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I recently met up with Trevor to pick his brain about the challenges producers face and how using operational and customer data can help save time and money. He shared several insights and practical advice. Below are highlights from our conversation. (Questions and answers have been edited for clarity and continuity.)

Q: What do you love most about the RMC business?

TP: I love the construction industry, in general. The building industry is really a people industry. It’s people building schools, roads, hospitals and houses for other people. And what I love about RMC, in particular, is the fast pace.

I like to joke that RMC is like organ donation married to air traffic control, in that you've got this perishable product that needs to be delivered on time and in spec. Producers are delivering concrete to potentially hundreds of jobsites—with hundreds or even a thousand different loads a day—depending on the size of the business. There are lots of opportunities to drive profit for producers who can overcome the challenges to consistently deliver on time and in spec.

Q: I’ve been hearing that the industry has been facing headwinds. What are the challenges that make it harder for producers to drive profitability nowadays?

TP: One of the big challenges is finding and retaining experienced staff that really know the industry. The days are gone of having a dispatcher who's been with the company for 35 years and just knows how to maximize your fleet productivity. Also hard to come by are experienced sales reps and managers who understand how to analyze risk and evaluate how their sales impact both costs and profitability, as opposed to simply looking at average selling price (ASP) and top-line revenue. It’s the same scenario with technical services managers and quality control (QC) personnel. Those old hands are retiring, and the new folks coming up don’t have the experience.

So, the headwinds are really about how to replace decades and sometimes centuries of combined experience in the business. To do that, producers must look at how to leverage new tools and technologies to help train and empower the next generation.

Q: Bright, young talent are entering the industry, but they're not necessarily equipped to “read the tea leaves” the way the veterans did. It seems there needs to be a shift from reading tea leaves to getting better at reading data. What are your thoughts?

TP: Absolutely! The people retiring knew how to do it well because they’ve been doing it for 30 or 40 years. Giving new, young talent the tools to take them from zero to 60 needs to be a big focus for the industry.

Q: What advice would you give to producers seeking to increase profitability?

TP: Your time is limited. You don't want too much trial and error, although that's going to happen—you're always going to have the day-to-day firefight of ready-mix. The key is to put strong processes in place to try and contain any fire, so it won’t consume your day. Good processes will free up your time so you can focus on what matters.

Focus on the big profit drivers in the business: material costs and delivery efficiency. The goal is to get the right volume at the right price, at the right margins, to optimize the margins.

If you're at a senior level, you have to think year to year, as well. The year-to-year focus is about making sure you've got the right assets, the right people in the right markets and understanding your niche in those markets. But the day-to-day focus is on maximizing your costs and revenue based on materials delivery and sales.

Q: Let’s start with delivery efficiency. What do you mean by that?

TP: Delivery always sounds simple, but it is maybe one of the most complex things in the business. Delivery efficiency means delivering the most concrete with the fewest number of trucks while keeping customers happy. It boils down to managing the big four:

1. Round-trip time.
2. Average load size.
3. Loads per day.
4. Truck use (making sure trucks aren’t parked against the fence two or three weeks out of the month).

Q: That sounds like good business management and good common sense but not industry-specific. Aren’t wine producers doing this every day?

TP: You're right, and maybe they are. But again, RMC is a busy industry that tends to run very lean, and there are many different factors that impact delivery efficiencies. Let’s look at round-trip time and load size. Both are primarily customer-driven; your average load size is determined by the type of work you take on and your round-trip time by customer behavior and jobsite location. This means a portion of the delivery costs are really driven by sales decisions. Which customers am I going to take on? Which types of jobs am I going after?

However, operational impacts also must be considered. Are we over-trucking certain jobs and waiting onsite as a result? Are the trucks getting loaded and out of the yard quickly?

Producers need to dig into the root cause of what's driving those delivery costs. Having operational and sales data at their fingertips will help management teams take action to improve business. The data helps determine whether the sales team needs to better manage customers and the work backlog.

Q: Let’s talk about asset utilization. If you’re not using trucks efficiently and there's data that tells you that—what can you do with that data?

