity. With this, you can track the budget cost/revenue of the construction project for different project stages. You can also track the actual rental cost/revenue per WBS activity to compare the actual with the budget.
Challenge 2: Using multiple outdated legacy systems with inadequate technology
Using various software solutions, each having a core function, means referring to multiple sources to get a single piece of information. Numerous tech stacks slow down operations as different teams work in silos with manual processes that are error-prone and time-consuming.
With no single source of truth, data, such as customer information, rental orders, accounts, and invoices, are documented in separate locations with no unified view. For bespoke or tailor-made software, you must ensure that the customizations are not affected by the software upgrade, as you would have to redo them, increasing cost and time.
Solution: Streamline processes to maximize efficiency with a software system that supports multiple business processes, such as ERP-embedded rental software. Consolidating your operations on a single technology stack based on the cloud offers a future-proof solution with quick automation.
You can also integrate multiple ERP systems (parent ERPs and local rental ERPs), allowing complete visibility of operations.
Challenge 3: Missing timely delivery of rental equipment to construction sites
Delivering the right construction rental equipment at the right time to your end customers is crucial, as every construction project has tight timelines. Sending the construction equipment before the requested time isn't advisable, as the bulky machinery on-site hinders the workspace. Neither can you afford any delivery delays, as it would put the entire construction process behind schedule.
Without proper planning and scheduling, construction rental companies tend to miss out on certain deliveries, especially with larger construction projects where different types of equipment are required at various stages of the construction project.
Solution: Invest in rental software with real-time scheduling that has information from booking to return in one place, to manage your equipment's planning and transportation. This enables you to minimize asset downtime with streamlined planning, logistics, and transportation of your assets.
Challenge 4: Experiencing equipment breakdowns due to lack of maintenance
Construction rental equipment requires ‘on-site’ maintenance, during which it cannot be used. If project managers do not know when preventive maintenance is due, it isn’t accounted for in the project approach and increases equipment downtime.
You must also focus on implementing preventive maintenance and safety checks to ensure the equipment is safe to work with during the project.
Solution: Look for software that supports timely maintenance equipment checks, including preventive/pre-emptive, corrective, and delayed maintenance. You can use a customer portal to view which equipment is ‘in use’ for the rental period, so the back-office team knows when to pick up the equipment for servicing.
A mobile app with remote access to field service technicians for quicker maintenance resolutions is also helpful.
Challenge 5: Associating all the costs to the right project
When delivering multiple services of varied nature, keeping track of every service provided is challenging, especially with shared expenses with other companies. With several deliverables over a prolonged period, some invoices could be missed. Multi-dimensional costing is also important to have a precise cost allocation.
Project managers must have visibility if the equipment is used for 1 week or 1 month and calculate accordingly (on a weekly or monthly basis). It’s imperative to know about the influence of the rental equipment on the overall project costs and match the internal and intercompany invoices to the construction project.
Solution: A solution offering rental project invoicing with dashboards on cost and project reports helps you associate all the relevant costs to the right project. With rental project invoicing, you can track the rental cost and revenue on the construction project for each rental object. The invoice can be issued using different invoicing methods, calendars, and prices.
Such a solution will automatically apply the relevant price, which differs depending on the duration of the rental order. Additionally, if the solution supports multi-dimensional cost allocation and BI reports, you can allocate various costs to multiple dimensions: products, countries, locations, customers, and rental orders.
Challenge 6: Failing to manage and track equipment availability and location
Construction projects demand precise equipment requirements, and not having complete visibility into the availability and location of your equipment poses a serious challenge. Without insights into the global fleet, you can't allocate the equipment and will fail to meet the specific customer requirements.
For instance, your customer requests an 8-meter working height scissor-lift. To allocate the right equipment, you must have knowledge of your fleet across depots to see the location and transportation costs and decide to rent from your fleet or sub-rent from a company closer to the construction site.
Solution: Rental software solutions with 'equipment availability dashboards' enable efficient allocation of products by offering a global view of the fleet across multiple depots. Closely tracking the equipment's location with GPS allows you to fulfill rental orders economically with quicker transport planning.
Challenge 7: Managing rental equipment across multiple construction projects
Construction companies can be involved in two projects:
Internal projects: Construction equipment is rented out for your construction projects, and you sell the project.
External projects: You generate revenue from renting out equipment to third-party construction companies who sell the project.
One company could be involved in several internal and external projects wherein one project could consist of multiple rental orders. With no standardized processes in place, keeping up with different rental orders running on several construction projects can be overwhelming.
Solution: Keep an eye out for software solutions with end-to-end business processing. Having standardized processes eliminates duplication of effort and provides company-wide consistency. With standardized procedures, you will know when to stop the rental project and reallocate the equipment to another project, maximizing utilization rates.
Challenge 8: Controlling global fleet with cross-country projects
Globally operating construction rental businesses have equipment moving across different regions or countries. Work norms are different for each country, and each region has distinct fleet rules that global fleet managers must adapt to.
Additionally, with your fleet moving from one country to another, it isn’t easy to keep track of the financial and physical ownership of the equipment. All the historical data of the equipment must be maintained, retained, and accessible when it moves from one legal entity to another to track actual ownership and prevent the loss of critical data.
Solution: Opt for software that offers information on your fleet's historical data and maintenance history. You can have an overview of the asset history and get insights into the equipment's movement across different countries, details on usage, and previous transactions.
Challenge 9: Handling equipment mass returns
Dealing with customers and projects using serialized and bulk items makes the return process tricky. Construction rental businesses receive various equipment in bulk from multiple projects at the same time and must have the returned items in stock at the earliest to rent to the next customer.
Under priority circumstances, like when a project is halted, you must be able to receive equipment returns quickly. Not knowing which equipment belongs to which project is challenging, as you must manually sort out the returned items, making it a time-consuming task.
Solution: Choose a rental solution that can manage mass returns of rental equipment. A scanning solution that automatically splits the line items to the relevant projects can be beneficial in knowing the items for each project.
Challenge 10: Evaluating the ROI and TCO of assets
Calculating the total cost of ownership (TCO) of each asset you procure and the return on investment (ROI) is crucial to know whether your financial strategy is headed in the right direction.
Being mindful of when the costs exceed the revenue is significant to decide to continue the existing investment or look at alternatives. Not thinking long-term and making decisions without evidence-based data will eventually hurt your business.
Solution: A rental software with advanced analytics provides insights into asset performance, utilization rates, and booking trends. Leverage these detailed reports to make calculated predictions about the equipment demand and increase the accuracy of your financial planning and budgeting.
Get started with equipment rental software for your construction business
If you’re interested in cloud-based software that solves all the above challenges and offers end-to-end visibility into your equipment lifecycle, DynaRent might be your choice.
DynaRent is a rental-specific solution embedded in Dynamics 365 Finance and Supply Chain Management and leverages the full Microsoft technology stack. You can explore more about DynaRent, in the solution factsheet below.