What is Dynamic (changing) Life Cycle Machine Costing?

What is Dynamic (changing) Life Cycle Machine Costing?

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Ten years ago in 2000, we began a study of how contractors were costing the Owning and Operating Cost of their heavy equipment. We evaluated many costing systems, some were home brew others were developed by others. When someone develops a system, it is often for their purposes, this means that it may not necessarily be for your purposes.

We looked at a wide variety of costing systems. A few of the systems we reviewed were:

• The Caterpillar Method (over approx. 40 years)
• Many other manufacturers' systems
• Federal Agencies like The U.S. Army Corps of Engineers
• State Agencies Like California DOT
• Published Costing Books
• Internet based costing Services
• Agricultural Machine costing programs
• Printed books back to the 1930's
• Aircraft costing studies

Without a doubt Caterpillar had the best system. In fact they pioneered heavy equipment costing back in the early 1970's. Never-the-less our study identified 35+ short comings in the CAT Owning and Operating Cost system. Considering the age of their system and the fact it was designed for an owner with a pencil, paper and a calculator, it was quite good in comparison.

The CAT engineers that designed the system did not have a powerful computer sitting on their desktop like you do today. The CAT O & O Cost system has remained basically unchanged except of some minor updates though 2001. Much of what made the CAT system good was mysteriously deleted in 2001. The user was instructed to talk to their dealer about repair cost.

This in itself, is not a bad idea. You do need the help of a good dealer to cost machinery. However, if you have a mixed fleet, good luck. If you want to do your own repair and maintenance, good luck, as maintenance contracts can be purchased for low time and aged machines (Although some dealers will take your fleet as is.) 

 

I do not want you to think that CAT was entirely self-serving by the deletion of this data. I believe that it had a lot to do with the fact that old system was a manual system and this made the repair cost data difficult to prove. In one market they were too high and in another too low. Dealers complained. To matters worse, competitors would use these numbers against CAT! If I faced this situation, I might have made the same decision that CAT did.

As you get into machine costing keep in mind that some manufacturers may believe that it is not in their best interest spend the time and money to collect costing data you need. Also, to open their books to you, may cost them sales and scare off customers, (if they knew the real cost of machinery) and expose them to competitors who do not calculate the same way they count. Fear is a great motivator.

Back to some history. We began to develop a heavy equipment costing system. Initially, we tried working with spreadsheets but quickly found that they would not do what was necessary. Yes, spreadsheets could cost part of a machine's cost but they just will not provide the whole picture. They just are not suited for the job. Why do think people buy millions of Accounting software packages form QuickBooks etc.? If spreadsheets are not suited for good accounting why would you think they are good for machine costing? We found out that they just will not provide the speed, flexibility, variability, reporting and error elimination that is necessary for costing, when you have more than one or two machines to cost.. It takes a sophisticated database with a simple to use custom interface.

I know a lot of people use spreadsheets. I do not criticize anyone for trying to cost with a spreadsheet. This is where companies often start but also quickly learn the weaknesses of spreadsheets. They are certainly better then pricing your equipment by matching a local rental house. (Your cost is your cost, a rental house may price based on their cost. Their cost has nothing to do with you.). The big problem with spreadsheets is that they are not designed to easily provide the variability needed in Dynamic Life Cycle Costing.

If I could categorize what made the original CAT system good was the focus on what today we call Dynamic (changing) Life Cycle Owing and Operating Cost. I don't want to focus too much on spreadsheets but as soon as you use one for costing, you loose the "Dynamic" part of costing. Costing one machine, for one work type and geology is one thing. Costing a mixed group of machines, is entirely another thing.

We have a free basic costing system at www,DecisiveCost.com 

You can also visit our group on Facebook called Heavy Equipment Best Owning and Operating Practices. 

Worn Iron Analysis

Worn Iron Analysis
The Cat® Rental Store Business Tip

Close examination of worn ground-engaging tools can reveal problems and point to improvements. 

Sometimes considered "sacrificial iron," ground-engaging tools (GET) sustain the majority of wear in order to protect the larger, more expensive parts such as buckets, motor grader moldboards and dozer blades. By examining that wear, contractors may discover ways to help extend the life of their GET, prevent premature replacement, as well as save money.

How Wear Works
Speed + downward pressure = wear. If the GET are wearing prematurely, speed and pressure should be considered

Missing Components
GET that have been allowed to wear excessively and fall off are no longer protecting the structural base edge. Missing GET mean the machine must work harder to dig, requiring more fuel and longer cycle times. Operating a bare bucket edge will also negatively affect production. Bucket edges that have worn thin often curl, making it more difficult to enter the pile.

Excessive GET wear also affects the adapter. When the adapter wears, the bucket tip is loosened and pushes up when loading, so the tip wears through the back and both the tip and adapter must be replaced.

Bucket Wear
Bucket wear occurs mostly from the bottom up, due to the pressure from the bucket, and the flow of material. GET that wear away and are no longer protecting the structural components (thin, cracking wear plates) should be replaced before the base edge begins to wear. Once the base edge, a structural component, starts to wear down, the wear plate may not attach correctly, thus failing to protect the bucket. Furthermore, the bucket is structurally weakened and welds can crack, especially at the corners. Worn base edges must be replaced, a costly measure that will require significant downtime.

The corners of a bucket see the greatest amount of wear for two reasons: The corner causes a change in directional flow of material, exerting more pressure for more wear. Secondly, operators generally favor one side or another when loading, exerting additional stress on the corner of choice. By rotating the bucket tips from the center to the corners, contractors can extend the life of the tips. Similarly, bucket teeth and edges can be flipped for extended wear.

Grader Blades
Motor grader blade edges should be changed before they wear into the moldboard. Contractors should be using the largest edge appropriate to the intended application to prolong edge life. Hardened washers last longer to keep the edge properly secured. Like bucket teeth, grader bits should also be rotated for even wear.

Operating Techniques
Proper operating techniques can extend the life of the components and prevent premature GET replacement. A slight change in loading technique can mean a lot of savings in terms of GET life as well as an increase in productivity.

Generally, the proper angle at which a bucket should enter a pile, or a ripper pulls through the ground creates the smallest footprint possible for the least amount of drag. By making a "clean" cut into a pile or into the ground, the operator can minimize fuel use and maximize efficiency.
Bucket tips that are worn through from the bottom may indicate that the operator has been loading uphill, rather than keeping the base edge parallel to the ground. Loading uphill accelerates wear on the underside of the bucket, as the material flows beneath the bucket
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A dozer operator is causing premature wear and unnecessary machine stress if he or she leaves the ripper shank to trail behind the machine. The tip should be positioned so that material flows down the centerline of the tip, which slows the rate of wear.

A motor grader operator who has been laying the blade back too far will have an edge worn to a greater angle. This practice creates a larger footprint, accelerates wear on the edge and consumes more fuel. Additionally, grader bits can chip away prematurely if the blade is rolled too far back.
Equipment dealers or rental equipment providers such as The Cat Rental Store can help instruct operators in using the most efficient techniques for maximum productivity and longer GET life.