Total Cost of Ownership

Costs are always a moving target

Determining total cost of ownership (TCO) is one of the most complex parts of owning and managing a fleet of forklifts. With expertise from managing thousands of forklifts, material handling companies can use their industry knowledge and infrastructure to help accurately determine comprehensive TCO to benefit your company.

When managing a fleet of material handling equipment, it can be difficult to accurately track the ongoing expenses of each piece of equipment. Regardless of the make or model, a forklift’s total cost of ownership (TCO) can be influenced by a complex variety of factors, including standard fixed expenses, general operating expenses, incidental costs, lost opportunity cost during maintenance and downtime, as well as depreciation and resale value.

Some fixed costs — such as the purchase price and down payment at acquisition — can be easily measured, but other variables, like battery charging and maintenance, can be difficult to track. If the person responsible doesn’t have a material handling equipment background, it can be hard to determine which data points to monitor, or how to use that data to calculate true TCO.

Difficulty of Measuring Total Cost of Ownership

Material handling equipment companies have the tools and resources to look at the entire market and across all original equipment manufacturers (OEMs), including the data and the expertise to understand market trends. Examples of these trends include resale values; future maintenance and repair cost fluctuations, assumed run time; and upcoming manufacturer makes, models, and safety options.

It’s important to view TCO comprehensively. Many companies focus on acquisition and depreciation costs and may consider all other costs as secondary operational expenses. In reality, these “other” costs make up the majority of equipment expenses.

The Hidden TCO Factors

While TCO factors such as acquisition, depreciation, and battery costs can be tracked with accurate reporting, other hidden TCO factors should be considered in the calculations. These include unexpected setbacks, driver habits, and equipment optimization.

Unexpected Setbacks

Unexpected factors may not be apparent to all facility managers. These types of factors include the effects of accidents, recalls, and unscheduled forklift repairs. For example, after an accident, someone may need to make an adjustment to the resale value of the forklift. Here, the facility can use the expertise of a material handling equipment partner to make adjustments to TCO calculations that may impact the optimal time to cycle out a piece of equipment from your fleet.

Downtime is another soft-dollar cost that needs to be measured. A good, proactive maintenance program may help reduce unplanned downtime. It is impossible to eliminate unexpected maintenance and repairs entirely, but with a preventive maintenance program, knowing what to do when something happens will reduce the amount of downtime. Industry averages for actual time down, in combination with the fleet’s actual cost per hour or day of downtime (including the operator’s salary and loss of revenue), can assist in adjusting TCO calculations.

To help with this process, a material handling equipment partner can provide expertise to help facilities make decisions by looking at TCO holistically.

For example, Wiese’s dedicated account team provide our partners with the expertise to evaluate TCO information with a local, hands-on approach. A Wiese Account Manager works with customers to complete customized and comprehensive analysis and makes recommendations based on the results. Wiese provides clients with the data, while the decision is made by the customers to ensure these decisions align with the facility’s overall business objectives.