Factors effecting equipment lifecycle cost

Equipment or system life has 4 factors.
Design
Installation
Operation
Maintenance

Design is the most important, yet often the most compromised aspect of capital equipment life cycle.  The design and purchase of equipment is often a very small portion of the lifecycle cost, but it locks in the rest of the total ownership costs (TOC).

Front-end Engineering Design (FEED), also referred to as Front-End Loading (FEL) and Pre-Project Planning (PPL), is robust planning and analysis during the Design stage,
when the ability to influence changes in design is relatively high and the cost to make
those changes is relatively low. It is important that TCO calculations should be made during this process to ensure the most effective and cost-efficient system is designed.

Though FEED adds cost and time to the design stage, these are minor compared to
making changes at later stages in the project. Identifying and implementing cost saving
modifications in the design stage are the keys to optimizing TCO.
Before actual design work begins, FEED confirms and prioritizes the product/system
requirements — what is critical, what would be ―nice to have, and what should be
categorized as beyond the scope. Refining the requirements before design work
begins is critical, because the requirements drive the design which then determines
the lifecycle. An overly broad scope negatively impacts other stages.
Once design work begins, FEED expands upon traditional engineering analysis,
which focuses primarily on the operational function of a product/system. FEED goes
beyond this by employing engineering best-practices to analyze how design
considerations impact each of the development lifecycle stages. These best-practices
include: mechatronics,  Reliability Centered Maintenance (RCM), Failure Modes and Effect Analysis (FMEA), 3-D modeling, and simulations.

Installation

Once design, selection, and purchase has been completed, acceptance testing and installation phase begins.  This phase needs as meticulous planning as the design phase.  Care to how operational materials and personal move and interact with the equipment must be taken.  Often equipment is designed with a “one-size fits all” operator in mind.  This can mean that controls and gauges are not able to be read properly by shorter operators.  Mapping the path of the operators around the equipment will highlight any interference issues.  The triad of material loading, controls, and product unload is as important as the sink-stove-refrigerator triad that home designers obsess about home kitchens.  Installations also need to consider both routine servicing requirements and equipment replacement.

Operation

The operational phase requires standard work instructions, trained operators, trained supervisors, and continuous improvement mindset.  This phase consumes most of the total cost of ownership.  These include raw materials, scrap, off-quality product, production labor, indirect labor, utilities, and supplies.  All of these go into the cost of goods sold.  Controlling these costs can either improve profits, or allow a reduction in sale price.  Depreciation is also part of operating cost, but that is completely set at time of purchase.

Maintenance

Maintenance costs are best controlled by being designed into the equipment.  Including condition monitoring into the system controls can ensure that all areas of the equipment are properly monitored.  Operator care, and ensuring that repairs are made promptly and accurately are also key components to optimizing the maintenance portion of total life cycle cost.

The final factor in a cost formula is disposal.  This may include rebuild/overhaul, sale, or decommissioning.

Total cost of ownership consists of the four phases, but design phase is most important in setting that cost.  Often in the rush to become operational, or a short sighted view of costs, the design phase is cut short and compromises are made.  Good front end engineering, project stage gate vetting, and capital budgeting are necessary to any company that values their manufacturing process as a competitive advantage.

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