Life Cycle Cost and Maintenance Optimization during design,
What is in it for you?

Introduction:

Asset-intensive facilities/fleets have high maintenance costs.
The best practice KPI is an annual maintenance cost, which is 3% of the replacement asset value (in most cases the cost is even higher).
Therefore, optimizing the maintenance policy can significantly reduce the asset Life Cycle Cost (LCC).
However, when the asset is already in operation, maintenance optimization options are limited.
Maintenance optimization should be considered during the design phase, when flexibility exists regarding maintenance and operations-related decisions (for example: installed stand-by items vs. mobile spare parts, repair tiers, and supply chains). In other words, during the design phase, the opportunity exists to optimize the sum of CAPEX and OPEX.
Unfortunately, asset maintainability and maintenance optimization are often considered too late in the design phase (if at all).

 
Why do few companies conduct maintenance optimization during the design phase?

One key reason is that big corporations often have different departments for design and operation: The design department tries to minimize CAPEX, resulting in poorly maintainable assets that cause the operation department to suffer from high OPEX and revenue loss due to downtime.
In other cases, the company that designs and builds the asset is not the operator (for example: public infrastructure and defense projects). In this case, the designer has no interest in investing in building an economically maintainable asset, unless the tender demands it.

Yet another reason is that LCC and maintenance optimization is an interdisciplinary task that requires a technical understanding of the asset operation and failure modes, as well as the logistics and financial aspects. This requires expertise that is not always available.
Examples:
1. LCC optimization should account for the effect of maintenance policy and spare parts availability on asset availability.
2. If the asset provides revenue (factory, transportation service…) – downtime incurs revenue loss that should be accounted for in the optimization.
3. The asset operation profile affects the equipment wear and frequency of failure events.

Simple LCC calculation tools are provided by the EU ( https://ec.europa.eu/environment/gpp/lcc.htm ), however, these tools are only relevant for specific simple cases, and they do not provide the means to optimize LCC.

 
Trends in LCC and maintenance optimization

The defense industry has a relatively mature view of the topic, and many defense project tenders require LSA (Logistic Support Analysis) and LCC (Life Cycle Cost) calculations.
This ensures that the designer will consider the asset maintainability and optimize the maintenance policy to reduce LCC.

Another promoter of LCC requirements in tenders is The European Union ( https://ec.europa.eu/environment/gpp/lcc.htm ). Example: By investing in environmentally friendly light and energy sources, the long-term operation costs may be reduced, i.e. the sum of CAPEX and OPEX may be lower for environmentally friendly solutions when compared to conventional solutions.

 
Summary

Several conclusions result from the above analysis:
1. LCC and Maintenance optimization can significantly reduce asset/fleet LCC.
2. LCC and Maintenance optimization are slowly becoming a standard part of large project tenders.
3. If you supply BOT (Build, Operate, Transfer) or BOO (Build, Own, Operate) projects, optimizing CAPEX + OPEX during the design stage can significantly reduce your asset/fleet expenses.
4. Performing the LCC and maintenance optimization requires expertise.
BQR provides LCC and maintenance optimization services and software. This allows you to focus on your core business, and to provide competitive bids on tenders that require such analyses.

 

​

​