Regarding improving freight efficiency, is your glass half full or half empty? My son likes to remind me that, technically speaking, the glass is always full.

Capital investments like trucks, warehouses, yard equipment, trains, ships, rails and port facilities nearly always require justification. Often that devolves to a number, the ROI and the return on investment. The calculations behind ROI can vary significantly depending on what factors can be included.

Traditional ROI calculations focus on three simple factors described typically as “costs,” which are relatively easily measured in terms of dollars.

1. Purchase cost
2. Operating cost
3. Depreciation cost

While simple, and we all love simplicity, there is a problem with viewing the world as if the only measurable things are costs. For example, depreciation is a cost only to the point that you sell something. At the moment you sell it, that is income, typically referred to as residual value. Money coming back in.

Operating costs include fuel. In some regions, low carbon fuel standard credits mean that for every bit of alternative energy used, you may qualify for credit. Again, this is money coming back in. Positive cash flow.

In some cases, simply buying a particular technology for a vehicle may get you credits or incentives. This is positive cash flow as well, reducing the effective cost of the purchase.

ROI is the default factor for many capital investment decisions. It is a hammer for all the investment nails. It is, however, a pretty crude tool.

ROI often overlooks complex costs, those that the accountants can’t easily or reliably measure or allocate. Those costs are real, but are so hard to measure they get bundled into an accounting grab bag called “overhead.” Overhead captures such diverse costs as compliance, waste management, facility maintenance costs, staff turnover, training, legal costs, etc.

An OEM’s paint robot requires maintenance. Do you spread the cost of that maintenance (the correct term might be “allocate”) across each vehicle the factory produces? Or do you just bundle it into overhead?

A SmartWay designated fleet has requirements to provide annual data reports to the EPA to maintain its SmartWay designation. Fleets also have requirements to submit IFTA tax reports to each state or province in North America. These are two examples of real-world costs — creating and submitting reports — which typically are bundled into overhead. Sometimes described loosely as “the cost of doing business.”

ROI often misses taking into account factors buried in overhead. For example, if a fleet decides to operate zero-emission vehicles, the reporting requirements like SmartWay and IFTA become less demanding. Those reporting costs don’t entirely disappear, but they are less laborious.

Some overhead costs can disappear. Let’s say your maintenance shop has to dispose of used motor oil on a regular basis. There are costs associated with that. A fleet that converts entirely to battery electric vehicles (BEVs) might no longer need that oil disposal service, or need to maintain any of the associated equipment or building space, or any of the associated permits or records, or the staff to manage oil recovery. Those real costs go away.

There may also be new costs associated with new technologies. New equipment needed in maintenance bays, or new filtration systems. How are those costs allocated? Does the first tranche of new vehicles have to pay for all the maintenance equipment? Does that mean the second tranche doesn’t have to, so it has a better ROI?

We’ve all heard the stories of the mythical $600 hammers associated with Defense Department’s airplane procurements. Those come about because the first few vehicles may have to carry the costs of all the infrastructure. The next batch of vehicles may not have those costs.

Operating costs are rife with opportunities for refining cost allocations. One fleet that chose to operate BEVs in return-to-base operations found they were saving upwards of an hour by eliminating out-of-route miles required for fueling. That extra hour meant the fleet had an extra hour a day to make deliveries, increasing asset utilization. More cash flow in.

ROI is much more complicated than the three basic factors of purchase price, operating cost and depreciation. Yes, it’s a simple single number to capture the potential of an investment. But you get what you pay for. The better you can understand both the positive and negative cash flows, the more realistic the ROI will be.

An alternative to ROI is something called Net Present Value (NPV). NPV is intended to look at all the positive and negative cash flows over the life of ownership of an investment. The greater the detail, again, the more realistic the evaluation.

Oversimplifying the inputs for ROI and NPV calculations can put your company at a disadvantage in the competitive transportation world. Competitors, armed with better understandings of their cash flows, can see opportunities that your company may miss.

NACFE characterizes costs and benefits as either “hard” or “soft.” Hard costs are typically easily tracked and measured. Soft ones are much more challenging to express. This graphic was included in our first report on BEVs, but it is relevant to any thinking about investments in any technologies.

History is full of examples where well-established commercial businesses have missed the boat on new technologies and wound up failing. Even successful companies can find they may be missing out on potential profits, leaving money on the table because of inadequate assessment of their real-world costs and opportunities.

Those opportunities are buried in your overhead. Digging them out requires some effort, but can mean the difference between success and failure in the long term.

You may choose to see your financial choices as a glass half full or half empty, but all those costs and opportunities are always there. My son is right, the glass is always full.

Rick Mihelic is NACFE’s Director of Emerging Technologies. He has authored for NACFE four Guidance Reports on electric and alternative fuel medium- and heavy-duty trucks and several Confidence Reports on Determining Efficiency, Tractor and Trailer Aerodynamics, Two Truck Platooning, and authored special studies on Regional Haul, Defining Production and Intentional Pairing of tractor trailers.