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Life Cycle Cost and Reliability - Barringer1.com

1 Page 11 Abstract: Reliability details are needed to predict end of life for components and systems. Failures and replacements drive costs during specific project intervals. cost details from Reliability analysis drive life Cycle decisions for calculating a key financial performance represented by a single number for net present value (NPV). Paul Barringer, & Associates, Box 3985 Humble, TX 77347-3985 Phone: 281-852-6810 FAX: 281-852-3749 Email: Cycle Costs and Reliability Barringer & Associates, Inc. 20142 Why Do life Cycle cost and Reliability Facts Go Together? life Cycle Money IssuesFact BasedBusiness DecisionsReliabilityDetailsFacts About How Things Live and Die Reliability Money IssuesAcquisition +Sustaining cost + Time ValueOf MoneyLowest Long Te r m C o s t O fOwnershipNo Beginning&No End!2 Page 23 Human Bathtub Curves020406080100 AgeHuman Mortality RateInfantChanceOld AgeBathtub Combined RatesBeyond the age of 10 years, infant mortality is not a big problem ------------------> <---------------Beyon d age 40, wear-out becomes a problemSimilar curves exist for hardware.

1 Page 1 1 Abstract: Reliability details are needed to predict end of life for components and systems. Failures and replacements drive costs during specific project intervals. Cost details from reliability analysis dr ive life cycle decisions for calculating a key

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Transcription of Life Cycle Cost and Reliability - Barringer1.com

1 1 Page 11 Abstract: Reliability details are needed to predict end of life for components and systems. Failures and replacements drive costs during specific project intervals. cost details from Reliability analysis drive life Cycle decisions for calculating a key financial performance represented by a single number for net present value (NPV). Paul Barringer, & Associates, Box 3985 Humble, TX 77347-3985 Phone: 281-852-6810 FAX: 281-852-3749 Email: Cycle Costs and Reliability Barringer & Associates, Inc. 20142 Why Do life Cycle cost and Reliability Facts Go Together? life Cycle Money IssuesFact BasedBusiness DecisionsReliabilityDetailsFacts About How Things Live and Die Reliability Money IssuesAcquisition +Sustaining cost + Time ValueOf MoneyLowest Long Te r m C o s t O fOwnershipNo Beginning&No End!2 Page 23 Human Bathtub Curves020406080100 AgeHuman Mortality RateInfantChanceOld AgeBathtub Combined RatesBeyond the age of 10 years, infant mortality is not a big problem ------------------> <---------------Beyon d age 40, wear-out becomes a problemSimilar curves exist for hardware.

2 They form a survival signature with indications of survival under specific y-axis is more precisely known as the hazard rate. Hazard rate measures the probability a person will die in the next time interval given they survived up to the beginning of the time the human experiencewe get Reliability ideas4 Weibull Curves Tell Failure Modes1. Weibull plots require few Weibull plotstell about Weibull plotshelp guide corrective Weibull plotsare often usedwith cost data to find least cost actions using risk the failure mode infant mortality,chance failure, or wear thecharacteristic PVE%tells the goodness of fit. To an engineer,one Weibull graphequals 1000+words from a statistician!!oooooLet Weibull tellyou how they died3 Page 35 cost Effects Of Failure Modes & Optimum $ / Month Maintenance Strategies & Costs< Infant Mortality< Chance FailuresEarly Wear-out > < Old Age Wear-outFor wear-out problems, minimums can occur only ifunplanned cost >>planned costsConvert reliabilityissues into time and money issueswith Weibull : Roots Of Reliability ProblemsEarly Plant LifeFrequency % Design Error35 Fabrication Error1 Random Component Failure18 Operator Error12 Procedure Error & Unknowns10 Maintenance Error12 Unknown12100 Mature Plants People 38 Procedures + Processes 34 Equipment 28100 MachinesPeopleProcedures/ProcessesCompon ent failuresDesignPeopleData from nuclear power plantsFor a modern example see t forget MTBSE!

