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Old 2nd June 2016, 17:15   #1
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Default Commercial Fleet for a Mine: Hire, Rent or Buy?

Hi everyone,
I am a newbie to commercial vehicles in general and need to produce an analysis on buy, hire (fixed price per trip/tonne basis) or rent(fixed prices per month basis). I plan to run an excel model for this and would be happy to share the results once done if anyone wants it. Please excuse any newbie mistakes and naive questions ("Masoom Sawal")

We are evaluating various options for a small mine (consider aggregate quarry) in Gujarat. The potential buyer is at a distance of about 25 odd kilometers one way and wants the material delivered at their site.

I plan to hire the mining equipment and transportation would be in dumpers procured on one of the above three criteria.
On a casual analysis of the distance involved the cycle time appears to be around 2.5 hours (15 minutes to load with an excavator/backhoe loader, half an hour of travel time each way, considering about 50 km per hour average speed and about 1.25 hours to process documents and unload at client site). I am assuming 12 work hours everyday for the dumper. Material to be transported is about 300 tonne per day. Based on internet research and assuming five trips per day it would translate in to about 3 31 tonne Gross Vehicle Weight (GVW) tippers with 19 tonne payloads, 4 25 tonne GVW tippers with 16 tonne payloads and so on. Given the size of the operation, i assume that smaller tippers will be unwieldy (below 25 tonne class would be 5+ and scheduling might be difficult to manage for a small operation) and larger tippers cost prohibitive (expensive machines with lot of idle time). I am currently sticking to the two large manufacturers Tata Motors Limited and Ashok Leyland, with the possible inclusion of Mahindra. Excluding the Foreign manufacturer/joint venture ones on the basis of assumed much higher cost (please correct me if i am wrong) and possibly less information available.

I have obtained a few quotes from dealers and the on road price appears to be about 25 lakhs for a Tata Motors 31 tonne fully built vehicle to Rs. 32 lakhs for an Ashok leyland one (Can someone please explain this huge difference in pricing ~20-25%?)

I have obtained equally varied responses from people on the "kitna deti hai?" question. The least i have got is 2.5 kilometers per liter for the Tata Motors and most i have got is 4 kilometers per liter for Ashok Leyland ones (This with the specific condition that the vehicle is to be loaded fully, only according to the approved weights). Couldn't find much information on Mahindra Blazo and no one in my network has any knowledge on these. Again a huge variation here and actual numbers would be more than welcome. Plus on asking a few owner operators they said mileage does not vary much between 25 tonne and 31 tonne vehicles running empty or loaded, which was difficult to digest.

Apart from fuel, i guess the other running costs would be driver salaries (assumed at about Rs. 15000 per month), lubricants, maintenance, tire wear etc. Could someone please let know what would be the quantum of these on a monthly/yearly/per kilometer basis.

Could not find any information online on commercial vehicle quotes, would love to know pure third party/ comprehensive quote numbers from various owners.

On the rent front I have received quotes of about Rs. 90 thousand per month to Rs. 1.5 lakh per month (again for 31 tonne category vehicles, they seem to be most popular in these parts)

On the hire front i have received quotes on the order of Rs. 2.25 to 3 per kilometer for the round trip distance, which i feel might be quite expensive. In my banking days I had somehow heard that it is about Rs. 1.5 per kilometer, this was again when oil was about 65 USD to the barrel so i don't think that should have changed much.

I would be very grateful for any information available and anyone running a sanity check on these assumptions and thanks in advance

Last edited by GTO : 3rd June 2016 at 10:13. Reason: Merging back to back posts
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Old 3rd June 2016, 10:16   #2
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

Thread moved from the Assembly Line (The "Assembly Line" Forum section) to the Commercial Vehicle Section!
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Old 3rd June 2016, 10:33   #3
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

With my very limited knowledge, did you consider Volvo? i know it's very expensive but rest assured it will serve without any hiccups. I heard from one of my friends who used to work in Volvo couple of years back say that even though Volvos were expensive, the returns were better in terms of maintenance and after sales support, the worst issue in the mining sector was frequent choking up of the air filters (leading to frequent loss of power and load carrying ability), burnt clutches because of inability to carry heavy loads, drivetrain breakdown etc.
As I said i have very limited knowledge, thought of sharing what I knew little.
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Old 3rd June 2016, 11:07   #4
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

I have no clue about this, but reading your post, it looks there are many variables involved.

