Title: Towards a standardised approach to life cycle cost analysis

Authors: Klaus Geissdoerfer; Ronald Gleich; Andreas Wald; Jaideep Motwani

Addresses: Schaeffler KG, Industriestrasse 1-3, D-91074 Herzogenaurach, Germany. ' EBS Business School, Rheingaustrasse 1, D-65375 Oestrich-Winkel, Germany. ' European Business School Paris, 37/39 Boulevard Murat, F-75016 Paris, France. ' Department of Management, Seidman College of Business, Grand Valley State University, Grand Rapids, MI 49504, USA.

Abstract: The rising significance of indirect costs attracts a greater prominence to total cost considerations in purchasing decisions for capital goods. Purchasing decisions made on the basis of a life cycle cost analysis include both, direct costs and indirect costs accruing over the entire lifespan. Existing models for life cycle cost analysis differ significantly from each other as they have been developed mainly for specific applications. A wider use of these techniques depends on the availability of standardised models which can easily be adapted to specific industries. We derive the requirements for the standardisation of life cycle cost analysis models from the existing literature. On this basis, we develop a standardised model with a modular structure. Due to its flexible structure, the model can be adopted to the needs of different industries.

Keywords: strategic purchasing; strategic cost management; total costs; ownership; life cycle costing; cost analysis; indirect costs; purchasing decisions; capital goods; direct costs; accrued costs; standardised models; standardisation; modular structures; flexible structures; industry needs; procurement management.

DOI: 10.1504/IJPM.2012.047167

International Journal of Procurement Management, 2012 Vol.5 No.3, pp.253 - 272

Published online: 16 Aug 2014 *

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