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The heavy building materials and construction industry is notoriously characterized as a late adopter of technology.
In fact, one study shows that the industry is next to last in digital transformation. The industry needs to leverage advanced technological solutions that will enhance productivity, improve efficiencies and increase profitability.
One of the largest opportunities for improvement with ready-mixed concrete producers is the daily under-utilization of resources (i.e., trucks, drivers, plants, materials, etc.) … and these resources are not cheap. A standard concrete mixer truck costs over $150,000. Variable delivery costs run in excess of $1 per minute and are forecasted to continue to rise. Material costs from plant to plant can vary widely even within a very small organization. In today’s dispatch environment, the overwhelming amount of data coming from all of these sources has far exceeded the human capacity to absorb this information and make a fully-informed decision.
Concrete producers can benefit greatly by transforming their transportation logistics through the implementation of a transportation management system (TMS) supported by an optimization engine. With these optimized transportation management systems, producers can benefit from proven algorithms that review resource demands constantly and utilize the resources more effectively to meet customer service levels and be more profitable.
It will take time for producers to understand the full benefits of using an optimized TMS and make this a standard business practice. The good news is this investment has proven to pay off. In a recent survey of CIOs, TMS systems were rated as returning the highest ROI of all technology investments. Studies show that an “average” ready-mix producer operates at a level of efficiency that has the fleet productive 60 percent to 65 percent of the time — which means that 35 percent to 40 percent of the time, the fleet is underutilized. Because producers have accepted this inefficiency as the “norm,” most don’t realize just how much money is being left on the table every month.
Some producers already understand that an investment in an optimized TMS allows them to gain a competitive edge by doing more with less. One producer recently reported they had the largest volume day in the history of the company — and, thanks in part to their investment in an optimized TMS, they were able to use a dozen fewer drivers/trucks versus their previous record. Producers who have already reshaped their logistics department to utilize an optimized TMS have shown that they can reduce costs by more than $1 per yard of concrete with these types of solutions.
To remain competitive and viable, producers will have to accept the changing world that we live in. Technology has advanced, and people (especially millennials) coming into the industry are used to leveraging technology to improve upon what is being done. To retain the top talent, producers will want to use technology as a way of improving not just their efficiencies but the job of managing all of those resources (not to mention the blossoming driver shortage that will only exacerbate the need to do more with less).
Right now, an optimized TMS is a disruptive technology in the construction industry. Ten years from now, the industry will look like most other industries that deal with transportation logistics today. Producers will use optimized TMS solutions to manage their fleets and wonder why it took them so long to adopt the technology. They will understand how to better manage assets and handle more work using fewer resources.
Whether the economy is up or down, a TMS system will always help producers capture more volume in a strong market and in a recession still maintain that focus on cost control and efficiency. Being a “good” producer is not going to be good enough someday — it takes leveraging proven technologies like optimized TMS solutions to become great and remain there through the good and the bad times.
Dave Donaldson is business unit manager, OMMANDoptimize, for Command Alkon.
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