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Incorporating an Asset Health Index into a Life Cycle Costing: A Proposition and Study Case

Author

Listed:
  • Orlando Durán

    (Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile)

  • Fabián Orellana

    (GNL Quintero, Las Condes, Santiago 2490000, Chile)

  • Pablo Perez

    (Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile)

  • Tamara Hidalgo

    (Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile)

Abstract

A physical asset’s health is the consequence of a series of factors, ranging from the characteristics of the location where it operates to the care it is submitted to. These characteristics can influence the durability or the horizon of the useful life of any equipment, as well as determine its operational performance and its failure rates in the future. Therefore, the assessment of the influence of asset health on Life Cycle Costs is a compelling need. This paper proposes the incorporation of a factor that reflects the projected behavior of an asset’s health index into its corresponding Life Cycle Costing (LCC) model. This allows cost estimates to be made more realistic and LCC models to be operated more accurately. As a way of validating this proposal, a case study is shown. The methodology proposed in this case study was applied in a real case, considering an LNG facility located in central Chile. In addition, sensitivity studies and comparisons with the results obtained by a traditional Life Cycle Costing model are included. The results show the usefulness of incorporating asset health aspects into the Life Cycle Costing of physical assets.

Suggested Citation

  • Orlando Durán & Fabián Orellana & Pablo Perez & Tamara Hidalgo, 2020. "Incorporating an Asset Health Index into a Life Cycle Costing: A Proposition and Study Case," Mathematics, MDPI, vol. 8(10), pages 1-18, October.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:10:p:1787-:d:428434
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    References listed on IDEAS

    as
    1. Eric Korpi & Timo Ala-Risku, 2008. "Life cycle costing: a review of published case studies," Managerial Auditing Journal, Emerald Group Publishing, vol. 23(3), pages 240-261, March.
    2. Falcone, Pasquale Marcello & De Rosa, Salvatore Paolo, 2020. "Use of fuzzy cognitive maps to develop policy strategies for the optimization of municipal waste management: A case study of the land of fires (Italy)," Land Use Policy, Elsevier, vol. 96(C).
    3. Orlando Durán & Paulo Sergio Afonso & Paulo Andrés Durán, 2019. "Spare Parts Cost Management for Long-Term Economic Sustainability: Using Fuzzy Activity Based LCC," Sustainability, MDPI, vol. 11(7), pages 1-14, March.
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