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Owning and operating costs

April 28, 2009 |

In the Magazine

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.

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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.

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