Maintenance Costs and Life Cycle Cost Analysis by Diego Galar, Peter Sandborn, and Uday Kumar

4:47 AM
Maintenance Costs and Life Cycle Cost Analysis
By Diego Galar, Peter Sandborn, and Uday Kumar
Maintenance Costs and Life Cycle Cost Analysis

Contents
Preface.....................................................................................................................xix
Acknowledgments................................................................................................xxi
Authors................................................................................................................ xxiii
1. Relevance of Maintenance Function in Asset Management...................1
1.1 Purpose of Maintenance Function.......................................................1
1.1.1 Maintenance Function..............................................................2
1.1.2 Benefits and Risks.....................................................................4
1.1.3 Maintenance Process: Goals to Achievements......................5
1.1.3.1 Develop a Structured Maintenance Framework...... 6
1.1.3.2 Develop a Maintenance Policy................................6
1.1.3.3 Develop a Maintenance Strategy............................7
1.1.3.4 Implement a Maintenance Management
Framework.................................................................7
1.1.3.5 Allocate Maintenance Resources............................8
1.1.4 Developing a Maintenance Program/Plan...........................8
1.1.4.1 Outline of a Maintenance Plan................................9
1.1.5 Fund Maintenance: The Beginning of Maintenance
Costs..........................................................................................10
1.1.6 Developing a Basis for Maintenance Performance
Measurement...........................................................................12
1.1.7 Maintenance World of Tomorrow........................................15
1.1.8 e-Maintenance.........................................................................15
1.2 Reliability and Maintenance...............................................................16
1.2.1 Reliability Engineering...........................................................17
1.2.1.1 Important Capabilities of Reliability Engineers..... 18
1.2.2 Maintenance Engineering......................................................18
1.3 Changing Role of Maintenance in Asset Management..................21
1.3.1 Asset Life Cycle.......................................................................22
1.3.2 Asset Planning.........................................................................22
1.3.3 Asset Creation/Acquisition..................................................23
1.3.4 Asset Operations.....................................................................24
1.3.5 Asset Maintenance..................................................................24
1.3.6 Asset Condition/Performance..............................................24
1.3.7 Asset Replacement..................................................................25
1.3.8 Asset Disposal/Rationalization............................................25
1.3.9 Financial Management...........................................................26
1.3.10 Asset Management Definition and Function......................26
1.3.11 Structure of Asset Management............................................27
1.3.12 Asset Management Strategy..................................................28
1.3.13 Changing Role of Maintenance Management in
Asset Management.................................................................29
1.3.14 Improve Asset Maintenance Strategy or Renew
the Asset?.................................................................................29
1.4 Physical Asset Management and Maintenance Cost......................32
1.4.1 What Are Assets?....................................................................33
1.4.1.1 Asset Life Cycle and Strategy................................33
1.4.2 Maintenance and Physical Asset Management..................36
1.4.2.1 Getting Help in the Development of Asset
Management............................................................37
1.4.2.2 Life Cycle Stages......................................................37
1.4.3 Life Cycle Processes and Interaction with
Maintenance Process..............................................................38
1.4.3.1 Asset Management: Standards..............................38
1.4.4 Develop a Maintenance Information System.....................39
1.4.5 Cost Avoidance for Physical Assets.....................................39
1.4.5.1 Business Benefits of Asset Management..............40
1.4.5.2 Proactive Use of Maintenance Budgets................40
1.4.5.3 Improved Ability to Manage Current
Resources and New Capital Assets......................40
1.4.5.4 Informed and Accurate Financial Planning
and Reporting..........................................................42
1.5 Focusing on the Bottom Line..............................................................42
1.5.1 Maintenance and the Bottom Line.......................................43
1.5.2 Maintenance beyond the Bottom Line.................................45
1.5.3 Managing Availability for Improved Bottom-Line
Results......................................................................................45
