Methodology for Estimation of Life Cycle Orientated Optimizatation Measures of Investment Goods

A manufacturer of any kind of product has to be in contrast to competitive to survive on market. A major point to win a customer over is the arrangements of costs. In investment goods industry asset cost are just the tip of the iceberg. Most of their costs accrue by use. Because of that it is important to overview the whole costs of the product life cycle. Product life cycle costs describe the cost of a product over its whole life. This includes all expenses from development, production and use to recycling and refers to manufacturer and customer equally. The majority of costs are determined in the stages of product development. As a manufacturer of complex investment goods (e.g. machine for production) the question of new development investments has to be answered. There are three important dimensions to consider. These dimensions concern the right part of product for improvement, the right kinds of costs and the owner of these costs. In detail they have to decide which part of product should be improved to get the main effect concerning reduction of life cycle costs. But in that case it is also important to know what kinds of costs of the chosen part have to be reduced (for example energy cost, cost for maintenance or repair). The third dimension in case of product life cycle costs aims at the owner of the cost, manufacturer or customer. This is a problem when new developments cause savings on one side but expenses for the other. In that context the best leverage of these combinations is searched for which means that exactly this kind of costs has to be identified, whose savings get the biggest benefit in relation to necessary expenses. This paper presents an approach to address this problem. For the pre-selection of possible functions established methods derived from product development are used in this context. Afterwards a procedure of quantification is presented. Calculation and rating of new defined management ratios provide the biggest leverage in order to reduce the product life cycle costs. This approach represents an instrument for manufacturer’s business of investment goods to make decisions about their future investments in the field of product development.