Since you are newbie too, I'm not sure spending 25 or 30 Lacs is the right way to go about it. Opt for rent/hire initially. Once you understand the logistics part properly, then you can consider purchasing trucks.
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Old 3rd June 2016, 11:25   #5
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

I am not the expert here but here goes.
1) Try to work out the Total Cost of Ownership (TCO) for your analysis. This means you have to consider the acquisition cost, the running cost, the replacement cost of your purchase.
To simplify, you can ask the dealers of the respective OEMs to provide you with their analysis (They must have done this for sure).
Acquisition costs is simply the cost, taxes, finance cost (like loans and upfront blocking of capital) and registration charges.
Running costs include (but not exhaust) the fuel cost, wages of workers, depreciation, maintenance, consumables like oil, tyre (2nd biggest running cost component) etc.
Replacement cost is breakdown, replacement of load body, hydraulics.
2) After you have an idea of the above, do the calculation of number of trips (you have already figured it out) and hence arrive at the same baseline as for rental, hired scenario.
3) Do take into account financing benefits like rental being completely tax deductible and no upfront locking up of capital.
4) Coming to softer issues, the productivity depends on how you pay your employees, rental company. For eg: If you decide a per ton agreement with a rental company, you may benefit from the deal but if you do that analysis for yourself, you may have overloaded trucks to squeeze every drop. You get the idea.

Best way IMHO is to ask for this type of TCO analysis from the OEM rather than wasting your energy on all this.
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Old 3rd June 2016, 13:40   #6
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

I would suggest you start renting out till you get a hang of how things work in the field. Even though it may work out bit costly.

When you own a truck, you need to take care of its maintenance , hire and retain a driver, get involved if the truck gets into a accident, grease authorities etc etc. Also buying just 1 truck for a fleet does not really make sense unless you are also willing to act as driver.

So , test the waters and then take a plunge. Because , fleet operation will be a long term plan
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Old 3rd June 2016, 13:45   #7
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

Like Sagar says, I would suggest to hire, or contract out.

Regarding brands - Bharat Benz looks to be getting popular.
AMW looks to be heading downhill.
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Old 3rd June 2016, 21:52   #8
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

I have no familiarity with the field. However after reading through your post and the replies, I think suggestions along the lines of what @turbospooler laid out makes most sense to me. I would add that the longevity of the proposed operation is perhaps an important variable. Is the company planning to use the trucks for say 5 years or is it a short term business that may come to an end in a few months? Obviously short term usage does not justify the capital costs involved in purchasing the vehicles. Even if it is a long term business, considering that maintaining a fleet of heavy tonnage vehicles is not the core competency of the business (I am assuming this), it would be better to go for hire. Again if it is a long term business opportunity, rather than hiring at a tonnage per km flat rate, one might be able to work out long term retainer ship arrangement with the vehicle operators at a more economical rate. For example, the company can commit to giving vehicle operators a minimum of X ton kms per month for Y period at a substantially discounted price and additional discounts on extra business. That might be the best option under the circumstances. Additional point to consider is the "expertise" of an established operator in the area in dealing with the authorities involved. Depending on the nature of the "authorities" in the area and the rapport that the operator is having with them, it might prove to be more valuable than hard economics. Again I am just thinking out aloud. I have no finance credentials. But I appreciate the learning opportunity that your thread has presented to me.
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Old 3rd June 2016, 22:21   #9
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

We are evaluating various options for a small mine (consider aggregate quarry) in Gujarat. The potential buyer is at a distance of about 25 odd kilometers one way and wants the material delivered at their site
You have not mentioned for how long will you have this contract, any challenges that can impact your contract in future ? Unless it's a very long term & you have large margins, with kind of limited experience handling such vehicles, it will be better if you can enter into a contract with someone who already owns such fleet or has experienced such job. Going further instead of fixing per Km or Per Hour try to negotiate Per Ton of Cargo invoiced / delivered, even if little expensive it will give you a clear idea about your exact costs.
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Old 4th June 2016, 01:15   #10
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

Your best bet is to float a tender for material movement from pithead to the customer. Focus on being a miner.

If you decide to do it yourself then you can call the local Tata or Ashok Leyland marketing team, explain to them the requirement and they will use their business scenario calculator to generate a report for you. This will give a fair idea should you desire on buying/renting/hiring

You also need to consider some basic things :

- From what depth the mineral needs to be ferried? After a certain depth you may need to look beyond Tata/AL. But if you only need to move the mineral from the pithead then TATA is the best overall package but YMMV.

- For a 50km round trip your real world return to pithead timing will be about 4 hours and not 2.5 hrs. These are typical timings in Eastern India with its inherent inefficiency. Perhaps in Gujarat this could be quicker.

- Does your costing includes freight? What is the percentage?

- A 12 hrs running cycle is severe underutilisation. This will adversely impact costs especially if you are owning or renting the assets. At a minimum plan for 18 hours. This will allow 6 to 7 trips.

- You need to allocate some time each day for regular maintenance & some time each week for servicing and repairs.

- Optimally useful life of tipper/dumper in mining operation is about 3 years.

Source: Stakeholder in a company that deploys 400+ tippers/tip trailers/bulkers in coal, iron ore and bauxite mining.
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Old 5th June 2016, 16:26   #11
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

There are a few important points to consider.

Conditions for acceptance:if the buyer rejects a load what happens? 1.25 hours is too long for sorting out papers.

Indemnity and accident controls: if accidents happen at loading or unloading, can you manage it?

