Thesis on Dynamic Life-Cycle Costing in Asset Management

Description
Life cycle assessment, the investigation and valuation of the environmental impacts of a given product or service caused or necessitated by its existence. Life-cycle cost include 15% construction costs, operational and maintenance costs, taxes, financing, replacement and renovation.

Kungliga Tekniska Högskolan – Department of Industrial Production

Dynamic Life-Cycle Costing in Asset Management of Production Equipments With Emphasis on Maintenance
Master Thesis Work in Production Engineering and Management

Erdem YÜKSEK, Osman CHAUDHARY June, 2011

Acknowledgements
We owe our deepest gratitude to the people who made it possible to accomplish this thesis study. First of all; we are heartily thankful to our supervisor, Jerzy Mikler, who helped us improve our engineering skills in a variety of fields throughout our master study and guided us in every step of our thesis project. We would like to thank Magnus Rylander from DynaMate AB, for his kind support to us. He gave us the opportunity of applying our theories in real industrial environment and provided real time maintenance history data which was a crucial element in this project. We would like to thank Jörgen Andreasson from DynaMate AB, who organized the data transfer from the company and assisted us in various stages of this project whenever we needed help. We also would like to thank Josef Axelsson from Scania AB for his help in clarification of the production environment used as a case study in this project. Finally, we would like to thank our families who have always supported us in every field of our lives.

Contents
1. Abstract ..................................................................................................................................................... 1 2. Introduction............................................................................................................................................... 3 2.1 Current Efforts ..................................................................................................................................... 3 2.2 Approach Scheme................................................................................................................................ 3 2.3 The Case Study with SCANIA ............................................................................................................... 5 2.4 Foreword ............................................................................................................................................. 5 3. Life-Cycle Costing ...................................................................................................................................... 6 3.1 Definition of Life-Cycle and Life-Cycle Cost ......................................................................................... 6 3.2 Life-Cycle Costing in Asset Management ............................................................................................ 7 3.3 Implementation of Life-Cycle Costing ................................................................................................. 8 3.4 Methodology of Life-Cycle Costing.................................................................................................... 10 4. Reliability Centered Maintenance ........................................................................................................... 13 4.1 Brief History ....................................................................................................................................... 13 4.2 Failure Modes .................................................................................................................................... 13 4.3 RCM and LCC ..................................................................................................................................... 15 5. Failure Modes and Effects Analysis ......................................................................................................... 16 6. Condition Based Monitoring Technology ................................................................................................ 18 7. Defect and Failure True Cost ................................................................................................................... 20 8. Statement of the Problem ....................................................................................................................... 23 8.1 General Information .......................................................................................................................... 23 8.2 Success Criteria.................................................................................................................................. 25 8.3 Alternatives ....................................................................................................................................... 25 8.3.1 Alternative-1 ............................................................................................................................... 25 8.3.2 Alternative 2 ............................................................................................................................... 28 9. Dynamic LCC Model................................................................................................................................. 30 9.1 General Information .......................................................................................................................... 30 9.2 Cost Drivers in the Model .................................................................................................................. 37 9.3 Generic Structure of the Dynamic Life-Cycle Costing Model ............................................................ 43 9.4 Results of the LCC Analysis: ............................................................................................................... 43

10. Monte Carlo Simulation ........................................................................................................................ 45 10.1 Introduction to Monte Carlo Method ............................................................................................. 45 10.2 Simulation Results ........................................................................................................................... 46 11. Conclusion & Recommendations .......................................................................................................... 48 Bibliography................................................................................................................................................. 50 Appendix...................................................................................................................................................... 52

1. Abstract
In the contemporary industry, companies need to make investments to grow their business volume. However each investment comes with its own risk. Cost of an equipment does not only consist of the initial payment but also covers the future costs related to the operations, maintenance, quality of production and many other associated issues. Therefore, economical analysis of an asset should be done by considering the whole life cycle. Life-Cycle Costing (LCC) can be used as an engineering tool in order to assess the future business risks and prevent the unexpected costs and losses due to failures and downtime before they occur. When first proposed as a proactive effort, LCC came into the industry with several advantages to be provided. However it could not keep pace with the modern industrial IT development. Automated machine tools constitute a crucial part of modern manufacturing activities. As an asset within the production layout, life-cycle of machine tools consists of several periods which are basically early design, purchase, installation, operation and disposal stages. Unfortunately, lack of a detailed cost analysis method drives most of the manufacturers to follow minimum adequate design (MAD) principle. As described above, decision process of investing in new equipments brings along the old famous debate: “Short -term spending or long-term benefits?” Recent studies have proven the fact that interruptions in production due to failures and maintenance account for a considerable part of not only production profit losses but also overhead costs. Regarding this problem, several new concepts in maintenance such as Reliability Centered Maintenance (RCM) and Condition Based Monitoring (CBM) have been developed. Main goal of these methods is to anticipate the failures which are likely to occur and keep the continuity of production. However, usage of these methods is still at very limited level since industry lacks a dynamic costing method that can justify the initial investment in production equipment assisted by such maintenance techniques. Although they are effective to some extent in calculating direct costs, traditional cost analysis methods usually fail in providing an accurate view on the indirect, consequential and overhead costs. On the other hand, by its

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different point of view in handling indirect costs and their future impacts, LCC method can be a possible solution for this investment analysis problem. The objective of this study is to develop an LCC model that can assist the decision making process during the early stages of an investment. A dynamic LCC model which considers the maintenance aspect will be proposed and, as a specific case, this model will be used for estimating and optimizing the life-cycle costs of a CNC machining center based on its real-time technical data history.

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2. Introduction
The goal of life-cycle costing is to help an investor to make the right decision in the planning stages of any venture. Maintenance costs are a major part of the total costs incurred. The motivation of this thesis is to develop a data collection and evaluation model in cooperation with an organization which is currently engaged in the life-cycle costing, which can be used, with slight modifications for other similar endeavors, to analyze if better maintenance practices can reduce the total operational costs.

2.1 Current Efforts
Many organizations today are striving towards minimizing costs related to redundancy. Any negative economic and environmental impact can be traced back to inefficiency in resource consumption. In this case, Scania has been engaged in life-cycle costing method for some time with their currently running machinery (at the location where the case study was conducted) and plans to introduce the lessons learned in the planning stages of their new projects. It is sensible to preserve the existing technology and introduce newer ways of optimization and lifecycle costing is a trend towards this new way of thinking [1].

2.2 Approach Scheme
Data collection and tracing a hierarchical link between the components of this data is the most important step before doing the life-cycle costing study of an organization, service or an individual asset. A statistical trend in this data from historical data records from similar assets is also necessary to make any predictions or perform probability studies. There are some traditional approaches to collecting and representing data, traditional in the sense that data collection for these is almost a standard measure in organizations, for example, maintenance records and scheduling, job and responsibility descriptions of people associated with the machinery or service with their performance evaluations etc, production reports, sales reports, quality reports, accounts reports, legal reports and any data that is gathered as soon as a venture begins operation (or even before, data associated with the planning stage such as pre investment forecast).

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Then there are other or sometimes custom made data representation methods for individual companies. Some of these have proven very helpful in organizing the data for the case study. So it can safely be suggested that data is almost always present, but for different purposes. The goal would then be to either centralize the data collection so that it is shared by all concerned and the data can be viewed by everyone involved according to their perspective. For example, the production staff might be more concerned with the time delays due to break downs and the accounts staff might ponder over the economic impact of the breakdowns [2, 3, 4]. Here it has to be mentioned that life-cycle costing is associated with more of a planning strategy before any venture to get maximum profits and minimal wastage, but in its infant stage researchers and people interested to introduce it to their businesses are relying on historical data from older machines to predict the life-cycle costing of the new ones. There could still be a chance to introduce the life-cycle cost as a standard process in asset management. There is no standard model for life-cycle costing for the planning stages. Hence within the scope of this thesis and the case study, effort has been made to perform life-cycle costing for an asset from the data already available in the organizations records. Different available analysis methods have been used to represent it, leading to a proposed life-cycle costing model for that asset. It has been noted that a standardized model may work for similar organizations involved in similar work that are using the same machines, later in the final evaluation and conclusions. After performing an initial research in this regard, also keeping an eye out for any new ways of applying the life-cycle costing method in research papers, it was decided to approach the problem beginning with a literature study (Text books and a new research from articles), then developing a conceptual idea for a life-cycle costing model, data collection for the real time case study from the company, interpretation of the maintenance historical records, applying the data in the common analysis methods, construction and analysis of the model and finally reaching a conclusion and mentioning some suggestions.

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2.3 The Case Study with SCANIA
To apply the Life-Cycle Costing techniques to a real time scenario, the main maintenance subcontractor called Dynamate AB for the Nordic truck manufacturing giant Scania was approached. The company was already engaged in a life-cycle costing study and data for one of their CNC machines was focused on to develop a life-cycle costing model for that particular asset and in doing so the feasibility of a probable standard model for similar operations was researched. The case study is discussed in detail in the “statement of the problem” section.

2.4 Foreword
Life-cycle costing is still considered an extra investment because the positives impacts would be visible during the whole life or even in the end evaluation of an asset. There is need to introduce it to the industry as a positive investment with long term benefits. “Choose always the way that seems the best, however rough it may be; custom will soon render it easy and agreeable” (As quoted in A Dictionary of Thoughts: Being a Cyclopedia of Laconic Quotations from the Best Authors of the World, both Ancient and Modern [1908] by Tyron Edwards, p. 101).

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3. Life-Cycle Costing
This chapter involves a brief introduction to the principles of life-cycle costing (LCC) and other related issues regarding the use of LCC in asset management.

3.1 Definition of Life-Cycle and Life-Cycle Cost
Establishing a comprehensive understanding about life-cycle costing, the concepts which together comprise LCC should be examined at first. LCC analysis starts with clarification of the term “life-cycle”. Although there are numerous definitions which are used to identify the term “life -cycle”, this study is going focus on the concept from asset management point of view. The life-cycle of an asset consists of several phases that can be listed as design, development, manufacturing, operation and disposal. Therefore, life-cycle of an asset simply covers of the entire period from the early conceptual design to the disposal of the system [5]. According to the International Electro technical Commission (IEC) standards, life-cycle stages of an asset are as shown below [5]:

Figure 1. Stages of a product life-cycle

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Life-cycle constitutes the basis of LCC. Life-cycle cost of an asset is the total direct and indirect costs and consequences incurred in any of the all life-cycle phases [6]. Hence, LCC of an asset considers future costs (operation, maintenance, disposal, recycling) and risks associated with a system in addition to the initial investments such as design, development and purchase costs [7, 8]. As a result, the method comes out as a useful engineering tool for cost management in foundation of sustainable asset strategies.

