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7.2 Component Costs to Supply Chain
Component costs of the supply chain include capital costs and operating costs. These are represented
in the model as discussed below.
Capital, unless otherwise specified, is depreciated over ten thousand hours of use. The model
assumes a current capital value and a salvage value at the end of the depreciation period.
Depreciation (or loss in value) costs are distributed on an hourly basis using straight line depreciation.
Annual capital finance costs are calculated by multiplying the capital value by an assumed interest
rate of 8%. This cost is split into cash and non-cash using the owner’s equity in the capital. Thus, if
there was 25% equity in the capital equipment then 25% of the capital finance cost would be non-cash
representing the opportunity cost of ownership. The remaining 75% would be a cash cost
representing the actual finance cost of ownership. These costs are each distributed per hour of
operation.
Overhead costs, representing registrations, insurance premiums, bank fees, accounting fees etc. are
represented in one figure per annum of $18,000. This cost is distributed per hour of operation.
It should be noted that no management costs are included in the model. Wage costs are applied at
fifty dollars plus a thirty percent on-cost per person per hour.
Total fuel use is estimated for the harvester and for each haulout by applying two fuel burn rates (in
litres per hour). An idle fuel burn rate is used whenever a machine is waiting or unloading and a
working fuel burn rate is applied at all other times. There is no fuel consumed during servicing and
repairs (but wages still apply). A cost of fuel, in dollars per litre, is assumed to derive the total cost of
fuel.
Repairs and maintenance (R&M) costs have been applied at a rate of one dollar per tonne.
Consumable blades are accounted for separately. Total costs are reported as gross figures and per
hour, per hectare and per tonne. Harvest time performance is used to attribute costs on an hourly basis.
The model represents actual operating cost and no profit margin has been included in the model.
Model component costs and the assumptions described in this section have been widely used in the
sugar industry and are considered appropriate for mallee biomass harvesting.
7.3 Costing Assumptions
7.3.1 Spatial Data
Harvesting cost will be affected by field layout. Spatial data, such as block area, row length and haul
distance to the nearest trafficable road were derived using Google Earth from two real plantings, one
representing a high density planting and the other representing a low to medium density planting.
Haul distance was estimated by measuring the straight line distance from the paddock centroid to the
nearest trafficable road and multiplying this by √2. The method assumes that rather than travelling in
a straight line the haul vehicle would traverse the two shorter sides of a right isosceles triangle
associated with the haul distance. This method has been used extensively and has been validated to be
within 2% accuracy.
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