Life cycle costs measurement of complex systems manufactured by an engineer-to-order company

K.B. Öner, R. Franssen, G.P. Kiesmüller, G.J.J.A.N. Houtum, van

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Abstract

Complex technical systems such as packaging lines, computer networks, material handling systems, are crucial for the operations at the companies (or institutions) where they are installed. Companies require high availability because their primary processes may halt when these systems are down. High availability implies a high level of support and service activities, and, thus high support and service costs in the exploitation phase. Together with acquisition costs, operational costs and maybe some others, support and service costs constitute the Life Cycle Costs (LCC) of a system. Then the question is what portion of LCC consists of support and service costs? If this portion is high, the companies should take into account these costs more carefully in their decisions. In this work, we develop a Life Cycle Costs Measurement (LCCM) methodology by adapting a Life Cycle Costs Analysis (LCCA) approach. With this methodology, cost buckets that compose LCC of the systems are determined and costs are measured for each bucket. LCC is just the sum of those costs then. This methodology is used to measure the LCC of complex systems at two different sites. These systems are manufactured by an Engineer-To-Order (ETO) company that we have cooperated with. The company designs and engineers systems from existing building blocks such that the customer requirements are met. We mainly focus on the measurement of the cost buckets that stem from the exploitation phase of these systems. The cost figures show that the nominal support and service costs are more than the acquisition costs and account for a significant portion of LCC. This suggests that both the suppliers and the buyers of these systems should deal with support and service costs seriously, when investments in new systems are made.
Original languageEnglish
Title of host publicationThe 17th International Conference on Flexible Automation and Intelligent Manufacturing
EditorsR.G. Qui, D.W. Russell, W.G. Sullivan
Place of PublicationPhiladelpia
Pages569-589
Publication statusPublished - 2007
Event17th International Conference on Flexible Automation and Intelligent Msanufacturing (FAIM 2007) - Philadelphia, United States
Duration: 18 Jun 200718 Jun 2007
Conference number: 17

Conference

Conference17th International Conference on Flexible Automation and Intelligent Msanufacturing (FAIM 2007)
Abbreviated titleFAIM 2007
CountryUnited States
CityPhiladelphia
Period18/06/0718/06/07

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    Öner, K. B., Franssen, R., Kiesmüller, G. P., & Houtum, van, G. J. J. A. N. (2007). Life cycle costs measurement of complex systems manufactured by an engineer-to-order company. In R. G. Qui, D. W. Russell, & W. G. Sullivan (Eds.), The 17th International Conference on Flexible Automation and Intelligent Manufacturing (pp. 569-589).