Page 303 - Improving Machinery Reliability

274 Improving Machinery Reliability

substantial setbacks when judgment is not used. Here are some of the most often
cited LCC limitations, some true, some imagined:

LCC is not an exact science. Everyone gets different answers and the answers are
neither wrong nor right-only reasonable or unreasonable. LCC experts do not
exist because the subjects are too broad and too deep.
LCC outputs are only estimates and can never be more accurate than the inputs and
the intervals used for the estimates. This is particularly true for cost-risk analysis.
LCC estimates lack accuracy. Errors in accuracy are difficult to measure as the
variances obtained by statistical methods are often large.
LCC models operate with limited cost databases and the cost of acquiring data in
the operating and support areas is both difficult to obtain and expensive to acquire.
LCC cost models must be calibrated to be highly useful.
LCC models require volumes of data and often only a few handfuls of data exist,
and most of the available data is suspect.
LCC requires a scenario for how the money expenditure model will be constructed
for acquisition of equipment, how the model will age with use, how damage will
occur, how learning curves for repairs and replacements will occur, how cost
processors will function (design costs, labor costs, material costs, parts consump-
tion, spare parts costs, shipping costs, scheduled and unscheduled maintenance
costs) for each time period, how many years the model will survive, how many
units will be producedhold, and similar details required for building cost scenar-
ios. Most details require extensive extrapolations and obtaining facts is difficult.
LCC models (by sellers) and cost-of-ownership (COO) models (by end users) have
credibility gaps caused by using different values in each model. Often credibility
issues center on which is right and which is wrong (a win-lose issue) rather than
harmonizing both models (for a win-win effort) using available data.
LCC results are not good budgeting tools. They’re effective only as
comparison/trade-off tools. Producing good LCC results requires a project team
approach because specialized expertise is needed.
LCC should be an integral part of the design and support process to design for the
lowest long-term cost of ownership. End users can use LCC for affordability stud-
ies, source selection studies of competing systems, warranty pricing and cost-
effectiveness studies. Suppliers find LCC useful for identifying costs drivers and
ranking the comparison of competing designs and support approaches.
LCC, unfortunately, is only useful for Department of Defense (DoD) projects and
is seldom applied to commercial areas because few practitioners exist for prepar-
ing LCC.

Remember this adage when considering LCC limitations: In the land of the blind,
a one-eyed man is king! LCC can help improve our blinded sight. We don’t need the
most wonderful sight in the world, it just needs to be more acute than our fiercest
competitor so that we have an improvement in the cost of operating our plants. DoD
tools and techniques are frequently used effectively in commercial areas and this is
true of life cycle costing.