LCC Analysis

Summary

Life cycle cost (LCC) analysis refers to the economic evaluation of the costs that arise in the period from concept development to production or facility disposal, or in a partial period. Giving due consideration to the international standards and the latest technical trends, TOYO supports customers quantifying and minimizing the LCC of their facilities.

Features

TOYO responds to following customer requests:

  • Want to estimate the life cycle cost for each case when the plant service life is assumed to be 20 years and 30 years.

  • Want to minimize the life cycle cost when the plant service life is assumed to be 20 years.

  • Want to purchase equipment and make facility investments with the aim of minimizing life cycle costs.

TOYO has constantly developed or updated the state-of-the-art methodology for LCC, such as through joint research with overseas research institutes.
Concerning the design and construction of new plants and the optimization of rejuvenation and maintenance for existing plants, we apply LCC analysis to help our clients minimize their LCC.

Basic processes of plant LCC analysis

Process 1Definition of objectives and scope of analysis
Process 2Definition of cost elements
Process 3System modeling
Process 4Data collection
Process 5Cash flow calculation
Process 6Evaluation

Based on these six processes, LCC is analyzed in a manner that suits the features of the plant and facilities.

Six basic processes of LCC analysis

Six basic processes of LCC analysis

Identification of cost elements and risk assessment based on reliability analysis

One of the key points in LCC analysis is to appropriately determine the cost elements considered in LCC. It is said that by using the Cost Breakdown Structure (CBS) promoted by the IEC and other standards, the cost elements may be set appropriately without omission. TOYO defines the cost elements by using the knowledge obtained through its own experience in LCC analysis, in addition to the method of IEC standards.
Another point is to conduct risk assessments. TOYO applies the reliability analysis capabilities it has cultivated through its extensive experience and quantify LCC by taking into consideration the risk assessment.

Definition of LCC cost elements based on CBS

Definition of LCC cost elements based on CBS

From CAPEX minimization to LCC minimization

LCC analysis can be viewed as a tool for decision-making. An example of the LCC analysis results may be represented by the diagram shown here. Alternative design schemes are selected in many cases after comparing initial investments (CAPEX). LCC considers not only the initial investments but also the costs that arise over long periods (20 years, for example). By comparing design schemes A and B in terms of LCC, the standard for decision-making will change greatly from CAPEX minimization to LCC minimization.

Schematic diagram of LCC quantification

Schematic diagram of LCC quantification

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