3.2 Life-Cycle Costing in Asset Management
The main advantage of LCC in asset management is the potential of applicability throughout the entire life time of the asset. However, success of the method is strongly dependent on the specific timeline where it is applied in the life of the asset [8].

Figure 2. Applicability chart of life-cycle costing methods

It is a well known fact that, the later the method is applied the less effective the results become [8]. Research studies in this field have revealed that 80% of the committed costs are based in the early life-cycle stages such as conceptual design, research-development, initial testing and process planning [9]. From this point of view; life-cycle costing should be used as a major element in the decision making stage of investments.

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As seen in the figure 2, life-cycle cost management in early design stages can make an impact up to 80% on the future costs. Nevertheless, generally-accepted approach in industry is taking the situation with a focus on operational costs [9].

Figure 3. Committed and incurred cost proportions in a life-cycle

This conventional mindset drives the business towards the concept called “Minimum Adequate Design (MAD)”. According to this approach, costs in the initial stages such as acquisition or design are kept to a minimum, anticipating a bigger budget for the later operation and maintenance stages for the asset. But then in later stages of life, the asset suffers from poor initial decisions which affect its overall life cycle cost.

3.3 Implementation of Life-Cycle Costing
The approach of LCC is implementation varies considerably according to when or in which stage of the lifecycle it is applied. For instance, in conceptual stage, main objective is to build an interrelationship between technical factors and life-cycle elements. Technical factors in this level are “delivery-availability (business interruption cost)”, “engineering-reliability (capital expenditures)” and “operations-maintenance (operating expenditures)”. These factors are intended to be controlled in a way to achieve the lowest life-cycle cost [8]. These elements together constitute the total reliability of the asset. Although increased reliability is a desired feature for production equipments, redundant level of reliability may cause the life-cycle costs
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to increase dramatically. The chart below displays the effect of reliability level on the total lifecycle costs. Effect of Reliability on LCC Cost
200 180 160 140 120 100 80 60 40 20 0

Life-Cycle Costs

Acquisition Cost Interruption Cost Operation Cost Total Life-Cycle Cost 1 2 3 4 5 6 7 8 9 10

Level of Reliability
Figure 4. Relationship between reliability and life-cycle costs

As seen on the figure 4, reliability improves the availability and reduces the life-cycle costs to some extent. However, profitability acquired by reliability starts to decrease from a certain point. This fact is a crucial point for decision makers of the design stage, as unnecessary level of reliability can incur excessive initial and prospective costs [8]. As mentioned above, LCC improvements can be also performed in the operation stage with some differences in the focus points and content. Hence, the major factors of the approach change. In the operational stage; LCC method aims at controlling “utilization -availability (business interruption and operating expenditures)”, “asset condition (residual monetary value)” and “intervention strategy (intervention expenditures)”. The goal of the approach is eventually achieving the least possible life-cycle cost onwards from the point of implementation [8].

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3.4 Methodology of Life-Cycle Costing
It is possible to implement life-cycle costing by following varying methodologies depending on the point of interest in the analysis. One of the widely preferred methods is called “Overarching Methodology” where the focus point is covering the interrelations and dependencies among different cost elements [8]. Since this study will focus on the life-cycle cost of a production equipment, a machining center, with respect to RAMS (reliability, availability, maintainability, safety) requirements [10]; it is inevitable that there will be many interdependencies between cost elements. Another important fact in life-cycle costing is the iterative structure of the method. Life-cycle costing is a continuous process that might need to be repeated until the optimum result is achieved. Step 1: In order to commence a study in LCC analysis, main problem of the case should be defined in detail at first. Definition of the problem can also be assisted by a brief SWOT (strengths, weaknesses, opportunities and threats) analysis when it is necessary [9]. Proper definition of a problem should express the nature of the system clearly, i.e. all of the useful information about the asset, which can be used in interpreting the cost drivers [8]. Step 2: In the second stage, success criteria for the desired solution are listed. Success criteria in different analyses alter considerably due to varying objectives [8, 9]. For instance; a life-cycle cost analysis can be made to find out the alternative which provides the least total ownership cost, which does the least harm on environment, etc. [9]. Step 3: In the third stage, all the alternatives that are going to be comparatively evaluated should be proposed. LCC usually involves at least two alternatives to be compared with each other. Besides, the differences between these alternatives should be stated [9].

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Step 4: In the fourth step, all the cost drivers and savings for each alternative are identified [9]. Since there can be a vast variety of different cost drivers, the examples should be given from the case study of this project to keep the content simple to understand. In this study, the following cost drivers will be used: 1. Purchase cost 2. Installation cost 3. Corrective maintenance cost 4. Scheduled preventive maintenance cost 5. Proactive maintenance cost 6. Consequential cost 7. Disposal cost The range of the cost drivers can be expanded depending on the complexity of the problem. Since LCC is usually applied for a period of time, which can be several years in some cases, some of the cost drivers may occur several times. This kind of cost drivers is called “recurring costs”. The costs which occur only once in a lifetime, such as purchase cost, are called “non-recurring costs” *11]. Step 5: In the fifth step, comparative analysis between existing alternatives is done with assistance of accessible data regarding cost drivers. Alternative options are evaluated with respect to how much they fulfill the success criteria [8]. All cost elements are gathered on a table which constitutes the baseline evaluation of the alternatives on focus [11]. If there are missing cost drivers in the evaluation table, extrapolation and assumptions can be done based on existing database and sources in order to derive missing data [11]. Step 6: Final step in LCC is the application of sensitivity and risk analyses on the baseline life-cycle cost evaluation. Sensitivity analysis is performed in order to find out the relative impact of each cost
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driver on the total life cycle cost. This is basically performed via changing a single cost driver each time and observing the impact on the total cost [11]. On the other hand, risk analysis is conducted in order to evaluate the uncertainty related to each cost driver in the baseline life-cycle cost estimation. Both sensitivity and risk analyses are executed based on probability distributions [11].

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4. Reliability Centered Maintenance
If maintenance is the ensuring of the continued performance of an asset within its capabilities and the users desires, then reliability centered maintenance (RCM) would be to ensure a continuous adoption to the maintenance trend that an asset follows in terms of its physical operation. The trend here would be the decreased capability of the asset during its life. A simple context would be to avoid putting the same load on the asset that it was capable of during the first few years of its life, but rather observe the decreasing capability and modify the work load accordingly [12].

4.1 Brief History
The maintenance practices can be observed evolving towards more efficient methods and new techniques. With the simple practice of operate to failure in the 1940s up to the second world war, where the asset was pushed to its maximum capability to get maximum output till failure. Here the cause would be the availability of assets during downtime to take over, although this applies more to the pre and post war industry involved in war time efforts. John Moubray has termed this era as the First Generation Maintenance culture. During the sixties to the present, indicated as the second and the third generation maintenance approaches by the author, more attention was given to cost effectiveness of the whole process. The customers demand cheaper products and the manufacturers strive to increase the efficiency of their operations and longevity of the assets [12].

4.2 Failure Modes
The latest maintenance techniques and research has classified the failure modes (the condition of the asset during or at the failure) in to six distinct patterns. They are briefly discussed below, the relationship between the probability of failure and the life of an asset. Please note that these distributions are theoretical models which are built by using the elements of probability and statistics [12]:

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Figure 5. Failure modes, probability of failure with respect to life span of an asset

A. The failure mode A categorizes asset behavior in which there is a high probability of failure in the beginning (initial operation where the asset behavior and maintenance is still being understood and the strategies are being developed and evolving, also known as infant mortality), an almost constant intermediate operation and ending with more failures as the asset reaches the end of its life. Assets usually follow this more common trend. B. This failure pattern shows a constant conditional failure probability leading to an increased probability of failure at the end of the asset ’s life cycle. Notice the absence of “infant mortality”, here the asset is run efficiently and with a tested pre-determined maintenance strategy in the beginning. C. This pattern shows a gradual increase in the failure probability throughout the life time. D. This pattern shows the behavior of a rapid increase in the very beginning of the asset ’s operation leading to a more constant pattern during most of the life. E. This pattern shows the behavior of constant probability of failure throughout an asset ’s life, more characteristics of a random failure anytime during its operation. F. This pattern shows the higher failure probability in the beginning of the life of an asset then decreasing to a constant, throughout its life.
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4.3 RCM and LCC
When conducting life-cycle costing of assets, the consequences of failures must be taken into account. The statement is “pointing out the obvious” but the researcher would be concerned with the hidden costs in the failures that the organization fails to account for. These consequences could be hidden, related to safety and environment, operational and nonoperational. All these consequences lead to hidden and pronounced costs that the researcher has to take into account. Also certain standard maintenance techniques could be redundant and costing the organization more in the maintenance process such as too early tool changes or too early lubricant changes. RCM falls into the category of techniques that the organization can use to decrease the total LCC of an asset, because in RCM the maintenance tasks and schedules are customized and over laid onto the failure trend that is seen and predicted for the asset. This approach can be further explained in context of proactive and default maintenance actions. Proactive tasks can be listed as “scheduled restoration tasks”, “scheduled discard tasks” and “scheduled on demand tasks”. The scheduled restoration and discard are collectively known as preventive maintenance involving scheduled maintenance or replacing of assets or asset components, but in terms of LCC there is a chance of over expenditure due to redundant maintenance efforts and spare part changes. Default maintenance tasks can be listed as failure finding, redesign, run to failure, etc. But in the context of LCC, the maintenance has to be more customized to the on condition based tasks. RCM focuses on the maintenance techniques and tasks that directly affect the efficient running of the asset thus saving unnecessary costs in maintenance resources [12].

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5. Failure Modes and Effects Analysis
The failure modes and effects analysis (FMEA) helps to develop and categorize a relationship chart between specific failure modes and their effects and consequences on the asset. The failure modes can be categorized into failing capability of the asset, rise in the performance demand and initial incapability. All failure modes correspond to the calibration of an asset ’s ability and functionality demanded by the user. Failure effects are all the related losses in time, money and resources that the failure has caused [12].

Figure 6. Sample FMEA analysis of major components of a truck

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To construct the FMEA of an asset, all aspects of the asset’s operation can be scrutinized and failure of each is associated with a certain loss to interest of the organization. This detailed map can then be used to develop a cost effective and customized maintenance schedule for the asset. The information gathered and researched has to be put into standardized forms that all the related departments can use. There is a limit to how much detail that goes into the analysis. The analysis should be done as comprehensive as feasible thus avoiding redundancy. In the example in figure 6, taken from [12], the function and failure relationships of a truck are studied. The hierarchy of the asset’s resolution can be seen starting from the whole truck leading to the fuel lines and their respective functions and their effects on the function on a certain level. The analysis could be made up to the molecular composition of the fuel but that would be too detailed. The FMEA of the asset components under the case study is provided in detail, within appendix 1 data set 2. Having such an analysis will help the maintenance staff to complete their tasks efficiently (and have necessary documentation for trainees), thus reducing costs.

