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Abstract: Weibull details are needed to predict end of life for components and systems. When the failures/replacements occur will drive costs during specific project intervals. The cost details from Weibull analysis drive life cycle cost decisions for calculating a key performance indicator represented by a single number for net present value (NPV).
Paul Barringer, P.E. Barringer & Associates, Inc. P.O. Box 3985 Humble, TX 77347-3985 Phone: 281-852-6810 FAX: 281-852-3749 Email: hpaul@barringer1.com Web: http://www.barringer1.com
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See: http://www.barringer1.com/Anonymous/lcc.xls
Barringer & Associates, Inc. 2007
Maintenance Engineers:
Minimize repair hours
Shareholders:
Maximize dividends and/or share price
Production:
Maximize uptime hours
Reliability Engineers:
Maximize equipment reliability to avoid failures
Accounting:
Maximize project net present value
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Communication Problems--Boring!!
Boring Beanie Stuff!!!
Engineering
Accounting
Equipment grades Installation grades Operating practices Maintenance practices Spare parts Turnarounds
Barringer & Associates, Inc. 2007
Return on investment Discount rates Capital budgets Shareholders equity Cash flow Depreciation
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Communication--Money Speaks
Engineering
Least Common Denominator = $s
Net Present Value: The Communication Tool!!!
Accounting
Equipment grades Installation grades Operating practices Maintenance practices Spare parts Turnarounds Weibulls
Return on investment Discount rates Capital budgets Shareholders equity Cash flow Depreciation
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Years hence 0 1 2 3 4 5 6 7 8 9 Present value of US$1.00 $ 1.00 $ 0.89 $ 0.80 $ 0.71 $ 0.64 $ 0.57 $ 0.51 $ 0.45 $ 0.40 $ 0.36 Future value of US$1.00 $ 1.00 $ 1.12 $ 1.25 $ 1.40 $ 1.57 $ 1.76 $ 1.97 $ 2.21 $ 2.48 $ 2.77 and Future value of US$1.00 = (1+ i)^n Present value of US$1.00 = 1/(1+ i)^n Years hence 11 12 13 14 15 16 17 18 Present value of US$1.00 $ 0.29 $ 0.26 $ 0.23 $ 0.20 $ 0.18 $ 0.16 $ 0.15 $ 0.13 Future value of US$1.00 $ 3.48 $ 3.90 $ 4.36 $ 4.89 $ 5.47 $ 6.13 $ 6.87 $ 7.69 where i = discount rate and n = number of years into the future
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$ 0.32 $ 3.11
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$ 0.12 $ 8.61
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$ 0.10 $ 9.65
What is the present value (PV) of US$1.00 today over time? What is the future value (FV) of US$1.00 received over time? A bird in the hand is worth two in the bush. Money is time and time is money.
Barringer & Associates, Inc. 2007
Engineers Must Think Like MBAs And Act Like Engineers To Get Lowest Long Term Cost Of Ownership Over The Entire Life Cycle
Barringer & Associates, Inc. 2007
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Feedback
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Acquisition costs and sustaining costs are not mutually exclusivefind both by gathering correct inputs and identifying cost drivers
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% Of LCC
Funds Expended
0 Conceptual Design
Start Of Life
End Of Life
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Initial Training
Technical Data
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Disposal Costs
Permits & Legal Costs Allowing Disposition Wrecking/Disposal Costs Remediation Costs Write-off/Asset Recovery Costs Green & Clean Costs
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Use strong R&M engineering tools to reduce the largest cost components and reduce LCC
Non-recurring costs Recurring costs Potential savings Up to 15 %
Old Method
12 % 3%
35 %
Concept
Design Develop
New Method
12 + 3 = 15 % 3 +1 = 4 %
Up to 3%
Concept
Design Develop
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Set Availability Requirements X Set Reliability Requirements X Set Maintainability Requirements X Define Functional Failures X Define Environment/Usage X Define Capital Budgets and Make TradeOff Decisions X Set Design Margins Design For Maintainability Make Reliability Predictions Do FMEA & Fault Tree Analysis Do Preliminary Cost Of Unreliability Conduct Design Reviews Make Machinery Parts Selections Do Tolerance/Process Studies Do Critical Parts Stress Analysis Do Reliability Qualification Testing Do Reliability Acceptance Testing Do Reliability/Maintainability Growth Improvement Collect Failure Reports & Analize Barringer & Associates, Inc. 2007 Provide Data Feedback X
X X X X X X X X X X
Tailor the matrix toto avoid too Tailor the matrix avoid too little or too much emphasis on little or too much emphasis on R&M but meet the needs ofof the R&M but meet the needs the business toto make the effort cost business make the effort cost effective effective
X X
X X X X X
X X X
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Infant Wearout
f chance ( t ) 0.001 f wearout ( t ) t
= 1000 <Characteristic life =5 <Shape factor ( has literal interpretations for individual component failures) MTBF or MTTF = (1/ + 1) and when = 1 then =
Wearout
Chance Infant
63.2%
F chance( t ) 0.5 F wearout( t ) t
0 0 1000 t
Chance
2000
f( t )
. ( t
1 ).
