Reassessing Your Total Cost of Ownership – Pandemic Edition
As provinces begin to reopen and the economy starts to surge, you may find yourself wondering: what now?
While there are no easy answers to this question, most experts will remind you of one thing…
This is NOT the same world it was 3 Months ago.
Things have changed, and the plans that worked pre-shutdown probably don’t apply anymore. You need to reassess the cost of running your fleet, or your Total Cost of Ownership.
What is a TCO?
Your Total Cost of Ownership (or TCO) represents the sum total of all costs associated with managing your fleet. From acquisition, to maintenance, to disposal, understanding your TCO is crucial in making a difference to how your fleet operates.
Is a Total Cost of Ownership the Same as a Price Analysis?
A Price Analysis is a look at what you pay to BUY goods and services; a TCO Analysis is an account of what is costs you to KEEP them.
But first things first…
What’s Included in Your TCO?
Your initial investment is the price at which you purchase vehicles or equipment; these are the foundation for your TCO calculations.
While this might sound like a complete no-brainer, it’s important to consider whether or not you’re getting the best possible deal when it comes to your assets and vehicles – after all, the lower your initial investment, the more optimal your TCO will be!
In order to ensure you’re getting the most out of your assets, implementing driver training programs is a good way to ensure the longevity of your vehicle/equipment lifespan. The costs of driver training can be two-part: first, the time associated with training a driver AND the service/company that does the training.
If your driver turnover is high and you find yourself running numerous training programs throughout the year, this is all added to your TCO.
When it comes to managing your fleet, storage is probably pretty low on your priority list – but sourcing a cost-effective storage method could mean tens of thousands in savings from your TCO!
Operational costs consist of a broad array of things that eat into the bottom line – from fuel, to administration, to maintenance, even to your time, it’s crucial that you ensure these costs are optimized to their fullest extent.
While it might seem small, your insurance premiums can quickly add up depending on what plans & packages your can qualify for. You need to ask yourself if there are ways to reduce your insurance premiums.
How to Calculate Your TCO
Now the fun stuff – Math Time!
According to industrial heavy hitter GRACO, you can tally your TCO using a simple formula:
I – Initial Cost
This is the total you spent to purchase an asset.
M – Maintenance
This is the amount you spend on maintaining an asset over the course of it’s lifespan.
D – Downtime
This is the cost of assets that are broken down or sitting throughout their lifecycle (i.e. the cost of a rental vehicle for a truck that’s in the shop).
R – Remaining Value
This is the value of the asset if it were sold as-is.
I + M + D – R = TCO
For those who read this until the end, thank you!
While we’d never pretend to know all the answers, we hope this can help give you a start in developing your own recovery plan for your fleet’s needs.
Not sure where to start in optimizing your Total Cost of Ownership? Speak with a Latium Expert today!