Life Cycle Cost Analysis

     When performing a cost analysis on a chemical process, usual considerations include the total installed cost of the plant and the annual operating costs.  Many various costs are included in these two cost divisions.  Unfortunately, other important costs have often been omitted due to the difficulty involved in predicting them.  However, with today's advanced testing methods and a significant chemical process history to learn from, these "new" costs can be estimated with a higher degree of confidence than in the past.  So what are these costs?  Life cycle costs may include the following:

• Maintenance cost to alter design

• Labor cost involved with maintenance

• Losses from ceased production or off-grade product

• Salvage value of the plant

     Figure 1 shows a graphical representation of the process of considering different chemical process configurations:

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Figure 1: Examing Chemical Process Configurations

     In conducting a life cycle cost analysis, you may begin to find correlations from testings that resemble Figure 2 below.  Rather than considering initial costs only and assuming that the equipment or material will perform well throughout the plant life, chemical engineers are beginning to consistently look at the "overall" big picture.

Figure 2:  Material Choices may Impact the Future

     As you can see in Figure 2, Material 1 is less expensive than Material 2, but at a future time it must be replaced with Material 1 or a comparable material.  Therefore, the cost of using Material 1 is actually the cost of Material 1 + cost of Material 2.  These are the sort of scenarios that life cycle cost analysis is designed to prevent because the cost associated with changing design specifications is often significant.

     Life cycle cost analysis cn be further explained by the following EXAMPLE.  This example is completely fictitious.  It also lacks a sufficient degree of accuracy and research based support.  It is meant only to represent the overall ideas presented in this article.  

     If you have any additional information regarding this subject or if you would just like to share some thoughts, please drop me a line.  

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