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Last updateFri, 23 Sep 2016 2pm

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An Alternative Basics Education: Valve Ed Comes to You!

An Alternative Basics Education: Valve Ed Comes to You!

For the first time in the seven-year his...

Give Your Flow Meter a Happy Home

Give Your Flow Meter a Happy Home

Increased emphasis on the need to improv...

What’s in Store for the Construction Market?

What’s in Store for the Construction Market?

As was the case with many of the present...

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Pentair Valves & Controls Hosts Customer Appreciation Training Event

2 DAYS AGO
Pentair Valves & Controls Hosts Customer Appreciation Training Event

More than 200 representatives from Houston’s refinery, chemical and petrochemical industries joined Pentair Valves & Controls on Sept. 15 at its Pasadena, TX facility for a customer appreciation BBQ and training event . The presented seminars are a part of Valves & Controls’ Pentai...

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Mueller Water Products Recognized for Best Smart Water Solution

3 DAYS AGO

Mueller Water Products, Inc. received the 2016 Best Smart Water Solution award at the third annual Smart Water Summit in Palm Beach Gardens, FL. Mueller Water Products, who won this award for the second time, was recognized for smart technology solutions offered through its Mueller Co., Mueller System...

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Senate Overwhelmingly Passes Water Resources Development Act

2 DAYS AGO

The U.S. Senate recently passed the Water Resources Development Act (WRDA) of 2016 with a broad bipartisan vote of 95 to 3. This legislation not only authorizes critical U.S. Army Corps of Engineers projects that drive investment in navigation, flood management, and ecosystem restoration, it provides ...

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Alaska Railroad Prepares First U.S. Shipments of LNG

2 DAYS AGO

The Alaska Railroad (ARRC) will demonstrate its ability to safely transport liquefied natural gas (LNG) in intermodal LNG ISO containers from southcentral to interior Alaska during a month-long operational performance project in early fall 2016.

ARRC is the first railroad in the country to obtain permi...

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Manufacturing Growth Eases Again in September

1 DAY AGO

At 51.4 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) was down from 52.0 in August and pointed to the weakest improvement in overall business conditions since June. The latest PMI reading marked seven years of continuous growth across the ...

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Leading Economic Indicators Down Slightly in August

2 DAYS AGO

The Conference Board Leading Economic Index (LEI) for the U.S. declined 0.2% in August to 124.1, following a 0.5% increase in July, and a 0.2% increase in June.

“While the U.S. LEI declined in August, its trend still points to moderate economic growth in the months ahead,” said Ataman Ozy...

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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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