cscp, unep, wbcsd, wi, inwent, ueap me life cycle management navigator: 12_expr_lcc 1 the life cycle...
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Life Cycle Management Navigator: 12_EXPR_LCC 1 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
The Life Cycle Management NavigatorLife Cycle Costing
Training Session 12
Life Cycle Management Navigator: 12_EXPR_LCC 2 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle CostingSetting the Scene
Exercise
1,000,00015,000485,000500,000 Costs
CostsDisposal
costs
Costs for storage, handling, processing,
collecting etc.
Procurement costs
The original cost accounting system of “Silla Manufacturing Co.” provides the following data.
“Disposal costs” = 1.5% of total costs“Disposal costs” = 1.5% of total costs
Life Cycle Management Navigator: 12_EXPR_LCC 3 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing Question 1
Exercise
• How would you as a manager of “Silla
Manufacturing Co.” evaluate the situation?
• Does life cycle cost reduction seem attractive
to you?
• How would you as a manager of “Silla
Manufacturing Co.” evaluate the situation?
• Does life cycle cost reduction seem attractive
to you?
According to the original accounting system of “Silla Manu-facturing Co.” life cycle costs (here: disposal costs) add up to 1.5% of total costs.
Life Cycle Management Navigator: 12_EXPR_LCC 4 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing What is Non-Product Output (NPO)?
Exercise
Examples for NPO:
• Solid waste
• Waste water
• Heat losses
• Emissions to air
Life Cycle Management Navigator: 12_EXPR_LCC 5 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing Changing the Scene
Exercise
“Silla Manufacturing Co.” came to the conclusion that they need more transparency on their life cycle costs to take appropriate action.
For this reason they screened their non-product output flows and allocated respective costs.
The result looks as follows . . .
Life Cycle Management Navigator: 12_EXPR_LCC 6 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing Extended Information Basis
Exercise
Procure-ment costs
Costs for storage, handling
Costs for production
process
Costs for collecting
Disposal costs
Costs
Product output
455,000 125,000 310,000 -- -- 890,000
Non-product output
45,000 15,000 23,000 12,000 15,000 110,000
Costs 500,000 140,000 333,000 12,000 15,000 1,000,000
“Non-product output costs” = 11% of total costs“Non-product output costs” = 11% of total costs
The revised accounting system provides the following data:
Life Cycle Management Navigator: 12_EXPR_LCC 7 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing Question 2
Exercise
• How do you as a manager of “Silla Manufacturing Co.” evaluate the situation now?
• What measures could you propose to reduce environmental costs (here: non-product output costs)?
• How do you as a manager of “Silla Manufacturing Co.” evaluate the situation now?
• What measures could you propose to reduce environmental costs (here: non-product output costs)?
Consider the more detailed information on life cycle costs.
Life Cycle Management Navigator: 12_EXPR_LCC 8 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing Findings
Exercise
The new transparency on NPO-flows and associated costs helped “Silla Manufacturing Co.” to . . .
• understand that NPO costs are about 7 times higher than
costs for disposal (15,000 => 111,000);
• recognise that NPO costs are a significant
component of the costs structure (11% of total costs).
This motivated “Silla” to develop improvement measures. . .
This motivated “Silla” to develop improvement measures. . .
Life Cycle Management Navigator: 12_EXPR_LCC 9 CSCP, UNEP, WBCSD, WI, InWEnt, UEAP ME
Life Cycle Costing New Opportunities
Exercise
Based on the better information basis “Silla Manufacturing Co.” was able to elaborate the following improvement measures:
- improving cutting process; - reuse of wood-NPO as input for other products
(wood NPO costs ca. 20% of unprocessed, “new” wood).
• Reduction of wood-NPO by . . .
• Substitution of adhesives, use of screws - In case of a defect/error, not longer does the whole product become NPO but just the defective part.
• Additional measures to avoid “NPO production” at the end of the production process, because NPO costs accumulate from production step to production step.