MAINTENANCE

MANAGEMENT

LIFE CYCLE COST AND OEE

Subject faculty: Mr. Kamaljeet Singh

PREPARED BY:
JINNY SEBESTIAN
JYOTI RAWAL
NIKITA DANIEL
NISHTHA VERMA
 ACKNOWLEDGEMENT

In preparation of our assignment, We had to take the help and guidance of some respected
persons, who deserve our deepest gratitude. As the completion of this assignment gave us much
pleasure, We would like to show our gratitude Mr. Kamaljeet Singh, Maintenance Management
Faculty, of Nift Kangra, for giving us good guideline for assignment throughout numerous
consultations. We would also like to expand our gratitude to all those who have directly and
indirectly guided us in making this assignment.

We also thank Nift Kangra for giving us such an opportunity to explore more with constant
learning. However, it would not have been possible without the kind support and help of many
individuals and institution. Our thanks and appreciations also go to our classmates in developing
the assignment and people who have willingly helped us out with their abilities.
LIFE CYCLE COST
Life cycle cost analysis (LCCA) is an approach used to assess the total cost of
owning a facility or running a project.

Life cycle cost is the cost associated with the project from the
beginning of the project to the end of its useful life and beyond.
It includes the cost of acquiring the project, operating it, and
disposing of it at the end of its useful life.
It may even include money spent after the project's useful life
that results from the project's existence and effects. T
his is reasonable because the project team is formed to carry
out the work of creating the project, deliver the deliverables, and
do it within the schedule and cost goals of the project.
Cost estimation of the life cycle is ideal for calculating the total
cost of options for a project.
It is often used to select the correct configuration to ensure that
a lower total cost of ownership that is compatible with feature
and functionality is provided by the selected option.
During the early phases of the design process, LCCA has to be
carried out and there is space to make adjustments and
refinements that can ensure that the cost of the life cycle is
minimized.
When conducting an LCCA, the first move is to assess the
economic effect of the feasible alternatives.
The results are then quantified in monetary terms and
expressed.
 OBJECTIVE OF LIFE CYCLE COSTING:
Assists management to smartly manage total cost throughout
the product’s life cycle.
To identify areas in which cost reduction efforts are likely to
be more effective.
To estimate the cost impact of various designs and support
options.

STAGES OF A PRODUCT LIFE CYCLE

Following are the main stages of a product life cycle:
Product planning and design stage: Research and development cost,
and cost of production design.
Manufacturing and sales stage: All the manufacturing, marketing,
selling and distribution costs are incurred in this stage.
Service and abandonment stage:
This stage signifies a decline in a sales volume. The demand for a
product declines at this stage. The producers may be required to
provide after sales service for already sold products.
COST ESTIMATION
Various costs occur when a project is acquired, run or disposed of.
Project-related expenses can be split into initial costs, fuel costs,
replacement costs, operational and repair costs, finance charges and
residual values.
Only the valid and significant costs in any of the above groups should be
used to make investment-related decisions.
Costs are deemed important because they are significant enough to
have a reliable effect on the LCC of the project.
All expenses involved are viewed as base year values equal to current
dollar amounts; LCCA translates all dollar values into future year event
equivalents and then reduces all values at their base dates.

LIFE CYCLE COSTING PROCESS

Conducting a life cycle cost assessment helps in better prediction on how
much the business will pay when it gains a new asset.
To calculate an asset’s life cycle cost, estimate the following expenses:
Purchase
Installation
Operating
Maintenance
Financing (e.g., interest)
Depreciation
Disposal
Add up the expenses for each stage of the life cycle to find the total cost.

One might use past data to help create a more accurate cost prediction. To
simplify the process, start with your fixed costs. Fixed costs for businesses
are the expenses that stay the same from month to month. Then, estimate
variable costs, which are expenses that change.
 LCC cost for an asset example

Suppose you buy a printer, which has a

purchase price of $1,000.
Next, you pay $100 as the delivery and
installation fee.You purchased it using a
financing option.
So, including interest, the printer will cost
you $1,050.
For the lifetime of the printer, you estimate
that the printer would use ink cartridges
totaling $1,000 and electricity of $100.
The lifetime maintenance and repair cost is
estimated to be $500.
If we total all these costs, the $1,000
printer will cost you $2,750.
In reality, it would cost you even more as
we have not considered depreciation and
disposal expenses.

