Prescription Software

May 1, 2006
Over the past two decades, equipment rental software has evolved at a steady pace, while the message remained largely the same: A good system can bring

Over the past two decades, equipment rental software has evolved at a steady pace, while the message remained largely the same: A good system can bring immeasurable benefits to a rental operation. Today, with more than two-thirds of independent rental businesses and all public companies computerized at the counter, the message has evolved as well.

To the owner who still operates manually: “Do you realize that the right rental system can alleviate virtually every concern you have, and help you capitalize on every opportunity?” And to the computerized operation: “Are your strategies fluid enough to use every tactical capability of the software to your advantage?”

These macro questions have hundreds of micro answers rooted in rental software applications. The right software toolbox gives rental staff multiple ways to address each aspect of the operation. To illustrate, consider one of the major challenges facing rental businesses today — the high cost of fuel — and six ways a good rental system can work to control it.

There are several sources of oil price pain in the rental and construction industries. These include vehicle fuel, equipment fuel, and the rising cost of products made from oil or natural gas, such as construction plastics and sealants. For the purposes of this example, we'll limit the discussion to fuel used in delivery vehicles.

We can start with some assumptions about fuel costs. The cost of fuel runs about 15 to 20 percent of total costs for a typical delivery vehicle, depending on the age and model. Other variable costs such as maintenance, tires and miscellaneous expenses make up another 15 to 20 percent. And about 65 percent of costs are fixed: depreciation, interest, insurance, taxes, driver cost and overhead. So while the majority of costs involved in operating a truck are fixed, fuel is still a large cost component.

Without good data at hand, rental operators may under react or overreact to rising fuel costs. In other words, owners may sit tight and absorb the impact as costs rise, without having a true handle on the damage being done. Or rental businesses may alienate customers by over-imposing surcharges and fee increases, or raising rates. A good rental system avoids all these missteps by arming rental companies to track and control.

Here are six specific ways to win the fuel battle using rental software.

  • Manage multiple delivery fee structures

    Any rental computer system that has the capability of automatically calculating delivery charges can do this. A system should allow one delivery charge to apply to destinations within three miles or 20 minutes from the store, or a higher charge at three to five miles, or 20 to 30 minutes.

    A system should be able to set up delivery zones defined by time or distance, and automatically apply the correct charge to the contract. The charge may vary depending upon the type of vehicle needed for transport. Overrides by employees should be tracked for management review.

  • Add a temporary fuel surcharge to contracts

    Some systems allow users to set up a fuel surcharge (or any variable charge) in a manner similar to damage waiver — as a percentage of some other item on the contract. In this case, the fuel surcharge would be calculated as a percentage of the standard delivery charge and appear as a separate line item on the contract. Furthermore, set an expiration date in the system to ensure that the surcharge is reviewed periodically by management, and renewed or canceled.

    Remove surcharges selectively from customers and equipment. Most systems allow the rental business to define customers by type and even sub-type, such as contractor or underground contractor. Based on the market situation or working agreements with customers, applying a fuel surcharge to some customer groups and not others may be necessary in order to stay competitive.

    Applying a fuel surcharge selectively to certain equipment categories like earthmovers may provide a good solution. The rationale is that large equipment must be delivered on rigs that are expensive to operate. One advantage of this approach is that the contract summary indicates the equipment that triggers a surcharge, so the customer understands the reasoning behind the increased charge.

  • Eliminate costly go-backs

    Go-backs are always a concern, because they can signal a failure to serve the customer completely the first time around. The event rental business is especially susceptible to additional trips per transaction. The “kits” capability found in most rental software is an effective way to minimize some of this expense.

    Kits are bundled rental items that include the actual rented inventory as well as no-charge items required for the rental. Kit contents are itemized on the pick ticket — the list of items that must be picked from the inventory to satisfy the order — so that a sledgehammer, for example, is loaded each time a tent is delivered.

    Another way to reduce go-backs is to automate push-pull communications with customers. The “push” comes in the form of screen prompts to the rental employee at the time the transaction is created. The prompts help ensure that all the key questions are asked up front. The “pull” communication can be automatic text messages that print on quotes and contracts. An example of this would be the notification that additional roundtrips on the contract will be charged at X dollars each.

    Customers who understand their cost exposure are more likely to be proactive in communicating 100 percent of their inventory needs, event or construction site restrictions. Automatic text messages can appear universally or selectively on contracts and quotes.

  • Become more efficient at routing

    The dispatch function in a busy rental operation can make or break margin on some transactions. Many of today's rental systems interact with third-party software programs such as Microsoft MapPoint, Streets & Trips or MapQuest to manage miles and deploy vehicles. These programs make it easy to identify the most efficient route to each destination point. It's also possible to schedule more deliveries per trip with fewer empty returns, without compromising customer service.

  • Some rental businesses offer incentives to customers to tweak their delivery schedules

    For example, if a contractor is willing to send someone out to the jobsite an hour early to take receipt of the equipment, that hour is free to the customer. The driver can then move on to make an on-time delivery at a less flexible site.

  • Manage vehicle maintenance

    Some rental businesses maintain their own vehicles, while others contract with an outside service. In either case, rental software can be used to automate the process. If you maintain your own vehicles in whole or part, you can set up each vehicle in the database as a non-rental inventory item. The system should be able to track repair costs, miles, parts, tire replacement and other aspects of the vehicle's life cycle, just as it would with a backhoe or light tower. The system uses this data along with pre-set maintenance cycles to flag the shop or general manager when preventive maintenance is due.

In fact, savvy rental owners can find more than six ways to keep vehicle costs in line. Management oversight is essential, particularly as fuel costs fluctuate.

Fuel cards, for example, can be a great way to track the cost of fuel per vehicle. But if cards have been pre-set with a maximum allowable charge, this needs frequent review. A limit set even a year or two ago could mean your drivers now have to make multiple stops to fill the tank — a poor use of their time on the road.

Customized reporting is another way to hone in on hidden inefficiencies. A computer system should be able to track operating costs for each individual vehicle. A diligent analysis of this information will point out cost variances between vehicles. If one vehicle is costing more to operate per mile than other like vehicles, prompt action can be taken to bring the costs back into line.

The fuel cost illustration drives home the point that rental software can help with cost control. Fuel is just one cost facing rental operators, and costs are just one side of the coin. Think about all the various risks and opportunities in a rental business — then come at them from every possible angle, using your rental system. That's what it is designed to do.

Jack Shea is president of Springfield, Mass.-based Solutions by Computer Inc., a supplier of rental management computer systems in North America, with more than 9,000 licensed users.