Thu January 28, 2021
Craig Mongeau - CEG Editor in Chief
If you are a land developer, finding a contractor to prepare your building site for construction can be an arduous task, especially if you want a top professional in your market.
Among the qualities to look for are experience, a history of excellence, low cost, and an outstanding management — all attributes hard to find in one company.
In the eastern Pennsylvania market, though, there is one contracting firm that easily fills all those qualifications: Schlouch Inc., based in Blandon, Pa.
The company was founded by Barry and Deb Schlouch in 1983 in their Berks County home to do excavation and utility work. Despite having no equipment at the time, they still landed small jobs that served as a springboard for their new firm. Over the next 37 years, Schlouch added design, survey, blasting, concrete and paving to its list of services on its way to becoming one of the leading total site preparation specialists in the region.
Today, Schlouch is a company with 280 employees and more than 300 pieces of equipment, of which about half are used for heavy work. Its reputation is rock-solid as most major local and regional developers and contractors repeatedly use Schlouch on their projects. Word of its excellence has spread beyond the market, too, as many national firms that handle construction management in the area turn to Schlouch.
In fact, repeat business accounts for more than 70 percent of Schlouch's business each year, a testament to the contractor's quality work, on-time performance and competitive pricing.
To keep Schlouch's fleet running like a well-oiled machine, a skilled team has been assembled at the company to make key decisions in several areas of its operation. One of those areas involves the acquisition of equipment to add to the company's vast rolling stock of scrapers, excavators, loaders pavers, tractors, rollers and other construction pieces.
‘Equipment Triangle' Is Decider
Before buying or disposing of any piece of machinery, Schlouch runs every decision through what it calls its "Equipment Triangle," made up of Don Swasing, chief operational officer; Richard King, its chief financial officer; and Kevin Reimert, the company's fleet coordinator. They meet weekly to decide which machines will serve Schlouch's needs the best, as well as which ones have reached the end of their useful lives with the contracting firm.
"[The Equipment Triangle] has been an evolving process, but we have been doing this for at least a dozen years," said King. "What we found is, if we consider the fleet perspective, the operational perspective and the financial perspective, by looking at all three areas and finding three green lights, we make better decisions. We consider application, reliability, production and operator preference. On the fleet side, we evaluate longevity, maintenance and uptime. From a financial aspect, we look at how it impacts our rates, and we consider utilization. What we have found is this approach and a high level of collaboration is a better way to make decisions."
With its equipment triangle being so deliberate in their decision-making process, due to the many factors to consider before buying construction equipment, King believes that that helps instill confidence in their clients because the firm puts in so much thought and effort in all areas of its operation.
"Our focus as a team is on lowest cost, not lowest price," Swasing added. "Employing the equipment triangle process allows us to find the path to the lowest cost. That is our advantage."
He said the concentration on core competency by each "Equipment Triangle" member must be established before they come together to align their effort to reach a sound, fact-based judgement.
"With our internal triangle, we can all focus on our core competencies in our areas," said Reimert. "Rich's strength is the financing, mine is the fleet and Don's is the operations. We use those strengths through the operating cycle of the asset's life: purchasing it, maintaining it and disposing of it. I focus on those areas every day."
"Once we make decisions, we've got operations, fleet and finance all aligned and delivering the same message to the organization," King said. "So, if there are questions, everybody is on the same page."
Big Investment Made in Cat 627Ks
Recently, Swasing, Reimert and King closed a large deal to purchase four Caterpillar 627K open bowl wheel tractor-scrapers. These durable machines are noted for their quick loading, high travel speeds and the ability to load and dump on the run.
Each 627K yields fast cycle times, allowing them to consistently deliver high productivity at the lowest cost per cubic yard. Open bowl units combine the push-pull abilities of both a scraper and a tractor, giving operators much more power and the ability to improve on their cycle times.
Schlouch bought the quartet of Cat 627Ks through Foley Inc., the Caterpillar dealer in nearby Bensalem, Pa. Schlouch and Foley have enjoyed a mutually beneficial relationship for a number of years, as has Schlouch with Cat, which understands Schlouch's prestige in the industry.