TP: Focus on small, incremental improvements and not on completely changing the way you do business. Getting your delivery efficiency up by a couple of percentage points can lead to tens or hundreds of thousands of dollars in savings per year, depending on the size of the business. Look at how many loads per day, truck usage and how often you have a truck on the road. These are the operational levers that producers should focus on and pull.

For example, has dispatch worked with clients to spread out the work and flatten truck demand so that dispatchers are not bringing in 20 trucks to handle a surge at 7 am? What if you tell that large-slab customer they’re not going to get 70 yards an hour between 7 and 9 am? Tell them they’re going to get 40. By doing that, you can spread the work (and even schedule an extra job) so that you use 18 or 19 trucks instead of 20. That's an enormous difference. That 20th truck can either take on more volume or be sent to a location with more work and volume.

Q: Doesn’t sending that 20^th truck to another plant take away from the safety blanket of having trucks in reserve for surges?

TP: Everybody wants that safety blanket, but nobody can afford it. If you give a dispatcher 100 loads and 20 trucks, they'll put five loads on every truck. With 30 trucks, they'll put three on each truck and change loads on every truck, right? Those are huge killers of profitability. There is always going to be a balance between the service you can offer, the premium time slots in the day you're able to offer and your costs. Knowing where that balance is and then optimizing for that is key. Instead of letting customers run your delivery schedule, work with them to manage something that works for both them and you.

Q: This loosely ties into my next question about sales. If producers have the capacity to deliver, the sales team will always try to get more volume to land the deal. But what SHOULD producers look for in terms of their markets and margins?

TP: One of the greatest mistakes some producers make is equating volume directly with profitability. They are obviously linked, but it’s not a 1-to-1 correlation. Another big mistake is assuming that a higher ASP is always going to flow through to the bottom line. A great ASP isn't going to help producers’ bottom line if, for example:

• They're driving up material costs for high-spec loads.
• They're hauling to a site an hour and a half away in five-yard loads, and it takes two hours to unload.

The sales manager’s job is to get the best work in the market. That means getting the right volume at the right price and margins to make sure you're still making money after factoring material and delivery costs (MoMD). Experienced sales managers know this, but it's tough to teach newcomers to the industry without the right analytics tools.

Q: It’s easier to tie the material to the volume of work and let sales staff figure out delivery costs—but they're not logistics experts. A lot of producers are either using an average delivery cost per hour or trying to figure out the distance to the job. Is that sufficient when calculating delivery costs for different types of work?

TP: Well, there's a lot more to it. I typically see three types of producers, and one is using an average delivery cost—but delivery costs can vary by a factor of 20. It’s the difference between a slab job across the street and a small job an hour away that is technically difficult and long to unload. That difference can range from $5 to $105 a yard.

Smart producers use their current and historical data to determine the delivery costs of future jobs. Producers who are trying to take it up a notch are estimating factors like average load size and how far they’re willing to haul.

Those who are doing this really well have the data at their fingertips to look backward and project forward. They can pull up the last project they did that was X number of miles away, with similar types of work and crews, to view how many yards were hauled on average and how long it took the crew to unload. They then use those numbers to chase the best work in the market by going after similar jobs. They also avoid the types of jobs their data shows weren't profitable from a delivered margins perspective.

Q: That sounds like producers must have the data for every single load, ticket and delivery, right?

TP: Absolutely. One of the cool things about the tools available in today's industry is there are ways to get that information without having somebody sitting in your back office eight hours a day, punching in delivery times and selling prices. You can get to those margins quickly to pursue the right work at the right price. You also can quickly identify the current jobs that are costing you money and task your sales teams to rectify that—either through managing the customer and the jobsite differently or sometimes through pricing and renegotiating.

Q: While important, some of what you are talking about can be categorized as medium-term business strategy. What can producers do day-to-day with regards to managing margins?

TP: Obviously, keeping the sales pipeline full and progressing deals to fill the backlog is key for day-to-day, week-to-week and quarter-to-quarter profitability. But there are simpler objectives, like performing daily checks to make sure you're capturing all delivery charges—small load fees, distance delivery and waiting time. Daily checks to ensure you're offsetting those costs can be a big boost to the margin.

