Application of a Performance-driven Total Cost of Ownership (TCO) Evaluation Model for Physical Asset Management

Abstract

The core concept of this paper is the total cost of ownership (TCO) of industrial asset and its relevance in supporting decision making if properly evaluated through the analysis of the asset technical performances. The paper is based on a framework that systematizes the benefits and potential applications of a TCO for different kind of stakeholders at different stages of the life cycle of the asset and for supporting different kind of decisions. The aim is to present an experimental case study that has been implemented to show the empirical evidence of what is in the framework by focusing on one of the primary companies in the chemical industry in Italy. The application proposes a modeling approach for trying to overcome one main relevant gap that still exists when referring to TCO models that is that most of the existing ones lack of the integration of technical performances evaluations into the cost models or are based on very limiting hypothesis. In this paper a comprehensive methodology for the evaluation of the Total Cost of Ownership of industrial assets that has being developed within a research activity carried out at the Department of Management, Economics and Industrial Engineering of Politecnico di Milano is presented. The objective of the proposed approach is to overcome the above mentioned limitations that are among the main obstacles for a spread application and use of TCO models in decision making for asset management.

System-Oriented Reliability-Based Methodology for Optimal Joint Maintenance and Production Planning

“…An iterative four-step methodology is proposed that integrates a joint optimization model with Reliability and Maintenance engineering analysis at system level. It is based on the modelling of the system under analysis through the Reliability Block Diagram (RBD) technique offering an integrated and reliability-oriented view of the system with a bottom-up perspective while keeping an easy implementation approach [15]. Stochastic simulation is then used for describing the random nature of reliability-related phenomena [16].…”

Building a Total Cost of Ownership model to support manufacturing asset lifecycle management

“…In the literature, it is recognized that a TCO model should take into account that, when the asset fails, the cost of repair/replacement (in terms of manpower and material) is affected, but also the money lost because the asset is out of service may have to be quantified (Waghmode and Sahasrabudhe 2012;Roda and Garetti 2015). The same is valid for other unexpected performance decay consequences like quality losses, speed losses, etc.…”

Spare Parts Cost Management for Long-Term Economic Sustainability: Using Fuzzy Activity Based LCC

“…Indeed, operating costs could even reach 10 times the purchase equipment cost [9]; therefore, they must be modelled properly, including the different non-reliability related costs. Garetti and Roda [10] proposed a framework that addresses the benefits of the total cost of ownership methodology in decision-making. In such a framework, based on TCO analysis, distinctions are made regarding the phase of an asset's life cycle.…”