Life cycle cost analysis of a fuel reduction for AGVs in a container terminal

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Life cycle cost analysis of a fuel reduction for AGVs in a

container terminal

By

Zhe Chuan Ooi

S1580795

Msc. Thesis Project

Technology and Operations Management

Examination committee

Dr. ir. Rob J.I. Basten (University of Twente)

Prof. dr. I.F.A. Vis (University of Groningen)

Henk Jan Bax (Europe Container Terminals B.V.)

Arie Vroegindeweij (Europe Container Terminals B.V.)

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Preface

This thesis is the result of my graduation project of the Master of Science program, Technology and Operations Management, at the University of Groningen. I have spent 6 months as an intern at ECT conducting my research and writing the thesis.

From the University of Twente I would like to thank Rob Basten for his clear feedback and providing support for my graduation project. From the University of Groningen I would like to thank Iris Vis for her feedback. Their guidance and interest have been very valuable to the quality of this thesis. At ECT I would like to thank my both supervisors Henk Jan Bax and Arie Vroegindeweij for giving me all the time and flexibility I requested. I have very much appreciated our discussions and effort they have put in my graduation project. Furthermore I would like to thank ECT’s maintenance engineers for their feedback and the rest of my colleagues from ECT for sharing their knowledge and

experiences with me.

Furthermore, I want to thank my family and friends for supporting me during my study period. Zhe Chuan Ooi

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Executive summary

This report is the result of a Master-thesis project. The aim is to develop a model for determining the life cycle costs of a fuel reduction project for AGVs in a container terminal environment by means of a case study. The case study focuses on Europe Container Terminals B.V. (ECT). Its main activity is discharging, temporarily storing and loading of containers. The containers that are unloaded from ships are loaded onto automated guided vehicles (AGVs), which transport the containers to the stack. ECT currently uses 273 AGVs for its Delta Terminal. In 2010 it was estimated that the fuel costs for these AGVs were €7,500,000. In order to reduce these fuel costs, a project called “Low RPM” and “Engine Off” was initiated. This project reduces the fuel consumption of the CT60H AGVs by switching off the engine and let the engine run at low revolutions per minute where possible. However, these measures could lead to additional breakdowns, because certain parts are used more intensely, such as the starter engine, which would increase the maintenance and operations costs. The managers of the maintenance department want to gain more insight in the impact of the project “Low RPM” and “Engine Off” on the different cost categories and look for opportunities to reduce their maintenance costs.

First, a cost model is selected to determine the costs that are caused by implementing the fuel reduction measures by comparing different cost models through a range of information sources. The three models that are most commonly used are Life Cycle Cost (LCC), Total Cost of Ownership (TCO), and Whole Life Cost (WLC). Each model has its own characteristics and purposes for which it can be used, because different models, include different costs. In case of the fuel reduction project, LCC has an advantage over the other cost models, because it only includes the costs that are affected by the fuel reduction measures. Next, a general cost model is composed which is used to come to a LCC model for the fuel reduction project by studying information from the information network of ECT and interviewing representatives of different departments within ECT. The LCC model helps to determine the impact of the fuel reduction project on the different cost categories and to identify possibilities for reducing the maintenance costs. The conclusions for the case study are presented below.

The implementation of the “Low RPM” measure leads to a monthly reduction in costs of €65,000 and the “Engine Off” measure leads to a small additional monthly reduction of €5,000.

The costs that are included in the analysis are shown in Figure 1. LCC of project

“Low RPM” and “Engine Off”

Research and

Development Cost Operations Cost Maintenance Cost

Software, tests and additional costs Production claim and QC cost Fuel Cost Planned maintenance Unplanned maintenance Starter engine (material and labor

cost)

Remaining preventive maintenance (material

and labor cots)

Starter engine (material and labor

cost)

Engine start failure (material and labor

cost)

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The reduction of costs is mainly caused by the large amount of fuel reduction, which is included in the operations category. This is calculated with a fixed, virtual fuel prize, to compensate for the fluctuating fuel prize. The drawback of implementing the fuel reduction measures is limited to a small increase in costs due to additional breakdowns. This means that the maintenance department does not have additional costs due to the implementation of the fuel reduction measures, while the operations department reduces its fuel costs greatly and therefore, the project of “Low RPM” and “Engine Off” should be continued for the CT60H AGVs.

Different opportunities for reducing the maintenance costs were identified by examining the current planned maintenance strategy for the starter engine of the CT60H AGVs.

Currently, many starter engines are replaced, not long after they are installed on the CT60H AGVs. This leads to unnecessary costs which are caused by different reasons:

 The repairable starter engine policy.

 The quality of the starter engine.

 Administrative errors.

 Installation of the incorrect starter engine.

In 2012, thirty-six premature replacements of the starter engine are registered, which equals €17,000 in terms of material and labor costs. This could have been prevented if the different causes of the premature replacements were solved. Also, the planned maintenance interval of the starter engine is examined. Decreasing the interval will not lead to savings, because of the increasing costs for additional planned replacements. Increasing the interval could lead to savings, because this strategy will lead to less costs for planed replacements. These savings slightly outweigh the costs for additional breakdowns. However, this savings are minor and uncertain because of the incomplete data. That is why the current replacements interval should be maintained.

The most important recommendations for the case study are:

 The case study focuses on the CT60H AGVs. However, the measures of “Low RPM” and

“Engine Off” are implemented on the other types of AGVs as well. Determining how each series is affected, could lead to a better understanding of the total impact of the fuel reduction project, because each type of AGV has its own characteristics, such as a different fuel usage, age, and parts. The different types of AGVs are therefore affected differently by the fuel reduction measures. This could lead to help to determine whether the “Low RPM” and “Engine Off” measures should be implemented on the different type of AGVs.

 The fuel costs are based on an estimation of the fuel usage of the AGVs, instead of the actual

fuel consumption, because this is not measured yet. These fuel costs have a large impact on the total costs that are included in the LCC. Measuring the fuel consumption per AGV (or type of AGV) allows to determine whether the fuel reduction measures should be implemented on the AGVs.

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List of abbreviations

AGV Automated Guided Vehicle

ASC Automated Stacking Crane

CBS Cost Breakdown Structure

DT Delta Terminal

ECT Europe Container Terminals B.V.

FEU Forty-Foot Equivalent Unit

FTE Full-Time Equivalent

HPH Hutchinson Port Holding

LCC Life Cycle Cost

NPV Net present value

PCS Process Control System

QC Quay Crane

RPM Revolutions Per Minute

RQ Research question

SC Straddle Carrier

TCO Total Cost of Ownership

TEU Twenty-foot Equivalent Unit

TOD Technical Maintenance Department (Technische Onderhoudsdienst)

TOM Technical Maintenance Manager (Technische Onderhoudsmanager)

TP Transfer Point

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1 Introduction

This chapter starts with the motivation of the research in Section 1.1. This is followed by the problem definition and research questions in Section 1.2. In Section 1.3, the methodology is explained. This chapter concludes with the report overview in Section 1.4.

