Integrating life-cycle cost and cost-of-ownership in the commercial sector

Abstract

The author describes two models, the LCC (life cycle cost) model and the COO (cost of ownership) model, and their use as an aid in meeting the objective of creating products that have the lowest LCC for both the manufacturer and the customer. First, the what and why of the LCC analysis process are discussed, and the objectives are defined. The model is described in terms of the major cost elements, as well as the various model variables. The use of the results as a planning tool in the decision-making process is emphasized. Sample baseline runs are provided to demonstrate the implementation and utility of the model, and illustrate the reporting formats. Then, the COO model is presented to provide the customer perspective of LCC. The utility of the model in helping to leverage product sales and services is explained. An overview of the COO model is also furnished in terms of mechanization, input data, and application. Sample runs and tradeoffs are made to illustrate the relative COO for varying levels of service maintenance contract options. >