May 02, 2013

Lifecycle costing

There is a misconseption when investing in an asset, investors tend to focus on the acquisition cost solely. However, this can be a fraction of the cost when investing in a multi million equipment, such as, an aircraft or a manufacturing plant. Other costs should be taken into consideration such as transport, installation, operating, maintenance and disposal. Moreover, such a decision should be done concurrently by consulting finance, engineering, process operators and understanding the involved regulations.

Understanding the total cost of ownership can then be compared to the revenue generated by such an asset from productivity, reliability and quality. Quality aspect tends to be intangible when it comes to non-measurable aspect although tools like QFD and decision analysis can be used, the final decision can be subjected to biasness and heuristics. Nevertheless, having understood the whole picture can contribute significantly to profitability and customer satisfaction.

Main fixed assets in my department "Flight Simulators" are invested in by strategic decisions. However, for moderate investments such as modifications and new components can be done by this approach. It would be useful to suggest the use of Excel to understand the effect of asset investments and the use of QFD to link this decision to the customer perspective.

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Most recent comments

  • Good point, you dont have to consider it while using the decision tree as the available data is limi… by Ahmed Alali on this entry
  • Good point Bu Salim. However, i failed to mention that a decision objective is linked to the busines… by Ahmed Alali on this entry
  • I do agree with you Ahmed that certain modification enhance GA performance, however, even if someone… by Waddah Alharthi on this entry
  • as u said, the time scaling and sentivity need to be taken into account… i agree but do u think in… by Tzu-i Yang on this entry
  • i agree with u … choosing tools is not easy… we might fall into trap info….it was whyi decisio… by Tzu-i Yang on this entry

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