Analysis of the optimal service lives of trucks under EUAC and benefit-based methods: A case-study of a road tanker fleet

Abstract

The trucking industry utilizes an extensive fleet of trucks. Of specific relevance is the determination of optimal economic service lives for this stock. Using a case study of a large-scale road tanker fleet belonging to a transportation arm of a major Eurasian oil company, we outline the application of some traditional life-cycle cost-based (EUAC) and benefit-based techniques for estimating the optimal service lives of the truck fleet; then we propose a simple and user-friendly version of modified cost-benefit analysis that integrates both cost-side and benefit-side considerations into the picture and accounts for the alternative investment opportunities available to the fleet owner. All the modelling is presented in a discrete-time format for convenience and ease of use. The key finding from the case study is that the answer to the optimal service lives of trucks hinges on the alternative investment opportunities available to their owner. The anticipated returns from such alternative investment opportunities enter as discount rates into analysis and the techniques we discuss are sensitive to the value of this parameter.