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Check Valves in LNG Cryogenic Service

Check Valves in LNG Cryogenic Service

Because natural gas is currently conside...

Will Smart Machines Obsolete Human Resources?

Will Smart Machines Obsolete Human Resources?

Is artificial intelligence (AI) going to...

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Is Valve Live Loading an Option?

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Managing Control Valve Reliability in the Arctic

Managing Control Valve Reliability in the Arctic

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Industry Headlines

U.S. Adds 228,000 Jobs in November

Friday, 08 December 2017  |  Chris Guy

Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1%, the U.S. Department of Labor report...

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Will Smart Machines Obsolete Human Resources?

Will Smart Machines Obsolete Human Resources?

Wednesday, 06 December 2017  |  Kate Kunkel

Is artificial intelligence (AI) going to take over manufacturing jobs and the jobs of human resources professionals? That is a question that concerns ...

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Industry Headlines

Classic Controls Certified by ITT Engineered Valves, REXA

3 DAYS AGO

Classic Controls is now certified by ITT Engineered Valves to repair Skotch brand FM approved and general purpose burner shut-off valves for oil and gas fired systems.

REXA, Inc. has also appointed Classic Controls as its exclusive authorized sales representative in the state of Florida. Classic Contr...

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Emerson Completes Paradigm Acquisition

6 DAYS AGO

Emerson has completed the purchase of Paradigm, a provider of software solutions to the oil and gas industry. Paradigm will be combined with Emerson’s Roxar software business to create a more comprehensive Exploration & Production (E&P) software portfolio offering.

Paradigm is headquarter...

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China to Become Second-Largest LNG Importer

3 DAYS AGO

The world’s no. 1 energy user, China, “is on the verge of passing South Korea to become the No. 2 buyer of LNG behind Japan, as environmental measures and winter heating needs boost demand,” Bloomberg reports .

“Tankers with total capacity of 33.6 million metric tons have visited...

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New Permian-Gulf Pipeline Proposed

5 DAYS AGO

Magellan Midstream Partners intends to develop an approximately 375-mile, 24-inch diameter pipeline from Crane to a location near Three Rivers, TX, providing shippers the option to ultimately deliver crude oil and condensate from the Three Rivers area to the Houston area via a new 200-mile pipeline or...

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U.S. Adds 228,000 Jobs in November

2 DAYS AGO

Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1%, the U.S. Department of Labor reported today. Employment continued to trend up in professional and business services, manufacturing and health care.

In November, manufacturing added 31,000...

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Manufacturing PMI at 58.2% in November

4 DAYS AGO

Manufacturing expanded in November as the PMI registered 58.2% , a decrease of 0.5% from the October reading of 58.7%. A reading above 50% indicates that the manufacturing economy is generally expanding.

"This indicates growth in manufacturing for the 15th consecutive month led by expansion in new orde...

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Life-Cycle Costing

vmwnt12_lifecycleFor most of us, the purchasing process is relatively simple: Find the lowest cost for the desired item, make the purchase and then move on to the next task. However, the purchase price may only be the first installment of that cost.

Too frequently the simple, short-term view of looking at the price only results in a purchase that ends up costing much more over a period of time than the original price tag. What’s more, the entity doing the buying may be pulled back to revisit that purchase multiple times if the item fails prematurely, turns out to be less efficient than expected, requires more time to install or maintain than anticipated, or some other, unanticipated problem comes up.

In the 1960s, life-cycle costing (LCC) became popular as a means to evaluate the true cost of something over its entire useful lifetime. LCC seeks to quantify all costs associated with ownership. In addition to the initial cost, LCC commonly attempts to weigh factors such as the cost to install, maintain, repair, operate, replace, even dispose of an item, and depending on how comprehensive the analysis is intended to be, the list can include many more factors. As this shows, the final cost of an item is almost always much more than its purchase price.

But alas, LCC is not a precise process—its calculation can become so complex that it involves factors as scary as scientific calculations using probability theory, risk assessments and statistical analysis. The degree of use depends on how precise the LCC calculation must be. This is probably one of the reasons LCC fell out of favor. However, that attitude is changing; in this time of tight budgets and the need to wring every bit of value out of each dollar spent, there’s renewed interest in LCC.

Fortunately, LCC as a concept can be applied without having to deal with much of the complexity, which is what this article seeks to do. Those who want to complete a “true” life-cycle cost analysis, the way such analyses have traditionally been done, can find ample source material on the Internet to help them and provide guidance. Those who choose this path can search some of the following terms:

  • Life-cycle cost
  • Life-cycle cost analysis
  • Life-cycle cost summary
  • Life-cycle cost calculator
  • Water distribution life-cycle cost
  • Water system life-cycle cost

However, before deciding to engage in this comprehensive LCC analysis with all its complexities, the following concepts about LCC should be understood:

LCC is not an exact science. Despite the many scientific principles and calculations that can be involved, the result itself is almost always only an estimate. That’s because the only part of the LCC equation that is well-known and clearly defined is the procurement cost. All other data is estimated or assumed, with no guarantees that one factor will behave exactly the same as another when trying to quantify things such as performance or repair histories. LCC estimates, by the very nature that they are estimated, lack hard accuracy.

A detailed LCC analysis can require costly procedures to obtain needed data. The more accurate the LCC calculation needs to be, the more cost and time involved to develop the input data.

Although LCC can call for volumes of data, typically only limited data will exist.

LCC for a given item that comes from different sources, such as from a seller versus an end user, can differ significantly. This is because each party has a bias when selecting or establishing the input data.

“Something” is almost always better than “nothing.”

Despite these realities, including LCC concepts in the procurement process can result in a more cost-effective purchasing decision. Even when a comprehensive analysis is not done, it is good practice to inject LCC into the discussion for no other reason than to push the various purchasing influences towards a team-like approach to the procurement process. In other words, considering only the initial cost without LCC:

  • Designers or engineers might cut back on an item’s performance variables to meet a capital budget constraint that only considers initial cost.
  • The purchasing department might focus on the lowest cost thinking as the desired goal, when in fact operating and other costs might mushroom once a less capable item is put into service.
  • The operations department might assume an item will perform at 100% of its capacity and last forever when in fact almost nothing lasts that long.
  • The maintenance department might plan an optimistic maintenance or repair program to reduce preventive maintenance costs and meet short-term management goals.

Including LCC principles in discussions and planning can push out each party’s cost horizon and encourage a more realistic assessment of potential costs over a longer period of budget years.

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