"Widely respected customers like Schlouch Inc. demonstrate the differentiated value Caterpillar and our dealers provide to our customers through our innovative products and services," said Caterpillar Chairman and CEO Jim Umpleby. "Our goal is to enable them to get their jobs done as efficiently and productively as possible, and make sure they can be more successful with Cat equipment and services than with any of our competitors."
Two on the Job, Two on the Way
According to Reimert, Schlouch purchased two 2019 Cat 627Ks models from South Dakota's Butler Cat through Foley. In March, Schlouch will take possession of the other two it ordered, both 2021 models.
Not wasting any time, Schlouch's first duo of 627Ks were put to work on a sizable residential site development for the contractor.
Each of the Cat 627K's attributes led the members of Schlouch's "Equipment Triangle" to arrive at an easy decision on the machine to replace their older 627G models.
Just by reviewing the 627K's specifications, they could see how much more value they could get from the scraper in comparison to earlier models.
The 627K model sports:
- An overall width of 11.71 ft. and a shipping height of 13.22 ft.;
- A maximum height of the scraper blade at 20.5 in.;
- A maximum depth of spread that totals 21.3 in.;
- Fully loaded, its top speed is 33.5 mph;
- The scraper's fuel tank refill capacity is 336 gal.;
- The 627K can make a 180-degree curb-to-curb turning width within a tight 36.71 ft.;
- Scraper capacity — struck, is 17.1 cu. yds., while the machine's capacity heaped measures 24 cu. yds.;
- The width of the Cat 627K's cut is 10.3 ft., and the maximum depth of the cut reaches 12.4 in.; and
- The model's rated load is 57,610 lbs., or 28.81 tons.
Looking at the motor on the Cat 627K, Schlouch found that the scraper's engine model is a Cat C9.3 that runs at 2,150 revolutions per minute, while the tractor's Cat C13 engine runs up to 2,000 rpm. Additionally, the scraper's flywheel power operates at 290 hp. The tractor has even more juice with 407 horses under the hood.
When the Cat 627K is not in its push-pull configuration, its operating weight, while empty, is 90,213 lbs. and 45.9 ft. long; when it is in the push-pull mode, the tandem machine has a weight, while empty, of 92,980 lbs. and measures 51.1 ft. in length, with the bail down.
Only High-Performance Cat 627s for Schlouch
Swasing and his team were not interested in a rebuild with their older fleet of Cat 627 scrapers because they wanted to continue to run high-performance models only.
"We understand the initial first life of that asset, and our 627G's were coming up on life," Swasing said. "We had multiple ways that we could replace those machines. Our choices were either doing a certified rebuild, buying a used 627 or purchasing a new one."
"We have a five-year forecast in place that lets us know at any given time what equipment we need to upgrade to protect the life and health of a fleet in the future," Swasing continued. "So, we looked at those options and had conversations with Foley. We asked them to scour the market for us and see what was available, and they did that. We ran the analysis and Kevin and I had been out to Caterpillar about three years ago to experience the 627Ks and get a basic understanding of the benefits to our fleet. We came back to Rich, worked out the numbers, did some negotiations — both on the trades and on the top line prices themselves — and ultimately arrived at a spot where we thought it was a win-win-win-win — it was good for Foley, for Schlouch and for Cat."
Prior to the discussions about buying the Cat 627Ks, Reimert had identified what repairs would be upcoming on their four older Cat G series scrapers within the next year, meaning that Schlouch risked a major part failure on one or more of those machines if a decision were not made soon.
"We took that big bite because our Cat scrapers were 2002 and 2006 models," he said. "If we were to rebuild those machines, we would be riding 24 to 26-year-old technology 10 years from now and that is not who we are. That is not high performance on our part."
King confirmed that those concerns also were weighed before deciding to spend significant money on the newer Cat scrapers.
"We knew we were going to have to invest major repair dollars and/or do a rebuild, so the choice became: Do we put our money into something where we are not getting any of the other benefits of a newer machine or, do we invest more money and get a much better return. That was a big factor in our thinking."