1.5.3.1 Availability Types....................................................46
1.5.3.2 Factors Determining Availability..........................47
1.5.3.3 Optimizing Availability..........................................47
1.5.3.4 Design of Achievable Availability.........................48
1.5.3.5 Determining Achievable Availability for an
Existing Facility.......................................................50
1.5.3.6 Building the Reliability Block Diagram (RBD)...51
1.5.3.7 Refining the RBD.....................................................51
1.5.3.8 Obtaining Failure and Repair Data.......................51
1.5.3.9 Closing the Gaps.....................................................52
1.5.3.10 Minimizing Number and Length of
Unscheduled Outages............................................53
1.5.3.11 Improve Equipment................................................54
1.5.3.12 Capital Improvements to Increase Availability..... 54
1.5.3.13 Matching Availability Goals to Annual
Business Needs........................................................54
References........................................................................................................57
2. Maintenance Costing in Traditional LCC Analysis................................61
2.1 Traditional LCC....................................................................................61
2.1.1 Life Cycle Phases....................................................................62
2.1.2 Considerations of Life Cycle Cost........................................64
2.1.2.1 Problems of Traditional Design.............................65
2.1.2.2 Problem of Cost Visibility......................................66
2.1.2.3 Structure of Cost Breakdown.................................67
2.1.3 Cost Categories.......................................................................71
2.1.3.1 Investment Costs versus Operational Costs........71
2.1.3.2 Initial Investment Costs versus Future Costs......72
2.1.3.3 Single Costs versus Annually
Recurring Costs.................................................. 72
2.2 Life Cycle Cost Analysis as a Project Follow-Up for Assets..........73
2.2.1 Objectives of the Life Cycle Costing Methodology...........75
2.2.2 Estimating Life Cycle Costs...................................................76
2.2.2.1 Estimating OM&R Costs from
Cost-Estimating Guides..........................................76
2.2.2.2 Estimating OM&R Costs from Direct Quotes....... 77
2.2.3 Impact of Analysis Timing on Minimizing Life Cycle
Costs..........................................................................................77
2.2.4 Selecting Potential Project Alternatives
for Comparison....................................................................78
2.2.5 Effect of Intervention..............................................................79
2.2.6 Estimating Future Costs.........................................................79
2.2.7 Managing Cash Flow.............................................................80
2.2.8 Selecting a Discount Rate.......................................................80
2.2.9 Time Value of Money.............................................................83
2.3 Trade-Off Tools for LCC......................................................................83
2.3.1 Effectiveness, Benchmarks, and Trade-Off Information....... 84
2.4 LCC Analysis as Maintenance DSS...................................................86
2.4.1 Maintenance as a Value Driver.............................................89
2.4.2 Typical Outcomes of Investments in Maintenance
and Repair................................................................................90
2.4.3 Mission-Related Outcomes....................................................92
2.4.3.1 Improved Reliability...............................................92
2.4.3.2 Improved Productivity...........................................93
2.4.3.3 Functionality............................................................93
2.4.4 Compliance-Related Outcomes............................................94
2.4.4.1 Fewer Accidents and Injuries................................94
2.4.4.2 Fewer Insurance Claims, Lawsuits, and
Regulatory Violations.............................................94
2.4.5 Condition-Related Outcomes................................................94
2.4.5.1 Improved Condition...............................................94
2.4.5.2 Reduced Backlogs of Deferred Maintenance
and Repair................................................................94
2.4.6 Outcomes Related to Efficient Operations..........................95
2.4.6.1 Less Reactive, Unplanned Maintenance
and Repair................................................................95
2.4.6.2 Lower Operating Costs..........................................95
2.4.6.3 Lower Life Cycle Costs...........................................95
2.4.6.4 Cost Avoidance........................................................95
2.4.6.5 Reductions in Energy Use and Water Use...........96
2.4.7 Stakeholder-Driven Outcomes..............................................96
2.4.8 Risks Posed by Deteriorating Assets....................................97
2.4.8.1 Risk to Users............................................................98
2.4.8.2 Risk to Safety, Health, and Security......................98
2.4.8.3 Risk to Efficient Operations...................................99
