Application engineer Stefan Petterson is Volvo CE Sales Region EMEA’s resident expert on total cost of ownership (TCO). We pick his brains to find out how the company and its dealers are working with this topic to deliver outstanding profitability results for customers.
Why does Volvo CE focus so much on TCO?
At Volvo CE, we strive to put customer success at the heart of everything we do. And along with having safe and environmentally-conscious operations that meet production targets and deadlines, profitability is a crucial part of customer success. Our customers simply cannot continue to operate if their business is not profitable.
As a premium brand, Volvo does not have the cheapest purchase prices on the market. The level of innovation and quality in the design and manufacture of our machines is, by necessity, reflected in the ticket price. But we can offer our customers the best value for money on the market.
The money that Volvo machines save on fuel consumption and maintenance in the long run, along with being highly productive, delivers an impressively low total cost of ownership overall. That’s what sets us apart from our competitors and makes all the difference to our customers.
But TCO is not only down to the machines themselves, it’s also how they are used. That’s why we aim to work proactively with customers in a consultative way to lower their costs even further.
How does Volvo CE define TCO?
We calculate TCO as the cost of owning and operating a machine in dollars per hour divided by what it produces either in tons or cubic metres per hour.
Owning costs include the purchase price, residual value, depreciation, interest, insurance and tax. Operating costs include fuel consumption, wear parts, preventative maintenance and repairs.
What are the biggest contributors to TCO?
Fuel consumption, maintenance requirements and productivity are undoubtedly the biggest contributors to TCO today.
What are the main obstacles to achieving the best possible TCO?
The first main obstacle to achieving the best possible TCO is not having connected machines. Connecting machines to our CareTrack telematics system helps customers to monitor the main factors influencing the TCO of their fleet – fuel consumption, utilisation, machine health and operating behaviour – so that they can identify areas for improvement, set targets and take action.
Another key obstacle to achieving the best possible TCO is not having the correct number and capacity of machines onsite based on the target tonnes per hour or cost per tonnes. If there is a mismatch, machines will waste time and fuel idling or waiting for their partner machine or machines to be ready.
Finally, if customers don’t invest in training their operators, they don’t allow them to reach their full potential. Well-trained operators have a feeling for how much power they need, plan their work efficiently and take good care of their machines, leading to lower fuel consumption, lower maintenance and repair costs and greater productivity.
How can Volvo CE help customers to improve their TCO?
I have already mentioned the benefit of CareTrack in lowering TCO. If customers need further assistance in interpreting the data, our Insight Reports are a great help. Customers can see at a glance the actual payback they are getting from their machines.
Another important TCO tool is SiteSim, which calculates the optimum set-up for a customer’s site to minimise wasteful waiting or idling. The software programme can even recommend the ideal routes operators should drive.
When it comes to operating training, there are many different options but I personally am a fan of simulator training. Volvo simulators use the same software and data as Volvo CE’s Technology function for R&D purposes, which makes them as close to the real thing as possible. Operators can practice their skills with no risk to the machine or other people and we can even install simulators at a customer’s site to minimise time away from production.
How will these tools develop in the future?
We’ve already made some pretty exciting advances recently. I’m sure you’ve heard of Volvo Co-Pilot by now. Our latest update is the inclusion of an ‘Operator Coaching’ function, which encourages improvements in driving techniques by targeting known operator behaviours that have a significant effect on fuel efficiency. Through instant feedback, the effect of operating behaviour is shown in real time on a screen in the cab and the operator is able to recognise the criteria and understand the effects of their actions related to these criteria. This real-time information helps the operator to make better decisions in reducing fuel consumption and machine wear and tear.
And since last year, we’ve been using drone measurements and photos to create 3D models of customers’ sites within SiteSim. This helps us reach a new level of accuracy with our simulations. We can now also input these 3D models of customer sites into our machine simulators so that operators can practice and hone the exact tasks and routes they will take in real life. I believe simulations are going to become an even more important part of the way we work with customers.
