Common Challenges with Life Cycle Cost Analysis (& How to Overcome Them!)

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Life-cycle cost analysis helps fleet managers accurately measure the long-term sustainability of their organization’s vehicles and assets. Not only can life-cycle cost analysis improve your bottom line, but it can also reveal the most sensible option for fleet managers faced with the decision to either hold onto or sell an asset.

While utilizing life-cycle cost analysis (LCA) can be an effective cost-saving tool for today’s fleet managers, there are a few common challenges that must be worked through to ensure accurate analysis: 

Challenge #1: Generating Asset Cost Profiles

For accurate asset cost profiles, you need a complete cradle-to-grave history for your vehicles and assets. These cost profiles can be successfully built from scratch, but historic data is needed to estimate mean cost by time and usage. Keep in mind: outliers, like inflated cost repairs or spare units, can skew your historic data.

Challenge # 2: Inflation Impacts

Consistent increases in price levels require that your historic costs and expenses be calculated in constant year dollars.

Challenge #3: Data Quality and Capture

Raw data alone can be misleading, since it doesn’t typically account for nuances and specifics that should be factored into the data. Downtime and all capital costs need to be identified, and your data’s quality is also contingent upon labor rates and salvage history.

The solution

AssetWorks Capital Asset Management (CAM) is a comprehensive asset life-cycle-based management system designed to help fleet managers overcome the common challenge of life-cycle cost analysis.

CAM compiles maintenance, disposal and replacement costs for your vehicles and assets and automates the calculation of full life-cycle costs. CAM allows fleet and asset managers to select the right assets at the right price, identify annual asset costs to pinpoint optimal replacement times and maximize asset disposal. It also provides support with fundamental asset management tasks like procurement and remarketing.

To learn more about CAM for life-cycle cost analysis, click here.