Incorporating an Asset Health Index into a Life Cycle Costing: A Proposition and Study Case

Orlando Durán, Fabián Orellana, Pablo Perez and Tamara Hidalgo
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Orlando Durán: Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile
Fabián Orellana: GNL Quintero, Las Condes, Santiago 2490000, Chile
Pablo Perez: Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile
Tamara Hidalgo: Mechanical Engineering School, Pontificia Universidad Católica de Valparaíso, Valparaiso 243000, Chile

Mathematics, 2020, vol. 8, issue 10, 1-18

Abstract: A physical asset’s health is the consequence of a series of factors, ranging from the characteristics of the location where it operates to the care it is submitted to. These characteristics can influence the durability or the horizon of the useful life of any equipment, as well as determine its operational performance and its failure rates in the future. Therefore, the assessment of the influence of asset health on Life Cycle Costs is a compelling need. This paper proposes the incorporation of a factor that reflects the projected behavior of an asset’s health index into its corresponding Life Cycle Costing (LCC) model. This allows cost estimates to be made more realistic and LCC models to be operated more accurately. As a way of validating this proposal, a case study is shown. The methodology proposed in this case study was applied in a real case, considering an LNG facility located in central Chile. In addition, sensitivity studies and comparisons with the results obtained by a traditional Life Cycle Costing model are included. The results show the usefulness of incorporating asset health aspects into the Life Cycle Costing of physical assets.

Keywords: assets health; Life Cycle Costing; reliability (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
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