I have frequently enquired why the citizenry seem to put so much value on hard cash, sitting in the vault, which is doing utterly zip for them, and disregard the serious cost of goods.

They will use a storage tank of gasoline to go apprehend a average, free item, never envisioning that the free item they just received cost them $25.00 in petrol.

What they don’t understand are factual costs, and an bankable theory renowned as “opportunity cost”.

“Opportunity cost” can be very complex to explicate, but I like to explain it in a very elementary fashion: You go to university, and the tuition and volumes for such an jaunt run you $18,000 per annum. Most people delineate this as the “expense of a instruction”.

That may be the yearly prices for books, classroom education, and lab fees, but that is not the “practical cost” of a college instruction. Oh, no. You see, a high school graduate can acquire around $18,000 a year in income, from a full-time job. In fact, they could make a great deal more money.

So, the “opportunity cost” of a university , is someplace around of $37000 per annum. How is that for the growing cost of an education. Pricey, no?

It grows even riskier as you move into areas where partnerships hold a vast amount of stock and equipment. The more these companies develop, the more overpriced opportunity costs become.

I will present, for an example, the mining and metals arena. This industry has huge fleets of giant trucks, that cost manifold millions of dollars to acquire. Then, they have the increased costs of tyres, which cost far less than the motortrucks, but are still a necessary expense.

Now, the beginning urge of a buying broker, when it comes time to buy OTR tyres, is to purchase whatever comes across the desk, at the lowest price. The trouble with purchasing on the smallest offer, is that it more often than not causes redundant consumptions.

Why? Because saving a few dollars by purchasing the lowest cost tire available, will save $1000 a tire in the short run. It will end up costing the company $65,000 an hour in downtime, when the tire breaks down in an untimely manner.

How? Well, the ore in an articulated dump truck’s bed is valued around $65,000 an hour, from potential material that is able to be claimed. If you interpret that it may take 4 hours to replace one tyre with the other, then you come to the understanding that a flat tire could be charging one of these $270,000 per day.

That, my friends, is how opportunity cost works. Should you have a desire to educate yourself about opportunity cost, and how it can affect tyre and mining expenses, please feel free to contact OTR Tire Supply, anytime.

Ask us about our Tyre Asset Management service, that specifically treats this issue.