2.4.8.4 Indexes and Models for Measuring Outcomes...... 99
2.5 Remaining Service Life as Gauge and Driver for
Maintenance Expenses and Investments........................................101
2.5.1 Service Life and Remaining Service Life...........................101
2.5.2 Techniques for RSL Estimation and Maintenance
Investment Outcomes..........................................................102
2.5.2.1 Engineering Analysis............................................102
2.5.2.2 Cost and Budget Models......................................102
2.5.2.3 Operations Research Models...............................103
2.5.2.4 Simulation Models................................................103
2.5.2.5 Proprietary Models...............................................104
2.6 Uncertainty in LCC and Maintenance Cost Estimations.............104
2.6.1 Approaches to Uncertainty in LCC....................................105
2.6.2 What Uncertain Variables Go into Life Cycle Costs?......106
2.6.2.1 Application of LCC Techniques for
Machine/Equipment Selection........................... 110
2.6.2.2 Application of LCC to Select Design
Alternatives: To Design Out Maintenance
or to Design for Maintenance.............................. 112
2.7 LCC Data Acquisition and Tracking Systems................................ 114
2.7.1 Data, Tools, and Technologies to Support
Investments in Maintenance and Repair........................... 114
2.7.2 Technologies for Asset Data Management........................ 115
2.7.3 Emerging Technologies for Data Acquisition and
Tracking..................................................................................120
2.8 Restriction of Maintenance Role in Operation Phase...................120
References......................................................................................................122
3. Maintenance Budget versus Global Maintenance Cost.......................127
3.1 Asset Management and Annual Maintenance Budget.................127
3.1.1 “Selling” the Maintenance Budget.....................................127
3.1.2 Composition of Maintenance Budget................................128
3.1.2.1 Maintenance Budget Composition.....................129
3.1.3 Development of an Annual Maintenance Budget............129
3.1.4 Basis of a Maintenance Budget...........................................133
3.1.4.1 Maintenance Program..........................................134
3.1.4.2 Key Considerations in Maintenance Budget
Decisions.................................................................135
3.1.4.3 Preparing a Maintenance Budget........................135
3.1.4.4 Executing a Maintenance Budget.......................136
3.1.4.5 Reviewing a Maintenance Budget......................138
3.1.5 Control Maintenance Costs Using the Maintenance
Budget.....................................................................................141
3.1.6 Maintenance Budgets versus Maintenance Costs............142
3.1.6.1 Associated Maintenance Costs............................143
3.1.7 Factors Affecting the Estimate of the Maintenance
Budget.....................................................................................144
3.1.7.1 Formula for Maintenance Budget Estimate.......145
3.2 Cost of Labor Force: In-House versus Outsourced, Blue
versus White Collar...........................................................................146
3.2.1 Guidelines for Choosing In-House or Outsourced
Maintenance..........................................................................146
3.2.1.1 In-House Maintenance Considerations.............147
3.2.1.2 Outsourced Maintenance Considerations.........147
3.2.2 Outsourcing Maintenance Activities..................................148
3.2.2.1 Expected Benefits of Outsourcing.......................148
3.2.2.2 Potential Risks of Outsourcing............................151
3.2.3 Cost Determination Methodology......................................152
3.2.4 Performance-Based Contracts.............................................153
3.2.4.1 Performance-Based Contracting Process...........153
3.2.4.2 Advantages and Disadvantages of
Performance-Based Maintenance Contracts.....154
3.2.4.3 Development of Performance Indicators
for Performance-Based Maintenance
Contracting..........................................................155
3.2.4.4 Lessons Learned Using Performance-Based
Contracting in the Maintenance Function.........156
3.3 Spare Parts Policies for Cost Savings..............................................158
3.3.1 Spare Parts Management.....................................................159
3.3.2 Spare Parts Evaluation and Optimization.........................161
3.3.3 Inventory Analysis................................................................162
3.3.4 Determining Optimal Parameters for Expediting
Policies....................................................................................165
3.4 Overinvestments in Maintenance and Avoided Costs.................167
3.4.1 Cost Savings, Avoided Costs, and
Opportunity Costs.......................................................... 168
3.4.2 Meaning of Cost Savings.....................................................169
3.4.3 Concept of Avoided Cost.....................................................169
3.4.4 Maintenance: Investment or Expense?..............................170
3.4.4.1 What Are Maintenance Expenses?......................171
