Truck Fleet Costs

©Dr. B. C. Paul 2000 Revised 2008, 2009Note – This presentation includes screen shots from the Caterpillar

Performance Handbook, Catapillar’s FPC Program, Western Mine Cost Service Costing Manuals, the U.S. Bureau of Labor Statistics Web

Site, and other materials and spreadsheets compiled by the Author

Truck Production Costs

Divided into Ownership and Operating Costs

Ownership includes• Annualized Investment Costs• Taxes and Insurance• Tax advantages

Operating Costs are Incurred as Vehicle performs service

Operating Costs

Fuel Tires Lubricants Repair Operators

Setting Costs In FPC

Use the HourlyCost Button

On Fleet Input Tab

Sub Menu Divides Owning and Operating Cost

Using Menu Requires a lot of side calculations

Latest Editions of Cat HandbookHas removed cost estimatingSections. Have to revert toEarlier issues (which we haveOnline)

Lets Go for Fuel First

Getting Fuel Consumption Rates

Info from 29th Ed Cat Handbook

Our Conditions are Medium

Our truck isA 777

We getAbout17 gallons/hr

We assumed$2.0/gal.17*$2=$34/hr

A Comment on Fuel Costs

We are assuming a truck fleet for Iran and middle eastern fuel costs are low

We can see diesel fuel posting regularly but our gas station prices are with tax• Off highway diesel does not have the highway tax• It is colored red and called “Red Dog”• Can estimate by removing tax from typical posted

prices• Companies vary with respect to issues like bulk buying

and delivery cost that can swing things several pennies more

Input Our Fuel Cost

Lets go for the LubeFilter, Oil and Grease

Enter the Lube/Filter/Grease

Terex rule of thumb wasHigh and 10% of fuel

Undercarriage is a dozerOr tracked machineThing – 0 here

Repair Reserve Next

Vehicle Life Impacts Repair Costs

Cat 777 will last 40,000 to60,000 hours

Under Average ConditionsAbout 50,000

Table from Cat Handbook29th Edition (online)

Repair Reserve Tables

Cat 777 has a baseRepair reserve costOf $10/hour

Actual cost Varies with Life of Machine

If we go forA 50,000 hourLife we willPay about1.5 times whatIs in the tableOr $15/hour

Enter Our Data

Lets do TiresNext

Need to Get Tire Life

Where most tires wear outBut some cut is zone B

An average is 3,000 hours

If retread cost is about 1.5Times normal tire andLife is about 1.75

Cat Handbook does notGive a cost.

Western Mine Cost Service Has Books of Costs

Including Tires in theSupply section

This resource isAvailable online forStudents or bySubscription fee forCommercial users.

Find Our 100 Ton Cat 777

Lists about $8,881

A Calculation of Tire Cost

6 tires * $8,900 each is $53,400 Because of heating considerations

I’m not retreading• $53,400 / 3,000 hours = 17.8/hour

Adding into FPC

Now Lets Go forOperator

Western Mine Cost Service Has Labor Surveys

Production TruckDrivers gettingAbout $15.6

Another Source Is the US Bureau of Labor Statistics

Note that I can pullPay and Benefit byArea and Occupation

Industries Are Listed By NAICS Code Numbers

Find the Best Match

Looks like mineMachine operatorsIn quarries average$15.9 /hr

Comment on Estimating

In addition to books, manuals and internet sources

Remember the Buddy Network Excerpts from Trade Journals Your Companies Own Historical Cost

Records Local Union Contracts or State Wage

Scales Vendor Quotes

Cooking Our Estimate

In our problem we are given that they will use Women truck drivers because if the Israelis launch an air strike they want something that is disposable (and teaching cows to drive was not successful)

Normally there are other costs• Unemployment, workers comp, social security,

vacation, health etc.• You can calculate specifically or use rule of thumb

estimating• 40-60% burden• I’ll go at low end for quarry

1.4 * $15.75 = $22.05

Input and Switch to Ownership

Hmm – Looks likeIt costs about$70.2/hr to run.

One of My First Issues in How Long it Will Last

Input My Knowns

I already scheduled2772 hrs per yearWith 80% availabilityIn my example

I also know the truck should last about 50,000 hours

At 2,218 hours per year that about 22.5 years

Getting My Truck Cost

Looks like I’ll beAbout $1,062,000For my Cat 777

Using WesternMine CostService

Price and Tires

Most Prices are Quoted at theFactory – Your have freightAnd assembly (I added a littleExtra as you saw)

Tires are a wear item so oftenThey are deducted from the priceTo avoid double counting

Truck weighs 161,000 lbs or1,610 units of 100 lbs – use $4/100Weight rule to estimate freight about$7,000 double for assembly

The Issue of Taxes and Insurance

Rule of thumb is that Tax and InsuranceAre about 5% (2.5% each) ofAverage Annual Investment(I wish they would call it average annual value)As vehicles values go down so does tax on insurance

Average value of calculation is

(N+1)/2N * Cost where N is life

Substitute and crank

33/64*$1,600,000 = $825,000 * 0.025 = $20,625

Griping About FPC

FPC does not handle time value of money

Taxes and Insurance are high in the early years and low in the late years• A mathematical average does not

show what this can do when investors are looking for a return on money

The Interest Problem

If money is borrowed most of the interest comes early• I’ll show a method for getting time

value of money into it even if FPC tries to ignore it.

From Engineering Economics Get the Interest Rate Comparison

Spreadsheet

Standard Fixed Period Compound Interest Loan

9 Interest Rate1 Number of Compounding Periods/Year

0.09 Period interest rate (as a decimal)1 Number of Payments/Year

0.09 Payment Interest Rate (as a decimal)10 Years for Loan Payoff

1600000 Loan Amount0 Down Payment Required0 Set Up Fees0 Set Up Fees Rolled into Loan0 Points Up Front 0 Points Cost0 Points Rolled into Loan 0 Points Cost

249312.1 Initial Guess for Payment

249312.1 Payment Amount249312.8 Final Payment Amount893121.7 Interest Paid

0 Fees Paid

Put in that I borrowMoney at 9% over10 years to pay forThe Truck

The Spreadsheet Gives a Yearly History of Interest

Payments

Period Debt Interest Payment Principal1 1600000 144000 249312.1 105312.12 1494688 134521.9 249312.1 114790.23 1379898 124190.8 249312.1 125121.34 1254776 112929.9 249312.1 136382.25 1118394 100655.5 249312.1 148656.66 969737.6 87276.38 249312.1 162035.77 807701.8 72693.17 249312.1 176618.98 631082.9 56797.46 249312.1 192514.69 438568.3 39471.14 249312.1 209841

10 228727.3 20585.46 249312.8 228727.311 0 0 0 012 0 0 0 0

Use Excels Copy functionAnd copy the interestColumn and paste it intoClass Assistant(Another EngineeringEconomics Spreadsheet)

Paste My Interest Cash Flow Into the Cash Flow Analyzer

in Class Assistant

Get the Total Life Cycle Cost of the Interest

A typical mine looksFor 15% rate of return

The truck goes intoAlmost immediateService – time zero

Lasts for 32 years

An equivalent streamOf interest over 32Years is $79,378

Plug it Into FPC

I could have doneThe total lifeCycle cost trick toThe InsuranceAnd Property TaxToo

At this point I know it costs me$107.85/hr to own the truck

When I Click Ok on the Subscreen I Know Have Total Hourly Cost for My

Truck

See! There it is!

That Was For My Fleet 2

Since I have Fleet 1

And Fleet 3

I can switch to thoseFleets and just typeIn my known hourlyCost for a Cat 785There.

Now I need to do thisFor Loaders!