Life Cycle Cost, an Overlooked
Opportunity
by Buyers
Life Cycle Cost (LCC) analysis is a management tool that can help companies to minimize
waste and maximize energy efficiency for many types of systems, including pumping
systems. Pumping systems account for nearly 20% of the world’s electrical energy
demand and range from 25-50% of the energy usage in certain industrial operations.
Although pumps are typically purchased as individual components, they provide a
service only when operating as part of a system. The energy and materials used by
a system depends on the design of the pump, the design of the Installation, and
the way the system is operated. These factors are interdependent. The initial purchase
price is a small part of the life cycle cost for high usage pumps. While operating
requirements may sometimes override energy cost considerations, an optimum solution
is still possible. A greater understanding of all the components that make up the
total cost of ownership will provide an opportunity to dramatically reduce energy,
operational, and maintenance costs. Reducing energy consumption and waste also has
important environmental benefits.
What is Life Cycle Cost (LCC)?
The life cycle cost (LCC) of any equipment is the total “lifetime” cost to purchase,
install, operate, maintain, and dispose of that equipment. LCC involves following
methodology to identify and quantify all of the components of the LCC equation.
When used as a comparison tool between possible design or overhaul alternatives,
the LCC process will show the most cost-effective solution within the limits of
the available data. The components of a life cycle cost analysis typically include
initial costs, installation and commissioning costs, energy costs, operation costs,
maintenance and repair costs, down time costs, environmental costs, and decommissioning
& disposal costs.
Why Organizations should consider Life Cycle
Costs?
Many organizations only consider the initial purchase and installation cost of a
system. It is in the fundamental interest of the designer or manager to evaluate
the LCC of different solutions before installing major new equipment or carrying
out a major overhaul. This evaluation will identify the most financially attractive
alternative.
As national and global markets continue to become more competitive, organizations
must continually seek cost savings that will improve the profitability of their
operations. Industrial equipment operations are receiving particular attention as
a source of cost savings, especially minimizing energy consumption and plant downtime.
Existing systems provide a greater opportunity for savings through the use of LCC
methods than do new systems for two reasons. First, there are at least 20 times
as many pump systems in the installed base as are built each year; and, second,
many of the existing systems have pumps or controls that are not optimized since
the pumping tasks change over time.