Swasing and his colleagues also keyed in on several enhancements Cat made to the 627K that equated to the lowest cost per yard and lower repair costs as well as better operator handling.
After examining the Cat 627K before the purchase, each member of Schlouch's Equipment Triangle came away with a product enhancement that impressed them.
"For me, it's the Cat Operator Assist, first and foremost," noted Swasing. "In my former life, I had 15 years in the seat of a Cat product as an operator. Back in the day, an operator had his hands full in the pan. There were three levers to pull up, down, eject and retract on the machine. Now, that has all been removed with Operator Assist. The technology overrides what an operator needs to do. It makes that operator a little bit safer and more productive and puts less wear and tear on the machine."
Both Cat, Schlouch Committed to Safety
In keeping with Schlouch's focus on being a safety-conscious company, it has 12 Safety Trained Supervisor Construction-credentialed (STSC) staff members in its employ.
The Cat 627K, too, comes equipped with several enhanced safety features inside the cab that protect the operator. Those improvements range from improved ergonomics to visibility.
For example, Caterpillar has engineered the 627K with Engine Over Speed Protection that, in case of an engine over speed situation, the compression brakes will automatically engage with no operator input. The machine determines the over speed condition based on its rate of acceleration and applies compression brakes automatically.
Each of Cat's open bowl models now come standard with bowl side overflow guards to help prevent material from spilling over the sides and falling onto the draft arms. Material that wedges between the bowl side and draft arm usually results in decreased work cycle times.
Among the smaller ergonomic upgrades that impressed Swasing, as a former operator himself, is that the 627K's cab seat can turn on an angle so the operator doesn't have to constantly twist his neck in looking ahead or behind.
"There are some other features that protect the machine from abuse, there's additional bowl capacity, which gives us another one-and-a-half or two yards of production, which Rich factored in as part of the final calculation," he added. "There are so many improvements, I could list them all day."
Bet On High-Tech to Recruit Young Gamers
Swasing also is keen on Cat's grade-control technology on the 627K, which makes moving dirt easier, safer and more efficient. Grade-control helps the operator see what is being built and see the information needed to produce the end product. Being able to see this from a cut fill production machine reduces the amount of support equipment time needed to perform the same tasks. In addition, the software on the scraper simplifies the operator learning process for potential new hires among young people used to the technology.
"That allows us to think about the operator of the future who likes the gamification," Swasing said. "With the Cat 627K's technology, running a scraper becomes an attractive job to prospective employees. It's a little easier training an operator if he doesn't have to learn those 14 to 20 different tasks that he would have to perform inside the cab simultaneously while trying to get oriented to a machine of that size. The technology does most of that for him."
Schlouch, like other heavy construction firms, has found it difficult to recruit a talented workforce due to the challenges of the past couple of years. But the company is betting that the high-tech equipment they use is one inducement to get the right people. He added that the smiles on his operators' faces recently as they climbed all over the two new 627Ks told him that they were on the right track with this investment.
"If we don't stay current and speak a common language with young recruits and know what appeals to them, we are really going to be left behind."
King also acknowledges the struggles the company has had in filling the scraper operator role. All three members of the Equipment Triangle have roles in the company's workforce development, and Reimert, specifically, has worked with the field team to recruit and train new people to run scrapers.
"Like Rich mentioned, it is not an easy job, but it is an important one" Reimert said. "Scrapers are tough on operators and specialized production machines. Older models just beat up their operators a little bit [due to the complexities of how they are operated]. With the old technology, there were a lot of moving parts to the scraper, a lot of things that the operators needed to learn and understand and time perfectly to get the cycle times we're looking for in a production setting. So, as Don said, the technology upgrades here with the Cat K series really made it more operator friendly to get those precise cycle times in the production setting. We're also getting better fuel capacity."
