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AssetLifeCycleManagement

CaseStudieson AssetLifeCycleCostModelling

Contents
TheBasics TheProcess DifferentModels Examples/CaseStudies

AssetLifeCycleCostBasics
Life Span (Assessment Period)

Life Cycle (Asset Estimated Life)

Total Cost

Replacement

Refurbishment

Financial Year

Time

LifeCycleCostModellingProcess
Step 1:
Define the Scope of the Analysis
Stakeholder involvement Project plan review Scope of analysis Data requirements analysis Model selection Depreciation policies and rates Governing accounting practices Categorisation of cost contributors Validation of the model by Accounting Team identification Responsibility allocation Data collection and configuration Data verification Audit trail for data entries Consensus discussion Base results demonstration Reality checks Sensitivity analysis Variations Presentation to Stakeholders Consensus Budget alignment and Project Team appointment Implementation project definition and activation

Step 2:
Develop or adjust the LCC Model

Step 3:
Define Team. Collect Information

Step 4:
Populate the Model

Step 5:
Review and Optimise the Model

Step 6:
Decision and Implement the Solution

Step 7:
Maintain the Model

Populate actual data Adjust and review

DifferentModels
OptimumReplacementAge Repair/Replacement AlternativeDecisionMaking MaintenanceStrategySelection OtherUses

OptimumReplacementAgeModels
LifeCycleCost
Replace every Year

LCC1

Replace Every 2 Years

LCC2

Optimal Asset Life?

Replace Every 3 Years

LCC3

Replace Every 4 Years

LCC4

Etc.

LCCX

Replacement Interval EveryYear Every2Years Every3Years Every2Years Every4Years Every5Years Every6Years Every7Years Every8Years Every9Years

CostSummationsacrossLifeSpan(Example)
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 LCC $77.95M $47.95M $37.5M $34.45M $33.65M $32.55M $32.5M $35.2M $38.9M $41.7M $45.05M

9.00 3.20 3.30 3.70 3.85 3.90 3.90 3.90 3.90 3.90 Every10Years 3.90

8.40 8.40 3.70 4.20 4.50 4.50 4.50 4.50 4.50 4.50 4.50

7.80 1.00 7.80 4.05 3.60 3.65 3.65 3.65 3.65 3.65 3.65

7.45 7.45 0.85 7.45 3.55 3.45 3.50 3.50 3.50 3.50 3.50

7.05 1.35 1.05 0.85 7.05 3.50 3.45 3.60 3.60 3.60 3.60

6.80 6.80 6.80 1.00 0.80 6.80 3.30 3.75 3.65 3.75 3.75

6.65 3.65 1.40 1.05 0.90 0.70 6.65 3.90 4.40 4.65 4.75

6.35 6.35 3.50 6.35 0.95 0.85 0.65 6.35 4.25 3.75 3.55

6.25 1.60 6.25 3.30 1.15 0.95 0.80 0.50 6.25 3.80 3.75

6.20 6.20 1.30 1.25 6.20 1.20 0.85 0.70 0.45 6.20 4.10

6.00 1.95 1.55 1.25 1.10 3.05 1.25 0.85 0.75 0.40 6.00

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Costs [$M]

7 6 5 4 3 2 1

Y0

Y1

Y2

Y3

Y4

Y5 Time

Y6

Y7

Y8

Y9

Y10

ExcelbasedModelRepresentation

AssetLifeDetermination

AssetLifeDetermination

RepairorReplace?
Old Truck?

New Truck?

Repair/ReplacementModels
LifeCycleCost
Replace After 1 Year

LCC1

Replace After 2 Years

LCC2

Maintain or Replace?

Replace After 3 Years

LCC3

Replace After 4 Years

LCC4

Etc.

LCCX

Replacement Year
ReplaceY0 ReplaceY1 ReplaceY2 ReplaceY3 ReplaceY4 ReplaceY5 ReplaceY6 ReplaceY7 ReplaceY8 ReplaceY9 ReplaceY10

CostSummationsacrossLifeSpan(Example)
0 Y0

Y1

10 Y2

Y3

20Y4

Y5

Y6 30

Y7

Y8 40

Y9 [$M] Y10

LCC

9.00 3.20 3.30 3.70 3.85 3.90 3.90 3.90 3.90 3.90 3.90

1.00 8.40 3.70 4.20 4.50 4.50 4.50 4.50 4.50 4.50 4.50

1.25 1.00 7.80 4.05 3.60 3.65 3.65 3.65 3.65 3.65 3.65

1.45 1.20 0.85 7.45 3.55 3.45 3.50 3.50 3.50 3.50 3.50

1.75 1.35 1.05 0.85 7.05 3.50 3.45 3.60 3.60 3.60 3.60

3.75 1.65 1.15 1.00 0.80 6.80 3.30 3.75 3.65 3.75 3.75

1.40 3.65 1.40 1.05 0.90 0.70 6.65 3.90 4.40 4.65 4.75

1.60 1.30 3.50 1.35 0.95 0.85 0.65 6.35 4.25 3.75 3.55

1.80 2.00 2.30 Replacement Capital 1.60 1.75 1.95 Maintenance Costs 1.20 1.30 1.55 Costs 1.25 3.30Process 1.25 1.15 3.20 1.10 Lost Productivity 0.95 Disposal 1.20 3.05 0.80 0.85 1.25 0.50 0.70 0.85 6.25 0.45 0.75 3.80 6.20 0.40 3.75 4.10 6.00

