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Last updateFri, 22 Jun 2018 2pm

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From Cannon Balls to Pressure Seals: Graphite for Sealing

From Cannon Balls to Pressure Seals: Graphite for Sealing

From time to time, we re-publish well-re...

Gaskets Are Not Created Equal

Gaskets Are Not Created Equal

Gaskets are near the bottom of the food ...

Your Valves May Be Weaponized

Your Valves May Be Weaponized

The advent of the Internet of Things (Io...

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Industry Headlines

SVF Flow Controls Joins VMA

Friday, 22 June 2018  |  Chris Guy

This week SVF Flow Controls became a full member of the Valve Manufacturers Association (VMA). This is the fourth new VMA member in 2018 so far.

For over...

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Industry Headlines

SVF Flow Controls Joins VMA

1 DAY AGO

This week SVF Flow Controls became a full member of the Valve Manufacturers Association (VMA). This is the fourth new VMA member in 2018 so far.

For over 35 years SVF Flow Controls of La Palma, CA has been manufacturing ball valves, actuators and controls for all industrial applications.

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Emerson Wins Global Tank Storage Award

2 DAYS AGO

Emerson’s Rosemount 5900S 2-in-1 Radar Level Gauge has won the Outstanding Terminal Safety Technology Award at the 2018 Global Tank Storage Awards. This award is given to a product or technology that adds an additional layer of safety to the terminal and reduces risk to employees and the surroun...

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U.S. Specialty Chemicals Markets Continue to Gain

2 DAYS AGO

The American Chemistry Council (ACC) reported that U.S. specialty chemicals market volumes continued to gain during the second quarter, increasing 0.5% in May after an upwardly revised 1% gain in April and a 0.4% gain in March. All changes in the data are reported on a three-month moving average (3M...

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Global LNG Trade Growing, Led by Australia and the U.S.

3 DAYS AGO

Global trade in liquefied natural gas (LNG) reached 38.2 billion cubic feet per day (Bcf/d) in 2017, a 10% (3.5 Bcf/d) increase from 2016 and the largest annual volume increase since 2010, according to the Annual Report on LNG trade by the International Association of Liquefied Natural Gas Importers...

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Optimism an All-Time High in NAM Survey

2 DAYS AGO

In the latest Manufacturers’ Outlook Survey from the National Association of Manufacturers (NAM), it’s clear that businesses continue to experience highly elevated levels of activity as a result of policies like tax reform, with optimism once again breaking records —95.1% of responde...

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Texas Economy Continues to Expand at “Solid Pace”

3 DAYS AGO

The Texas economy is expanding at a solid pace. Employment has grown at a 3.6% annualized rate through May, driven by job gains in the goods-producing sector. Unemployment remains near its historical low, and labor markets are tight. The Dallas Fed’s Texas Business Outlook Surveys (TBOS) suggest...

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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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