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Second level
Third level
Management
Fourth level
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Studies 2
2011-2012 Presentation
Email : Andrew.Spowage@nottingham.edu.my
2
Overview of the course
Click
To understand
to edit Master
the basic
text styles
use and value of
LCC
Second level
Third level
Fourth level
To appreciate the
Fifth level different phases of LCC
Introduction
Click to edit Master
to LCC text styles
Second
LCC phaseslevel
Third level
LCC models
Fourth level
LCC implementation
Fifth level
6
6
Introduction Why LCC
Life Cycle
Click Costing
to edit (LCC)
Master is not new:
text styles
Second level
US Third
government
level records dating back to 1933
Fourth level
The Building Research Institute Conference
Fifth level
Methods of Building Cost Analysis in 1961
The Logistics Management Institute published a
report in 1965 for DoD US and subsequently the
publication of guidelines for LCC acquisition
The Office
Click of Government
to edit Master textCommerce
styles (OGC), UK
National
Second Institute
level of Governmental Purchasing
(NIGP), USA
Third level
National Association
Fourth level of State Procurement
Officials (NASPO),
Fifth level USA
American Bar Association (ABA), USA
National Association of Fleet Administrators
(NAFA), USA
Caterpillar Inc.
International Electrotechnical Commission
published a standard (IEC 60300) 9
Etc 9
Introduction Definition
By B. Blanchard
10
10
Introduction Nomenclature
Click
Through
to Life
editCosting
Master text styles
Life Cycle Costing
Second level All contain the
Whole Lifelevel
Third Costing same basic
CradleTo Grave
Fourth level philosophies
Womb To TombFifth level
Click
A technique to establish
to edit Master the total cost of
text styles
ownership
Second level
Third level
Fourth level
It is
a structured approach that addresses
Fifth level
all the cost elements
Third level
Training Cost Special Test
Equipment Repair
Fourth level
Cost Cost
Fifth level Facilities
Cost
Supply Support Transportation and
Inventory and Distribution Handling Cost
Cost
Disposal Technical
Cost Data Post
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WHAT IS THE REAL COST OF OUR EQUIPMENT ? 13
Introduction
Fundamental Principle
14
Introduction
Fundamental Principle
15
Introduction
Fundamental Principle
16
Introduction
Why is it important?
Click
The visible costs
to edit of anytext
Master purchase
stylesrepresents
only a smalllevel
Second proportion of the total cost of
ownership
Third level
Fourth level
There are 4Fifth level
major benefits of LCC analysis:
Evaluation of competing options in purchasing;
Improved awareness of total costs;
More accurate forecasting of cost profiles; and
Performance trade-off against cost
17
17
Introduction
Why is it important?
Click
With LCC
to all
editmajor costs are
Master established
text styles in advance
All of the owning and operating expenses throughout a
Secondworking
machines level life are considered
LCC can save
Third guesswork in budgeting
level
LCC can reducelevel
Fourth worries about the costs of machine
repairs, downtime, and lack of availability
Fifth level
LCC can also protect you against a dealer who wont or
cant stand behind the machines they sell
Procurement based on LCC can reduce total costs
It is useful in making decisions associated with
equipment replacement, budgeting and planning
Provide downstream resource visibility
Support downstream strategic budgeting
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18
Introduction
Why is it important?
Click
Wouldto edit
you Master
considertext
thestyles
purchase of an
Second level
automobile solely based on its list price?
Third level
Fourth level
Or would Fifth
youlevelalso consider:
Reliability
Depreciation
Maintenance costs
Fuel cost
19
19
Introduction
Disadvantages
Click
The accuracy of LCC analysis
to edit Master diminishes as it
text styles
predicts further into the future
Second level
LCC Third
is time consuming
level
Fourth level
LCC is an expensive
Fifth level concept, not appropriate
for all applications
The assumption is that the product has a finite
life-cycle
The accuracy of data is often doubtful
It has a high sensitivity to changing requirements
20
20
Overview
Introduction
Click to edit Master
to LCC text styles
Second
LCC phaseslevel
Third level
LCC models
Fourth level
LCC implementation
Fifth level
21
21
LCC Phases
LCC V2 22
Andrew Spowage 2007 22
LCC Phases Elements
23
23
LCC Phases Importance
Click
LCC istobased on the premise
edit Master that:
text styles
Second
to arrive at a meaningful purchasing decision full
level
account must be taken of each available option
Third level
Fourth level
All significant
Fifth expenditure
levelof resources likely to
arise must be addressed
Introduction
Click to edit Master
to LCC text styles
Second
LCC phaseslevel
Third level
LCC models
Fourth level
LCC implementation
Fifth level
25
25
LCC Models
26
26
LCC Models Aims
Click
Typical
to aims of Life text
edit Master Cycle Cost Modeling?