$27.30M $27.05M $26.80M $29.45M $30.65M $32.45M $32.50M $35.20M $38.90M $41.70M $45.05M

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Costs [$M]

7 6 5 4 3 2 1

Y0

Y1

Y2

Y3

Y4

Y5 Time

Y6

Y7

Y8

Y9

Y10

ExcelbasedModelRepresentation

Net Present Values [Millions]


10.00 12.00 14.00 16.00 -4.00 0.00 2.00 4.00 6.00 8.00 -2.00

Repair/ReplaceModel

Replacement Year

Current Machine Depreciation Disposal Shutdown Lost Productivity Lost Productivity Lump Sum Capital Lump Sum OPEX Routine Process Routine Maintenance Replacement Capital

Re pla Re ce Y pla 0 (2 Re ce Y 00 6) pla 1 ce (20 Re 0 pla Y2 ( 7) 2 c Re e Y 008 pla 3 ( ) 2 Re ce Y 00 pla 4 9) (2 Re ce Y 01 pla 5 ( 0) 2 Re ce Y 011 ) pla 6 (2 Re ce Y 012 pla 7 ) (2 c Re e Y 013 pla 8 ( ) Re ce 201 pla Y9 4) ( c Re e Y 201 5) pla 10 Re ce Y (201 pla 11 6) c Re e Y (20 pla 12 17) ( Re ce Y 201 pla 13 8) ( c Re e Y 201 pla 14 9) Re ce Y (202 pla 15 0) c Re e Y (202 pla 16 1) Re ce Y (20 pla 17 22) Re ce Y (20 pla 18 23) ( c Re e Y 202 pla 19 4) Re ce Y (202 pla 20 5) c Re e Y (202 pla 21 6) ( Re ce Y 202 pl 22 7) a ( Re ce Y 202 pla 23 8) Re ce Y (20 pla 24 29) ce (2 Y2 030 5 ) (2 03 1)

CoalTerminalAssets

StackerRepair/ReplaceModel

ReclaimerRepair/ReplaceModel

Repair/ReplacementModelExample1

PasteuriserPerformanceImprovement
Alrode L9 Pasteuriser IQMS Results
100 90 80

IQMS Results [%]

70 60 50 40 30 20 10 0 Apr- May- Jun00 00 00 Jul00 Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun00 00 00 00 00 01 01 01 01 01 01

Month

AlternativeDecisionMaking

MaintenanceStrategySelection

Cyclic fatigue cracking Reinforcing webs Reinforcing

MaintenanceStrategySelection
Risk Based Maintenance Task LCC Comparison
8000000 7000000 Alternative Risk Based Maintenance Solutions (Mitigated Risk) Current Risk

TLCC NPV [AUD]

6000000 5000000 4000000 3000000 2000000 1000000 0 RBM: Condition Based Maintenance RBM: Usage Based Maintenance RBM: Run to failure Maintenance RBM: Design Improvement Maintenance

Non-RBM Maintenance

Maintenance Types of Work

LifeSpanImpact

LifeCycleCostModelling

OtherUses

LifeCycleCostManagement
Life Cycle Costs
$

Time

22

Replacement Year Scenarios

10 12 14 16 18 20 22 24 26 30
Assets
1 2 3 4 5 6 7
FleetTotalLCC $

Fleet Plan
RollingYearsX?)
0 4 8 12 16 20 24 28 32 36

$ $ $ $ $ $ $ $ $

Replacement Scenario Costs

LifeCycleCost

MachineBenchmarking

Cumulative Costs

Target (Model) Machine 1 Machine 2

Usage

DubaiFestivalCity/DubaiPalmJumeirah

ModellingSoftwareTools
Excel APTLifespan(WoodhousePartnership) AssetLife (HansenCorporation) Meridium ReliabilitySolutionLifeCycleCostModule

References
Standards:
AustralianFederalIncomeTaxLegislation AS15288:2003SystemsEngineering SystemLifeCycleProcesses AS/NZS4356:Lifecyclecosting Anapplicationguide AustralianAccountingStandardAAS4Depreciation AustralianAccountingStandardAAS116Property,PlantandEquipment InternationalFinancialReportingStandards(lFRS)IAS16andIAS36Standards AustralianGovernmentDepreciationGuidelines AustralianMasterTaxGuide TR2009/4:TaxationRuling Incometax:effectivelifeofdepreciatingassets GAAP(GenerallyAcceptableAccountingPractices) LifecyclecostingBetterPracticeGuide AustralianNationalAuditOffice Maintenance,ReplacementandReliability,A.K.S.Jardine LifeCycleCostandEconomicAnalysis,PrenticeHall,EnglewoodCliffs,NJ LifeCycleCost,Reliability,Maintainability,andSupportabilityGuidebook,Warrendale,PA LifeCycleCosting:Techniques,ModelsandApplications,B.S.Dhillon LifeCycleCostandEconomicAnalysis,BenjaminS.Blanchard,Fabrycky,Wolter J APTLifespan:www.reliability.com.au LCCWare3:www.aptools.co.uk Barringer &Associates,Inc:http://www.barringer1.com/

Books:

Websites: