Total Cost of Ownership

In the previous issue (Industrie 4.0 Management 5/2016) the features and characteristics of supply concepts and the fundamentals of the Total cost of ownership (TCO) concept were explained. The present article addresses all supply related logistics processes and refers to specifics of the TCO concept.

When investing into new technological equipment, decision-makers have to take into account a lot more than just the purchasing price. Forward-looking enterprises consider all the costs that are generated over the course of the life span of machines. Two factors play an increasingly important role in this context: Firstly, energy efficiency, as it can help reduce the total cost of ownership (TCO). Liquidity on the other hand is essential for a firm’s further growth and competitiveness. With the right financing methods, these two preconditions for budget-friendly investments can be ensured.

Plant operators are getting more and more aware that operating costs are usually exceeding acquisition costs. For that reason there is an increased interest in methods like Life Cycle Costing (LCC) and Total Cost of Ownership (TCO). Weakness of these methods is their exclusive focus on costs. Because they do not allow differentiating benefits of various machines and plants, a holistic evaluation is difficult. The concept developed by the Institute of Production Engineering and Machine Tools (IFW) is concentrating on that issue, extending the Life Cycle Costing by a benefit assessment of investments.

Industrial processes need to cope with outstanding requirements. Individual products, delivered just-in-sequence, short delivery time and lowest possible overall costs need to be realized simultaneously. In this context Life Cycle Cost Conceptions (LCC) can help to tap the full potential of cost reduction for manufacturer and customer within the complete life cycle. The following article illustrates essential elements of LCC conceptions, assets and drawbacks and implementing steps that need to be taken.

The start-up of production and logistics equipment in a production system is embedded in a superior start-up management. This has to manage the different types of ramp-ups in a value-added network efficiently regarding to products, processes and equipment. Planning uncertainties and multifaceted faults increase the equipment manufacturer’s cost and effort substantially, often lead to delays, partially to delayed start-ups, and tie the system manufacturer longer than planned on the ground. Due to these reasons, a holistic and integrated start-up management is required. Thus, the start-up process accelerates and the competitiveness of all involved companies improves significantly.