step 5 truck fleet costs ©dr. b. c. paul 2000 revised 2008 note – this presentation includes...

Step 5 Truck Fleet Costs

©Dr. B. C. Paul 2000 Revised 2008Note – This presentation includes screen shots from the Caterpillar

Performance Handbook, Catapillar’s FPC Program, Western Mine Cost Service Costing Manuals, the U.S. Bureau of Labor Statistics Web

Site, and other materials and spreadsheets compiled by the Author

Truck Production Costs

Divided into Ownership and Operating Costs

Ownership includes• Annualized Investment Costs• Taxes and Insurance• Tax advantages

Operating Costs are Incurred as Vehicle performs service

Operating Costs

Fuel Tires Lubricants Repair Operators

Setting Costs In FPC

Use the HourlyCost Button

On Fleet Input Tab

Sub Menu Divides Owning and Operating Cost

Using Menu Requires a lot of side calculations

Latest Editions of Cat HandbookHas removed cost estimatingSections. Have to revert toEarlier issues (which we haveOnline)

Lets Go for Fuel First

Getting Fuel Consumption Rates

Info from 29th Ed Cat Handbook

Our Conditions are Medium

Our truck isA 785

We getAbout25 gallons/hr

We assumed$3.8/gal.25*$3.8=$95/hr

Input Our Fuel Cost

Lets go for the LubeFilter, Oil and Grease

Lube Oil Grease Filter

One alternative is anList of tables – QuickEstimator Table is faster

This one is from CatHandbook 25th Edition(More recent Editions Missing)

For a Cat 785 we get$1.89 for parts $0.61 for labor

Updating lube costs over double $3.5Assumed try $4Labor up about 20% try $0.73

Enter the Lube/Filter/Grease

Cat tends to be a littleLowTerex rule of thumb wasHigh and 10% of fuel

Undercarriage is a dozerOr tracked machineThing – 0 here

Repair Reserve Next

Vehicle Life Impacts Repair Costs

Cat 785 will last 40,000 to60,000 hours

Under Average ConditionsAbout 50,000

Table from Cat Handbook29th Edition (online)

Repair Reserve Tables

Repair costs jumpBeyond 40,000Hours

With life in the50,000 hour rangeWe anticipate1.5 times listed cost

$13*1.5 = $19.50

A Defect of FPC

Poor Handling of the Time Value of Money• Operating costs going up dramatically

• Last 20,000 hours bring an average over 60,000 up to 1.5 times base rate

FPC averages costs over time with no regard to where they occur in cash flow.

Inserting More Info

Lets go after the tiresNext.

Need to Get Tire Life

Where most tires wear outBut some cut is zone B

An average is 3,000 hours

If retread cost is about 1.5Times normal tire andLife is about 1.75

Cat Handbook does notGive a cost.

Western Mine Cost Service Has Books of Costs

Including Tires in theSupply section

This resource isAvailable online forStudents or bySubscription fee forCommercial users.

Find Our 150 Ton Cat 785

Lists about $16,000

(Book notes these areManufactures list and 15-25%Discount is common – tiresHowever, have almostDoubled in price)

I’m trying $30,000

A Calculation of Tire Cost

6 tires * $30,000 each is $180,000 Because of heating considerations

I’m not retreading• $180,000 / 3,000 hours = 60/hour

Adding into FPC

Now Lets Go forOperator

Western Mine Cost Service Has Labor Surveys

Production TruckDrivers gettingAbout $15.6

Another Source Is the US Bureau of Labor Statistics

Note that I can pullPay and Benefit byArea and Occupation

Industries Are Listed By NAICS Code Numbers

Find the Best Match

Looks like mineMachine operatorsIn quarries average$15.9 /hr

Comment on Estimating

In addition to books, manuals and internet sources

Remember the Buddy Network Excerpts from Trade Journals Your Companies Own Historical Cost

Records Local Union Contracts or State Wage

Scales Vendor Quotes

Cooking Our Estimate

We have $15.6 from Western Mine Cost and $15.9 from BLS• I’ll try $15.75

There are other costs• Unemployment, workers comp, social

security, vacation, health etc.• You can calculate specifically or use rule of

thumb estimating• 40-60% burden• I’ll go at low end for quarry

1.4 * $15.75 = $22.05

Input and Switch to Ownership

Hmm – Looks likeIt costs about$179/hr to run.

