Comparing Life Cycle Costing and Performance Part Costing in Assessing Acquisition and Operational Cost of New Manufacturing Technologies

Even if practitioners want to adopt new manufacturing technologies, there is a lack of comprehensive tools to support their decisions, regarding both cost and sustainability. This paper reviews and compares the practical use of Life Cycle Costing (LCC) with a performance part costing (PPC) model, chosen based upon the criteria of providing in-depth analysis capabilities and the prospect of integrating cost and sustainability assessment. A case study of a Swedish gear manufacturer is selected, where the company investigates adoption of a new manufacturing technology. Since, this type of decision requires heavy investments e.g. in new machines, tools, linking performance with costs would be a prerequisite for performing well-informed decisions. Based on interviews, the level of detail requirements e.g., performance indicators, when acquiring new technologies are identified. LCC model cost parameters are compared with the PPC cost drivers and the data availability and estimation are discussed.