Life Cycle Monitoring
Insight into the life cycle costs of a technical process or equipment is a specific area where much can be achieved.
Total cost of ownership: cheap can only prove expensive at the end of the technical life cycle.
Over the past two decades, technological innovations and an increase in (international) competition in organizations have led to much more attention to controlling and also reducing costs. Interferences of science and practice have provided a range of methods and techniques that can assist with this. These instruments generally relate to transaction processes, reporting and control measures, information systems and decision making.
A method that focuses on information and decision making is Life Cycle Costing. The importance of the initial stages of the product life cycle. It is apparent from frequent research that at least 80% of the total cost of the product life cycle is determined by decisions that are taken in particular in the so-called development phase.
It is therefore evident that an economic analysis of capital investment alternatives in this phase can significantly affect the performance of an organization.
Many organizations base their capital investments on initial costs. In recent decades, it has been found that there was little attention to the total cost of the entire lifetime of products. LCC, on the other hand, tries to optimize the costs of developing, producing, selling and scraping products. This begins with the determination of all costs incurred at the life cycle of the product to be developed. Alternatives can then be calculated to achieve optimum choices during the phases of the product life cycle. LCC can therefore be defined as the sum of all costs of a product (component) relating to the design, development, manufacture and termination of use of the product, as well as termination of service on that product.
Life Cycle Management (LCM) refers to the cost of managing resources through their various phases. These phases can be related to products (design, development, production and logistics), but also to technical installations, equipment and machinery (purchase, use, support, maintenance and disposal). Hence, the ultimate goal of LCC is to make decisions that lead to such cost levels in the aforementioned life stages that the organization can maintain and improve its competitive edge in the long term.
LCM contributes to an adequate evaluation of investments in view of the fact that all relevant costs can be considered; This is in contrast to the usual approach whereby only initial costs are studied. Ultimately, this facilitates management choices between competitive alternatives.