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AGE/CON: Fleet (Vehicle) Replacement Decisions

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AGE/CON calculates the best replacement time for your vehicles.

Management of fleet maintenance and vehicle replacement can be a complicated task. Best practice management will create the lowest costs with the highest efficiency so that each vehicle serves the overall business as best it can with a minimum of downtime disruption. Such management cannot rely on mere guesswork, but must find a way to balance the decreasing ownership costs of a vehicle with the increasing costs of operations and maintenance. An understanding of economic life models will allow a manager to apply mathematical calculations that will determine the ideal time to replace a vehicle, the year in which the total cost of a vehicle has its lowest value; before replacement time, repair costs are understood as necessary expenditures to maintain the equipment, and beyond the replacement time, repair creates an unnecessarily high cost for use of the vehicle.

AGE/CON applies your data through sound mathematical models.

The mathematical models needed to calculate ideal replacement time have been readily available for decades, notably in Dr. Jardine's text Maintenance, Replacement and Reliability. Dr. Jardine has also used seminars as a means of making the strategies accessible to maintenance managers and has provided consulting to a number of businesses/institutions seeking to improve efficiency. Such work with Montreal Transit in 1980 led to the development of the AGE/CON software.

AGE/CON simplifies your decision-making.

AGE/CON is designed for easy and accurate application of statistical analysis for optimizing maintenance and replacement decisions for mobile equipment. The manual available for the software provides definitions and explanations of the key terms and concepts that are important to this process of optimization, as well as displaying examples of problems that can be solved with use of AGE/CON. The fundamental principles behind the methodology are explored more exhaustively in research literature and training courses.

One advantage of AGE/CON is that the user only needs to input the necessary data for the calculations to be made by the software. Typical calculation would involve the following:

  • the scope of time the user would like to consider for the data available

  • the acquisition cost of purchasing a new vehicle in present day currency

  • parameters of constant utilization, variable utilization (unplanned fluctuations), and planned changes to

  • utilization (considering the workload to be assigned to a vehicle of a particular age) over the life of a vehicle

  • inflation (the decrease in the purchasing value of a given currency as purchasing costs rise) with the consequent necessity of making calculations using a constant value for currency

  • the discounting rate — considering the present time-value of future cash flows to obtain a fair comparison of future and present values

  • calculation of taxes, such as through a tax depreciation rate and corporate tax rates (which may be appropriate for companies in the private sector)

  • operations and maintenance costs — the relevant costs in establishing economic life, primarily

  • including all values that may vary from year to year in the use of the equipment: regular maintenance, downtime of equipment caused by unexpected failure or planned time for maintenance or rebuilding, materials needed for operations (including fuel), and cost of holding inventory of spare parts

  • resale values and resale rates to consider the value of dispensing with a vehicle in any given year.

AGE/CON provides an accurate and clear solution.

AGE/CON utilizes the data provided to calculate the EAC (the Equivalent Annual Cost). The economic life model for an item considers an infinite chain of replacements or by modification for the first N cycles. Using the CRF (the Capital Recovery Factor), the values for total discounted cost can be converted into the EAC, the Equivalent Annual Cost, to better manage comparisons that will indicate the ideal year of service at which to replace the equipment. The lowest EAC value within a cycle represents the ideal year of replacement, based on the data that has been entered. Based on the calculations for EAC, AGE/CON advises the best year for replacement.