Total Cost of Ownership (TCO)
Definition
Total cost of ownership – known internationally as Total Cost of Ownership (TCO) – is the sum of all direct and indirect costs incurred over the entire life cycle of a plant. It extends far beyond the purchase price and encompasses planning, procurement, operation, cleaning, maintenance, downtime and decommissioning.
The purchase price is merely the tip of the iceberg: the actual cost-effectiveness of a mixing plant only becomes apparent over its entire service life, which in process engineering – provided the plant is operated correctly – typically spans 30 to 40 years.
Composition
Capital expenditure (CAPEX)
Purchase price, accessories and peripherals such as dosing units, control systems and extraction systems, planning and engineering, transport, assembly, commissioning, integration into existing production, adaptation of the infrastructure to include foundations, electrical, compressed air and media connections, as well as training for operating and maintenance staff.
Operating costs (OPEX)
Energy requirements of the drive; labour costs for operation, feeding, discharge and monitoring; consumables and media such as seals, lubricants, cleaning agents, water and compressed air; and raw material losses due to incomplete discharge.
Maintenance and servicing costs
Scheduled maintenance intervals including inspection, lubrication and adjustment; replacement and wear parts such as bearings, seals and mixing tools; on-site service calls; remote diagnosis and support; and the costs of unplanned downtime. Design features, such as shaft seals positioned above the mixed material, influence wear and maintenance intervals.
Cleaning and changeover costs
Cleaning times between product and batch changes; costs of water, cleaning agents and drying; production downtime during cleaning and changeover; the effort required for manual cleaning compared with automated CIP or WIP systems; and the accessibility and minimal dead space of the equipment. In food and pharmaceutical applications, the total cost of cleaning is often one of the largest individual cost components.
Quality and failure costs
Scrap due to inadequate mixing quality or thermal damage; batch losses due to contamination or cross-contamination; rework on batches outside specification; production stoppages; opportunity costs of unavailable capacity; and the effort involved in quality testing, handling complaints and documentation.
Disposal and decommissioning costs
Dismantling at the end of the service life, recycling, resale or disposal; in regulated sectors, decontamination and documentation are also required. Any residual value must be taken into account.
Key features
- Life-cycle oriented: The analysis covers all costs over the service life, not just at the time of procurement.
- Holistic: Both visible and hidden costs are included, ranging from CAPEX and OPEX to quality and disposal costs.
- Comparable: The approach provides a robust basis for evaluating plant concepts, designs and equipment against one another.
- Transparent: Cleaning, downtime and quality costs are made visible; these would otherwise be overlooked when comparing quotations.
Strategic: Total cost of ownership underpins investment decisions, cost optimisation and budget planning.
Practical application
For a technology comparison, the cost categories for each concept are set for the same period under consideration and populated with reliable input data: batch size and number of batches per year, number of product changes, cleaning methods, energy price, labour costs and required availability. Missing values are determined in a mixing trial using the original product, rather than being estimated.
Over a service life of 30 to 40 years, operating, cleaning and quality costs significantly outweigh the initial investment in the overall calculation. The lowest purchase price is therefore rarely the most economical solution.