optimal replacement cycles for highway operations equipment...

Optimal Replacement Cycles for Highway Operations Equipment

Wednesday, August 15, 20181:00-2:30 PM ET

TRANSPORTATION RESEARCH BOARD

The Transportation Research Board has met the standards and

requirements of the Registered Continuing Education Providers Program.

Credit earned on completion of this program will be reported to RCEP. A

certificate of completion will be issued to participants that have registered

and attended the entire session. As such, it does not include content that

may be deemed or construed to be an approval or endorsement by RCEP.

Purpose Discuss research from the National Cooperative Highway Research Program (NCHRP)’s Research Report 879: Optimal Replacement Cycles of Highway Operations Equipment.

Learning ObjectivesAt the end of this webinar, you will be able to:• Describe the importance of and economic benefits of optimal

equipment replacement cycles• Understand replacement factors and how they are applied in a highway

operations environment• Understand how to implement a systematic replacement program,

prioritize equipment replacements, and make effective fleet replacement decisions

• Understand how to use the Excel-based analysis tool to perform life-cycle cost analysis in support of the replacement process

http://www.trb.org/nchrp/nchrp.aspx

http://www.trb.org/Main/Blurbs/177263.aspx

NCHRP Research Report 879: Optimal Replacement Cycles of Highway Operations Equipment

NCHRP Project 13-04

NCHRP is a State-Driven Program

– Suggest research of national interest

– Serve on oversight panels that guide the research.

• Administered by TRB in cooperation with the Federal Highway Administration.

• Sponsored by individual state DOTs who

Practical, ready-to-use results• Applied research aimed at

state DOT practitioners• Often become AASHTO

standards, specifications, guides, syntheses

• Can be applied in planning, design, construction, operations, maintenance, safety, environment

Today’s Speakers

• Jeff Holabaugh, Dye Management Group

• Moderated by Bill Dye, Dye Management Group

NCHRP Research Report 879

NCHRP Project 13-04

WebinarAugust 15, 2018

1:00pm to 2:30pm Eastern

Guide for Optimal Replacement of HighwayOperations Equipment

Outline

• Project Purpose and Importance of Effective Fleet Replacement

• Project Outputs• Life Cycle Cost Analysis• Replacement Decision Process• Replacement Factors• Excel-Based Tool Demonstration• Future Work

2NCHRP Project 13-04 Webinar

Project Purpose


Develop rational replacement processes based on optimal life cycles

Develop processes and tools to assist the replacement planning process

Assist equipment managers and administrators with the task of equipment replacement

Benefits of Effective Fleet Replacement

• Equipment is an asset vital to agency’s mission– Necessary to develop and implement a systematic

approach to support effective fleet replacement decisions

• Equipment replacement merits the attention of dedicated resources within the fleet management organization

• Optimal fleet replacement results in reduced costs of equipment ownership and operation


Benefits of Effective Fleet Replacement

Other benefits include:


Better equipment

leads to

Operational efficiencies

Cost savings

SafetyEmployee

morale

Public perception and image

Project Outputs

6

Guide Excel-Based Tool

Tool User Manual

Final Project Report

NCHRP Project 13-04 Webinar

Replacement Guide

• Provides a primer on replacement concepts and approaches• Describes:

– replacement factors– life-cycle cost analysis– Decision-making process

• Helps managers:– Determine replacement needs and funding– Develop a business case for securing funding


Tool User Manual

• Companion document to the User Guide• Provides instructions for:

– Installing the optimization tool– Customizing the tool to meet your agency’s needs– Importing your agency’s equipment data– Using the tool’s six main functions to support

equipment replacement


Life Cycle Cost Analysis


Life-Cycle Cost Analysis

Replacement Factors


Maintenance and repair

costsAge

Utilization

Depreciation

Fuel cost

Downtime Obsolescence

Replacement cost

Age

• Fundamental factor in two ways:– Used to express optimal replacement cycles in

years– Used as a planning value to identify potential

replacement candidates

• Replacement of individual equipment units decisions should not be made based solely on age


Utilization

• Similar to age, can be used as a replacement planning target

• Is used to identify optimal replacement cycle• Is used to determine depreciation• Operating costs are expressed in $ per mile or

hour• Can vary significantly between equipment

classes and from year-to-year for individual units


Depreciation


Not an accounting depreciation

Based on actual salvage value of

unit

Average salvage values from DOT

data

Tool depreciation curves based on

utilization –not age

Typical Depreciation Curve

• Example depreciation schedule, ½-ton pickups


Depreciation Schedule

Miles 10,000 20,000 30,000 40,000 50,000 60,000 80,000

Accumulated

Depreciation15% 24% 32% 40% 47% 53% 59%

Ownership Cost Component (Depreciation) of LCCA Example


Equipment Type 1/2-ton pickupLTD Utilization 45,500 miles

Replacement Cost $25,000Accumulated Depreciation

= (Accum. Depr. %) * Replacement Value

43.5% * $25,000 = $10,875The LCCA ownership cost component is based on LTD cost per mileLTD cost per mile = $10,875/45,500 miles = $0.24/mile

