Lecture 5 - Life Cycle Costing Flashcards
What is life-cycle for an asset?
The time interval between a product’s recognition of need or opportunity and its disposal
What are the two perspectives of a life-cycle assest
- Life cycle from a consumer perspective
– Business Need - Purchase – Install – Commission - Operating & Maintenance – Disposal - - Life cycle from a manufacturing perspective
– Product conception – Design – Prototype - Production – Logistics – Warranty & Support – Phase out
What are the inputs and outputs for LCC and define it?
A process to determine the sum of all expenses associated with a product, including acquisition, installation, operation, maintenance, refurbishment, discarding and disposal costs
REFER TO SLIDES FOR DIAGRAM
What are the 3 main objectives of LCC ?
(a) Calculate a dollar value representing the LCC of a product as an input to a decision making or evaluation process together with other inputs. The cost is based on a defined need associated with the product.
(b) Support management considerations affecting decisions during any life-cycle phase.
(c) Identify the attributes of the product which significantly influence the LCC (cost drivers) of the product so that they can be properly managed
What is the cost iceberg in terms of cost management?
REFER TO SLIDES FOR DIAGRAM
When is LCC appropriate?
- EVALUATING ALTERNATIVE SUPPLIER PROPOSALS
- EVALUATING ALTERNATIVE DESIGN CONSIDERATIONS
- EVALUATING ALTERNATIVE PRODUCTION PROFILES
- JUSTIFYING EQUIPMENT/ COMPONENT REPLACEMENT DECISIONS
- PROJECT MANAGEMENT & CONTROL
- LONG-RANGE PLANNING, BUDGETING, AND ALLOCATION OF RESOURCES
- IDENTIFICATION OF HIGH COST CONTRIBUTORS (AREAS OF RISK)
- COMPARING LOGISTICS & MAINTENANCE SUPPORT POLICIES
What is timing in cost cycles?
- 50-70% of the life cycle cost for a given system can be locked during the early stages of the life cycle.
- A large % of costs are associated with the operation and maintenance phase but the opportunity to influence those costs is at the start of the life cycle.