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6. Condition Based Monitoring Technology
Condition based maintenance (CBM) consists of a set of techniques those intend to accomplish maintenance tasks through continuously monitoring the condition indicators of an equipment [13]. Several CBM methods and condition monitoring technologies have been invented with respect to the different groups of equipments and condition indicators. Condition based maintenance provides numerous benefits for establishing a cost effective strategy compared to maintenance on failure or planned preventive maintenance. Besides its many other advantages, condition based maintenance [13]: 1. is applicable during routine manufacturing without causing any interruptions and downtime 2. reduces the number of maintenance activities needed since it is focused on the onset of failures and detects failures before they occur 3. cuts down the usage of spare parts associated to maintenance There is no unique way that exists for classifying condition monitoring techniques. Classification can be done with respect to the content of monitoring resulting in 3 main classes which are; “inspection” where mostly human senses are used for qualitative checks, “condition checks” where quantitative analysis of indicators are done and “trend monitoring” where condition of the equipment is analyzed with respect to a trend that represents the normal state. Besides, condition monitoring can be performed off-load where the equipment has to be stopped in order to make measurements or on-load where there is no interruption in the production activities. Furthermore, condition monitoring can be done via direct or indirect measurements of condition indicators [13]. Despite the many advantages furnished by CBM, there is also a limit on its reliability. Considering the relatively high cost of implementing the technology, it is essential to choose the appropriate method and justify its costs.

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In the following chapters, condition based monitoring will be mentioned continuously, especially in terms of the technologies to be used. This study is considering the types of condition based technologies in 8 different classes, which are [13]: 1. Human senses 2. Optical methods 3. Thermal methods 4. Vibration methods 5. Lubricant analysis 6. Corrosion monitoring 7. Performance monitoring 8. Motor current techniques Appropriate techniques for a specific system among the methods listed above should be chosen by analyzing the FMEA of that system. Failure modes and effects analysis is a major element in identifying most critical failure types and components of a system. A precise analysis provides high efficiency in condition monitoring and prevents unnecessary costs spent on redundant monitoring equipments. In the dynamic LCC model section; failure history records of the machining center will be reviewed, most frequent and critical failures will be discovered and appropriate technologies will be proposed with respect to the analysis.

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7. Defect and Failure True Cost
Failure is defined as the inability of an asset to deliver what is required from it. The initial capability of an asset thus should be assessed so that it performs within a maintainable envelop [12]. Defect and failure true cost or DAFT cost is a method of identifying and associating failure costs to an activity breakdown of a bigger process and indentifying miscellaneous costs associated with the repair of a failure which are otherwise not taken into account in a traditional sense. This is a method (a way of thinking per say) to take into account not only the costs incurred from spare parts and maintenance services but also the production losses, idle costs of assets left redundant during the repair of the broken down equipment, cost of utilities and the lost opportunities during downtime [14, 15]. It is important to evaluate true costs incurred from defects and failure for a more detailed assessment of problem areas and redundant assets. This helps to save resources and increases efficiency. To put it simply, it is the evaluation of where the money is going [14]. As any organization moves towards reducing waste of profits and resources and strives towards running the operations more efficiently, it becomes very important to identify and if possible even predict current and potential inefficient assets or activities and to assign a cost to the losses incurred by each. It is sometimes difficult to identify such activities and assets. The costs incurred from such inefficiencies are evident only at the end, when the traditional profit loss finances are tallied. While evaluating and researching the root causes, it becomes difficult to assign costs to certain routine and hidden failures. As the researchers go deep into isolating activities for a more activity based costing analysis, the various activities are seen to be overlapping in their interdependency hierarchies [14]. When evaluating a failure; the costs incurred will be manpower, scrapped products, maintenance service costs, spare parts etc. The DAFT cost analysis also takes into account costs such as failure review by management and the respective cost in terms of lost time, data process by the documentation personnel, costs incurred by any departments of the organization involved or effected in any way including any utilities used during the breakdown and even the
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lost opportunities for profiting (a probabilistic cost but still important). Consequential costs such as recalls, legal costs and penalties, environmental effects, medical costs of the effected etc. are also considered [14] In order to calculate DAFT costs, it is advisable to create a relationship tree between identifiable activities and to observe the cost relationships. It might take some time to isolate the various activities but it is an evolving process. It depends on how efficiently the data is managed and updated at a day to day basis so that various departments and responsibles can view the relationships and cost charts in different perspectives [14]. A simple model would be, in order [14]: 1. to identify and isolate the activities (processes performed by the assets, capability of assets, their interrelationships, mechanical competencies, times, maintenance costs and spares required, resources required to run the assets, the manpower associated with its operation etc). 2. to calculate the cost incurred from each activity and if possible to break down the cost to all associated responsibles but that depends on how much of a detailed DAFT cost analysis is to be performed. 3. to trace relationships between activities and costs and document them accordingly using standardized forms so that it is easier to perform the DAFT cost review and analyze from various perspectives the effects of breakdowns on activities, departments and responsible personnel. DAFT cost tables for manpower resources, spares and maintenance services, wasted resources and products, missed out opportunities and the final report can be standardized as well as a system to gather daily reports and data for these forms. A standard procedure when a failure or defect has been detected would be to do an activity and cost analysis from the main activity and then break down and assign the breakdown cost to more sub-activities and responsible personnel as thoroughly as possible. The relationships and hierarchy will of course come from the steps discussed above. Starting from Identifying the main effected department, effected
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sub-category (a certain machine or a manufacturing cell), responsible personnel, the exact work done to rectify the problem, exact spare parts and resources allocated, exact (or as close to the exact possible) times spent, breakdown of the cost for the times spent, production loss or products lost, lost opportunity form the sales department etc. are evaluated [14, 15]. DAFT cost analysis can help to develop a rating for each asset. This rating can be used to help the maintenance teams to develop maintenance priority schedules for the assets. The analysis can also help to predict future breakdowns in terms of times associated with repairs and stocking up on spare parts or the delivery times of maintenance services etc while giving a cost overview of each satiation [14]. DAFT cost analysis is useful for Product or asset life cycle costing and predictions (in terms of maintenance costs of machinery etc). The inherent activity based analysis incorporated in the DAFT process helps in the evaluation of decisions and their consequences on the whole project. The predictions thus concluded can help to assign costs that might be incurred throughout the whole life-cycle of different assets and thus the whole project. This will help to identify high cost operations or machinery and help to make feasibility decisions [14].

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8. Statement of the Problem
8.1 General Information
The problem which is going to be examined in this study is the feasibility of condition based monitoring applications on a machine tool with respect to life-cycle costing issues. Life-cycle costing analysis of two alternatives will be evaluated. The selected machine tool for the analysis is a horizontal machining center, the model of which is SW EMAG B600-2 displayed in figure 7.

Figure 7. SW EMAG B600-2 CNC machining center

This machining center is solely used for the internal milling of the bearing sections of connecting rods. Machining process is carried out by two identical spindles located in a distance of 600 mm from each other. Travel distance in X, Y and Z axes are 600,600 and 500 millimeters respectively. Machining center is operated on a 3-shift basis. Therefore daily operation time will be considered as 24 hours in the cost analysis calculations.

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Figure 8. Connecting rod

Connecting rods are placed in the machining center by an industrial robot arm. Therefore, the process is fully automated. Model of the robot is “ABB IRB 6660” as shown in figure 9.

Figure 9. ABB IRB 6600 robot arm

However, there also exists an operator who is measuring the sample connecting rods once in every two minutes. One operator is doing the same job for two machining centers. Therefore, the operator spends half of the daily shift in measurement activities at this machining center. Measurements are being done in order to track any deviation from the standard tolerances. Under normal conditions, 4 pieces are processed in 8 minutes.

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The main problem about the system is the relatively high number of unexpected interruptions in the production process. These unexpected incidents cause an impact on the operating costs and total-life cycle costs considerably. Therefore, this study will focus on the question whether it is possible do decrease life-cycle costs by altering the maintenance policy that is actually being applied. Two systems will be compared to each other in terms of LCC performance: 1. Actual system without condition based monitoring technology 2. A new system assisted by proposed condition based monitoring techniques

8.2 Success Criteria
Main and the most crucial success criterion in the comparative analysis being performed here is to find out the alternative that assures less whole life-cycle cost. Life-cycle cost structure used here is based on the fact that this study is mainly about proactive failure prevention and reliability centered maintenance techniques. Selected main cost drivers are purchase, installation, operation, maintenance (corrective, preventive, proactive), consequential and disposal costs. These cost drivers are further divided into sub-categories where necessary. As a result of the first success criterion, a second criterion is acquired automatically. This second criterion is the level of RAMS. RAMS stands for reliability, availability, maintainability and safety. Although this method has been mainly used in LCC evaluations of railway vehicles, it is efficiently applicable for production equipments as well [9].

8.3 Alternatives
As mentioned above, two different alternatives in terms of maintenance activities will be evaluated. 8.3.1 Alternative-1 In the actual scenario, maintenance of the machining center is based mostly on reactive and partly on planned preventive maintenance. Reactive maintenance efforts cover the entire set of actions done under failure state. Below in figure 10, an example of a failure state is given:

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Sudden fluctuations which are seen on the figure, account for the failure states. First step in failure correction is reactive maintenance activities; such as fixing/replacing the defective component, making visual checks, calibration of the components etc. When conventional inspection methods are remained insufficient to discover the main reason behind persistent failures, a special process called “Quick Test” is applied.

Figure 10. Condition chart of the machining center

8.3.1.1 Quick Test Quick Test is a maintenance activity that is scheduled due to customer demand in order to provide information regarding the actual condition of a machine tool. This test represents the properties of a typical condition based monitoring method. The techniques applied in the test can be classified as “trend monitoring method” where several measurements are made in order to establish a trend line and detect the critical deviations from the normal condition. Quick Test is an off-load test which means that production carried out by the machine tool has to be stopped while the test is conducted. An ordinary Quick Test session lasts for 1-2 hours of downtime [16]. There is a group of methods which are applicable for Quick Test measurements. The four main methods are [16]: 1. Ball bar test 2. Vibration analysis 3. Spindle orientation test 4. Thermography

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Among these methods, vibration analysis is a very common technique applied in measurements. Figure 11 shows a portable vibration analyzer that is used in spindle vibration tests of SW EMAG BA600-2 horizontal machining center.