1.1 Motivation

An automated guided vehicle (AGV) is a driverless, computer controlled vehicle, that is programmed to transport materials within a particular facility. AGVs travel from one pickup and drop-off point to another on fixed or free paths. There are multiple advantages of using AGVs for material handling over manually driven carts. These benefits include reduced labor, increased productivity, additional flexibility, and automatic interface with other systems (Kulwiec, 1983). They can be used in different environments, such as manufacturing, distribution, transshipment, and transportation areas (Vis, 2006).

Within container terminals, AGVs are partly responsible for the internal transport of the containers, together with other material handling equipment, such as the straddle carrier (SC), and the

automated stacking crane (ASC). The use of automated equipment requires complex control strategies to exploit the possibilities of the automated equipment (Günther and Kim, 2004). Due to the large amount of fuel that is consumed by the material handling equipment, and the increasing fuel prices, there is a need for container terminals to reduce their fuel consumption. Fuel reduction projects can be initialized to explore the possibilities for reducing its fuel consumption, and therefore also reducing its fuel costs. However, there are also potential drawbacks of initiating fuel reduction projects, such as the increase of failures that is caused by certain fuel reduction measures, or high investment costs. The effect of a fuel reduction project for AGVs in a container terminal can be determined with different methods. Life Cycle Cost (LCC), Total Cost of Ownership (TCO) and Whole Life Cost (WLC) are most commonly used. Each model has its own characteristics and purposes for which it can be used, because different models, include different costs. For determining the costs for of a project, LCC has an advantage over the other methods, because it can include the costs that are affected by the implementation of a certain project or change. LCC also allows for identifying opportunities for reducing the life cycle costs. This will be explored in more detail in Section 2.2. Research work has been published for performing LCC analyses for different kinds of vehicles (e.g. Lin et al., 2013; Jeong and Oh, 2002; Marr and Walsh, 1992). However, these analyses cannot be directly applied to AGVs, because different equipment will result in different LCC results. This thesis intends to develop a model for determining the life cycle costs of a fuel reduction project for AGVs in a container terminal environment by means of a case study. The case study focuses on Europe Container Terminals B.V. (ECT), which is the largest container terminal of Europe. ECT wants to gain insight in the costs that are affected by implementing a fuel reduction project for its AGVs, mainly because this will help to determine whether unexpected costs are incurred.

1.2 Problem definition and research questions

Container terminals can initiate fuel reduction projects for their AGVs to reduce the fuel

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and how the maintenance costs for the AGVs can be reduced. This leads to the research questions (RQs), which are divided in general research questions and case study research questions.

General research questions:

RQ1. By what method can be determined how a container terminal is affected by initiating a fuel reduction project for its AGVs?

Different life cycle analysis models are compared and the most suitable model is selected. RQ2. How should a life cycle cost model be developed to determine how a container terminal is

affected by a fuel reduction project?

There are different processes for developing a life cycle cost model. The process that is used in this thesis will be described.

Case study research questions:

RQ3. How are the life cycle costs of ECT CT60H series affected by the fuel reduction project of “Low RPM” and “Engine Off”?

The composition of the life cycle costs, before and after the fuel reduction project, are compared with each other to identify the changes for the different costs.

RQ4. What can be done to reduce the maintenance costs for ECT’s CT60H AGVs?

Suggestions are made for the maintenance strategy for the starter engine of the CT60H AGVs.

1.3 Methodology

The objective of this research is to present a model for determining the life cycle costs of a fuel reduction project for AGVs in a container terminal environment by means of a case study. A new model is developed, which makes it a design science project.

First, literature concerning different cost models are reviewed through a range of information sources, such as internet search engines, scientific databases, and academic abstracts to determine what cost model should be used. This also leads to a general cost model, which can be used for the case study. Before coming to a specific cost model for the case study, data is gathered by

studying information that is available within the information network of ECT (i.e., ECTNet, ECTQM and TODInfo) and interviewing representatives of different departments within ECT e.g.:

maintenance engineer, operations manager, and financial manager. This information is used to come to a cost model for the case study. The proposed model is discussed with maintenance engineers and an operations manager for validation. After composing the cost model for the study, possibilities for reducing the maintenance costs for ECT’s AGV are identified and also discussed with the

maintenance engineers and operations manager. This process is also used to determine the steps to develop a general life cycle cost model, which can also be applied to different cases.

1.4 Report overview

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2 Literature

This thesis aims at developing a life cycle cost model for a fuel reduction project of AGVs in a container terminal. Therefore, literature is reviewed about AGVs in Section 2.1. Section 2.2 is an introduction to cost analysis models. Section 2.3 explains why the LCC method is chosen for this thesis and how the different categories within the LCC can help to categorize the costs.

2.1 AGVs

An automated guided vehicle (AGV) is a driverless, computer controlled vehicle, that is programmed to transport materials within a particular facility. AGVs were introduced in 1955 (Müller, 1983). It is are among the fastest growing classes of equipment in the material handling industry (Tanchoco and Bilge, 1997). AGVs have different advantages for material handling over manually driven carts. These benefits include reduced labor, increased productivity, additional flexibility, and automatic interface with other systems (Kulwiec, 1983). They can be deployed in different material handling

environments, such as manufacturing, distribution, transshipment and (external) transportation areas (Vis, 2006). The specifications of AGVs differ per environment. Groover (1987) divides AGVs into three categories as listed below:

 Driverless train. This type of AGV is typically used in a warehouse for loading and unloading

heavy loads and consists of an AGV that pulls multiple trailers, forming a train.

 Pallet trucks. This type of AGV is generally used in distribution centers for product delivery by

loading the pallets on the vehicles after which it proceeds to its destination and automatically return to the loading area.

 Unit load carriers. Unit load carriers are generally used for individual load movement in

warehousing and distribution centers. They usually have the ability to maneuver in tight areas and operate independent of one another.

AGVs travel from one pickup and drop-off point to another on fixed or open paths. For fixed paths, different guidance mechanisms can be used such as embedded wires in the floor, optical sensors, and mapping of the parts with software. Altering the path layout, requires a modification of the whole system and physically changing the paths. The benefit of this method is that the navigation is easy, because it only requires a sensor to detect the guide on the floor (Martínez-Barberá and Herrero Pérez, 2010). In an open path environment, an AGV can theoretically, freely navigate between two locations.

