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Task #2: Ensures that all plant equipment has an equipment maintenance plan on file
that matches the expected failure modes.
The RE crafts a strategy of both preventive and condition monitoring tasks that are
specifically designed to identify or prevent failure modes. By using collected information
about the equipment, failure modes are identified and the appropriate tasks are
selected to identify or prevent these failure modes as early as possible. The strategy is
implemented according to the criticality database. Methodologies to determine the failure
modes of equipment include Reliability Centered Maintenance (RCM) and Failure Mode
Mapping.
Task #3: Development and Management of the PdM/CBM program
As the owner of the failure mode based strategy, the RE will develop and implement the
Condition Monitoring program, often referred to as CBM or PdM. This entails determine
what technologies will be deployed to which equipment based on an understanding of the
capabilities of the CBM technologies to address failure modes and the resources available to
apply to
the most critical assets. Using the foundational elements to determine which equipment
should initially be included as well as what technologies are deployed to what failure modes
is a key to early success. By measuring and understanding the health of the equipment
included in the strategy will determine the next phase of implementation. The RE will
manage the CBM program by tracking key indicators such as equipment health, route
adherence, mean time to implement recommendations and
defect elimination.
Task #4: Performs statistical analysis on equipment failures to determine changes to the
equipment maintenance plan
Understanding what types of failures are most common through analysis of the Failure
Reporting and Corrective Action System (FRACAS) enables the RE to make adjustments to
the existing equipment maintenance plan. Collecting and analyzing equipment failure data
allows for the tracking of bad actors and identifying dominant failure modes. Implementing
the appropriate strategies enables a robust defect elimination strategy. Statistical analysis of
failure data using tools such as Weibull analysis allows the RE to accurately determine what
type of maintenance strategy is most appropriate. Tools such as Availability Simulation allow
for the optimization of task intervals.
Task #5: Leads and manages the Root Cause Analysis process
Managing the Root Cause Analysis (RCA) Process consists of identifying appropriate
triggers, facilitation of RCA and managing the Action Item Register. Effective triggers allow
opportunities to be identified without overwhelming the system. Proper facilitation will
obtain the true root cause and identify appropriate action items that will not only solve the
problem at hand but make possible system and process level improvements. Effective
management of an Action Item Database will drive ownership of the corrective actions as and
make for an effective method to communicate and track results.
Establishing processes for these five activities allow the RE to fulfill the primary mission:
creating and implementing an effective strategy to identify machinery defects and eliminate
the source of those defects and use the appropriate tools to continuously improve that
strategy.
include, planning, design, construction and acquisition, operations, maintenance, renewal and
rehabilitation, depreciation and cost of finance and replacement or disposal.
Contents
[hide]
1 Financial
4 IT industry usage
6 See also
7 References
8 Further reading
9 External links
[edit] Financial
Whole-life cost analysis is often used for option evaluation when procuring new assets and
for decision-making to minimise whole-life costs throughout the life of an asset.It is also
applied to comparisons of actual costs for similar asset types and as feedback into future
design and acquisition decisions.
The primary benefit is that costs which occur after an asset has been constructed or acquired,
such as maintenance, operation, disposal, become an important consideration in decisionmaking. Previously, the focus has been on the up-front capital costs of creation or acquisition,
and organisations may have failed to take account of the longer-term costs of an asset. It also
allows an analysis of business function interrelationships. Low development costs may lead
to high maintenance or customer service costs in the future.
[edit] Environmental and social
Main article: Life cycle assessment
The use of environmental costs in a whole-life analysis allows a true comparison options,
especially where both are quoted as "good" for the environment. For a major project such as
the construction of a nuclear power station it is possible to calculate the environmental impact
of making the concrete containment, the water required for refining the copper for the power
plants and all the other components. Only by undertaking such an analysis is it possible to
determine whether one solution carries a lower or higher environmental cost than another.[2]
Almost all major projects have some social impact. This may be the compulsory re-location
of people living on land about to be submerged under a reservoir or a threat to the livelihood
of small traders from the development of a hypermarket nearby.
[edit] Whole-life cost topics
[edit] Project appraisal
Whole-life costing is a key component in the economic appraisal associated with evaluating
asset acquisition proposals. An economic appraisal is generally a broader based assessment,
considering benefits and indirect or intangible costs as well as direct costs.
In this way, the whole-life costs and benefits of each option are considered and usually
converted using discount rates into net present value costs and benefits. This results in a
benefit cost ratio for each option, usually compared to the "do-nothing" counterfactual.
Typically the highest benefit-cost ratio option is chosen as the preferred option.
