Life-cycle cost analysis

The other cost reduction technique is Life Cycle Cost Analysis to influence design. To avoid products being developed with a low acquisition cost but high operation and support costs, or vice versa, life cycle cost analysis considers the full cost of ownership of the products in the engineering and decision making process, to establish the correct balance of acquisition and in-service cost, whilst maintaining the required effectiveness of the product.

British Aerospace uses sophisticated cost modelling to investigate and estimate the life cycle cost of an aeroplane. This provides insight into the hidden costs of operation and support hence overcoming the iceberg syndrome. All investment involves providing a balance between reliability and the cost of ownership. Investment in improving the reliability and ease of maintenance of an aircraft will help to reduce the cost of ownership, but usually with an increase in the cost of acquisition.

During the design stage, the earlier the opportunity for improvement can be identified, the less it will cost to incorporate. Initially the benefits exceed the associated cost of investment, resulting in a reduction in the life cycle cost. However, there is a point beyond which increased investment will not yield greater savings and the life cycle cost cannot be reduced further.

Life cycle cost analysis is the technique of predicting future costs early enough to enable decisions to be taken that influence design to minimise lifecycle costs without compromising the performance of an aircraft.

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Re-Engineering	\|	Production costs

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