LCC Life Cycle Costing To understand LCC, there are two points of view: the manufacturers point of view

w and the users point of view. From the manufacturers point of view, the Life Cycle of a machine starts from the point it is made. It ends when it is replaced by a new product and the machine in question is discontinued. From a user point of view, the Life Cycle is considered from the point it is procured to the point it is disposed. In any organisation, the cost factor is the topmost priority. The aim of any organisation is to get the best return on the investment made on the machine only if the machine performs the prime function without interruptions, or at least with justifiable interruption that too at the end of its useful life. It is important to discuss the three factors: maintenance, life cycle and failure vis--vis each other. The LC of equipment is defined as the time interval from the concept stage to the final breakdown/disposal of the asset. LCC is called also called the whole life costing, is a technique to establish the total cost of ownership. Benefits of LCC analysis In a LCC analysis, we must evaluate the different competing options for the whole life costing of the options. It helps to provide a deeper insight of the total cost (check the cost effective areas of the purchase). In line with that, it helps in making an accurate decision making and also forecast the cost profile (accurate forecasting for future expenditure). And also make performance trade-off against cost. In purchasing decision, cost is not only the factor to be considered when assessing the options. Quality of goods and level of service is to be provided. Acquisition Costs are the costs associated from the time the decision to proceed with the procurement to the time the good/service is put to operational use. Operational Costs are the cost incurred during the operational life of the asset/service. End Life Costs are those cost associated with the disposal/termination/replacement. In the case of assets, the disposal cost can be negative. A purchasing decision commits a user to over 95% of the through life costs. LCC involves identifying the individual costs relating to the procurement of the product/service. These are one off and recurring cost. One off are the cost when acquisition is made. Recurring costs are time-dependent and continue to incur throughout the life of the product/service. Examples of One-off costs include: Procurement, documentation, implementation, initial training, facilities, Examples of recurring costs include: Operating cost, maintenance/repair cost, transportation, and downtime.

Methodology of LCC This involves: Cost breakdown structure, cost estimating, discounting, inflation Procedure of LCC 1. 2. 3. 4. 5. Estimate the useful life of the equipment Estimate the associated cost, including the cost of operation Estimate the terminal value of the equipment Ownership value terminal value Procurement cost + present value = LCC

Terotechnology is another word for life cycle management. It describes a system of managing physical assets. It concerns a combination of management, financial, engineering and other practises applied to physical assets in pursuit of economic life-cycle costs. It concerns with the design for reliability and maintainability of plant, equipment.