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Operating Cost of Equipment

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Operating Cost of Equipment
Hello everyone I welcome you all to this lecture 4 of this course construction methods and equipment management. So in this lecture we are going to estimate how to estimate the operating cost associated with the equipment.(Refer Slide Time: 00:42)So let us have a recap what we learnt in the amp previous lecture so in the previous lecture we have seen how to estimate the ownership cost using the time value method. So this is the outline of amp today’s presentation I will just introduce to you what are all the component of the operating cost of the equipment. So we will working some illustration on the estimation of the various components of the operating cost.Then we will also discuss how to estimate the total equipment cost using 2 different method one is Caterpillar method other one is the Peurifoy method which are the commonly adopted methods for equipment cost estimation.(Refer Slide Time: 01:18)So what are these operating cost? So basically these operating cost occurs only when the equipment is used. So unlike ownership cost when we discuss about the ownership cost I told you that the ownership is incurred irrespective of whether the equipment is operated or not. Even if your equipment is ideal we are going to bare the ownership cost okay but in your in the case of operating cost the operating cost occurs only when the equipment is used okay.This will be highly variable cost okay it depends upon the usage of the equipment but your ownership cost are generally relatively fixed annual cost okay every year. But this cost is highly variable it depends on the usage of a machine. First let us see what are all the components of the ownership cost? So basically you have this consumables okay they come under the operating cost. Your fuel, lubrication oil, filter, grease and all the other small components which are getting consumed during the equipment operation okay all these are called as consumables.So this forms the part of the operating cost then the wages what you pay for the operator that is part of the operating cost. Then your maintenance and repair cost so this maintenance and the repair cost can be either major or minor okay. Say major maintenance and repair cost means involves huge replacement of a particular part of the machine. It involves huge investment so those things the major repair will be major repair or usually consider are accounted under the ownership cost.So only the minor repair cost is consider into the operating cost say for example you have an excavator okay. So you are going to change the complete boom of the excavator okay so that will be major investment okay so that will come under ownership cost. See we are going to just replace some small parts of the machine say you are going to change the wiring or you are going to change some small parts like headlight okay.So in that case it will be the minor repair and it will be consider under the operating cost okay so we will be discussing all these components in depth in the upcoming slides okay. So one thing what you need to know is your operating cost will vary with the usage of the machine okay it vary with the number of operating hours of the machine. The more you use the machine the more will be the fuel consumption more will be the repair cost okay.So the operating cost will also be more it depends upon the usage similarly it also depends upon the job operating condition. A same equipment if it is put under 2 different types of operating condition one is put in a very severe or tough operating condition one is put in a average operating condition. In that both the cases you can see a significance difference in the operating cost okay. Say for example an excavator okay so one is working in a Quarry one is working in the Quarry okay.So it is used to excavate the short rock pieces so the other excavator it is use in the common construction site where it is handling the ordinary earth. So when you compare the difference between these 2 excavators you can see the one which is working in Quarry is in a severe condition or tough operating condition okay. We can also call it as unfavorable working condition okay.So in that condition the operating cost will be the fuel consumption will be more power consumption will be more okay. So it is repair cost wear and tear will be more so same machine when put into different operating conditions okay you can see the difference in the operating cost. So we can give n number of examples in this perspective say for example a pile driving equipment okay.We are going to discuss all these machines in detail in the upcoming lectures okay the pile driving equipment I am using for 2 different sites in one particular site you have a cohesivelyclay. In another particular site I have the ordinary earth obviously the one which is working in the cohesive clay will incur more operating cost it is wear and tear will be more power consumption will be more fuel consumption will be more and the repair cost will be more.So like this we can give n number of examples so basically the operating cost depends upon the job also. It depends upon for what job we are using the job equipment’s. Say for example this excavator the same example I am using it for excavating the earth I told you earlier also in the previous lecture that the excavator is commonly used for trenching and pipe laying okay because same equipment can do the complete entire process okay.So when we use the excavator for trenching when it is excavating it is power consumption will be more. Then later when I use it for only for pipe laying I