Front-end Engineering Design Reduces Total Cost of Ownership (TCO)
When analyzing the Total Cost of Ownership (TCO) of a product/system, the initial or purchase price is just the tip of the iceberg. Over the life of a product/system, the majority of the ownership cost is incurred during the operation of the equipment. Fortunately or unfortunately, the factors that determine TCO are set at the product design stage.
Businesses across all industries face the challenges of maintaining a competitive edge and profitability. They are researching and implementing measures that improve productivity and reduce operational costs. The cost of operating equipment over its lifetime has become an important factor in purchasing decisions. A lower TCO is a competitive advantage.
The key to controlling TCO is a thorough analysis of a product’s design — both its operational performance and its effect on the manufacturing, operation, maintenance and decommissioning of the product/system. The analysis must take place on the front-end, very early in the design of a product or system. It is at this very front-end that small changes in scope and design can have the most impact in reducing TCO.
Front-end Engineering Design (FEED) is the application
during the design stage, of
a robust set of engineering best-practices that enable
system designers to control TCO by designing
a product or system to do its job most efficiently.
FEED is applied throughout the design stage,
starting with product specification
and is revisited continually. This identifies even
hidden costs as soon as
decisions are made, cost- saving changes
can be made at that time, where they have the most impact.
By definition, TCO is the cost to design, procure, operate and maintain equipment, minus the residual value. It’s a concept with which many people become most familiar ―after the fact. It is not until you own a dog, a car or a home that you are able to fully realize the TCO of that purchase. You may have compared the prices and features before making your final selection. But did you calculate the upkeep costs, both financial and time-wise, of each over its lifetime? Arriving at TCO for personal purchases requires a commitment to an in-depth analysis that most people are not able to make.
However, in the case of capital equipment, identifying the TCO can mean the difference between competitive advantage or disadvantage, profit or loss, and success or failure.
Impeding the view to
TCO are the separate
channels (silos) of
accountability that designers/builders
and users/maintainers often
follow. Designers/builders are charged with
rewarded for a product
built to specification, within budget and on schedule.
Operators/maintainers are rewarded
for keeping the equipment running
and producing to achieve the expected Return On Investment (ROI).
However, the price for meeting
the design/build budget and schedule is
paid by operators/maintainers
who are challenged by a product or system that is
difficult, time-consuming, and expensive to operate and maintain. Separate accountability can lead to
poor design decisions and animosity among stakeholders
throughout the life of a product.
Understanding the Development Lifecycle
Figure 1 – The Development Lifecycle
The Development Lifecycle illustrates the stages a product or system will pass through during its lifetime. As shown in Figure 1, the Development Lifecycle contains five stages: design, test, manufacture and distribute, operation and routine maintenance, and overhaul maintenance. By understanding the Development Lifecycle, it is easy to see how decisions made in the early stages impact the later stages and eventually TCO.
Decisions made in the design stage have the most impact, positive or negative, on the rest of the Development Lifecycle. In this stage, system designers define the functional requirements: what the product/system must be able to do and how fast, how often should it be able to do it, and under what operating conditions. They then develop the design, select the material and components, create the interaction between product and operator, and determine energy consumption, reliability and availability. Once the design and bill of materials are defined, 85% of the lifecycle cost is set.
the test stage, products are
evaluated for how they perform
in various conditions and under various circumstances.
modeling and physical tests,
such as prototypes, evaluate fit, operator interaction and
potential interferences. Simulations determine start-up,
steady state and shutdown capabilities.
Manufacture and Distribute
The manufacture and distribute stage focuses on the manufacturability of a product. Design complexity and the availability of components and materials factor into the production schedule. Packaging must protect the product and be appropriate for the distribution channel – retail, wholesale, OEM, etc. Large, bulky products or those that contain hazardous materials may require special transportation to reach their distribution outlets or end users.
Operation and Routine Maintenance
The operation and routine maintenance stage focuses on the useful life of a product, beginning with its deployment to address the need for which it was built. Because most of a product’s life is spent in the operation and maintenance stage, this stage incurs the majority of the TCOs. It is also in this stage that the effects of poor design decisions become most apparent.
