With life cycle cost analysis, building materials manufacturer ramps up for growth

By determining the optimal age in which to turn over aged fleet, a supply company positions itself for a market upswing while lowering transport costs by 8%

Challenge

The U.S. markets were exhibiting demand resurgences and two of the company’s divisions were in the midst of managing the challenges that come with such an upswing.  The company had previously frozen all capital spending on new transport vehicles and were thus concerned that neither fleet would be able to adequately respond to the expected volume increases in upcoming years.  Ramifications included loss of third party revenue, higher maintenance costs, and increased fuel costs, as well as more fees paid to third party haulers.  Added to the capacity issue was a drop in driver retention.

Discovery

One of the most debated issues among fleet managers is when to sell a unit to maximize returns and minimize lifecycle costs.  To perform a thoughtful analysis of this issue, it was important to consider all direct costs, including depreciation and maintenance, as well as indirect costs, including perk value, corporate image, downtime, and feature upgrades. A project team was set up to address this issue and charged to develop a framework that would determine the optimum amount and age of trucks given the various business constraints.  The team had three objectives:

1. Determine the optimum age at which to turn over truck vehicles.

2. Identify location priority and levels in which the fleet should be turned over.

3. Recommend the best purchasing options going forward for identified replacement opportunities.

   
   

 TOV Concrete Producer JulyAug 2016