Life Cycle Cost

Before you make a decision on which mobile video safety system to invest in, you should consider Life Cycle Cost.

Life Cycle Cost is the sum of all recurring and one-time (non-recurring) costs over the full life span or a specified period of time. It includes purchase price, installation cost, operating costs, maintenance and upgrade costs, and remaining (residual or salvage) value at the end of ownership or its useful life.

Life Cycle Cost Analysis (LCCA) is a tool to determine the most cost-effective option among different competing alternatives. While initial cost may be important, a more important factor is Life Cycle Cost. How much will this system cost you over its life and the life of your vehicle?

Why do company’s and individuals install video safety systems on their vehicles? Improve safety, increased productivity, peace of mind? All of the above? Invest in a system that will be there for you when you need it. The Life Cycle Cost of a system is in direct relationship to how well it’s built, how durable it is and how reliable it will be for you.

INTEC has been building Car Vision® video safety systems for over 35 years. Our Car Vision® systems are built to withstand the rigors of today's demanding vehicle applications. We use rugged system components and durable polyurethane cables designed and tested to withstand the villains of corrosion, vibration, and abrasion providing years of reliable performance. We're so confident we offer the longest standard warranties and expect our Car Vision® systems to out live most vehicles on which they are installed.

Can you really afford to buy a cheap safety system? There are a lot of camera systems on the market today and the old saying holds true – “You get what you pay for.”

Let’s look at several examples of LCCA.

CASE STUDY – PENNSYLVANIA COLLECTION COMPANY, 50 TRUCKS

In our first case study, one prospect in Pennsylvania equipped their fleet of 50 vehicles with single camera systems from a competitor. They purchased a “low-cost” camera system thinking they'd save money. Turns out that wasn't the case. The single camera system costs app. $600 and it included a one year warranty.

Less than a year after installing the systems they started to have problems which now average three failures a week - within the first two years. Remember this system came with a 1-year warranty. Most “low-cost” systems include a standard 1 year warranty, maybe two. We’ll mention this again later.

Labor Cost
The customer states that it usually takes their mechanic about 1 hour to troubleshoot and find the failed component and another hour to reinstall and test the system. Their mechanic shop rate is $65.00/hour.

Replacement Cost
In order to get the repaired product fixed, they have to box it up and ship it back and have determined that it’s more economical to replace a camera at $200 each than shipping and repairing the defective unit (so we have to assume it costs more to fix the item).

Lost Revenue
Further, this customer has determined that they can’t operate the truck with the camera down. If the truck is not on the route, the down time costs any where between $1,500 and $5,000 depending on the route for each day the truck is not on the route. Once repaired or replaced, they have to pay their mechanic another hour to reinstall the item and get the truck back out on the route.

Adding it all up
Assuming you have just a single day of down time for each occurrence, to replace a defective component and in this example we’ll use a camera at $200, labor at $130 (2 hours x $65 per hour), and the low end of $1,500 in lost revenue it costs you approximately $1,830 for each occurrence. Assuming you have 3 of those a week, your weekly camera related costs balloon to $5,490 multiply that by 52 weeks in a year you’re at $285,480.00 – over a quarter of million dollars and this figure does not include the initial investment!

INTEC's rugged “built for the application” Car Vision® systems on the other hand come with a standard 5-year warranty and while nothing last forever our systems typically outlast the vehicle. Currently INTEC’s failure rate is 0.9% within the first year – all of which are warrantable. For a 50 system fleet this works out to be less than one camera or monitor a year requiring service.

Let’s review. In this case study, what did the “low-cost” camera system actually cost? We'll use the 3 camera failures a week they indicated x 52 weeks and 1 INTEC failure (based on our failure rate).

 INTECCompetitor
Total Investment for 50 trucks$89,800.00$30,000.00
Labor Cost$130.00$20,280.00
Replacement Cost$0.00$31,200.00
Lost Revenue$1,500.00$234,000.00
TOTAL REAL COST
(includes initial investment)
$91,430.00$315,480.00
First Year Cost$91,430.00$315,480.00
Monthly Cost$7,619.00$26,290.00
Per Truck Cost$1,828.00$6,309.00

As you can see that “low-cost” camera system costs you approximately 71% more after 1 year and it will only go up from there.

