Page 319 - Improving Machinery Reliability

Life Cycle Cost Studies 289

resides in local computer files, but it has not been analyzed or put to effective use.
Analysis can start with arithmetic analysis and grow to more complicated statistical
analysis. Follow the guidelines for each step listed to work out a typical engineering
problem. (Remember, a single right or wrong method/solution does not exist. Many
methods and routes can be used to find LCC). If you disagree with the cost or life
data, substitute your own values determined by local operating conditions, local
costs, and local grades of equipment.

Step I: Define the Problem. A pump is operating without an on-line spare. At
pump failure, the process shuts down and financial losses are incurred as each hour
of down-time results in a gross margin loss of US$4,000/hour of outage. Find an
effective LCC alternative as the plant has an estimated 10 years of remaining life and
is expected to be sold out during this interval.

Step 2: Alternatives and acquisitions/sustaining costs. Consider three obvious
alternatives for LCC (other alternatives exist for solving this problem, however, the
list is pared for brevity):
1. Do nothing. Continue solo ANSI pump operations with a 100 horsepower, 1750
RPM, 250 psi, 500 gpm, 70% hydraulic efficiency, while pumping fluid with a
specific gravity of 1.
2. Add a new, second ANSI pump in parallel (literally in redundant standby) that
can be started immediately without the loss of production upon failure of the
running pump. Alternate running of the parallel unit every other week to avoid
typical failures incurred by nonoperating equipment. The capital costs for the
second pump are $8,000 plus $3,000 for check/isolation valves, plus $2,500 for
installation.
3. Remove the existing solo ANSI pump and replace it with a new solo API pump
with the same performance as for the ANSI model. The API pump cost $18,000
plus $3,500 for installation and the installation will incur a four-hour loss of
production for connecting the new pump.

Step 3 Prepare cost breakdown structure/tree. For the do-nothing case, the cost
breakdown structure will incur cost in the categories given in Figure 5-13; the cost
breakdown structure depicted in Figure 5-14 refers to the redundant ANSI case. For
the API pump case, the cost breakdown structure will incur cost in the categories given
in Figure 5-15. The individual details for each case will become obvious in step 5.

Step 4: Choose analytical cost model. The model used for this case is explained in
an engineering spreadsheet. The spreadsheet merges cost details and failure details to
prepare the NPV calculations. Failure costs are prorated into each year because the
specific time for failure, because of chance events, is not known.

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