3.4.4.2 Accounting of Maintenance Expenses...............171
3.4.5 When Is Maintenance Work Classified as a Capital
Expenditure?..........................................................................172
3.4.5.1 Extension of Useful Life.......................................172
3.4.5.2 Extension of Useful Life of an Asset...................173
3.4.6 Reduction in Future Operating Costs: Effect of
Overinvestments...................................................................174
3.4.7 Optimizing Maintenance as a Cost Control Measure......175
3.4.8 Role of Avoided and Overinvestment Costs in
Global Maintenance Cost.....................................................176
3.4.8.1 Costs of Intervention.............................................177
3.4.8.2 Costs of Failures....................................................177
3.4.8.3 Cost of Storage.......................................................178
3.4.8.4 Cost of Overinvestments......................................178
3.4.8.5 Avoided Costs........................................................179
3.5 CMMS as a Maintenance Cost Control Tool..................................179
3.5.1 Uses of Computerized Maintenance Management
System.....................................................................................180
3.5.1.1 CMMS Needs Assessment...................................180
3.5.1.2 CMMS Capabilities...............................................181
3.5.1.3 CMMS Benefits......................................................182
3.5.1.4 Use CMMS to Save Costs by Avoiding
Maintenance...........................................................183
3.5.1.5 Line Maintenance Costs.......................................183
References......................................................................................................185
4. Maintenance Performance Measurement: Efficiency...........................191
4.1 Key Performance Indicators for Maintenance...............................191
4.1.1 Physical Asset Management................................................191
4.1.2 Asset Reliability Process......................................................194
4.1.3 Performance Metrics for the Maintenance Function.......196
4.1.3.1 Reliability Process Key Performance
Indicators: Leading Measures.............................197
4.1.3.2 Performance Analysis...........................................201
4.1.3.3 Key Performance Indicators of Maintenance
Effectiveness...........................................................202
4.2 Maintenance Costs.............................................................................203
4.2.1 Maintenance-Related Downtime........................................203
4.2.2 Summary of KPIs for Maintenance....................................204
4.2.3 Hierarchy of Indicators........................................................206
4.3 Financial KPIs and Their Relation to Maintenance Costs............206
4.3.1 Maintenance Performance Indicators................................208
4.3.1.1 World-Class Indicators.........................................208
4.3.2 Economic Indicators in EN 15341.......................................210
4.3.3 Financial Perspective............................................................214
4.4 Benchmarking Financial KPIs..........................................................216
4.4.1 Benchmarking Fundamentals.............................................216
4.4.1.1 Language of Benchmarking.................................216
4.4.1.2 Competitive Analysis...........................................218
4.4.1.3 Enablers..................................................................218
4.4.2 Defining Core Competencies..............................................219
4.4.3 Types of Benchmarking........................................................223
4.4.3.1 Internal Benchmarking.........................................223
4.4.3.2 Similar Industry/Competitive Benchmarking..... 224
4.4.3.3 Best Practice Benchmarking.................................224
4.4.3.4 Benchmarking Process..........................................225
4.5 Key Performance Indicators, Benchmarking, and Best
Practices...............................................................................................226
4.5.1 Continuous Improvement: The Key to
Competitiveness....................................................................227
4.5.2 Benchmarking Goals............................................................227
4.5.3 Gap Analysis..........................................................................228
4.5.4 Benchmarking Process.........................................................230
4.5.4.1 A. Plan.....................................................................230
4.5.4.2 B. Search..................................................................231
4.5.4.3 C. Observe..............................................................232
4.5.4.4 D. Analyze..............................................................232
4.5.4.5 E. Adapt..................................................................232
4.5.4.6 F. Improve...............................................................233
4.5.5 Benchmarking Code of Conduct........................................234
4.5.6 Traps in Benchmarking........................................................234
4.5.7 Other Pitfalls..........................................................................236
4.5.8 Procedural Review................................................................236
4.5.9 Final Points............................................................................237
4.6 Maturity of Maintenance as a Roadmap: Outcome
of Benchmarking................................................................................237
4.6.1 Preventive Maintenance......................................................239
4.6.2 Inventory (Stores) and Procurement..................................240
4.6.3 Work Flows and Controls....................................................240
4.6.4 Computerized Maintenance Management Systems
Usage......................................................................................241
4.6.5 Technical and Interpersonal Training................................241
4.6.6 Operational Involvement.....................................................241
4.6.7 Predictive Maintenance........................................................242
4.6.8 Reliability-Centered Maintenance......................................242
4.6.9 Total Productive Maintenance............................................243
4.6.10 Financial Optimization........................................................243
4.6.11 Continuous Improvement...................................................243
4.7 Attempts at Standardization from Europe (EN) and the
United States (ISO).............................................................................244
4.7.1 European Maintenance Standards.....................................244
4.7.2 Objective of the Harmonized Indicator Document.........245
4.7.2.1 Contents of Harmonized Indicators
Document...............................................................246
4.7.3 International Maintenance Standards................................247
4.7.3.1 Review of ISO 55000 Series..................................247
4.7.3.2 Contents of ISO 55001 and Its Companion
Documents.............................................................249
4.7.3.3 Context of the Organization................................249
4.7.3.4 Leadership..............................................................250
4.7.3.5 Support...................................................................253
4.7.3.6 Operation................................................................256
4.7.3.7 Performance Evaluation.......................................257
4.7.3.8 Improvement.........................................................258
4.8 Role of Maintenance Cost in a Maintenance Audit.......................259
4.8.1 Conducting an Audit............................................................261
4.8.2 Historical Maintenance Audit Models...............................262
4.8.3 Fundamental Financial Information for Maintenance
Audits.....................................................................................264
References......................................................................................................266
5. Consequential Maintenance Cost: A Problem Area.............................269
5.1 Economic Importance of Maintenance...........................................269
5.2 Classification of Maintenance Costs................................................270
5.2.1 Global Cost of Maintenance................................................273
5.2.1.1 Definitions..............................................................273
5.2.1.2 Imputation of Global Cost of Maintenance.......276
5.2.1.3 Optimization of Global Cost................................276
5.2.1.4 Other Factors..........................................................278
5.2.1.5 Determination of Cost of Failure........................278
5.2.1.6 Cost Breakdown on Shop Floor..........................279
5.3 Costs after Downtime........................................................................279
5.3.1 Reasons for Downtime.........................................................280
5.3.2 Impact of Downtime.............................................................281
5.3.3 Downtime Factor Analysis..................................................281
5.3.3.1 Site-Related Factors...............................................281
5.3.3.2 Equipment-Related Factors.................................281
5.3.3.3 Crew-Level Factors...............................................283
5.3.3.4 Force Majeure.........................................................283
5.3.3.5 Company Procedures and Policies.....................283
5.3.3.6 Project-Level Factors.............................................284
5.3.3.7 Shop-Level Management Actions.......................284
5.3.3.8 Consequences of Downtime................................284
5.3.4 Dynamics of Downtime.......................................................285
5.3.4.1 Repair Cost.............................................................287
5.3.4.2 Cost of Idle Time for Laborers, Operators,
and Supervisors.....................................................287
5.3.4.3 Cost of Idle Time of Equipment..........................287
5.3.4.4 Cost of Substitute Equipment..............................287
5.3.4.5 Project-Associated Costs......................................288
5.3.4.6 Loss of Labor Productivity...................................288
5.3.4.7 Other Costs.............................................................288
5.4 Intangible Aspects of Maintenance Costs and Uncertainty.........288
5.4.1 Sources of Intangible Costs.................................................289
5.4.2 Addressing Intangible Costs...............................................289
5.4.3 Iceberg Effect and Intangible Costs....................................290
5.4.4 Analysis of Benefits and Intangible Costs.........................291
5.4.4.1 Intangible Benefits and Costs Defined...............291
5.4.4.2 MDSS Function Analysis......................................293
5.4.4.3 Intangible Benefits of MDSS Function...............295
5.5 Combining Tangible and Intangible Maintenance Costs
and Benefits.........................................................................................295
5.5.1 Maintenance Practices Influencing Maintenance
Costs: Causal Relations between Various
Cost Factors.......................................................................296
5.5.2 Estimation of Cost Elements...............................................297
5.5.3 Associated Resource Impact Costs.....................................300
5.5.4 Lack of Availability and Downtime Costs.........................300
5.5.4.1 LAD Groups...........................................................300
5.5.4.2 Scenarios.................................................................302
5.5.4.3 LAD Cost Model....................................................302
5.5.5 Associated Resource Impact Cost Procedure...................304
5.5.6 Lack of Readiness Costs.......................................................307
5.5.6.1 Lack of Readiness Cost Procedure......................308
5.5.7 Service-Level Impact Costs.................................................310
5.5.7.1 SLI Cost Procedure................................................ 311
5.5.8 Alternate Method Impact Costs..........................................312
5.5.8.1 AMI Cost Procedure.............................................313
References......................................................................................................316
6. Maintenance Services and New Business Models: A New Way
to Consider Costs.........................................................................................319
6.1 New Maintenance Service Providers..............................................319
6.1.1 New Maintenance Network................................................320
6.1.2 Performance Measurement of Maintenance Services......320
6.1.3 Impact of Servitization on Life Cycle.................................322
6.1.4 Life Cycle Accounting in Business Networks...................323
6.1.5 Managing Value in the Network........................................327
6.1.6 Mutation of Maintenance toward Asset
Management.........................................................................327
6.1.7 Holistic Maintenance, the Beginning of
Servitization..........................................................................330
6.2 Impact of Business and Technological Environment on
Maintenance Costs.............................................................................331
6.2.1 Maintenance Technology Insights and Profitability........333
6.2.2 Maintenance Impact on Business Processes.....................333
6.2.3 Industry 4.0 and Maintenance 4.0......................................334
6.2.3.1 Maintenance 4.0.....................................................336
6.2.4 State-of-the-Art Technologies and Methodologies for
Maintenance..........................................................................338
6.2.4.1 CBM, the First Step to the Fourth Industrial
Revolution in Maintenance..................................340
6.2.4.2 PHM, One Step Ahead of CBM...........................342
6.2.4.3 e-Maintenance: Pervasive Computing in
Maintenance...........................................................344
6.3 Planned Obsolescence and the End of Traditional
Maintenance........................................................................................351
6.3.1 Key Principle and Measures................................................352
6.3.1.1 Preemptive Measures...........................................352
6.3.1.2 Proactive Measures...............................................353
6.3.2 Types of Obsolescence and Terminology..........................353
6.3.3 Reasons for Obsolescence....................................................353
6.3.3.1 Use of Commercial Off-the-Shelf Products.......353
6.3.3.2 Life Cycle Duration...............................................354
6.3.3.3 Increased Use of Electronics................................355
6.3.4 Obsolescence Mitigation......................................................356
6.3.4.1 Systems Engineering.............................................356
6.3.4.2 Software Engineering...........................................359
6.3.4.3 Test Phase...............................................................359
6.3.4.4 Prognostics.............................................................360
6.4 Outsourcing Maintenance: New Frameworks...............................360
6.4.1 Maintenance Contracting Strategies..................................361
6.4.1.1 Delivery Methods..................................................362
6.4.1.2 Contract Specifications.........................................363
6.4.1.3 Pricing Strategies...................................................364
