National Academies Press: OpenBook

Optimal Replacement Cycles of Highway Operations Equipment (2018)

Chapter: Chapter 1 - Introduction and Purpose

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Page 49
Suggested Citation:"Chapter 1 - Introduction and Purpose." National Academies of Sciences, Engineering, and Medicine. 2018. Optimal Replacement Cycles of Highway Operations Equipment. Washington, DC: The National Academies Press. doi: 10.17226/25036.
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Page 49
Page 50
Suggested Citation:"Chapter 1 - Introduction and Purpose." National Academies of Sciences, Engineering, and Medicine. 2018. Optimal Replacement Cycles of Highway Operations Equipment. Washington, DC: The National Academies Press. doi: 10.17226/25036.
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Page 50

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49 higher future expenditures. Also, as downtime increases with older fleets and sufficient equipment becomes unavailable, vital services are underperformed or performed inefficiently. Without an effective fleet planning and replacement pro- gram, equipment-operating costs go up, downtime goes up, the cost of highway operations goes up, and service levels go down. High-quality fleets are important to an agency’s mission and service delivery goals. 1.2 Benefits of an Effective Equipment Replacement Program Good equipment replacement practices provide signifi- cant economic benefits for highway operations. Benefits can be measured in real dollars associated with reduced cost of equipment ownership and operation. Nontangible benefits also accrue. Newer, more dependable fleets reduce equip- ment downtime with a resulting outcome of more effective service delivery. Employee morale, safety, and public image are other real nontangible benefits that result with newer, well-maintained fleets. If equipment is not replaced at optimal cycles, the total cost of owning and operating the equipment is higher. Replacing equipment too soon or too late has the same negative cost impacts. Table 1 illustrates potential cost savings based on actual highway agency cost data for a fleet of 266 wheeled end loaders. The replacement optimization tool analyzed the agency’s cost data and determined the optimal replacement year for the loaders to be 16 years. If the end loaders were replaced on 16-year cycles (optimal cycle), the total annual cost to own and operate the 266 wheeled end loaders would be $3,580,103 annually. If the units were replaced before they reached their optimal life, for example, at 14 years, the total annual cost would be $3,667,820, or $88,717 more. If the units were replaced on a 20-year cycle, the additional total cost of ownership would approach $400,000 per year. Applying this example of savings for the end loaders to an entire equipment fleet consisting of thousands of units The Guide for Optimal Replacement Cycles of Highway Operations Equipment was developed as part of NCHRP Project 13-04, which had two primary objectives: • Develop rational processes that will provide a realistic means of determining optimal replacement cycles. • Include processes and tools for consideration in making decisions regarding optimal replacement cycles. The guide presents a realistic cost analysis approach and outlines replacement decision-making processes adapted to highway operations equipment. An Excel-based replacement optimization analysis tool was also developed to support the equipment replacement processes. A user manual in Part III provides instructions for using the optimization tool in combination with the guide. The tool is available for download from TRB’s website at www.trb.org by searching on NCHRP Research Report 879. The guide is both a handbook on equipment replacement concepts and an instruction manual for making cost-effective replacement decisions. The guide will help fleet managers deter- mine optimal life cycles and implement systematic replacement processes supported by sound data-driven analysis. Ultimately, the guide should help fleet managers determine replacement needs and develop justifiable replacement budgets necessary for ensuring that the highway operations program is provided with a high-quality, dependable fleet to support the agency’s mission. 1.1 Importance of Fleet Planning and Replacement A quality fleet is vital for an efficient and effective highway operations program. Having a high-quality fleet requires good maintenance and sound replacement decisions. The guide pro- vides the framework for making sound replacement decisions. When faced with budget restrictions, the task of making fleet replacement decisions becomes more difficult. Keeping equipment too long costs more in the long run, and replace- ment budget cuts may save dollars in the near term but result in Introduction and Purpose C H A P T E R 1

50 would demonstrate the magnitude of potential savings that can accrue when equipment is replaced at optimal cycles. Implementing the equipment replacement processes out- lined in this guide will help the fleet manager provide a reliable fleet for highway operations. The guide and the accompany- ing replacement optimization tool are designed to help fleet managers and improve fleet performance in three ways: 1. Provide a realistic and rational approach for determining optimal equipment replacement cycles that, if followed, will reduce the cost of owning the fleet and performing highway operations. 2. Lay out step-by-step procedures for making replacement decisions so units are replaced at the optimal time and achieve maximum benefits within available budgets. 3. Provide easily understood estimates of replacement needs and the cost consequences if equipment is kept beyond its optimal life cycle. These estimates can help fleet managers make a business case for replacement budgets. Potential Cost Savings Equipment Class: End Loaders No. of Units: 266 Optimal Replacement Cycle: 16 Years If the replacement cycle is: The total annual cost of ownership and operation will be: 12 Years 14 Years $3,667,820 16 Years $3,580,103 18 Years 20 Years Optimal $3,942,200 $3,964,659 $3,679,049 Table 1. Example of potential cost savings.

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TRB's National Cooperative Highway Research Program (NCHRP) Research Report 879: Optimal Replacement Cycles of Highway Operations Equipment acts as a handbook on equipment replacement concepts and an instruction manual for making cost-effective replacement decisions. The research report presents a process for determining replacement needs for highway operations equipment, identifying candidate equipment units for replacement, and preparing an annual equipment replacement program. The products include a guidance document and an Excel-based replacement optimization tool to support the equipment replacement process and facilitate its implementation.

Disclaimer - This software is offered as is, without warranty or promise of support of any kind either expressed or implied. Under no circumstance will the National Academy of Sciences, Engineering, and Medicine or the Transportation Research Board (collectively "TRB") be liable for any loss or damage caused by the installation or operation of this product. TRB makes no representation or warranty of any kind, expressed or implied, in fact or in law, including without limitation, the warranty of merchantability or the warranty of fitness for a particular purpose, and shall not in any case be liable for any consequential or special damages.

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