Have you heard of a term called ‘Total Cost of Ownership’? This blog will help you make the right choices, not just in your company, but in your personal life as well. I am going to use ‘high performance lubricants’ as an example, as this will reduce my total cost of owning this blog!
As a sales person I often get asked “why use high a performance lubricant for my machinery? Does it really make any difference, since we are already running problem free?”
Before, I used to answer by explaining the benefits of our products, but soon I realized that, while my information was important and valid, it could be dismissed as a boring sales pitch (with the prospect probably thinking, “here we go again, another salesman with ‘great’ product”). I learned from Kenneth Lerman, one of the speakers at our annual sales meeting, that whenever you inject the topic of money into the conversation, it becomes more interesting.
The Total Cost of Ownership is the measure of forecasting and comparing the long term cost of owning two products that have the same function, each with different capital and operating costs. Some customers tell me that Lubrication Engineers’ lubricants costs more (capital cost) than what they are currently using, but are they really considering the operating cost? As an example, let’s say you compare Lubrication Engineers’ gear oil with ordinary gear oil for use in your gearbox:
|Lubrication Engineers (Capital Cost $200)||Ordinary Brand (Capital Cost $100)|
|Extend Gearbox life by 3-5 years||Meets gearbox operating standards|
|Annual downtime 6 days||Annual downtime 12 days|
|Drain Interval 3 times a year||Drain Interval 4 times a year|
|Labour maintenance “ x”||Labour maintenance “x+x”|
|Utility (Electric) cost “x”||Utility (Electric) cost “1.5x”|
|Production speed “x”||Production speed < “x”|
|Personal training 3 times a year||No training scheduled|
|Environment cost (waste/pollution) “x”||Environment cost (waste/pollution) > “x”|
Now, let me ask you, which option costs more?
By considering all the cost factors in choosing the right supplier/partner, you could very well ensure your personal and your company’s corporate success for the long term.
Blog by Birju Shah, a dedicated employee @ Lubrication Engineers of Canada