Respond to classmates posts- due in 6 hours

Daniel

Life-cycle costs (LCC) are the total sum of costs for a project or product from the time that it is manufactured all the way to the recycling and disposal fees. According to Barringer (2003), "Life cycle cost is the total cost of ownership of machinery and equipment, including its cost of acquisition, operation, maintenance, conversion, and/or decommission" (Pg. 2). Normally when thinking about the costs associated with projects or products, people consider the manufacturing, transportation, labor, etc., but there are often costs associated with the LCC that are overlooked. The LCC encompasses all the costs associated with manufacturing, sustaining, and decommissioning projects or products from the time that it is created to the very end of its life. A good example of all the costs of LCC and how they are typically overlooked could be all the costs associated with the construction of a major bridge over the Mississippi River. Initially, the costs for construction would be high as expected, but LCC also takes into account the costs to maintain the bridge through repairs, labor costs, as well as the deconstruction of the bridge and phasing out of major components once the bridge has reached the end of its lifespan. Many of these costs can be offset through tolls, taxes, etc., and that is where the benefit cost analysis (BCA) comes into play and why it is often confused with the LCCA. According to USDOT (2002), "Unlike LCCA, BCA considers the benefits of an improvement as well as its costs and therefore can be used to compare design alternatives that do not yield identical benefits (e.g., bridge replacement alternatives that vary in the level of traffic they can accommodate), as well as to compare projects that accomplish different objectives (a road realignment versus a widening project). Moreover, BCA can be used to determine whether or not a project should be undertaken at all (i.e., whether the project’s life-cycle benefits will exceed its life-cycle costs" (Pg. 8).

Effective management of LCC requires an in-depth analysis of all the possible costs associated with a given project or product. Many future costs may seem negligible during construction, but can be incredibly costly in the long run if overlooked. This analysis affects the supply chain, because it provides insight into what systems and services will be needed before the construction of a project even begins. If a bridge will require new support beams every 10 years, then steps can be taken ahead of time to ensure that the supply chain can support the needs of the bridge project. Within advanced supply chain operations, LCCA is a tool that allows supply chain mangers to be proactive instead of reactive in streamlining their processes.

References:

U.S. Department of Transportation. (2002). Life-Cycle Cost Analysis Primer. Retrieved from https://www.fhwa.dot.gov/asset/lcca/010621.pdf

Barringer, Paul. (2002). A Life Cycle Cost Summary. Barringer and Associates. Humble, TX. Retrieved  from http://www.barringer1.com/pdf/lifecyclecostsummary

Andy

Life Cycle Cost is the cost that a project or product will cost from the time it is envisioned to the time it is retired. There are many different steps within this process to include R&D, testing costs, marketing costs, manufacturing costs, storage and distribution costs and reverse logistics and retirement costs. LCC is something that must be examined and weighed at the very beginning of a project through the use of a Life Cycle Cost Analysis. “Life-cycle cost analysis (LCCA) is an evaluation technique applicable for the consideration of certain transportation investment decisions. Specifically, when it has been decided that a project will be implemented, LCCA will assist in determining the best— the lowest-cost—way to accomplish the project” (U.S. Department of Transportation, 2002).

LCC and LCCA are very important to the supply chain because it touches every facet within the chain. Logistics does not simply stop after the planning process and implementation of a product or project are complete. Each product that is created has a lift cycle timeline, the considerations for when it is phased out must be devised as technology changes, and newer, more robust products are created. The decision on whether to overhaul or retire a product is important as overhauling can be cost effective to newer designs. Advanced supply chains take life cycle costs into careful consideration to ensure that they are maximizing their efforts on a product or project, creating the most cost effective effort for the end user.  

 

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: concepts, strategies, and case studies (3rd ed). Boston: McGraw-Hill/Irwin.

U.S. Department of Transportation. (2002). Life-Cycle Cost Analysis Primer. Office of Asset Management.