The Cat 627K's efficiency is boosted by the manufacturer's Fuel Economy Mode, a two-part feature that when selected, first lowers the transmission shift points to allow for shifting to take place at lower revolutions per minute (rpms) to aid in fuel savings. The second part of the mode lets the machine, when operated at engine rpms less than full throttle, to automatically vary the power distribution between the tractor and the scraper. That, in turn, can use the more efficient tractor powertrain over the full-time torque converter drive scraper powertrain.
Then there is Cat's Machine Speed Limit function, designed to take the place of top gear selection. So, if the scraper's top speed needs to be limited the operator can choose the desired speed through the display, or the top speed can be set to ET. This setting lets the 627K find the correct gear that works best for the engine and transmission. In most cases, the result is a lower engine load factor and a lower fuel burn rather than using a top gear selection that requires the motor grader to run at engine speeds near a high idle.
Schlouch Demands Much From Its Cat Equipment
A no-nonsense, demanding group of professionals, Swasing, King and Reimert prefer nothing less than toughness, reliability and performance from their equipment.
The Cat 627K almost seems to have been built with the "Equipment Triangle" in mind.
"It is an expensive machine, but it is surely reliable," Swasing said. "Rich mentioned it as being a high-performance machine, but we also want it to move dirt at a lower cost. Our cycle times are created and monitored based on a group of scrapers. If I have one pan down in a group, my cost per yard is going up. That's important for a couple reasons: One, the effect it has on our project budget; and two, at the end of the day, we need to stay competitive, so the scraper's reliability allows us to run our groupings and take advantage of our estimated costs and ultimately deliver on time.
"What I want to convey to the market is that I have reliable equipment, I can do my projects faster and smarter with a high-performance model, as opposed to a competitor," he continued. "From a customer's perspective, our equipment is going to deliver the project on time — and from a cost perspective, we are going to have a competitive cost per yard and that added capacity should also result in schedule acceleration."
Synergy Developed Between Schlouch, Foley, Caterpillar
The relationship that Schlouch has with Foley and Jeff Merle, vice president of machine sales, began three years ago when the Cat dealership bought Bensalem's Ransome CAT. Due to the external equipment triangle that has developed between Cat, Foley and Schlouch, the partnership has proven to be a success for each company. The best example of that cooperation is the 2020 deal to supply Schlouch with its four new Cat 627Ks.
"This really started out, when we looked at it, from the standpoint of a large equipment bundle of four scrapers, but there also was a Cat 349 excavator included, meaning it was a five-machine deal," Swasing said. "I think that gave Foley some leverage to get creative with the structure and to work with Cat and with us to reach a deal that worked for everybody and provided some flexibility. On the larger deals, we have done with Foley, we have seen them be more willing to work with us than some other dealerships. And we have seen good results with the Cat equipment as far as longevity, the disposal and the trade value on the back end. There has been an open dialogue ongoing with Foley in all areas of fleet management."
Reimert added that Schlouch also has been more involved with Cat from a product engineering standpoint, more than other OEMs with whom it has worked.
"I have met with Cat engineers online who are asking, ‘Hey, you have a big fleet of 953 track loaders, how can we make them better? How about the D6s or D7s in your fleet?'" he said. "We are not seeing that kind of commitment to us very often from the other equipment makers. Certainly, none are as dominate as Cat. I think they are reaching out to their end users looking for the little tweaks that they can make to their models to improve the experience for their customers and, to me, that sets Cat apart in a big way."
Schlouch is an Association of Equipment Management Professionals (AEMP) member company, Swasing noted, and there are four Certified Equipment Managers (CEMs) on staff, two facts that he said means the contractor is "playing on a different level than some other companies."
"Jeff Merle would tell you that he recognizes the sophistication of the analysis that goes into our purchasing decisions," Swasing said. "I think there is a working understanding with Foley that we like to play in three buckets, so we are obviously going to have our act together on the acquisition of assets. Kevin has alluded to the effort we have applied to the operational costs, so we have tight control of the costs through the life cycle of the machine; he also mentioned that we like to have a fair-trade value on the back end, so we make a little money on disposal. With that, we have a very solid maintenance reputation. What that means is our trades bring a little bit more than the average company because we know what right looks like and we are trying to do it from the cradle to grave.
