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How to calculate the true cost of tool ownership

How to calculate the true cost of tool ownership

Hidden costs are everywhere in a construction business. From downtime to administration and repairs, it’s easy to lose sight of how much money you're actually spending on a day-to-day basis. Tool parks in particular are notorious for hidden costs, and when it comes to maximising value within your business, these unaccounted costs can make a huge difference.

Within every tool park, there are a range of direct and indirect costs. Direct costs refer to the tangible spend on tools that are easy to quantify in financial terms. Things like purchase price, repairs and calibrations are fixed costs that can be easily tracked and recorded.

Indirect costs, however, are far more difficult to quantify because they're measured in time. Dust cleaning, for example, doesn’t take long - but if several workers are doing this every day, the hours soon rack up. While this may seem insignificant, there are lots of indirect costs like this associated with tool ownership, which can hugely increase the costs within your tool park.

To get the most value out of your tool park, it’s essential to understand the true costs associated with tool ownership.

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Purchase price
The up-front costs of purchasing each tool

Batteries
Replacement and backup batteries for cordless tools

Repairs
Any costs associated with repairing tools

Chargers
Chargers have a short life-span and often need replacing

Back-up tools
Procuring and renting back-up tools

Calibrations
Costs associated with configuring tools

Procurement
Time taken to decide on and purchase tools

Health and safety claims
Costs associated when tools cause damage or injury

Administration work
All the time spent on office, warehouse and site administration

Corded tools preparation
Unfurling and reeling cords before and after work

Tool breakdowns
Reporting tools as broken and organising replacements

Time spent on hiring
All of the administrative costs spent on hiring

Dust cleaning
Clearing away dust after work

Downtime
Time lost when workers are unable to work

WHAT YOUR TOOL PARK IS REALLY COSTING YOU

Let’s look at an example of how small indirect costs can add up.

If a worker is paid PHP 67 per hour (following PHP 537 minimum wage with 8 working hours), and spend 30 minutes per day laying power supply cords for corded tools, this is a cost of PHP 33.5 a day. Here’s how that cost can quickly spiral:

PHP 33.5 a day X 10 workers on site x 10 jobsites x 260 (the average number of working days a year) = PHP 871,000 a year on preparing cords alone.

This figure is just for one direct cost. As others are brought in, the true cost of your tool park can quickly spiral.

why these costs matter

Knowing all the costs associated with your tools is essential in understanding the true value of your tool park. Without this information, it’s impossible to know how profitable your business truly is.

At Hilti, our productivity experts have helped thousands of businesses streamline their tool parks and optimise the way their assets are managed. By identifying the areas of waste in your business, and the hidden costs throughout your tool park, we can help you to make changes that will improve productivity whilst saving you money.