HomeMy WebLinkAbout20160722AVU to Staff 48 Attachment B.pdf
2016 Replacement Report
Avista
Presented by Utilimarc
Staff_PR_048 Attachment B Page 1 of 25
2
Table of Contents
Summary ......................................................................................................................................................................................... 3
Lifecycle Analysis ............................................................................................................................................................................. 4
Lifecycles by Class ......................................................................................................................................................................................... 4
Units to Replace Annually ............................................................................................................................................................................. 7
Aging Table ................................................................................................................................................................................................. 10
Projections .................................................................................................................................................................................... 13
Unit Average Age ........................................................................................................................................................................................ 14
Units Out of Lifecycle .................................................................................................................................................................................. 15
Annual Unscheduled Work Order ................................................................................................................................................................ 16
Annual Total Cost ........................................................................................................................................................................................ 17
Annual Ownership Cost ............................................................................................................................................................................... 18
Annual Maintenance Cost ........................................................................................................................................................................... 19
Annual Capital Investment .......................................................................................................................................................................... 20
Methodology ................................................................................................................................................................................. 21
List of Assumptions ..................................................................................................................................................................................... 21
Lifecycle Calculations .................................................................................................................................................................................. 22
Regression Analysis ..................................................................................................................................................................................... 24
Definitions .................................................................................................................................................................................................. 25
Staff_PR_048 Attachment B Page 2 of 25
3
Summary
• Utilimarc’s Vehicle Replacement Module (VRM) mathematically determines when to replace your assets. The module uses
historical analysis to predict future ownership and operating expenses and determines which lifecycle will achieve the lowest
total cost over the life of the asset.
• The VRM uses Avista’s historic ownership and operational data to develop a replacement strategy that is unique to the
behavior and characteristics of the Avista fleet.
• The VRM uses Avista historic operating cost, purchasing patterns, usage patterns, and mechanic practices to develop a class-
specific set of lifecycles and demonstrates the effect of replacement on a variety of fleet metrics.
• Utilimarc recommends replacing 126 units (vehicles and off road equipment) in 2016, with an annual capital cost of
$9,478,564. Avista has chosen to replace 130 units in 2016, with an annual capital cost of $9,715,138.
Staff_PR_048 Attachment B Page 3 of 25
4
Lifecycle Analysis
This section shows the results of Utilimarc’s class-specific lifecycle analysis. Lifecycles are calculated for each class based on Avista
historic operating cost, purchasing patterns, usage patterns, and mechanic practices.
Lifecycles by Class
The table below contains Utilimarc’s recommended lifecycle for each class in terms of age and mileage. Replacing a unit within its
recommended lifecycle range will result in operating within 1% of the lowest total annualized cost over the life of the asset. The