3 4 Page 47 Pump Curve CharacteristicsPump Curve Sensitivity For Pump Reliability % Flow% HeadPump CurveBEP = Best Efficiency PointThis is the correct point forachieving the greatest inherentlife for the pumpCentrifugal pump curves are a wonderful advertising device leading na ve engineers to believe the entire curve is useful for long life ---this is not true!--only a portion of the curve is useful!Intrinsic Reliability -- is achieved at BEP(and measured by mean time to failure) System Resistance Curve DesiredPoor Example Of System Resistance Curve DesiredPoor--Under DesignedPoor--Over DesignedExcellentWho is responsible for correct results:At start-up?During normal operationCorrective action?What s the rootof the problems?People?Procedure?Equipment?8 Pump Curve Practices--A ModelWho sets the standard?Who communicates standards and reasonsfor conformance?Pump Curve Sensitivity For Pump Reliability % Flow% Head% ReliabilityBest Efficiency PointReliability Curve ++++CharacteristicLife ~MTBFB etter Practice = -20% to +10%Best Practice= -10% to +5% of BEP ++Good (Commercial) Practice = -30% to +15% Avoid!

4 !High Temperature RiseLow Flow CavitationLow Bearing & Low Seal LifeLower Impeller LifeSuctionRecirculationDischargeRecircu lationLow Bearing &Low Seal LifeCavitationPump Curve Barringer & Associates, Inc. 1999 Barringer & Associates, Inc. 1999 This drives life Cycle costs5 Page 59 life Cycle cost Definitions life Cycle Costs--All costs associated with the acquisition and ownership of a system over its full life . The usual figure of merit is net present value. Net Present Value-- NPV is a financial tool for evaluating economic value added. The present value of an investment s future net cash flows(a measure of a company s financial health)minus the initial investment for a given hurdle discount rate(the interest rate used in discounting future cash flows) are summed for the a life Cycle cost Excel work sheet to calculate NPV? See: Issues--What To Do?Project Engineers:Minimize capital expendituresMaintenance Engineers:Minimize repair hoursProduction:Maximize uptime hoursAccounting:Maximize project net present valueReliability Engineers:Maximize equipment Reliability to avoid failuresShareholders:Maximize dividends and/or share priceBuy right?

5 Or Buy Cheap?6 Page 611 Engineers Must Quantify All CostsEngineers MustThink Like MBA sAndAct Like EngineersTo GetLowest Long Term cost Of OwnershipOver The Entire life CycleCan you calculate NPV?12 LCC: A Management Decision Tool Provides a costing discipline Useful for procurement strategies Balances acquisition costs and operating costs Useful for trade-off studies based on facts Requires engineers to: Think like MBAsfor cost considerations Act like engineersby using numbers for decisions Requires use of teamwork to generate numbersThink smart. Act smart. Be responsible. No one has all the answers. Think and act with a conscience!7 Page 713 Engineers And Spreadsheets Most financial spreadsheets are generalities because engineers do not give accountants specific equipment details for making accurate financial calculations Engineers must add many equipment details to help accountants arrive at the correct economic impact-- I don t have the information is a void in decision process which drives poor decisions toward bad economic resultsIf you don t have the information do what they taught you at the university:1.

6 Make a hypothesis2. Test the hypothesis3. Use your head! Common sense is an uncommon virtue. Don t wait!14 What Goes Into life Cycle Costs? Everything goes into LCC and each case is tailored for individualcircumstances LCC follows a process that fits asimple tree for acquiring dataDefine the problem requiring LCCP repare cost breakdown structure/treeChoose analytical cost modelGather cost estimates and cost modelsMake cost profiles for each year of studyMake break-even charts for alternativesPareto charts of vital few cost contributorsSensitivity analysis of high costs and reasonsStudy risks of high cost items and occurrencesSelect preferred course of action using LCCA lternatives and acquisition/sustaining costsFeedback1762345111098 StepTaskManagement appreciates you following a process more than you as an engineer may appreciate 815 Top Levels Of The LCC Tree LCC = Acquisition Costs + Sustaining CostsLife Cycle cost TreeSustaining Costs(Always inferred)Acquisition Costs(May have quotes)

7 Acquisition costs and sustaining costs are not mutually exclusive find both by gathering correct inputs and identifying cost driversThis is as simple as it gets!16 Hidden Costs Found By LCC Often sustaining costs (including hidden costs) are2-20 times acquisition costs (obvious costs) About 65%+ of total LCC are fixed by the time equipment is specified (but only a few percent of funds have been expended at this point in time) Minimizing LCC pushes up NPV and builds stockholder wealth Finding the lowest long term LCC requires details for both acquisition costs and sustaining costs requires choices between alternativesWorry more aboutsustaining costs!!!Wham! A key issue!Think long term!Say it in NPVF irst alternativeis the cost of doingnothing!9 Page 917 Commitments And ExpendituresDemonstrationAnd ValidationConceptualDesignProduction And Salvage% OfLCC25751005066%95%85%Funds CommittedEndOf LifeStartOf LifeLife Cycle SpanLCC cost Reduction OpportunityAcquisition CostSustaining Cost0 Funds ExpendedEngineering,Manufacturing,AndCon structionVery importantdecision point!