This thesis focuses on AGVs within container terminals, in which they are part of the automated transport handling process for loading and unloading containers. They can be controlled by an automated guided vehicle system, which communicates with the other material handling equipment for an efficient container transportation process. Within the application of AGVs in container

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2.2 Cost analysis model

There are different models that can be used for a cost analysis. The differences between these models lie in the inclusion of different cost types in various stages of a project. The different cost types are discussed in Section 2.2.1. These cost types will be used to differentiate the different cost models that are explored in Section 2.2.2. In Section 2.2.3, the cost model that is used for this thesis is selected.

2.2.1 Cost types

The total project cost is more than the acquisition cost; it is the cost incurred throughout the life of the project (El-Haram et al., 2002). This means that it can include different costs such as research and development cost, operations cost, but also disposal cost. NATO (2003) divides the different project costs into six categories. These categories are described below, together with an example of

providing a safety course for the employees of a company, to distinguish the different cost types more clearly.

 Linked and non-linked costs:

o Linked costs are costs that are assigned to activities or resources that can be associated with the project cost. For instance, assigning instructors for the safety course.

o Non-linked costs are costs that are not directly related to a project, such as expenses for medical services, buildings or training. The safety course for instance can be assigned to linked costs when they are required to perform a specific project, but can be considered non-linked costs if the course is used for an entire organization.

 Direct and indirect costs:

o Direct costs are costs concerning activities or resources that can be assigned directly to a unique product or project. Salary for the instructor of the safety course is an example of such a direct cost.

o Indirect costs are costs concerning activities or resources that are not directly related to a product or project such as administration or security costs. It also depends on the ability of an organization to measure whether costs are direct or indirect, because an activity can also be related to multiple projects. The costs are direct when they can be assigned proportionally to specific projects and they are indirect when they cannot be specified per individual project. An example of an indirect cost for the safety course is the cost for security for the area where the course is held.

 Variable and fixed costs:

o Variable costs are expenses that are affected by the existence of a project. They change in proportion to the characteristics of the project such as the fuel costs. An example of such a cost is the cost for books. The number of books is proportional to the number of employees that are enrolled to a safety course, when fewer books are required with fewer participants.

o Fixed costs are costs that do not vary because of the existence of a project. They tend to be time-related. In case of the safety course, this can be the building cost where the course is held.

These cost types will be used to differentiate between the different cost models that are introduced in the next section.

2.2.2 Different cost models

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products, but they can also be applied to projects. NATO (2003) distinguishes these models, based on the different cost types that the models include as shown in Figure 3. The three cost models and the differences between these models will be explained next.

LCC

TOC

WLC

Direct costs and indirect variable costs LCC + linked indirect fixed costs TOC + non-linked indirect fixed costs

Figure 3 Graphical clarification of cost analysis models (NATO, 2003) Life Cycle Cost (LCC)

There is no standard for an LCC and there are many different definitions of what it should and should not be used for (Clift, M., 2003; Durairaj, S.K. et al., 2002; Fabrycky, W.J., Blanchard, B.J. 1991). However, the general purpose of the LCC can be identified. The objective of this method is to provide a framework or model for finding the total cost of the different stages of the product with an

intention of reducing the total cost. The emphasis is on understanding the composition of the purchase price, and determining the costs for the different phases of the life cycle of an asset. Fabrycky and Blanchard (1991) divide the life cycle in the following phases:

 Research and development

 Production and construction

 Operations and maintenance

 Retirement and disposal

LCC includes direct costs and indirect variable costs. All indirect costs that are not affected by the implementation of a new project can be excluded, depending on the scope of the analysis.

Woodward (1997) presents a model for analyzing the LCC with the focus on optimizing the value for money in the ownership of the product, by including all costs concerning the product during its operational life. Optimizing the trade-off between these cost factors will determine the minimum life cycle cost of the product. This requires estimating all the different costs that are included in the model, before selection the best alternative.

Total Cost of Ownership (TCO)

TCO helps to understand all costs that occur during the lifetime of a product. It is regarded more as a philosophy, rather than a tool, because adopting TCO requires a cultural change. The focus shifts away from a price orientation in procurement towards total cost understanding (Ellram and Siferd, 1993).The relevant costs that are included in the TCO vary due to various factors, such as the nature, magnitude, and importance of the purchase (Schmenner, 1992). A general categorization of costs is identified for the TCO method by Blad and Ström (2008):

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 Transactional costs. These costs arise when purchasing an asset.

 Post-transactional costs. These costs are related to the usage and disposal of the asset.

The concept of TCO is similar to LCC in the way that it also analyzes costs from a long-term

perspective and shows the importance of measuring all activities associated with the life cycle of a product. However, TCO is broader in scope, because all costs that are included in the LCC, are also included in the TCO, but supplemented with indirect, fixed, linked costs. These costs can include operations costs, planning and control costs, common facilities costs, supplier equipment costs, etc. This is why TCO is mostly used for supplier selection and supplier evaluation (Bhutta and Huq, 2002). Whole Life Cost (WLC)

WLC is defined in the draft International Standard, ISO 15686 Part 5 as: “Economic assessment considering all agreed projected significant and relevant cost flows over a period of analysis expressed in monetary value. The projected costs are those needed to achieve defined levels of performance, including reliability, safety and availability”. It includes both capital and revenue costs over the whole life of the project in the form of annual cash-flows, together with non-linked, indirect fixed costs. It can also be used for decision making of alternatives that differ not only in the initial costs, but also in the maintenance and operational costs. Opportunity costs are also included, which represents the cost of not having the money available for alternative investments, or the interest that would have been generated. This method starts with calculating the net present value (NPV), by discounting all costs and revenues associated with the acquisition, use, maintenance, and disposal of different alternatives. Then the alternatives are ranked, based on the outcome of the NPV and one alternative is selected (Kishk et al. 2002).

WLC typically includes all costs of the TOC (and LCC), supplemented with indirect, fixed, non-linked costs such as medical services, basic training, recruiters, etc. WLC is often used for strategic view on an organizational level and is broader in scope than LCC and TOC.

2.2.3 Cost analysis model selection

The three cost models that are described in Section 2.2.2 can all be used to determine which cost elements are affected by implementing fuel reduction measures on AGVs in a container terminal. However, each cost model has its own characteristics and could lead to different results. For this thesis, it is only relevant to determine the costs that are affected by implementing the fuel reduction measures. In other words, pre-purchase costs associated with a particular supplier are less relevant, which are included in the TCO. WLC includes even more costs that are not directly associated with implementing the project for fuel reduction. The wide scope of these two cost models makes them less appropriate than LCC. LCC also has the benefit over the other two models that it can determine more exactly whether a proposed change is cost-effective against no chance by only including the affected cost elements (Clift, 2003). These are the reasons why LCC is used in this thesis for

determining the implications of implementing the fuel reduction project. This also answers RQ1: “By what method can be determined how a container terminal is affected by initiating a fuel reduction project for its AGVs?”.

