Downtime Index Report
Week 20 (May 11th - 17th)
Published May 20. 2020
The COVID-19 outbreak has exposed several challenges for the construction sector. While some of us in construction are still building temporary hospital wards, installing complex and life-saving oxygen systems, and building the infrastructure that society needs to function, others have shut down.
Downtime Index Explained
The Downtime Index compiles weekly harmonized engine utilization changes. Engine utilization is defined as voltage activity on a machine’s alternator. We express the changes as index numbers to allow for quick international comparisons. The index starts at week 4 (January 20 2020) which is referred to as the base week. In subsequent weeks, percentage increases push the index number above 100, and percentage decreases push the figure below 100. An index number of 102 means a 2% rise from the base week, and an index number of 98 means a 2% fall. The underlying data comes from a fully anonymized cohort of approximately 150,000 off-highway construction machines in Europe and North America with high densities in France, Germany, Denmark and the US (40% all together).
Week of May 11th
Downtime index up with 5%
From week 19 to week 20, we see an increase in the downtime of 5% from 84.4 to 88.9. The construction site activity is therefore now globally at 11% less than expected – measured as pre-COVID-19 level of week 4 in 2020. Also, if we compare to last year, we see a 11% underutilization of global construction machines in the off-highway segment.
Machine activity rises
In the previous two weeks, we have seen a steady increase in the machine activity metric, which measures the number of machines that have been turned on and worked more than 1 hour. In week 20, the machine activity rises from 55% to 58%, which represents an increase of 5% and we therefore see a similar trend as with engine utilization, which is a positive indicator for a normalization of the activity indices.
Regional differences emerge
From week 19 to week 20, we see that the downtime index for North America falls by 1% while it increases by 7% in Europe. Europe is now operating 11% below expected utilization, while North America has to climb 13% to cross the expectation bar. This indicates a flatlining of the construction site activity for North America.
Men and machines at work
More machines are working. In week 20 we see an increase of 2% and 3% in North America and Europe, respectively. From the extended data lake, we can see that especially older machines are being put to work, which indicates the shift from new to older machines to meet the demand of the construction sites.
Strong growth for Southern Europe
In week 20 we see strong growth for Southern Europe with an increase of 26% which leaves this region at an 18% underutilization compared to last year. All other regions but Eastern Europe and North America increases as well.
How Can Construction Adopt to Changes
We think that the following actions can help construction executives overcome the ongoing challenge of COVID-19’s impact and benefit from it when the economy rebounds.
Contractors moving towards modular construction
Contractors are forced to move more and more activities off-site. As social distancing and other exceptional safety measures will remain part of everyday construction for a while, contractors will have to protect the well-being of their employees in a safe environment. Rethinking construction activities calls for acceleration of new ways of working. Leveraging modular construction is one of the most prominent industry trends that contractors can capitalize on. With significantly less on-site activity, this allows for shortening of the time of site-built construction schedule. During the factory building phase of modular construction, waste is also eliminated. Exploring possibilities of modular construction leads to faster, greener and more efficient project completion.
Rentals reimagined through click and collect
Rentals are forced to find new ways and channels of engaging with their customers. As less and less customers are hoping to see and rent machines on site, but the need for rental machines is expected to keep up, rentals will have to rethink their operations. Best practices from fashion retail around “click and collect” provides an interesting opportunity for construction rentals. Renting a machine is vastly different from buying a t-shirt on H&M or Zara. However, with an increased level of digital tools that enable rentals to do so, operation costs can be decreased significantly, while efficiency increases. Contact-less receival of machines will positively impact rentals’ customer relationship and engagement level also.
OEMs shifting from just-in-time to just-in-case supply chain
More and more OEMs are reopening their production facilities across North America and Europe. The “old model” of highly depending on single sources for critical materials demonstrated high vulnerability during shut down already when operations halted. However, during reopening such vulnerability is causing difficulties again. In case critical component factories are still shut down, reopening can be extremely difficult. Thinking in “new ways” around supply chain gained traction. Speed and flexibility remain essential, but closeness of suppliers is also becoming more and more important. Inventory programs will rather prepare for just-in-case than during previous decades.