Values used for plots: = 0.5 for infant mortality, 1.0 for chance failures 5.0 for wear-out failures = 1000 for the characteristic life
0 0 1000 t 2000
F( t )
Wearout Chance
Wearout
Infant
1 0 0 1000 t 2000
<Weibull failure rates can represent: infant failure modes, chance failure modes, or wearout failure modes.
R( t )
36.8%
Infant
h( t )
. t
0 0
1000 t
Chance
2000
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Use Weibull data and equations to find random times to failure using Monte Carlo methods
Age-to-failure = t = *{ln(1/(1-CDF))}^(1/) = *{-ln(1-CDF)}^(1/) Less computer intensive substitute the Excel function RAND() for CDF
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1 16500 6865 1296 69 1351 5185 1815 513 600 364 520 128 $35,205 0.00 0.47 2.11 60.5% 62.2% 99.95%
2 16500 10488 1678 296 1983 7577 2287 557 600 364 520 128 $42,977 0.00 0.72 1.39 48.7% 99.93%
3 16500 11925 1892 747 2431 8390 2712 606 600 364 520 128 $46,815 0.00 0.86 1.17 42.5% 99.92%
4 16500 12282 2260 1087 2812 8732 2556 633 600 364 520 128 $48,473 0.00 0.91 1.09 40.1% 99.91%
5 16500 12433 2028 1661 2560 8821 2755 663 600 364 520 128 $49,034 0.00 0.95 1.05 38.5% 99.91%
6 16500 12537 2190 2076 2837 8596 2897 680 600 364 520 128 $49,922 0.00 0.98 1.02 37.4% 99.91%
7 16500 12310 2273 2527 2978 9057 2879 692 600 364 520 128 $50,827 0.00 1.02 0.98 36.2% 99.90%
8 16500 12595 2225 2816 3242 8994 2868 702 600 364 520 128 $51,553 0.00 1.04 0.96 35.4% 99.90%
9 16500 12509 2356 3217 3334 8917 2937 703 600 364 520 128 $52,084 0.00 1.05 0.95 34.9% 99.90%
10 16500 12499 2532 3592 3144 8868 2871 707 600 364 520 128 $52,324 0.00 1.06 0.94 34.5% 99.90%
Costs Of Failures--->
Electricity --Seal 3 1.4 Shaft 18 1.2 Impeller 12 2.5 Housing 18 1.3 Pump Bearings 4 1.3 Motors 12 1.2 Coupling 8 2.0 Maintenance PM visits Operations PM visits Vibration Dept Training costs Total Approximate suspensions per failure= Approximate system failure rate (failures/yr)= Approximate system MTBF(years/failure) = Theoretical 1 yr Reliability = 1 yr reliability, R= # of iterations-> 10000 1 yr Availability, A= Fix When Broken Strategy
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
Metrics
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NPV
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#1: Weibull: = 0.8, = 10, replacement expense costs = $10,000, Discount rate = 12%, tax rate = 38%, project = 10 years, NPV = -$4,050 where simulated expense cost each year is: $1624, $1216, $1146, $1088, $1039, $1011, $986, $989, $968, and $957
Annual Costs For Use In LCC Spreadsheet
$2,000.00 Cost Each Year ($)
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#2: Weibull: = 1.0, = 10, replacement expense costs = $10,000, Discount rate = 12%, tax rate = 38%, project = 10 years, NPV = -$3,513 where simulated expense cost each year is: $1003, $1009, $999, $994, $996, $1012, $997, $1012, $1001, and $1011
Annual Costs For Use In LCC Spreadsheet
$2,000.00 Cost Each Year ($)
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#3: Weibull: = 3.5, = 10, replacement expense costs = $10,000, Discount rate = 12%, tax rate = 38%, project = 10 years, NPV = -$1,714 where the simulated expense cost each year is: $3, $32, $110, $251, $450, $700, $967, $1211, $1379, and $1441
Annual Costs For Use In LCC Spreadsheet
Cost Each Year ($) $2,000.00
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LCC Summary
Life cycle costs include cradle to grave costs Including Weibull failures into LCC decisions permits engineering quantities of resources LCC provides a visualization technique for tradeoff studies and uses NPV for sound decisions Monte Carlo models add realism to numbers Good engineering produces LCC alternatives to search for the lowest long term cost of ownership In the end, the effort is all about the money and Weibull analysis is a key tool to get to the money! Weibull distributions and LCC go together like peanut and jelly sandwiches for great results!
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