will just change the attachment I change the ringing device and I handle the pipe with the help of the excavator that time you can see that the power consumption the fuel consumption will be less okay,. So the operating cost will vary depending upon the nature of the job.Similarly you can compare different examples say for example you can consider aggregate crusher okay. It is subjected to a very severe operating condition I can say okay it is subjected to more amount of wear and tear so it is nature of the job is very touch so the amount of operating cost invested in this machine will be more when compare to other sophisticated machine like a electric motor.You compare aggregate crusher with electric motor okay this is more sophisticated machine so the operating cost involve in this machine will be less. So it depends on the nature of the job so generally the equipment’s which are more subjected to more ability okay they are more subjected to wear and tear they are operating cost is more. The equipment which are more stationary okay which are subjected to less amount of mobility okay and which are not used continuously okay.In those cases you can say that the operating cost will be less so it is highly variable your operating cost is highly variable. Okay now so how to estimate these operating cost how to get information on all these operating cost that is very important. Because basically; you can get this information from the past experience records.If you have accounted all the information consolidated and accounting the information properly from your past experience records you can get the information. If you have worked with the similar equipment’s in similar side condition or operating condition so those fuel cost or the lubricating oil cost or the repair cost you can make use of for the equipment cost estimation. Otherwise we have to go for the manufacturer recommendation okay so most of the equipment manufacturers okay they supply equipment’s hand book okay.So in that particular handbook for every model they manufacture they give the information on the fuel cost estimation lubrication oil estimation for different operating conditions okay. Similarly what will be the repair cost what will be the tire life okay so all these information I can get it from the manufacture guidelines also. So there are different hand books available okay we can get this information from appropriate hand books.(Refer Slide Time: 08:32)So now let us discuss about the operating cost one by one in detail the first one which we are going to discuss is about the maintenance and the repair cost. So this contributes to significant proportion of the operating cost of the machine. So basically as your machine age increases okay as a machine ages obviously your repair cost will increased your repair and the maintenance cost is going to increase. Because the machine; has been subjected to more amount of wear and tear.So it is almost worn out you have to replace some components okay so cost of those replacement parts okay. So you have to replacement some components right the cost of the replacement parts. So for repair work you engage some labor okay so the labor involve for the repair work so all these will come under the maintenance and repair cost. Generally for a contractor who as a good equipment fleet so what he does is? He will have a maintenance facility okay in his site. He has a maintenance facility on his own okay.In this maintenance facility he will periodically maintain is equipment’s he will do periodical checkup of the machine, timely service okay he will do cleaning of the machine okay. So he will engage some labor there okay to do the maintenance operation okay. So to set up this facility also some cost is involved so all these things makes up the maintenance and the repair cost. So as we discussed just now we can see that the maintenance and the repair considerably vary with the type of the equipment and the nature of the job.The one which is subjected to severe working condition or tough working condition or unfavorable working condition so that will be incurring more amount of repair cost okay it will be more worn out than this sophisticated machines which are subjected average working conditions. So it will depend upon the type of equipment and the nature of the job. And your cost maintenance and repair cost will depend upon the care it receives okay so the preventive maintenance it is very important for any job okay.So basically if; you have your own maintenance facility and if you periodically maintain your equipment periodically do the checkup okay and do the timely service for the machines do daily cleaning of the machines. If you do if you take of the machine very well in this way you can extend the life of the machine okay your machine life will get extended and your operating cost will get reduced how the operating cost gets reduced?Because you can reduce the major breakdown of the machine so the major repair will get reduced that will significantly save your total cost. So that is why it is always preferable to go for the preventive maintenance we have to take care of the machines properly. So this we have discussed just now maintenance and repair tends to increase with age of the equipment we know the reason already.