 There are those who see beauty in the gleaming power of a machine, and others who only see the perfect efficiency of the work performed by mechanical means. Still others see machines as a wonder of human creation, and indeed they are. The machines we see today represent the end product of the ingenuity of many of our ancestors, and now it's our turn to do our share, to improve the interaction between machines and people. One way of doing that is by systematically managing our machines so that we can get the greatest benefit out of them, and that's called an equipment management system, or EMS for short. This videotape and the accompanying manual have been designed to assist you, the equipment manager, in developing and implementing an equipment management system. In most public works operations, equipment is one of the largest support functions. In fact, 20 cents of every dollar of the total budget is spent on equipment. Fully aware of this, the Federal Highway Administration contracted experts to develop an EMS manual, specially suited to local agencies. Then to make sure that the system truly addressed those agency's needs, the FHWA requested comments from equipment and maintenance managers, and included their input in the form of managers' practical tips. There's also space for your personal notes and calculations. This videotape corresponds to chapters 5 to 8 of the manual, and is divided into six segments. This first segment contains an introduction to the concept of an equipment management system, and the other five segments will describe the subsystems of the EMS, which can be shown schematically like this. At the end of each segment, your instructor will give you exercises on the material covered. As you work through them, keep in mind that the overall purpose of the EMS is to provide the right equipment at the right time and place at the lowest cost. Stop the tape for now, and take a few minutes to review the objectives of chapter 5 of your EMS manual. When we return, we'll talk about equipment inventory, planning, and control. In this segment, we'll discuss the first subsystem of an EMS, equipment planning, inventory, and control. For our purpose, we'll assume that you have already developed your agency's policy statement, so that everyone connected with equipment has a clear picture of the overall objectives, and we'll also assume that you've developed your EMS implementation schedule and have identified the individuals in the organization who will play a role in the implementation. Now, don't get me wrong, these are all big assumptions that we're making. Each one requires a great deal of thought and effort, because together they represent the foundation of your EMS. However, here we'll concentrate on the subsystems of the EMS. By using this modular approach, you can choose whether to implement all or some of the subsystems. We'll start with equipment planning, inventory, and control. There are three objectives in this subsystem. To identify the fleet size requirements, to maintain close control of the equipment inventory, and to carry out an economic replacement of the equipment. Well, let's look at each objective independently. As equipment manager, you have to meet the needs of the various users of equipment. This means that you need to plan the fleet and determine the best size and mix of purchase or rental equipment for each organizational unit. Although the actual process may take some months to accomplish, fleet planning can be summarized in these seven steps. What do we mean by establishing assignment and utilization policies and procedures? Well, there are many factors which affect fleet size, some of which may require top-level approval. For instance, there has to be clearly defined policy with respect to 24-hour assignments to individuals, pooling, temporary transfers within departments, leasing, utilization objectives, and downtime objectives. Your organization may need to address different factors, but whatever they are, you have to make sure that they're defined and that policies and standards are established. For example, you'll need utilization and downtime standards to determine nominal and real availability of the equipment. Then, with that information, you're ready for the second step of the fleet planning process. That is, to define individual user needs. There are various ways of doing this. One can be through a maintenance management system. The important thing is that the users of the equipment should all use a uniform format for defining their requirements of major equipment. Then, when you receive all the forms, you'll be able to analyze them to summarize the requirements, which is step three of the fleet planning process. And you can use a form such as this to be able to see individual department and total fleet needs and define and analyze alternatives for meeting the user's needs. At this point, you'll be ready to combine the previous four steps into a comprehensive fleet plan, which should also include programs for equipment replacement and small equipment purchases. Although the fleet plan should be well documented to justify budget expenditures, you should summarize it in one or two pages and include a chart which quickly shows an overview of the equipment program. That overview will be essential when the plan is presented to top management, so that the plan can be incorporated into the overall fleet budgeting process. The fleet planning process ends with the approval of the plan. Now, we said that the second objective of this subsystem was to maintain close control of the equipment inventory. In other words, you need to have a way of identifying and classifying equipment for tracking equipment transfers, locations, assignments, and utilization. We refer to that as high visibility of the fleet. In essence, what you need is a way of grouping equipment by class and of identifying individual units, and you do that with a numbering