How to calculate the total cost of ownership for waste management equipment
Monday, June 25, 2018
Waste management costs include more than purchase price or equipment rental fees
The total cost of waste management, and therefore the total cost of ownership (TCO) of a baler or compactor, goes well beyond acquisition costs. To reduce or minimize your waste management costs there are several factors to consider.
1. Impact on waste management costs.
The first thing to consider, of course, is what impact this piece of equipment will have on your overall waste management costs. Will it reduce the number of trips a waste hauling company makes from your facility to the landfill? Will it produce revenue in the form of recyclables that can be sold?
These are not simple questions, but the whole point of waste management is to minimize your costs and make your business more environmentally sustainable. So understanding your current and future waste stream, and what your waste management equipment needs are, is critical. If you’ve never formally analyzed your waste stream, a waste audit may be valuable at this point.
2. Repair costs.
Sometimes things go wrong and your baler or compactor requires repairs. If you’re renting the equipment, are those repair costs included in the rental agreement? And if so, how long will it take to dispatch a technician to fix the equipment? Downtime has a cost, and if you have to wait a week or longer for repairs, your equipment may cost you more.
If you’re purchasing the equipment, consider whether a warranty comes with it, what it covers and how long it lasts. Also, make sure you know who to call when it needs repairs — preferably someone with the experience to troubleshoot the issue and dispatch a qualified technician who comes prepared to fix it. When buying a baler or compactor, it may make sense to pay for a maintenance contract. Rental agreements wrap all of these costs into a single payment, whereas purchasing equipment is more complicated and more expensive.
3. Equipment lifespan.
Nothing lasts forever. Do you know how long your new compactor or baler will last? When calculating the TCO you’ll need to know how long the equipment will likely last. In addition to the operational lifespan of machinery with many moving parts, smart facility managers will also consider how long the equipment will provide value for their facility. If you have to get a bigger compactor because of growth in a few years, or if a change in packaging materials requires a different type of baler, you may end up disposing of equipment before it’s lived out its useful life.
When renting equipment, ask your leasing company under what circumstances you can switch out the equipment for something different, in case your business changes. Having the flexibility to switch out a piece of equipment on demand gives your company extra flexibility.
4. Installation and site preparation.
Compactors and balers, whether installed indoors or out, are large pieces of equipment that come with electrical needs. And you’ll need to transfer waste or recyclables from the device to the truck that will haul it away. In other words, whether you’re bringing new equipment to an existing facility or planning a new site, design and engineering will be involved.
You may have engineering talent in-house, but reputable equipment dealers and equipment rental companies often provide this service as part of their overall offering. Having the engineering and design work completed up-front will save you time, money and hassle.
Finally, make sure you understand who’s handling installation and whether there are additional costs involved. You don’t want a 25-foot-long compactor delivered to your site without a plan for getting it properly installed.
5. Tax and financial implications.
The financial consequences of renting or purchasing waste management equipment vary. While we can’t say exactly what those will be for your company, you’ll want to consult your accountants and financial analysts to understand the costs associated with these decisions. Renting equipment often provides a fixed, predictable monthly expense. Buying equipment may require you to consider disposal costs, depreciation and other factors.
Consider these five factors and you’ll not only understand the total cost of ownership for waste management equipment, you’ll probably have a clearer grasp on all your waste management costs. And that means even more opportunities to reduce them.
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