Total cost of ownership (or TCO) includes the purchase price of a particular asset plus all operating, service, maintenance and repair costs over the asset’s lifespan, including cost of disposal and residual value on disposal.
Whole of life costs can be categorised into purchasing, operating and disposal, and might include the following:
Developing a business case, the tender process, purchase price of equipment, delivery costs, staff training and annual insurance.
Maintenance and servicing, spare parts, repair costs and consumables.
Decommissioning, transport away from the worksite, fees for disposal of parts and money received on sale.
With a long service life, the initial up-front cost of a product is often only a small part of TCO and purchasing managers know that while good procurement is achieving the right price, best value for money is the lowest lifetime cost.
While minimising lifetime operating and asset care costs requires best practice by management, the manufacturer can make a significant contribution to TCO through quality design, engineering and product build. There are three critical factors in managing TCO to minimise the incurred cost of operations and maintenance.
The most crucial factor in minimising TCO is to ensure that operating practices adhere absolutely to operations within the asset’s designed operating envelope. This highlights the critical importance of customisation to ensure that each asset is designed to perform a specific range of work and bound by a specific range of inputs and outputs.
A second critical requirement is effective operator care. The operator plays a vital role in controlling total cost of ownership as properly maintained assets require less energy, can consistently maintain rated performance and generate near perfect product quality. Shermac design and engineer equipment to ensure that operator maintenance can be performed quickly and easily including ‘self-reporting’ products that alert the operator to maintenance needs.
Finally, in conjunction with proper operation, effective asset care has a direct impact on total cost of ownership, including preventative maintenance, scheduled replacements and periodic rebuilds. Again, Shermac’s focus on details such as chassis selection, product selection and durability, ease of access and maintenance and availability of spare parts all contribute to effective asset care.
The net result is predictable and low lifetime cost of ownership of Shermac equipment, and outstanding value for money.