The benefits of Opex / Capex planning for fleet managers
Operational expenditure and capital expenditure, or Opex/Capex planning, is a powerful tool in accounting and budgeting, and it can be important for fleet managers to put this strategy into practice as well. When measuring KPIs and ensuring that fleet operation is efficient, fleet managers are often looking to save money, without sacrificing quality and effectiveness of their vessels. Opex/Capex planning can help fleet managers achieve this challenge in a few different ways:
What is opex/capex planning?
To begin, let’s take a look at what opex/capex planning actually is. The goal of this strategy in the most basic sense is to increase capital expenditure while lowering operational expenditure, but reducing spend overall. The idea here is that when you invest in capital expenditures, you are using those investments to make improvements, see long-term benefits, and actually potentially add value to your existing assets. In ship management, this can be upgrading technical systems like the ECDIS, or replacing large parts rather than continuing to fix faulty equipment.
Operational expenditures are the on-going costs that businesses need to run, and for fleet managers, this includes expenses such as fuel, staff costs, and expenses for supplies that are needed to keep machinery working. When you evaluate what the operational expenditures will be for items that you can invest capital expenditures in, you can get a better idea of your total spending over time, and find ways to improve the balance of opex/capex to minimize your total spending.
What should you look at to start opex/capex planning?
When getting started, you need to make sure that all your costs are documented and organized. While you probably already take stock of your expenditures, you might benefit from organizing them into lists that are divided by operational expenses versus capital expenses. Furthermore, do a measurement of your running costs, they are usually opex. These can include prices on spare parts or the cost of your Annual Performance Test (APT), surveys and associated service labor costs.
But also look at numbers you may not have considered lumping into your budget, such as return on investments. Fleet managers should also be carefully calculating and following KPIs (Go to blog 4 Fleet performance KPIs that every shipping organisation should set today) in order to have a better understanding of what works in their fleet and what does not – return on investment might be one of those KPIs as well. This number is crucial for understanding what you’re getting out of capital expenditures and can help you make decisions on long-term investments.
Long-term investment versus short-term spending
Opex/Capex planning is the key when weighing pros and cons for long-term or big-budget spending in certain categories. It could be that by taking on a large capex, you might actually see better returns and reduce related opex over time. You should look at the full picture on lifetime costs of tools and machinery, installation, maintenance, labor or repairs, and calculate what the total investment most likely is. It could make all the difference rather than saving initial monies on machinery, but spending much more on off-hire repairs or parts replacement over time.
When you take into consideration all the money going out and coming in, and how they can balance each other out, you will be able to use opex/capex planning to your advantage to save costs immensely over time. Evaluate the lifetime value of tools and technology that you use, and you could potentially see a great solution for investments that are more efficient and cost effective.
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