Life Cycle Cost Analysis: An Economic Model for Sustainable Tomorrow

By: Nirjhar Chakravorti

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Synopsis: Life Cycle Costing (LCC) is the process of economic analysis to assess the total cost of ownership of an asset, including its cost of procurement, installation, operation, maintenance, conversion, and decommissioning. The economic approach to assess the total cost of owning an asset or facility is known as Life Cycle Cost Analysis (LCCA). LCCA is a key economic tool for business decision-making in terms of various functional requirements, such as sustainability, asset management, supply chain management, and project management. Every organization is a combination of various interrelated functions or departments. Every function has its own set of objectives and targets. Even though all functions try to achieve overall organizational objectives, in reality, they work to protect their functional interests as well. In many cases, it becomes detrimental to the health of the organization. This conflicting behavior increases when decisions are made on subjective considerations. When a company's strategy works on an objective platform, chances of conflict are reduced. LCCA can be used as a management decision tool for synchronizing functional conflicts by focusing on facts, money, and time. Life Cycle Cost Analysis: An Economic Model for Sustainable Tomorrow explains a simple, innovative model to carry out LCCA, along with a unique methodology to determine how the value of money changes over a period of time.