scheme. As shown in your EMS manual, there are various ways of doing this, and in fact, your organization may already have an established system. The important point to remember is that, from your point of view, the numbering scheme should allow comparison of specific units with similar units. There's no need to attempt to make equipment numbers provide every fact about an equipment unit, since all the attributes of the equipment should be maintained in a master file. This should contain the master record, commonly referred to as the birth certificate, and history files. The birth certificate of an equipment unit should include detailed information which is developed only once in a unit's life, and it should be kept in a history jacket along with work orders, accident records, and other applicable information, regardless of whether your system is manual or automated. As part of equipment inventory, you need a method of tracking equipment location and assignments. A magnetic board is an effective method of doing this. The last aspect of inventory control is equipment monitoring to determine equipment utilization and performance. This is one area where a computer will be essential because the monitoring process can be very time consuming. What will be monitored is equipment availability, downtime, and utilization. The way to do this is to take the downtime information from the shop work order and calculate the percentage of nominal availability with this formula. Let's say that in one month there are 168 nominal hours available. If the shop work order for a particular unit indicates that it was down 11 hours during the month, and if you put those values in the formula, you would have a downtime of 6.5%, and an availability of 93.5%. Now these calculations allow you to determine when the equipment is available. In order to monitor the equipment, you also need to know how often it's used. Depending on the type of equipment, use can be measured by miles or hours. In the case of heavy equipment, utilization is the number of hours that the equipment is assigned to a job rather than engine hours, even though both should be recorded. The performance of the equipment can be compared against the utilization and downtime standards we discussed before. In summary, the numbering scheme, the master file, and the equipment tracking board, together with equipment monitoring, allow you to maintain control of the inventory. Now we come to the most complex aspect of managing equipment, equipment replacement. The objectives are to replace equipment units at the end of their most economic life and to purchase quality equipment according to established plans and schedules. Although the ideal system should be computerized, we'll describe here a manual method of making replacement decisions to familiarize you with the theory behind economic replacement. Stated simply, the basis of the theory is the following. An equipment unit should be replaced when it's more expensive to keep than to replace. Let's see how that concept can be put into practice. First you need to establish replacement targets for each equipment class, and you should have a procedure for equipment users to submit replacement requests. Then using the targets as guidelines, the equipment must be physically inspected to determine if the unit can last another year without excessive repair or overhaul. Your EMS manual shows a replacement inspection form which can be used to record the results of the physical inspection. When you have the results of the inspection, you'll have three alternatives. You can leave the equipment as is, you can replace it, or you can overhaul it. To assist you in making this decision, you can use the guidelines developed by the U.S. Navy and shown on page 48 of chapter 5 of your EMS manual. When you reach this point in your equipment replacement analysis, budget limitations may require that you establish replacement priorities. Then you need to develop a total capital replacement plan, which of course should be part of the overall fleet plan. As we said, the main difference between a manual equipment replacement system and an automated one is the economic analysis performed by the computer. Once the method of analysis has been programmed into the computer, all the necessary calculations are performed automatically. Appendix A of your EMS manual discusses the theory behind economic analysis of equipment replacement. While we've covered a great deal of material in this segment, we've discussed the three objectives of the equipment planning, inventory and control subsystem. Now let's take a break so that you can do some of the exercises for this subsystem. Stop the tape and clear up any questions you may have with your instructor. The objective of this segment is to serve as a guide for developing the equipment maintenance subsystem of the EMS. The importance of this subsystem lies in the fact that it can help you to minimize maintenance and repair costs. Equipment maintenance has three components, preventive maintenance, shop operations and facilities. Preventive maintenance consists of all periodic scheduled services, which are aimed at maintaining safe and efficient operation, detecting potential breakdowns and reducing equipment downtime. Shop operations involves management functions required to maintain the fleet at the least possible cost, including developing work procedures and repair job standards and defining the workload and establishing schedules. And the last component of equipment maintenance is shop facilities. Work quality, productivity and worker safety are directly linked to suitable facilities. We'll discuss each of these three components from the development and implementation point of view. Let's start by listing the basic parts that should be included in a preventive maintenance or PM program. PM service intervals. PM service standards. Long-range PM schedules. And schedule compliance and