Life Cycle Costing
Sustainable acting requires the combination of ecological and economical criteria in process and product development, comparison of scenarios etc. Therefore the method of Life Cycle Costing (LCC) qualifies for the support of sustainable decision making because of its ability to analyze economic aspects within the same system boundaries and constraints as ecological life cycle assessments. Thereby the definition of the life cycle is both times the same – the product life cycle.
Using this method it’s possible to calculate total costs of a product or service. Therefore you gather and structure all costs of the product or service along the expected lifespan. Results of a LCC analyses primarily serve as:
- Assessment of alternatives – A LCC analyses indentifies all life cycle costs of a product or service. By doing this, it’s possible to compare and evaluate alternatives.
- Better knowledge – The LCC-method simplifies the management to gain better knowledge about cost drivers and necessary resources. Additionally, an investigation of cost drivers identifies areas where action by the management is needed.
- Improved forecasts – In the early stage of development of a product you make decisions with the biggest impacts on the environment (see figure 1). So it’s possible to ascertain the most important factors for an economic optimized product in the same way as you calculate ecological optimization. This results in a support for decision making in an early stage of development of a product.
By using the LCC method, it’s possible to calculate the total costs of acquisitions more precisely. This allows better decisions in each stage, e.g. for big investments or the implementation of rules to support cost effective development.
Industrial decision support
The advantage of LCC consists of the industrial decision support in sustainability and especially in following fields:
- Identification of cost drivers in production of a product
- It’s possible to compare different production methods economically
- Early economical optimization of production, use and recycling costs of a product
- Consideration of the product life cycle from the customer’s perspective. Interesting for products which have:
- Cost-intensive use phase
- Cost-intensive end of life
- Marketing tool
- Decision support in sustainability, if it’s used coincidently in the process of LCA (and LCWE).