Figure 11. Portable Quick Test device

This machine tool is equipped with two identical spindles as seen in figure 12. Frequency analyzers can detect several unintended situations (mechanical, electrical and dynamical abnormalities) in different machine components such as bearings, rolling elements, holders, surfaces exposed to friction, fittings and also the lubrication problems inside the machining center.

Figure 12. Twin spindles of SW EMAG B600-2 CNC machining center

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Figure 13 below is displaying a sample maintenance screen obtained during a vibration analysis experiment.

Figure 13. Condition monitoring screenshot taken from a Quick Test session

Although it represents the properties of condition based monitoring technology, this application is still being performed randomly when a demand is received from the customer. Quick Test could be modified to be used as a routine monitoring method in order to prevent onset of failures and interruptions related to them. In the following chapters, different alternatives regarding condition monitoring will be discussed in detail. 8.3.2 Alternative 2 The second alternative that will be involved in the comparative LCC evaluation is a machining center that is assisted by condition based monitoring techniques. Decisions on the appropriate maintenance technology require a justification process where [12], 1. Critical components, and failures related to them are identified 2. Each failure mode is associated with a technically and economically feasible proactive task 3. Each selected proactive task is associated with a corresponding monitoring technology A proactive task can be considered as technically feasible only when it totally eliminates, or at least decrease to a very low level, the risk of failure related to that task. Even if the task is

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technically feasible, it should also be justified on economical ground which means the cost of the proactive task should not exceed the total consequential cost of the related failure [12]. There are 3 main sources of information about failure modes, which are [12]: 1. Other users of the same equipment 2. Technical history records 3. The people who operate and maintain the equipment In this study, required monitoring technologies are selected through a failure modes and effects analysis on the maintenance history records of the aforementioned machining center which is given in detail in Appendix 1 – Data Set 1. Maintenance records are obtained from the cooperating company “Dynamate AB”. Detailed information about the failure modes and effects analysis and the selected methods can be found in Appendix 1 – Data Set 2.

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9. Dynamic LCC Model
9.1 General Information
As explained in the previous chapters, main objective of this thesis study is to establish an appropriate model that can be used for making a comparative life-cycle costing analysis between the existing production equipment and the system assisted by condition based monitoring techniques. The activities carried out to build this model will be explained step by step in this chapter. First step in designing the model is analysis of the existing data. Since the focus point of life-cycle costing in this case is maintenance, initial action to be taken is analyzing the failure history records of the machining center of issue (see Appendix 1 – Data Set 1: Maintenance History Records). Maintenance history of the machining center is recorded by a central computer software system. This software records the following data regarding failures: 1. Start date and time of the failure 2. Type of the failure 3. Priority code of the failure 4. Actions taken to fix the problem 5. Completion date and time of the failure Priority code system of the failures is based on 6 different categories by the software. These categories are as given below:

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Code Level 1

Definition Breakdown is causing safety problems, immediate corrective maintenance and protective work required Breakdown is causing production to stop but no safety problems exist. Corrective maintenance required No urgent treatment is required. Problems exist with the run of the machine tool but not causing production to stop Problems which are discovered during preventive maintenance

Level 2

Level 3 Level 4

Level 5 Level 6

Improvement work Scheduled maintenance work
Table 1. Priority codes of failures in maintenance software

Some further information is required to fully clarify this table. First of all, it is only the first two levels which cause an unexpected interruption in manufacturing processes. Since level 3 defects do not require urgent action, machine tool is run to failure and then become level 1 or 2 type failure. Therefore level 3 failures are disregarded in the model. Level 4, 5 and 6 type failures and actions belong to scheduled maintenance work section. The main reason behind distinguishing these three types of failures is the content of the activities carried out. Hence, it is obvious that necessary technologies for condition based monitoring will be identified mainly according to the data about level 1 and 2 failures which together account for all the unexpected interruptions in production. Level 1 and 2 type failures are divided into two categories in terms of the system they affect. These two categories are mechanical and electrical failures. Historical maintenance data is available from the central software system between September-2003 and March-2011. During this 8-year period, 200 individual level 1 and level 2 failures have occurred. Figure 14 shows the distribution of electrical and mechanical failures during this period.

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Figure 14. Frequencies of electrical and mechanical failures

As seen from the figure 14, 116 mechanical and 84 electrical failures happened within the period between 2003 and 2011. Percentage of level 1 and 2 failures among mechanical and electrical failures is also another important criterion in failure mode analysis. Figure 15 and 16 shows the dominance of level 1 and 2 failures in electrical and mechanical breakdowns:

Figure 15. Frequency of level 1 and 2 failures among mechanical breakdowns

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Distribution of Electrical Failures (2003-2011)

Level 1 13%

Level 2 87%

Figure 16. Frequency of level 1 and 2 failures among electrical breakdowns

Failure history records can be used in order to calculate the costs so far. However, this study intends to build a model that is applicable for calculation of both actual costs and the costs that may occur in the future. According to the information meeting with the co-operating companies, expected lifetime of the machining center is considered to be 15 years. In order to build a complete model that covers the entire 15 year period, some further statistical data should be extrapolated by using the data on hand. Figure 17 shows the number of level 1 and level 2 incidents between 2003 and 2011.
Frequency of Level 1 & Level 2 Failures (2003-2011)
30 Occurence 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year
Figure 17. Distribution of level 1 and 2 failures between 2003-2011

Level 1 Level 2

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The number of failures in 2003 and 2011 are relatively low due to fact that statistics of those years do not cover the entire year. Another important parameter about failure history records is the annual amount of downtime in each year. Figure 18 given below shows the annual downtime caused by unexpected failures.

Figure 18. Distribution of downtimes between 2003-2011

In addition to the level 1 and 2 type failures, there are also other times when production is stopped. Planned preventive maintenance is the second division of maintenance activities carried out at the company. However; according to the maintenance history records, it is obvious that there are some problems about the reporting of planned preventive maintenance activities. The most important problem concerning planned preventive maintenance records is the large gap between recorded start/finish dates and the considerable fluctuations in time spent for the maintenance work. In this part of the study, interpolated values will be used as assumptions as a necessity. This kind of assumptions is an important element in life-cycle costing, as the process is basically reaching the most satisfactory decision by using the accessible data on hand [8]. Preventive maintenance activities in 2010 are reported relatively clear, in terms of duration, to be used as the base point for the rest of the maintenance period between 2003 and 2011. According to the planned preventive maintenance history data chart, there are 5 maintenance sessions available for downtime calculation in 2010. The table given below displays the amount of downtime spent in each maintenance session.
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Session No 1 2 3 4 5

Actual Start 2010-10-27 08:00:00 2010-11-14 17:38:16 2010-02-02 00:00:00 2011-02-01 11:00:00 2011-02-18 07:00:00

Actual Completion 2010-10-27 15:00:00 2010-11-14 18:38:16 2011-02-03 00:00:00 2011-02-01 14:10:00 2011-02-18 09:30:00

Downtime (min) 420 60 1440 190 150

Table 2. Planned preventive maintenance time table

Mean downtime spent in planned preventive maintenance, with respect to the given values above:

TD ?

?T
i ?1

5

Di

5

?

420 ? 60 ? 1440 ? 190 ? 150 ? 452 min 5

Average number of preventive maintenance sessions per year is calculated by using the frequencies between 2004 and 2010 since the data given for 2003 and 2011 do not cover the entire year. Thus, average number of planned preventive maintenance activities per year is assumed to be 5. As a result of the two assumptions given; it is considered that each year, 5 days are arranged for planned preventive maintenance each lasting for 452 minutes. Preventive maintenance days are distributed evenly throughout the year, which means that activities are scheduled to be done in March, May, August, October and December. All of the information considered so far in this section is related to failure statistics and their resulting downtimes, because this study is supposed to take the life-cycle costing issue from the maintenance point of view. However, the available information is about the actual state, which means there must be further efforts to develop a scenario for the second case where condition based monitoring is planned to be applied. Failure modes and effects analysis can be chosen as a start point for the development of the second alternative, because this method is crucial to find out both the most critical components in the entire structure and what types of condition monitoring technologies can be applied on
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this machining center. Focus point of this step is preventing as many potential failures as possible by achievable minimum cost spent in the monitoring equipments. It could be also possible to analyze the maintenance history records in a manner that aims to evaluate the entire set of failures and implement every condition monitoring method to cover all the failure types. However, this approach is likely to end up in unacceptable investment costs and a higher life-cycle total cost as a result of the complexity that is created by the excess number of additional systems on the main structure. FMEA on the maintenance history records has proven that the most frequent failures have been observed on the following components (see Appendix 1 – Data Set 2: FMEA Analysis): 1. Turret 2. Spindles 3. Supports Main types of failures discovered in these components are positional misalignment and vibration based problems. FMEA analysis has shown that 64 failures out of total 200 unexpected failures have occurred due to the malfunction of the components above. Since the most frequent failures emerged due to misalignment and vibration abnormalities, human senses and a different approach in Quick Test applications can be utilized as proactive maintenance efforts. Content of the proactive applications are planned to be as below: Human Senses: An operator will be assigned to perform weekly routine visual checks on the machining center. Each routine check will last for 30 minutes and will be carried out in the beginning of the week. Positions and visual conditions of turret, spindles and supports will be monitored and any onset of a possible problem will be reported. Quick Test: Quick Test will be applied as a monthly routine maintenance task in order to track the previously explained condition indicators of the machining center. Each Quick Test session will last for approximately 1.5 hours. The duration of the sessions are determined by taking the average downtime of actual Quick Test applications (1-2 hours). Due to the fact that this
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application also covers the activities done in planned preventive maintenance, there will be no planned preventive maintenance activities in alternative 2. These 2 applications are determined according to the FMEA analysis of most frequent failures. Further technologies can also be applied, as long as they are technically and financially feasible, in order to prevent other types of failures. The CBM techniques that are selected and given above will be applied in off-load mode. Besides, these methods do not require any additional initial investments as they are already accessible in the actual production environment.

