Assessing the True Cost of Lifting Decisions
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The Fighting Gravity Series
The goal of the Fighting Gravity Series is to help operators, engineers and purchasers think through their requirements for lifting solutions, primarily in the lift range of loads of 1 tonne to 10 Tons, but many of the principles apply to all of your lifting decisions. Does a portable gantry solution make sense? What about an overhead gantry crane? When is a lightweight davit crane the appropriate tool?
In this edition of Fighting Gravity we will focus on a portion of your gantry crane planning: cost assessment. Having a framework to assess the costs is an important factor in arriving at the correct decision. There are a wide range of costs that aren’t readily apparent at the time of purchase, so let’s try and flush out a few of those hidden items below!
Assessing the Cost: Price vs Total Cost of Ownership (TCO)
Unfortunately most decisions start with the question “How much does that cost?” The correct question should really be “How much will this cost me over the life of the solution.” It’s often difficult to get an exact apples-to-apples comparison while evaluating competing products. Focusing exclusively on the up front price can miss the longer term cost of a solution. Rather than price, let’s discuss the Total Cost of Ownership (TCO) of your lifting solution over the life span of the equipment. Products that appear slightly more expensive initially can often be very cost effective over the useful life of the equipment. Things to consider when assessing your TCO:
- Cost to implement the solution
- Annual costs
- Product durability
- Vendor reputation
- Solution versatility
Costs to Implement the Solution
Certain solutions such as overhead gantry cranes will likely require extensive up-front planning, including engineering costs, a potential building review to ensure the structural integrity of the building, safety program planning, along with a number of other items depending on the situation. The number of service providers required to successfully implement the project can grow quickly, making organization and team management critical. You should also consider the cost of internal resources required to evaluate and manage the project. It can often require a diverse set of internal resources from engineering, finance, safety etc. to properly manage a project of that magnitude.
As a comparison, for lighter lifts, a 2 ton aluminum gantry crane would have no implementation costs aside from the purchase price, but different mobile gantry cranes come with different features. One question might be whether or not a beam trolley is included in the initial purchase price. Does it come with required safety documentation such as engineered stamped drawings or certificate of test? Is the manufacturer representing that it’s been tested or will you need to that yourself (and take on that liability). These, plus other questions are important to consider at the outset of a purchase.
Annual costs operating costs should be factored into the TCO calculation. These costs might involve annual maintenance or safety inspections, along with annual safety training or certification. It’s critical for operator safety to know the Occupational Safety and Health Administration standard (OSHA) for each piece of equipment and operating environment.
While the upfront implementation cost might be less burdensome for portable gantry cranes, there are definitely hidden annual costs to evaluate. Legacy steel mobile gantry cranes may require large pieces of equipment such as a forklift or front loader to move them around a facility due to their heavy weights and limited mobility. The cost of an operator’s time, the operating cost of the machinery, along with the opportunity cost of that piece of machinery not engaging in a higher value added activity should be seriously considered. With a forklift costing more than $30k and a front-loader at $100k the opportunity cost can become substantial. Many operators or purchasers are shocked at how high these hidden costs are on an annual basis, sometimes equaling the entire cost of a less than mobile gantry crane! A general rule of thumb is to multiply these annual operating costs by 10-20x to understand their true cost over a longer term time period (say 10+ years). So if you will incur an additional $3,000 per year in annual operating costs for one solution vs a competing solution, then over the life of the solution the cost is really closer to $30,000 to $60,000 greater than the alternative.
Lightweight, aluminum portable gantry cranes avoid the trappings of the older legacy steel gantry cranes. The aluminum portable gantry crane can be easily moved from location to location, due to its lightweight, either by quickly disassembling it to move it or by easily rolling it around a facility. As lifting capacity increases, the difference between the aluminum gantry crane and steel gantry crane can become significant. A 3 tonne to 10 ton aluminum gantry crane can be moved without additional machinery, such as the ones we produce at Easily Moved Equipment (eme). Avoiding the cost of specialized equipment to move or rig the portable aluminum gantry crane can result in substantial savings over the life of the product, reducing the TCO.
