Total Cost Of Ownership Calculations Research Articles

Green Wheels, Greener Wallets: Economic Viability of Last-Mile Delivery Fleet Electrification in Case of Latvia

The analysis of internal combustion engine vehicle (ICEV) usage habits in the DPD Latvija company and the study of the specifics of its last-mile delivery transport business will allow to understand whether electromobility solutions can make the company more efficient. The question addressed in the research is whether the electrification of the delivery vehicle fleet can reduce transport expenses for the company and under what conditions. For estimation of direct and indirect costs of transport acquisition and usage Total Cost of Ownership (TCO) is used. The company’s daily operation parameters and technical data of the used vehicles VW e-Crafter and VW Crafter 35 Kasten/long base are considered in the study. Net Present Value (NPV) and Internal Rate of Return (IRR) calculation methods are used for analyzing the investment project. The expense of the creation of electrical vehicle charging infrastructure is not considered, because the company’s daily routine allows to cover all charging processes overnight by using domestic sockets together with Mode 2 chargers. All technical data and calculations were made for deliveries in a city cycle. In financial terms of owning delivery transport, the company is using a 5-year operational lease with 0% first payment. The obtained results in terms of TCO comparison showed a slight advantage by using EV after 5 years of last-mile delivery service per 1 vehicle – 706.98 Euro at 31200km a year or 100km in the working day of 6-day working week (156000km in 5-year is under 160000 warranty condition). The calculation is performed for DPD Latvija 213 ICE vans of a total 240-vehicle fleet. Results of NPV, NPVI, and IRR with a comparison rate of 10.6% for EV case clearly show a sufficiently good return. The Net Present Value of the solution is 89271.92 Euro and the Internal rate of return is 48.05%. The study proves that the electrification of the last-mile delivery company's fleet is economically justified and within 5 years. In the process of electrification, the company will reduce its expenses – by 1.45%, which increases the net annual profit by 0.13%. The main conclusion is that the company will not incur losses by switching to an environmentally friendly vehicle, the capital investment in a realistic scenario pays off already from the 3rd year. Nevertheless, the authors of the study recommend evaluating delivery vehicles with higher driving range parameters, because during peak delivery and seasons with cold weather, the company may experience unplanned downtime and expenses due to the need for additional charging time at public charging networks on the road, that could lead to financial losses and need for TCO calculation corrections.

Techno-economic assessment of hydrogen as a fuel for internal combustion engines and proton exchange membrane fuel cells on long haul applications

Powertrain energy conversion and management are critical factors in providing affordable and robust solutions for transport decarbonization. Various powertrain technologies are being proposed to reduce the impacts of transportation-related carbon dioxide emissions, such as battery electric, fuel cell, and conventional vehicles running with lower carbon fuels. Specifically for the commercial sector, hydrogen internal combustion engines and fuel cells are being extensively discussed. In this sense, this investigation evaluates the benefits and areas of enhancement for hydrogen internal combustion engines and fuel cells from a techno-economic perspective. Power plant models were developed and validated in GT-Power, and detailed investigations on the energy loss pathways were performed. In addition, the powertrains are included in full longitudinal vehicle models and submitted to different driving cycles, representing homologation and real-world driving conditions, with the intent to understand the effect of the cycles from a global energy management perspective. Finally, the fuel consumption results are used as inputs for a total cost of ownership calculation to determine the economic viability of each powertrain. Overall, fuel cells offered efficient operation across the conditions assessed, with engine-powered powertrains showing reduced efficiencies ranging from 23 % to 63 % depending on the cycle and payload. The limited peak efficiency for the spark-ignited low-pressure hydrogen direct injection engine was a dominant factor for the reduced performance of this platform. Strategies for efficiency improvement are identified that could lead to improved internal combustion engine operation. Despite the limited efficiency benefits of hydrogen internal combustion engines, total cost of ownership calculations show hydrogen internal combustion engines being the most cost-effective solution in the near to medium-term scenario.