2.3 General LCC model

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2.3.1 Cost breakdown structure

A cost breakdown structure helps to identify all relevant cost elements and structure the LCC. The cost breakdown structure must be designed to meet the objectives of the project and the company concerned for performing the LCC analysis and trade-offs (Woodward, 1997). As mentioned in Section 2.2.2, Fabrycky and Blanchard (1991) divide the life cycle in four different phases. These four phases can also be used for setting a cost breakdown structure (CBS) for the project of “Low RPM” and “Engine Off”. Each phase is defined as a cost category as shown in the CBS of Fabrycky and Blanchard (1991) in Figure 4.

Figure 4 Cost breakdown structure (Fabrycky and Blanchard, 1991)

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Life cycle category Use / %

Research and development 20

Production and construction 87

Operation and maintenance support 98

Retirement and disposal 26

Table 1 Use of life cycle categories in LCC case studies of Korpi and Ala-Risku (2008)

Table 1 shows that not all LCC analyses have the same cost breakdown structure. Each project has its own characteristics and it can include different categories. However, before selecting the cost category it is helpful to gain insight in each of the different categories. This will be explained in the next section.

2.3.2 General cost elements

The cost breakdown structure of Fabrycky and Blanchard (1991), as shown in Figure 4, includes

different elements per cost category. However, not all elements can be directly related to costs. Therefore, the cost categories are operationalized to cost elements in this section.

Research and development cost

Research and development costs are the initial costs that are incurred before a project is initiated. It is a function of the project definition requirements. These requirements are used to achieve the project objectives with help of designers, engineers, constructors and their knowledge and

experience in planning, design, procurement, and field operations (Chasey and Schexnayder, 2000). Research and development establishes the reliability, maintainability and the effectiveness of the project and its components. Also, it is often stated that 80% of the life cycle cost is determined in this phase (e.g., Chao and Ishii, 2004). Since the research and development costs are cost that are

realized before an asset is brought into operation, it should also include the initial capital costs. According to Woodward (1997), these capital costs can be divided into three categories:

 Purchase costs. These costs include the assessment of equipment, buildings, fees and other

investments of items that are required to perform the project.

 Finance costs. This is the cost and interest for borrowing money to build or purchase assets.

 Installation and training costs. Installation and training costs include the costs of setting up the machine, and training the operators to use the machine. However, before the

installation, the product and project has to be designed first. This will be explored in more detail next.

The research and development processes are the activities that are required to design a product or project. These activities are mostly intellectual and organizational, rather than manufacturing a physical product or developing a solution. This is done in the next phase. The process of research and development can be considered a risk management system (Ulrich and Eppinger, 2008). In the early stages of the project, various risks are identified. In the later stages of the project, these risks are reduced and the functions of the asset are approved. This process should lead to a solution that is well tested and functions correctly.

Production and construction costs

After the research and development phase of the project, the proposed changes can be

implemented. This will be in the form of construction or adjusting the assets, but it can also include training the operators to cope with the proposed changes. Ulrich and Eppinger (2008) divide the production and construction costs into the following costs:

 Component costs. The component costs are the costs for the parts that are required to

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 Assembly costs. The assembly costs usually incurs labor costs, but also costs for equipment and tooling.

 Overhead costs. Overhead costs cover all the other costs for the production and

construction. This category can include different costs such as costs for material handling, shipping, facilities, quality assurance, etc.

Operations and maintenance costs

The category of operations and maintenance costs contain the costs incurred during the use of the asset and the maintenance that is required.

The operations costs are the recurring costs, incurred with the operations of an asset. These costs can include:

 Materials

 Fuel costs

 Operating costs

 Downtime costs

Maintenance is defined as the combination of all technical and associated administrative activities required to keep equipment, installations, and other physical assets in the desired operating condition or restore them to this condition (Pintelon et al., 1997; Pintelon and Vanpuyvelde, 2006). Maintenance can be performed in different ways. Kumar and Westberg (1997) divide the

maintenance costs into planned and unplanned maintenance costs. The difference between these two types of maintenance is explained below:

 Planned maintenance, also referred to as preventive maintenance, involves the repair,

replacement, and maintenance of equipment in order to avoid unexpected failure during use (Mann et al., 1995). It is used to minimize the costs of repair and equipment downtime. It can also help to increase the reliability of the machines or decrease the costs of repairable systems (Yuan, 2001). Equipment downtime can lead to different costs such as loss of production capacity or reduced product quality.

 Unplanned maintenance involves actions for repairing equipment after a breakdown. The

costs for unplanned maintenance are usually higher than the costs for planned maintenance, because breakdowns can occur in a random location and at a random time. This is also the case for corrective maintenance, because this is unplanned as well.

The maintenance costs are the costs for repairing the assets, but also costs for planned maintenance. In normal operational circumstances, deterioration of equipment takes place as soon as it is installed. This leads to more failures and eventually to equipment downtime, quality problems, safety hazards etc. (Muchiri et al., 2011). These are the costs for the maintenance:

 Planned maintenance costs.

 Corrective maintenance costs.

 Downtime costs.

 Labor costs.

 Material costs.

Retirement and disposal costs

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 Physical life. This is the period that the asset is expected to perform its operations, before replacement or revision is required. The starter engine is used more intensively, but the amount of engine hours decreases. It is hard to determine whether this will increase the physical life of the AGV.

 Functional life. This the period over which the need of an asset is determined. This is directly

related to the physical life expectancy.

 Technological life. This is the period until the development of the technology comes up with

a superior alternative. On aspect of the technological developments concerns the economical use of fuel. The technological life will probably increase, because the project of “Low RPM” and “Engine Off” will reduce the fuel consumption.

 Economical life. This is the period during which an asset is expected to be useful with normal

repairs and maintenance. This is also directly related to the physical life, but it also depends on whether the costs of the parts that are used more intensively or not.

 Social and legal life. This is the period over which an intangible asset is allowed by legal requirements. There are legal requirements about the fuel consumption and CO2 emission. A reduction in the fuel consumption will also lead to a reduction of CO2 emission and therefore increase the social and legal life of the AGVs.

The retirement and disposal costs are incurred at the end of the asset’s economical life. This category includes cost of demolition or selling the asset, which will be deducted from the value of the asset at the end of its life:

 Disposal costs

The main cost categories that can be identified for this phase are the following:

 Service years

 Acquisition/ or book value

 Useful life

 Useful life moves

 Depreciation

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3 Case study

This chapter starts with an introduction of ECT and its Delta Terminal in Section 3.1, followed by an explanation of the use of its AGVs and the projects aimed at reduction of the fuel usage in Section 3.2. In Section 3.3, the fuel reduction project for the case study is selected and the demarcations are explained. This chapter concludes with the LCC elements for the fuel reduction project in Section 3.4.

