The financial statement of equipment rental company ABC businesses was released today. The Chief Financial Officer of the company, Tom, is analyzing the statement and the situation seems grim. Despite having world-class cranes, rollers, cement mixers, and machinery, the company did not reach its targets.
With lower profits than before, Tom plans to re-invest 20% of the profits generated from the previous financial year into procuring new equipment and adding to the existing inventory. He hopes that buying the latest equipment could be the answer to attracting more customers and increasing the number of rental orders received.
To verify whether his idea would work, Tom reaches out to Kate, an equipment rental consultant. After two days of analyzing the data provided by ABC businesses, Kate realizes that their existing fleet is of better quality than their competition. The reason for not generating higher profits had nothing to do with the quality of the fleet but was due to the inability of ‘ABC businesses’ to make full use of their existing assets.
Kate proposes Tom explore software solutions that enable rental companies to maximize the utilization of their assets and increase profits.
If Tom’s situation seems familiar, then this article is for you!
With nearly 2 decades of experience in the equipment rental and manufacturing industries, we at To-Increase have empowered multiple enterprises across the globe to streamline their business with industry-specific rental management software, DynaRent, embedded in Microsoft Dynamics 365 Finance and Supply Chain Management.
In this article, we’ll share the following:
- What is asset utilization?
- Why is it important?
- How can you maximize asset utilization?
- How can we help you maximize equipment utilization with specific KPIs?
What is asset utilization?
Asset utilization is measured as a percentage, and it is the actual use of an asset divided by the number of assets available to use. The actual usage of a piece of equipment will almost always be lesser than the potential use due to adjustments, maintenance, downtime, breakdowns, recalibrations, and so on.
In the rental industry, asset utilization is commonly calculated using two ways:
1. Physical utilization: This is measured by the time the equipment is available (in days or hours) for rental against the time it is actually rented out.
2. Financial utilization: Also known as $ utilization, it is measured as the rental revenue achieved over a period versus the potential revenue that could have been achieved based on a set standard.
Why is it important to know how your equipment is being utilized?
Knowing the utilization of your assets is essential for rental businesses, as it provides information on the operational and financial aspects of your fleet. You can analyze the performance of each piece of equipment and take decisions on how to continue your business, rethink your strategy, adjust your hire rates, anticipate future demand, and make profitable investments.
It’s important to note that the ideal percentage of asset utilization could be different for each asset, and targets must be set accordingly. For instance, some of your assets could be used for only one season compared to other assets that are used all year round. While building your equipment utilization strategy, you must consider such varying factors.
How can you maximize the utilization of your assets?
One element every equipment rental and manufacturing business looks to master is maximizing profits cost-efficiently. The best way companies can achieve this is by maximizing asset utilization.
However, maximizing utilization cannot be done without having the right technology and software to support different processes. A rental-specific software embedded in ERP could be one way to go.
Six ways you can enhance equipment utilization with industry-specific ERP software are:
1. Track the location and utilization of equipment
Stay updated in near real-time on the location of your equipment through asset tagging methods. You can use barcodes, unique identifiers (UIDs), serialization, or GPS to track the location and movement of your assets with IoT.
You can monitor unauthorized usage based on the movement of your assets and ensure to invoice the customer based on the actual usage of the equipment. For instance, if the IoT data reflects asset movement over the weekend, which wasn’t stipulated in the rental contract, you can charge your customer for using the equipment for the additional time.
Additionally, you can monitor the usage of your equipment with the internet of things (IoT) to plan preventive maintenance.
2. Automate billing and consolidate invoicing
Following manual processes to invoice customers causes unnecessary delays or errors in the process, increasing the time your asset spends in each stage of the rental lifecycle. An automated billing system with end-to-end financial capability allows you to have all your contracts, renewals, invoices, and credits in a central location. You can use the standard templates for billing models and get complete visibility of the stock on hand across different depots and sites. You can make quick decisions with the rapid calculation of rental rates while allocating equipment for customer orders, thereby increasing the potential utilization of each asset.
You can also opt to combine multiple invoices into a single bill with consolidated invoicing. Billing your customers for the different services you offer in a single document ensures timely payments and improves cash flow.
3. Reduce downtime with timely maintenance and logistics
Ensuring your assets are always fit for hire, with timely repairs, checks, and upgrades quickens the entire rental process. Additionally, with accurate maintenance you avoid anticipated breakdowns, thereby reducing the time in recalls to repair. Having robust maintenance plans and a rapid response to equipment maintenance calls is vital.
You can empower your field engineers and technicians by offering them access to data anytime, anywhere through a mobile app such as our DynaRent mobile app. This enables your field staff to avoid costly downtime with prompt repair services of equipment.
The logistics of your rental business become smooth as the transport teams can view all transport work order details on the mobile app. This makes it easier to plan and schedule tasks in order of priority and enables the transport, maintenance, and service teams to plan and complete their tasks smoothly.
4. Minimize service gaps with equipment availability insights
Each asset in your fleet goes through various stages: rental-ready, on-rent, off-rent, workshop, and back to being rental-ready. Focus on reducing the idle time of your equipment in each of these stages by having end-to-end visibility of your equipment availability.
You can get an overview of your assets and sub-parts at a glance by having detailed insights into the availability of your equipment. Based on the information of when the equipment is on-rent and due for return, you can support customer requests, fulfill orders, and ensure no equipment is double-booked.
For instance, our DynaRent solution offers graphical availability overviews with which you can track equipment status and availability, schedule orders and maintenance accordingly, ensure on-time deliveries, and minimize overhead costs.
5. Use analytics to measure asset performance
An equipment rental software solution with advanced analytics models offering industry-specific KPIs and BI capabilities can allow you to track the performance of each piece of equipment you’ve rented out. You can leverage analytics to get insights into asset performance, utilization rates, booking trends, and much more.
Detailed reports on your asset performance allow you to:
- Make calculated predictions about the demand
- Support data-driven decisions
- Increase the accuracy of your financial planning and budgeting
- Adjust your rental rates and pricing
- Know when to divest and invest in your equipment
6. Empower your customers and prospects
Implementing an easy and customer-friendly solution with which your target audience can get visibility into equipment anytime and anywhere, can be beneficial. A customer portal, such as the DynaRent customer portal, provides your customers with an insight into their rented equipment while getting secure access to their contract and usage of equipment. They can also book, track, and request information on their own.
This lets your customers be more self-sufficient and speed up the sales and rental processes, ultimately impacting the utilization of your rental equipment.
Furthermore, you can manage your entire lead-to-cash processes in one location to sell better to your prospects and customers. For example, our solution, DynaRent for D365 Sales, provides your sales team with the right information at the right time, increasing customer satisfaction, which raises the probability of such customers renting your equipment again.
How can we help you maximize equipment utilization with specific KPIs?
You can quicken your journey toward maximizing your rental equipment utilization by leveraging our rental-specific software – DynaRent, which offers all the above and more. It is a cloud-based, end-to-end software solution embedded in Dynamics 365 F&SCM that takes care of all your financial, operational, logistical, and rental requirements in one location.
The analytics add-on solution of DynaRent – Analytics for Rental and Lease offers strategic, tactical, and operational KPIs of assets across the different rental lifecycle stages.
Some of the KPIs to measure asset utilization within our solution are:
Watch this video for an overview of our Analytics solution
Ready to maximize the utilization of your equipment?
If you’re interested in further exploring how to maximize asset utilization with our solution, you can check out the solution factsheet which offers information on:
- The solution features and benefits
- The different industries the solution supports
- The features of each optional add-on solution
- How DynaRent can help your business