6.4.2 Conclusion.............................................................................364
6.4.3 Main Reasons for Outsourcing...........................................364
6.4.3.1 Refocusing on Strategic Activities......................365
6.4.3.2 Economies of Scale and Costs..............................365
6.4.3.3 Reorganization Policies........................................365
6.4.3.4 Swift Technological Change.................................366
6.4.3.5 Market Globalization............................................366
6.4.3.6 Conclusion..............................................................366
6.4.4 Outsourcing: Decision-Making Process.............................366
6.4.4.1 Internal Costs versus External Costs..................367
6.4.4.2 Need for Specialized Capability of
Suppliers........................................................... 368
6.4.5 Framework for a Win-Win Maintenance Outsourcing
Relationship...........................................................................368
6.4.5.1 Selecting the Number of Activities to
Outsource...............................................................369
6.4.5.2 Selecting Which Activities to Outsource............369
6.4.5.3 Selecting Which Activities are Outsourced
Individually and Which Are Bundled................370
6.4.5.4 Selecting a Single Outsourced Activity..............370
6.4.5.5 Selecting Bundled Activities................................371
6.4.5.6 Selecting Nearly All Activities.............................371
6.4.5.7 Selecting the Type of Contract
Specification................................................... 372
6.4.5.8 Selecting a Pricing Strategy..................................372
6.4.6 Elements in Successful Management of Outsourcing
Relationship...........................................................................372
6.4.7 Cost of Selecting a Service Provider...................................374
6.4.8 Benchmarking to the Current Market................................374
6.5 Warranty Management: Extensions and Claims...........................375
6.5.1 Warranty Management Framework...................................378
6.5.2 Importance of a Warranty Management System..............379
6.5.3 Models and Support Tools for Warranty Cost
Management..........................................................................380
6.5.4 Adapting e-Warranty to Warranty Assistance..................382
6.6 Insurance: Economic Responsibility of Third Parties...................383
6.6.1 Breaking Down Third-Party Insurance.............................384
6.6.1.1 Importance of Third-Party Liability
Insurance.............................................................. 384
6.6.1.2 Other Types of Third-Party Liability
Insurance................................................................385
6.6.2 Economic View of the Insurance Business........................385
6.6.3 Equipment Maintenance Insurance...................................386
References......................................................................................................387
7. Maintenance Costs Across Sectors...........................................................395
7.1 Maintenance Costs Across the Sectors............................................395
7.2 Transportation Assets: Rolling Stock Case Study 1.......................396
7.2.1 Introduction and Background.............................................396
7.2.2 Decision Models of Transport Systems Evaluation.........397
7.2.2.1 Assumptions and Purpose of LCCA..................399
7.2.2.2 Comparison of Service Process in Analyzed
Variants...................................................................400
7.2.2.3 System Breakdown Structure and LCC
Model Development.............................................400
7.2.2.4 LCC Assessment and DSS Based on
Outcomes................................................................402
7.3 Transportation Assets: Rolling Stock Case Study 2.......................404
7.3.1 Introduction and Background.............................................404
7.3.2 Calculation of Cost and Profit Life Cycle of a Tram........407
7.3.2.1 Assumptions and Purpose of LCCA..................407
7.3.2.2 Decision Models Considering Asset Revenues.... 409
7.4 Infrastructure: Railway Infrastructure............................................410
7.4.1 Introduction and Background.............................................410
7.4.2 Decision Models of Transport Systems Evaluation.........410
7.4.2.1 Assumptions and Purpose of LCCA with
a Focus on Maintenance....................................... 411
7.4.2.2 Availability: The Goal of Infrastructure
Mangers..................................................................413
7.4.2.3 Prediction of the Infrastructure Downtime
as Budget Maintenance Optimizer.....................413
7.4.2.4 Life Cycle Costs of Rail Infrastructure...............414
7.4.2.5 LCC as Supporting Decision-Making on
Design and Maintenance......................................416
7.4.2.6 Process of Railway Data Collection for
Accurate LCC Estimates.......................................418
7.4.2.7 MRO and Infrastructure Expenditures..............420
7.4.2.8 Infrastructure Costs...............................................423
7.4.2.9 Valorization of Infrastructure Assets..................424
7.4.2.10 Cost of Life Extension of Deteriorating
Structures................................................................426