3.1 Company description

This section starts with an introduction to the company in Section 3.1.1. This is followed by an introduction to ECT’s Delta Terminal in Section 3.1.2. In Section 3.1.3, the overall process of the Delta Terminal is explained. This section finishes with an introduction to the maintenance department of the Delta Terminal in Section 3.1.4.

3.1.1 Europe Container Terminals B.V.

Europe Container Terminals B.V. (ECT) is the largest container terminal operator in Europe. It has a unique position in Europe because of its ability to handle the largest ships of today.

ECT was founded in 1966 and, initially a small company, its City Terminal was located at the

Eemshaven and processed 160,000 containers in 1970, rising to more than a million in 1983. In 1985, ECT constructed the Delta Terminal at the Maasvlakte. In 1988, ECT cooperated with Sea-Land to establish the first robotized terminal container with automated guided vehicles (AGVs) and

automated stacking cranes (ASCs) of the world. 1993 was the year of the opening of this Delta/Sea-Land Terminal. Later, in 1999, Sea-Delta/Sea-Land was taken over by Maersk. In 2002, ECT became part of the Hong Kong-based Hutchison Port Holdings (HPH) (98%) and Stichting Werknemersaandelen ECT (2%). HPH is the world’s largest port investor, developer and operator with interest in different countries throughout the world. In 2008, ECT opened the Euromax Terminal on the northern side of the Maasvlakte. Currently, ECT has a throughput of 7.7 million twenty-foot equivalent units (TEU) and employs around 2150 people (ECT intranet, 2013).

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Figure 5 shows the location of ECT’s terminals. The ECT Delta Terminal (DT) and the Euromax Terminal Rotterdam, located on the Maasvlakte, are automated container terminals. The largest ships can load and unload their containers here. The ECT City Terminal is located about 30 kilometers from the North Sea and handles container ships with a capacity of up to 8000 TUE and specializes in the handling of reefer cargo.

3.1.2 The Delta Terminal

This research focuses on the Delta Terminal (DT). This terminal has a high level of automation and with a draft of 16.65 meters, it is able to handle all current container vessels. Containers that arrive at the DT are shipped from terminals all over the world. These containers can contain the most diverse products. Transport of containers from the quay cranes (QCs) to the stack is performed by AGVs, which are unmanned vehicles that can automatically drive a programmed route. The

automated stacking cranes (ASCs) can stack the containers in order to reduce the required space for the storage of containers. This process will be described in more detail in the next section.

3.1.3 Overall process

The main activity of ECT is discharging, temporarily storing and loading of containers at its three deep-sea terminals. Not every flow of containers is the same, due to different types of containers and cargo restrictions. However, a general flow of containers can be identified for the main activities. This is shown in Figure 6. The general flow is the following:

 Most container flows start with barges, deep-sea vessels or feeders that arrive in the DT.

 Next, they are unloaded with help of a quay crane (QC) that picks up one or two containers

at a time from a ship, depending on the type of QC, and puts it on an automated guided vehicle (AGV). The AGVs queue up at the QC to reduce the downtime of the operation.

 The AGVs transport one or two containers to the stack, depending on the type of AGV. The

stack can be divided into two locations: one on the water side and one on the landside access point.

 On the water side, the container is picked up by an automated stacking crane (ASC) from the

AGV and then placed in the stack.

 When a container is ready for transporting it is picked up by an ASC from the stack and

placed at the exit point on the landside of the stack.

 Depending on the destination of the container it is then placed on a truck, a multi trailer

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Stack

Stack Maersk

(not part of ECT)

Ships Ships Stack Stack Ships Water side Quay crane (QC)

Automated Guided Vehicle (AGV) Area Straddle carrier (SC)

Automated stacking crane (ASC)

Trucks

Multi trailer system (MTS) Train

Automated Guided Vehicle (AGV) Area

Automated stacking crane (ASC)

Straddle carrier (SC)

Container flow

Figure 6 Container flow of the DT

3.1.4 Maintenance department – Delta Terminal

This graduation project is conducted in the business office (Bedrijfsbureau, BB) of the Technical Maintenance Department (Technische Onderhoudsdienst, TOD) of the DT. The TOD is part of the Technical and Engineering Department of ECT and employs 188 people, as shown in an organization chart in Figure 7. The TOD BB is responsible for the equipment of the DT. Other departments of the TOD DT are vehicles, cranes, logistics and buildings. The Delta Terminal has a maintenance

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Executive board

Technical &

Engineering Manager Operations Mangager

Human Resources Manager

Finance Manager Marketing & Sales _Manager

Projects Manager Logistics Development Manager Infrastructure & Equipment Manager TOD HT Manager

TOD DT Manager TOD EMX Manager ICT Manager

Cranes TOD BB

Maintenance Eng. Sr. Maintenance Eng.

Adm. Assistant TOD Technisch specialist Sr. Technisch specialist

Work Prep. Officer Sr. Work Prep. Officer

Work Prep. Officer-planner

TOD Logistics

Vehicles BTOD

Figure 7 Organizational chart of the Technical Maintenance Department of the Delta Terminal

3.2 ECT’s AGVs

This thesis focuses on the AGVs (Automated Guided Vehicles) of the DT (Delta Terminal). This section starts with explaining the operations of the AGVs within the Delta Terminal in Section 3.2.1. Section 3.2.2 provides insight in the fuel usage of the AGVs. The different projects concerning fuel reduction are explained in Section 3.2.3. This section finishes with selecting the fuel reduction project for the case study and explaining the demarcations in Section 3.2.4.

3.2.1 AGVs within the Delta Terminal

ECT currently uses 273 AGVs for its Delta Terminal. As mentioned in Section 3.1.3, the AGVs are used to automatically transport containers to the stack. An AGV has an advantage over a conventional manned vehicle because it can operate in theory 24/7 without human intervention. However, it is sensitive to breakdowns because of its complexity. An AGV receives a command from the Process Control System (PCS) to automatically drive a specific route. It is able to adjust its position and speed with help of an onboard navigation system. The AGVs use a reference frame and transponders in the pavement (every 2 meters) in the operating area of the AGVs. This system is called a block system, because each AGV claims a number of blocks. These blocks are occupied by an AGV when it is located in a certain area and they are not accessible by other AGVs, to prevent collisions. An AGV also has sensors to prevent itself from colliding into other vehicles or objects. It is also capable of monitoring its motor temperature, fuel level, oil level and other important indicators for the maintenance department. This information can be sent to the PCS who can determine when an AGV needs maintenance or fuel. However, the amount of fuel that an AGV consumes is not measured on an individual level.