Most operators or purchasers will focus on direct repair costs. However, loss of productivity due to downtime is the real economic monster. Wasting time and resources to replace or repair a piece of lifting equipment that should be functional, can ripple its way through the production process or service workflow, costing multiples of the initial equipment cost.
You should also consider the environment that the equipment will be located. Is it outdoors where the elements will eventually cause degradation in either the structural or operating integrity of the asset? If so, then maybe a mobile solution has a lower TCO over the long-run.
Understanding your equipment vendor is very important while analyzing the risk of hidden future costs. A poor assessment here regarding quality, service costs, etc. of the vendor could be costly down the road.
Understanding your equipment vendor’s reliability track record is critical in this area. How quickly do they respond to service requests, if necessary? Can you obtain parts domestically or are they shipped in from overseas? What does the vendors track record of quality look like? Do they rigorously test the equipment before sending it out to a customer? These are important questions to ask of your equipment vendor to assess your TCO.
Is your vendor committed to your particular market? As an example, are you dealing with an overseas vendor that’s new to your particular geography? Is there risk that vendor may decide to pack up and head home if it doesn’t achieve the sales levels it requires to justify geographic expansion? What does that mean to you if you are in the unfortunate position of needing service or parts 2 or 3 years after purchasing the gear?
Understand your vendor’s full product line-up. Is the model you are buying from them their core competency, or did they simply produce a couple of products for “marketing purposes” and aren’t fully committed to that technology and type of product for their core lineup.
Has the ownership of your vendor changed? Sometimes this can put the historical track record such as service or quality levels at risk since new ownership may decide to focus on financial metrics rather than putting the customer first. In that situation you might not be factoring the risk and cost of repair correctly.
Certain solutions are likely purpose built, such as the overhead crane that we discussed above. You can’t move it to other parts of the facility, but it’s there to do a specific job!
Other solutions can potentially serve multiple functions around a facility or worksite. If it’s possible to substitute a mobile 10 ton gantry crane for a 10 ton overhead crane, the solution could have significantly lower TCO. A mobile gantry can take on many different forms. An older steel gantry crane, as discussed above, may have such limited mobility at heavier rated capacity loads of 3 tonne, 5 tonne, 7.5 tonne or 10 tonne, that it’s effectively an overhead crane but on the ground. In order to use these gantry cranes at that rated capacity, you likely need to incur the cost of having multiple steel gantry cranes at each desired location, even if it has infrequent use. In contrast, the eme portable aluminum gantry crane at a 3 tonne, 5 tonne 7.5 tonne or 10 ton rated capacity can be disassembled and moved around a specific location or to another site. This may allow the operator to replace multiple legacy products with significantly fewer aluminum gantry cranes. Not only is this likely to save up-front costs, but it reduces the complexity of having to maintain or potentially certify a higher amount of equipment each year.
Lastly, understand if your equipment vendor’s products are interoperable with other products in their lineup. For example, if your primary need is for a 3 tonne 8 foot wide portable gantry crane, but occasionally require a 2 tonne 20 foot wide lift, can you simply buy a wider 20 foot beam and use it with the legs of your 3 tonne portable gantry crane, or do you need to buy an entirely new mobile gantry crane. Having the ability to “future proof” your lifting environment by simply changing components can result in not only enormous long-run cost savings, but also more efficient use of your valuable floor space.
It’s clear that the true cost of your lifting solution has many facets beyond the initial purchase price. The above list is a good starting point when considering the true cost of a lifting solution over the life of the product. It’s important to remember that the up-front price and the long-run value of lifting equipment can be dramatically different. And that’s why you should focus on the Total Cost of Ownership (TC) and not just the price when making lifting investments.
The Fighting Gravity Team