Total Cost of Ownership Best Factors to Compare Before Buying

Total Cost of Ownership Best Factors to Compare Before Buying

By James

August 9, 2022

Factors of the Total Cost of Ownership you need to consider to make the best decision for your company.

Your company is considering the purchase of a conveyor system, and you’ve been charged to identify the proper material handling system. Research and selection can be daunting, even for some seasoned professionals. However, armed with the knowledge we’ll share, you can be the hero and select the best material handling system for your company.

First, conveyor systems can be highly beneficial to a company when the correct system is chosen. Conveyors can be configured in many ways and offer many features, including custom sizes, belts, rollers, low voltage, high voltage, motor driven, manual, automation, etc.
One major factor that must be considered, if not the most important, is the Total Cost of Ownership, or TCO. This is calculated by dividing the Initial Cost + Operational Cost + Maintenance Cost by the equipment’s Useful Life.

Total Cost of ownership

In the above example, the system’s cost is $45,000. Also included is the cost to operate the system, $1,250, and the cost of maintenance, $3,000. TCO is then known by dividing the sum of these costs by the number of years the system is expected to be productive until obsolete, $49,250. One can then drill down farther to an annum level and realize a defined annual cost to own the conveyor system.

Total Cost of Ownership is comprised of several factors: Initial Investment, Yearly Maintenance, and Operational Costs.

Decision Making and Support

Total cost of ownership

The decision-making process on a conveyor system purchase is not yours to assume alone. Gather a team of trusted and knowledgeable individuals authorized to speak and act for various departments to assist you in the process.

A team approach increases buy-in and ownership of the conveyor system’s success. Members will also assist in earning approvals from upper management and garner support from employees who operate the conveyor system.

One must consider expenses beyond the purchase price to clearly understand the system’s benefit.

Because you read our blog post about Preventative Conveyor Maintenance, you are now ready and able to extend the useful life of your conveyor system, which in turn ensures your material handling system will remain productive much longer and extend the lifespan until obsolescence.

Drilling Deeper into TCO

total cost of ownership drilling deeper

Total Cost of Ownership is comprised of several factors. Companies may need to consider all or more of the factors listed below.
• Initial equipment cost: including mechanical and electrical installation

• Maintenance costs: including spare parts, support, labor, and training

• Operational costs: including energy consumption and utility costs of the conveyor system and supporting equipment and training of employees to operate and maintain your investment.

The right system should increase your throughput and be scalable as your company grows. Discovering you’ve outgrown the system and must reinvest can dramatically deplete your company’s capital, time, and trust.

A well-thought-out strategy comprises a conveyor system that will grow with you. Ultimately, a new conveyor should align with the company’s material handling needs, planned growth, and output. Businesses evolve over time, and any likely need to expand the system should be considered and incorporated in the planning and purchase decision. Failure to include this can dramatically increase TCO and negate any cost savings initially realized.

Consider Logistics and Efficiencies to Maximize your Experience

total cost of ownership maximize experience

Now that it’s clear why companies must look beyond the initial upfront cost of purchase and installation to the overall lifespan of the conveyor system, you and your team should also include the following in research, discussion, and the decision-making process.

  • Lead time, difficulty to assemble and cost of installation
  • Will the manufacturer assemble prior to delivery or at your location?
    • Some assemblies are completed to various levels and may even be shipped as units.
    • Units will reduce cost of installation
    • If possible, request the conveyor manufacturer deliver in order of installation to reduce time and get the system online as quickly as possible.

By taking all the above into account, the process will be streamlined, uncover hidden issues from order to delivery to installation and ultimately bringing the new system online, and reduce your TCO.

More Ways to Save

total cost of ownership ways to save

Companies should consider the type and amount of energy needed to operate the conveyor system in their TCO calculations. Considering how the system will be powered, workload, and materials being handled is essential in avoiding unnecessary costs and improving TCO.

Different types of conveyors provide different results on TCO. Low voltage conveyors save money and time to install, allowing a company to get online quickly. They also avoid additional costs with compressed air systems.

Companies needing to accumulate or stage goods will be served well by utilizing intelligent, controlled low voltage conveyors. These systems save energy by engaging segments of the system to move products. The remaining segments remain idle and mitigate energy usage.

There are many other ways to reduce energy consumption and a company’s carbon footprint. They include high-efficiency motors, specified gearing, other drive components, and variable speed controls, which can help reduce wear and maintenance to extend the system’s lifespan and lower TCO.

While these features can be an additional upfront cost, they typically result in a small initial expense when calculated in the Total Cost of Ownership.

Understanding Total Cost of Ownership will allow you to select the right conveyor system and optimize overall expense. As material handling systems and conveyors continue to serve a vital role in a company’s success and growth, selection and knowledge of Total Cost of Ownership will be equally as important. Contact a Russell Conveyor & Equipment professional to help you understand these costs and assist you from design to installation and beyond.

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About Russell Conveyor & Equipment

Russell Conveyor and Equipment has been in business for over 20 years. We specialize in conveyor systems and material handling solutions. Russell is a family-owned business, and we take pride in our customer service and quality products.

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