(Refer Slide Time: 11:30)So generally this is the maintenance and the repair cost if you look into literature there are different ways which is estimated okay. In some literature they express it as a percentage of theannual cost of the depreciation of the machine. So percentage of the annual cost of the depreciation of the machine in some cases you can see that the life time repair cost is estimated as a percentage of equipment initial cost.So there are different ways by which you can estimate it okay but when you estimate it as a percentage of equipment initial cost you are supposed to detect the tires cost that is very important. Because the; life of the tire is different from the life of the remaining part of the equipment. So it is depreciating rate is also very much different when compared to the reaming part of the machine.So the repair cost of the tires will be considered separately so we were considered along with the remaining part of the equipment. So that is why you take the life time repair cost of the machine excluding the tire it is estimated as a percentage of the equipment’s initial cost minus the tire cost. So you can see the values are available related to the life time repair cost. You can get the life time repair factor as a percentage of the initial cost of the machine without tires for different types of equipment’s for different operating conditions okay like favorable, average, unfavorable okay.So for different operating conditions and for different equipment type you can get these values from literature. So these values are taken from Gransberg you can find this similar kinds of information from different literature also. So you can make use of this information to estimate a repair cost. So one thing I wanted to tell you here is your lifetime repair factor that is repair factor depends upon the type of the equipment okay.There are different types of equipment just to show some sample values I have just represented only crane and the truck it is called as off-highway the truck okay. These trucks and all permitted on the public highway that is why it is called as off-highway truck it is used in the site construction project site or quarries okay wherever. So this you can see based upon your operating condition as soon as based upon the equipment type your repair factor is varying a lot. So basically when it compare crane and the truck you can see the repair factor is more for the truck when compared to crane.Obviously you know the reason because it is a highly mobile machine we use it continuously and it is mobility is also very high it is subjected to high mobility okay. So that is why which repair cost will be more when compared to crane which is now highly mobile okay. So we do not use its mobility to greater extent and also the crane use would not be continuously truck it will be used in intermittent way.The crane is used intermittently when compared to truck that is why you can see the repair factor is less but in the truck the repair factor is high. Similarly when you compare the unfavorable condition with favorable condition you can see that in unfavorable condition the repair amount is very high. Say a truck is operated in a rocky terrain so on a steep terrain poorly maintain all roads in that case obviously that is unfavorable condition.So you can see that obviously your repair factor will be more same truck when it is operated on a properly maintained all road on a graviant which is not very steep. In that case that is favorable condition you can see that the repair factor is less okay 70 to 75%. So you can see in the literature even the definition of the operating conditions will be given for different types of equipment. You can find those information in the equipment handbooks.(Refer Slide Time: 15:17)Now let us see how to estimate the hourly repair cost for a particular year say this formula if you remember this is somewhat similar to what we used for estimation of depreciation using some of the year’s digit methods something similar to that. So the hourly repair cost for a particular yearhow to calculate so say for example you are going to estimate it for the second year of the equipment operation.So then you have to put the year digit as 2 and the sum of the years we have to take what is the total n say the useful life of the machine is say 5. Then the sum of the years digit in the 1 + 2 + 3 + 4 + 5 so multiplied by the lifetime repair cost. So lifetime repair cost you know it depending upon the type of the equipment depending upon the operating condition it is expressed as the percentage.Say for example if it is 90% of initial cost minus tire cost okay initial cost minus your tire cost okay. So divided by the total operating hours of the machine in a year so operating hours of the machine in a year so this will give you may hourly repair cost for a particular year.(Refer Slide Time: 16:36)Now let us work out an example on how to estimate the repair cost okay estimate the hourly repair cost of a scraper for the second year of the operation. So the initial cost of the scraper is 82 lakhs I have to retain the same input data from the beginning okay you can see the tire cost is 6 lakhs and the useful life of the machine is 9 years. And the assumed average operating condition so operating condition is given to you and the scraper is working in a average operating condition and the annual usage of the machine in hours is operating hours of the machine in a year is 2400.Expected life of the tire for average working condition is 3000 hours so this information also you can also get it from the hand book. The manufacturer can provide the data so what will be the expected tire with for this working condition you can get it from the manufacturer deadline or you can go with the your past experience data. So in this problem it is given to you directly then the life time repair cost for this scraper machine is 90 to 95% of the initial cost of the machine without a tires for average working condition okay.So the factor is also given to be directly in this problem so we do not search for this factor in any equipment handbook. So the values are directly given in this problem if it is not given you have to look into the handbooks equipment handbooks or the manufacture guidelines.