What is Equipment Lifecycle Management?

Equipment lifecycle management (LCM) is a methodology for managing equipment throughout its life span from design and development through end of life. A lifecycle management process is most often applied post production and utilized as an augmenting strategic sustainment strategy for equipment and assets. A lifecycle projection of your equipment’s life along with a costing prediction will help your company predict future overhaul, retrofit or recapitalization expenses well ahead of the failure or even degradation of equipment capability in some cases. This process should be scalable and tailorable to your specific equipment type(s) and variations as there are no cookie cutter solutions to managing your equipment’s lifecycle. The most optimal method for lifecycle managing is to build your plan into the design stage of equipment or product release. The Design for Sustainability (D4S) process for LCM is the most effective way to predict lifecycle events and project failure, it does after all make more sense to pre-empt potential impacts at the design stage. Post production life cycle management is as much an art as it is a science since pre-established benchmarks have not been established during the D4S process. Initially, there will be little or no data from which to begin the mapping process meaning the Original Equipment Manufacturer (OEM) guidance will be the primary basis for your analysis early on. Most OEMs provide general guidance and will estimate an average life expectancy with wear out dates based on average wear and tear under normal circumstances.

To get started, I would recommend performing a macro assessment of your equipment’s current state along a serviceability threshold map. There are four (4) commonly understood thresholds: serviceable (new), maintainable (some maintenance required), unserviceable and repairable (routine maintenance required), and unserviceable and unrepairable (end of life).

Lifecycle Costing

As previously discussed, there are no cookie cutter solutions as this is as much an art as it is a science. However, there are a lot of tools for use that can really help executive management make data driven decisions that involve strategic fleet management. One tool for use is called life cycle costing (LCC) and this tool is often used as a foundational assessment of equipment life projections. Life cycle cost is a measure of the total cost of ownership and is commonly used by larger organizations to analyze facility management but it certainly has value added utility in medium and heavy equipment lifecycle projections as well. I will vaguely discuss how I inject a LCC analysis into my larger lifecycle methodology, for LCC formula and specific instruction, please reference the U.S. Department of Commerce and National Institute of Standards and Technology (NIST) Life Cycle Costing Manual (NIST Handbook 135). The life cycle costing analysis will require deep data that dig into multiple relevant cost metrics. Typical parameters include depreciation, inflation, maintenance, repairs, and obsolescence, all of which is applied in a formula that helps to produce a lifecycle “cost” by year expressed in dollars. This product is then measured against your company’s annual operations and maintenance (O&M) costs. The product’s annual life cycle costs and your organization’s operations and maintenance costs are then plotted on a chart with Y axis representing dollars spent and X axis representing the years of service. It may be of value to add the spreadsheet used to track O&M costs to sort of “show the work”. Once all is plotted and you see the intersect, you may add the serviceability thresholds for visual impact. When O&M costs climb at a faster rate you should soon see that the current year O&M costs match or exceed annual life cycle costs. When the two trend lines intersect, you will have reached the End of Life (EOL) candidacy window. If Telehandler was purchased in 2020 (year one), associated maintenance costs are reasonable through about year 2025 when something happens. The rate at which O&M costs climb is significantly accelerated and it matches the calculate life cycle cost by September of calendar year 2025. By 2026, it may be extrapolated that the telehandler is costing more money to maintain than the measured value that it provides.

The chart indicates the “when” and helps with some other deeper trend analyses but does little for the “why”. Why did O&M costs skyrocket after only five (5) years? OEM recommendations for medium size material handling equipment may be between seven to twelve years depending on hours, loads, heights accessed, terrain, and weather as examples of criteria used by OEM for end of life recommendations. At five years, this particular model costs more at least two years ahead of schedule. This is where your personalized and detailed equipment service records and evaluated external criteria can be measured in a lifecycle scorecard. The scorecard can be your organization’s highly specialized evaluative tool to micro manage all aspects of an equipment’s characteristics and performance. The scorecard can then produce a raw score which is measured on a scale of your design. Annual or semi-annual evaluations should be conducted in order to truly micro manage these critical micro aspects of performance. In this particular notional example, you will see in the recommendation statement that the telehandler lifecycle was accelerated as a result of DMSMS. This is an industry term for Diminishing Manufacturer Sources and Material Sources. If the availability of critical parts and components diminishes due to business decisions then your score increases and the potential lifecycle may be reduced, sometimes significantly.