7.5 Manufacturing Assets........................................................................426
7.5.1 Introduction and Background.............................................426
7.5.2 LCC of Pumping Systems....................................................428
7.5.2.1 Assumptions and Purpose of LCCA..................428
7.5.2.2 Life Cycle Cost Analysis.......................................429
7.5.2.3 Data Collection for LCC and TCO Estimation..... 429
7.5.2.4 Total Life Cycle Cost.............................................434
7.5.2.5 Lessons Learnt in LCC and TCO of
Pumping Systems..................................................436
7.6 Military Equipment...........................................................................437
7.6.1 Introduction and Background.............................................437
7.6.2 Cost Analysis and Uncertainty...........................................438
7.6.2.1 Assumptions in LCCA..........................................438
7.6.2.2 Economic Analysis................................................438
7.6.2.3 Cost Analysis Training..........................................439
7.7 Aviation...............................................................................................439
7.7.1 Introduction and Background.............................................439
7.7.2 Air Transport Association (ATA)-Level Costs..................442
7.7.3 System and Component Reliability....................................444
7.8 Facilities...............................................................................................445
7.8.1 System-Level O&M Manuals..............................................447
7.8.2 Teardowns..............................................................................447
7.8.3 Major Resources....................................................................447
7.8.3.1 Planning and Design Phase.................................447
7.8.3.2 Construction Phase...............................................448
7.8.3.3 O&M Approach.....................................................448
7.8.3.4 Life Cycle O&M.....................................................448
7.8.3.5 Computerized Maintenance Management
Systems...................................................................449
7.8.3.6 Coordinating Staff Capabilities and
Training with Equipment and System
Sophistication Levels............................................449
7.8.3.7 Non-O&M Work....................................................450
7.9 Energy..................................................................................................451
7.9.1 Nuclear Plant Life Cycle Cost Analysis Considerations.....451
7.9.2 LCCA Defined.......................................................................452
7.9.2.1 LCCA Considerations...........................................452
7.9.2.2 Cost and Revenue Influences..............................452
7.9.2.3 Economic Factors...................................................454
7.9.2.4 Determining Magnitude of Change...................454
7.9.2.5 Data Uncertainty...................................................455
7.9.3 LCCA Tools............................................................................456
7.9.3.1 PRA and RAM Analysis.......................................456
7.9.3.2 LCCA Output.........................................................457
7.9.3.3 LCCA Tool Selection.............................................459
7.9.4 Improvement Option Selection...........................................461
7.9.4.1 LCC Optimization Step 1: Data Collection........463
7.9.4.2 LCC Optimization Step 2: Economic
Screening Analysis................................................464
7.9.4.3 LCC Optimization Step 3: Optimization
with Constraint......................................................466
7.9.4.4 Step 4: Optimal Solution Process........................466
7.10 Mining..................................................................................................467
7.10.1 Introduction and Background.............................................468
7.10.2 Design of Maintenance Plan................................................468
7.10.3 Analysis of Maintenance Data............................................469
7.10.3.1 Machine Hours......................................................469
7.10.3.2 Machine Availability.............................................470
7.10.3.3 Mean Time between Failures and Mean
Time to Repair........................................................470
7.10.4 Decision Models for Maintenance Decision and
Optimum Life Cycle Management.....................................472
7.10.5 Cost of Maintenance.............................................................472
7.10.5.1 Fixed Costs.............................................................472
7.10.5.2 Variable Cost..........................................................472
7.10.6 Life Cycle Maintenance Cost...............................................473
7.10.7 Outcomes of LCCA: Added Value.....................................475
References......................................................................................................475
Index................................................................................................................479


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