Proceedings of the ASME 2010 10th Biennial Conference on Engineering Systems Design and Analysis
ESDA2010
July 12-14, 2010, Istanbul, Turkey
ESDA2010-24043
LIFE CYCLE COST MODELING OF PUMPS USING AN ACTIVITY BASED COSTING METHODOLOGY
Laxman Yadu Waghmode*
Department of Mechanical Engineering,
Annasaheb Dange College of Engineering and
Technology, Ashta, Sangli 416301, Maharashtra, India
Anil Dattatraya Sahasrabudhe
Department of Mechanical Engineering,
College of Engineering,
Shivajinagar, Pune 411005, Maharashtra, India
ABSTRACT
In order to survive in today’s competitive global business environment, implementation of life cycle costing methodology with a greater emphasis on cost control could be one of the convincing approaches for the manufacturing firms. The product life cycle costing approach can help track and analyse the cost implications associated with each phase of product life cycle. Life cycle costing (LCC) practices with traditional costing methods may provide results that have a severe deviation from the real product LCC as it focuses on the cost of materials, labor and a low portion of overheads apportioned by the absorption rate to the product. Activity based costing (ABC) has emerged as one of the several innovative and more accurate costing methods in recent years. It is based on the principle that products or services consume activities and activities consume resources that generate costs. Thus, the ABC system focuses on calculating the costs incurred on performing the activities to manufacture a product. This paper presents a LCC modeling approach for estimating life cycle cost of pumps using activity based costing method. The study was conducted in a large pump manufacturing company from India that has significant global standing within its industry. Firstly, all the activities and cost drivers associated with the life cycle of a pump have been identified. A methodology for LCC analysis using ABC is then developed and it is applied to two different pumps manufactured by the same industry and the results obtained are presented.
1. INTRODUCTION
Till now manufacturing firms have concentrated mostly on the manufacturing cost of a product. Similarly customers were also considering only the initial product cost while selecting a product. But upon entering into twenty first century, this scenario is gradually changing. The international markets are forcing the manufacturers to compete in quality, cost, and the time to market aspects of their products in order to survive in this fierce global competition. The customers are now considering not only product cost but also after sale service and support that the manufacturer can provide till the product disposal. This is resulting into a considerable shift in the business environment leading to the implementation of the life cycle cost concepts by the manufacturing companies. The life cycle of a product represents various time-connected phases, through which any system, equipment or a product must pass from its creation to the
disposal at the end of its useful life period such as the concept and definition, acquisition, operation and maintenance and disposal.
The life cycle cost refers to all the costs that are incurred over the life cycle of a single product [1]. The components of a life cycle cost analysis typically include initial costs, installation and commissioning costs, energy costs, operation costs, maintenance and repair costs, down time costs, environmental costs, and decommissioning and disposal costs [2]. Life cycle cost models are used to estimate LCC of products. The state-of- the-art literature classifies these models as general and specific models [3]. Both these modeling approaches are based upon the traditional costing methods. In this paper, a LCC modeling methodology using ABC is proposed for life cycle costing of pumps based on the framework suggested by the authors in their previous work [4]. The model is developed using activity based costing method and is based on the wider life cycle perspective. The focus is though on modeling the post manufacturing activities in the life cycle of pumps. The maintenance/repair cost is one of the significant components of product LCC. In view of this, three different maintenance/repair strategies/policies have been analyzed from LCC perspective, the renewal/replacement upon failure strategy, minimal repair upon failure strategy and combination strategy. The maintenance/repair costs are estimated based on the assumption that the failure of pump components follows Weibull times to failure. The developed methodology is found useful and applicable for all types of pumps produced by the concerned pump manufacturer.
2. LITERATURE REVIEW
Accounting history has shown that new techniques and methodologies have periodically been incorporated into the accounting craft. The context of the 1980s and the 1990s has led to the emergence of activity-based costing. The method was first discussed by Cooper and Kaplan [5]. They presented the ABC system as a useful means to distribute the overhead costs in proportion to the activities performed to manufacture a product. ABC is a good alternative to traditional cost estimation techniques since it provides more accurate results. Boons et al. [6] discussed activity-based costing from the point of view of the German/Dutch cost pool method describing the similarities and differences between ABC and German cost theory. Innes and Mitchell [7] presented the results of a 1994 survey of activity-based costing in the U.K.'s largest 1000 companies focusing on the adoption rate of ABC in these companies,
Proceedings of the ASME 2010 10th Biennial Conference on Engineering Systems Design and Analysis
ESDA2010
July 12-14, 2010, Istanbul, Turkey
the specific application of ABC, the views of users on the success and importance of ABC, the views of non-ABC users on ABC and the possibilities for future research. The application of ABC was extended to manufacturing activities by Park and Kim [8]. The costing procedures for various manufacturing activities were incorporated into a multistage investment decision model. Tsai [9] presented the ABC model for joint products. He used a simplified illustrative case to demonstrate the product costing for joint products under ABC. Gunasekaran and Sarhadi [10] discussed the implementation issues of activity-based costing in manufacturing. They presented an overview of the literature on ABC and the role of ABC in advanced manufacturing systems along with the experiences of some Finnish companies in implementing ABC.
