Maintenance Plans for Accessory EquipmentBimini100
Source: Agriculture.com Outsourcing Farm Equipment Repair and Maintenance
Maintenance and repair for farm equipment is one of the major expenses for any operator. The larger the farm operation, the larger the equipment, and the more sophisticated the maintenance requirements typically. Deciding whether to keep maintenance in-house both for primary tractors and combines as well as for accessory equipment can be both an operational and a financial question.
Skillsets for Today’s Farm Equipment – High Tech
On the operational side of the question, if the farmer or a member of the staff simply does not have the skills, the tools, or the time to keep the equipment in peak operating condition, then there is no choice but to subcontract out the maintenance. A good example of this is one of the worlds top food producers, Olam Group, deciding to outsource the maintenance for a new operation because the high tech skills and resources required for maintaining their advanced technology ag equipment was simply not available on staff, or locally. They decided to use TractorExport’s team of factory certified technicians to routinely maintain and repair all of their equipment. This contract also includes the logistics of keeping the parts on hand for these high tech farm implements. Maintaining parts and logistic support is an often overlooked part of the maintenance picture. Remember the last time you had to shop for parts or call around and locate parts for particular equipment and you will get some idea of how critical and time-consuming is this portion of maintenance and repair.
Trend is Towards Outsourcing Farm Equipment Maintenance
The trend since 2000 has been for larger operators to outsource all of their farm equipment maintenance. The reasons for this are simple. The equipment has become so complicated and the technology so advanced, that most farmers and operators, even with a staff of capable maintenance personnel, cannot keep up with the level of technology.
Answering the question of in-house or subcontracted maintenance financially requires knowing both your fixed and your variable costs for your ag equipment. The final answer on this decision is how much is maintaining and repairing your equipment is costing you on a per acre basis. By optimizing your maintenance or repair cost you can drop your per a expenditure for your equipment as much as $25. Not only will this add immediately to your bottom line, but it should also optimize your uptime for your equipment. And your equipment is only making you money when it is out in the field performing as intended.
Financial Records Tell the Farm Equipment Maintenance Tale
The best method for determining financially if it makes sense for you to outsource your maintenance is to examine your current records for maintenance and repair. You do have those records, don’t you?
Even though keeping track of all of the receipts and all of the expenditures for your farm implements is a major hassle, the benefit of it is that you will be able to make informed decisions regarding what each piece of equipment is costing you to maintain on a year-by -year basis. With this kind of information you can then decide when it is time to replace that equipment with af newer piece that will presumably cost you virtually zero dollars to maintain for the first several years under warranty service.
If you are buying used equipment, then you may not even have the option for service contracts. That is an important consideration prior to buying used equipment. Because as a farm operation grows in size, there are economies of scale which suggest it becomes beneficial to out source the maintenance of at least the most sophisticated equipment. Even with outsourced maintenance though, most operators will require some level of maintenance capability for routine day-to-day issues such as minor oil changes and such.
The important formula for estimating your maintenance costs is the accumulated repair estimate per year based on operating hours. According to Iowa State University, a 2 Wheel drive tractor that accumulates 400 hours per year of service time will have 6000 hours on it by the end of its 15 year economic life. Accumulated repairs will cost roughly 25% of the new list price of an equivalent tractor at that point. This translates into about $38,000 in repairs.
Dividing the $38,000 by the operating period of 6000 hours gives an approximate average repair of about $6.30 per hour. A key aspect of this formula is that the repair costs will increase dramatically over time for that piece of equipment once it reaches the end of its economic life. Knowing this figure can help you determine if you are exceeding by a wide margin the estimated repair costs for your equipment. That will help you determine how much to spend on maintenance and whether or not subcontracting maintenance is a good idea for you.