Life Cycle Costing for Product Design Choices

It costs our customers to own our designed products. It costs them initially to purchase it, but it also costs them to use it, maintain it, repair it, and eventually dispose of it. And it costs our company in ways too, like processing, training requirements for customers, and warranty repair costs. 

Life cycle costing can help our team choose between design alternatives, like alternate design options, features, manufacturing methods, or suppliers.

A broad equation of a life cycle cost (Ebeling 150)

Life-cycle cost = acquisition costs + operations costs + failure cost + support costs + disposal cost - salvage value

Life cycle costing is a big topic in certain sectors of design like civil, transportation, construction, and capital equipment. We can use it for our smaller product designs, too, to compare our design choices - where it makes sense. We can get help from Reliability Engineers about the failure rate and expected life of the product. If economic variables like interest, depreciation, and development costs are a factor, then we can get help from Accountants in the organization. We'll need to make assumptions, but we just note what those are and are transparent with them.

A life cycle cost equation to consider for when our design reliability is mainly dependent upon the initial costs and the failure costs (Dhillon 50-51):

Life Cycle Cost = Initial Cost + Failure Cost

 

Failure Cost = F ∗ L ∗ (CR + CS)

F = failure rate

L = expected life of the product

CR = repair cost

CS = cost of spares

The key takeaway: When choosing a component or design option based on cost, let's widen our view from procurement cost to include costs of our choices over the life of the product. We can use life cycle costing to do this.

For an example of a detailed life cycle cost analysis, see this graduate thesis report: 

Reimert, Michal. "The impact of Additive Manufacturing on the life cycle cost of one-off parts at Thales Hengelo.” University of Twente. 26 May 2017. essay.utwente.nl/72270/1/Reimert_MA_BMS.pdf. Accessed 5 Oct 2021. 

Recommended book as a starting point:

Dhillon, B.S. Life Cycle Costing for Engineers. CRC Press, 2010. 

 

References & Citations: 

Dhillon, B.S. Life Cycle Costing for Engineers. CRC Press, 2010. 

Ebeling, Charles E. An Introduction to Reliability and Maintainability Engineering. Waveland Press, Inc, 2005, pp. 149-151. 

 

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