9.2 Cost Drivers in the Model
Dynamic life-cycle cost analysis model involves several cost factors which together creates the whole life-cycle cost. Purchase Cost: Purchase cost involves all the costs which are associated with the acquisition of a new system. Purchase cost is a non-recurring cost driver. This cost driver can be calculated by the following formula:

In the comparative analysis of alternative 1 and alternative 2, base cost of the machining center is equal for both alternatives. However, total acquisition cost for alternative 2 can increase due to investments on the selected monitoring technologies to be integrated with the base system. As mentioned above, selected methods in this case study do not require any initial investments. Nevertheless, CBM costs section in the model is kept intact due to future implementations of new technologies which may require additional investment. According to the existing data, approximately 1 million € was spent for the machining center during the acquisition stage. 5% of the total acquisition cost was expended for installation of the system. Numerical cost analysis in this study is performed in SEK currency. Current exchange rate between SEK and EURO is taken into account as “0.11”.
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Installation Cost: Installation costs account for the total cost incurred in the setup of the purchased system. Installation cost is usually classified as a non-recurring cost driver, unless the system is transferred to another location and reinstalled during its lifetime. Installation cost is calculated in a similar way as the purchase cost. Like in the previous stage, base cost of the system installation is equal for both alternatives. Installation cost of alternative 2 may increase due to establishment of additional monitoring technologies. However in this case, there is no additional installation cost for alternative 2; because the 2 methods (visual check by maintenance operators and routine Quick Test) do not require any installation costs. Installation cost is calculated via the formulas given below:

Even though there is no additional installation cost that exists for alternative 2, CBM installation cost section is kept intact in the model in case new condition monitoring equipments are decided to be installed on the machining center in the future. Operation Cost: The costs incurred to establish a sustainable performance of the system, together constitute operation costs [7]. Numerous sub-categories are included in operation costs. Cost drivers created by the operation of a machining center can be classified as below:

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Electricity

Utilities

Lubricant

Coolant Operation Costs

Robot Arm WorkforceLabor Measurement Operator Cutting Tool

Material
Figure 19. Operation costs

The hierarchical distribution provided here is used for calculating the operation costs of alternative 1 and alternative 2. Calculation of the operation cost drivers are based on the duration of activity. Different maintenance strategies in two alternatives result in altering operation times. Therefore, total life-cycle operation costs of the two alternatives differ from each other. Detailed quantitative data is provided for each case in “Appendix 4: Dynamic LCC Model Tables”. Total power of the machining center SW EMAG 600-2 is approximately 50 kW. Cost of electricity consumption is calculated with a unit cost of 1 SEK/kWh. Annual electricity cost of operation is calculated by the following equation:

The lubricant type used in this machining center is hydraulic oil which is consumed at a level of total 394 liters during the last 5 years of operation. Unit cost of hydraulic oil is 11 SEK/l. After dividing the 394 liters of lubricant consumption by the total number of hours in operation

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during the given period, it is found out that hourly lubricant consumption is 0.011 liter. Annual lubricant consumption cost is calculated by the formula given below:

Calculation of coolant consumption is similar to the process performed for hydraulic oil. However, the unit cost of the coolant used in the machining center is 25 SEK/l. According to the records, 330 liters of coolant is consumed within the last 4 months of operation. Hourly consumption of coolant is calculated as 0.139 liter. Following equation shows how the annual cost of coolant consumption is calculated:

Labor costs involve the robot arm’s energy consumption and the payment of the operator who measures the sample connecting rods in every two minutes. IRB 6600 robot arm model has a power of 4 kW. Unit cost of electricity is again considered as 1 SEK/kWh. The operator measuring the sample pieces is working simultaneously at 2 workstations. Therefore, half of the daily working time of an operator is spent at the machining center that is evaluated in this case. Based on the information gathered from the company, it is known that an operator used to cost 250 SEK/h to the company in 2003. Current payment to an operator is 400 SEK/h. According to the given parameters, annual increase rate can be calculated as 6%. These amounts are equal for both measurement operators and maintenance personnel. Due to the fact that employees are paid independent from failures, costs of the operator and robot arm are calculated on a fulltime basis. Cost of the robot arm in operation:

Cost of the operator performing the measurement of samples:

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Material cost of operation is associated with cutting tool consumption. However, there is no sufficient historical data concerning the annual consumption of cutting tools. On the other hand, unit cost of a complete cutting tool (both cutting part and the body) is obtained as 15000 SEK through the information exchange with the co-operating companies. In order to use as many numerical parameters as possible in the cost analysis, cutting tool costs are calculated and added to the operation costs although there is not sufficient data regarding the number of tools used yearly. Therefore it is assumed that, 4 cutting tools are changed a year due to loss of function. Since the situation is the same for both alternatives, accuracy of the results is not influenced by the assumptions made for this part. Annual cost of cutting tool consumption can be calculated through the following equation:

Maintenance Cost (Reactive and Planned Preventive Maintenance): Maintenance costs comprise all the costs that are associated with any maintenance activity performed on the system. Maintenance expenditures may alter due to different strategies chosen for the asset [7]. Reactive (corrective) maintenance and planned preventive maintenance costs include the payments to the maintenance labor and material expenses. At first, downtime for each year is derived from the maintenance history records and then this data is used for evaluating labor and material costs. The total amount of material costs spent in maintenance activities between 2003 and 2011 is 93177 SEK. This total amount is distributed between years with respect to the downtime occurred for each year. Following equations display how the maintenance related labor costs are calculated for this model. It should be noted that, there will be no planned preventive maintenance activities in the second case, because Quick Test is proposed to be applied on routine monthly basis. Corrective maintenance related labor costs:

Planned preventive maintenance related labor costs:

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Maintenance Cost (Condition Based Monitoring): Maintenance costs associated with condition based monitoring involve every cost driver related to each CBM technology. The dynamic LCC model in this project is prepared in a manner that it is possible to add any extra cost caused by the technologies which will be implemented in the future. The table of CBM costs is built with the same algorithm for each of the 8 types of condition based monitoring methods, which are human senses, optical technologies, thermal technologies, vibration technologies, lubricant analysis, corrosion monitoring, performance monitoring and motor current monitoring [13].

Consequential Cost: Consequential costs cover the expenses which are created by the downtime caused as a result of failures. Cost drivers of this section can be listed as idle operator cost, environmental/safety impact cost and lost production cost. According to the recent cost evaluations performed at SCANIA, each minute of downtime costs the company 20 SEK. This total cost of 20 SEK per minute involves 2 of the 3 cost drivers given above. However, there are no data records concerning the costs associated with environmental and safety issues. Therefore, the total cost is distributed within idle operator and lost production categories. Since the total amount is the same, accuracy of the model is not affected by this decision. Idle operator cost is calculated through the multiplication of downtime (caused by any type of failures and maintenance) and labor cost per hour. When the idle operator cost is subtracted from the total downtime consequential cost, cost of the production loss due to downtime is obtained.

Disposal Cost: Disposal cost accounts for the total expenditure that occurs at the end of the asset’s lifetime. This section includes both savings and costs. Costs related with the disposal of an asset are generated by disassembling the asset, transportation of the disassembled structure and legal issues about disposal of the asset. On the other hand, there exists a salvage value associated with the asset at the end of its lifecycle. The machining center used in this model counts for approximately 1.200.000 SEK at the end of 15 years of usage. There might be also some other components which may provide extra
42

savings in addition to the salvage value of the asset. However, in this case, the only source of disposal savings is the salvage value of the machining center. It should be noted that there is no available information regarding the disassembly, transportation and legal costs of this machining center’s disposal.

9.3 Generic Structure of the Dynamic Life-Cycle Costing Model
The complete model that is shown at the end of “Appendix 4: Dynamic LCC Model Tables” section constitutes the skeleton of LCC analysis performed in this thesis study. This model is basically the combination of all cost drivers explained so far. Aim of the model is to find out the whole life-cycle cost of each alternative.

9.4 Results of the LCC Analysis:
The main objective of this thesis study has been evaluating the total whole life-cycle costs of two different alternatives of maintenance strategies performed on a machining center. The model which is previously described is built with respect to the objective of the study. Tables in the models were filled with as much data as possible and final costs for both alternatives are obtained. According to the model, the following table demonstrates the whole life-cycle costs for both alternatives: Costs & Savings (SEK) Total Costs Total Savings Whole Life-Cycle Cost Alternative A 41.858.721 1.438.154 40.420.567
Table 3. Costs and savings for each alternative

Alternative B 40.889.223 1.444.548 39.444.675

Dynamic life-cycle model results indicates that alternative B is supposed to provide less total costs, more total savings and consequently less whole life-cycle cost. On the other hand, costs and savings on the table displayed above are obtained by using absolute values, which means effect of the real life discount rate has been disregarded so far. However, the same amount of money does not have the same value in 2003 and 2017. The real values of costs and savings can be calculated by using “Net Present Value (NPV) Method”. NPV is obtained through assessing net present values of each year’s costs and savings by taking discount interest rate into account. As a result, higher level of accuracy is achieved in cost analyses [9]. Since the dynamic LCC model is prepared for the period between 2003 and 2017, it is convenient to apply NPV starting from the beginning, i.e. from 2003. According to Swedish Central Bank records, discount interest rate in 2003 was approximately 4%. Therefore, discount
43

rate parameter in the calculation is identified as 4% for the model. The results after calculating NPV of the costs and savings are as listed below: NPV of Costs & Savings (SEK) Total Costs Total Savings Whole Life-Cycle Cost Alternative A 32.371.687 833.696 31.537.991
Table 4. Net present values for each alternative

Alternative B 31.713.997 839.240 30.874.757

Along with the fact that total values are less than before, the result is still the same as before. Alternative B is supposed to provide less cost; more savings and less whole life-cycle cost compared to alternative A even when the effect of NPV on the values is taken into consideration. Nevertheless, there is still a remaining risk caused by the uncertainty in the model. Previous studies have shown that disregarding uncertainty in LCC models causes increased risk of loss of accuracy [9]. In order to improve the existing model in terms of uncertainty tolerance, Monte Carlo Method will be performed as a final step.

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10. Monte Carlo Simulation
10.1 Introduction to Monte Carlo Method
Within the scope of this thesis study, a dynamic life-cycle cost analysis model has already been established and used for comparing two different alternatives of a machining center with respect to maintenance activities. According to the results obtained from the model, alternative B is proven to be more efficient on economic grounds. However, the analysis of the alternatives was performed by using certain values. Uncertainty is a crucial factor in cost analysis activities, because it is present in almost every real life example. The case study examined in this project also includes uncertainty in cost drivers. In order to introduce required level of uncertainty into this cost analysis model, Monte Carlo method will be applied. Monte Carlo method is the application of repeated random sampling in order to analyze and simulate deterministic and probabilistic mathematical problems [9]. Monte Carlo method is a key element in defining the uncertainty in simulating mathematical systems. In the dynamic life-cycle costing model, Monte Carlo method is used for introducing uncertainty to the cost drivers involved in the structure. Random samplings of the cost drivers are prepared by means of triangular distribution. Triangular distribution is a convenient technique for business simulations when the available data is limited while on the other hand some specific indicators are present [9]. Specific indicators which are used for building the triangular distribution are the minimum, maximum and the mean values of the variable. In this model, these indicators are available for most of the cost drivers. For the non-recurring costs and some other cost elements where there are no minimum and maximum values available, triangular distribution is still applicable by using only the mean value. In such cases, upper and lower limits can be described within ±10% range which is widely preferred in business and industrial applications [9]. The next step, after introducing the random distributions of the cost drivers, is running the simulation for sufficiently high number of repetitions. In this case study, the simulation is prepared for 10000 trials. For a model like the one used here, 10000 trials can be considered as a sufficient level for establishing a well distributed solution function. Monte Carlo method is applied via using an add-in function, which is specially prepared for Monte Carlo Analysis, in Excel 2007. The simulation was performed for 10000 trials and results are obtained for each alternative.

