What Data
Do You Need?
Snapshot
To work with PERDEC
you need three sets of numbers —
- Operating & Maintenance Costs
- Trade-In or Scrap-Value Estimates
- Inflation Rates
Even if your database is not great, PERDEC
will give you better replacement indications than your previous estimates. |
The Details
PERDEC requires some numbers to work
with. These numbers are from your own records, or, in some cases they’re estimates
based on your own knowledge and experience.
Essentially, you need three sets of figures —
- The year-by-year actual costs of operating and maintenance for each machine.
- Inflation-rate percentages for each year of the machine’s life
- Your estimates of trade-in values, if any, for each machine at the end of each year of
its life.
Pin-point accuracy is not essential. Even when exact figures are available they need
only be expressed, as you enter them into the program, as rounded numbers.
A scarcity of real data should not necessarily be an
impediment concerning the use of PERDEC. Why do we say this?
For one thing, even with estimates, you’ll likely get replacement recommendations
from the software that are better than you previously arrived at.
For another, you can easily determine the sensitivity of the PERDEC
results by playing what-if games with your input.
Thirdly, by beginning to use PERDEC, even without the most accurate
numbers, you’ll be developing a feel for the kind of data you need to collect for
future analyses.
Let’s look at each of these data-requirements in turn —
Operating & Maintenance Costs
You’ll need one O&M Costs figure for each year of the machine’s life.
O&M Costs should include all of the costs of maintaining and operating the machine.
The maintenance costs will be, essentially, parts and labor. Getting at these figures is
not usually a problem. You have records for each machine that include these costs, and
your records are often computerised in a spreadsheet format or in a CMMS
(Computerized Maintenance Management System).
As remarked above, PERDEC will need only one O&M total figure for
each year, unless — and this is not typical — you wish to carry out quarterly
analyses in which case you’d need one total O&M number for each quarter.
These costs are usually in current dollars, that is, the dollars that were
actually spent in a given year on these expenses.
PERDEC, however, works in constant dollars. It needs to work
out the trend of O&M Costs that exclude the effects of inflation. Which brings us to
—
PERDEC’s Inflation-Adjustment Feature
The software will easily be able to convert your current dollar figures to constant
dollars if you tell it what the inflation rate was for each year of the data. How do you
arrive at this? Quite easily. Since maintenance labor is a major component of the O&M
Cost total, you have only to look at your labor wage-rates over the years and work out the
yearly increase…that’s the inflation rate you can apply to the overall O&M
Costs input.
Remember, PERDEC does the applying. All you have to do is input these
inflation rates once, for each unit, and you’ve got it!
The third input component is…
Trade-In Estimates
PERDEC will also ask you for the acquisition cost, today, of a brand
new machine of this type. Based upon this figure, you must estimate what that machine, at
that acquisition cost, would bring today as a trade-in if it were one year old, two
years old, three years old, and so on. PERDEC allows you to enter these
estimates as dollar-amounts, or as percentages-of-acquisition costs, whichever you prefer.
That’s the story on data input. Any questions? Contact us. Also, get PERDEC
to come to life by asking us for our demo program to try
out for yourself on your own computer.
Here’s a look, right now, at PERDEC’s
Main Screen where most of the input and output are displayed. Nice and clean…and
simple! (Who needs complications there days!).
Notice the input, as described in the text earlier. The
Acquisition Cost of $150,000; The O&M Costs (Operating & Maintenance), that
increase each year; The Resale Values that decrease each year — and they can be
entered as dollar-estimates or as percentages of the acquisition cost.
The output in the right-most column will be described in
the next section.
This screen allows you to select the
scenario that most closely resembles your policy of utilization. It’s an important
component of the model Dr. Jardine uses to ensure that the optimal replacement year that
PERDEC arrives at is indeed…optimal.
Here’s how you select which inflation
calculation you’ll require. PERDEC must work in "today’s dollars".
That makes it necessary to adjust "yesterday’s dollars" to represent what
the costs would have been had they been incurred this year…i.e., "today".
The Output
You’ll Get
Snapshot
This snapshot is an easy one! You get
one critical piece of information — the time to replace the machine or piece of
equipment that is absolutely the most economical solution to your replacement question.
There’s not an operations manager in the world that
doesn’t have to justify his or her proposals to a higher-up, or to a committee. What
better way to sell your recommendations than to show them PERDEC’s
output and explain that it’s been calculated from the proven mathematics applied by
one of the world’s most respected maintenance authorities, Dr. Andrew Jardine. |
The Details
The answer is in the right-hand column of PERDEC’s
main screen — the EACs, the Equivalent Annual Costs. If you scroll back up to the
screen-display, you'll see we have circled them in red. The year where you see the
lowest cost EAC is the recommended trade-in year, and it’s also displayed in the Best
Year box, above.
Your Savings
What this screen shows is…if you replace the machine at the end of it’s
6th year, the total cost of everything…ownership, labor, maintenance,
power, and so on…will have amounted to $11,856 in each and every year. If you had
traded it in after only 4 years, it would have cost $14,978 per year. Thus in those four
years you would have spent $3122 x 4 = about $12,500 more than you should have!
Multiply these kind of savings by the number of
machines you operate, and you’ll see what an impressive total the possible
savings amount to. PERDEC can easily pay for itself the first time
you use it.
There’s an added wrinkle, by the way. If, as sometimes happens, your EACs are
decreasing throughout the time-span of the analyses — that is, the final year is the
lowest year — that may mean that next year’s EAC may be lower still.
Communicating the Results
If you like pictures better than numbers, just click VIEW GRAPH and you get a curve. The
low point on the curve corresponds to the BEST YEAR number.
What about showing all this to management? One way is to tell the program to
"Print Report". The report will detail in hard copy all the input and output for
a given analysis. Still another way is to capture some of the screen-displays and build
them into your Microsoft WORD or PowerPoint presentation. Your management will not only be
impressed with the "look", but they’ll also be impressed with your
recommendations — seeing that Dr. Jardine helped you with them!
Perdec Delivers Even More!
Yes, PERDEC can do even more for you. Take the Repair-or-Replace
question for example. Along with the procedures in our user’s Manual you can work out
whether it’s better to repair your unit or replace it. Of course, making the right
choice can save tons of money! Same with the Lease-or-Buy quandary, as well as the
question of establishing how much equipment is required to do a given amount of work.
It’s true that the basic reason for acquiring PERDEC is to
find out exactly when to replace your equipment, but PERDEC will deliver
these added features, when you need them.
The Bottom Line
PERDEC can — and will — save you money. Our guarantee is
in writing! |
