Everything You Need to Know About Total Cost of Ownership
Material handling systems and specifically conveyor systems come in many configurations and in varying levels of sizes, degrees of detail, and automation. These systems are very beneficial to most businesses’ overall output, whether it be a manufacturing facility, distribution facility, parcel handling facility, or an order fulfillment center. Businesses often reduce labor costs and lost or damaged products while increasing output and improving order quality and accuracy.
So, what’s the holdup? Typically, we find it in the significant capital expense required for such an investment. That’s why we prefer to look at the Total Cost of Ownership (TCO). The TCO goes beyond the purchase price of the asset and adds in the operating costs over the asset’s lifespan.
In looking at the TCO calculation, all the costs must be divided by the useful life. The useful life is how long the system will be productive before reaching obsolescence. The longer the useful life, the lower the TCO.
We often take the TCO into consideration when we’re looking at even smaller purchases; for instance, we know that the expense of buying a car doesn’t stop at the purchase, and includes repairs, fuel, and maintenance for the life of the car.
The selection of a conveyor system is significant and typically should involve a team of individuals with knowledge ranging across multiple business sectors.
Components of the Total Cost of Ownership
Components that make up the total cost of ownership of a conveyor system include:
- Initial equipment cost
- Mechanical installation
- Electrical installation
- Controls umm
- Maintenance costs
- Spare Parts
- Support costs
- Labor requirements
- Operational costs
- Energy consumption of the equipment/utility costs
- Energy consumption for any equipment supporting the
Other factors to be included in TCO considerations are expected mechanical design life and expected design life based on obsolescence due to the business outgrowing the system’s usefulness. In short, can the design of the equipment scale with your business as it grows? If not, you may be looking at buying an entirely new system down the line.
From looking at the above list of items that make up the TCO of a material handling system, it is easy to see why individuals should look beyond the initial equipment cost. The mechanical installation cost, difficulty, and time can vary significantly based on what conveyor brand and type are selected. In addition, some conveyor manufacturers assemble the equipment in the facility to different levels of completion. The more fully assembled the conveyor is at the facility will lower the cost of installation. Also, if the conveyors are shipped as complete units rather than by components, the installation cost will be lower. Also, if shipments are sequenced by order of installation plan, this will quicken the time for equipment to become beneficial.
You can improve expense, difficulty, and time for installation simply by selecting between various types of conveyors. One example is selecting a low voltage conveyor, which can save installation money. With a 24-volt conveyor, there are no belts to install, tension, and track. Also, installing is plug-and-play without the precision required with some belt-driven live roller conveyors. This reduces start-up system troubleshooting and expense. Installation time is shortened in many cases using low-voltage conveyors and eliminates the costs associated with compressed air systems.
When traditional belt-driven conveyors are selected, energy can be saved by conveying on rollers rather than slider beds. This can significantly reduce friction which lowers horsepower requirements and energy costs needed for moving the load.
The use of intelligently controlled low voltage conveyors, particularly for accumulation and staging of products, can significantly reduce energy consumption. This allows only the sections of conveyors moving a load to be consuming energy, while the rest of the conveyor is allowed to “sleep,” consuming little energy.
Other intelligent choices to reduce the energy consumed during the conveyor life equipment are using high efficient motors, gearing, and other drive components. Selecting controls that can operate the system at selectable speeds or throughput levels based on requirement levels can also save money in utilities and maintenance while extending the equipment’s useful life. For instance, if a facility has a peak season or peak week during a month that requires twice the output, the system can run at half the speed or throughput during off-peak times. Therefore, saving energy, wear, maintenance, and even noise. The extra up-front controls cost may be minimal compared to the overall savings resulting from this small initial expense.
A very important piece of material handling systems is the conveyor portion. Part of any conveyor selection is understanding the TCO and becoming familiar, and educating oneself with each cost component. A slight difference in the initial cost can often result in lengthening the equipment’s lifespan. The equipment supplier and a Hytrol Integration Partner can help assist you in understanding these costs.