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Operational costs continue a relentless upward march year-on-year, and this matched with current skyrocketing prices for material (affected by demand and supply chain challenges both at home and abroad for the moment) equates to a tough operating environment.
Reflecting these issues should also mean greater emphasis on total cost of ownership (or TCO) in purchasing and planning decisions, with vehicle fleets being a case in point.
Every seasoned operator will know TCO is critical to gaining a true picture of the required capital investment in a piece of equipment over its operational life and through this, the impact on the business’ bottom line.
Signalling the importance of this metric, approximately 64 per cent of Australian businesses in road transport believe that whole-of-life ownership costs are more important than the initial upfront cost of a truck.
Buying capital equipment can be one of the biggest upfront expenses that a business can face. As such, it’s often hard to look at the whole package, beyond the big sticker price.
While initial outlay is certainly an important thing to consider, a purchasing decision should not only be about getting a good deal but procuring equipment that will provide the greatest benefit and return for your business over the long term.
Just as you would not pick the first builder off the block to construct your new house or choose a brain surgeon based on a discount rate; when it comes to deciding on a piece of working capital equipment, it will also pay to look at the full suite of costs (and reason for) behind the product and service.
There are a host of factors to consider in TCO for a vehicle, including cost of acquisition, repayments, insurance and registration, fuel, servicing and repairs, and finally, resale value—though this in no way is an exhaustive list.
Common methods to calculate fluctuating costs (fuel, maintenance, repairs) is year by year, every three years, five years, or a period matching the company’s cash flow.
Therefore, we see many of Australia’s larger fleets opting for service schedules and cost effective maintenance agreements that come with a known cost per month, which can then be factored into the books easily and used for projection in the years ahead.
An added benefit for both small and large operators—these types of service and maintenance agreements can often be tied neatly into the financing for the truck or fleet. A key factor in the calculation of TCO (and by extension, procurement) is fuel. Although it represents only one input for road transport, it is significant.
We see a large percentage of Australian businesses—59 per cent in road transport—reporting fuel costs as a critical challenge in the current business landscape.
Contributing to the final equation and determination of profitability also comes down to equipment performance, trip times, and driveability.
It can be difficult to gauge how productive a new truck is unless you are comparing to it an outgoing piece of equipment with recorded metrics, or against one that is significantly different (for example, a ute versus a truck).
And so we see it boils down to small efficiencies here and there: time saved on a job, a few cents less at the pump each visit, or a decrease in costs in an area such as parts replacement or ongoing maintenance.
These small efficiencies will ultimately mean dollars saved—and whether it’s a one-truck business or a 50-truck fleet the impact will be felt on the balance sheet. As an OEM, it is our responsibility to find these small efficiencies that combine to make a difference to our customers’ bottom line.
These can take the form of engineering updates between truck models; an incremental improvement to load capacity, or a feature more smartly specified that saves an operator 30 seconds per trip. It may take the form of a transmission system that is more forgiving for the less experienced driver, saving repairs down the line.
Playing into this is having access to skilled drivers that respect and operate equipment in a manner that allows it to perform at peak efficiency.
Driver training and experience is a huge factor here, affecting the ability of the fleet to achieve better fuel economy and performance, and with all feeding back into TCO. And around it goes.
Aside from the necessaries of warranty and mindful aftercare services, OEMs must continue to deliver performance, reliability, durability and efficiency, and each from a multi-faceted point of view.
Chief among our responsibilities is to get the right tool into the hands of those that need it, in a timely manner that reduces time and energy spent on the purchasing and procurement process.
Another is to deliver productivity gains for the business with an efficiently performing piece of equipment, specified intelligently for the task. By doing this, we keep more customers in business (and on the road), while consistently addressing the factors behind total cost of ownership, and the big picture issue—business profitability.
Author Les Spaltman
With a background as a qualified Auto Electrician specialising in commercial vehicles and with over 32 years’ of industry experience in varying roles, Les Spaltman, Isuzu Australia Limited National Sales Manager, knows the truck industry intimately. As Australia’s road transport industry experiences significant growth and pressure under COVID-19, Les understands the key challenges for operators, focusing on whole-of-life costs and how it can affect the decision to purchase capital equipment.
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Healthy Heads in Trucks & Sheds (HHTS) Foundation has delivered a National Mental Health and Wellbeing Roadmap, which sets out the plan for the road transport, warehousing and logistics industries to move forward on mental health and wellbeing.
The Roadmap is about knowing where to start, knowing where to turn, knowing where to go next, and it is freely available to everyone in the sector.
In establishing HHTS, industry leaders acknowledged the long road ahead to building a sector that is healthy and happy, one where mental health is as everyday as physical safety.
The role of HHTS is to coordinate the implementation of the three-year Roadmap strategy across all levels of the sector, whether it be owner-operators, small businesses or large organisations.
As a Foundation we know that systemic change will not occur overnight. This is partly due to the wide range of challenges that people in the industry face.
Through research conducted by AP Psychology Consulting Services (APPCS) and engagement with industry, we know that these challenges vary from workload and fatigue to critical incidents and trauma, as well as high levels of isolation and social disconnection.
Unquestionably, these risk factors can play a significant role in impacting a person’s mental health and wellbeing. This is why the Roadmap is a vital step toward making a tangible impact, creating environments and workplaces where employees can thrive in what they do.
The Roadmap has been developed by APPSC in consultation with HHTS and industry participants through an Advisory Board, and covers three key priority areas that have been identified as pivotal in changing existing approaches to mental health and wellbeing.
These areas aim to address:
Leadership capabilities in the workplace,
Challenges of work design, and
Building psychologically safe cultures within industry.
In targeting these key areas, the Roadmap provides an integrated approach for leaders and managers to support and protect employees.
Traditionally, many workplaces in the sector have focused on awareness, rather than implementation of support and recovery strategies.
Although awareness is of critical importance, moving forward greater emphasis must also be applied to prevention.
Over time, as HHTS embeds understanding of the Roadmap, we, as an entire industry, can build better work cultures that champion support and recovery, with a focus on increasing the resilience of the entire workforce.
In the future we hope that if a person is struggling in work or in their personal life, their workmates and other colleagues will be able to support them with the right tools and strategies.
Underpinning the success of the Roadmap is our industry taking small steps over time and recognising the journey ahead.
Equally important is all of industry coming together to make a unified commitment to following the plan that is set out in the Roadmap.
For some businesses this will be the beginning of their journey to better mental health and wellbeing, and for others the Roadmap will support them in building upon the progress that they have already made.
Beyond the Roadmap itself, HHTS provides the opportunity for businesses and individuals to become members of the Foundation, in doing so they will be able to receive the tools, resources and support to successfully implement the Roadmap, with the opportunity to become a certified workplace in the process.
Healthy Heads in Trucks & Sheds
Naomi Frauenfelder was previously Executive Director of the TrackSAFE Foundation — an Australian rail industry not-for-profit, that addresses suicide on the rail network and the resultant trauma caused to train drivers and other frontline staff. It is this experience that Naomi will draw upon and apply to HHTS, to strengthen and grow the organisation and work to improve mental health in the trucking and logistics industry. Naomi has spent her career to date honing her passion for working nationally to unite industries behind significant causes such as mental health, providing individuals and organisations with the resources they need to face challenges head-on, creating cultures of care and support. Naomi holds a Bachelor and Masters from Monash University and is a Graduate of the Australian Institute of Company Directors.
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