It’s important to have the tools to quickly identify, for example, each individual pour or jobsite from yesterday to see where you made or lost money before sending the invoice to the customer. That would allow for any needed adjustments (i.e., additional fees). If that process is automated so that it happens almost instantly, producers can just look at the data and decide, yeah, throw on waiting time for this customer, charge a zone delivery fee to this guy and be done with it in five minutes. This also frees the sales team to focus on getting the work, managing customers and ultimately match pricing to customer performance.

Q: We’ve talked about delivery and sales, but how about material costs? Is this an area where producers can improve?

TP: Material optimization is a giant opportunity that often gets missed in the industry. It is both a means to lower costs and improve product performance and customer satisfaction. Materials are the No. 1 cost for an RMC business. I often see simple fixes that can save producers tens of thousands of dollars in material optimization. Product performance is also what RMC customers care about the most in conjunction with on-time deliveries.

Q: Material costs are a huge part of the cost base, right? I have a hard time believing producers are not all over this.

TP: Certainly, every producer is to some degree. Once again, it's often about having the data and analytics at your fingertips so you can take immediate action instead of spending time drilling down in Excel files or running reports trying to figure out your next action.

For example, every producer knows how to ensure mixes are designed to 27 cubic feet per yard. But mixes get changed on the fly all the time–something pumps better, sets faster, sets slower or is too coarse. I can't tell you how many times I've sat down at a batch panel or pulled up mix designs in a mix management or QC system and found mixes that are over-yielding by 1% or 2%. That’s giving away 27.5 or 27.6 cubic feet per yard when you’re getting paid for 27.

The profit leak may come from just a small amount of overdesign or over-yielding in the materials because somebody added and subtracted and didn't quite balance it before they went on to batch the next load. Or it could come from air entrainment settings for non-air mixes. For instance, are they being designed at 1%? I see it all the time! There's naturally entrained air of at least 1.5%, even 2% and 2.5%, nowadays with modern admixtures. There's no such thing as 1% and barely even a 1.5% non-air load anymore. That’s a percentage point, in some cases a percent and a half, of material costs that you could be saving.

The problem is not in the complexity of a fix, but in identifying where it is needed. A producer can have thousands of mixes, and nobody's going through them every single day. But if they use a tool that shows they're over-yielding a mix, they can get right to the fix.

Q: There's so much detail that can get lost because there's too much data or information to sift through to pinpoint these things. Do you agree that it sounds overwhelming for a producer?

TP: If you have the right tools and processes to make it part of the marching order, it's not so big and scary. The basics, such as yield and looking at design errors for both non-air and air entrained concrete, can be controlled by simple actions with huge impacts—like locking down the batch panels to ensure not just anybody can change mix designs.

Q: You've provided a great rundown of important and practical things that producers can focus on. Where do you think a producer should start?

TP: Find opportunities to save the most money and execute them. One of the great things about our C60 platform is it dollar-quantifies some of those big opportunities across a business and essentially ranks them. That's why we built the tool the way we did. And we added an integrated action tracking tool so producers can highlight one or two or even half a dozen opportunities and track the progress of their actions to see how they're saving.

Q: If I recap this, I've captured five key takeaways to driving profitability:

1. Understand your delivery cost.
2. Understand how customer behavior impacts P&L (profit and loss).
3. More volume doesn't automatically equal more profit.
4. Pick your time slots—to get the right work at the right margins for the right customers and jobs.
5. Start with the biggest opportunities to save money.

Does that sum it up?

TP: I think you’ve got that right. We also covered materials optimization. Producers should really focus on those materials, and they can start with the simple stuff. They don’t have to start with cement optimization.

Q: Why don’t we bring you back and have a materials episode?

TP: We could devote a whole podcast to material optimization! It’s such a fantastic topic to dive into.

To watch/listen to Ramy’s full conversation with Trevor Panas, tune into the K-Factor podcast and vlog. Watch the full K-Factor episode now!