| September 2023 |.
Principal operating expenses for equipment management
In the modern business world, machine fleets play a crucial role in increasing efficiency, productivity and competitiveness within various industries. However, managing a machine fleet involves much more than just purchasing equipment. To achieve sustainable results, an understanding of various operating costs and a thoughtful approach to cost management is essential. But what are the main types of operating costs in machinery management, and how can smart strategies strengthen an organization's profitability?
Seven main types of equipment operating costs
Effective management of a machine fleet requires attention to seven main categories of operating costs:
- Repair and maintenance costs
- Fuel costs
- Tire costs
- Cost of filters, lubricants and greases
- Wages of the machine operator
- Cost of high wear replacement parts
- Mobilization, demobilization and assembly costs.
1. Repair and maintenance costs
These costs include all expenses necessary to maintain and repair equipment subject to wear and tear from daily use. Repair and maintenance costs make up a significant percentage of total operating costs. Consider costs for parts, labor and facilities specific to repair and maintenance.
As equipment ages, these costs also increase. However, with regular and proper maintenance, costs can be kept under control. Minor repairs are usually done on-site, while larger repairs are done at specialized facilities. These costs are often calculated as a percentage of the annual depreciation cost. Alternatively, historical data or factory guidelines can help estimate expected maintenance costs.
Tip: With All-Connects material management software, you always have insight into the status of your machines and equipment. Alerts for inspections and maintenance ensure that deadlines are never overlooked, even remotely.
2. Fuel costs
Fuel costs are another major expense. Machines with internal combustion engines use gasoline or diesel fuel, with consumption depending on operating conditions and rated flywheel power.
Fuel consumption can be estimated more accurately based on historical data from similar machines. In the absence of this data, the factory fuel consumption statement can be used.
Practical insight: In the All-Connects management application, you get a complete overview of your fleet's fuel consumption. By analyzing and comparing consumption patterns, you can make adjustments to optimize fuel consumption.
3. Tire costs
Tire costs include both repair and replacement costs. Pneumatic tires, which wear out faster than the equipment itself, fall within this category. Tire repair and replacement costs can be determined based on previous data from similar conditions.
Efficient driving behavior: The driving behavior analysis module in the All-Connects management software tracks driver behavior. Alerts can be set for behaviors that increase wear, such as abrupt braking or hard acceleration.
4. Equipment operator pay
Operator pay and fringe benefits are also operating costs involved in machine management. Operator wages vary from project to project and are often calculated as a separate cost category. Ultimately, these costs are added to the operating costs of the equipment.
5. Cost of replacing wearing parts.
Some equipment parts have a shorter lifespan compared to the equipment lifespan. These are therefore categorized as high wear items, such as cutting edges, drills, bucket teeth, knives, etc.(*). The normal expected lifespan of these items can be estimated from historical data or from manufacturing guidelines.
* Knowing the lifespan of these components, and having a clear view of their lifespan, is important for a fleet manager.
Thanks to the All-Connects management application, this is child's play, and the person responsible can draw up a clear proactive maintenance schedule to ensure that his colleagues on the various job sites can work optimally.
6. Mobilization, demobilization and assembly costs
These costs relate to transportation and installation of equipment at the project site. They include:
- Transportation costs between locations
- Unloading and assembly
- Traffic permits
- Cost of lubricating oil, greases and filters
Lubricant and filter consumption varies depending on operating conditions and engine characteristics.
Knowledge is power when managing business expenses
Managing a fleet of equipment efficiently can result in significant cost savings. A smart fleet manager uses technology such as All-Connects to always have access to up-to-date data on all equipment in the field. 24/7 visibility into asset status ensures timely maintenance interventions and optimizes the use of available assets.
Want to know more about cost optimization?
Are you interested in how our software can reduce your costs? Contact us for free advice via phone +32 289 55 35 or the form below. Our expert will gladly visit you to discuss the possibilities and make a customized proposal.
Also read our other blogs on asset management and cost management:
- Tool management: what is it?
- Smart deployment of IoT sensors for machine management
- Asset tracking with SMART QR codes
- The benefits of CHECK.connects for asset management
