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The Indian construction and Infra. sector has gone through a major transformation steered by significant reforms announced by the government in recent times. At present, these sector is emerging as one of the core growth sectors in India, targeting both local and global markets.
Purchasing a piece of equipment, such as Tower Crane, passenger Hoist, Placing boom etc requires significant investment and hiring does seem like a suitable choice, especially if you are on a budget. And let us face it; everyone wants to keep the costs down. So, how do you make the right decision that will benefit not only your pocket but also the entire project?
Striving towards operational excellence, construction are adopting a range of strategies and practices including Safety hazards, Latest Equipment (less than 5 year age) & Regular inspection etc. Few organise builders and developers are also evaluating and adopting flexible business operating models to manage their internal processes more efficiently and to minimise the capital expenditure and operational costs to abate the risk associated with huge capital investments.
Capital Expenditures (CAPEX) business model
The Capital Expenditures (CAPEX) model is the most common business model within the construction sector in the country. Under this model, Builder / Developer / civil contractor bear the entire capital expenditure of the major equipment’s i.e Tower crane, passenger Hoist, CNC Stirrup machine, Concrete pump etc. In the recent past, the CAPEX model has slowly started losing its ground as it is not viable for small and medium civil contractor and builder that are cash-strapped and those unable to secure funding. However, large builder and developer are adopting this model due to its flexibility, benefits, and saves time that is required for negotiating contract value, obtaining necessary approval and construction of the facility, etc.
Operating Expenditures (OPEX) business model
The Operating Expenditures (OPEX) model is emerging over the Capital Expenditures (CAPEX) model as many civil contractor / builder & developer are giving more attention to Cash flow optimisation, as it is a better alternative to buying expensive equipment’s. It is flexible in terms of payment models and is economically viable. The operating expenditures include ongoing costs incurred in the operation, maintenance of the equipment, and expenses incurred in the day-to-day operations of the equipment. The biggest opportunity contractor or site got is that they can choose advance and good quality equipment’s i.e. European equipment’s compare to Chinese equipment.
Few Advantages of OPEX (Hiring) :
Many people fail to realise that ownership is not all about freedom of owing the machine. Cost of ownership is very different than owing the machine. You have several responsibilities attached to the piece of equipment you bought. And knowing that a tower crane / passenger hoist is a pretty hefty investment, it is only right that you treat it excellently. Regular maintenance, proper storage, complete and professional analysis, and many other routine tasks are a part of your duties.
If you neglect your responsibilities, especially periodic checks and maintenance, you will have to pay for the expensive repair costs. Apart from servicing, you should also make sure that you have adequate storage for the equipment. And if you fail in all this, you will end up wasting your hard-earned money on the equipment.
Many new customers always ask us, “Why should I hire a Tower crane / Passenger Hoist or any equipment? Why not just buy it outright?” Being in this industry for several years, we thought that the benefits are quite obvious. However, we do understand that many people overlook those advantages. From a consumer point of view, it is indeed a smarter choice to purchase rather than hire a piece of construction equipment. After all, becoming an owner can provide tax cuts.
But in reality, hiring trumps buying easily, especially when the subject involves construction equipment. So, what are the benefits of hiring? Let’s take a look:
Risk – As the contractor, subcontractor, or customer, you do not have any responsibility regarding the compliance of the equipment. You merely pay for the provision of equipment, which means it is the rental company’s sole duty to remain compliant with the law. The pressure to meet ready usage requirements is placed on the company, as well. That means that there is a much lower risk for you as the customer.
Since it is the company’s job to ensure 100% compliance with the tower crane or any construction machine you would like to rent, you can be sure of its quality and performance. The company will take care of the equipment by keeping the fleet up-to-date, especially when it comes to routine maintenance and servicing. Therefore, the machinery is safer for operation, which is a huge plus compared to buying.
Apart from that due to political or legal issues many a time project stops or scrap in between. At that time you will not have a pressure of equipment cost amortization from project. There are many such incident / project in India where contractor purchased heavy and costly equipment, erected and project stops and now the equipment they purchased is the liability.
Cost Efficiency – Most people will tell you that buying is more cost-effective. You do not have to pay the rental fee each time you need a tower crane. You can simply have someone operate it for your project. But renting the equipment, believe it or not, is a better financial decision.
