"What is the meaning of "the life cycle cost of oil" and how is it calculated?"
Sometimes a higher performance product costs less than a commodity-type product, even though the price is higher. To
gauge whether this will be the case, we should look at the product life cycle cost rather than the purchase price.
The life cycle cost of oil is effectively the total long-term use cost for a given product from oil change to oil change.
There are a variety of indirect, but none-the-less valid, costs
and time commitments that factor into an oil change, including
the following:
1. Oil specification.
2. Oil purchase, including: purchase document generation and sending purchase document.
3. Cost of the oil itself.
4. Oil receipt and storage, including: tracking of shipment paperwork to affirm receipt and rework for errors and omissions.
5. Invoice receipt, approval and payment (this item alone can add a lot to the real cost of plant lubrication).
6. Oil transfer to the user or the asset.
7. Oil disposal cost, if any.
8. Cost of labor associated with the oil change.
9. Cost of other materials associated with an oil change.
10. Cost of monitoring the new oil for the life of the oil.
11. Cost of degradation effect, including loss of oil strength, loss of filterability, loss of cleanliness, corrosion and
corruption of mechanical surfaces.
12. Cost of machine downtime associated with the
oil change.
There may be other costs you could identify for your specific
organization.
If you estimate each actual incremental cost or time requirement, apply a normalized labor rate for the time, and then add the
various costs together, you could fairly accurately guess the
total life cycle cost of an oil change at your facility. It is higher
than you might expect.
While all of these items do not show up in the obvious as a line-item in the maintenance budget report (which is generally
limited to the cost of the purchase itself, and is measure by
cost per pound or cost per gallon), the costs are nonetheless
absorbed by the organization and added to the total cost per item manufactured.
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