Not all the AGVs are the same because they were purchased at different times and from different manufacturers. There are currently 7 types of AGVs with 3 different types of power sources, which are shown in Table 2. These AGVs can be divided in 3 groups, based on their power source:

 Diesel hydraulic: The diesel engine is initiated by a starter engine and drives a hydraulic

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 Diesel electric: The start and stop system of the diesel electric AGVs stops the diesel engine automatically when the AGV is at a standstill and restarts it when the vehicle has to drive again. When starting, the diesel electric engine of the AGV is initiated by a starter engine. The internal combustion engine is idle during this time until the AGV is driving and then it switches to the diesel engine.

 Hybrid: The hybrid AGV is similar to the diesel electric AGV, because it uses electric power as

well as the diesel engine for the driving. The main difference is that the hybrid AGV has a smaller and more economical engine and it uses an ultra-capacitor to start and accelerate the AGV. This means that it does not use a starter engine like the other two types of AGVs. The unused generated energy can be stored in the ultra-capacitor. This technology allows the AGV to react faster and the diesel engines can be shut down faster than the other types of AGVs.

Type Engine Power source Engine model

CT40 DAF Diesel hydraulic DNTD 620 V

CT40H Scania Diesel hydraulic DSC-9-42 A

CT60E Volvo Diesel electric TAD942VE

CT60H Mercedes Diesel hydraulic OM 501 LA

CT60HN Volvo Diesel hydraulic TAD942VE

CT60N Mercedes Diesel electric OM926LA

VDL1 Cummins Hybrid Unknown

Table 2 Overview of AGVs at ECT DT

Despite the differences between the three types of AGVs, they are deployed together in the same area. A more detailed overview of an AGV operating area is shown in Figure 8.

AGV location

1 The operational area of the AGVs. 2 ASC TP for loaded AGVs.

3 ASC TP for unloading AGVs.

4 The first AGV in queue, handled by a QC. 5 The remaining AGVs in the QC queue.

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8 Parking and waiting at ASC TP for position. 9 ASC TP, waiting for remaining AGVs. Figure 8 AGV operating area

3.2.2 Fuel usage of AGVs

In 2010 it was estimated that the total fuel consumption of AGVs at ECT was approximately 13.65 million liters of diesel a year, which was equivalent to €7,500,000. This means that a fuel reduction of a couple of percent would already have a large impact on the total costs of fuel. An additional reason to reduce the amount of fuel usage, is the change of fuel tax for red diesel. Red diesel was designed exclusively for non-taxed off-road or commercial equipment usage. The AGVs were allowed to use the red diesel because they are employed for off-road purposes, since they operate on private property. However, as of January 1st_{2013, this lower tax rate for diesel fuel was removed. For ECT,}

this meant that with equal fuel consumption the total costs of fuel increased by approximately 12%. In order to compensate for the rising fuel costs, projects were started to reduce the fuel costs. This will be discussed in the next section.

3.2.3 Projects concerning fuel reduction

There are different projects at the DT that are concerned with reducing fuel costs. As mentioned in Section 3.2.1, the amount of fuel that is consumed per AGV is not measured yet. Only the total fuel consumption is measured by the fuel stations, which are used for the AGVs and SCs. However, there is a current project for measuring the fuel consumption per AGV, but this will be completed after this thesis.

At the DT it was observed that 67% of the running time of the AGV engine is without driving. This will be referred to as standstill hours from here on. It is impossible to completely remove standstill hours, because there is downtime between starting the engine and driving away and stopping.

Furthermore, sometimes an AGV has to stop because it has to wait for other AGVs or vehicles to pass or it has to wait at a crane when it is loading or unloading. Nevertheless, there are possibilities for improvement. The projects that are concerned with reducing fuel usage are listed per AGV type in Table 3. The details of the different projects are described below. It should be noted that “Low RPM” and “Engine Off” is one project, but because not all AGVs are able to implement the “Engine Off” measure, they are separated in Table 3.

projects Low RPM Engine Off Load depending power Diesel hydraulic project

CT40   CT40H   CT60E    CT60H     CT60HN     CT60N    VDL1  

Table 3 Fuel reduction projects per AGV type Project “Low RPM” and “Engine Off”

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 First the engine passed through low revolutions per minute (RPM), high RPM, and high pressure, before driving, which takes about 21 seconds in total.

 When an AGV reached its stopping point, the engine switched off after 5 minutes, because

this is the standard configuration of the manufacturer.

This stop procedure can be improved by switching off the engine 10 seconds after it has reached its stopping point at the ASC transfer point (TP) and quay crane (QC) queue. This is the “Engine Off” measure. “Low RPM” is the other measure for reducing the fuel consumption by letting the engine run in status low RPM, instead of switching off the engine after 300 seconds. The stop procedure cannot be shorter than 10 seconds, because the engine has to gradually slow down before it completely stops, to prevent wear on the engine. The aim is to implement these strategies for all AGVs, except the “Engine Off” strategy cannot be implemented on the CT40 and CT40H series, because they are too old.

Load depending engine power

The diesel engine of an AGV normally operates with the same RPM, independent off the load of an AGV. However, an AGV with light load or even without load needs less power than an AGV that is loaded with two containers. This is the reason why a project was started to reduce the fuel consumption by lowering the RPM of the diesel engine, based on the load of an AGV. In order to realize this change, some adjustments have to be made on the AGV:

 An accurate meter to measure the load has to be installed.

 A new engine has to be installed, because of the wear on the main bearing of the original

engine. This caused a lower oil pressure and more failures on the engine oil pressure.

 The standard turbo has to be replaced with a turbo with a waste gate. This new turbo should

pressurizes faster and react better on breaking and accelerating. However, the turbo has to maintain the same power and filling pressure.

These measures are being tested on the CT60H and CT60HN series. However, some adjustments have to be made to the implementation of a load depending engine power, based on the type of AGV.

Diesel hydraulic AGVs

As mentioned in Section 3.2.3, ECT uses different types of AGVs. One of them is a type that has a diesel hydraulic engine. This type of AGV can reduce its fuel consumption by placing a valve that prevents the unused generated hydraulic pressure from releasing. Also, the diesel engine can be shut down when the AGV is not accelerating. The amount of pressure that is needed for the hydraulic engine can also be reduced by making the required pressure dependent on the load of the AGV. By reducing the required pressure to drive, less fuel will be needed for an AGV to drive.

