Finding the right fit

When it comes to acquiring a mobile shear for a specific application, one of the most common errors purchasers make is looking strictly at the invoice cost and not at the overall operational or ownership cost of a unit over time. In today’s tight economic climate, employees are doing their companies a disservice by spending money when it can be better conserved. Being more thorough in the cost analysis phase of shopping around can help companies stay profitable and ahead of the competition.

The starting point for success when acquiring a mobile shear is being able to analyze business operations and understand exactly what the costs are when it comes to profitability versus operational costs. Most owners/purchasers of mobile equipment get stuck in the rut of “buy low, sell high,” but that philosophy needs to be grounded in facts, not feelings. Understanding the fixed costs and, most importantly, variable costs for processing material is where a company can excel. Fixed cost (FC) is the purchase price of equipment. The variable costs (VC) are the owning and operating expenses of that equipment. Being aware of these differences can help keep profits high.

WHAT TO CONSIDER

The application of the mobile shear should be considered first when making a decision to buy equipment. The mobile hydraulic shear is designed for cutting and processing various ferrous metals, excluding cast. This equipment can also process nonferrous metals, but in most cases, processability will vary. A potential buyer should ask him or herself the following questions when considering the application: “How often will I be using the shear?”; “What will its processing uptime be?”; “What type of material do I plan on processing?”; “Why am I processing it?”; and “What is going to be done with the material after it is processed?”

For example, mobile shears can be used for sizing large materials coming into the recycling yard or for the first stage in sizing upstream for a demolition project. The buyer will have to discern whether the unit will be the cornerstone of the project’s processing requirements or will split time in the facility. He or she should also consider whether it will work out of the yard, perhaps on a project site, or be rented when it is not being used? Once the processing requirements are defined and decided upon, the size of the unit needed and the carrier it will be mounted on can be decided.

SMALL, MEDIUM OR LARGE?

The size of the mobile shear needed is dependent on the material type and size being processed, with the former category taking precedent. For all applications, look at processing 80 to 90 percent of the material that has been targeted. The other 10 to 20 percent can be left to be processed by other means. Acquiring a mobile shear to process 100 percent of the material, unless it is controlled, is not practical or cost effective. One of the best ways a company can find the right size attachment for its needs is by asking an attachment supplier to show the processing and appetite capacity of the attachment, and then weighing the available options.

CARRY THAT WEIGHT

Once the buyer settles on the right mobile attachment size, he or she needs to find a suitable hydraulic excavator. This is a critical step for putting together a successful and profitable processing package. A mobile shear manufacturer representative can help in this regard and show the options available. Any previously owned hydraulic excavator should match the attachment’s hydraulic- and weight-balancing requirements to operate at maximum efficiency.

The hydraulic excavator specifications need to be studied as well. Items to be reviewed include carrier operating weight, hydraulic lift capacity, hydraulic pump flow capacity and operating pressure. Other factors to consider include whether the machine needs to be on tracks or has wheels and whether the unit can handle the attachment mounted on the boom of the carrier or needs it to be mounted on the stick. Properly matching these considerations with the operating requirements of the attachment will allow the attachment to perform to its best ability.

WEARING DOWN

Equipment wear part and maintenance costs need to be tracked over time to give an accurate return on investment (ROI). Many companies do not track these expenses and cannot report an accurate rate of return on their projects, or, in the case of scrap processors, what their actual net profit is on a ton of processed material. Using the equipment manufacturer’s efficiency ratings or tracing some basic consumption costs can help produce an accurate formula to discover the actual total wear part and maintenance cost (TWPMC). The following formulas can be helpful when trying to ascertain what the profit margins are per ton of material processed. Using these metrics, you can figure a healthy ROI that is attainable.

• TWPM = [years x parts] + [labor rate x service hours]
• Ownership cost per hour = total equipment net investment / total operational time
• Total ownership and operational cost per hour (O&OC) = total equipment net investment + total operational costs of equipment (TOCE)
• Operating cost per ton of material processed (OCTP) = tons of material processed / O&OC+TOCE
Net profit per ton, in dollars = material selling price per ton (MSPT) - [OCTP + material purchase price per ton (MPPT)]

A quick analysis of the operational variable costs over time will result in a much more accurate picture of the profitability of an operation or project. With this information in hand, a company can be confident in bidding new business and expanding its operation with healthy results.

Salvatore LaCorte is the scrap and demolition products sales director for Rotar North America, Willoughby, Ohio.

All formulas and accounting examples are merely simplified samples, your specific needs and outcomes may vary based on your input information. Check with your accountant and tax advisor before certifying the results.