Activity-Based Costing has been successful in large scale industries for improving the operational performance by providing appropriate and accurate information on the consumption of resources. However, ABC has not received significant attention from small companies’ inspite of the fact that it has an important role to play in improving their performance. Gunasegaram and Singh [11] developed an ABC system for a small company to produce more accurate cost information. Ittner [12] highlighted how activity based costing concepts can be applied to measure quality related costs arising from supplier deficiencies and the opportunity costs of lost sales due to quality problems in order to prioritize quality improvement efforts. Lee [13] examined the theory, development and implementation of activity-based costing in an international managerial accounting context. The study revealed that there were notable differences in the rates of ABC adoption in different countries in the early days of ABC dissemination. U.K., Australian, and Scandinavian firms followed adoption of ABC in the U.S. in its early days without too much gap in the implementation time frame.
The competitive manufacturing requires a shorter market life span of products, emphasizing the design and development phase of the product life cycle. Thus, it has become more important to analyze the cost of the design and development phase accurately. Tornberg et al. [14] investigated the possibilities of activity-based costing and modeling of design, purchasing and manufacturing processes in providing useful cost information for product designers. The study was conducted in a large Finnish manufacturing company and the results of the study suggested that activity-based costing and process modeling provide a good starting point in heading towards more cost-conscious design. Ben-Arieh and Qian [15] presented a methodology of using ABC to evaluate the cost of the design and development activity for machined parts. Ozbayrak et al. [16] estimated the manufacturing and product costs by using ABC method in an advanced manufacturing system. They used ABC to model the manufacturing and product costs. Thyssen et al. [17] applied the ABC method to assess the economics of modularization. Gosselin [18] reviewed the evolution of ABC from its emergence around 1985 to its most recent development, in addition to the consequences of ABC on the evolution of management accounting. Lana et al. [19] successfully developed an ABC system jointly with a large Chinese manufacturing company. The research provided a unique opportunity to examine some key success factors pertinent to ABC implementation within a Chinese organizational and cultural setting.
Manufacturing firms are more often required to study the feasibility of expanding capacity or outsourcing of production of parts especially when the market demands exceed the company’s production capacity. Tsai and Lai [20] developed an ABC joint products decision model that incorporates capacity expansions and outsourcing features. By applying this model, the companies who produce joint products can derive an optimal decision about further processing, capacity expansions or outsourcing. Qian and Ben-Arieh [21] presented a cost-estimation model that links activity-based costing with parametric cost representations of the design and
development phases of machined rotational parts. Baykasoglu and Kaplanoglu [22] applied the principles of ABC to a land transportation company that is located in Turkey. They proposed an integrated approach that combines ABC with business process modeling and analytical hierarchy in order to improve the effectiveness of the ABC. Banker et al. [23] studied the impact of activity-based costing on adoption of world-class manufacturing (WCM) practices and plant performance. They analyzed the data from a large cross-sectional sample of US manufacturing plants. The analysis indicated that ABC has no significant direct impact on plant performance, as measured by improvements in unit manufacturing costs, cycle time, and product quality.
The above reviews show that the published literature on ABC covers a number of issues ranging from the emergence of ABC, the implementation issues involved, key success factors, and the adoption rates of ABC to the specific applications of ABC. The literature reveals that ABC is mainly applied for estimating product manufacturing costs and evaluating design and development activity costs. Thus the work is centered in and around the manufacturing phase of a product. While use of ABC methodology helps in heading towards more cost conscious design of products, the extension of ABC methodology to entire life cycle of a product will help to estimate and analyze the product LCC more accurately. Therefore, in this paper an ABC methodology is developed and applied for life cycle cost analysis of pumps. The methodology is found quite useful for LCC analysis of pumps produced by the concerned firm.