8 18 Branches For The Acquisition TreeResearch &Development CostsAcquisition cost TreeProgram ManagementR&DAdvanced R&DEngineering DesignEquipment Development & TestNon-recurringInvestment CostsSpare Parts & LogisticsManufacturing andOperations & MaintenanceFacilities & ConstructionInitial TrainingEngineering DataTechnical DataRecurringInvestment CostsUpgrade PartsSupport EquipmentUpgradesSystem Intergration OfImprovementsUtility Improvement CostsGreen & Clean CostsMemory Joggers10 Page 1019 Branches For The Sustaining TreeSched. & CostsSustaining cost TreeLabor, Materials & OverheadReplacement & Renewal CostsReplacement/RenewalTransportation CostsSystem/EquipmentModification CostsFacility Usage CostsEnergy Costs & Facility Usage CostsSupport & SupplyMaintenance CostsOperations CostsOngoing Training ForMaint. & OperationsEngineering Documentation CostsTechnical DataManagement CostsDisposal CostsPermits & Legal CostsAllowing DispositionWrecking/DisposalCostsRemedia tion CostsWrite-off/AssetRecovery CostsGreen & Clean CostsMemory Joggers20 What Costs Goes Where?

9 Use common sense Each case is special Consider the details for BOTH acquisition and sustaining costs to develop the cost schedules When in doubt, include the costs Don t ignore obvious costs or include trivial costs Include the appropriate cost elements and discard the trivial elements--use standard modelsDon t make this a career to complete the tasks!11 Page 1121A New View Of R&M Influence On LCCC onceptDesignDevelopBuildandInstallOperat ionandSupportNon-recurring costsRecurring costs3 %12 %35 %50 %ConceptDesignDevelopBuildandInstallOper ationandSupportNon-recurring costsRecurring costs3 +1 = 4 %12 + 3 = 15 %Up to 15 %Potential savingsUp to 3%Save up front and defer costs until laterby holding down engineering costsUse strong R&M engineering tools to reduce the largest cost components and reduce LCCSet R&M GoalsApply R&M ToolsVerify Maintainability RequirementsMonitor R&M Continuous Improve ProgramEliminate Infant MortalitySource: SAE Reliability and Maintainability Guideline for Manufacturing Machinery and Equipment, 2ndedition, vary bytype of projectOldMethodNewMethodGet your money back quickly!

10 Apply yourtechnology Barringer & Associates, Inc. 200722 The Big Picture For Each PhaseTailor the matrix to avoid toolittle or too much emphasis onR&M but meet the needs of the business to make the effort cost effectiveThe Big PictureTasksConcept & Proposal PhaseDesign & Development PhaseB uild & Install PhaseOperation & Support PhaseConversion Or Decomm. PhaseSet Availability Requirem entsX`Set Reliability RequirementsXSet M aintainability Requirem entsXDefine Functional FailuresXDefine Environment/UsageXDefine Capital Budgets and Make TradeOff DecisionsXXSet Design MarginsXDesign For MaintainabilityXMake Reliability PredictionsXDo FMEA & Fault Tree AnalysisXDo P relim inary cost O f UnreliabilityXConduct Design ReviewsXMake Machinery Parts SelectionsXDo Tolerance/Process StudiesXDo Critical Parts Stress Analysis XDo R eliability Q ualification TestingXDo Reliability Acceptance TestingXDo R eliability/M aintainability G row th Im provem entXXXC ollect Failure Reports & AnalizeXXProvide Data FeedbackXXXXXS hort List O f R eliability & M aintainability Activities Over The life Cycle PhasesTailor the matrix to avoid toolittle or too much emphasis onR&M but meet the needs of the business to make the effort cost effective12


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