For all cases discussed, a life cycle cost analysis has been set up, as explained in chapter 3.4. Input parameters were defined using the cost breakdown structure and Dell’Isola’s Excel sheet (appendix 4). The output of the model results in the life cycle cost present worth difference. This output parameter indicates whether an alternative is interesting or not.
This has been done for every individual case. To examine the influence of some parameters on the output, graphs were made with curves plotting the life cycle cost present worth difference against the lifetime for different input parameters, with one parameter being changed every time. The advantage of this simple way of conducting sensitivity analyses is transparency, and the fact that it is easy to understand for everyone. From these graphs, it became clear that the choice of discount rate greatly influences all cases.
Dissertation document B. Kemps Page 42 To improve this simple but arbitrary way of conducting sensitivity analyses Dell’Isola’s Excel sheet has been modified in such a way as to make it possible to import @Risk in the model. For each of the input parameters a distribution has been defined (cf. input parameters, appendix 4). When the models are approached by means of a Monte Carlo simulation, this results in a mean output parameter and the standard deviation of this parameter. @Risk also gives the correlation coefficient of each input parameter with the output parameter.
Appendix 5 shows the results of the four cases. A description of the different graphs is also given. 5.3.1 Weinig versus Leadermac
The main difference between Weinig and Leadermac is the price of purchase. This can be derived from appendix 4.1. Both moulders have the same specifications and are in that respect comparable. Since Leadermac is expected to be of a minor quality, a technical lifetime of 15 years is expected. The lifespan of a Weinig, by contrast, will, after an update, be ten years longer.
The influence of the replacement cost of a moulder (at 15-25-30-40-45 years), is clearly seen in Appendix 5.1, graph 1. In order to clearly visualize the impact of the different lifetimes of the assets, a lifetime of up to 75 years is examined, which will smoothen the effect over time. It is obvious that this does not correspond to reality. The complete calculation is shown in appendix 4.2.
The results of the Monte Carlo simulations (cf. appendix 5.1, graph 3 specifically) show, that with a lifespan of 25 years, the discount rate influences the results the most. This makes sense, since the longer the lifetime, the more the influence of the value of money in time will increase.
As all graphs show, the Leadermac is expected to cost slightly less than the Weinig. The question arises whether the difference is significant enough to opt for the Leadermac. In this case, positive experience with Weinig in recent years may be expected to tip the balance in favour of the latter. 5.3.2 Moulding Cutter Head
By the second case, the investigation had to be modified. The Powermat Cutter Head was not compatible with our current moulder, so a fair comparison was impossible. Weinig has a special product line for the Powermat Cutter Head which is lower in price, but has fewer possibilities.
However, the case remains an interesting one: if the Powermat line turns out to be suitable for the company, an overkill of capacity and opportunities with the current moulder (the Hydromat 2000 of the High-speed line) may be possible. In that case, Veteka could have saved on purchase, labour cost and energy cost by purchasing a moulder of the Powermat line. Although this is a very interesting question, another way has been chosen to transform the second case.
Leadermac can provide the Speedmac (counterpart of the Hydromat) with an HSK clamping, which is equal to the Powermat cutter head. This HSK clamping gives an additional cost of € 7.500 for each axis. Within the company’s production process only five of the seven cutter heads are changed frequently, so a Leadermac with traditional cutter heads will be compared with a Leadermac with five HSK clamping systems. Besides the additional cost of the clamping system, extra costs have to be taken into account for training, and since the traditional cutter chisels do not fit onto the new system, an additional cost for support tools will be necessary.
Dissertation document B. Kemps Page 43 Appendix 4.4 shows the Excel calculation sheet for this particular case. Besides the additional costs of purchasing the Cutter Head, there will be a reduction of changeover times. As is clearly visualized by the results from the Excel sheet (appendix 4.4) and the distribution (appendix 5.2, graph 6), the HSK clamping system will hardly yield any savings for the parameters chosen. Changing these parameters demonstrates that the influence of changeover times is enormous, as shown in appendix 5.2 graph 5, “Reeks 2”.
The Monte Carlo analysis confirmed this simple sensitivity analysis: as shown in graphs 7 and 8 (appendix 5.2), changeover times had the highest correlations in uncertainty and sensitivity, followed by discount rate. Clear insight into the changeover times is therefore essential.
5.3.3 Coating line
In the case of the coating line, the additional cost of the sophisticated line is the highest amount of money. Added to this is the fact that the sophisticated line has a higher failure cost during the first two years and it is expected to need updates after 5 and 15 years. There will, however, be savings in energy, heating and labour costs (appendix 3). These parameters are all processed in the Excel sheet. The simple method (appendix 5.3, graph 9) shows that in the long term the sophisticated line will win out on the traditional line. For a low discount rate or by coating more meters this effect will be stronger.
From the Monte Carlo analysis, it can be concluded that there is a high degree of uncertainty in the result (appendix 5.3, graph 10). To further refine this, a better estimate of the amount of meters per day and/or the escalation rate of the labour cost is necessary, as is shown in graph 11.
5.3.4 Double vacuum box
In the fourth case, it may at first seem that there is only an additional cost at the time of purchase, with no additional profits. The work of cleaning the vacuum boxes is the same for both options. So, at first sight, the double vacuum box is less attractive. But when the production process is taken into account, it turns out that secondary costs are also involved: in the single version, when the vacuum box is being cleaned, the entire production line will have no output. Yet the heating and ventilation of the drying chamber and the transport system will still be running. In the case of a double vacuum box, these cost are eliminated.
So the benefits of a double vacuum box are lower energy and heating costs. When calculating these costs, one may be surprised at the amount to which they add up on an annual basis. (For the complete layout see appendices 4.7, 4.8 and 5.4.)
The Monte Carlo analysis also shows that discount rate has a considerable influence in this case. While the discount rate creates the highest degree of uncertainty, the model is most sensitive for energy costs (appendix 5.4 graph 15 & 16).
Dissertation document B. Kemps Page 44