Hire or buy?

By Rory Macnamara

Equipment rental (also called plant hire in some countries) is a service industry providing machinery, equipment, and tools of all kinds and sizes (from earthmoving to powered access, from power generation to hand-held tools) for a limited period to final users, mainly being construction contractors, but also industry and the consumer DIY market.

plumbing 840835 new webImage credit: Pixabay

Plumbing is no exception, with a high percentage of both maintenance and construction plumbers hiring instead of owning. We discuss this aspect later in the article.

The equipment rental industry that first developed in Anglo-Saxon countries has become well-established, especially in South Africa where hire companies range from being nationally based to regionally based. The American Rental Association was founded as early as 1955, and the first waves of consolidation took place as early as in the 1970s in North America, leading to the creation of companies with nationwide operations.

South Africa has the Contractors Plant Hire Association (CPHA), where some of the major tool and equipment hirers are members. Sadly, at the time of going to print, we never received a reply to our question regarding a code of ethics.

The main reasons for the industry’s overall development are:

  • Capital release: In times where they have to demonstrate high levels of profit compared to invested capital, contractors are increasingly eager to rent equipment, as it allows them to minimise the size of their equipment fleet. Less immobilised capital allows for improved cost control, lower maintenance costs, as well as for a reduction in transportation fleets. Renting equipment with operators even allows for optimising staff costs.
  • Range of recent equipment available: Some rental companies have fleet inventories reaching up to the hundreds of thousands of pieces of equipment, while others are very specialised in only a few specific products. They can thus supply the most comprehensive range of state-of-the-art equipment — with or without qualified operators — as and when contractors/customers need it.
  • Maintenance, compliance with standards and regulations: Rental companies bear the responsibility for ensuring that the equipment they rent out complies with all applicable regulations. Safety checks are performed before each delivery.

Colin du Plessis, managing director of Talisman, concurs and adds another element, which is storage. Du Plessis, when asked to rate the importance of quality, service level agreements (SLAs), delivery, fast turnaround, and price on a scale of one to five with five being low, rated quality, delivery, and turnaround as most important (one), with SLAs and price being least important (four).

Gregg Phillips of Independent Plant Hire (IPH) agrees that quality rates number one, followed by price (two), and turnaround at three.

Bear in mind the rating was to identify the main aspect of hire, to handle a specific situation in the quickest and most economical way.

The hirer has a huge responsibility, rated a one by Du Plessis as the most important criteria, in that he/she must handle the tools/equipment in the correct manner, as well as have someone qualified to work with that tool. The hirer also has the responsibility to ensure the goods are returned in the same condition as provided.

Phillips rates the correct handling of tools as number one and having knowledgeable people working with the tools and return time as a two, underlining the importance of these two aspects.

IPH offers training sessions on most items hired, which may include a video explanation.

Du Plessis makes the point that in the case of loss of hired items, “We invoice the customer for replacement value or agreed value. If a customer cannot pay, we claim from insurance, but then the insurance will recoup from the customer. We are currently piloting insurance or loss cover in a few stores, which will give the customer a loss cover option at a certain percentage of the hire charge.”

Phillips, however, states, “The insurance falls under the hiree whilst in their possession.”

The European rental industry, through its representative association ERA, has published a Manifesto for the promotion of the sustainable benefits of the rental concept. The motivation for the manifesto comes from the five principles used in the rental business:

  1. Shared usage: The construction companies can access equipment when required. The centralised ownership leads to a more frequent and, therefore, more efficient use of the equipment.
  2. Reparability: The rental companies contribute to a product design facilitating maintenance and repair activities. The rental companies focus on spare parts management and ask for increased information on product repair from the equipment manufacturers.
  3. Resource use: Rental companies search for equipment to offer the most sustainable option to their customers. Rental companies provide theoretical and practical training to their customers to optimise the use of equipment.
  4. Reusability: Components of the dismantled construction equipment can be reused.
  5. Recyclability: Rental companies take care of their equipment by repairing when it is still possible; recycling when it is at the end of its life cycle; and selling it to second-hand markets, if it still complies with the regulations.

Rental companies use their bargaining power to demand equipment suppliers to invest more in R&D to limit the use of non-recyclable material, and to take responsibility for end-of-life of equipment by collecting, reusing, or recycling.

The hire business fulfills an important role in the bigger picture. Based on how the owner wishes to operate, they may focus locally, regionally, or nationally by ‘owner operated’ stores where there is one holding company with ‘owner managed’ stores, or the franchised network where the franchisee owns the store and pays the franchise holder a royalty for national marketing and other support, as well as the intellectual property of the franchisor. The local operation will be owner driven and would be positioned in an area where the client has easy access.

Talisman is a national franchise network with 77 stores and responded to the questionnaire. Coastal Hire and Lambson Hire seem to be national, but as they did not respond to the questionnaire we cannot confirm this. Ian Dickie is in hire and sales but for the plumbing sector only; they offer the Trailer Mounted Pump for large applications. IPH operates in Johannesburg, Cape Town, and Durban.

The typical tools and equipment hired by plumbers include (among others) compaction rammers, rollers, reversible plate compactors, drills, core drills, breakers, chasing machines, grinders, air compressors, pipe threading equipment, inspection cameras, pipe locators, extension ladders, scaffolding, concrete drilling, recording devices, extension electrical cords and so on.

IPH has the exclusive contract to hire Geberit tooling and carry the full range. Also available are the Hilti and Rothenberger tools.

Professional tools and equipment are expensive and somewhere along the line the cost must be amortised. Should the plumber purchase the tools needed to run a successful operation, the outlay will be huge but the benefit is the tools belong to the company. If these tools are being used regularly, the return on the investment is shorter than if they are used periodically. Common sense! When one adds the cost of maintenance, wear and tear, and use by staff (not always used with the greatest of care), though, the picture changes somewhat.

Hiring is the outlay at the time of use, which is or can be charged to the client directly and, therefore, is recoverable within a short space of time. The hiring company carries the cash outlay, servicing, and maintenance and will amortise the cost far quicker.

Clearly, the decision to buy or to hire rests with the plumber’s needs and applications, but it would appear that hiring is the way to go, based on feedback from plumbers. It seems that the hire business proves this point, too.

Acknowledgements

  • Talisman Plant Hire
  • Independent Plant Hire
  • Ian Dickie
  • Burgess & Partners

Click below to read the April 2017 issue of Plumbing Africa

(ensure you are logged in first)

PA April2017

Search


Button Talk To Us 300x125


Click below to access the digital publication:

(please ensure you are registered and logged in first)
PA brand


Wall of Shame

PA PLUMBDRAIN logo 150 PLUMBING Online logo TP SA Plumbers Handbook Logo

Product of

IMD logo White

 

Interact Media Defined (IMD), is one of South Africa’s leading multi-media magazine publishers READ MORE

Our Products

building LOGO white

Water Online logo white 200

HVACR Online logo 200

mining LOGO whiteCLA Online logo white MM

Talk to us

JHB T : +27 (0) 11 579 4940
CPT T : 0861 727 663
E : admin@interactmedia.co.za

13A Riley Road, Bedfordview,
South Africa 2007

© Interact Media Defined