45

10.2 Simulation Results
As stated earlier, 10000 trials have been performed by using the variables coming from triangular distribution of cost drivers. Since numerous trials have been performed by varying cost elements, the result obtained in each trial differs from the others. Therefore, the right way to analyze Monte Carlo simulation results is to distribute the results in a histogram so that the trend of the values can be observed. The table below demonstrates the NPV of the costs, savings and resulting life-cycle costs of two alternatives based on Monte Carlo simulation after 10000 trials. NPV of Costs & Savings (SEK) Total Costs Total Savings Whole Life-Cycle Cost Alternative A 34.181.396 839.179 33.342.217 Alternative B 33.300.985 824.875 32.476.110

Table 5. Net present values of each alternative according to Monte Carlo simulation

As seen on the table, alternative B is proven to be more efficient in terms of economical criteria. There are 2 other charts obtained from the simulation, which show the trends of whole lifecycle costs of the alternatives. According to these charts, both alternatives tend to cause whole life-cycle costs which are slightly higher than the values previously calculated by using the dynamic LCC model. This tendency towards a higher cost does not change the result, as the same phenomenon exists for both alternatives.

Simulation: Histogram Alternative A
1400 1200 1000 800 600 400 200 0

Figure 20. Distribution of Monte Carlo simulation results for alternative A

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Simulation: Histogram Alternative B
1400 1200 1000 800 600 400 200 0

Figure 21. Distribution of Monte Carlo simulation results for alternative B

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11. Conclusion & Recommendations
The main objective of this thesis study has been to develop a dynamic costing model that can be used in life-cycle cost analyses of different alternatives among varying production equipment designs. Besides, the problem has been handled with emphasis on maintenance activities, mostly condition based monitoring technologies. Special attention paid on designing a methodology that is capable of being modified according to alternating needs which are likely to emerge in the future. Therefore, the resulting model came out as a dynamic method that is also applicable for decision making processes in the future rather than a concrete technique which is only useful for actual issues in production equipment design. Required modifications can be performed on the model when necessary, just by introducing new cost elements and removing the factors which are out of date. This methodology can also be applied in different disciplines by finding out the relevant cost factors for the chosen branch of business. The entire life-cycle cost analysis model has been built on three base points. The first point is defining the correct cost drivers which affect the life-cycle cost. After identifying the set of cost drivers, skeleton of the model was completed. Then; the outcomes obtained from the model were put in a net present value equation, which constitutes the second base point. As a result, accuracy and precision of data have been improved by considering the effects of discount interest rate. The final base point that completes the structure of the model is Monte Carlo Simulation, which was used for evaluating influence of uncertainty on the results of the model. In order to provide insight to the way how the model is used for calculating life-cycle costs, a case study was performed based on real time maintenance data taken from Dynamate AB and SCANIA AB. This case study was quite useful for evaluating the performance of the developed model. Real time maintenance data was also used for proposing a new alternative to the existing machining center. For the given set of conditions, it has been proven that applying routine visual checks 4 times a month in addition to regular Quick Tests once a month enables the company control the overall life-cycle costs more efficiently than the actual situation where maintenance is performed mostly in reactive and planned preventive manner. In addition, the difference between two alternatives would be more significant in favor of alternative B, if environmental and safety impacts of failures could be traced by using the data from maintenance records. As mentioned in the previous sections as well, accuracy of the model increases by the availability of required data. Main difficulty in this study has been the lack of proper reporting of maintenance history records. Problems usually occurred because of the different styles of
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reporting preferred by different people in the maintenance team. This problem caused considerable time loss in interpreting the maintenance data. Another problem caused by actual reporting method is the related difficulty in defining required CBM technologies. As an example, the situation about spindles can be studied. The machining center examined in the case study has two identical spindles. However, failures in these components were usually noted simply as “spindle failure”. If the defective spindles were recorded in detail, it would be possible to trace the failure trends of each spindle and the efficiency of the chosen CBM technologies could be improved to a higher level. The actual situation about reporting can be improved by introducing some measures into the existing system. First of all, a standard maintenance language should be identified and used in reporting the failures. As a result of using a standard terminology, maintenance history records would become clear to everybody independent from the person who saved the data. Another problem concerning the actual data is the inaccurately registered start and finish times of the failures. It was obvious that some failures were registered later after the failure had been fixed. Therefore, the accuracy of the downtimes caused by failures is affected to some extent. Although the influence caused by inaccurate registering was not significant in this case study, it could cause bigger problems in another situation. It is hereby recommended that the date and time sections in the maintenance data charts should be filled in more accurately. Furthermore, emerging new technologies in maintenance applications can be used to overcome these problems in a relatively easier way. New generation handheld data stations can be used to record the failures both in a standard language and with precise date and time indicators. Finally, the existing data should be reviewed by a board consisting of the people who have involved in the maintenance activities performed on the aforementioned machining center. That kind of a team could enhance the understandability of the existing documents and find out possible ways to improve the efficiency of reporting to a further level.

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Jong-Woon Kim; Jong-Duk Chung; Seok-Yun Han, "Life cycle cost model for evaluating RAMS requirements for rolling stocks", Computers & Industrial Engineering, 2009. CIE 2009. International Conference on, vol., no., pp.1189-1191, 6-9 July 2009 doi: 10.1109/ICCIE.2009.5223870 Brooks, S.M., "Life cycle costs estimates for conceptual ideas", Aerospace and Electronics Conference, 1996. NAECON 1996., Proceedings of the IEEE 1996 National , vol.2, no., pp.541-546 vol.2, 20-23 May 1996 doi: 10.1109/NAECON.1996.517701 Moubray, J. (1997) Reliability-centered maintenance. 2nd ed. New York: Industrial Press Inc. Henry, T., Baker G., Scott, T. (2002). Condition Monitoring Technology. In Wilson, A. (Ed.), Asset maintenance management: a guide to developing strategy and improving performance (pp. 291325). New York: Industrial Press Inc. Sondalini, M. (2006). E-Book: Defect and Failure True Cost. Feed Forward Publications [available at:http://www.feedforward.com.au/Defect_failure_waste_cost.htm] Fitchett, D. (2002). E-Book: The True Cost of Downtime. Business Industrial Network [available at:http://ebook-the-true-cost-of-downtime.downloadnow-366-23356.programsbase.com/] Dynamate AB. Quick Test Guidelines. April, 2011

[11]

[12] [13]

[14]

[15]

[16]

51

Appendix

52

Appendix I: Case Study Data
Data Set 1: Maintenance History Records from 2003 to 2011

Year: 2003
Failure No 1 2 3 4 5 6 Type of Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Definition of Maintenance Task Turret aligned Position scale adjusted Visual check done Fault fixed, turret aligned Priority 1 1 1 1 1 2 Start Date/Time 2003-09-07 22:40 2003-09-10 00:21 2003-09-30 20:39 2003-11-04 05:44 2003-12-11 09:03 2003-12-15 06:44 Finish Date/Time 2003-09-08 02:30 2003-09-10 02:00 2003-10-01 10:00 2003-11-05 03:00 2003-12-11 10:00 2003-12-15 07:30

Year: 2004
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Type of Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Plate replaced Spindle aligned Turret set Brake changed Protecting cover of lower turret changed Turret couplings fixed Chip protection changed Safety switch fixed Gearbox changed Protection changed Plates aligned and new protection installed Main switch reset and tool correctors adjusted Subprogram terminated Chuck aligned Stop screw disassembled and fixed again Motor protection reset All 3 roller wheels changed Belt changed Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 1 2 2 2 2 1 2 Start Date/Time 2004-03-23 06:42 2004-03-29 06:23 2004-03-31 04:36 2004-04-20 13:54 2004-04-27 19:32 2004-05-04 05:37 2004-05-25 10:24 2004-06-07 06:21 2004-06-08 13:08 2004-06-08 13:15 2004-06-17 14:15 2004-06-21 22:06 2004-06-22 04:30 2004-06-22 21:57 2004-07-02 07:10 2004-07-02 09:54 2004-09-02 05:15 2004-09-10 04:20 2004-09-14 06:46 2004-09-15 04:22 Finish Date/Time 2004-03-23 11:00 2004-03-29 16:30 2004-03-31 15:00 2004-04-22 22:00 2004-04-27 20:30 2004-05-04 18:00 2004-05-25 12:00 2004-06-07 10:30 2004-06-08 13:16 2004-06-10 17:00 2004-06-17 17:00 2004-06-21 23:20 2004-06-22 23:00 2004-06-22 23:30 2004-07-02 10:00 2004-07-02 22:00 2004-09-02 09:30 2004-09-10 05:00 2004-09-14 09:00 2004-09-15 08:00

Year: 2004 (Continued)
Failure No 21 22 23 24 25 26 27 28 29 Type of Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Definition of Maintenance Task Screws replaced Scale changed Measuring circuit card on the servo changed Parameter failure, overlapping parameters checked LT module and control cards changed but no result achieved Control card changed Priority 2 2 2 2 1 2 2 2 2 Start Date/Time 2004-09-15 04:25 2004-09-25 06:53 2004-09-29 09:45 2004-10-01 18:13 2004-10-07 20:07 2004-11-12 13:40 2004-11-15 06:34 2004-12-07 18:44 2004-12-28 14:24 Finish Date/Time 2004-09-15 09:00 2004-09-26 11:00 2004-09-29 11:45 2004-10-02 00:00 2004-10-07 21:45 2004-11-12 16:00 2004-11-16 15:00 2004-12-07 18:50 2004-12-28 15:00

