Total cost of Usership: everything you need to know
We already stream our movies and music. We store everything in the cloud. More and more of us share, lease, and rent our cars. So why wouldn’t the exact same logic apply to your process-critical equipment?
Let's talk usership vs ownership
The way we think about ownership is changing, and many B2C industries are already adapting accordingly. So why shouldn’t we? Especially when use is subjected to fluctuations that are becoming harder and harder to predict.
"Clearly, the time has come for a more comprehensive, flexible cost-effective and measurable solution. One that gives you back control over your operations and your capital. "
Goodbye ownership. Hello usership!
Wondering whether usership is relevant for your business?
Goodbye Ownership. Hello usership!
What does total cost of usership entail? And why should you consider it?
When to user, when to own?
What are the benefits of usership for you?
So when to rent, when to buy and when to do both?
Calculate your tipping poinbt
At which tipping point does renting become more advantageous for you?
How to improve the agility of your operations?
The total cost of any investment is a much bigger and more complex picture than the purchase price alone. You need to consider all kinds of hidden factors: from transport and running costs to maintenance, inventory, depreciation, and divestment costs … to name but a few. There is a whole ocean of hidden costs and risks lurking beneath the surface. Additionally, we are living in uncertain times. Markets are volatile. Product demand fluctuates. As does the supply of raw materials. And in between it all, natural disasters are making it even harder to expect the unexpected. More than ever, agility is key. Both operationally… and on your balance sheet. Any procurement decision should therefore consider your ability to adapt quickly, mitigate risks and safeguard your bottom line. If unexpected fluctuations decrease the rate of utilization of your equipment, then the return on your initial investment goes down with it. Your total cost of usership takes all these factors into account.
The true value of ownership is use
More and more companies are making the shift from “owning” to “using”. The concept of usership touches on many different, often complex factors. Therefore, the independent European Rental Association and the Solvay Brussels School of Economics and Management developed an objective and transparent method of calculating the total cost of usership of any given piece of equipment. The criteria go beyond the financials alone and include such factors as support services, sustainability, logistics and access to expertise.
Are you considering all aspects before making an investment in new equipment?
When to use, when to own?
There are many factors that determine the respective advantages of renting and buying. For each organization, the “crossroads” at which they intersect will be different. But overall, the equation revolves around three main parameters.
1. Percentage of utilization
If there is even a small chance that the equipment you are thinking of purchasing will not be in operation 100% of the time, it is essential to look at the total cost of usership. Our experience has shown that once the rate of utilization drops to 40% or lower, the flexibility afforded by renting makes it the overwhelming favorite. Allowing you to increase capacity for recurring or emergency peak shaving and decrease it in response to both foreseen and unforeseeable downturns in production.
2.Cost of utilization
When most people think about operating or utilization costs, they think about repairs and maintenance, and the cost of parts and labor. But what about things like electricity or fuel consumption, installation time, ease of operation? Not to mention the issue of reliability and the indirect costs of potential downtime! All of these costs go up as your machine gets older. And the potential cost savings of newer, more efficient technologies can only be booked as a missed opportunity.
3. Agility of utlization
Flexible decision-making is an important part of an agile organization. One that is capable of adapting to market changes efficiently and effectively. Renting essential equipment typically involves much shorter validation procedures with fewer stakeholders. Thus lowering the barriers to financial decision-making and saving valuable time throughout the whole process. And we’re sure we don’t need to tell anyone that time is money.
So when to rent, and when to buy or to do both?
Of course, renting and buying need not necessarily be mutually exclusive. A combination of both is quite common and, in many circumstances, to be recommended. By renting a proportion of your base and/or reserve capacity, you retain maximum control while sharing the liability during peak production and adding an extra buffer of reliability to your operations. All with the added peace of mind that your machine park – the means with which you create value as a business – is in the hands of trustworthy specialists.