"For me, I trust Jeff Merle — if he says he is going to do something, he will," said Swasing. "I personally believe that he is going to bat for us every single time to try and win the deal. Knowing that we understand our costs, knowing the sophistication that we bring to the table, I think, has maybe had him step up his game a little bit, and it has been good for both Foley and Schlouch."
That trust in Foley extends to the dealership's product service after the sale as well.
"If I call Jeff, which I have done maybe twice in the past 18 months, it's a 911 call," said Swasing. "I don't do that often, but if I call him, he helps me."
Most of the day-to-day product support and service, though, along with educational and operative training, falls under the authority of Reimert. Any service he needs, he said, comes from working with both the manufacturer and the dealer, and through them, he can locate the correct specialist to speak to about an equipment problem, if needed.
"We have brought in production specialists, model-specific professionals to work out issues and we typically tend to find what they call ‘product improvement programs,'" Reimert said. "Because of our tracking and how we manage our fleet, we see problems early and identify them. We'll start asking them questions like, for instance, ‘What is going on with this fan clutch on a Cat 953,' then maybe three months later, a product improvement program will come out because the rest of the end-users of 953s have also been seen the problem. If it's not resolved, it will come back around."
Owner Trusts His Team Implicitly
Swasing, King and Reimert feel they have the freedom to work more successfully than decision-makers at similar contracting companies, due to the unwavering support they get from Barry Schlouch, the firm's founder and owner.
"Whether Schlouch experiences good times or challenging times, Barry has always supported us in making the types of investments, like buying the Cat scrapers, when they are good for the business," explained King. "That's a big thing; not all company owners do that. Collectively, the three of us here have probably 70 years working at Schlouch, with Don having the longest tenure at 25 years. What we found is Barry trusts us with big investments when they make sense from a business standpoint and moving the company forward. His kind of support is hard to beat."
Schlouch Prepared to Succeed in 2021
Obviously, 2020 was a difficult year for everyone, individuals and companies alike. The downbeat economy, and the blistering it continues to take from COVID-19, will hopefully begin to rebound in 2021 as the hoped-for flame-out of the pandemic ensues.
Despite those challenges, Schlouch and its "Equipment Triangle" are optimistic about the company's growth and success in the new year as well as the return to good health for the entire construction industry.
"By going through our budget processing and looking at the economic projections," King said, "we are expecting modest growth as compared to 2020, but a lot of what we're focusing on is the type of work and the geography. As far as type of work, we focus on residential subdivisions, e-commerce warehousing and healthcare. All three of those areas are where we have a strong customer base, we do a lot of work in those segments and we think we will continue to work on those kinds of projects at a good pace in 2021."
"Additionally, we feel that we are uniquely positioned here in eastern Pennsylvania, just with the infrastructure, for growth in e-commerce and residential projects, bolstered by some migration out of the cities into the secondary markets where we work," added King. "We believe that maybe we are affected less than companies in other areas of the country and I would say Schlouch is well-positioned here to face the challenges out there, such as COVID-19."
Swasing added, "We are as deliberate with business development and sales as we are with the purchasing of equipment. We lead with the relationships and, as a result, we have a lot of great opportunities in the pipeline."
Schlouch's unique style of management and the success of the Equipment Triangle is an accomplishment that Swasing sees as "amazing" and goes a long way toward his goal of differentiating his company from others in the marketplace.
"The magic for me, in addition to a celebration of what we have all created here, is to showcase our performance, our high reliability and our lowest cost model," he stated. "Rich had mentioned e-commerce and what matters to e-commerce more than anything is performance and schedule. Let's just say I was sitting on 150 acres for two years and suddenly a tenant shows up. That's the money shot for these guys and they want to go quick — even the spec guys want to move fast. How we do things and what equipment we use means something to the big industrial developers of the world that we work with. We want to be distinct and we have hope for the industry. At Schlouch, we are confident that we are going to succeed, and to do so we are making big investments here." CEG