How to Determine the Correct Equipment Payback

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Determining and evaluating a return on investment for different equipment is vital to running a successful business. As management expert Peter Drucker said, “What gets measured gets managed.” If you are spending money on equipment for your truck but have no way of determining the correct return on investment, you could be making a poor financial investment. Or you might be getting a fantastic return. The fact is that you might not know that you are calculating a return using the wrong or an incomplete set of variables.

 

One industry trend is the quick turnover of trucks. Fleets are now trading in trucks on shorter cycles – between 36-48 months – due to better features for driver comfort and technological advances with trucks and engines. With a quicker turnover, it’s critical to consider the useful life of both the investment and the truck. For example, if the ROI is calculated at 4 years, but the average truck refresh cycle is 3 years, the fleet will never get the return they need to justify the investment. This is just one example of how determining the correct return on investment can become challenging.

 

North American Council for Freight Efficiency (NACFE) put together a thorough list of the different variables that should be included as you put together a payback calculation for your idle reduction equipment. If you aren’t familiar with NACFE, it is a great organization that provides in-depth and quality research to help fleets run more efficiently.

 

The following is a copy of the NACFE’s report on Payback Calculations. You can read the full NACFE Confidence Report by clicking here.

 

Elements of a Thorough Payback Calculation

Throughout all of the surveys and other conversations conducted in the course of completing this Confidence Report the industry clearly expressed to the study team its desire for a holistic payback calculator that can compare multiple idle‐reduction solutions, including their interaction on the same vehicle. Quite simply, some technologies reduce certain causes or motivators of idling better than others, so the most fuel‐efficient truck will have a complimentary package of these idle‐reduction technologies installed. The task of creating such a payback calculator, however, is extremely complicated. Some idle‐reduction systems run when the vehicle is turned off but do consume some fuel (diesel APUs), some consume additional energy while the vehicle is driving down the road (battery HVACs and thermal storage systems), some operate sporadically as required (automatic engine start/stop systems), and some are completely passive (light colored‐paint, additional cab insulation, etc.). The challenge is also complicated by the law of diminishing marginal returns – some fleets have long been implementers of idle‐reduction components and policies that have allowed them to drive their idle time down into the 5 to 10% range, while other fleets are just getting started with these efforts, and are currently near 40% idle time – and it is far easier to show paybacks to the fleets with high idle times than fleets that have already found some success.

 

However, in an effort to meet the industry’s need for more information around the potentials of various idle‐reduction technologies, this Confidence Report attempts to document all of the different factors fleets should consider when putting together an optimal idle‐reduction technology package.

 

Benefits of idle‐reduction, both financial and others that are more intangible, consist of the following:

  • Fuel savings
  • Driver comfort (sleep quality, convenience, productivity, and safety), which can help control the costs associated with driver recruiting and/or retaining
  • Reduced emissions and increased environmental sustainability
  • Reduced truck and engine wear, especially to main engine accessories (fan, alternator, air compressor, belts, power steering pump, HVAC system, electrical components, etc.), due to reduction of mileage, as well as longer component life due to lower vibration
  • Decreased preventive maintenance costs due to longer periods between oil and filter changes
  • Improved truck resale values, given fewer hours on the engine and the value‐add of the idle-reduction systems installed
  • For newer (2007 and later) vehicles with active exhaust systems, the reduction in regeneration of the exhaust systems (DPF/SCR) means less fuel is burned and diesel particulate filters may need to be cleaned less often
  • Depending on the frequency and cost of the fleet’s jump starts, some idle‐reduction systems will reduce those jump starts, as both APUs and automatic start/stop systems can monitor and charge truck batteries, while off‐board AC power as well as battery chargers can avoid hotel load battery drains
  • Potentially the avoidance of fines from idling regulations and no‐idle areas
  • Reduced noise pollution both inside and outside the cab
  • Some idle‐reduction systems will reduce cold starts by providing heat to the engine or power block
  • Reduced time spent fueling due to less fuel being consumed

 

Costs of idle‐reduction systems consist of the following:

  • Purchase price of system(s)
  • Fuel used to operate the system (either while moving or stationary), per hour of operation, multiplied by the number of hours operating per year
  • Parts and labor costs to maintain the system(s), including oil and belt changes for diesel APUs, filter changes, battery changes for battery HVACs, etc.
  • Cost of downtime for maintenance if outside of normal PM schedule
  • Out‐of‐service time required to maintain the system(s), as well as to install systems when they are being retrofit onto existing vehicles

 

More specifically, along with the purchase price of the system, the initial costs of adoption by new vehicles will also include:

  • Installation labor costs (if not factory installed)
  • Cost of any additional items (service contracts, interest if financed)
  • Driver/technician training costs

 

A fleet’s analysis additionally needs to include an understanding of current idle percentages (both unavoidable and avoidable) and the associated costs incurred by those instances of idling, in order to correctly asses the amount of savings they should reasonably seek from the adoption of idle‐reduction technologies.

 

“Unavoidable idling,” aka normal work‐day idling, which most idle‐reduction technologies will not be able to ameliorate, includes:

  • Stuck in traffic
  • Waiting in line to pick up or drop off a load
  • Extreme cold (during which gelling of diesel fuel is a concern)
  • Extreme heat (during which the current idle‐reduction air conditioning systems cannot keep the cab comfortably cool)
  • Engine shut‐down/cool‐down period
  • Running power take‐off (PTO)
  • Engine/windshield warm‐up to operating temperature following cold start

 

The “avoidable idling” which is the target of idle‐reduction systems includes running the engine while:

  • Using truck stop facilities
  • Eating or doing paperwork inside the truck
  • Rest periods during the driving cycle
  • Overnight periods in the truck

 

Finally, the actual cost of idling will be dependent on the following factors:

  • Number of hours per week the truck idles
  • Number of weeks per year the truck operates
  • Average price of diesel fuel
  • Fuel consumption rate at the idle RPM
  • Additional engine/exhaust system maintenance costs due to idling

 

Again, the information in this post is from NACFE’s report on Payback Calculations. You can read the full NACFE Confidence Report by clicking here.

About This Author

Ryan is Vice President of Product Development and Marketing at Idle Smart. He holds a BS and MBA from Saint Louis University where he played baseball and was named Academic All-American by ESPN. He currently resides in Kansas City and is a big Kansas City Royals and Chiefs fan.

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