As fleet companies look for new and innovative ways to reduce the cost of their operations, there may be a fail-safe method to help managers and owners meet their budgets.
Using total cost of operations calculations, fleet companies have the ability to use data-driven metrics to reduce costs across the board.
The TCO method has been around the trucking industry for years, and it has long been a way to determine the costs linked to operating any vehicle or separate pieces of equipment.
The major costs when calculating TCO include:
- Fees and taxes
As time went on, the reliance on TCO measurements diminished. But the financial crisis that occurred during the Great Recession has brought back TCO as fleets and manufacturers continue to regain their grip on overall costs.
The main reason for the TCO resurgence: Finding a way to counter the costs for growing vehicle repairs and maintenance.
Vehicles are now required to have new emissions-compliant equipment that is more expensive to purchase and maintain. Still, the fuel economy savings that trucks receive could counter the upfront and recurring costs, which is why it’s beneficial for fleets to calculate the TCO of their vehicles.
Noel Perry, a senior consultant with FTR Transportation Intelligence, said in an article with FleetOwner.com that while great strides in fuel economy occurred over the past 20 years – since 1993, the TL sector’s fuel efficiency has jumped up 8.9 percent – overall trucking costs jumped 4 percent in the early 2000s and 8 percent in 2010-11.
These costs include higher equipment prices, rising driver pay, fuel costs and regulatory costs. At the center of it all, however, are repair and maintenance costs.
Accumulating enough data to understand a vehicle’s TCO can be challenging. Implementing a GPS tracking platform in daily operations makes it simple to collect valuable fleet data that aids in calculating TCO costs.