table also shows the lifecycles chosen by PGE for comparison. Classes marked with (*) could not be modeled with the current data
set. A default lifecycle is used in these cases.
Custom Lifecycles Recommended Lifecycles
Class Code Unit Count Age Mileage Age Mileage
Compact Car 3 8 101,380 8 101,380
Compact Pickup* 1 6 - 6 -
Light Duty Pickup 156 6 73,216 5 61,013
Medium Duty Pickup 79 7 79,009 6 67,722
Heavy Duty Pickup 23 7 108,558 7 108,558
Midsize SUV 2 12 24,416 27 54,937
Fullsize SUV 1 11 99,033 11 99,033
Van - Mini Cargo 1 8 75,360 8 75,360
Van - Cargo 250 3 14 111,738 16 127,701
Van - Cargo 350 3 9 132,344 9 132,344
Van - Cube / Walk-in etc. 4 12 181,029 12 181,029
Dump Truck 26 16 86,928 16 86,928
Dump - Single Axle 10 13 118,746 10 91,343
Staff_PR_048 Attachment B Page 4 of 25
5
Dump - Tandem Axle 6 15 85,753 15 85,753
Light Duty Service Truck 134 6 78,488 5 65,407
Medium Duty Service Truck 2 13 80,520 13 80,520
Heavy Duty Service Truck 19 15 85,330 17 96,707
Stake Truck 70 10 67,113 11 73,824
Light Duty Bucket 54 9 148,354 10 164,838
Medium Duty Bucket 16 10 125,101 9 112,591
Heavy Duty Bucket 32 18 123,192 20 136,880
Super Heavy Duty Bucket 1 10 74,980 10 74,980
Digger Derrick 44 18 99,254 21 115,796
Tankers 1 15 21,421 15 21,421
Semi Tractor - Single Axle 3 15 420,452 15 420,452
Mobile Crane 16 15 84,144 14 78,534
Medium duty Track* 17 25 - 25 -
Self Contained Drill Unit* 3 11 - 11 -
Ft End Loader & Backhoe* 53 13 - 13 -
Skidsteers* 1 21 - 21 -
Dozer* 2 15 - 15 -
Trenchers* 28 13 - 13 -
Small Trencher* 2 11 - 11 -
Rod Mach/Tuggers/Tensioners* 11 15 - 15 -
Welder* 43 15 - 46 -
Air Compressor* 5 24 - 24 -
ATV* 28 18 - 18 -
Backyard Mobil Equipment* 3 15 - 15 -
Generators* 1 15 - 15 -
Mobile Aerial Platform* 3 15 - 24 -
Staff_PR_048 Attachment B Page 5 of 25
6
Forklift* 2 20 - 32 -
Misc Equipment* 11 41 - 41 -
Misc Vehicle* 1 15 148,301 15 148,301
Misc POE* 12 24 - 24 -
Trailers* 374 20 - 30 -
Staff_PR_048 Attachment B Page 6 of 25
7
Units to Replace Annually
Utilimarc recommends replacing a consistent number of vehicles each and every year. This will create an even distribution of older
and younger units across your fleet, leading to predictable maintenance costs, staffing needs, and vehicle availability while avoiding
large replacement bubbles. The table below shows the average number of units to replace each year while following the
recommended and custom lifecycles. This calculation is hypothetical in nature (you can’t purchase half a pick-up truck!), but is useful
for establishing your average capital budget.
Custom Lifecycles Recommended Lifecycles
Class Code Units Replaced Cost Units Replaced Cost
Compact Car 0.38 $13,125 0.38 $13,125
Compact Pickup 0.17 $4,167 0.17 $4,167
Light Duty Pickup 26.00 $858,000 31.20 $1,029,600
Medium Duty Pickup 11.29 $463,132 13.17 $540,321
Heavy Duty Pickup 3.29 $167,913 3.29 $167,913
Midsize SUV 0.17 $5,833 0.07 $2,593
Fullsize SUV 0.09 $3,636 0.09 $3,636
Van - Mini Cargo 0.13 $3,875 0.13 $3,875
Van - Cargo 250 0.21 $13,488 0.19 $11,802
Van - Cargo 350 0.33 $21,000 0.33 $21,000
Van - Cube / Walk-in etc. 0.33 $21,667 0.33 $21,667
Dump Truck 1.63 $243,750 1.63 $243,750
Dump - Single Axle 0.77 $103,846 1.00 $135,000
Dump - Tandem Axle 0.40 $77,600 0.40 $77,600
Light Duty Service Truck 22.33 $1,987,667 26.80 $2,385,200
Medium Duty Service Truck 0.15 $15,385 0.15 $15,385
Staff_PR_048 Attachment B Page 7 of 25
8
Heavy Duty Service Truck 1.27 $217,867 1.12 $192,235
Stake Truck 7.00 $644,000 6.36 $585,455
Light Duty Bucket 6.00 $990,000 5.40 $891,000
Medium Duty Bucket 1.60 $293,538 1.78 $326,153
Heavy Duty Bucket 1.78 $519,111 1.60 $467,200
Super Heavy Duty Bucket 0.10 $29,200 0.10 $29,200
Digger Derrick 2.44 $943,556 2.10 $808,762
Tankers 0.07 $7,667 0.07 $7,667
Semi Tractor - Single Axle 0.20 $26,000 0.20 $26,000
Mobile Crane 1.07 $278,208 1.14 $298,080
Medium duty Track 0.68 $146,014 0.68 $146,014
Self Contained Drill Unit 0.27 $8,925 0.27 $8,925
Ft End Loader & Backhoe 4.08 $168,575 4.08 $168,575
Skidsteers 0.05 $3,663 0.05 $3,663
Dozer 0.13 $26,667 0.13 $26,667
Trenchers 2.15 $117,525 2.15 $117,525
Small Trencher 0.18 $5,950 0.18 $5,950
Rod Mach/Tuggers/Tensioners 0.73 $93,133 0.73 $93,133
Welder 2.87 $208,868 0.93 $68,109
Air Compressor 0.21 $3,802 0.21 $3,802
ATV 1.56 $39,038 1.56 $39,038
Backyard Mobil Equipment 0.20 $25,800 0.20 $25,800
Generators 0.07 $667 0.07 $667
Mobile Aerial Platform 0.20 $13,580 0.13 $8,487
Forklift 0.10 $2,358 0.06 $1,474
Misc Equipment 0.27 $17,426 0.27 $17,426
Misc Vehicle 0.07 $12,733 0.07 $12,733
Staff_PR_048 Attachment B Page 8 of 25
9
Misc POE 0.50 $41,025 0.50 $41,025
Trailers 18.70 $256,577 12.47 $171,051
Total 122.19 $9,145,554 123.91 $9,268,448
Staff_PR_048 Attachment B Page 9 of 25
10
Aging Table
The table below shows the number of units in your fleet by age and vehicle class. Your replacement ages have been highlighted in
red. High concentrations of vehicles have been highlighted in yellow. These "bubbles" can cause sudden increases in parts and labor
cost, vehicle downtime, and technician requirements. Conversely, consistent replacement yields predictable parts and labor cost,
vehicle downtime, and technician requirements.