control procedure. Your aim in designing a PM program should be to select service intervals that result in the lowest total cost. The intervals can be based on time or usage. You can use the manufacturer's recommendations as a starting point, but you'll have to take into consideration special conditions that might affect the PM intervals. Along with the PM service intervals, you'll need to set service standards. In other words, the type of service and inspection to be performed at each interval. The best thing to do is to give a code to each type of service. Make sure that the specific services are identified so that the mechanic will know exactly what has to be done when he gets a unit in for PMB. PM service standards must include the name of the individual responsible for performing the PM service, the estimated hours for performing the service, a detailed list of inspections or services to be performed, and a list of parts needed. The time required for performing PM services can be estimated either by using existing information by using commercial flat rate guides or having a panel of experts. For whatever method, time standards have to be established for each equipment class and for each type of PM service. After setting the PM service intervals and standards, you can develop a long-range PM schedule, the PM plan. Now, basically, the PM plan projects the total PM workload, the estimated mechanic hours, and the number of mechanics needed. Then the work has to be distributed by month or week in order to level the workload. The exact format of the schedule depends on whether the system is manual or automated. Your EMS manual describes the assumptions and requirements for both PM scheduling systems and explains the difference between them in monitoring schedule compliance and control. The shop operations component of equipment maintenance deals with the management functions required to maintain the equipment, and that is planning, organizing, scheduling, monitoring, and controlling. The equipment maintenance planning function begins with defining the shop's workload and projecting the resources and budget required to accomplish it. Before planning for a shop, it's important to determine exactly what will be its responsibilities. All shop work can be grouped into three broad categories, preventive maintenance, which we discussed earlier, unscheduled repair, and scheduled repair. Three methods for defining shop workload and staffing are vehicles per mechanic ratio, which requires the development of a standard ratio based on fleet makeup, utilization, type of use, and climate. Vehicle equivalency, which is based on the average number of labor hours required to maintain one base equivalent vehicle in a year. This concept is best demonstrated by the following formula, which uses something called the key volume indicator to find out the equivalency unit. This is how it works. Let's say that the base vehicle, a general auto, requires 20.46 hours of labor, and we want to know the equivalent labor that will be required to maintain a dump truck. If we insert the values, we find out that maintaining a dump truck for one year is equivalent to maintaining eight general use autos. The third method of staff planning is the maintenance labor hour planning standards. This method was developed by the U.S. Navy, and it estimates staffing needs on the basis of expected vehicle usage. Standard planning values are established per 1,000 miles, per hour, or per unit. Organizing the shop operations involves the distribution of the workload throughout the year, which includes three work categories, preventive maintenance, repair, and rebuild and overhaul. This graph illustrates how the shop workload can be distributed throughout the year. Now, the second aspect of the organizing function consists of determining skill requirements. Again, for the same work categories, PM, repair, and rebuilding and overhaul. Then, after defining the staffing levels and skill requirements, the next step is to determine how they can be provided most effectively. The analysis should tell whether peak needs should be handled by overtime, seasonal help, or contract work. Once you've made the various decisions with regard to staffing and skill requirements, you can begin scheduling, the third element of the management cycle. Scheduling is short-term planning, and it's impossible to operate an efficient shop without an effective scheduling system. There are some factors that influence the priority of a job request, for example, safety, or the effect of downtime on user operations. This chart gives you some ideas for repair priority guidelines. Of course, your organization may have different requirements. What's important to recognize is the need for establishing priorities. As part of the EMS design for shop operations, a systematic scheduling procedure should be developed and implemented. A basic approach could consist of following these five steps. In step one, your information would come directly from the 52-week schedule, and for step two, the work backlog board would be your source of information. Past records would contain the facts you need for step three. Step four would require your reviewing PM standards or in-house standards. And for step five, you need the weekly shop schedule. And now we come to the monitoring and controlling element of management. Let's take a look at a form that's the basis of the workload control system. That's the shop work order, which has many variations, but which is used to authorize the work. Approve expenditure of funds. Assign mechanics to specific jobs. Record estimated and actual labor. Aid in shop workload monitoring. And capture data related to labor and parts usage, downtime, and type and cost of completed work. With the work order as the basic document, it's possible to establish a flow of work, which is illustrated in your manual. The last component of the equipment maintenance