3. THE LIFE CYCLE COST MODEL
In general the life cycle cost includes initial costs, installation and commissioning costs, energy costs, operation costs, maintenance/repair costs, down time costs, environmental costs, decommissioning and disposal costs. In addition to this the product may also incur some other costs such as the recurring functional testing costs, diagnosis and rework costs due to manufacturing defects, qualification and certification costs, training and documentation costs, intellectual property costs and the profit charged by the manufacturer. The life cycle cost of the pump from the customer’s perspective can be expressed as sum of the costs incurred over all the life cycle phases. In the most general form, the life cycle cost of pumps can be proposed as follows:
LCC NC C C C C C C C C
C C
where LCC is the pump life cycle cost ($), N the number of pumps to be produced, C the cost of concept, design, development and verification ($), C the cost of pattern making and tool engineering ($), C the manufacturing cost ($), C the cost of accessories ($), C the cost of pump testing ($), C the cost of painting, packaging and dispatch ($), C the cost of transportation and storage ($), C the installation and commissioning cost ($), C the operation cost ($), C the cost of maintenance/repair ($), and C the pump disposal cost ($). The cost of accessories includes the cost of motor, coupling and bought out items.
4. IDENTIFICATION OF PUMP LIFE CYCLE STAGES,
ACTIVITIES AND COST DRIVERS
To start with, the various life cycle stages for the pumps manufactured by the firm under study have been identified such as concept, design, development and verification, pattern making and tool engineering, manufacturing and assembly, pump testing, painting, packaging and dispatch, transportation and storage, installation and commissioning, operation, maintenance and disposal.
After identifying the major stages in the pump life cycle as above, the most important activities carried out by the company and associated cost drivers at the various stages of pump life cycle have
been formulated. Table 1 depicts all the major stages, the activities performed by the company and the associated cost drivers.
TABLE 1. PUMP LIFE CYCLE ACTIVITIES AND COST DRIVERS Activity Major cost drivers
Concept, Design, Development and Verification
Collection of data from website Number of persons, time spent, skill level and equipments used
Collection of data from user Number of visits to user location, distance of user location, number of persons visiting, skill level and time spent
Analysis of data and pump skeleton Number of persons and their skill level, time spent
CFD analysis Number of persons, time spent, skill level and software package used Mechanical design Number of components, time spent, number of persons and skill level Proposal drawings Number of persons, skill level and time spent
Component drawings Number of components, number of persons and time spent Checking of drawings Number of persons, skill level and time spent
Solid modeling Number of persons, skill level, time spent and modeling package used Preparing bill of material Number of persons and time spent
Cross functional team review Number of persons, skill level and time spent Release of drawing for pattern and tool making Number of persons and time spent
Pattern Making and Tool Engineering
In-house cost estimation of pattern Number of persons, skill level and time spent Floating enquiry for pattern making Number of vendors, number of persons and time spent
Receiving quotations and finalizing the vendor Number of quotations received, number of persons and time spent Visit of quality inspector to vendor Distance of the vendor location, number of visits and time spent Receiving pattern Number of persons, distance of the vendor location and time spent Pattern mounting on match plate Number of persons, skill level and time spent
Molding and try out casting Materials, number of persons, skill level and time spent Detailed quality control report Number of persons, skill level and time spent
Drawing preparation for jigs, fixtures and tooling Number of drawings, number of persons and time spent Manufacturing of jigs, fixtures and tooling Materials, number of persons, skill level and time spent Crediting to tool division Number of persons and time spent
Crediting inspection gauges to tool crib Number of persons and time spent Manufacturing
Casting and machining of components Materials, number of persons, skill level and time spent Incoming inspection check - Bought out items Quantity, number of persons and time spent
Cleaning of components Number of persons and time spent
Dynamic balancing of impeller Number of persons, skill level and time spent
Pump assembly Number of persons, number of components, skill level and time spent Pump Testing
Hydro testing of pump Testing facility, number of persons, skill level and time spent Performance testing Testing facility, number of persons, skill level and time spent Third party inspection Number of inspections, number of persons and time spent Painting, Packaging and Dispatch
Painting of pump Quantity and quality of color, number of persons and time spent Packaging of pump Quantity and quality of cartons, number of persons and time spent
Dispatch Number of persons and time spent
Transportation and Storage
Loading of pump Number of persons and time spent
Transportation to the site Distance of the site, space occupied and mode of transport Unloading of pump Number of persons and time spent
TABLE 1. CONTINUED
Activity Major cost drivers Installation and Commissioning
Preparation of foundation Number of persons, time spent and tools used Grouting Number of persons, time spent and tools used Pump set alignment before piping Number of persons, time spent and tools used
Piping Number of persons, time spent and tools used
Pump set alignment after piping Number of persons, time spent and tools used Electric connections Number of persons, time spent and tools used Supervision for commissioning Number of persons and time spent
Pump Operation
Day to day supervision Number of hours of pump operation, number of persons and labor rate of supervision Day to day operation Cost of energy and number of hours of pump operation
Maintenance and Repair
Access to the failed component Time to gain access to failed component, personnel and tools used
Diagnosis Fault isolation time, Number of persons, manuals, technical data, test equipments and tools used
Repair/Replacement Actual hands on time to compete repair/replacement, personnel, support equipments and tools used
Verification and alignment Time spent, personnel and tools used Disposal
Pump disassembly Time to disassemble pump, personnel and tools used
Separation Time spent and personnel
Material recovery The quantity of material and cost of transportation
Dumping The quantity and cost of dumping
5. APPLICATION OF THE MODEL
The above generalized model is applied to two different pumps manufactured by the concerned pump manufacturer, a single stage, horizontal, split-case type pump (Pump A) and a multi-stage pump (Pump B). The pump A is used for water irrigation purpose while pump B is used in coal mining application. The specifications of both the pumps are given in Table 2. The motor used for pump B is costlier as it is a HT motor, customized for a given application, drip proof and requires F class insulation as compared to a LT motor used for pump A which is easily available in the market.
TABLE 2. PUMP SPECIFICATIONS
Particulars Pump A Pump B
Head (m) 90 300 Flow Rate (m3/hr) 300 205 Pump Efficiency (%) 76 75 Motor Efficiency (%) 92 90 Input Power (KW) 110 250 Motor Cost ($) 1500 23750 Cost of Coupling ($) 30 250
Cost of Base Frame ($) 200 550 Design Life of Pump (hrs) 90000 90000 No. of pumps to be Produced 50 50
5.1 Acquisition Cost (
)
Table 3 shows calculation of activity based costs. The data related to the number of persons involved, time units and cost per unit is obtained from the pump manufacturer. For each activity a weightage is assigned that accounts for the skill level required, number of times the activity needs to be performed and the level of facilities used. A sample calculation for the total cost of an individual activity for the first two life cycle stages is given in the Table 3. The total cost for collection of data from the web-site as an example activity for pump A is estimated as follows:
Total Cost = Weightage x Number of persons x Time units x Cost/unit = 1.5 x 1 x 16 x 3 = $72
The acquisition cost for pump A is estimated as follows: CANC C C C C C C
CA50 2307 7024 1900 "1500 30 60$ 1501
100 150 CA $4080
Similarly, for pump B the acquisition cost is, CB $29431
TABLE 3. CALCULATION OF ACQUISITION COST
Activity Weightage
No. of Persons Time Units (Hrs) Unit ($) Cost / Total Cost ($) Pump A Pump B Pump A Pump B Pump A Pump B Concept, Design, Development and Verification
Collection of data from website 1.5 1 2 16 16 3 72 144
Collection of data from user 1.8 2 2 32 32 3 346 346
Analysis of data and pump skeleton 1.3 2 3 16 16 3 125 187
CFD analysis 1.7 2 3 16 16 3 163 245 Mechanical design 1.5 2 4 24 24 3 216 432 Proposal drawings 1.5 2 4 24 16 4 288 384 Component drawings 1.5 2 4 32 32 4 384 768 Checking of drawings 1.3 2 3 16 16 4 166 250 Solid modeling 1.5 2 2 16 24 3 144 216
Preparing bill of material 1.2 2 2 8 8 3 58 58
Cross functional team review 1.5 8 8 4 8 6 288 576
Release of drawing for pattern and tool making 1.2 2 2 8 8 3 58 58
Total Cost 2307 3662
Cost per Pump 50 75
Pattern Making and Tool Engineering
In-house cost estimation of pattern 1.2 2 2 16 24 3 115 173
Floating enquiry for pattern making 1.2 2 2 8 16 3 58 115
Receiving quotations and finalizing the vendor 1.2 2 2 16 16 3 115 115
Visit of quality inspector to vendor 1.8 1 1 16 16 4 115 115
Receiving pattern 1.1 4 4 8 8 10 352 352
Pattern mounting on match plate 1.5 4 4 8 8 3 144 192
Molding and try out casting 1.8 8 8 32 40 8 3686 4608
Detailed quality control report 1.2 2 3 16 16 3 115 173
Drawing preparation for jigs, fixtures and tooling 1.5 3 3 16 24 4 288 432 Manufacturing of jigs, fixtures and tooling 1.5 8 8 16 16 10 1920 1920
Crediting to tool division 1.2 2 2 8 8 3 58 58
Crediting inspection gauges to tool crib 1.2 2 2 8 8 3 58 58
Total Cost 7024 8310
Cost per Pump 140 166
Manufacturing 1900 4200
Pump Testing 150 350
Painting, Packaging and Dispatch 100 250
Transportation and Storage 150 230
Cost of Motor 1500 23750
Cost of Coupling 30 250
Bought out items 60 160
Acquisition Cost per Pump ($) 4080 29431
5.2 Installation and Commissioning Cost (
())
Installation and commissioning task is subdivided into seven different activities such as preparing the foundation, grouting, pump
set alignment before piping, piping, and pump set alignment after piping, electric connections and commissioning.
TABLE 4. CALCULATION OF INSTALLATION AND COMMISSIONING COSTS
Activity *()( +()( ()( *()(.+()(.()( -()( Pump A Pump B Pump A Pump B Pump A Pump B Pump A Pump B Pump A Pump B
Preparing foundation 4 8 3 5 6 6 72 240 10 15
Grouting 8 12 3 5 6 6 144 360 20 30
Pump set alignment 1 4 3 4 6 6 18 96 10 15
Piping 2 4 3 4 6 6 36 96 10 15
Pump set alignment 1 2 3 4 6 6 18 48 10 15
Electric Connections 4 4 3 4 6 6 72 96 20 25
Commissioning 8 16 1 2 18 18 144 576 0 0
Table 4 shows these activities and the related data collected such as time consumed for each activity, number of persons required, labor and tooling cost associated with each activity. Installation and commissioning cost is estimated as follows [24]:
C ."T .N .C $ Ct 12
1
where C is the installation and commissioning cost ($), n the number of activities identified, T the time to complete the activity i (hours), N the number of persons required to complete the activity i, C the labor cost associated with the activity i ($/hour), and Ct
the cost of tooling associated with the activity i ($). Using equation (3) the installation cost for pump A is, C A = $584
and for pump B is, C B $1627
5.3 Operation Cost (
5)
Two main cost drivers associated with the operation of a pump, the cost of energy and labor cost of operation have been identified. Considering these two factors the following equation is developed to estimate the operation cost of a pump. Mathematically, the pump operation cost over a design life of t can be estimated as follows:
C t . 6C789366.nQ. H
.n< C=8>
where, C is the operation cost over the design life ($), t the design life of pump (hours), C78 the cost of energy ($/KWH), Q the pump flow rate (m3/hr), H the pump head (m), n the pump efficiency (%), n the motor efficiency (%) and C=8 the labor cost of operation
($/hour).
The pump operation cost is estimated using following data. Cost of energy = $ 0.1/KWH
Labor cost of operation = $ 1 per hour
Using equation (4) the operation cost for pump A is,
CA 90000?0.1@366 x 0.76 x 0.92B 1C $1052224300 x 90
and for pump B is,
CB 90000 ?0.1@366 x 0.75 x 0.90B 1C $2330437300 x 205
5.4 Maintenance and Repair Cost (
DE)
With the ability to repair or restore a failed system, a failure-repair-failure-repair cycle is generated [25]. Depending upon the nature of repair process the maintenance/repair cost can be estimated. The maintenance/ repair cost in this case is estimated based on three different maintenance/repair strategies, the renewal/replacement upon failure strategy, the minimal repair upon failure strategy and combination strategy. In case of renewal/replacement upon failure strategy, an item upon failure is replaced and it is assumed that the system is restored to its original condition, or “as good as new”. Such
a process is called as a renewal process wherein the mean times between failures are independent and identically distributed. If N(t) is the total number of failures by time t, then the expected number of failures, E[N(t)], in the interval (0, t) are,
EN"t$ MTBFt
In case of minimal repair upon failure strategy, the repair consists of restoring only a small percentage of parts composing the system. This will leave the system in approximately the same state it was in just prior to failure. In this case an item upon failure is subject to minimal repair and the hazard rate after repairs is same as the hazard rate just prior to failure (as-bad-as-old). If N(t) is total number of failures by time t, then M(t) = E’[N(t)] is the expected number of failures by time t. If an item receives minimal repair after each failure then the expected number of failures are estimated as follows:
E′N"t$ M"t$ J h"x$dx
M
In case of Exponential and Weibull time to failure distributions the expressions for expected number of failures can be obtained as follows:
For Exponential time to failure distribution,
E′N"t$ M"t$ J h"x$dx M Jλdx M λt MTBF t For Weibull time to failure distribution,
E′N"t$ M"t$ J h"x$dx M Jβη M @ηBx QRdx @ηBt Q In case of combination strategy, it is assumed that some of the components are replaced upon failure and the remaining components are subjected to minimal repair upon failure.
In the present study the maintenance/repair cost is estimated for two different pumps for the above discussed maintenance/repair strategies. It is assumed that the components follow Weibull times to failure. Mathematically, the maintenance/repair cost for renewal/replacement upon failure strategy can be expressed as follows: C . S t η.Г @1 1βB T 12 1 x CF CF = C MTTR"N .C C $ C . S t η.Г @1 1βB T 12 1 x C MTTR"N .C C $ "11$
For minimal repair upon failure strategy the maintenance/repair cost can be expressed as follows:
(3) (4) (5) (6) (9) (10) (7) (8)
C . @ηt B QV 12 1 x CF′ CF′ C MTTR"N .C C $ C . @ηt B QV 12 1 x C MTTR"N .C C $
where n is the number of pump components, t the design life of the component i (hrs), η the Scale parameter for component i (hrs), Г the Gamma function, β the shape parameter for component i,
CF the cost per failure for renewal/replacement upon failure strategy
($), CF′ the cost per failure for minimal repair upon failure strategy ($), C the cost of component i to be replaced ($), MTTR the mean time to repair of component i (hours), N the mean number of persons required to perform the maintenance/repair task of component i, C the labor cost associated with the maintenance/repair of component i ($/hour), C the tooling cost associated with the maintenance /repair of component i ($/hour), and C the cost associated with minimal repair of component i ($/hour).
The values for C, β, η and MTTR are obtained from the pump manufacturer. The values obtained for various parameters have been given in Table 5 and Table 6 for pump A and pump B respectively for renewal/replacement and minimal repair strategy.
TABLE 5. MAINTENANCE/REPAIR COSTS – PUMP A
Component ( ($) X( Y( (hrs) Z*[\"]E^$ ( Z**_(hrs) ( `(+"-$ `(′+"-$ \( ($) \( ′ ($) (+"-$ ($) ( ′+"-$ ($) Lower Half Casing 800 1.3 50000 46068 8 1.95 2.14 872 232 1700 496 Upper Half Casing 500 1.3 50000 46068 4 1.95 2.14 540 140 1053 300
Impeller 400 2.5 150000 133089 8 0.67 0.27 472 152 316 41
Shaft 360 1.2 50000 46984 8 1.91 2 432 144 825 288
Bearing Housing DE 400 1.2 40000 37587 2 2.39 2.64 406 86 970 227 Bearing Housing NDE 400 1.2 40000 37587 2 2.39 2.64 406 86 970 227
Impeller Key 120 1.4 50000 45528 8 1.97 2.27 192 96 378 218
Key for Coupling 120 1.4 50000 45528 4 1.97 2.27 136 40 268 91
Impeller Nut 80 1.1 50000 48088 8 1.87 1.9 152 88 284 167
Bearing Lock Nut 160 1.1 50000 48088 2 1.87 1.9 168 40 314 76
Vent Valve 400 1.4 40000 36422 2 2.47 3.1 406 86 1003 266 Insert 200 1.4 50000 45528 2 1.97 2.27 208 48 410 109 Motor 1500 1.2 100000 93969 8 0.95 0.88 1596 396 1516 348 Coupling 30 2 75000 66467 4 1.35 1.44 38 14 51 20 Wear Ring 16 1.1 50000 48088 4 1.87 1.9 28 15 52 28 Shoulder Ring 20 1.1 50000 48088 2 1.87 1.9 26 10 48 19 Mechanical Seal 24 1.4 25000 22764 4 3.95 6 44 25 174 150 Bearing 120 1.3 40000 36854 4 2.44 2.86 140 44 342 125 Angular Contact Bearing 200 1.3 50000 46068 4 1.95 2.14 220 60 429 128 Oil Seal 20 1.1 25000 24044 2 3.74 4 32 16 120 64
O Ring for Insert 30 1.1 25000 24044 2 3.74 4 42 26 157 104
Total 11380 3492
Using this data the various parameters for lower half casing as an example are estimated as discussed below. The mean time between failures is estimated as follows:
MTBF η.Г @1 1βB
50000.Г a1 .bc 46068 hrs Using equation (5) the expected number of failures for renewal/replacement upon failure strategy is estimated as follows:
EN"t$ @MTBFB @t 9000046068B 1.95
Using equation (8) the expected number of failures for minimal repair upon failure strategy is estimated as follows:
E′N"t$ @ηBt Q @9000050000B.b 2.14
Using equation (10) the cost per failure for renewal/replacement upon failure strategy is estimated as follows:
CF 800 8"4x2 1$ $872
The maintenance/repair cost expected over the design life of the component for renewal/replacement upon failure strategy is estimated as follows: CN"t$ CF. EN"t$ 872x1.95 $1700 (14) (13) (15) (16) (12)
