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The Challenges of Slurry Valve Packing

The Challenges of Slurry Valve Packing

Because of the difficulties of dealing w...

The Many Layers of Valve Qualification

The Many Layers of Valve Qualification

While there has been much rhetoric from ...

Valves Help Achieve Net-Zero Water Use

Valves Help Achieve Net-Zero Water Use

With drought and climate change affecting ...

Valve Selection in Pulp and Paper Operations

Valve Selection in Pulp and Paper Operations

Over the centuries, the pulp and paper i...

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Industry Headlines

Wolseley Announces Name Change, CEO Succession

Wednesday, 29 March 2017  |  Chris Guy

Wolseley plc is officially changing its name to Ferguson plc, subject to shareholder approval. Ferguson is the most significant brand in the Wolseley ...

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Industry Headlines

Wolseley Announces Name Change, CEO Succession

6 HOURS AGO

Wolseley plc is officially changing its name to Ferguson plc, subject to shareholder approval. Ferguson is the most significant brand in the Wolseley Group of companies and accounts for 84% of the Wolseley Group’s profitability.

The company also announced that CEO Frank Roach will retire on July ...

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Spirax Sarco Employees Build Prosthetic Hands for Children

12 HOURS AGO

Spirax Sarco hosted their annual charity event at the Westin Hotel in Savannah, GA on Saturday, March 11, 2017 where participants built prosthetic hands for children in third-world countries who are missing limbs.

There are 300,000 landmine rated amputees globally and 20% of those are children. Emplo...

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In Blow to Nuclear Industry, Westinghouse Files for Bankruptcy

12 HOURS AGO

“The Westinghouse unit of Japanese technology giant Toshiba plunged into Chapter 11 bankruptcy Wednesday as the Cranberry Township, Pa.-based division faces cost overruns and delays with its U.S. nuclear plant projects,” reports USA Today .

“The company said the bankruptcy does not aff...

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Colorado Seeing Surge in Oil & Gas Investments

1 DAY AGO

“Drilling applications and investments by oil and gas companies are surging in Colorado after crude prices partially rebounded from their collapse in recent years, pushing the industry deeper into residential communities largely unaccustomed to drilling,” the Associated Press is reporting .

&...

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Four Out of Ten Jobs Could be Lost to Automation by 2021

1 DAY AGO

Automation is the new norm across sectors and will affect the bottom of pyramid so much so that four out of every 10 jobs globally would be lost due to this by 2021, experts say. As automation adoption increases, all high transaction and labor intensive jobs will take a hit. According to PeopleStrong...

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U.S. Durable Goods Orders Rose 1.7% in February

2 DAYS AGO

New orders for manufactured durable goods in February increased $3.9 billion or 1.7% to $235.4 billion, the U.S. Department of Commerce announced . This increase, up two consecutive months, followed a 2.3% January increase. Excluding transportation, new orders increased 0.4%. Excluding defense, new or...

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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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