Historically, asset investments have been based on expedient design and lowest cost
construction. If such investment has been made without proper analysis of the standard of
service required and the maintenance and intervention options available, the initial saving
may result in increased expenditure throughout the asset's life.
By using whole-life costs, this avoids issues with decisions being made based on the shortterm costs of design and construction. Often the longer-term maintenance and operation costs
can be a significant proportion of the whole-life cost.
[edit] Asset management
During the life of the asset, decisions about how to maintain and operate the asset need to be
taken in context with the effect these activities might have on the residual life of the asset. If
by investing 10% more per annum in maintenance costs the asset life can be doubled, this
might be a worthwhile investment.
Other issues which influence the lifecycle costs of an asset include:
site conditions,
Although the general approach to determining whole-life costs is common to most types of
asset, each asset will have specific issues to be considered and the detail of the assessment
needs to be tailored to the importance and value of the asset. High cost assets (and asset
systems) will likely have more detail, as will critical assets and asset systems.
Maintenance expenditure can account for many times the initial cost of the asset. Although an
asset may be constructed with a design life of 30 years, in reality it will possibly perform well
beyond this design life. For assets like these a balanced view between maintenance strategies
and renewal/rehabilitation is required. The appropriateness of the maintenance strategy must
be questioned, the point of intervention for renewal must be challenged. The process requires
proactive assessment which must be based on the performance expected of the asset, the
consequences and probabilities of failures occurring, and the level of expenditure in
maintenance to keep the service available and to avert disaster.
[edit] IT industry usage
Whole-life cost is often referred to as "total cost of ownership (TCO)" when applied to IT
hardware and software acquisitions. Use of the term "TCO" appears to have been popularised
by Gartner Group in 1987[3] but its roots are considerably older, dating at least to the first
quarter of the twentieth century.[4]
It has since been developed as a concept with a number of different methodologies and
software tools. A TCO assessment ideally offers a final statement reflecting not only the cost
of purchase but all aspects in the further use and maintenance of the equipment, device, or
system considered. This includes the costs of training support personnel and the users of the
system, costs associated with failure or outage (planned and unplanned), diminished
performance incidents (i.e. if users are kept waiting), costs of security breaches (in loss of
reputation and recovery costs), costs of disaster preparedness and recovery, floor space,
electricity, development expenses, testing infrastructure and expenses, quality assurance, boot
image control, marginal incremental growth, decommissioning, e-waste handling, and more.
When incorporated in any financial benefit analysis (e.g., ROI, IRR, EVA, ROIT, RJE) TCO
provides a cost basis for determining the economic value of that investment.
Understanding and familiarity with the term TCO has been somewhat facilitated as a result of
various comparisons between the TCO of open source and proprietary software. Because the
software cost of open source software is often zero, TCO has been used as a means to justify
the up-front licensing costs of proprietary software. Studies which attempt to establish the
TCO and provide comparisons have as a result been the subject of many discussions
regarding the accuracy or perceived bias in the comparison.
[edit] Automobile industry, finances
Total cost of ownership is also common in the automobile industry. In this context, the TCO
denotes the cost of owning a vehicle from the purchase, through its maintenance, and finally
its sale as a used car. Comparative TCO studies between various models help consumers
choose a car to fit their needs and budget.
TCO can and often does vary dramatically against TCA (total cost of acquisition), although
TCO is far more relevant in determining the viability of any capital investment, especially
with modern credit markets and financing. TCO also directly relates to a business's total costs
across all projects and processes and, thus, its profitability. Some instances of "TCO" appear
to refer to "total cost of operation", but this may be a subset of the total cost of ownership if it
excludes maintenance and support costs.
[edit] See also
Infrastructure
Asset management
[edit] References
1.
2.
3.
4.
This article needs additional citations for verification. Please help improve
this article by adding citations to reliable sources. Unsourced material may be
challenged and removed. (November 2008)
[edit] Further reading
Riggs, James L., (1982), Engineering economics. McGraw-Hill, New York, 2nd
edition, 1982.
Norris, G. A. (2001): Integrating Life Cycle Cost Analysis and LCA, in: The
International Journal of Life Cycle Assessment, Jg. 6, H. 2, p. 118120.
Kicherer, A.; Schaltegger, S.; Tschochohei, H. & Ferreira Pozo, B.: Eco-Efficiency.
Combining Life Cycle Assessment and Life Cycle Costs via Normalization,
International Journal of LCA, 2007, Vol 12, No 7, 537-543.
Role of depreciation
Cost Structure and Life Cycle Cost (LCC) for Military Systems - Papers presented at
the RTO Studies, Analysis and Simulation Panel (SAS) Symposium held in Paris,
France, 24-25 October 2001