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| What is TCO Analysis? |
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The Total Cost of Ownership (TCO) model and analysis is commonly used to make decisions when purchasing new equipment. Part of this evaluation process should include an audit: an evaluation of current equipment and manufacturing operations to determine the capacity or capability for meeting present and future operational requirements. Figure 1 illustrates the events taken place during a TCO audit. An audit is used to do the following: The main cost elements are purchase, energy, maintenance and repair. Secondary costs that have a bearing on the overall value are productivity, risk and disposal. A value assessment reflects all costs associated with a capital purchase, including owning and operating, over a given period of time. This information is a useful tool in optimizing asset ownership and determining the best value between several alternatives. A good TCO analysis should fit the business plan and identify the best solution to match the business goals. For example, adding capabilities in order to service new customers or expand into different markets. Using new technology can often eliminate some of the process and take a fresh approach to jobs. Additional capacity and improved machine performance are often the drivers in the decision to look at equipment changes.
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