Other projects

There are also other initiatives that have started which concern reducing the fuel consumption for the AGVs. However, these projects are less developed or focus on a different department of ECT, such as hydrogen AGVs, using liquid natural gas, and optimizing the driving behavior and queuing of AGVs.

3.2.3 Fuel reduction project selection and demarcations

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more detail is “Low RPM” and “Engine off”, because there is a need from the company to gain more insight in the costs that are affected by this specific project. The different reasons for determining the affected costs are listed below:

 The actual costs can be compared to the expected costs. This will help to determine whether

unexpected costs are incurred and where possible areas of improvement are.

 Determining the affected costs will also gain insight in the possible change in costs for the

different departments. This could lead to a change in the budget allocation of the company.

 Determining the affected costs will also help to determine whether the fuel reduction project

is successful or not.

The project for “Low RPM” and “Engine Off” started within the maintenance department and therefore it is one of the most important stakeholders for this project. This thesis is also performed at the maintenance department and therefore the costs that are relevant for this department are explored in more detail. An additional reason that this project was selected is because research was already conducted before implementing certain measures. This means that there is data available for the estimates of the savings that could potentially be realized.

Due to the limited time that is available for this thesis, there is a necessity to narrow down the scope for the case study. The following demarcations are made:

1. This thesis will only focus on the project of “Low RPM” and “Engine Off”.

2. This thesis will only focus on the CT60H AGVs. After a meeting with the project leader, it was

decided that the focus of this thesis will be on the diesel hydraulic CT60H AGVs. This series consist of 77 AGV out of the total 267 AGVs of ECT’s Delta Terminal. The reason for this decision is that this particular AGV has both measures of “Low RPM” and “Engine Off” implemented. Also, these AGVs are not planned for revision or replacement for near future and information is available before and after the implementation of the fuel reduction measures.

3.3 LCC elements for the project of “Low RPM” and “Engine Off”

This section is used to come to a specific LCC model for the fuel reduction project. However, before setting up this model, it is necessary to gain more insight in the details of the project of “Low RPM” and “Engine Off”. This project was already introduced in Section 3.2.3, but the details of the project are described in Section 3.4.1 for a better understanding of the costs that will be affected by

implementing the fuel reduction measures. The implications of the fuel reduction project for each of the life cycle categories are explained in Section 3.4.2. This is used to compose a cost breakdown structure for the project of “Low RPM” and Engine Off” in Chapter 4.

3.3.1 Details of the project “Low RPM” and “Engine Off”.

In Section 3.2.3, the project of “Low RPM” and “Engine Off” was already introduced. However, in order to identify the areas that are affected by implementing the fuel reduction project, the details of this project are described.

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reduced by switching off the engine 10 seconds after an AGV has reached its stopping point at ASC TP and QC queue, instead of switching off the engine after 300 seconds. This measure will be referred to as the “Engine Off” measure.

Another measure is to let the engine run in status low RPM, instead of letting the engine run in status high RPM or high pressure when the AGV stops in the QC queue and when it arrives at the TP for load and discharge activities. As shown in Table 4, this will reduce the fuel consumption. This will be referred to as the “Low RPM” measure. The stop procedure cannot be shorter than 10 seconds because the engine has to gradually slow down before it completely stops, to prevent wear on the engine. Most fuel, besides driving, is consumed in the high pressure status and after that in high RPM and finally in low RPM.

AGV status Start procedure (seconds) Stop procedure (seconds) Fuel consumption (liters/hour) 0. Navigation off - - 0 1. Engine off 4 - 0 2. Low RPM 6 100 3.4 3. High RPM 6 90 6.5 4. High pressure 5 110 12.9 5. Driving - - 10-15 (estimation) Total 21 300

Table 4 Fuel consumption of CT60H series (source: measurement TOD)

The implementation of the “Low RPM” and “Engine Off” measures for the CT60H series can be divided in four phases:

 Before: Before implementing the fuel reduction measures, the CT60H AGVs were set to the

standard configuration.

 Low RPM: From April 2011 until March 2012, the measures of “Low RPM” were

implemented on the entire CT60H series. The AGVs that stopped at the quay crane queue or at the water side transfer point, run their engines with low RPM.

 Low RPM and partially Engine Off: From April 2012 until November 2012, the measures of

“Engine Off” were implemented on the CT60H series. The AGVs that stop at the quay crane queue turn their engines off, except the first AGV, because this AGV is directly beneath the quay crane. In order to minimize the time that the quay crane has to wait for an AGV, the first AGV is set to low RPM.

 Low RPM and Engine Off: As of December 2012, the “Low RPM” and “Engine Off” measures

are implemented on all AGVs of the CT60H series.

3.3.2 Cost categories for the project of “Low RPM” and “Engine Off”

In this section, the cost elements for the different categories are analyzed. It should be noted that operations and management are separated, to get a better understanding of the cost development for these categories.

Research and development

As mentioned in the previous section, research was conducted by a project team to determine how the fuel consumption of the AGVs can be realized. This research consists of the following phases:

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2. Formal go/no go. The results of the simulation were studied to determine whether a live test should have been performed or not and a project organization was set up with members of operations and TOD.

3. Develop and implement software of AGVs for the new stop behavior. The stop behavior of the three control strategies were developed in this phase.

4. Live test. A live test was performed and the software changes were evaluated and fine-tuned.

5. Optimize control strategies. After the live test, adjustments were made to improve the control strategies.

6. Evaluation. The proposed changed were evaluated in this phase. Adjustments were made, depending on the results of the tests.

7. Implementation. The proposed changed were implemented in this phase.

The costs that are concerned with the research can be divided into the following cost elements:

 AGV software costs (including installation)

 PCS software costs (including simulation tests)

 Live test costs

 Remaining costs

Production and construction

There are no relevant production and construction costs for the project of “Low RPM” and “Engine Off”, because the modifications are software related, rather than physical adjustments. The only cost that could be included in this category is the cost for installing the software on the AGV. However, this is already included in the research and development phase. Therefore, this phase will be excluded from the analysis.

Operations

The project of “Low RPM” and “Engine Off” was implemented in order to reduce the fuel

consumption by switching off the engine of the AGV, and let the engine run at low revolutions per minute. This has led to a reduction of fuel costs.

The fuel reduction project has led to additional engine starts, because an AGV has to start multiple times in the QC queue, until it is first in queue, and each time an AGV stops at the water side of the ASC TP as explained in Section 3.3.1. This increase in engine starts should lead to additional engine start failures. The cost of an engine start failure depends on different factors. These factors are explained below:

 The location of the failure. A QC only has one lane for loading or unloading containers. If a

failure occurs when an AGV is directly beneath the QC for loading a container, it stops the operations of the QC. Then a straddle carrier has to remove the container from the AGV and then remove the AGV from the operational area. Because of the layout of the operational area of the AGVs, this can lead to a shutdown of the entire sub terminal.