Year: 2005
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Type of Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Restart via using main switch Turret reset to zero position Position scale adjusted Chip protection repaired Turret aligned and set to zero position New mounting plate for safety switches installed Sensor B42 of the right chuck is cleaned Turret reset to zero position, and aligned Sheet metal changed Drilling tool changed Orientation of the plate corrected Laser disc reader cleaned General cleaning done Protection replaced Fixed by operator (no action) Switch replaced Circuit breaker disassembled, examined and reinstalled Spindle aligned Turret aligned Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 Start Date/Time 2005-01-31 16:03 2005-02-01 07:48 2005-02-17 03:23 2005-02-17 17:57 2005-02-18 06:32 2005-03-01 16:02 2005-03-17 06:35 2005-03-21 18:54 2005-03-22 11:39 2005-04-13 04:04 2005-04-21 22:44 2005-05-03 14:29 2005-05-18 07:22 2005-05-22 22:38 2005-06-23 01:07 2005-06-29 04:06 2005-07-05 15:13 2005-07-06 01:04 2005-07-06 05:37 2005-07-13 18:37 Finish Date/Time 2005-01-31 16:30 2005-02-01 10:30 2005-02-17 15:30 2005-02-17 19:30 2005-02-18 11:00 2005-03-01 23:00 2005-03-17 09:00 2005-03-21 21:00 2005-03-22 14:30 2005-04-13 14:00 2005-04-21 23:05 2005-05-03 21:00 2005-05-18 08:00 2005-05-23 04:00 2005-06-23 07:30 2005-06-29 06:00 2005-07-05 21:30 2005-07-06 04:00 2005-07-06 16:30 2005-07-13 19:30

Year: 2005 (Continued)
Failure No 21 22 23 24 25 26 27 28 29 30 31 Type of Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Definition of Maintenance Task Control card replaced Control card of the turret changed Plate replaced Actuator on servo 2201 "xoz bottom right" replaced Bearing of the guide changed LT module and control card of the lower turret replaced Unfitting coils are fixed Upper turret and support aligned Control card of the servo 2201 changed Sensor in the jack 7.3 replaced MD 36400 changed Priority 1 2 2 2 2 2 1 2 2 2 2 Start Date/Time 2005-07-13 21:59 2005-07-14 00:10 2005-08-18 02:32 2005-08-22 06:42 2005-08-26 14:49 2005-09-01 09:12 2005-09-06 22:36 2005-09-08 13:10 2005-09-15 13:17 2005-11-04 18:00 2005-12-30 07:19 Finish Date/Time 2005-07-13 22:30 2005-07-14 09:00 2005-08-18 19:45 2005-08-22 11:00 2005-08-26 15:50 2005-09-01 12:00 2005-09-07 04:20 2005-09-08 21:00 2005-09-15 16:15 2005-11-04 21:05 2005-12-30 11:00

Year: 2006
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Type of Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task The problem with the door is fixed Optimization of spindleservo of spindle 1 Speed of spindle 2 adjusted Pump unplugged Clamps and bushings replaced, gasket of 0.4 mm mounted Clamp replaced Door switch changed Fixed by operator (no action) Connection point of the coolant hose adjusted Spindle 1 parameters adjusted Servo connection bolted Motor refurbished at SKF Spindle servo adjusted Suction tube mounted back in its position Gripper changed Butterfly bolt changed and fixed Butterfly bolt changed and fixed Butterfly bolt of the chuck replaced Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Start Date/Time 2006-01-16 06:41 2006-01-17 16:20 2006-01-25 09:30 2006-01-26 07:54 2006-02-01 03:31 2006-02-15 13:38 2006-02-19 23:04 2006-03-08 22:40 2006-04-07 10:28 2006-04-18 05:31 2006-04-18 14:42 2006-05-24 18:44 2006-06-30 00:12 2006-07-03 09:04 2006-07-04 07:47 2006-09-01 11:19 2006-09-07 13:49 2006-09-25 05:06 2006-10-05 15:23 2006-10-16 19:37 2006-12-03 19:50 2006-12-05 11:56 2006-12-06 12:18 2006-12-14 11:26 Finish Date/Time 2006-01-16 09:00 2006-01-17 18:00 2006-01-25 15:48 2006-01-26 10:36 2006-02-01 04:10 2006-02-16 16:00 2006-02-20 00:05 2006-03-09 02:00 2006-04-07 13:40 2006-04-18 07:52 2006-04-19 04:00 2006-05-24 21:00 2006-07-03 11:00 2006-07-03 14:00 2006-07-04 09:00 2006-09-01 13:20 2006-09-20 00:00 2006-09-25 05:30 2006-10-05 22:00 2006-10-16 20:55 2006-12-04 04:30 2006-12-05 20:00 2006-12-06 15:15 2006-12-14 14:45

Year: 2007
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Type of Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Definition of Maintenance Task Spindle optimization Spindle optimization once again (right spindle) System equalized and restarted Bolts and screws replaced Cable breakage fixed Door switch SG4503 replaced O-ring behind the tool holder changed O-ring changed Door switch changed Measurement test on turret Turret aligned in x and z axes Multiple pieces taken into process caused failure Upper turret aligned Turret aligned Error in zero point setting of tool holder fixed Tool holder adjusted Switches lubricated Door switch changed Door switch changed Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 2 2 2 Start Date/Time 2007-01-17 09:24 2007-01-29 23:24 2007-02-28 14:17 2007-03-28 08:51 2007-04-05 06:21 2007-05-03 21:14 2007-05-07 04:15 2007-07-01 22:01 2007-07-02 07:21 2007-07-10 08:15 2007-10-07 08:00 2007-10-10 01:22 2007-10-10 07:33 2007-10-10 13:59 2007-10-11 22:12 2007-10-14 16:37 2007-10-15 01:21 2007-11-05 21:45 2007-11-06 17:44 2007-11-13 21:34 Finish Date/Time 2007-01-17 15:00 2007-01-30 09:30 2007-02-28 14:48 2007-03-28 14:30 2007-04-05 08:30 2007-05-03 22:00 2007-05-07 10:30 2007-07-02 05:00 2007-07-02 09:30 2007-07-11 01:30 2007-10-07 15:00 2007-10-10 03:50 2007-10-10 07:50 2007-10-10 16:10 2007-10-12 07:00 2007-10-14 18:00 2007-10-15 02:00 2007-11-05 23:30 2007-11-06 22:15 2007-11-14 03:00

Year: 2007 (Continued)
Failure No 21 22 23 24 25 26 Type of Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Definition of Maintenance Task Coating changed Keys of the door switch corrected One of the support arms and 3 bearings replaced Screws of the support's bearing tightened General adjustment Adjustment of +1 mm in X2 and -2 mm in Z2 Priority 2 2 2 2 2 2 Start Date/Time 2007-11-20 00:57 2007-11-25 18:46 2007-12-05 17:32 2007-12-20 23:55 2007-12-21 00:43 2007-12-22 09:52 Finish Date/Time 2007-11-20 01:50 2007-11-25 23:59 2007-12-05 20:00 2007-12-21 00:10 2007-12-21 14:00 2007-12-22 12:00

Year: 2008
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Type of Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Definition of Maintenance Task Troubleshooting and adjustment of the turret Sent to repair and reinstall Protection plate adjusted to fit chuck spindle Key screwed again, new key order needed Adjustment of X2 belt Bearing of the rotary tool in the turret replaced 24V fuse reset, sensor of the lower rotating clutch adjusted Screw adjustment Lubricant leakage in chuck 2 checked Burnt motor disassembled, new ordered Interlock box changed Sensor wires soldered again Support aligned Forced run contractor for hydraulic pump to bring down the palette Sensor (ref.point E6.1) changed Bolts replaced and new belt installed Upper turret aligned Loading hatch manually jogged Upper turret aligned again New reference point set Priority 1 1 2 2 2 2 1 1 2 1 1 2 2 1 2 1 2 2 1 1 Start Date/Time 2008-02-04 08:13 2008-02-12 14:44 2008-02-14 20:00 2008-04-30 15:03 2008-05-06 23:00 2008-06-18 11:42 2008-06-22 07:01 2008-06-24 22:41 2008-06-25 16:00 2008-06-29 06:56 2008-08-14 15:50 2008-08-19 14:19 2008-08-28 21:35 2008-09-05 14:57 2008-09-15 07:41 2008-09-24 00:09 2008-10-16 10:37 2008-10-16 16:54 2008-10-16 21:09 2008-10-16 23:52 Finish Date/Time 2008-02-04 12:00 2008-02-14 13:30 2008-02-14 22:32 2008-04-30 16:03 2008-05-07 09:02 2008-06-19 18:00 2008-06-22 11:20 2008-06-24 23:59 2008-06-25 17:00 2008-06-29 08:00 2008-08-15 14:40 2008-08-19 18:45 2008-08-29 00:05 2008-09-05 15:20 2008-09-15 19:50 2008-09-24 03:40 2008-10-16 16:30 2008-10-16 19:00 2008-10-16 22:09 2008-10-17 08:00

Year: 2008 (Continued)
Failure No 21 22 23 24 25 26 27 28 Type of Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Spindle aligned Upper turret aligned Turret and support aligned, lubrication problem of support fixed Adjustment of the spindle Pulse sensor B2001 changed Some parts of the support changed Priority 1 1 1 1 1 2 2 2 Start Date/Time 2008-10-17 13:03 2008-10-20 13:20 2008-10-29 22:52 2008-11-04 11:21 2008-11-06 21:17 2008-11-17 22:19 2008-11-19 02:59 2008-11-27 20:11 Finish Date/Time 2008-10-17 17:00 2008-10-21 06:45 2008-10-30 18:00 2008-11-04 17:00 2008-11-06 23:30 2008-11-18 06:23 2008-11-19 03:15 2008-11-27 23:00

Year: 2009
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Type of Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Support aligned Broken screws (3 pcs) taken out Support cleaned and a drain hole unplugged Lower turret aligned in X and Z axes Turret aligned Defective protection uninstalled and forwarded for FU Belt and belt carrying wheels are OK, NCK reset and problem solved Base plate of the chuck (Spindle 1) replaced Tools oriented, lubricant storage filled and restart Noise damper of the ventialtor changed for purging Failure checked by operator, turrets seemed OK Belt X2 changed Upper turret aligned Support aligned Turret aligned X-axis belt changed Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Start Date/Time 2009-02-17 16:32 2009-02-24 09:41 2009-02-25 15:45 2009-02-26 18:58 2009-03-04 18:41 2009-03-25 17:54 2009-04-06 11:07 2009-05-19 13:15 2009-05-20 07:08 2009-05-28 07:35 2009-09-09 21:35 2009-10-15 09:09 2009-10-28 00:25 2009-10-28 04:46 2009-11-24 13:12 2009-12-15 21:03 Finish Date/Time 2009-02-18 10:30 2009-02-24 10:36 2009-02-25 20:15 2009-02-27 12:00 2009-03-04 19:54 2009-03-26 16:00 2009-04-06 12:00 2009-05-19 18:00 2009-05-20 09:08 2009-05-28 08:00 2009-09-09 22:00 2009-10-15 11:00 2009-10-28 04:30 2009-10-28 05:15 2009-11-24 13:55 2009-12-15 23:00

