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Life Cycle Costing (LCC) - Business modeling the whole life cycle of products and services

Life Cycle Costing (LCC) is an accounting approach, which addresses the the cost implications of a service or asset in a broad sense. The cost modelling is done in phases, which normally stretch from the idea to start the venture until its shutdown or decommissioning of the assets. Because of this complete life cycle thinking, LCC is also referred to as "womb to tomb" or "cradle to grave" approach.
Typical phases to be considered are: research and design phase, production phase, implementation and deployment phase, operation phase and decommissioning phase.
A fundamental principle in this life cycle modelling approach is the observation, that most follow-up cost are hardly to be changed, once the initial design choices and investment decisions have been made. Thus, LCC is often performed beforehand in order to estimate the total cost of ownership of several alternative solutions before irreversible decisions have been taken and the venture is progressed to far to be reverted.
The following figure roughly depicts the fundamental concept of life cycle thinking in LCC modelling and shows how the cost appointment vs. ability to change the cost incurred are inversely proportional.

Life Cycle Costing (LCC) phases with initial and acquisition cost and follow-up cost for the whole life cycle of products and services

If you do need help in performing Life-cycle cost (LCC) calculations, do not hesitate to contact us. This is particularly true for whole-life cost and profit calculations - including incentive and tariff design - for communication networks such as Mobile networks (2G, 3G, HSPA, HSPA+ and 4G LTE/LTE Advanced) and Fixed networks (DSL, fibre optical lines (FTTx, GPON) and MPLS-TP transport platforms).

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Sensitivity Analysis

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STEM example models and talks
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STEM LCC model examples

Life Cycle Costing References and Standards:
German Standards for LCC assessment and calculations English Standards for LCC assessment and calculations
  • DIN EN 60300-3-3 - Zuverlässigkeitsmanagement – Teil 3-3: Anwendungsleitfaden – Lebenszykluskosten
  • DIN EN ISO 15663-1 - Erdöl- und Erdgasindustrie – Betriebsdauerkosten – Teil 1: Methodik
  • VDI 2884 - Beschaffung, Betrieb und Instandhaltung von Produktionsmitteln unter Anwendung von Life Cycle Costing (LCC)
  • VDI 5200 - Fabrikplanung - Erweiterte Wirtschaftlichkeitsrechnung in der Fabrikplanung
  • VDMA 34160 - Prognosemodell für die Lebenszykluskosten von Maschinen und Anlagen inkl. LCC-Berechnungssoftware / Excel Arbeitsblätter
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  • SAE ARP 4293 - Life Cycle Cost - Techniques and Applications
  • ASTM E917 - ASTM E917 - 05(2010) Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
  • ISO 15663-1:2000 - Petroleum and natural gas industries -- Life cycle costing -- Part 1: Methodology
  • ISO 15663-2:2001 - Petroleum and natural gas industries -- Life-cycle costing -- Part 2: Guidance on application of methodology and calculation methods
  • ISO 15663-3:2001 - Petroleum and natural gas industries -- Life-cycle costing -- Part 3: Implementation guidelines
  • ISO 15686-5:2008 - Buildings and constructed assets -- Service-life planning -- Part 5: Life-cycle costing
  • TAM04 - Total Asset Management of NSW Treasury
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German References for LCC modelling and calculation English References for LCC modelling and calculation

Life Cycle Costing Software and Tools:
German References for LCC Software and Tools English References for LCC Software and Tools
  • GaBi 4 - Life Cycle Costing in GaBi Software
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