2. Step 5 Truck Fleet Costs ©Dr. B. C. Paul 2000 Revised 2008 Note – 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

3. Truck Production Costs l Divided into Ownership and Operating Costs l Ownership includes Annualized Investment Costs Taxes and Insurance Tax advantages l Operating Costs are Incurred as Vehicle performs service

4. Operating Costs l Fuel l Tires l Lubricants l Repair l Operators

5. Setting Costs In FPC Use the Hourly Cost Button On Fleet Input Tab

6. Sub Menu Divides Owning and Operating Cost

7. Using Menu Requires a lot of side calculations Latest Editions of Cat Handbook Has removed cost estimating Sections. Have to revert to Earlier issues (which we have Online) Lets Go for Fuel First

8. Getting Fuel Consumption Rates Info from 29 th Ed Cat Handbook Our Conditions are Medium Our truck is A 785 We get About 25 gallons/hr We assumed $3.8/gal. 25*$3.8= $95/hr

9. Input Our Fuel Cost Lets go for the Lube Filter, Oil and Grease

10. Lube Oil Grease Filter One alternative is an List of tables – Quick Estimator Table is faster This one is from Cat Handbook 25 th Edition (More recent Editions Missing) For a Cat 785 we get $1.89 for parts $0.61 for labor Updating lube costs over double $3.5 Assumed try $4 Labor up about 20% try $0.73

11. Enter the Lube/Filter/Grease Cat tends to be a little Low Terex rule of thumb was High and 10% of fuel Undercarriage is a dozer Or tracked machine Thing – 0 here Repair Reserve Next

12. Vehicle Life Impacts Repair Costs Cat 785 will last 40,000 to 60,000 hours Under Average Conditions About 50,000 Table from Cat Handbook 29 th Edition (online)

13. Repair Reserve Tables Repair costs jump Beyond 40,000 Hours With life in the 50,000 hour range We anticipate 1.5 times listed cost $13*1.5 = $19.50

14. A Defect of FPC l Poor Handling of the Time Value of Money Operating costs going up dramatically Last 20,000 hours bring an average over 60,000 up to 1.5 times base rate l FPC averages costs over time with no regard to where they occur in cash flow.

15. Inserting More Info Lets go after the tires Next.

16. Need to Get Tire Life Where most tires wear out But some cut is zone B An average is 3,000 hours If retread cost is about 1.5 Times normal tire and Life is about 1.75 Cat Handbook does not Give a cost.

17. Western Mine Cost Service Has Books of Costs Including Tires in the Supply section This resource is Available online for Students or by Subscription fee for Commercial users.

18. Find Our 150 Ton Cat 785 Lists about $16,000 (Book notes these are Manufactures list and 15-25% Discount is common – tires However, have almost Doubled in price) I’m trying $30,000

19. A Calculation of Tire Cost l 6 tires * $30,000 each is $180,000 l Because of heating considerations I’m not retreading $180,000 / 3,000 hours = 60/hour

20. Adding into FPC Now Lets Go for Operator

21. Western Mine Cost Service Has Labor Surveys Production Truck Drivers getting About $15.6

22. Another Source Is the US Bureau of Labor Statistics Note that I can pull Pay and Benefit by Area and Occupation

23. Industries Are Listed By NAICS Code Numbers

24. Find the Best Match Looks like mine Machine operators In quarries average $15.9 /hr

25. Comment on Estimating l In addition to books, manuals and internet sources l Remember the Buddy Network l Excerpts from Trade Journals l Your Companies Own Historical Cost Records l Local Union Contracts or State Wage Scales l Vendor Quotes

26. Cooking Our Estimate l We have $15.6 from Western Mine Cost and $15.9 from BLS I’ll try $15.75 l 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 l 1.4 * $15.75 = $22.05

27. Input and Switch to Ownership Hmm – Looks like It costs about $179/hr to run.

28. One of My First Issues in How Long it Will Last

29. Input My Knowns I already scheduled 1800 hrs per year With 85% availability In my example I also know the truck should last about 50,000 hours At 1,530 hours per year that about 32 years

30. Getting My Truck Cost Looks like I’ll be About $1,600,000 For my Cat 785 Using Western Mine Cost Service

31. Price and Tires Most Prices are Quoted at the Factory – Your have freight And assembly (I added a little Extra as you saw) Tires are a wear item so often They are deducted from the price To avoid double counting

32. The Issue of Taxes and Insurance Rule of thumb is that Tax and Insurance Are about 5% (2.5% each) of Average 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

33. Griping About FPC l FPC does not handle time value of money l 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

34. The Interest Problem l 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.

35. From Engineering Economics Get the Interest Rate Comparison Spreadsheet Put in that I borrow Money at 9% over 10 years to pay for The Truck

36. The Spreadsheet Gives a Yearly History of Interest Payments Use Excels Copy function And copy the interest Column and paste it into Class Assistant (Another Engineering Economics Spreadsheet)

37. Paste My Interest Cash Flow Into the Cash Flow Analyzer in Class Assistant

38. Get the Total Life Cycle Cost of the Interest A typical mine looks For 15% rate of return The truck goes into Almost immediate Service – time zero Lasts for 32 years An equivalent stream Of interest over 32 Years is $79,378

39. Plug it Into FPC I could have done The total life Cycle cost trick to The Insurance And Property Tax Too At this point I know it costs me $107.85/hr to own the truck

40. When I Click Ok on the Subscreen I Know Have Total Hourly Cost for My Truck See! There it is!

41. That Was For My Fleet 2 Since I have Fleet 1 And Fleet 3 I can switch to those Fleets and just type In my known hourly Cost for a Cat 785 There. Now I need to do this For Loaders!