Minimizing total cost involves trade-offs between the elements of LCC analysis.
by Anusuya Ramadoss, Beroe

Pump users and industry leaders have increased the emphasis on reducing the life-cycle cost (LCC) of industrial pumps. Organizations with a matured procurement division do not purchase pumps based on their initial purchase and installation costs. Instead, they focus on the total LCC of a pump, which is five times greater than the initial and installation costs.

The key objective of analyzing total LCC is minimizing total cost, which involves trade-offs between the elements of LCC analysis. This analysis is a strategic tool to determine whether the initial cost is worth it after major future costs—such as maintenance, energy and downtime—are considered.

What Is LCC?

LCC is the total cost associated with an industrial pump from the point of procurement up to the point of decommissioning and disposal of the installed pumping system. It is an important tool to help plant managers choose between alternative resources and decide between repairs versus new purchase.

Figure 1 shows the different costs incurred during the life of a pump, based on the assumption that the service life of the pump is 20 years. Of these eight major elements of LCC, energy, maintenance and repair account for approximately half the total LCC. These costs can be divided into the following three groups which are based on the buyer’s control over costs:

The costs incurred during the life of a pump.Figure 1. The costs incurred during the life of a pump.
  • Lower control comprises environmental and 
disposal costs.
  • Moderate control comprises initial, operating and installation costs.
  • Higher control comprises energy, maintenance and repair, and downtime costs.
The adoption of different maintenance activitiesFigure 2. The adoption of different maintenance activities

Why Should Pump Users Care About LCC?

Pumps make up a major portion of capital expenditures (CAPEX) in any processing industry, especially the chemical industry. It accounts for up to 20 to 25 percent of all the components used. The purchasing price is only a small part of the total LLC of any industrial pump, but other operating costs—such as maintenance, repair and energy—account for nearly half of it. Despite this, purchasing managers often make decisions based on the initial investment instead of overall operating costs.

In the end, a plant manager must decide between an overhaul and purchasing a new pump for the application. To do so, LCC analysis is an important tool for plant managers.

LCC Analysis Benefits

Most pump users make procurement decisions based on the initial purchase cost which is often only 10 percent of the total LCC. LCC analysis provides the trade-off point between the initial purchase cost and the other cost elements that occur during the pump’s life. This assists in deciding whether to pay a higher initial cost to avoid unwanted and unexpected maintenance and other costs.

Users have little control over many of the inevitable costs—such as environmental, disposal and installation costs. However, maintenance, energy and downtime costs can be managed, and potential cost-savings are associated with these factors.

Maintenance Cost Reduction Methods

Generally, pump users do not choose maintenance strategies based on the type of equipment. Reactive maintenance is not always the wrong maintenance strategy. Implementing predictive and proactive strategies on less critical pump systems may not be cost effective.

The adoption of maintenance practices based on criticality of equipmentFigure 3. The adoption of maintenance practices based on criticality of equipment

The group of industrial pumps in a plant can be segmented into three subgroups based on the pumps’ impact on plant productivity. Low-volume, high-critical and high-value equipment are in Group 1. Having proactive maintenance and predictive maintenance practices for this group makes more sense. Group 2 includes equipment that is moderate in terms of volume, criticality and value related to plant operation. For this group, using reactive maintenance practices at the cost of plant productivity is risky, but having a proactive maintenance is more costly. High-volume, low-critical and low-value equipment are placed in Group 3. For Group 3, having a more reactive maintenance approach is cost effective rather than other maintenance practices.

Energy Cost Reductions

Energy cost accounts for a higher portion of the LCC of an industrial pump than any other cost. Buyers look for energy-efficient options to reduce the pump’s energy consumption. Table 1 shows the possible reasons for higher energy consumption and ways to mitigate them.