The above is based on several assumptions. For example, assuming they keep their trucks only 10 years. As we know in today's tight economic environment that may or may not be the case. Also assuming they have only 3 failures per week and only replacing a component of the system and not the entire system (in this case study, the customer indicated a prevalence of camera failures. In our experience, monitor failures are 2x that of cameras). We’re also conservatively assuming the truck is down only one day in each occurrence and that the truck is on the lowest end of the revenue collecting route. Based on our conservative assumptions, in reality their costs are probably higher than presented and possibly much higher, but we stayed on the conservative side to show a best case scenario.

Where this collection company thought they were saving 2 times the difference in initial cost between the “right” camera system for the application and “just any” camera system, they actually end up spending over 3 times the cost of the system per truck per month over the life of the fleet and will spend over $315,000.00 to save $60,000.00. And this doesn’t take into account the present or future cost of that money.


CASE STUDY – CALIFORNIA REFUSE COLLECTION COMPANY, 62 TRUCKS

In this case study, a California customer equipped their fleet of 62 vehicles with dual-camera Car Vision® system from INTEC. They determined they were going to consider Life Cycle Cost and worked these numbers out before hand as part of the decision making process and made the right decision as a result.

Initial Cost
Including installation, the dual camera Car Vision® system from INTEC cost $2,800. For the sake of their evaluation, the customer compared that with a competitive dual-camera system that would cost $1,295 with installation and a standard 1-year warranty.

Labor Cost
To replace just a failed component and get the truck back on the route, it takes their mechanic about 5 hours on average to troubleshoot, replace the defective component, and test the system at a shop rate of $90/hour or $450 for each occurrence. To be conservative will use this amount to replace the entire camera system.

Replacement Cost
This customer keeps their trucks 12 years on average and estimates they’d have a 3-year life on the lower cost system (longer than the 2 years the Pennsylvania customer is experiencing but considering the different locations and for the sake of being conservative, we’ll go with their numbers). Based on purchasing 4 additional systems for each truck over 12-year life, the actual system cost per truck will total $6,475 (4 x $1,295 = $5,180 + $1,295 initial cost = $6,475)

INTEC on the other hand builds systems that outlast the trucks and based on current figures this customer could expect a failure rate of 2.8% over the 12 year life of their trucks. This is the equivalent of replacing 2 camera systems over 12 years.

Lost Revenue
California law requires all new refuse collection vehicles purchased after Jan 1, 2010 to have a working back-up camera system. To remain compliant, this customer wouldn't operate the truck if the system were down. If the truck is not on the route, the down time in lost revenue costs between $3,600 and $5,300 depending on the route for each day the truck is not on the route collecting trash. Using the 5 hour estimate above we get a conservative $2,780 in lost revenue for each occurrence.

Let’s review. In this case study, what did the “expensive” camera system actually cost over the 12 year life of the truck?

 INTECCompetitor
Total Investment for 62 trucks$173,600.00$80,290.00
Labor Cost$900.00$111,600.00
Replacement Cost$5,600.00$321,160.00
Lost Revenue$5,560.00$689,440.00
TOTAL REAL COST
(includes initial investment)
$185,660.00$1,202,490.00
Yearly Cost$15,471.00$100,207.00
Monthly Cost$1,289.00$8,350.00
Per Truck Cost$2,994.00$19,395.00

As you can see this customer saved over $1,000,000 total or just under $85,000 a year by picking the” right” camera system for their fleet.

The above is based on several assumptions. For example, assuming they keep their trucks only 12 years. As we know in today's tight economic environment that may or may not be the case. Also assuming they replace the other system only 3 times we’re also conservatively assuming the truck is down only 5 hours in each occurrence.

Where this collection company could have spent less than half of what they initially invested on the “right” camera system for a "low cost" camera system, they made the decision to invest the extra money up front and saved over $1,000,000.00 over the life of the fleet.

As a result, their trucks have experienced less down time from safety camera system failures and their fleet has experienced fewer accidents due to their use of a reliable operating camera systems. We should also mention this customer has been with INTEC now for almost 15 years (2 fleets).

Bottom line, the INTEC Car Vision® system is an investment which helps the hauler to be profitable.  would like to say INTEC makes CENTS for your bottom line.