 The activity of the AGV. A failure of an AGV that is loading containers onto a ship can lead to

a delay of the departure of the ships. This can eventually lead to claims, when the ship departs later than the agreed time. This is more costly than AGVs that break down after unloading a container.

 The duration of the failure. Not all failures will lead to the same costs. Some failures can be

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The cost of an failure is based on the average error and impact it has on the operations. The details of the calculation for the failure costs can be found in Appendix A. The cost elements for the operations category are:

 Fuel cost

 Production claim and quay crane operator cost

Maintenance

As mentioned in Section 2.3.2, the maintenance costs can be divided into planned and unplanned maintenance costs.

The starter engine is not the only part of the CT60H AGV that is preventively replaced. The costs for the remaining parts that are preventively replaced, can be found in Appendix B. It should be noted that the starter engine is not included in the list of large maintenance, because the list is not

updated. Small planned maintenance is performed after every 2400 engine hours and large planned maintenance after every 4800 engine hours. The costs for planned maintenance are not expected to change with the implementation of the “Low RPM” measure. With the implementation of the “Engine Off” measure, the number of driving hours stays equal, but with less engine hours

proportionally. This is caused by a decrease in standstill hours, because the engine switches off when an AGV arrives at the water side transfer point for load and discharge work, or stops in quay crane queue, except for the first the AGV. This means that on average, less planned maintenance will be performed and therefore, less planned maintenance costs will be incurred. The costs for planned maintenance are split into the material and labor costs for the starter engine, and the material and labor costs for the remaining planned maintenance parts.

The costs for unplanned maintenance are split into material and labor costs for the starter engine, and material and labor costs for engine start failures, because the data for engine start failures is not obtained from TODinfo, but from a different tool that registers the number specific failures. The costs for unplanned maintenance of the starter engine is expected to increase, because the starter engine is used more intensely with the implementation of the “Engine Off” measure due to

additional engine starts. The unplanned maintenance costs for an engine start failure depends on the time it takes for the maintenance department to repair the equipment. As mentioned in Section 3.3.2, this depends on various factors. This is also expected to increase due to additional engine starts.

The cost elements for maintenance are divided into two subcategories. The cost elements for these subcategories are:

 Planned maintenance

o Starter engine (material and labor cost)

o Remaining planned maintenance (material and labor cost)

 Unplanned maintenance

o Starter engine (material and labor cost) o Engine start failure (material and labor cost) Retirement and disposal

The implementation of the fuel reduction project could have an impact on the different life

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4 Model

There are different approaches to composing a cost breakdown structure (CBS). However, the most important aspect is that the structure should allow the analyst to perform the necessary LCC analysis and determine the trade-offs that meet the project objectives (Harvey, 1976). Also, regardless of the different cost categories of a general CBS, the actual categorization and breakdown of the costs depends on the purpose and scope of the analysis. The CBS for the project of “Low RPM” and “Engine Off” is shown in Figure 9.

LCC of project “Low RPM” and

“Engine Off”

Research and

Development Cost Operations Cost Maintenance Cost

Software, tests and additional costs Production claim and QC cost Fuel Cost Planned maintenance Unplanned maintenance Starter engine (material and labor

cost)

Remaining preventive maintenance (material

and labor cots)

Starter engine (material and labor

cost)

Engine start failure (material and labor

cost)

Figure 9 Cost breakdown structure for the project of "Low RPM" and "Engine Off"

This CBS can only be applied to the specific case of ECT for reducing its fuel consumption of the CT60H AGVs with the project of “Low RPM” and “Engine Off”. However, the following process of composing a CBS and an LCC model that is used for the case study can be applied to different projects:

1. Define the purpose and scope requiring LCC. When conduction a LCC analysis, the purpose and scope of the analysis must be clear.

2. Define the cost elements of interest. All cash flows that occur within the scope of the asset must be identified.

3. Define the cost structure to be used. Grouping costs allows to identify potential trade-offs. 4. Compose the cost breakdown structure. The cost breakdown structure should be composed. 5. Establish the cost estimating relationship. The relationship between the cost of a an asset or

activity should be identified.

6. Compose the LCC model. The LCC model can be composed.

7. Gather the cost estimates. The costs of the assets or activities must be identified. 8. Select the preferred course of action. Based on the purpose of the LCC analysis, the

preferred course of action can be determined.

This process is based on the procedure for performing a LCC analysis of Harvey (1976), but

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5 Case study results

This chapter describes the results of the LCC analysis, which are based on the LCC model for the case study. The LCC model is composed in Microsoft Excel and it includes all the different costs elements and its relations. An impression of this model can be found in Appendix C. In Section 5.1, the cost developments will be explored per category. In Section 5.2, a sensitivity analysis is performed. The analysis of the starter engine’s maintenance cost is given in Section 5.3.

5.1 Cost developments per category

As mentioned in Section 3.3.1, four different phases for implementing the project of “Low RPM” and “Engine Off” can be distinguished. However, the phase of “Low RPM and partial Engine Off” is not included in the analysis, because this phase is not relevant for understanding the cost development for implementing the fuel reduction measures. This is why this chapter focuses on the three remaining phases. The periods that are used to determine the costs for these phases are displayed below in Table 5.

Phase Period

Before Jan 2010 – Dec 2010

Low RPM Apr 2011 – Mar 2012

Low RPM and Engine Off Dec 2012 – Jun 2013

Table 5 Phases and corresponding periods of interest

The information that is used for determining the costs is obtained from TODinfo, unless mentioned otherwise. TODinfo is a tool, developed by ECT, which is used to display information from the ERP system. This section answers RQ3: “How are the life cycle costs of ECT CT60H series affected by the fuel reduction project of “Low RPM” and “Engine Off”?”. In Section 5.1.1, the costs for research and development are given. Section 5.1.2 describes the cost developments for the operations costs and in Section 5.1.3, the maintenance costs are described. This section concludes with the total LCC for the project of “Low RPM” and “Engine Off” in Section 5.1.4. The details and calculations of the costs that are given in this chapter can be found in Appendix C.

5.1.1 Research and development costs

The research and development costs were a onetime investment for January 2011. The total cost of the investments for research and development for all the AGVs is €200,000. The costs for the research and development phase are based on the proportion of AGVs for the CT60H series to the total number of AGVs (77/267). The result is shown in Table 6. It should be noted that the cost are rounded and therefore, the sum of the cost elements is not €56,000, but €58,000.

Cost elements Costs

AGV software 14

PCS software 14

Live test 14

Additional costs 14

Total 58

Life cycle cost analysis of a fuel reduction for AGVs in a container terminal