ADVANTAGES OF LCC:
Improved forecasting: The application of LCC technique allows
the full cost associated with a procurement to be estimated
more accurately.
Improved awareness: It provides management with an
improved awareness of the factors that drive cost and
resources required by the purchase.
Performance trade-off against cost: LCC technique not only
focuses on cost, but also considers other factors like the
quality of goods and level of service to be provided.
DISADVANTAGES OF LCC:
Time consuming: Life cycle costing analysis is too long
because of the changes in new technology.
It is based on estimate only: This method relies heavily on
estimates based on market research and past experiences. If
anything goes wrong with the sales figures, the product won’t
be profitable and might be a loss to the company
Not flexible during market change: Due to the trending,
customers may need different products by the time we reach
the market.
The product life cycle will get shorter as a competitor will inject a
similar or better product. Hence the actual situation will be
different from one’s expectations, and it will impact the strategic
plan.
OVERALL EQUIPMENT EFFECTIVENESS OR OEE
Overall equipment effectiveness is a maintenance KPI that measures an asset’s level of
productivity. OEE is a combination of three factors that tell you how efficient an asset is
during the manufacturing process: asset availability, asset performance, and production
quality.Worldwide, OEE implementation has been significantly effective in improving
availability, performance rate and quality rate while reducing unscheduled breakdown time
and wastage that twigs from the equipment

OEE = Overall Availability X Performance Efficiency X Quality

Where:
Overall Availability: a percentage measure of the degree to which machinery and
equipment is in an operable and committable state at the point in time when it is
needed.
Performance Efficiency: Percent of maximum production speed
Quality: Percent of parts that are good (out of all introduced parts)

An OEE of 100% would mean you are manufacturing 100% good parts (quality) out of all
introduced parts at 100% of maximum production speed (performance efficiency) with no
downtime. However, this level of perfection is rarely achieved. Most organizations use
modified OEE measurements that take into consideration their hours of operation. When
modified OEE is used, a rate between 60 and 85% is considered desirable.

Measuring OEE
OEE is a great tool for identifying losses from maximum production. OEE losses can arise
from equipment failure, overlong setups and adjustments, machine idling and unscheduled
stops, reduced speed, process defects and lack of productivity.
When measuring OEE, first define the metrics to the maintenance operations.
Then capture OEE data regarding availability, performance, and quality so you can
calculate OEE.IN
CALCULATION EXAMPLE
Let’s consider the following data recorded for a shift:

Planned Production Time:

Formule= shift length - breaks
480-60 minutes = 420 minutes
Run Time: The next step is to calculate the amount of time that production was actually
running.
Stop Time should include both Unplanned Stops (e.g., Breakdowns) or Planned Stops
(e.g., Changeovers). Both provide opportunities for improvement.
Formula = Planned Production Time - Stop Time
420-47 minutes = 373 minutes

Good Count:
Formula = Total Count - Reject Count
19,271 widgets - 423 widgets = 0.8881 (88.81%)

Availability: It accounts for when the process is not running (both unplanned stops and
planned stops).
Formula: Run Time / Planned Production Time
373 minutes / 420 minutes = 0.8881 (88.81%)

Performance: It accounts for when the process is running slower than its theoretical top
speed (both Small Stops and Slow Cycles).
Formula: (Ideal Cycle Time × Total Count) / Run Time
(1.0 seconds × 19,271 widgets) / (373 minutes × 60 seconds) = 0.8611 (86.11%)

Quality: It accounts for manufactured parts that do not meet quality standards.
Formula: Good Count / Total Count
18,848 widgets / 19,271 widgets = 0.9780 (97.80%)
OEE: Finally, OEE is calculated by multiplying the three OEE factors.
Formula: Availability × Performance × Quality
0.8881 × 0.8611 × 0.9780 = 0.7479 (74.79%)
The OEE for this shift is 74.79%.

BENEFITS OF OVERALL EQUIPMENT EFFECTIVENESS

Return on Investment
Companies invest a lot of money in machinery and need to achieve the max
return on investment. Using OEE metrics the company can manufacture more
products in the same time.

Get the best performance from the machinery

The implementation of OEE increases the performance of the machinery
equipment. Helps attain maximum performance from the equipment.

Helps increase competitiveness

It is essential to reduce production losses and achieve greater competitiveness.
For example, if a production line is capable of making 100 pieces per hour, but is
only producing 60, it is not efficient enough. With the hard OEE data in hand,
operators are able to identify constraints in the production line. With a cloud
based OEE-system, you can identify where your weaknesses are and where your
opportunities are by analyzing the OEE metrics data.

Reduce machinery repair costs

Knowing the actual performance of the machinery goes hand-in-hand with
knowing whether or not the machine is working properly, or whether there are
issues that may lead to the need for the future repair. Having a OEE-system that
is able to anticipate these events (analyzing unexpected shutdowns, reduced
speeds etc.) represents a major saving in both preventive maintenance of
machinery, as well as in the high costs associated with the failure of the machine
itself.
 REFERENCES:

https://www.patriotsoftware.com/blog/accounting/life-cycle-costing-process/
https://efinancemanagement.com/costing-terms/life-cycle-cost
https://www.oee.com/calculating-oee.html
https://www.diap.online/blog/10-advantages-of-oee/
https://www.ariscommunity.com/users/eva-klein/2010-11-30-what-overall-equipment-
effectiveness
https://ftmaintenance.com/maintenance-management/what-is-overall-equipment-effectiveness/