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Owning and operating costs

April 28, 2009 |

Big machines bring big profits but they also cost a lot to operate – all the more reason to calculate out to the penny what you’ll spend working these high volume producers. Another reason to closely analyze the cost considerations of your big equipment is that new production-level machines often come with the latest technology in the equipment industry.

Today’s newer machines with Tier 3 engines and high-tech electronics and hydraulics can run circles around earlier generations of machines – and do so while burning less fuel and maximizing their up-time. In this economic climate some contractors may shy away from new equipment purchases, but you’re shortchanging yourself if you look only at the sticker price. Experienced contractors know that what matters is not the purchase price, but what it costs you per yard or per ton to move material.

In this article we’re looking at wheel loaders with bucket capacities in the 7- to 8-cubic-yard range – a typical quarry machine or high volume earthmover. To help us analyze the costs on these we turned to two of Komatsu’s product managers, Rob Warden and Chuck Murawski. They recommended we study the new WA500-6 wheel loader as it is a new, clean-sheet-of-paper design. The only things that were carried forward from the previous Dash-3 model were the size of the tires and the size of the engine. Everything else, the transmission, torque converter, axle, frames and hydraulics were redesigned to work together harmoniously, making it a good candidate to show off the cost saving potential of a new machine.

“What often happens as a machine model grows older is that the weight and horsepower increase but the components stay the same,” Warden says. “You have to work your components harder to get the performance you require and you end up using more fuel.”

When you start over, from scratch, the engineers can design everything to hit a certain sweet spot, so you’re not constantly pushing the engine or hydraulics up against their limits. Manufacturers will also integrate the latest technology, which in this case includes more shifting modes; a lockup torque converter; Closed Center Load Sensing System (CLSS) with variable displacement piston hydraulic pumps; and a variable speed, on demand hydraulically-driven cooling fan. To reduce downtime the new WA500-6 also offers DT electrical connectors, O-ring face seals on hydraulic hoses and Equipment Management Monitoring System (EMMS) onboard diagnostics.

Residual value
As part of the O&O cost calculations we include the residual value of the machine at the end of its first lifecycle. But with a new generation of machine, estimating the resale value is tricky, because the field population is relatively young, there aren’t any on the used equipment market and a survey of price guides only turned up two roughly comparable machines. Further complicating matters is that there are many different ways to sell a machine. You can trade it in to the dealer, sell it yourself, or sell it at auction. And don’t forget that there are some O&O cost models that have you zero out the value of the machine at the end of its lifecycle and claim no residual value. We build the residual value into our calculations, which lowers your O&O cost, but all these considerations are best settled with the advice of your accountant, equipment dealer and in some cases a tax advisor.

To help with the math on this assignment, we used a spreadsheet calculator that’s available at Komatsu dealers. Most of the top equipment OEMs today make similar calculators available and they’re an invaluable tool for totaling up costs. Remember also the numbers we cite here are theoretical, and for discussion purposes only. To get your costs to the level of accuracy you need to operate your equipment profitably you need to sit down with the dealer and plug in the exact specs of the machine you want, using your own labor, fuel and consumables costs. Don’t be tempted to guesstimate based on our figures as even small variations in the numbers can quickly add up over time.

Fuel efficiency
In our fuel calculations we estimated the fuel use of the WA500-6. Fuel consumption of this model ranges from 4.6 to 12.0 gallons per hour and it will vary based on the load factor of your application. Because of its big impact on your lifecycle operating costs, this is one figure you should research from your previous operations and plug into your own O&O models.

No other operating cost gets as much attention today as fuel costs. Even though diesel is a lot less expensive than it was a year ago, it’s still one of the few costs you can have some control over. And it’s the one cost most newer machines can successfully help you control.

The first way manufacturers reduce the fuel burned per unit of work performed is, as we mentioned earlier, to design a machine where all the components are engineered to work together harmoniously and by adding things like additional shifting modes that better match the tire speed and torque to traction needs. Lock up torque converters are a good way to gain a few extra gallons per hour when roading a wheel loader or doing load and carry work.

Closed Center Load Sensing System (CLSS) with variable displacement piston pumps will reduce wasted energy by only pumping as much oil as is needed for the immediate demand. In side-by-side comparisons to the previous generation Dash-3 models, the WA500-6 is 15 to 17 percent more fuel efficient in terms of gph and 25 to 30 percent more efficient in yards moved per gallon, say Warden and Murawski.

Plug those kind of figures into an O&O calculator and you start to see some significant savings. In this case, the most conservative figure, 15 percent savings in gph (at $2.25 per gallon), still delivers $26,325 in savings over the life of the machine.

Tracking your assets
Another big boost to fuel savings comes from the use of asset tracking programs to monitor and manage things like excess idle times. Komatsu calls its asset management program Komtrax, and most of the major OEMs as well as GPS providers now offer similar capabilities. What these do is remotely track the location and operating condition of your equipment and/or vehicles. You can customize reports to alert you to things like excessive idle time, then you can coach operators to shut the machine down when not working.

Asset tracking also helps you save money in service calls. Although this isn’t something we would plug into an O&O calculator, you can do your own rough estimate on how much you would save if your technicians never had to chase down a hard-to-find machine, or if all your maintenance or diagnostic issues and needs were e-mailed to the shop every morning before the service truck headed out. Asset management programs combined with onboard diagnostic systems will also tell you about small problems before they grow into big problems and allow you to more efficiently schedule preventive maintenance.

Maintenance and repairs
The figures we used for PM and repairs are based on Komatsu averages. If you’re in a high labor cost area or have a lot of variables that depart from the average, be sure to detail these with your dealer.

One thing we did not put into the formula was the cost of the replacing bucket cutting edges and/or teeth. These vary widely depending on what the machine is used for and the soil or material conditions. Bring your own replacement schedule to the table when you do your calculations.

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