I hear it every day. I hear it on phone calls, in board rooms, on foundry floors, and in the C Suite. No matter the industry or the organization, the response is shockingly similar. Daily the question is posed and daily I am reminded of why our insight is needed and in demand.
“What is the Total Cost of Ownership of your fleet?”
“I have no idea. Is that important?”
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Fleet Managers are in a precarious position. They are being tasked with managing their fleet while also driving down the cost. Yet, they are not being given the data or the resources necessary to make optimal decisions. These managers are being kept in the dark as to what the most important metrics are regarding the cost of their fleet. We believe that Total Cost of Ownership (TCO) is just the torch to lead them out of the darkness and into the light.
It can be difficult to determine your fleet’s TCO because of how exhaustive the list of expenses can and should be when aggregating them. Almost everyone will include the obvious costs of acquisition, maintenance, administration, and disposal. But what do these areas entail? How do you know when you have included all the pertinent data into your calculation?
The four main components that make up your Total Cost of Ownership are: Acquisition, Maintenance, Administration, and Disposal. Each of these components include multiple inputs; here are just a few:
· Acquisition: price, cost of capital, interest
· Maintenance: contract costs, dealers, self-maintenance, parts/supplies, tires, maintenance overhead
· Administration: fleet management, IT costs, employee management
· Disposal: disposal/make-ready fees, resale
This isn’t a one-size-fits-all calculation. Every fleet is unique and so are the costs associated with it. Only through rigorous data analysis are we able to drill through the data, eliminate the noise, and focus on the true drivers of your TCO. As you go through the process of calculating your TCO, be sure to ask yourself some hard questions to ensure that you aren’t leaving out important metrics (and by doing so leaving money on the table). Some questions to consider would be:
How do your expenditures change as your fleet ages?
Have you considered every element of TCO in your cost per hour analysis?
Have you considered capital costs and increased maintenance costs as your fleet ages?
If you choose to lease, what opportunities might be available for your extra capital?
Is your organization willing and capable of handling your fleet sourcing, acquisition, maintenance, administration, and disposal?
The undertaking is considerable, but the results are worth it. Calculating your TCO enables you to make data-driven decisions that will bring cost savings to your fleet.
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I say it every day. I say it on phone calls, in board rooms, on foundry floors, and in the C Suite. No matter the industry or the organization, my response is shockingly similar. Daily I speak my truth and daily I am reminded of why Fleet Team’s expertise is needed and in demand.
“What is the total cost of ownership of your fleet?”
“I have no idea. Is that important?”
“Yes it is, and we can help.”
Yes, it is important. Yes, it should drive all your decision-making regarding your fleet. And yes, we can help you calculate it, understand it, and leverage it.