Take a look at the upfront investment you need to provide when purchasing. You can already tell the vast difference between buying and hiring. Most of the time, you will use a variety of machines, switching from smaller to bigger capacity. All of them require an upfront investment. And usually, you only need one at a time or rarely ever again.
With the huge possibility that you will no longer use the equipment again, there is truly no point in spending a considerable amount to buy. Many heavy equipment options are used for a specific task or project. It takes months or even years before you use them again. You end up paying more for the storage and upkeep.
Maintenance – Speaking of upkeep, hiring requires little to no maintenance. The cost of the asset maintenance will not rest on your shoulders. You do not have to worry about it, and you will surely be thankful you do not have to.
Maintaining plant equipment is expensive. You have to make sure it is clean even when you do not plan to use it for a long time. Also, if something goes wrong, you need to call a mechanic or a professional so that the equipment will function again. On many occasions, a repaint is required. Having an old, worn machine does not look safe to operate at all.
Part of the maintenance is having a storage facility for the crane. You may even need appropriate lifting equipment for some machines. That way, you can move it around and send it to the project location.
All the requirements mentioned can take too many resources. Instead of focusing on your project, you end up wasting a lot of time.
Disposal – Every piece of equipment, even the ones that are expensive and are of high-quality, will eventually need to be disposed of. You can either sell them to another party or get rid of the old machine. When it is no longer useful, where do you take it? How will you deal with that big machinery in your yard? It can block people’s way and can be unsightly, as well, especially when it has stopped working for some time.
When you hire a machine, you do not have to worry about equipment disposal. It’s a hassle that you will never have to deal with. The rental company will take care of the process and handle the hassle of sending the old machine to warehouse or anywhere else.
Modernisation – After every project, when we move equipment from one place to other place there are lot of damage happen during lifting, and during its operation.
If you choose to buy, you will eventually have to upgrade your current fleet. Unless you have an unlimited budget, purchasing new equipment is not a good idea at all. On the other hand, if you stick to hiring a hoist or crane, you can enjoy well maintained equipment without the huge cost associated with any purchase.
Transport – Let us say that you did buy a Tower crane. Your Site is in Mumbai, which is also where you store the equipment. What happens now if your next project is in Delhi or chennai? That means you will have to deal with the additional transport costs. Moving the machine, especially if you require a tower crane, hoist, boom pump, and a few more can easily make a sizeable dent in your profits. That huge chunk is not worth the effort and stress of moving the heavy equipment from one location to another.
When you rent, you can truncate the costs since the rental company will simply send the local equipment to the location in most of the cases.
Specialised – Your projects can differ from one to the next. That means you will need more than one type of equipment. Some types of plant machinery are flexible enough that you can use them for digging, breaking materials apart, and grinding. However, many construction jobs require specialised equipment for them to be done correctly and quickly or it may be stationary for year or so.
Many contractors do not find it economically viable to purchase more than one equipment or other types. That is why hiring is better than buying.
Cost Advantage – We have already mentioned how cost-effective it is to rent than purchase. But here is another reason that directly relates to your financials. If you buy, you tie up capital, which you can no longer use for other projects or expenses. Instead of purchasing materials or assets that you would have liked, you end up spending more for a piece of equipment that you may not even use more than once.
Making the Decision –
You can easily see how advantageous it is to rent or hire any construction equipment compared to buying. Over the recent years, companies have engaged in machinery rental. Our country has seen an increase in demand for such a transaction, especially with construction consumers and business-to-business construction markets.
The technology in construction equipment evolves rapidly. Over the last few years, we have seen so many great changes that focus on comfort, efficiency, Safety, sustainability, and speed. Construction managers and their clients call for quick service, finishing projects right on time or even before the deadline.
You will agree that time is of the essence, especially in the construction industry and equipment is like production machine. Businesses know that time is money, which is why contractors look for ways to achieve or conclude a project on time. Back then, it was all about saving money. People used to look for equipment at the lowest price. Today, the attitude has changed. Construction supply chains want to create sustainable relationships with their suppliers. As a result, they understand the challenges better, allowing them to collaborate to deliver an excellent service.
As with any other product or service, rental companies are not always the same.
Our mission here at TRUE-VALUE is to become your first choice whenever you need top-quality machinery. You can check out our list of equipments. Alternatively, you can contact us to learn how we can help you with your construction project.
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All the best!
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