Staff_PR_048 Attachment B Page 10 of 25
11
Staff_PR_048 Attachment B Page 11 of 25
12
Staff_PR_048 Attachment B Page 12 of 25
13
Projections
The following graphs compare the effect of each replacement scenario on metrics including vehicle average age, fleet maintenance
cost, capital investment and more. Each graph shows the effect of each replacement scenario over the next five years. The green line
represents the replacement scenario based on Utilimarc’s recommended lifecycles (Utilimarc). The blue line represents the
replacement scenario based on Avista’s chosen lifecycles.
Staff_PR_048 Attachment B Page 13 of 25
14
Unit Average Age
This graph shows average unit age of fleet over the next five years. Under the Utilimarc and Avista scenarios, Avista can expect to
see a reduction in fleet age as a result of consistent replacement.
2016 2017 2018 2019 2020
Avista 8.18 7.96 7.82 7.79 7.76
Utilimarc 8.41 8.29 8.27 8.28 8.38
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Fleet Average Age
Staff_PR_048 Attachment B Page 14 of 25
15
Units Out of Lifecycle
This graphs shows the number of units outside of the stated lifecycle for each scenario. The target value for this metric is close to
zero. This graph demonstrates how quickly Avista will “catch‑up” on replacement based on each scenario. Avista achieves this goal
fastest when following Utilimarc’s recommendations.
2016 2017 2018 2019 2020
Avista 251 212 243 211 190
Utilimarc 228 208 146 160 156
-
50
100
150
200
250
300
Units Out of Lifecycle
Staff_PR_048 Attachment B Page 15 of 25
16
Annual Unscheduled Work Order
This graph shows the number of demand repair or unscheduled work orders required to support fleet under each scenario.
Decreases in labor demand often translate into reduced downtime and reduced labor cost.
2016 2017 2018 2019 2020
Avista 6,975 6,947 6,951 6,962 6,995
Utilimarc 6,950 6,890 6,869 6,882 6,926
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Annual Demand Repair Work Orders
Staff_PR_048 Attachment B Page 16 of 25
17
Annual Total Cost
Annual total cost remains relatively similar under both replacement scenarios. The Utilimarc replacement scenario provides annual
savings of approximately $200,000 when compared to the Avista scenario. Increases in ownership cost due to investment in
replacement are offset by savings in maintenance cost under the Utilimarc scenario.
2016 2017 2018 2019 2020
Avista $11,464,377 $11,557,276 $11,680,040 $11,842,816 $12,036,867
Utilimarc $11,426,177 $11,461,059 $11,523,378 $11,656,931 $11,804,540
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Annual Ownership & Maintenance Cost
Staff_PR_048 Attachment B Page 17 of 25
18
Annual Ownership Cost
2016 2017 2018 2019 2020
Avista $6,699,013 $6,685,013 $6,688,698 $6,707,847 $6,750,873
Utilimarc $6,678,587 $6,644,919 $6,608,574 $6,590,614 $6,590,668
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
Annual Ownership Cost
Staff_PR_048 Attachment B Page 18 of 25
19
Annual Maintenance Cost
2016 2017 2018 2019 2020
Avista $4,765,364 $4,872,263 $4,991,343 $5,134,969 $5,285,994
Utilimarc $4,747,590 $4,816,140 $4,914,804 $5,066,316 $5,213,871
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Annual Maintenance Cost
Staff_PR_048 Attachment B Page 19 of 25
20
Annual Capital Investment
This graph shows the amount spent on replacement each year under each scenario. While more money is spent under the Utilimarc
scenario, the difference is more than made up when accounting for savings on maintenance and the optimization of resale values.
2016 2017 2018 2019 2020
Avista $9,715,138 $8,587,440 $9,299,938 $9,110,415 $9,866,304
Utilimarc $9,478,564 $8,726,231 $9,505,018 $9,257,659 $10,083,874
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
Annual Capital Cost
Staff_PR_048 Attachment B Page 20 of 25
21
Methodology
List of Assumptions
The following is a short list of important assumptions made by the model, provided for your reference and information:
• Inflation is included on all future costs, set to 2%.