(Refer Slide Time: 18:02)Now let us estimate the life time repair cost okay it is nothing but it is given as 90 to 95% of the initial cost. So this value I am just checking it as the 90% okay 0.9 into initial cost minus tire cost 0.9 into 82 lakhs – 6 Lakhs it is comes around 68,40,00 that is a life time repair cost. Now I can calculate the hourly repair cost for the they have asked you to find it for the second year of the equipment operation.So the year digit the numerator we have to put as 2 then in the denominator sum of the years digits. So what is the total life of the machine n = 9 so how did you get this 45 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9. So sum of the digits in the life of the machine that will give you 45 now what isa life time repair cost? So you have estimated it already okay you can put the lifetime repair cost as 68,40,000 divided it by the hours operated in a year it is nothing but 2400 okay.If you multiply you can get the value as 126.67 okay per hour okay this is your hourly repair cost for the second year of operation of this machine. So this is how we estimate.(Refer Slide Time: 19:30)So now let us see how to estimate the tire cost so this tire cost is really a little bit uncertain and more difficult to estimate. Because there are so many factors affecting the tire cost in the tire repair. So it depends upon the life of a tire is highly variable it depends upon your project condition it is highly variable. It also depends upon operator skill okay so with a very good operator the tire will last for a longer time with a very poor operator the tire may lose at may be lesser okay.So it is really little bit difficult to estimate but anyway you can get this data from the past experience record which is similar equipment and similar operating condition or you can go for the information in the equipment handbook okay as given by the manufacturer. Basically tire cost represent a cost of the tire repair and the tire replacement okay. The life of the tire is very much different and let us lesser compare to the life of the remaining part of the machine.And the depreciation rate of a tire will requires different from the rest of the vehicle obviously your tire will depreciate at the faster rate when compare to the other part of the vehicle that iswhy we are calculating the tire cost separately. If you do not have much information on the tire repair cost you can just add 15% to the tire replacement cost to determine the tire repair cost okay.‘Just add 15% to the tire replacement cost to find the tire repair cost okay as I told you get there is information about the tire life, tire cost and the tire repair all these information you can get it from your own past data okay or from the manufacture guidelines okay. Now let us see how to estimate the tire repair and replacement cost for the previous problem. So I am just assuming that repair cost will add to 15% to the tire replacement cost. So I multiply 1.15 with the tire cost so the cost of setup tires is known to you it is 6 lakhs divided by the life of the tire 3000 hours okay.So it will depend upon the operating condition okay so it depends upon the so many factors as I told you even it depends upon the operator so you can get the information from the equipment handbook of in a past experience. So for this problem the 3000 hours is directly given in the problem so we can estimate it we can find the value as rupees 230 per hour it is your tire repair and replacement cost.(Refer Slide Time: 22:12)So now let us see how to estimate the consumable cost so consumables also forms a part of the operating cost as we know your fuel, the lubricating oil, grease, filter all the other small parts whatever small components what we used which are consumed during the operation of the machine they are called as consumables. So until the first we are going to discuss about the fuelcost. So the amount of the fuel consumption it depends upon the engine type so all the construction equipment’s are basically IC engines okay internal combustion based engines which may be either diesel operator or gasoline operator.So the fuel consumption it is going to depend upon the horse power of the machine it is very important it depends upon the type of an engine okay and the horse power of a machine. So the amount of fuel (()) (23:07) to power a piece of the equipment for a specific task depends upon the horse power of the machine. So greater the horsepower of the machine a fuel consumption will be more so this is one important thing we have to note it. So depending upon the horse power of the particular engine or the particular machine your fuel consumption will be varying.And another important thing is your time factor or a working efficiency that is also going to effect an fuel consumption. So basically you know that in 1 hour so the entire 60 minutes the machine is not going to work on an average maybe the machine will be working from either for 45 minutes or 30 minutes. So depending upon the job productivity needed at your project site so your machine work for the entire 1 hour so that is what is called as the working efficiency.So how do you find the working efficiency say for example if a machine is working for 45 minutes in an hour your working efficiency is 45 by 60 so that gives you a time factor. The actual time the unit will operate in a hour or a day that is called as a time factor. The next important factors which are going to consider is a load factor. So one thing we have to know that your machine may not be working at full power always.So whenever it is working in a very