management subsystem deals with shop design and layout. If a new facility is planned by your organization, it's important that you spend additional time going over the pitfalls mentioned in your EMS manual. In addition, the American Public Works Association manual on shop design and layout is an excellent reference. Well, with that recommendation, we come to the end of the segment on the equipment maintenance subsystem. We've covered a great deal of material, all of which is discussed in greater detail in your EMS manual. Please take some time to go over the same concepts in Chapter 7, and consult with your instructor to clear up any questions before going on to the next subsystem. Parts and supplies management enables us to reduce equipment downtime by stocking the right types and quantities of parts, while maintaining the inventory at the most economical level. How exactly can we accomplish this? Well, we can do it by developing a system of managing parts and supplies, which includes stock numbering and classification, stock selection and stock levels, parts and supplies inventory management, and fuel management. The American Trucking Association has developed a logical system for identifying parts, and it's partially described in the EMS manual. If your agency does not have its own numbering system, standard parts identification system would be a good one to adopt. Classification systems are useful for inventory management and can be based on parts usage. For example, you can classify parts as regular stock, seasonal stock, critical stock, or trial stock. The subject of stock selection and stock levels is one that has to be addressed individually by each organization, and it depends entirely on an answer to the question of, what is the most economical stocking level? Generally, the supply function should attempt to maintain a balanced, flexible line of supply to minimize downtime and reduce inventory costs. Three ways of determining the appropriate stock levels are the request fill rate, which is the capability of a stock room to fill a parts request. For example, if 850 parts are issued from the stock room to 1,000 parts, the request fill rate is 85%. Another way to determine stocking levels are the investment in inventory and the cost of equipment downtime, although this last one is difficult to quantify. In the exercises for this segment, you'll find some that ask you to calculate the ROP of spare parts. ROP stands for reorder point, and it represents the level of stock at which an order should be placed, and it depends on usage rate and vendor lead time, plus a safety margin. This formula tells us when to order, and to determine how much to order, there's another formula which gives us the reorder quantity, or ROQ. The third element of parts and supplies management is inventory management and inventory control. The purpose of inventory management is to ensure that inventory levels are kept at the most economical point, that parts are ordered at the appropriate time, that obsolete parts are purged from the system, and that the managers have timely information. On the other hand, inventory control deals with the physical aspects of handling the inventory, purchasing, pricing, charge-out procedures, record keeping, and security. Each one of these aspects is discussed in greater detail in your manual under parts and materials inventory management. In particular, we'd like to call your attention to the inventory management forms provided by an automated system. However, for now, let's take a look at the third and last component of the parts and supplies management subsystem, fuel management. It's possible to determine the size of fuel tanks by using the ROP, ROQ, and safety stock procedures we used for parts and supplies. Then the location of the tanks can be determined by the size and the location of the equipment fleets. Fuel can be purchased from local distributors selected by bid. Fuel delivery tickets should be verified by spot-checking tanker gauge readings, and the quality of the fuel should be checked periodically by sending samples for independent testing. Since fuel consumption is a significant part of equipment operating costs, fuel usage should be monitored and charged to the equipment. One way of monitoring fuel consumption is by means of a daily fuel dispensing record, which gives the quantity and type of fuel, pump number, and date, along with the employee's ID, equipment number, and odometer, or hour meter reading. Then a monthly fuel usage summary can be used to monitor fuel usage for security reasons and for reordering. Speaking of security, there are a number of measures that can be used, such as padlocking the pumps and only issuing keys to those who are authorized to use fuel, or by having dispensing systems which use coded cards, similar to credit cards, issued to authorized users. Of course, there's no perfect system, although spot checks can help. Ultimately, all systems depend on the integrity of one or several employees. Well, this concludes the parts and supplies management subsystem. Stop the tape and review this material in your manual. When we come back, we'll begin our discussion of financial management. There are many equipment decisions which require sound cost information. Since equipment is a key operational element, the financial management subsystem has to provide that information at the same time that it fits into the overall organizational standards or existing systems. The EMS should have a cost accounting system that defines equipment expenses and distributes them to the specific cost elements. The objective must be to give managers a picture of operating costs that relate specifically to their responsibilities and decisions. The key costs that should be incorporated into an equipment management cost accounting system are maintenance and repair, including significant indirect costs. Fuel and lubricants, which should include all