Using equation (11) the maintenance/repair cost for renewal/replacement upon failure strategy for pump A is estimated as follows:
CA . CF 12 1
. EN"t$ $11380
Similarly, for pump B, CB . CF
12 1
. EN"t$ $33880
Using equation (13) the cost per failure for minimal repair upon failure strategy is estimated as follows:
CF′ 160 8"4x2 1$ $232
The maintenance/repair cost expected over the design life of the component for minimal repair upon failure strategy is estimated as follows:
C′N"t$ CF′. E′N"t$ 232x2.14 $496
Using equation (14) the maintenance/repair cost for minimal repair upon failure strategy for pump A is estimated as follows:
CA . CFf 12 1
. EfN"t$ $3492
Similarly, for pump B,
CB . CFf 12 1
. EfN"t$ $9832
TABLE 6. MAINTENANCE/REPAIR COSTS – PUMP B
Component Ci ($) βi ηi (hrs) MTBFi (hrs) MTTRi (hrs) Ei[N(t)] Ei’[N(t)] CFi ($) CFi’ ($) Ci[N(t)] ($) Ci’[N(t)] ($) Delivery Casing 990 1.3 50000 46068 4 1.95 2.14 1058 266 2063 570 Suction Casing 1365 1.3 50000 46068 4 1.95 2.14 1433 341 2795 730 Stage Casing 250 1.3 50000 46068 8 1.95 2.14 386 186 752 398 Diffuser 115 2 125000 110778 8 0.81 0.51 251 159 203 81 Diffuser 1 230 2 125000 110778 8 0.81 0.51 366 182 296 93 Enclosed impeller 280 2.5 150000 133089 8 0.67 0.27 416 192 279 52 Pump Shaft 210 1.2 50000 46984 8 1.91 2 346 178 660 356 Shaft Sleeve 1 55 1.2 40000 37587 8 2.39 2.64 191 147 456 388 Shaft Sleeve 2 55 1.2 40000 37587 4 2.39 2.64 191 147 456 388 Set of keys 25 1.4 50000 45528 8 1.97 2.27 161 141 317 320
Set of ‘O’ rings 120 1.1 25000 24044 8 3.74 4 256 160 957 640
Gland packing 45 1.4 25000 22764 8 3.95 6 181 145 715 870 Wear ring 10 1.1 50000 48088 8 1.87 1.9 74 66 138 125 Lantern ring 15 1.1 50000 48088 2 1.87 1.9 31 19 58 36 Liquid deflector 10 1.4 60000 54634 2 1.64 1.76 26 18 42 32 Bearing cover 10 1.2 40000 37587 2 2.39 2.64 26 18 62 48 Balancing ring 55 1.1 50000 48088 2 1.87 1.9 71 27 132 51 Balancing disc 130 1.1 50000 48088 2 1.87 1.9 146 42 273 80 Gaskets 5 1.4 25000 22764 2 3.95 6 21 17 83 102 Gland bush 15 1.4 40000 36422 2 2.47 3.11 31 19 76 60 Motor 23750 1.2 100000 93969 8 0.95 0.88 23886 4886 22692 4300 Coupling 250 2 75000 66467 4 1.35 1.44 278 78 375 112 Total 33880 9832
5.5 Disposal Cost (
g$The disposal cost can be estimated as the sum of the cost of disassembly, cost of shredding, cost of material recovery and cost of dumping [26]. The pump disposal cost is estimated as sum of the cost of disassembly, cost of recovering a part of the material and cost of dumping the remaining material. The disassembly cost is estimated as
product of the time required to disassemble the pump and the cost incurred per unit time. The model considers the cost gain due to material recovery and the transportation cost associated with the material recovery. The cost of disposing the material is estimated as product of the weight of the material to be dumped and the cost of
dumping. Mathematically, the pump disposal cost can be estimated as follows: C hiC8.. T 12 1 j "C . km. W$ n "C. W $ "C o. km1. Wo$ "Co. Wo$ p
where C is the system disposal cost ($), C the cost of disassembly ($), C the cost of material recovery ($), Co the cost of dumping the material ($), C8 the hourly cost of disassembly ($/hour), n the number of components, T the disassembly time for component i (hour), C the cost of transportation of the recovered material ($/ton/km), km the distance over which the recovered material is to be transported (km), W the weight of the recovered material (ton), C the scrap rate ($/kg), C o the cost of transportation of the disposed material ($/ton/km), km1 the distance over which the dumped material is to be transported (km), Wo the weight of the disposed material (ton), and Co the cost of dumping the material ($/ton). The data required to estimate the disposal cost is depicted in Table 7 for pump A and pump B.
