Optimizing Total Cost of Ownership


Written by:
Tom Dabbs, Plant Performance Services Group

Initial purchase price is a small fraction of the TCO.

How much does a pump cost? Ask a corporate executive or plant manager about the cost of a piece of equipment, and you're likely to hear the purchase price. In fact, capital outlay is only a fraction of the total operating expenses for pumps or rotating equipment. Companies that want to compete effectively should carefully measure total costs and analyze them as part of system design and equipment purchase decisions.

Optimizing total cost of ownership (TCO) is a difficult process for organizations to plan and sustain, but the payback is worth the effort. Most organizations that succeed at optimizing TCO have leaders who demand cooperation between functional groups. They recognize that optimizing costs is a function of operations, maintenance and purchasing working toward the common goal of lowering total costs. They also insist on the discipline that is required to always follow proper work processes.

The TCO Formula

TCO analysis is simply a financial estimate of all costs—direct and indirect—of acquiring, commissioning, operating, maintaining and disposing of a product or system for a specified period of time. The analysis can be used to effectively compare alternative approaches. One can understand these costs by using the model below for pumping systems that can be extended to almost any class of manufacturing equipment:

TCO = Ca + Cc + Co + Cm + Cp + Cd

Where:

Ca = Cost of Acquisition—includes the cost of engineering, procurement, equipment cost, auxiliary equipment cost, inspections and documentation.

Cc = Cost of Commissioning—includes the cost of construction, testing, training and technical support

Co = Cost of Operation—includes energy, operating personnel, facility costs, support and handling for raw materials

Cm = Cost of Maintenance—includes maintenance personnel, maintenance facility cost, test equipment, maintenance support and handling cost, maintenance spares and repair parts

Cp = Cost of Production—includes production losses, quality cost, environmental cost and cost of redundancy

Cd = Removal and Disposal Cost—minus any reclamation value

The breakdown in Figure 1 shows pump costs reported by a top 10 global chemical manufacturer. It is interesting to note that initial cost typically represents less than 10 percent of the TCO. Energy and maintenance costs have at least five times more relevance but are rarely considered during the selection process.

Figure 1. Pump costs from a top 10 global chemical manufacturer, FY 2006

The first opportunity to optimize TCO is during the design phase. Specifying the right equipment for the right application is critical to operating efficiently—which lowers the energy, operation and maintenance expenses that comprise more that 60 percent of the TCO.

Many engineers specify oversized pumps, based on the theory that it is better to err on the side of having too much power for the application than too little. If the flow of the system is too high coming from the pump, it can simply be throttled back using a valve on the discharge side. This arrangement increases energy costs for operating the pump, reduces the operating life of the equipment and likely increases downtime.

When a pump is operating optimally—or at its best efficiency point (BEP)—liquid flow is constant and radial forces acting on the impeller are balanced. This allows the pump to experience the highest efficiencies and lowest vibration. If the pump runs off-BEP, it creates an imbalance of pressure inside the pump. Any of these problems can cause shaft deflection and the likelihood of pump failures.

Case Study 1—Too Much Suction Causes Too Many Failures

A large paper manufacturer installed a critical process pump on one of its paper machines. The pump demonstrated high vibration levels from the beginning and mean time between failures (MTBF) was less than nine months. A root cause failure analysis showed that cavitation was the reason for the failures, but the cause of the cavitation was that suction energy in the pump was too high. The ultimate solution was to install a different pump with lower suction energy.

The solution reduced the pump's overall vibration by 89 percent, eliminated the pump cavitation and reduced its energy consumption by approximately 30 percent. The new pump has operated flawlessly for more than five years after the solution was implemented.

Left of BEP: A low flow rate restricts flow and re-circulates fluid through the pump. The resulting higher velocity near the cutwater causes a low-pressure area that increases loads on the impeller, which causes shaft deflection and related stress on the seals and bearings.

Case Study 2—Non-OEM Parts Go up in Smoke

A customer recently purchased lower-cost pump replacement parts—built to non-OEM standards—that caused a major loss in production and inferior performance that increased energy consumption. The application was a typical condensate service, for which the customer used a standard OEM pump. After an above-average time in service, the wet-end components were scheduled to be replaced due to routine wear.

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Upstream Pumping Solutions

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