consumable operating supplies and labor and benefits of those in charge of operating and maintaining pumps, as well as those transporting fuel. Parts distribution costs, which also include the costs of maintaining and operating parts storerooms and wages and benefits of stockroom staff. Miscellaneous parts costs, which would be allocated to equipment units in proportion to direct parts charges. Shop overhead costs, which should include all non-direct charges connected with the supervision, operation, and maintenance of central and field repair shops. And the general management and administration costs, which are all costs required to support planning, funding, operation, and maintenance of the equipment fleet. Ultimately, all costs should be allocated to each unit in the fleet so that it's possible to see the total cost for owning, maintaining, and operating the equipment. In the budgeting part of the financial management subsystem, we have to stress the importance of developing procedures which support the existing system. This graphic shows a development process which can be adapted to specific situations. The budget process allows you, as equipment manager, to identify high cost items and to take the necessary corrective action. In other words, to improve cost control. An effective means of distributing equipment-related costs is through a chargeback or rental rate system. Basically, charging equipment rental rates to users permits user visibility and also puts a price on equipment availability and usage. There are various ways of developing a system of rental rates. The most effective consists of an ownership rate which is charged as a flat monthly rate regardless of use and an operating rate which is charged per mile or hour of usage. The last part of financial management that I'd like to mention is an equipment fund. The primary purpose of such a fund is to provide the equipment manager with the funds to replace equipment when it's most economical. For the fund to function effectively, the funds that are allocated to it must not be used for other purposes. Other considerations for an equipment fund are discussed in greater detail at the end of Chapter 8. Take a few minutes to review this section and discuss it with your instructor. As opposed to the last four segments which discussed standalone subsystems, this segment is designed to support all the other management procedures developed up to now. In general terms, the equipment management information system is an integrated relational database which has report-generating capabilities. Data is collected and entered through the individual EMS subsystems and is stored in the database. The basic input data is processed in several ways and may be shared by several modules. And the processed data is summarized in various standardized output reports. Now that we've seen the system configuration, I'd like to explain what I mean by database and report generation capability. The advantage of designing a system around a relational database is that there are many commercially available database management systems for all computers. And special reports which were not originally conceived can be generated with minimal effort. Most database systems have the capability to generate reports which permits users to produce reports tailored to suit their needs. Now the decision on what hardware to get should be based on storage capacity and processing speed, since there's no fixed rule for determining computer size in relation to fleet size. Microcomputer systems can handle databases of 20 to 30 megabytes in single-user environments. If each alphabetic character requires approximately one byte of computer storage, you can calculate your storage requirements and triple them to account for future growth. If your files will be in the 30 to 100 megabyte range, you should consider a more powerful microcomputer or a mini-computer. The other factor, processing speed, is important because management information has to be available in a timely manner. The system has to be able to receive and process data and produce reports. Until recently, that meant that a fair-size system would need mini or mainframe computers. However, with the advances in microcomputer technology, processing speed can be increased to the required standards with additional hardware for the microcomputer. For example, a hard disk drive can provide 100 megabytes of storage without any loss of speed. For larger organizations, the equipment management information system can be designed to have various terminals for data entry and reports. Again, this can be done for a reasonable cost with a microcomputer network connected by telephone. To establish communication between two terminals, you'll need a modem. But with a little creativity, it's possible to design a microcomputer system that can imitate an expensive mainframe computer. Of course, a microcomputer network will not be fast enough if you require large numbers of daily transactions. The database required for an effective equipment management information system should include these files. These files are used in all the subsystems we discussed throughout this tape, and as you implement each system, the need for an automated file will become clear. As you've seen, the successful implementation of an equipment management system requires careful planning and scheduling and a lot of work. However, the key element in successful implementation of an EMS is your commitment to making it work. This videotape has presented a general design for an EMS. You can apply it to your operation with some modifications. We have covered the five subsystems and have discussed the elements of each. Your instructor will provide you with exercises which can help you to determine the best way of adapting this EMS to your equipment management needs so that you and your organization can get the maximum benefit from the interaction of equipment and people.