Maintenance and Repair Costs


Preventive Maintenance

Scheduled and unscheduled

repairs

Accident repairs and body work

Rebuilds and overhauls

Fuel Costs


Fuel prices vary year-to-year

Tool uses average annual fuel cost per mile

Downtime

• Is a real and significant equipment cost• Most DOTs are not tracking and recording

downtime• Cost is manifested in higher highway

maintenance and operations or lower service due to equipment downtime

• Tool allows for hourly downtime cost• Based on existing equipment rental rates


Condition and Mission Criticality


Engine

Body

Electrical

Transmission

Steering/Suspension

Overhead

• Historically, mechanic hourly rates have not fully recognized overhead

• Overhead for warehouse, non-chargeable mechanic time -- mechanic training, shop clean-up

• True operating costs are understated without fully-loaded mechanic hourly rates

• Tool has feature to include overhead• Guide provides examples of how to calculate


Obsolescence

• Considers equipment efficiency and dependability

• Tool measures obsolescence based on fuel utilization

• 2 percent rate, applied to vehicle’s fuel cost to calculate obsolescence

• Also includes equipment productivity and efficiency. Difficult to quantify.


Replacement Cost

• Utilized in two ways:– To calculate depreciation in LCCA– To project long-range replacement budget needs

• Should include the original price + cost of outfitting the unit prior to deployment


Making Replacement Decisions is a Process


Organizational Considerations

• Equipment replacement merits the attention of dedicated resources within the fleet management organization


Excel-Based Tool

25

Determine optimal life cycles for each equipment

class

Perform LCCA on individual equipment

units

Identify candidate replacement needs based on age, utilization or cost

Prioritize equipment replacement units based on cost, condition, and

mission criticality

Develop a 5-year replacement needs

budget

Analyze the cost consequences of various

replacement cycles

NCHRP Project 13-04 Webinar

Class-Level LCCA

• Looks at all units in a specific equipment class• LTD cost per mile calculated for each of the

cost components• Total cost per mile is obtained by totaling

maintenance, fuel, downtime, operating costs• Tool develops a trend line to model the total

cost curve


Identify Replacement Candidates

• Tool identifies potential replacements that:– Are past their replacement targets (miles or

hours) – Have high costs (>25 percent) compared to the

class average

• Only candidates for replacement• Each unit should be evaluated individually


Perform Condition Assessments

• Provides insight on individual units


Prioritize Replacement Units

• Tool determines priority ranking based on unit’s LTD cost and condition score

• Priority report will only show units with condition scores have been entered

• Default weighting of 40/60 percent to cost and condition


Unit-Level LCCA

• Analyzes cost performance of individual equipment units

• Requires annual data by unit• Recommend considering other factors

(beyond cost) such as condition and mission criticality


Determine Replacement Program

• Tool informs decision-makers• Guidelines for final decision making:

– Priority ranking as a starting point– Utilize condition assessments to identify units in

the best condition– Unit-level LCCA to identify trends of individual

units– Consider cost, condition, and other objective

factors in final decision31NCHRP Project 13-04 Webinar

Develop 5-Year Plan and Budget

• Planning tool to communicate future budget needs to upper management and budget decision-makers

• Tool determines replacement needs by comparing each unit’s current age with the target replacement age

• 5-Year Plan shows which year a unit is projected for replacement and calculates the total budget for each year


Analyze Cost Consequences

• Optional step• Helps fleet managers develop a business case

for funding levels• Tool analyzes annual cost of various

replacement cycle scenarios• Compares impacts of “optimal” versus “other”

replacement cycles


Tool Demonstration


Future Work and Enhancements

• Build tool in more robust software• Develop data validation feature• Link Condition Assessment Form to the tool• Commit resources to equipment management• Develop training for fleet managers


601 108th Avenue NE Suite 1900 Bellevue, WA 98004-5500T: (425) 637-8010 F: (425) 637-8020 www.dyemanagement.com

DMG [email protected]

D Y E M A N A G E M E N T G R O U P , I N C .

Today’s Participants• Jeff Holabaugh, Dye Management Group,

[email protected]

• Bill Dye, Dye Management Group, [email protected]

mailto:[email protected]

mailto:[email protected]

Panelists Presentations

http://onlinepubs.trb.org/onlinepubs/webinars/180815.pdf

After the webinar, you will receive a follow-up email containing a link to the recording

http://onlinepubs.trb.org/onlinepubs/webinars/181108.pdf

Get Involved with TRB• Getting involved is free!• Join a Standing Committee (http://bit.ly/2jYRrF6)• Become a Friend of a Committee

(http://bit.ly/TRBcommittees)– Networking opportunities– May provide a path to become a Standing Committee

member• For more information: www.mytrb.org

– Create your account– Update your profile

http://bit.ly/2jYRrF6

http://bit.ly/TRBcommittees

http://www.mytrb.org/

Get involved with NCHRP

• Suggest NCHRP research topics • Volunteer to serve on NCHRP panels• Lead pilot projects and other

implementation efforts at your agency• For more information:



Receiving PDH credits

• Must register as an individual to receive credits (no group credits)

• Credits will be reported two to three business days after the webinar

• You will be able to retrieve your certificate from RCEP within one week of the webinar

optimal replacement cycles for highway operations equipment...

Documents