Retrospective Total cost of ownership analysis of battery electric vehicles in Norway

• Purchase incentives and local incentives made battery electric vehicles competitive. • Total cost of ownership was from 2012 lower than for 3-year old gasoline vehicles. • Battery electric vehicles became from 2012 economic to own for multivehicle owners. • Sales increased with model availability from 2012 as incentives were kept in place. A retrospective Total Cost of Ownership (TCO) analysis of battery electric vehicles (BEVs) versus gasoline vehicles (ICEVs), provided insights on the TCO effects of Norway’s BEV incentives that counts the registration and value added tax exemptions, reductions/exemptions from the annual tax, parking fees, road tolls and ferry rates, and bus lane access. BEVs were according to the TCO calculation too expensive before 2001. A 2001 breakthrough failed when California revised the ZEV-mandate and the Norwegian BEV producer THINK owned by Ford had problems. The TCO has since 2012 been favorable also compared to 3-year old ICEVs. The latter enabled adoption in multi-vehicle households that effortlessly coped with BEVs limited range, through the access to another vehicle for long trips and vacations. BEVs got a good reputation. Adoption targets were revised upwards when old targets were met. The costly incentives became institutionalized and difficult to downscale without hurting the successful market.

Vehicle to Grid Impacts on the Total Cost of Ownership for Electric Vehicle Drivers

Electric vehicles (EV) are foreseen as one major technology toward decarbonizing the mobility sector. At the same time, Vehicle to Grid (V2G) technology opens a new market for EV owners. This article identifies the impacts of providing V2G services on the Total Cost of Ownership (TCO) of EVs. Thus, we studied EVs in private, semi-public and public charging cases, considering two different V2G revenue streams. The included V2G services were: (i) local load balancing to balance the peaks and valleys of the electricity demands of buildings and (ii) an imbalance service to enhance grid stability. In this paper, the impact of these two V2G services is quantified and considered in the TCO calculations. To the authors’ knowledge, no comparable study incorporating the same V2G services exists in the literature. The TCO is calculated with real-life data for four different EVs currently available in the market. As a result, the V2G TCO ranges from €33.167 to €61.436 over an average of nine years for the Flanders region (Belgium).

Electrification of Urban Waste Collection: Introducing a Simulation-Based Methodology for Technical Feasibility, Impact and Cost Analysis

Electrification is a potential solution for transport decarbonization and already widely available for individual and public transport. However, the availability of electrified commercial vehicles like waste collection vehicles is still limited, despite their significant contribution to urban emissions. Moreover, there is a lack of clarity whether electric waste collection vehicles can persist in real world conditions and which system design is required. Therefore, we introduce a multi-agent-based simulation methodology to investigate the technical feasibility and evaluate environmental and economic sustainability of an electrified urban waste collection. We present a synthetic model for waste collection demand on a per-link basis, using open available data. The tour planning is solved by an open-source algorithm as a capacitated vehicle routing problem (CVRP). This generates plausible tours which handle the demand. The generated tours are simulated with an open-source transport simulation (MATSim) for both the diesel and the electric waste collection vehicles. To compare the life cycle costs, we analyze the data using total cost of ownership (TCO). Environmental impacts are evaluated based on a Well-to-Wheel approach. We present a comparison of the two propulsion types for the exemplary use case of Berlin. And we are able to generate a suitable planning to handle Berlin’s waste collection demand using battery electric vehicles only. The TCO calculation reveals that the electrification raises the total operator cost by 16–30%, depending on the scenario and the battery size with conservative assumptions. Furthermore, the greenhouse gas emissions (GHG) can be reduced by 60–99%, depending on the carbon footprint of electric power generation.

Integrated planning for electric commercial vehicle fleets: A case study for retail mid-haul logistics networks

Electric commercial vehicles can contribute significantly to sustainable transportation. However, they are still perceived as being less economically viable than internal combustion engine vehicles. To this end, we analyze the deployment of electric commercial vehicles in retail mid-haul logistics fleets for current and future technology scenarios. We develop a novel assessment methodology that combines total cost of ownership calculations with a rich location-routing model. We consider integrated strategic network design and operational routing decisions over a multi-period time horizon, accounting for mixed fleets of electric and conventional vehicles and battery degradation. To solve this problem, we develop a novel matheuristic that embeds a state-of-the-art metaheuristic to take operational routing decisions. With this framework, we analyze a possible transition towards electrified logistics fleets. Starting with a real-world case, we perform sensitivity analyses based on a technology roadmap and further network structures. We discuss cost structures, the time-dependent nature of investment decisions, operational characteristics, and potential emissions savings. We show that in certain cases an electrification of mid-haul logistics fleets is operationally feasible, economically viable, and provides environmental advantages.

