Costs on the Horizon

Rod Sutton, Editor in Chief | September 28, 2010

Rod Sutton, Editor in Chief
Rod Sutton, Editor in Chief

When would a $2 wrench be worth $5? When it's a Craftsman, which carries a lifetime replacement guarantee. If it breaks, Sears replaces it. Unfortunately, Sears doesn't manufacture Craftsman construction equipment.

The general concept applies, though, as equipment managers must evaluate a machine by more than its sticker price. The cheapest machine won't always provide the best performance over time. Government agencies wrestle with this more than private firms due to low-bid laws, but even these managers can successfully employ lifecycle costing as they write their bid specifications.

We've used this space before to encourage lifecycle cost management. It's the right way to ensure maximum return on equipment-asset investment. Of course, the key to lifecycle management is good data, not only industry data such as Construction Equipment has published over the past few years, but also historical data on an organization's specific machines.

Over the next 18 months, new cost data will be integrated into an equipment manager's calculations, and it will require reevaluation of lifecycle costs. Those costs are connected to the next major step in the diesel-emissions reduction saga, effective Jan. 1, 2007.

In order to reach the next level of reduction, engine makers have added aftertreatment devices. These devices will add cost to the engine, the machine it powers, and the maintenance of both. Nobody is sure exactly how much cost will be passed along to end-users, but prices will increase. Plus, fuel formulations are changing. In addition to ultra-low-sulfur diesel fuel, bio-diesel is becoming a viable option for some managers. In both cases, managers will need to look at the costs associated with fuel handling and storage.

Equipment managers need to be aware and ready for these changes. To that end, we're putting together a special report, "Recipes for Reduction," which will be included with our November issue. We'll look at 2007 engine designs, including the various aftertreatment solutions, and we're talking with both truck and heavy-equipment manufacturers to provide equipment managers a preview at what engineers are doing to house the new engines.

Unless Sears enters the engine business, managers must still keep an eye on costs, so be prepared for the next generation of diesels.