Life Cycle Costing and Stainless Steel

Stainless Steel is typically selected over other materials because it is the most economical solution over time. Although it may be true that stainless steel is not often the most inexpensive price candidate, its durability and ease of maintenance compensate for the higher initial purchasing costs. This ability to provide long-term performance with a minimum of downtime and cost associated with maintenance is determined by calculating the material's life cycle costing (LCC) which is of particular importance to the stainless steel industry.

What is Life Cycle Costing?

Life cycle costing (LCC) is a technique developed for identifying and quantifying all costs, initial and ongoing, associated with a project or installation over a given period.

LCC uses the standard accountancy principle of discounted cash flow, so that total costs incurred during a lifecycle period are reduced to present day values. This allows a realistic comparison to be made of the options available. As far as material selection is concerned, LCC enables potential long-term benefits to be assessed against short-term expediency.

Materials costs are assessed with their implications, for example initial outlay, maintenance and its frequency, downtime effects, production losses, repair, replacement, and other operationally related costs such as manpower and energy consumption.

The LCC model is more than a philosophy of forward-thinking. It has been refined to a detailed system of specific calculations; comprehensive LCC software is available to aid decision makers to compare accurate forecasts that have taken all the pertinent factors into consideration.

In general terms the total LCC can be broken down into components:

LCC = Acquisition Cost + Fabrication and Installation Cost + Maintenance Costs (periodic) + Replacement Costs (periodic) +
Cost of Lost Production (periodic) - Residual (Scrap) Value.

Each of these terms must be known if a realistic result is to be calculated.

The environment and scope of usuage, mentioned earlier, are therefore crucial in determining the LCC benefits when choosing stainless steel.

Why Life Cycle Costing?

A full life cycle cost analysis enables the materials specifier to consider the full implications of future costs, in terms of both actual monetary value, and inconvenience of future maintenance and replacements. Experience has shown that future maintenance and associated downtime costs can far outweigh the initial material costs.

Cost vs. Life span Graph

The consequences of using the cheapest materials should therefore be quantified before the final material selection, as it inescapably commits the company/ client to a total financial package. Generally speaking, the longer the demanded lifetime, the higher will be the operating costs.

Some manufacturers plan for the obsolescence of their products in order to profit from fast replacement cycles. Reputable companies, on the other hand, understand that the long-term success of a business depends on being perceived correctly by their markets. Transferring the benefits of LCC to your customers also adds value to your business. For example, an automobile that needs to have its exhaust system replaced regularly, will not be perceived as having the same value of one that lasts much longer.