Documented savings

Total cost savings are not always reflected in the purchase price.

An aggregate facility needed a new gear reducer for a conveyor. The conveyor’s gear reducer had been in place since the plant was built in the mid 1980’s. In an effort to find a new reducer to replace the old one, the facility began looking at various manufacturers.

By comparing the Baldor Dodge Torque Arm II to the competitor’s gear reducer, Baldor was able to illustrate the total cost savings that were not reflected in the purchase price. Total operating cost parameters such as initial installation costs, long-term maintenance costs, and purchase price were included in the analysis to give a true price comparison to the customer.

Although the purchase price of the competitor’s reducer was $64 less than the Dodge Torque Arm II, the annual operating cost was $522 more than the Baldor solution.

In addition to searching for a new reducer, this aggregate plant also needed a new main drive for its C-1 conveyor drive system. By listening to the customer and understanding their needs, Baldor was able to provide a complete pre-assembled drive system that included a new reducer, motor, v-drive and belt guard. This also helped reduce installation time and money, therefore contributing to additional total cost savings.

Annual operating costs

Step 1 — For each product that was analyzed, Baldor asked the following questions:

  • What was the amount of time required to perform each of the following activities?
  • Lock out conveyor drive and belt
  • Remove the existing drive
  • Select and purchase new components
  • Install a new drive
  • What was the number of employees required for each activity?
  • What was the labor rate for each activity?
  • What was the cost of parts for each activity?
  • What was the replacement frequency of each component?
  • What were the downtime costs ($ per hour)?

Step 2 — Baldor calculated the total operating costs for the existing and proposed solutions using the following formulas:

Installation Cost = [(Time Spent on Activity/60 Minutes) x (# of Employees for Each Activity) x (Labor Rate) x (Replacement Frequency)]

Downtime Cost = [Downtime Cost ($ per Hour) x (Time Spent on Activity) x (Replacement Frequency)]

Efficiency Cost per Unit = [(kW Spent*) x (# of Operating Hours) x ($kW per Hour) x (# of Years in Operation) x (# of Units)]* kW Spent = Unit HP x 1/Unit Efficiency

Result:

  • Existing or alternative total operating cost: $ 6,285
  • Baldor total operating cost: $ 5,763
  • Savings: $ 522

Step 3 — Baldor compared the purchase price of the existing and proposed solutions to illustrate an accurate assessment of overall costs.

Result:

  • Existing or alternative purchase price: $ 4,579
  • Baldor purchase price: $ 4,643
  • Savings: $ (64)

Step 4 — Based on these calculations, Baldor was able to discover and document a total savings of $ 458.

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