The costs of operator training, consumables such as fuel and oil, preventive and routine maintenance, replacement of wear parts, etc., occur during this stage. Overly complex products or systems are more difficult to operate. Excessive, difficult to replace or specialty wear parts can severely impact the reliability and availability of the product/system. The ease of performing maintenance correlates to whether or not owners/operators adhere to the recommended maintenance schedules. Neglected equipment eventually leads to reduced performance, premature failures, dangerous conditions for operators, decreased profit, and a competitive disadvantage.
Products intended for a long life will, at some point, need to undergo an overhaul to extend their useful life. More invasive than routine maintenance, overhaul maintenance, such as rebuilding a pump or replacing the system plumbing, will render the product/system unavailable. Some overhaul maintenance procedures can take place on-site; others could require components to be sent to the depot for rebuilding, testing and re-commissioning. When, how long, and how much it will cost to perform an overhaul are set by decisions made in the design stage.
The preceding overview of the Development Lifecycle stages illustrates the importance of understanding the impact design decisions have on the downstream lifecycle stages.
Under a traditional product development scenario, each stage has
its own stakeholders, budget, schedule
and accountability. There is
little opportunity or incentive
stakeholders to evaluate the impact of their
decisions outside of their
area of responsibility.
Front-end Engineering Design Enables Better Design Decisions
Front-end Engineering Design, 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. Figure 2 shows how FEED tools are applied during the Design and Test stages, and how regular TCO calculations should be made during the stage to ensure the most effective and cost-efficient system is designed.
Figure 2 – Application of FEED at the Design Stage includes TCO Check Milestones
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 reducing 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, 3-D modeling, simulations, Reliability Centered Maintenance (RCM), Failure Modes and Effect Analysis (FMEA), and prototypes.
- Mechatronics is the synergistic combining of electrical, mechanical and computer engineering disciplines in the design and test stages of product development. For example, mechatronics might be applied to the design and testing of a hydraulic steering system that uses joystick controllers and an LCD panel for navigation.
- 3-D modeling creates a visual of the design intent that enables engineers to identify potential interferences and design flaws with a component or with the equipment on which the component will be installed. It also visually conveys the design intent to stakeholders early in the project to foster a common understanding and accelerate the approval process.
- Simulations determine start-up, steady state and shutdown capabilities; very important aspects of a fluid power system. Simulation studies enable the design team to factor in the ―bumps in the road.
- Reliability Centered Maintenance (RCM) and Failure Modes and Effect Analysis (FMEA) identify system components that are critical to the operation of the product/system. These tools determine the conditions under which components might fail, how likely they are to fail, and the consequences of that failure to the product/system. In combination with 3-D modeling and simulations, RCM and FMEA during the design stage provide the analysis to select the most cost-effective solution for the job.
- Prototypes, including rapid prototypes are not-yet-fully-functioning versions of a product/system. In conjunction with 3-D modeling and simulations, they further aid the design team in testing fit and operator interaction.
Using these tools
during the design
stage to evaluate
the effect design decisions
will have on other stages,
designers to uncover design flaws, potential conflicts, and cost-prohibitive features before implementing a design. System
designers are then able to
change the design, material or components,
the conflict, improve the interaction, mitigate the
failure or reduce the amount of operator
training. The result is the
most effective and efficient product/system design for the job.
Spending on FEED Reduces TCO
Early-stage changes are the most cost-effective
FEED is able to identify and introduce changes at the design stage, where they can be made cost-effectively and have the most impact on TCO. As shown in Table 1, the cost of implementing changes at later stages increases exponentially – approximately 10 times more at each stage.
|Development Lifecycle Stage||Relative Cost of Change*|
|Test – Theoretical||$100|
|Test – Physical||$1,000|
|Manufacture and Distribute||$10,000|
|Operation and Routine Maintenance||$100,000|
|*Source: Wohlers Associates|
Table 1 – Relative Cost of Implementing Change at Each Stage
Changes are also easiest to implement during the analysis of a design, before system designers and stakeholders form an attachment to a design. Once locked into a vision, it can be challenging to see the project in any other way. This narrowed vision, along with subsequent decisions based on that vision, adds to the difficulty and expense of making changes at later stages.