Are Battery-Electric Trucks for 24-Hour Delivery the Future of City Logistics?—A German Case Study

Especially in urban areas, a large proportion of air pollution can be attributed to road traffic. Thus, in many countries, bans are being discussed on diesel vehicles in inner cities. These diesel bans pose a severe threat to logistics service providers (LSPs) that are active in city logistics, since their fleets are based on diesel-powered vehicles. One solution for LSPs is to introduce battery-electric heavy-duty trucks (HDTs). However, this is rarely done at present, due to high investment costs of such trucks. In order to compensate these high investments, high mileages are required in order to benefit from such vehicles’ low operating costs. Implementing 24-hour delivery would increase the daily mileage of HDTs. Because of noise emission regulations, 24-hour delivery could only be performed using battery-electric HDTs. In this study, we explore whether using battery-electric HDTs for 24-hour delivery is economical for LSPs. We use data from a German LSP in food logistics, develop a system dynamics model, and integrate a total cost of ownership calculation along with an LSP and a retail store discrete choice model to determine whether 24-hour delivery with battery-electric HDTs is profitable for the LSP, and how it might be accepted and diffused among stores. We find that 24-hour delivery using battery-electric HDTs is immediately profitable. This is due to the almost 50% increase in the daily trip potential of battery-electric HDTs in comparison to diesel HDTs, which leads to a lower required total number of HDTs in the fleet. Lower transportation costs, increased delivery quality, and decreased risk lead to rapid adoption of 24-hour delivery among stores, while lower total costs of ownership (TCO) accelerate the adoption by the LSP. Diffusion through the fleet and stores takes only slightly longer than one HDT lifetime. Consequently, 24-hour delivery with battery-electric HDTs is a promising solution for innovative and sustainable city logistics.

Reliable estimation of suppliers’ total cost of ownership: An imprecise data envelopment analysis model with common weights

Total cost of ownership (TCO) is a management accounting technique that evaluates the total cost of a business partnership using a time-consuming activity-based costing procedure. Studies have suggested that TCO-based data envelopment analysis (DEA) can effectively estimate the results of TCO with substantially less effort and time; however, its adoption in practice is limited due to certain shortcomings. First, managers struggle to understand and accept the uncommon weighting schemes of existing TCO-based DEA models because traditional TCO analyses require a common set of weights. Second, both the traditional TCO approach and TCO-based DEA models are designed to handle precise data, whereas TCO analyses often involve imprecise data from conflicting data sources and estimations.To address the managerial and technical issues of handling weighting schemes and imprecise data, this paper proposes a novel TCO-based model: common set of weights imprecise DEA (CSW-IDEA). We validate the proposed methodology using real-life datasets from 175 suppliers that serve five key components to two multinational mechanical manufacturers. For both precise data and imprecise data, the proposed CSW-IDEA reliably approximates traditional TCO calculations significantly better than existing TCO-based DEA. The cost savings that can be theoretically generated by applying the CSW-IDEA approach are similar to the cost savings estimated by the traditional TCO approach.

A Systematic Mapping Study on the Current Status of Total Cost of Ownership for Information Systems

Context: More and more industries and businesses are being run on software, making information systems a pivotal component of our lives. Because of globalization and harsh competition, strategic cost management has become essential to keep or gain competitive advantage. These two trends make the investigation of Total Cost of Ownership (TCO) for information systems crucial. Objective: We aim to identify how and to what extent TCO concept is used for information systems. Method: We used systematic mapping study (SMS) to identify the use of TCO in information systems context. We defined 7 research questions (RQs). To answer these RQs, we selected 75 relevant publications by applying our inclusion and exclusion criteria. Results: An increased interest in TCO for information systems is observed over the years. We classified these publications per research type and main motivation of dealing with TCO. The results show that 76% of the selected publications (opinion and solution proposal) lack validation and evaluation. The main motivation behind the 72% of the publications is reduction of TCO. According to the results, essential means of reducing TCO are cloud computing, SaaS model, and multi-tenancy. TCO calculations are also generally made to compare cloud-based infrastructures with in-house infrastructures and SaaS model with on-premise software. TCO is an important criterion in making investment decisions for information systems such as ERP, CRM. Conclusions: To the best of our knowledge, this study is the first SMS on TCO for information systems. We observed limited collaboration between academia and industry. More collaboration would enable to gather data for validation and evaluation. Moreover, methods and frameworks for calculating TCO for information systems are needed. Benefit realization exercises will complement TCO analysis to assess success of investments in information systems.