Lighting points: if it's a day and night operation adequate lights are needed.

Road stability: is it a high gradient road or gentle slope? Is the road just mud or tarred.

The Slope of operations will make a huge difference in a trucks mileage. Like cars, if it's only low gear operations then you'll get 2 km/l. Horizontal, tarred straight roads will give 6 km/l.
So don't make the truck go deep into a mine. Let them install conveyors to bring the ore to road level.

Amount of Load is irrelevant to fuel consumption. The engines have huge torque. An elephant will eat same food both while walking alone in a jungle and carrying war eqpt.

Do you have meteorological data? Do roads get worse in the rainy season?

Repairs and truck waste mgnt.:
Kamaz and Ural tipper trucks are quite well built. Maintenance for first 5 years is only rubber bushings, tires and suspension components.

Regular Service cost must still be taken into account. There will be oils that need replacing. You need to stock at least basic spares.

Where do you dump old oil?

Mining trucks use special treads. They cost more. Standard distance before change is 40,000 km.
Will you use retreaded tires? You need storage for those.

Truck bed issues:
There will be heavy wear on the bed. It will be due to abrasion, sliding or impact.
I suggest you look at trucks with a U shape bed. The usual V shape ones will wear out very fast at the entrance hinge point and the joint of the V's. There is some physics in this. Load, change of direction and angle of discharge are related by a formula.

WearNTear = solar emissions x polestar angle x McHammer x Sunny Leone's mood

Just check the formula once.

Hyva is a tipper body mfg. company in Gujarat. Talk to them.

Air blast or water jet cleaning is needed for the truck in general, it's bed and tires. Add that to your costing.

Some states expect you to moisten the load to reduce dust. This reduces ore weight capacity marginally. But makes for a more rigid load.

Get trucks that can unload sideways. This will mean less road blockage and better turnaround time.

Quality Drivers are not easy to find. A bad driver can break a truck by wrong positioning at unloading or loading. 20-30 tons getting twisted is no joke. Maybe the chassis will break.

Get the highest power engines. Something with > 260 hp.

I hope your Sunday is better now.
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Old 5th June 2016, 18:03   #12
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Default Re: Commercial Fleet for a Mine: Hire, Rent or Buy?

I forgot to mention, you'll also need a truck weighing area. So add that cost and its personnel's salaries.

You may need a standby crane to extract trucks from ditches.

Don't get the operator in the video. Watch the last frame.
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Old 8th June 2016, 11:48   #13
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Shall try helping you with the info what you have given.

Rent/Hire/Own : At any cost an own fleet will only have the lowest Cost/Ton/Km transported. But if this business is short term say for about 6 to 8 months, you can go for rent. Otherwise if its going to mid and long term of about 2 years you will need to invest in tippers. But remember owning a truck needs good understanding of trucks, drivers and your service centres. You will actually need to soil your hands to know about them fully and to sustain in business for a long term. Otherwise if you are not confident in them go for a mixed fleet of own and rented fleet. This should be a proper trade off between your knowledge interest and to learn about trucks. Once you get settled you will be in a better position to know which is proving good interms of not just financially but for your comforts as well.

Choosing the brand : Location being GJ, AMW should have been the ideal choice. They have very good network and parts support as well. But now the company is in a not good position and not sure about the dealer doing well in your area. Take a call post visiting dealer. Otherwise both AL and TML are immediate best choice and you can choose between them. IMO you should also consider Bharat Benz as they have good presence in tipper and is equally good like AL and TML. The choice of brand is based on resale value. Incase you continue to use for lifetime and scrap the product you need not worry about resale value.

Choosing the product: If its going to surface to surface you can limit yourself to lower hp versions of around 180hp. They are good contenders and are ideal choice. Now a days even 180hp tippers have 9Speed GB and is much superior in performance. Otherwise if its mid to deep mines go for a mid range hp of around 230. In case the gradient is going to get steeper(rathet deeper) dont settle anything less than 230hp. Even 2528 from BB should be ok as better power to weight ratio the better turn around time as well. Your calculation of TAT will completely go wrong if you choose a wrong product.

25T or 31T or 37T : Obviously the higher tonner the lower cost per transportation. But tyre being the single largest expense next to fuel they will have more running costs as well. If its only surface to surface I would suggest even AL 3718il as they are newest entrant and is first on road 37T tipper.

Type of tipper body: Not to worry too much here as once your type of material is known, your dealer should be able to guide you. Basically its between box and scow. If its going to heavy rock you can opt for hardrox material for tipper body. These are quite expensive and they will be used only in deep mines to excavate rocks. Otherwise regular box should be ok. There is also underbody and front end tipping. The underbody tipping is least expensive but front end tipping is quite reliable. Most of 31T OE bodies are with FET tipping only all with only back door and is most convenient.

Since some of info required is not fully shared unable to narrow down to few products. Once they are available or with this info you can narrow down.

Last edited by bblost : 9th June 2016 at 20:45. Reason: as requested
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