Total cost of ownership (or TCO) includes the purchase price of a particular asset plus all operating, service, maintenance and repair costs over the asset’s lifespan, including cost of disposal and residual value on disposal.
Whole of life costs can be categorised into purchasing, operating and disposal, and might include the following:
Purchasing
Developing a business case, design and engineering costs, purchase price of equipment, delivery costs, staff training and annual insurance.
Operating & Asset Care
Maintenance and servicing, spare parts, repair costs and consumables.
Disposal
Decommissioning, transport away from the worksite, fees for disposal of parts and money received on sale.
For an asset with a long service life, the initial up-front cost of a product is often only a small part of TCO and purchasing managers know that while good procurement is achieving the right price, best value for money is the lowest lifetime cost.
While minimising lifetime operating and asset care costs requires best practice by management, the manufacturer can make a significant contribution to TCO through quality design, engineering and product build. There are three critical factors in managing TCO to minimise the incurred cost of operations and maintenance.
The most crucial factor in minimising TCO is to ensure that operating practices adhere absolutely to operations within the asset’s designed operating envelope. This highlights the critical importance of smart design to ensure that each asset is designed to perform within a specific range of inputs and outputs.
A second critical requirement is effective operator care. The operator plays a vital role in controlling total cost of ownership as properly maintained assets require less energy, can consistently maintain rated performance and generate near perfect product quality.
Finally, in conjunction with proper operation, effective asset care has a direct impact on total cost of ownership, including preventative maintenance, scheduled replacements and periodic rebuilds.
A simple example might be the use of stainless steel in preference to mild steel. While there may be a modest up-front cost premium for stainless steel, with significantly reduced maintenance, lifetime cost of ownership is much lower and value for money is increased.
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Founded in 1963, A&G Engineering is an Australian, family-owned company that has grown from humble beginnings to become Australia’s leading designer and fabricator of stainless-steel tanks and vessels. A&G has an outstanding reputation in the winery and brewery markets, as well as throughout the dairy, water treatment and petrochemical industries.
A&G’s history has been characterised by an unwavering focus on a simple goal – to be the lowest risk manufacturer and supplier to the industries we serve, while delivering the most favourable lifetime cost of ownership model to our clients.
Clients are rarely in situations where a standard solution is enough, and A&G’s engineering team work closely with clients to meet all challenges with smart design and sophisticated engineering.
A&G products are a critical part of the client’s supply chain, and A&G are relentlessly focused on ensuring that these products do the job required of them, as efficiently and effectively as possible.
The unmatched combination of experience, flexibility, expertise and technology for every A&G project serve to minimise production risk and ensure on-time, on-budget and as-specified delivery. The net result is predictable and low lifetime cost of ownership of A&G equipment and outstanding value for money.
Ready to find out how A&G can help you? Talk to our expert team by calling us on (02) 6964 3422 or email sales@agengineering.com.au with your inquiry. We look forward to hearing from you.
