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Identifying Costs & Benefits

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Because of the uncertainties and practical difficulties involved in performing a rigorous pre-purchase estimates of Total Cost of Ownership (TCO), a less formal yet more practical approach may still provide the guidance needed to fairly support the purchase decision.

Considering a feeding system’s intimate connection to end product quality and overall process efficiency, it should come as no surprise that the cumulative effects of even small comparative differences in ongoing performance and operational efficiencies can, over time, more than counterbalance any minor differences in initial procurement cost.

Clearly, the prudent course is to invest some time and attention early on in the purchase process to identify the contributors to the cost and benefit streams that are relevant to your specific process operation, estimate the size and scale of those streams, and then compare and select among available alternatives. Though the process will not be perfect and is sure to contain uncertainties, the exercise will be instructive and will help make the best decision possible at the time it has to be made.

As shown below, the major elements involved in TCO analysis relate to procurement, quality and efficiency.

Costs of initial purchase, installation, commissioning and operator/maintenance training are categorized as procurement costs, and are usually available from supplier quotes early on in the purchase process. However, all other costs of ownership are somewhat more difficult to identify and estimate. Each of the ongoing cost/benefit factors mentioned in the previous section can be categorized as either a quality- or efficiency-based contributor to cost. The first two factors (formulation accuracy and end product uniformity) directly contribute to the quality of the end product, whereas all the remaining factors primarily impact the overall efficiency of the process operation itself as shown below.

Discriminating between quality and efficiency contributors highlights the fact that the scale of the costs and benefits associated with quality is related to total process throughput, while those associated with efficiency are primarily related to time-based operational efficiency. Viewed from this perspective, each contributor can be more adequately addressed and estimated as presented next.

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