One of My First Issues in How Long it Will Last

Input My Knowns

I already scheduled1800 hrs per yearWith 85% availabilityIn my example

I also know the truck should last about 50,000 hours

At 1,530 hours per year that about 32 years

Getting My Truck Cost

Looks like I’ll beAbout $1,600,000For my Cat 785

Using WesternMine CostService

Price and Tires

Most Prices are Quoted at theFactory – Your have freightAnd assembly (I added a littleExtra as you saw)

Tires are a wear item so oftenThey are deducted from the priceTo avoid double counting

The Issue of Taxes and Insurance

Rule of thumb is that Tax and InsuranceAre about 5% (2.5% each) ofAverage Annual Investment(I wish they would call it average annual value)As vehicles values go down so does tax on insurance

Average value of calculation is

(N+1)/2N * Cost where N is life

Substitute and crank

33/64*$1,600,000 = $825,000 * 0.025 = $20,625

Griping About FPC

FPC does not handle time value of money

Taxes and Insurance are high in the early years and low in the late years• A mathematical average does not

show what this can do when investors are looking for a return on money

The Interest Problem

If money is borrowed most of the interest comes early• I’ll show a method for getting time

value of money into it even if FPC tries to ignore it.

From Engineering Economics Get the Interest Rate Comparison

Spreadsheet

Standard Fixed Period Compound Interest Loan

9 Interest Rate1 Number of Compounding Periods/Year

0.09 Period interest rate (as a decimal)1 Number of Payments/Year

0.09 Payment Interest Rate (as a decimal)10 Years for Loan Payoff

1600000 Loan Amount0 Down Payment Required0 Set Up Fees0 Set Up Fees Rolled into Loan0 Points Up Front 0 Points Cost0 Points Rolled into Loan 0 Points Cost

249312.1 Initial Guess for Payment

249312.1 Payment Amount249312.8 Final Payment Amount893121.7 Interest Paid

0 Fees Paid

Put in that I borrowMoney at 9% over10 years to pay forThe Truck

The Spreadsheet Gives a Yearly History of Interest

Payments

Period Debt Interest Payment Principal1 1600000 144000 249312.1 105312.12 1494688 134521.9 249312.1 114790.23 1379898 124190.8 249312.1 125121.34 1254776 112929.9 249312.1 136382.25 1118394 100655.5 249312.1 148656.66 969737.6 87276.38 249312.1 162035.77 807701.8 72693.17 249312.1 176618.98 631082.9 56797.46 249312.1 192514.69 438568.3 39471.14 249312.1 209841

10 228727.3 20585.46 249312.8 228727.311 0 0 0 012 0 0 0 0

Use Excels Copy functionAnd copy the interestColumn and paste it intoClass Assistant(Another EngineeringEconomics Spreadsheet)

Paste My Interest Cash Flow Into the Cash Flow Analyzer

in Class Assistant

Get the Total Life Cycle Cost of the Interest

A typical mine looksFor 15% rate of return

The truck goes intoAlmost immediateService – time zero

Lasts for 32 years

An equivalent streamOf interest over 32Years is $79,378

Plug it Into FPC

I could have doneThe total lifeCycle cost trick toThe InsuranceAnd Property TaxToo

At this point I know it costs me$107.85/hr to own the truck

When I Click Ok on the Subscreen I Know Have Total Hourly Cost for My

Truck

See! There it is!

That Was For My Fleet 2

Since I have Fleet 1

And Fleet 3

I can switch to thoseFleets and just typeIn my known hourlyCost for a Cat 785There.

Now I need to do thisFor Loaders!