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Fig. 2 Demand for information about product life cycle in relation to availability of the informationHistorical data constitute a relatively accessible and important source of data for ananalysis and forecast of product life cycle costs. However, even the possible ways ofusing historical data are often limited. The biggest problem is that there are not alwayshistorical data about a comparable product or its components. New products are oftenmore efficient, of higher quality and more reliable, which understandably distinguishesthem from their predecessors in many respects – e. g. the cost structure, operating costsand maintenance costs.In addition to historical data, what is also indispensable is forecasts of future trendsconcerning technologies, materials, product components, operating strategies, market developmentand competition, research, anticipated demand, requirements of product users,etc. When developing special databases for product life cycle cost analyses it is necessaryto take account, above all, of data accessibility, serviceability of defined needs, adaptabilityto changed requirements, etc.3.1 Calculation of product life cycle costsThe procedure for calculating product life cycle costs is illustrated in Figure 3,(Woodward, 1997).Define thecost elementsof interestDefine thecoststructureEstablish thecostestimationrelationshipsEstablishthe methodof life cyclecostformulationProductlife cyclecostsFig. 3 Product life cycle costing38 ACTA FACULTATIS TECHNICAE, XVI, 2011 (1): 35–43
The cost items we track include all costs that arise from the instant of product conceptionuntil its disposal at the end of its life cycle. The cost items should be structured so asto facilitate identification of potential links between them with a view to identifying theappropriate level of product life cycle costs. The cost item structure will always dependon the nature of the specific product. It should always allow for carrying out a product lifecycle costs analysis. The objective of the cost estimation is to try to identify cost items asa function of one or more independent variables. The last stage of the costing procedureconsists in defining an approach to calculating life cycle costs. For example, (Kaufman,1970) presents a method comprising eight steps:• Establishing the operating profile: description of the periodic cycle the product (e.g.a piece of manufacturing equipment) will go through. As part of this step the operatingmodes for the entire life span of the product are defined.• Establishing the utilisation factors: while the operating profile captures the proportionof time during which the equipment will be operating or not operating, utilisation factorsindicate the way in which the equipment will be functioning within the variousoperating modes (continuously, intermittently,…).• Identifying all the cost elements.• Determining the critical cost parameters: determining the parameters that affect theequipment’s life cycle costs. For example, the time period between failures, repairs,overhauls, scheduled maintenance, etc.• Calculation of all costs at current prices.• Increasing current costs to accommodate inflation.• Discounting all costs to the base period.• Summing up the discounted costs.Another example of the structure and sequence of steps as part of product life cycle costanalysis may be found in (Wynholds and Scraft, 1997):• Developing a representative cost structure (identification of cost items).• Collection of data to support the cost structure.• Establishing appropriate connections for cost estimation for each cost component.• Developing a comprehensive cost model (life cycle cost calculation).• Testing and use of the model (carrying out a sensitivity analysis).3.2 The key influence of the design and development stageon product life cycle costsThe greatest opportunity for reducing life cycle costs and improving the product parametersand performance can be identified in the initial stages of the product life cycle(the design and development phase). The costs incurred at this stage are not so high whencompared to the overall life cycle costs of the product. However, decisions taken duringthis phase have a considerable impact on costs during the manufacturing and operationalstages. At the manufacturing stage, and even more so at the operational stage, any modificationsand attempts to influence manufacturing and operating costs are considerablylimited. This is well illustrated in Figure 4, (Wrobel and Laudanski, 2008).ACTA FACULTATIS TECHNICAE, XVI, 2011 (1): 35–4339
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