RLT Group

The true cost of servicing a mobile engineering contract.

The true cost of servicing a mobile engineering contract.

Many times when we present to clients, they ask us, what is the cost of your product.  The real answer is, it depends, but in this post, we’d love to show you how we arrive at pricing for your products.  Firstly, let’s look at the difference in our business model and how this works for mobile engineer teams.

Our approach to you.

Our approach always starts off at the same point; how can we make your engineers, your processes and your admin teams more efficient.  (As an aside, this process would never stop if you became one of our valued clients).

We distribute our materials via courier with zero distribution charges.  For many FM companies, one of their biggest single supplier spends is on carriage for both small orders and special orders, often hitting six, and sometimes even seven figures.  With RLT Onsite, the cost of the product is the price you pay.  Period.

But is price of materials the true cost of a maintenance contract?

Typically, the cost of materials is around 20-40% of service delivery costs in a contract.  Labour is the other 60-80%.  Right now, with the labour shortage, the cost of labour is dictated by the marketplace and is certainly not coming down.

Often the focus on pricing, whilst right, is overstated vs. the importance of engineer productivity.  For instance, a 5% reduction in pricing has an overall impact of 1-2% saving on the cost of the contract.  However, a 5% boost in productivity has an overall impact of 3-4% saving on the cost of the contract.

Moreover, it is actually easier to achieve a boost in productivity of greater than 5% than it is to achieve a price reduction of 5%.  The reason here is simple.  When issuing a tender, a set list of products might be priced and the ‘cheapest’ supplier chosen.  However, no maintenance contract in the FM sector, certainly for lighting, electrical or compliance materials, could take into account every product that will be or has been bought for that contract and often that is where any savings on paper are actually lost.  Changes of product, obsolescence and refits can dramatically change the list of products being bought to service a contract.

However, the cost of the mobile engineer, and associated costs of fuel, vehicle and so on, is not so negotiable and rising.  A typical engineer is estimated to spend:

  • Four hours a week collecting materials that aren’t needed same day
  • Two hours a week on a failed visit or not able to complete a job due to a material issue
  • Four hours a week travelling to find materials that aren’t available immediately

This is on top of additional fuel costs.

Across a mobile engineer team of just 15+ engineers, six figure savings start to come into play, and for larger mobile engineer teams, savings of seven figures can be achieved.

However, this doesn’t discount that fact that pricing on materials is essential.

Steps towards arriving at our pricing model

Firstly, we the look at your most commonly used items.  It’s these items we look at closely, with manufacturer support, to arrive at a price that will save you money on your volume.

Secondly, we look at rebate agreements.  Typically, these would be tiered with greater reward for greater spend.  Significant rebates would obviously increase the price of products on paper but obviously a rebate would be given in a periodic fashion to suit you, the client.

Thirdly, we look at how we would deliver materials to you.  We look at that in more detail below.

Finally, we look at immediate innovations in product and service that can reduce your operational and product costs. 

Why does delivery direct to engineers cost you less?

Often we are told that you must cover the cost of your delivery in your products.  You are dead right.  However, the RLT Onsite model is based on one super-hub and then direct to engineer delivery, taking out the cost of hundreds of branches.  As such, the only cost covered in the price of products is the cost of carriage rather than the cost of branches, and complex distribution to manage stock in each of those.  Ultimately, our pricing will be similar to what you might be currently paying whilst enjoying the huge benefits of the simplyonsite system.

One final word… you will have access to our Live Price Book system

As alluded to earlier, the additional products, ‘outside of tender or scope’ are where pricing becomes vague and uncontrolled, and often different from day to day.

With the simplyonsite system, we know that one of the biggest time-killers in admin is invoice and credit queries.  RLT Onsite locks pricing in to ensure every product you purchase is kept in your special price book unless and until we re-negotiate.  Even if a product is purchased for the first time, quoted and approved, another engineer from the other end of the country could order it the next minute and would get the same price.

This eliminates invoice queries and gives you contract certainty.

Ultimately, the true cost of mobile engineers is obviously a combination of materials and labour, but savings can be made more easily by keeping engineers on sites for longer, doing what they are good at, rather than travelling or collecting and wasting time and valuable resource.

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