How Telematics and Technology Can Help You Calculate a Truer Total Cost of Ownership (TCO)

Construction business owners and equipment managers are increasingly interested in understanding the total cost of ownership (TCO) of their machines. It’s a more complicated equation than you may realize, but if you have access to the right tools — especially telematics data and software — the information is easily within reach.

Doing the Math

In its simplest terms, Volvo calculates total cost of ownership as the cost of owning and operating a machine in dollars per hour, divided by what it produces in tons per hour. There are several ways telematics and software can help with all three parts of this equation: owning costs, operating costs and productivity.

Owning costs include the purchase price, interest, insurance, tax, residual value and depreciation. The one cost we can help customers control most is depreciation. Imagine two of the exact same machines doing the same amount of work on the same jobsite — but Machine A runs with 50 percent idle time and Machine B is idling at 33 percent. Machine A runs about 2,000 hours each year, whereas Machine B runs about 1,500. While it may seem small at first, the difference quickly adds up. After five years, Machine A has accumulated 10,000 hours — with a true working time of 5,000 hours due to higher idling times. Machine B only has 7,500 total hours — with a true working time of also 5,000 hours.

The same work rate was achieved over the same period of time, but the difference of 2,500 lifetime hours can cut thousands from the resale value, depending on the machine size and type — all because of idle time.

Some manufacturers have technology that helps equipment owners — and in some cases, potential buyers — track data like this. For example, a MATRIS report (Machine Tracking Information System) from Volvo provides an in-depth look at operation data and operator behavior throughout the life of the machine. Also, Advanced telematics services like Volvo’s ActiveCare Direct can help owners and operators monitor idle times and set goals for improvement through concise, easy-to-read online dashboard reports.

Operating costs include fuel consumption, wear parts, preventive maintenance and repairs. Using a service like ActiveCare Direct can reduce unplanned maintenance and repair costs by catching problems before they occur and more quickly diagnosing and solving bigger issues. It can also help customers stay on top of scheduled maintenance with reminders and alerts.

Reducing operator misuse is another big advantage of the reports that typically come from telematics. Five of the most common mistakes that ActiveCare Direct helps catch are hot turbo shutdowns and high-speed shifts on wheel loaders, excessive service brake use and overuse of differential lock engagement on haulers, and misuse of excavator work modes. Identifying these and other errors, then training operators to avoid them, can save you significantly on operating costs, thereby reducing a machine’s TCO.

Maximizing production in tons per hour is what every owner and operator strives to do. A helpful tool in this arena is site simulation, which can help managers right-size their fleet for the job. When you know what routes, distances, gradients, fuel usage and hours are involved, you can choose which equipment fits that jobsite best. This will save machines from being used inappropriately, which decreases their value. Volvo Site Simulation can provide recommendations on alternative configurations and the cost impact of those changes, giving you the insight to develop stronger forecasts, budgets and bids.

Fuel efficiency factors in, too. As the first heavy equipment OEM to emphasize fuel consumption and savings — eventually leading to our fuel efficiency guarantee — Volvo has for years focused on gallons per hour and helping customers understand that in addition to these fuel savings, you’re also getting more done for every gallon you burn. Fuel efficiency is a reflection of efficient productivity, not simply a dollar savings — and that impacts your TCO over time.

Volvo also has a suite of Assist solutions that give operators instantaneous data and insights to help them improve productivity:

• Haul Assist is helpful in monitoring the productivity part of the TCO equation. Haul Assist shows productivity data on a hauler’s in-cab display, so the operator can watch production numbers and tons per gallon in real time, comparing against daily goals. Haul Assist also feeds into Volvo’s CareTrack Production telematics portal, so the fleet manager can watch trends in tons per gallon over time and set goals for improvement.
• Load Assist improves a wheel loader operator’s accuracy, thereby improving his productivity and efficiency to boost an operation’s overall efficiency. Load assist allows operators to work in 1% or 2% accuracy modes, use on-board weighing to improve site performance and profits, and even use the new operator coaching app to help to ensure Volvo machines are utilized to their fullest potential.
• Dig Assist Start — the basic package in our Dig Assist portfolio of apps — is a powerful tool for both new and experienced operators. You can set up some of the most common tasks to make digging, trenching and excavating much faster and easier using Dig Assist Start and 2D, or you can create more advanced digging profiles direct from the cab with In-Field Design.
• Compact Assist is our Intelligent Compaction system for soil and asphalt compactors. Intelligent Compaction offers real-time insight into the worksite using pass mapping, temperature mapping and density calculation mapping for asphalt compaction, and pass mapping and compaction mapping for soil compaction.

Solving for X

Many customers try to evaluate TCO in one way or another. Some use very few data points, and some have very structured programs using all available data. One major benefit to measuring TCO is visibility to machine performance. This gives you the ability to grab the low hanging fruit. As your crew progresses and you continuously measure TCO, you’ll be able to improve your machine purchase process. This can help you identify the best machine, warranty timeframe, maintenance procedures, operator training, machine disposal process and so on to get to a truer TCO number.

As you can see, telematics data and software support not only help you calculate TCO but can also help you control it. Measuring and adjusting things like fuel usage and utilization helps maximize efficiencies and decrease TCO, so don’t assume buying the latest machine means you can “set it and forget it.” Talk to your Volvo dealer about all the ways we can help you lower your machine’s TCO.