Volvo Construction Equipment now provides asset management with Equipment as a Service (EaaS), administered through its dealer network.
EaaS provides equipment for an hourly fee, eliminating acquisition costs for the fleet. A local Volvo dealer maintains the machine and provides an agreed upon rate of uptime. The manufacturer retains ownership of the asset.
The fleet purchases hours or usage without acquiring the asset, says Stephanie McCall, VP strategic accounts for region N.A., Volvo Construction Equipment. “Instead of buying a wheel loader, you need 2,000 hours per year for the next five years.” The agreement provides a fixed hourly rate for its term and guarantees uptime.
“EaaS gives them access to the most current models,” McCall says. “And it’s up to us to manage it. The best part for the customer is we’re guaranteeing uptime. We assign a dollar value to it. If it’s not up, then we owe them money. If they don’t utilize the asset, they could owe us money.”
EaaS frees up capital for fleet managers
Jon Kaye, VP of equipment and information technology for Miller Bros. Construction, has 10 ADTs in his fleet under an EaaS agreement and says the incentive is that he incurs no capital outlay in the acquisition.
“We’ve owned haul units,” he says. “Every time a spurt came, we had a new round of acquisition. When we’re running hot and heavy, we use them. Then we have a block of trucks for replacement.”
He describes EaaS as “almost like a time share.”
“We commit to a block of hours for a class of equipment. [It’s a] five-year minimum and 10 units for this deal.”
Based on an estimated 1,000 average hours of use per year, the agreement covers 50,000 haul truck hours, according to Kaye.
“We only pay for what we use each month,” he says. “That’s huge. During down times, we don’t pay. We have to hit what we promised Volvo[, however.] If we fall short in the year, there’s a penalty. If we have a better year, we get a credit.”
Dealers maintain machines, guarantee uptime
For Arnold Machinery, a Volvo dealer in Idaho, the key benefit is not having an asset on its books. The customer signs the agreement with Volvo Construction Equipment, and Arnold signs a service agreement with Volvo. Volvo CE retains ownership of the machine, meaning Arnold does not have to carry it as an asset on its books.
“We’re not packing the asset,” says Michael Miles, president of Arnold’s construction equipment division. “It’s Volvo’s machine. We just lose the asset, which is nice.”
Arnold supports 30 machines in an EaaS agreement with a local dairy operation, including wheel loaders and an ADT.
“We’re pretty much taking care of the equipment from start to finish as far as the service and parts side, we’re filing all the warranty claims with Volvo. We take care of all the product support.”
Arnold maintains the units and monitors uptime through its own uptime center, while Volvo monitors the machines through its corporate uptime center. On a regular basis, Arnold and the customer look at machine data. Occasionally, Volvo joins the call.
Volvo provides 24-hour fleet monitoring, McCall says, and provides uptime reports to track utilization. “We can give them metrics, too, for example, carbon monitoring,” she says, based on the customer’s needs and priorities.
