Get to know the vital terms of Logistics and Supply Chain Management.
Life Cycle Cost (LCC) is the total cost of ownership throughout the whole life of a product or service, including all expenses from initial acquisition to final disposal. In logistics and supply chain management, knowledge of LCC will enable companies to evaluate the total economic impact of a product or system over time, which will lead to more informed decision-making and cost management.
This encompasses the cost of buying, implementation fees, and any initial investment required to make the product or service operational. Acquisition costs must be taken seriously since they are often the most visible but not necessarily the largest part of LCC.
These are the costs associated with operating the product or system, including energy use, labor, and training. Operational costs vary with the complexity and frequency of use and commonly constitute a large fraction of the life cycle cost.
It covers normal operating and maintenance and repair services and replacement parts. The activities are done to prolong the useful life of a product or service, therefore provision has to be included in budgeting for those expenses so that an individual should not be subjected to unnecessary financial shocks.
This last stage includes all the costs of decommissioning, recycling, or dismantling the equipment or the product. In a number of cases, some amount of resale value or salvage can be recovered to level out the removal cost making the LCC figure somewhat smaller.
Evaluating LCC helps gain a holistic view over the years of the financial impact of the product, not only through its initial price. It allows companies to adapt more cost-effective choices for products and services in the long run based on both operational and environmental or regulatory requirements.
It enables companies to make well-rounded purchasing and maintenance decisions by performing life cycle cost analysis. Therefore, a business can optimize resources without any unexpected costs, leading toward long-term sustainability in logistics and supply chain management if considering LCC.