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Dynamic life-cycle costing in asset management of production equipments with emphasis om maintenance
KTH, School of Industrial Engineering and Management (ITM), Production Engineering.
KTH, School of Industrial Engineering and Management (ITM), Production Engineering.
2011 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

In the contemporary industry, companies need to make investments to grow their business volume. However each investment comes with its own risk. Cost of an equipment does not only consist of the initial payment but also covers the future costs related to the operations, maintenance, quality of production and many other associated issues. Therefore, economical analysis of an asset should be done by considering the whole life cycle. Life-Cycle Costing (LCC) can be used as an engineering tool in order to assess the future business risks and prevent the unexpected costs and losses due to failures and downtime before they occur. When first proposed as a proactive effort, LCC came into the industry with several advantages to be provided. However it could not keep pace with the modern industrial IT development.Automated machine tools constitute a crucial part of modern manufacturing activities. As an asset within the production layout, life-cycle of machine tools consists of several periods which are basically early design, purchase, installation, operation and disposal stages. Unfortunately, lack of a detailed cost analysis method drives most of the manufacturers to follow minimum adequate design (MAD) principle. As described above, decision process of investing in new equipments brings along the old famous debate: “Short-term spending or long-term benefits?”Recent studies have proven the fact that interruptions in production due to failures and maintenance account for a considerable part of not only production profit losses but also overhead costs. Regarding this problem, several new concepts in maintenance such as Reliability Centered Maintenance (RCM) and Condition Based Monitoring (CBM) have been developed. Main goal of these methods is to anticipate the failures which are likely to occur and keep the continuity of production. However, usage of these methods is still at very limited level since industry lacks a dynamic costing method that can justify the initial investment in production equipment assisted by such maintenance techniques. Although they are effective to some extent in calculating direct costs, traditional cost analysis methods usually fail in providing an accurate view on the indirect, consequential and overhead costs. On the other hand, by its2different point of view in handling indirect costs and their future impacts, LCC method can be a possible solution for this investment analysis problem.The objective of this study is to develop an LCC model that can assist the decision making process during the early stages of an investment. A dynamic LCC model which considers the maintenance aspect will be proposed and, as a specific case, this model will be used for estimating and optimizing the life-cycle costs of a CNC machining center based on its real-time technical data history.

Place, publisher, year, edition, pages
, Degree Project in Production Engineering Management, Second Level, 469
Keyword [en]
Life-Cycle Costing
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-41281OAI: diva2:460064
Educational program
Master of Science - Production Engineering and Management
Available from: 2011-11-29 Created: 2011-09-26 Last updated: 2011-11-29Bibliographically approved

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