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TOTAL COST OF OWNERSHIP – TCO

TCO is an economic assessment method for estimating direct and indirect costs. This method calculates the cost of purchasing and operating the equipment over its lifetime.

Total cost of ownership

TCO is an economic assessment method for estimating direct and indirect costs. This method calculates the cost of purchasing and operating the equipment over its lifetime.
TCO assessment allows you to see beyond the cost of acquisition, and take into account all aspects of operations.
Proper and professional assessment will show you the economic significance of future use, and of the maintenance of your equipment or system.

TCO calculation takes into account, inter alia:

  • Costs related to breakdowns or downtime (initiated and not);
  • Poor performance or decreased productivity;
  • Area/space required;
  • Electric power;
  • Development expenses;
  • Tests formation;
  • Expansion/scaling expenses.

Hence, TCO is sometimes considered the Total Cost of Operation, which means “total operating cost”.

When TCO is implemented as part of feasibility calculations (such as ROI, IRR, EVA, ROIT, RJE), TCO provides the cost calculations helping to decide between different bids.

An example of a case that requires cost calculation includes:

The decision to purchase a plate heat exchanger, or any other heat exchanger, must be accompanied by a TCO analysis. The cost of purchasing a system is more expensive, balanced and sometimes dwarfed, against the heavy and unnecessary ongoing costs that a cheaper system is prone to produce. Considering the other factors, the purchase price is only the first step in calculating the costs over the system’s lifetime.

Many organizations and even governments, fail to understand and calculate the TCO. This happens because they rely on TCA (total cost of acquisition) to make purchasing decisions. It also happens that buyers do not take into account all the costs attributed to TCO, since other departments in the organization bear these costs (a concept called cost shoving).

Often, TCO cost calculation results are significantly contradictory to TCA calculations. In our method, calculating TCO is far more relevant in deciding on any capital investment. In addition, taking into account a firm’s cost estimates for all of its projects and processes, TCO calculation provides the company’s true earnings estimate.

Are you ready to start saving a lot of money today – sometimes a fortune – and an abundant amount of energy?

Total cost of ownership can be applied to any equipment and system, but it is especially critical to apply TCO calculation with respect to heat exchangers’ systems. Today, in most companies, TCO constitutes a crucial consideration in purchasing decisions. In the case of heat exchangers, purchasing decisions must be made in accordance with TCO calculation.

The cost of heat exchangers is only a tiny fraction of the larger system’s cost they serve. Continuous decline in their output “gorges” hidden expenses and costs for years, and the damage done to the company could amount to millions on millions. That is, the potential damage is greater by the scores in comparison to the heat exchangers’ purchase price.

TCO does, however, take into account the “initial cost” forecast of a new system (design, production and installation). But TCO’s implementation of equipment and facilities includes much more than that. In addition to the initial cost, a variety of critical requirements and costs are taken into account throughout the lifespan of the heat exchangers.

The key to the efficiency of heat exchangers lies in their unique adaptation to the specific application they serve.

The existing variants spectrum, adheres paramount importance to the engineering knowledge and the planning ability of the manufacturer in this important compatibility, otherwise the main facility will start generating unnecessary energy and other expenses, almost from day one, a process that will get worse over the lifespan of the facility.

All of the above, apart from the continuous maintenance costs and frequent replacement of parts, that result from the heat exchangers’ underrated production quality and the use of inferior raw materials.

A key goal of designing, constructing, operating, and managing facilities through TCO procedures, is to anticipate needs and deliver data-driven results.

TCO can be implemented at any time during the lifetime of the system, to manage the cost inputs for the system’s operational lifetime in the future.

The American Standard

ANSI, the American Standard Institutes and APPA – Association of Physical Plant Administrators, have joined forces and developed a standard on TCO. Thus, in December 2017, a TCO Standard 1000-1 was created for facilities and systems (see presentation of this standard here).

APPA 1000-1 provides the basics of the standard and a holistic approach to implementing key principles of TCO.

Implementation of the standard concerns a variety of managerial roles and requires collaboration between them:

  • Financial experts, facility professionals, architects, engineers, consultants, construction and operations & maintenance (O&M) workforce.
  • Implementing key TCO principles can improve decision making, and maximize financial strategies throughout the lifetime of the asset.

All of this can and should be done starting from the planning and design stage up to the end of the system’s lifespan.

A wise TCO approach beyond the initial cost of procurement

In our heat exchangers’ solutions, we apply the TCO approach, as part of our product quality concept that we provide. It starts in the development phase. We take in account all aspects of usage and application beforehand.

These are aspects, such as: energy costs, repair and maintenance, and the critical effects on the entire system’s operating expenses. This aspect of the development phase is designed to ensure maximum savings throughout the sometimes decades long product’s lifespan.

HEAT TRANSFER USING PLATE HEAT EXCHANGERS

Heat transfer through plate heat exchangers has been in use for about 100 years. In all other areas, i.e., hotels, building services, etc., it has been widely used for over 40 years now.

Our plant is, among other things, a knowledge center on the area of heat transfer in general and heat exchangers in particular. You can learn, inform yourself and keep up-to-date with all the technologies, usages, aspects and innovations that exist in this area.

Are you ready to start saving a lot of money today, sometimes a fortune, and an abundant amount of energy? We offer free seminars:

We deliver engineering seminars in the area of heat transfer to impart knowledge and understanding in this area among all concerned. Typically, we conduct a 2-hours engineering seminars.

Additional seminars are held in factories and other facilities that are related to this manufacturing and operating systems. These are seminars that provide engineers and technicians knowledge of the various structures, configurations and types of heat transfer and heat exchanging methods. In this type of seminar, we focus on different application requirements, from heat exchangers, their characterization and temperature, their various applications, their maintenance and their role in various energy systems.

To coordinate the seminar please contact us by email or phone.

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