TABLE 7. DATA TO ESTIMATE DISPOSAL COST
Item Pump A Pump B
Weight of the pump (Kg) 515 1860 Material to be recovered (Kg) 490 1767 Material to be disposed (Kg) 25 93 Distance of transportation of recovered
material (km) 100 100
Distance of transportation of disposed
material (km) 1 1
Transportation cost ($/ton/km) 2 2
Scrap Rate ($/Kg) 0.5 2.5
Cost of dumping ($/ton) 20 20 Time to disassemble the pump (hrs) 8 16 Hourly disassembly cost ($) 3 5 Disposal cost ($) using equation (18) -122 -3982
5.6 Life Cycle Cost (
r
)
Using equation (1) the life cycle cost of pump for renewal/replacement upon failure strategy can be written as follows:
LCC N C1 C C C C C C ."T . N . C $ Ct 12 1 t . 6C789366. nQ. H . n< C=8> . S t η. Г @1 1βB T 12 1 x C MTTR"N . C C $ hiC8. . T 12 1 j "C .km. W$ n "C. W $ "C o. km1. Wo$ "Co. Wo$ p
Similarly, the life cycle cost of pump for minimal repair upon failure strategy becomes, LCC 1N C C C C C C C ."T . N . C $ Ct 12 1 t . 6C789366. nQ. H . n< C=8> . @ηt B QV 12 1 x C MTTR"N . C C $ hiC8.. T 12 1 j "C . km. W$ n "C. W $ "C o. km1. Wo$ "Co.Wo$ p
Using equation (19) the life cycle cost for pump A is, LCCA $1068146
Similarly, for pump B the life cycle cost becomes, LCCB $2391393
Using equation (20) the life cycle cost for pump A is, LCCA $1060258
Similarly, for pump B the life cycle cost becomes, LCCB $2367345
For combination strategy, the life cycle cost of pump A is, LCCpA2 $1062230
Similarly, for pump B the life cycle cost becomes, LCCpB2 $2368047
5.7 Life Cycle Cost Results
Table 8 shows the results of the life cycle cost analysis for combination strategy of maintenance/repair. The pump A has a life cycle cost of $ 11.80 per operating hour while pump B has $ 26.31 per operating hour. Life cycle cost per hour of pump operation can be one of the design criteria to compare different design alternatives.
TABLE 8. RESULTS OF LCC ANALYSIS
Cost Component Pump A Pump B Acquisition Cost ($) 4080 29431 Installation and Commissioning ($) 584 1627
Operation ($) 1052224 2330437
Maintenance and Repairs
Renewal/replacement Strategy ($) 11380 33880 Minimal Repair Strategy ($) 3492 9832 Combination Strategy ($) 5464 10534
Disposal ($) -122 -3982
Life Cycle cost ($) 1062230 2368047 Life Cycle Cost per hour of Pump
Operation ($) 11.80 26.31
(19)
(20) (18)
6. CONCLUDING REMARKS
In this work a methodology for life cycle cost analysis of pumps manufactured by a well known pump manufacturer in India is presented. For cost estimation, activity based costing approach is employed. The activities performed by the company over pump life cycle and the associated cost drivers are first identified. The calculation of activity based costs is then explained. The developed methodology is applied to estimate life cycle costs of two different pumps manufactured by the pump manufacturer and the results obtained are presented. The results of the study show that the life cycle energy and maintenance costs dominate the pump life cycle cost. The pump operation and maintenance/repair costs are observed to be significant over the expected life of the pump. The operation cost is the most significant cost component of LCC as these pumps are heavy usage pumps. For the design life of 90000 hours the pump has to operate almost 20 hours a day. The pump operation cost depends upon the cost of energy, the efficiency of pump and motor. A careful consideration of these parameters in the pump design stage will considerably reduce pump LCC. The maintenance/repair costs are estimated for three different strategies the renewal/replacement upon failure, minimal repair upon failure and combination strategy. It is assumed that all the pump components have Weibull time to failure distributions. The maintenance cost is observed to be lowest for minimal repair upon failure strategy, somewhat higher for combination strategy and highest for renewal/replacement upon failure strategy. Since it is not practically possible to have minimal repair for all the pump components, a combination strategy would be more economical and practically feasible.
7. ACKNOWLEDGEMENT
The authors thank the product engineering division of Kirloskar Brothers Limited, Kirloskarwadi for providing the necessary data. The authors also thank Dr. S. G. Joshi, formerly Professor and Head, Department of Mechanical Engineering, Walchand College of Engineering, Sangli for his help during this work.
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