touch condition or whenever it is doing at a touch nature of job that only the power consumption will be maximum. So remaining part of the production cycle you can see that the power consumption may be average or it may be more than the average but it may not be the maximum so that thing we have to notice. Say for example a scraper okay scraper is a earth moving machine okay.So we will be discussing the scraper as the upcoming lectures so this scraper is used for the earth moving operation okay. So basically it can cut the earth okay excavate the earth and then made it into the board. During the cutting operation the power consumption will be maximum okay itwill be working at full power. But when the bowl is full when it is just carrying the bowl or howling the material it will be working at an average power only.So for how much part of the production cycle or how much time so it is operating at full power and how much time it is operating at average power that we need to know because accordingly your fuel consumption will vary. Similarly for different types of machine we can consider that is the importance of load factor because that is going to influence your fuel consumption. So based upon this time factor and load factor you can calculate your operating factor. So your operating factor is nothing but your time factor multiplied by a load factor.(Refer Slide Time: 25:43)Now regarding the fuel consumption okay as I told you can get the information about the fuel consumption for a particular machine particular type of the equipment and there are, particular operating condition okay. So you can classify the operating condition accordingly so in different literature you can see different types of specification. So just now we saw the textbook by the Gransberg et al it was classified as unfavorable operating condition, average operating condition and favorable operating condition.So you can classify this way so another different equipment handbooks if you go through the definition of the operating conditions terminology may be different. Say for example if you refer the Caterpillar handbook which is published by the Caterpillar equipment manufacturing company okay it is a very popular company okay so they have published a Caterpillar handbook.So the link of the handbook is given in the references you can download the handbook and you can go through what are all the different factors and how they estimate the cost?Okay it will be very useful to you so basically you can see that the Caterpillar handbook they are classified different load conditions. So load conditions they have classified into high load conditions, medium load conditions and low load conditions you can see that. Say for example take an example of excavator okay in the Caterpillar handbook you can see that for every model they have manufacture.For an every model of machine they have manufactured for that particular model you can see the fuel consumption estimation for different load conditions okay. If you look into the excavator a particular model number you can see for high load conditions what is the fuel consumption you can get the value directly there are tables. And for medium load condition what is fuel consumption value you can get it directly similarly for the low load condition.And the definition of the load conditions also given accordingly say high load conditions means your excavator working in the rocky terrain so it is a tough condition. Also the expected job productivity is 90 to 95% schedule. So they are going as per the expected the productivity schedule of 90 to 95% so that means the usage machine is for a more amount of time. Similarly low condition means your excavator working in a sandy terrain so which is not very touch okay for the excavator.And similarly the productivity you can see it is less than 50% of the expected schedule it is less than 50% of expected schedule that means a machine is not working for a longer duration. So this (()) (29:30 low condition so the definition of the conditions also define and for different operating conditions for a different model what is the fuel consumption value directly you can take it from the tables.So let this different equipment manufacturers have published own hand books and in that handbooks you can directly get the fuel consumption value for that particular equipment model okay. So So that will give you 0.375 now you find the total cycle okay so while filling the bowl it is 0.25 during rest of the cycle just for howling the material it is using 0.375. So the total cycle amounts to 0.625 now the time factor it is working for 45 minutes in 1 hour. So it is working efficiency is 0.75 now the operating factor is nothing but your time factor multiplied by load factor. So with this we have come to the end of the lecture 4 so these are the reference which I have to use for this lecture 4. So basically I would like you to download this Caterpillar performance handbook even the link is given. So as I mentioned earlier lot of information on the fuel consumption your filter, oil, grease consumption for different models of machine and the repair factors okay the tire life okay.So all this values you can get the much clear information by going to this handbook and also there are lot of illustrations worked out which will give you more information to learn this the subject. So there are also other handbooks not only caterpillar performance handbook there are other handbooks supplied by different manufacturers. So you are free to download it and go through that and this is another handbook which is published by U.S army Corps of Engineers. This also provides a lot of information on how to estimate the equipment cost okay thank you.