IPWEA National Executive Officer Ross Moody explains how new online IPWEA tools can help fleet and plant managers get the most out their equipment.
It is now widely accepted that whole of life costs must be used in decision making in plant and vehicle management. But, for some people, the calculation can be laborious and others are not sure of what they need to do. Even less know how to calculate the optimum replacement point.
The optimum replacement timing for a vehicle or an item of plant or equipment is calculated to best estimate the optimum time, in either kilometres or engine hours, to achieve the lowest average annual cost during the life of the machine. Once the optimum point is established, the next step is calculating the whole-of-life costs.
Whole-of-life cost is the total cost of owning and operating an item of fleet over the estimated life of the item. Whole of life costs include:
• Straight-line annual depreciation, to an anticipated residual
• Finance costs
• Operating costs, tyres, fuel, repairs and maintenance
• Fixed costs, overhead recovery, insurance, wages, license
• FBT for light vehicles
Whole-of-life costs should be used in calculating internal hire rates and in purchasing decisions, but we don't believe this is always happening. There are still people who base their decisions on net capital cost. Unless you are calculating whole-of-life costs, you are not comparing tender submissions on an 'apples with apples' basis and incorrect decisions can be made.
IPWEA has responded by providing the tools to take the hard work out of the calculations and at the same time ensuring best practice is being followed. We have been training people for years about the importance of and how to calculate whole-of-life costs so it was inevitable that an online calculator would be provided by IPWEA to make the process less time consuming.
Organisations can access the online tools by subscribing to the IPWEA's Systems Plus plant and vehicle management program. For further information visit www.ipwea.org.au/fleet
Grant Andrews will take participants through the whole-of-life costs and optimum replacement points calculators at the IPWEA Plant & Vehicle Management Workshops in September 2012. For more information, please visit http://www.ipwea.org.au/fleetmgtworkshop2012