Year: 2010
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Type of Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Tension control sensors cleaned Support and its bearing in X-2 axis changed Turret aligned Screws of the support's bearing changed No critical tension level detected Hose disassembled, hose coupling changed and relubricated Current cut off by safety fuse Lower turret aligned after failure Upper turret aligned Turrets A and C aligned and reset to 0-position Oil under the machine vacuumed Upper turret set Lower turret aligned and support changed Operator calibrated the machine (No action) Lower turret and support directed, zero point set Upper turret aligned and new zero point set X-axis belt replaced Turret adjusted Ventilation system failure Butterfly valve released Priority 2 2 2 2 2 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 Start Date/Time 2010-01-13 21:11 2010-01-25 13:05 2010-03-30 14:23 2010-06-28 15:40 2010-08-05 08:35 2010-08-25 01:52 2010-09-01 19:01 2010-09-02 08:53 2010-09-09 14:54 2010-09-24 02:30 2010-09-24 17:37 2010-09-30 05:22 2010-09-30 19:43 2010-10-01 00:08 2010-10-01 08:58 2010-10-04 21:47 2010-10-14 15:38 2010-10-15 14:55 2010-10-27 15:59 2010-11-04 01:53 Finish Date/Time 2010-01-13 23:18 2010-01-26 18:00 2010-03-30 17:43 2010-06-28 16:20 2010-08-05 08:55 2010-08-25 04:42 2010-09-01 20:00 2010-09-02 10:50 2010-09-09 15:54 2010-09-24 05:40 2010-09-24 20:00 2010-09-30 07:30 2010-09-30 23:00 2010-10-01 00:30 2010-10-01 17:00 2010-10-05 02:08 2010-10-14 18:45 2010-10-15 17:57 2010-10-27 18:50 2010-11-04 02:40

Year: 2010 (Continued)
Failure No 21 22 23 24 25 26 27 Type of Failure Mechanical Failure Electrical Failure Mechanical Failure Electrical Failure Electrical Failure Mechanical Failure Mechanical Failure Definition of Maintenance Task Turret aligned Spindle cooler flow switch restarted Turret aligned Cables of the spindle cooler flow switch changed Flow switch checked Bearing changed Upper/lower turrets aligned Priority 2 2 2 2 2 2 2 Start Date/Time 2010-11-14 16:32 2010-11-24 09:05 2010-12-02 07:57 2010-12-02 13:26 2010-12-02 15:01 2010-12-16 23:54 2010-12-17 01:01 Finish Date/Time 2010-11-14 20:00 2010-11-24 11:00 2010-12-02 12:30 2010-12-02 14:26 2010-12-02 15:28 2010-12-17 00:35 2010-12-17 16:51

Year: 2011
Failure No 1 2 3 4 5 6 7 8 9 10 11 12 13 Type of Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Mechanical Failure Mechanical Failure Mechanical Failure Mechanical Failure Electrical Failure Electrical Failure Electrical Failure Mechanical Failure Definition of Maintenance Task Spindle cooler flow switch adjusted Turret aligned Support set up New support ordered due to misalignment of the existing one Troubleshooting regarding the cutting tool Turret aligned and moving plate loosened Support adjusted Screws changed, adjusted and tested Wear detected in ball screw's thrust bearing Formation of a glycol layer on the flow switch sensor detected Upper turret checked, no problem found Flow switch adjusted One of the turret drivers lubricated Priority 2 2 2 2 2 2 2 2 2 2 2 2 2 Start Date/Time 2011-01-09 22:28 2011-01-10 10:48 2011-01-24 10:48 2011-01-24 17:57 2011-02-11 09:59 2011-02-16 08:49 2011-02-17 08:15 2011-02-17 17:14 2011-02-25 07:24 2011-03-04 13:28 2011-03-04 18:48 2011-03-05 12:41 2011-03-06 20:35 Finish Date/Time 2011-01-09 23:30 2011-01-10 10:59 2011-01-25 01:50 2011-01-24 17:59 2011-02-11 10:45 2011-02-16 11:00 2011-02-17 11:07 2011-02-17 23:45 2011-02-25 09:30 2011-03-04 15:10 2011-03-04 19:30 2011-03-05 14:30 2011-03-06 21:00

Data Set 2: FMEA Analysis of 3 Major Components Experiencing the Most Frequent Breakdowns
Sub System: Turret
Sr. No. FUNCTION FUNCTIONAL FAILURE
Tool change operation, and normal tool function not possible due to vibrations

FAILURE MODE

FAILURE EFFECT
Tool change operation effected, calibration required and average downtime is 5.5 hours Tool change operation effected, quick maintenance check needed, average downtime is 0.56 hours Tool change operation effected, control card &/or LT module changed and average downtime is 5.82 hours Tool change operation effected, driver has to be lubricated and average downtime is 0.42 hours Tool change operation effected, bearing has to be replaced and average downtime is 30.3 hours Tool change operation effected, coupling has to be fixed and average downtime is 1.6 Hours

FREQUENCY

A

1

Calibration out

35

1 B Holding multiple cutting tools and indexing them for auto tool changes and operations also many auxiliary functions including providing a solid base and coordinates movement etc. C Electrical failure effects the normal operation of the electrical components and the machine stops 2

Sensor false alarm

2

Control card malfunction

2

1

Tool change operation, and normal tool function not possible due to vibrations due to no lubrication

1

Turret driver needs lubrication

1

2

Worn out bearing

1

D

Coupling failure causes disconnection from main shaft

1

Coupling malfunction

1

Sub-System: Spindle
Sr. No. FUNCTION FUNCTIONAL FAILURE FAILURE MODE
1 Holds chuck assembly with the cutting tool while it is rotated during the cutting operation, many other auxiliary components for functions related to safety and lubrication etc. Cutting operation effected, tolerances and dimensions of resulting work piece are effected Spindle becomes misaligned Spindle becomes unstable Base plate damaged Protection plate damaged

FAILURE EFFECT
Cutting operation fails to meet tolerances and average downtime is 7.65 hours Cutting operation fails to meet tolerances and average downtime is 5.18 hours Machine stops, average downtime is 4.75 Hours Safety issues arise, average downtime is 2.53 Hours

FREQUENCY

4

A

2

5

2

3 B Protection covers no longer available for surrounding safety 1

1 1

Sub System: Support
Sr. No. FUNCTION FUNCTIONAL FAILURE FAILURE MODE
Support gets misaligned Support unusable

FAILURE EFFECT

FREQUENCY

A

No longer holds the long work piece in a straight line

1

Machining tolerances are effected due to the misalignments , average downtime is 5.95 hours Machine stopped for part change, average downtime is 15.1 hours The bearings and the support become clogged with residues and effect operation, average cleaning downtime is 3.66 hours

4

2 "Lynett" is a support for longer work pieces, holds the overhung portions in three bearings which allow the work piece to rotate within while operations are performed on the work piece near the spindle, dampens vibrations.

1

3

Residue 1 buildup

2

B

The bearings not running properly

2

Bearings worn-out

The bearings become worn effecting the work piece dimensions, average downtime is 15.71 Hours

2

Bearing 3 screws loose

The bearings become loose effecting the work piece dimensions, average downtime is 0.46 Hours

2

Appendix II: Tables, Figures and Equation References
Figure 1: Reference number [5] Figure 2: Reference number [8] Figure 3: Reference number [9] Figure 4: Reference number [8] Figure 5: Reference number [12] Figure 6:

Figure 7:http://www.emag.com/fileadmin/content/emag-webseite/doks/Prospekte/BA400.600_gb.pdf Figure 9:

Figure 8:http://www.abb.se/product/seitp327/63bc9f7c7410ca74c125744200314d16.aspx Figure 10: From Dynamate AB Introduction Presentation Figure 11: From Dynamate AB Introduction Presentation Figure 12: From Dynamate AB Introduction Presentation Figure 13: From Dynamate AB Introduction Presentation Figure 14: Percentage Calculated from the maintenance data of Data set 1 in Appendix 1 Figure 15: Percentage Calculated from the maintenance data of Data set 1 in Appendix 1 Figure 16: Percentage Calculated from the maintenance data of Data set 1 in Appendix 1 Figure 17: Downtimes Calculated from the maintenance data of Data set 1 in Appendix 1 Figure 18: Failure occurrences counted from the maintenance data of Data set 1 in Appendix 1

Appendix III: Abbreviations and Explanations

Appendix IV: Dynamic LCC Model Tables

Category: Purchase Cost

Category: Installation Cost

Category: Operation Cost – Type A

Category: Operation Cost – Type B

Category: Maintenance Cost (Corrective)

Category: Maintenance Cost (Planned Preventive)

Category: Maintenance Cost (Condition Based Monitoring)

Note: CBM cost table is partly shown here for the ease of understanding. Longer version of the table consists of all 8 sub-categories of CBM technologies. Each table is prepared for a specific group of CBM technology (human senses, optical technologies, thermal technologies, vibration technologies, lubricant analysis techniques, corrosion monitoring techniques, performance monitoring techniques, motor current monitoring techniques)

Category: Consequential Cost

Category: Disposal Cost

Dynamic LCC Model for Option A

Dynamic LCC Model for Option B

Appendix V: Triangular Distributions of Cost Drivers

Purchase Cost - A

Installation Cost - A

Utilities (Electricity Cost) - A

Utilities (Lubricant Cost) - A

Utilities (Coolant Cost) - A

Operation Cost (Robot Arm) – A

Operation Cost (Operator) – A

Operation Cost (Cutting Tool) – A

Corrective Maintenance (Labor Cost) – A

Corrective Maintenance (Material Cost) – A

Planned Preventive Maintenance (Labor Cost) – A

Planned Preventive Maintenance (Material Cost) – A

Idle Operator Cost – A

Lost Production Cost – A

CBM Activities Savings – A

Salvage Savings – A

Purchase Cost – B

Installation Cost – B

Utilities (Electricity Cost) – B

Utilities (Lubricant Cost) – B

Utilities (Coolant Cost) – B

Operation Cost (Robot Arm) – B

Operation Cost (Operator) – B

Operation Cost (Cutting Tool) – B

Corrective Maintenance (Labor Cost) – B

Corrective Maintenance (Material Cost) – B

Proactive Maintenance Cost (Visual Check) – B

Proactive Maintenance Cost (Quick Test) – B

Idle Operator Cost – B

Lost Production Cost – B

Planned Preventive Maintenance (Labor Savings) – B

Planned Preventive Maintenance (Material Savings) – B

Salvage Savings – B



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