Optimal virtualized network function allocation for an SDN enabled cloud

Enterprise and Service Provider networks are increasingly making use of Virtualized Network Functions (VNFs) to reap the benefits of reduced Capital expenditures (CAPEX) and Operating expenses (OPEX). Total cost of ownership calculations however are typically a function of the attainable network performance, which in a virtualized system is highly dependent on the overall system architecture and the resource allocation policy. This paper examines how to improve the overall performance of deploying VNFs in a virtualized environment, proposing an appropriate architectural framework to leverage the capabilities of other technologies such as Software Defined Networking (SDN) and Cloud Computing which can be highly complemented with the Network Function Virtualization (NFV) paradigm. We focus on the standardization of the three technologies under a common architecture and we incorporate resource allocation as a main functional architectural block. The problem studied is referred as the VNF placement problem, and tries to efficiently, intelligently, and dynamically allocate a series of VNFs comprising a service chain in a cloud environment according to the current status of the cloud resources. We propose and evaluate a set of algorithms towards satisfying the requirement of enterprise and service providers to grant high performance VNFs for the end users, while allowing the cloud providers to profitably utilize the available resources.

Method for Assessing the Total Cost of Ownership of Industrial Robots

With the launch of Industry 4.0, automation has increasingly been put into focus as one of the key factors for future production. The introduction of industrial robots is widely seen as an effective strategy against rising competition and outsourcing to low-cost countries. The investment into industrial robot cells is often based on the initial offering and its pay-off time. However, procurement decisions based only on the initial price are often poor decisions since they do not consider hidden cost factors such as maintenance or energy consumption. Evaluating the total cost of ownership (TCO) of industrial robots is a far better alternative to calculate all costs involved during their company ownership. Thus far, only a few models concerning TCO or similar cost analysis techniques for industrial robots have been published and empirical studies of the economic aspects of robotic implementation are scarce. The key contribution of this paper is the development of a conceptual model for TCO calculation of industrial robots, which can be used during the decision making process. The developed model was tested in two case studies, one for material handling robots and one for arc welding. The goal was to identify the most crucial factors allowing an easily estimated calculation of the TCO based on the net present value. As most contributing factors, operators’ wages, spare parts and energy consumption are identified. However, this paper also shows that retrieving necessary data from companies turned out to be complicated, because of the low awareness of these companies’ expenditures for the costs generated by their automation equipment. In accordance with the results, both, a simple template was created in order to support the people involved in the decision making process with additional investment information and crucial factors are pointed out for measuring and evaluation in of future digitalized robot systems.

Value pricing when you understand your customers: Total cost of ownership – Past, present and future

At the heart of pricing and selling in the twenty-first century is the ability to price based on created value. In this context, total cost of ownership (TCO) plays an important role. Historically, both academics and practitioners have included exclusively elements related to cost reductions in TCO calculations. In this article, we point toward emerging practices of including not only cost elements, but also all differentiating elements that contribute to customer value in TCO calculations.

Effects of Providing Total Cost of Ownership Information on Attribute Weights in Purchasing Decisions

In this paper we investigate how the provision of total cost of ownership (TCO) information affects attribute weights in sourcing decisions, and how this effect is moderated by decision complexity. TCO quantifies the costs of each decision alternative for purchasing decisions, from the perspective of the buying organization. We consider incomplete TCO information, in that some non-financial attributes are not included in the TCO calculation, and we investigate unintended (and potentially disadvantageous) effects of providing decision makers with such information. Experiments with 817 participants were conducted, both students and managers. We found moderate support for the hypothesis, that when complexity was low, participants gave a higher weight to the attribute that was excluded from the TCO information. We found support for the hypothesis that when complexity was high, decision makers gave less weight to this attribute, but this result was only found for the most experienced subgroup of managers. Experience did, however, not necessarily have a positive effect. Results suggest that, due to the provision of TCO information, experienced decision makers were more likely to follow an evaluation process in which less attention was paid to attributes that were not part of the TCO calculation. This suggests that experienced decision makers could be less mindful of the incompleteness of TCO information.

The Impact of Reverse Logistics on the Total Cost of Ownership

Reverse logistics can have a significant impact on the cost of owning an item, and is an important factor to consider in calculating the total cost of ownership (TCO), when making a purchasing decision. Frameworks for calculating TCO are presented from the literature. Then, the impact of reverse logistics on each of these costs is discussed. The importance of including disposal and end-of-life costs in any total cost of ownership calculation is also discussed.Total cost of ownership (TCO) is a structured approach for determining the total costs associated with the acquisition and subsequent use of a given item or service from a given supplier (Carr and Ittner, 1992). An important area for consideration in TCO is the cost associated with product returns (LaLonde and pohlen, 1996). Reverse logistics (RL) is the process of moving products the “wrong way,” from the customer back to the supplier. Many of these costs are affected by the presence of a reverse logistics system, and this should be taken into account in the calculation of total costs of ownership.