Meaning
Financial assessment of all expenses related to a product from the initial purchase through its operation, maintenance and eventual disposal provides a complete picture of its value. Calculating the total cost of ownership for a moulding project includes the price of the resin, the energy used in production and the cost of any quality failures. This approach moves beyond the simple unit price to look at the long term economic impact of a material choice.
The calculation ends when the part is removed from service and recycled or scrapped.
Operational Expense
Energy consumption and cycle time are major factors that influence the daily cost of running a production line. Since a faster cooling resin can reduce the total cost of ownership, a more expensive material may actually be the cheaper option in the long run. Labor costs and machine maintenance are also included in this section of the budget.
These ongoing expenses often outweigh the initial purchase price of the equipment.
Quality Variance
Impact of scrap rates and warranty claims on the bottom line can be considerable for high volume manufacturers. If a cheap resin leads to a higher percentage of defective parts, the total cost of ownership will rise quickly. Consistent materials reduce the need for inspection and rework.
Reliable parts ensure that the final customer remains satisfied.
Lifecycle Management
Planning for the end of a product life involves considering the ease of recycling and the potential for material recovery. Because total cost of ownership includes the disposal phase, choosing a material that is easy to reprocess can provide a final credit to the budget. Sustainable choices are gaining priority in global markets.
A complete analysis helps a company make better long term decisions.