Life Cycle Costing, a View of Potential Applications: from Cost Management Tool to Eco-Efficiency Measurement

Abstract

In the field of modern production contexts, the complexity of processes combined with an increasingly dynamic competitive environment has created, in business management, the need to monitor and analyze, in terms of generation costs, not only the internal production phase but all stages both upstream and downstream in order to minimize the total cost of the product throughout the entire life cycle. The approach of life-cycle cost analysis was used primarily as a tool to support investment decisions and complex projects in the field of defence, transportation, the construction sector and other applications where cost constitutes the strategic analysis of cost components of a project throughout its useful life. The analysis methodology of Life Cycle Costing (LCC) concerns the estimate of the cost in monetary terms, originated in all phases of the life of a work, i.e. construction, operation, maintenance and eventual disposal / recovery. The aim is to minimize the combined costs associated with each phase of the life cycle, appropriately discounted, thus providing economic benefits to both the producer and the end user. Life Cycle Costing (LCC) is a tool used in consolidated management accounting (Horngren, 2003, Atkinson et al., 2002), which aims to achieve a reduction in carbon dioxide. Whole life cost. This identifies, with reference to the system, the functional activities within the appropriate stages of design, production, use and disposal of waste, and appropriates a cost (Fabricky Blanchard, 1991) in order to clarify the causal relationship between resulting architecture of product design alternatives and cost estimates of fees, which will probably be supported by the various actors within the economic life of the product [Fixson, 2004]. Life Cycle Costing is an analytical tool and method which belongs to the set of life cycle approach. Traditionally, LCC was used to support purchasing decisions of products or capital equipment involving a large outlay of financial resources (Huppes et al., 2005). In the definition provided by Rebitzer & Hunkeler (2005) LCC incorporates all costs, both internal and external, associated with the life cycle of a product, and are directly related to one or more actors in the supply chain.