styles
Second level
To identify
Third level the total cost of alternative
means oflevel
Fourth solving / making purchase
Fifth level
To achieve our cost, schedule and
performance objectives
To estimate the cost impact of various
designs and support options
27
27
LCC Models Requirements
Click
Any LCC
to edit
Model
Master
needs
textto:
styles
Second level
To identify and define precisely each cost
element during the entire life cycle
Third level
Fourth each
To assign level defined cost in a LCC phase
Fifth level
Ensure that each partner speaks the same
cost language i.e. A standard nomenclature
Ensure each partner uses same inputs and
understands same results
28
28
LCC Models
Click
To compute
to the life
edit cycle costs
Master text of a system, the following
styles
straightforward equation is frequently used
Second level
LCC
Third level+ Ko + Kd
= Kaq
Fourth level
Where, Fifth level
Introduction
Click to edit Master
to LCC text styles
Second
LCC phaseslevel
Third level
LCC models
Fourth level
LCC implementation
Fifth level
30
30
Implementation
Consider
Click theMaster
to edit following
texttostyles
avoid failure: -
Second
Guidelineslevel
Common Errors
Third level
Fourth level
Fifth level
31
31
Implementation Guidelines
Click
A LCCto
unit should
edit be attached
Master to the finance or
text styles
logistics
Second departments
level
The LCC
Third must
level start as early as possible
Performance requirements should be
Fourth level
documented Fifth level
Loss or
Click to omission
edit Master of text
datastyles
Lack of systematic
Second level structure
Misinterpretation
Third level of data
Fourth level
Wrong or Fifth
misused
level
techniques
A concentration on insignificant facts
Failure to access uncertainty
Failure to check work
Estimating the wrong items
33
33
Implementation Guidelines
Click
Institutional
to editinertia
Master text styles
Symbolic
Secondroles
levelof sophisticated accounting
systems helps to maintain a rational faade
Third level
In many departments,
Fourth level the responsibility for
acquisition costlevel
Fifth and subsequent support funding
are held by different areas
Consequently, there is little or no incentive to
apply the principles of LCC to purchasing
policy
Potentially high cost of collecting appropriate
data
35
35
Implementation Barriers
Concept of unpredictability :
Click to edit Master text styles
It is a common belief that there are so many
unforeseeable
Second levelor Unquantifiable parameters it is
impossible to conduct adequate LCC.
Third level
Fourth level
Fifth levelProject Environment
Example of
project Technological Industrial disruption
uncertainties Work scope Weather
Configuration control Politics
Reliability Administration
Productivity Market forces
Contracting philosophy Demand 36
In Conclusion
Click
True LCC
to can
editonly be determined
Master after a system or
text styles
equipment has been withdrawn from service
Second
LCC levelin many applications in an
can be used
organization:
Third level
Purchasing
Fourth level
Developing new level
Fifth products
Optimal time for withdrawal
When making trade-offs and evaluate various alternatives
LCC should be a dynamic tool used by engineers to
assess the costs of each phase
The sooner a LCC modeling tool is used, the faster it will
have an impact on the logistic lifecycle
37
37
Home Work
Click
http://www.treasury.nsw.gov.au/__data/as
to edit Master text styles
sets/pdf_file/0005/5099/life_cycle_costings
Second level
.pdf Third level
Fourth level
Fifth level
38
Lecture 1 - LCC V9: Andrew Spowage for Management Studies 2 2012 38
A gift
Click
www.bbc.co.uk/science/humanbody/sleep/
to edit Master text styles
sheep/reaction_version5.swf
Second level
Third level
Fourth level
Fifth level
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Lecture 1 - LCC V8: Andrew Spowage for Management Studies B 2011 39
References
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Lecture 1 - LCC V8: Andrew Spowage for Management Studies 2 2012 40