• An Interest rate of 3% is applied to capital investments, representing an opportunity cost of money.
• Annual mileage is assumed to be consistent among all vehicles of a given class. No adjustments in annual mileage are made
based on the vintage of the unit.
Staff_PR_048 Attachment B Page 21 of 25
22
Lifecycle Calculations
For each vehicle class, Utilimarc’s Vehicle Replacement Module (VRM) determines what replacement age achieves the lowest total
annualized cost. This guarantees the lowest total cost over the life of an average vehicle. In the example below, this principle is
demonstrated in the calculation of the total annualized cost of an industry vehicle class over the lifetime of the vehicle.
Replacement Age Total Annualized Cost Deviation
1 $7,811 34.4%
2 $7,121 22.6%
3 $6,613 13.8%
4 $6,251 7.6%
5 $6,010 3.5%
6 $5,869 1.0%
7 $5,810 0.0%
8 $5,821 0.2%
9 $5,892 1.4%
10 $6,015 3.5%
11 $6,183 6.4%
12 $6,391 10.0%
13 $6,636 14.2%
14 $6,913 19.0%
Staff_PR_048 Attachment B Page 22 of 25
23
The table on the previous page shows the annualized cost for the possible lifecycles of a typical light duty pickup truck. Consider the
following three replacement scenarios over a 14-year financial period.
Scenario 1: A fleet manager plans to replace this vehicle every year. The annualized cost of this replacement strategy is $7,811.
Over the 14-year period, this replacement strategy will cost fleet 14 x $7,811 = $109,354.
Scenario 2: A fleet manager plans to replace this vehicle every seven years. The annualized cost of this replacement strategy is
$5,810. Over the 14-year period, this replacement strategy will cost fleet 14 x $5,810 = $81,340.
Scenario 3: A fleet manager plans to replace this vehicle every fourteen years. The annualized cost of this replacement strategy is
$6,913. Over the 14-year period, this strategy will cost fleet 14 x $6,913 = $96,768
The table below summarizes the calculations in the previous example.
Chosen Replacement Age Financial Period (Years) Annualized Cost Total Ownership Cost For Financial Period
Scenario 1 1 14 $7,811 $109,354
Scenario 2 7 14 $5,810 $81,340
Scenario 3 14 14 $6,913 $96,768
This example illustrates that by minimizing total annualized cost achieves the lowest total cost of ownership over the life of the
vehicle. Utilimarc recommends replacing units within 1.0% of the true lowest cost of ownership. This generally provides a three-year
range for replacement, which allows for flexibility when planning replacement without dramatically effecting overall cost.
Staff_PR_048 Attachment B Page 23 of 25
24
R² = 0.93809
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
$0.20
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Co
s
t
P
e
r
M
i
l
e
Unit Age
Light Duty Pickup Parts and Labor Cost Regression
Industry Data Regression Analysis
Regression Analysis
The VRM predicts future maintenance costs using vehicle class specific linear regressions. A regression model is built for each vehicle
class based on historical, maintenance data from the Utilimarc database. The following example was built from historical industry
data. It shows the total parts and labor regression for light duty pickup trucks. Note the R-squared value of .93. This means that 93%
of the change in the vehicles cost per mile is a result of its increased age. For most vehicles in your fleet, the oldest units will cost
you the most on a per mile basis. Utilimarc’s replacement model prioritizes these units for replacement, followed by the units with
the highest lifetime mileage.
Staff_PR_048 Attachment B Page 24 of 25
25
Definitions
Lifecycle is the age at which a unit is prepared for replacement. This is typically stated as an age or limit on lifetime mileage. This
analysis relies primarily on age when determining whether or not to replace a unit.
Labor Hour Demand is the amount of labor hours needed to support a unit over a period of time. This includes labor hours handled
internally or by an outside vendor.
Ownership Cost is the cost associated with owning a unit over time. This analysis interprets ownership cost as the difference
between the sale value of a unit in the current year and the sale value of the same unit in the previous year.
Maintenance Cost is the cost to actively use a unit over time. This includes the cost of parts and repairs handled internally or by an
outside vendor. For this analysis, fuel is not included as a maintenance cost.
Total Cost is the sum of Maintenance and Ownership cost.
Capitol Investment is the amount spent on purchasing a new unit. This includes all costs to put the unit into service.
Residual Value is the amount received for the sale of a unit, expressed as a percent of the original purchase price.
Staff_PR_048 Attachment B Page 25 of 25