Putting total cost of ownership in your hands

Munesu Shoko, managing editor at Quarrying Africa.

When times are this tough, price tends to be the principal determinant of whatever we buy. In a difficult economy, understandably, capital isn’t always available, and procurement decisions are forcibly taken based on capital cost, without necessarily factoring the ‘hidden’ lifecycle ownership costs.

Total cost of ownership is no new term, but what does it mean for cash-strapped capital equipment owners who need to make wise decisions on their capital equipment purchases? Are you looking at the bigger picture, or just the upfront cost?

Ongoing costs after you have written the cheque for that piece of equipment are just as important, if not principal, as the purchase price. However, for certain asset acquisitions, purchase price and ownership cost can be very different.

It is for this reason that a TCO analysis should be done to uncover both the obvious costs and the hidden costs of ownership. TCO highlights the difference between purchase price and long-term costs. There is actually a general school of thought that owning the equipment could cost between five and eight times the purchase price, if not more.

While savvy quarry operators know that total cost of equipment ownership is more important than just the purchase price, what most don’t know is that they could actively reduce their total cost of ownership across earthmoving equipment and trucks by using modern load weighing technologies to set benchmarks and measure productivity.

Total cost of ownership includes everything from the original purchase price to the daily running and maintenance costs, depreciation, finance and even ‘hidden’ costs like insurance and employee wages.

A machine that appears to be competitively priced may end up costing many thousands more than a higher priced machine because it may deliver lower productivity, increased fuel and maintenance costs and a lower resale value.

You can measure total cost of ownership based on the number of hours a machine works, or based on actual productivity in terms of the amount of material moved. By basing total cost of ownership calculations on the amount of material moved, operators can get a clearer picture of the machine’s actual cost of ownership, since a machine that moves more material in less time is likely to generate more income as well as using less fuel per tonne of material moved.

While it makes sense to choose a fuel efficient, highly productive machine, it is also possible for smart operators to proactively reduce the machine’s total cost of ownership by reducing the running costs.

There are a number of steps that can achieve this, such as improving efficiency to reduce fuel usage, optimising the loading process and improving the maintenance scheduling so that all machines and vehicles are up and running when you need them to be.

The first step is to understand how productive your machines are, including how much fuel they use and how much material they move. The next step is using that information to make changes where necessary to improve efficiency and reduce costs.

By tracking the amount of material moved per hour to measure productivity and set benchmarks, operators can see underperformance and make appropriate adjustments to ensure all equipment is working at its optimum efficiency.

Modern onboard weighing systems can be used to calculate the weight of material in an excavator’s or loader’s bucket, relay this information to the operator and record the weight for later use. Being able to track the amount of material moved per hour can then be used internally as part of an overall business analysis to measure productivity and set benchmarks. Once productivity benchmarks are set, fleet managers can customise the load weighing system to capture a wide range of other data such as cycle times, which can then be used to identify process bottlenecks and inefficiencies. By resolving these issues, managers can improve productivity and reduce operating costs.