Understanding the Term Life Cycle Cost

A common way to analyze a product investment is through a systematic approach, or a life cycle cost (LCC) analysis. This analysis examines all stages in the life cycle of the operating product, including everything from the selection of raw materials to final waste removal and recycling. 

LCC analysis is often used as a comparison tool between different investment options. The LCC analysis result provides guidance on issues concerning specific processes or  specific product design elements, which can help minimize the operational impact on the environment.

LCC calculation

LCC calculations are used as a tool to evaluate various investment options. These calculations include the combined costs of capital, service and maintenance, and operating costs. 

Serving as the basis for defining requirements in a new installation, LCC calculations are often implemented based on a planned installation. The calculations give users a qualified estimate of future costs based on current knowledge of functioning equipment. Calculations should be made jointly by the purchaser and the compressed air expert with regard to current energy prices and installation conditions.

What does the LCC calculation compare?

LCC calculations look at how different investment options affect:

• Production quality
• Production safety
• Subsequent investment requirements
• Maintenance of production machines and distribution network
• Environment
• Quality of final product
• Risks for downtime

When assessing the service and maintenance costs, the equipment’s expected condition at the end of the calculation period must also be taken into account.

Prior to making any purchases in your facility, compare different options and calculate the product or service’s LCC to understand  its financial and operational impacts. For help calculating your LCC, leave us a comment below.