Early-stage changes have the most effect on TCO
FEED does negatively impact the cost and length of the design stage. If considered only within the context of this stage, the impact can be significant. However, in the context of entire lifecycle costs, the impact is significantly positive. Up-front spending on design analysis reduces costs in the later stages. As shown in Table 2, spending at the design stage can significantly reduce the operation and maintenance costs of a product. Over the entire lifecycle, the savings can increase the useful life of a product by 50% and reduce TCO approximately 40%.
Modify the design to reduce failures
If an ounce of prevention is worth a pound of cure, then the best way to mitigate the effect of failures is to prevent them from happening. Changes at the design stage can eliminate the potential for or reduce the effect of failure on a product/system.
The bathtub curve illustrates the risk of product failure over time. It depicts an initial period of relatively high failure rates that gradually decrease, followed by a longer period of low failure rates, and then a period of increasing failure rates as a product nears the end of its useful life. The bathtub curve identifies the types of failures most likely to occur at throughout the life of a product. RCM- and FMEA-style analysis at the design stage enables system engineers to determine the probability of these failures and their impact to the availability of the product/system. They can then identify and implement design changes to mitigate the failure. Reducing failures reduces TCO because repair and maintenance decrease, and reliability and availability increase.
Figure 3 – The Bathtub Curve
The bathtub curve places failures into three categories:
- Infant Mortality: Defects in design, material, manufacturing or assembly typically appear in the early releases of a product, when it is in its ―infancy.‖ FEED best-practices can identify the potential for defects in the design stage. Changes to the design can then mitigate or eliminate these types of failures. For example, reducing the complexity of a design can simplify the manufacturing process and reduce the risk of failure due to a manufacturing defect.
- Random: These types of failures occur during the useful life of a product. They are infrequent and seemingly without a definitive cause. However, inferior components, lack of maintenance or improper use can increase the chance of failure. FEED best practices can reduce random failures. RCM- and FMEA-style analysis enables system designers to identify critical system
components, specify robust parts and develop easy-to-implement maintenance.
- Wear-out: Failures of this nature occur toward the end of a product’s useful life and with increasing frequency as the product/system ages. The life expectancy of components is set by decisions made at the design stage. However, by applying RCM and FMEA style analyses in the design stage, wear-out failure can be delayed. Selecting the appropriate components for the environment ensures that a cost effective selection is made. The tradeoff between initial cost of components, accessibility, expected life and time to repair is evaluated. When wear-out parts, such as filters, are designed to be easy to replace, they keep a fluid power system clean, thus increasing availability and extending useful life of the system.
Changing the Accountability Clears the View to True TCO For FEED to have the most impact on TCO, project participants must be able to migrate from ―silos‖ of accountability to a shared accountability. With shared
accountability, a system designer’s responsibility extends past the design stage to
now include partial responsibility for the success of later life stages. This provides incentive for system designers to evaluate their decisions from total lifecycle perspective. It encourages them to share data and develop two-way feedback channels with operators and maintainers, the group that bears most of the lifecycle costs. This feedback enables system designers to better determine how products and systems will perform. In return, data from modeling and simulations provides benchmarks by which operators and maintainers can monitor performance.
Benefits of Applying FEED to System Design
- Analyze and refine the scope to ensure the design and manufacturing are only as complex as necessary to produce the product.
- Select components that are robust and appropriate for their operating environment to reduce premature failure.
- Where applicable, design diagnostic instead of invasive measures to check system characteristics and conditions.
- Develop models to emulate start-up, steady state and shutdown situations to ensure the system responds appropriately and conditions are controlled.
- Reduce the frequency of routine maintenance and ensure procedures are easy to perform.
- Protect the equipment from external damage by protecting them in the layout and eliminating interference — between components and between the operator and the product/system.
- Ensure interaction with the product is safe for the operator and appropriate for their skill level.
- Increase Return on Investment (ROI)
- by reducing TCO
- by increasing availability
- by reducing failures!
- by increasing availability
- by reducing TCO