Life cycle cost analysis (LCCA) is an approach used to assess the…

Question Answered step-by-step Life cycle cost analysis (LCCA) is an approach used to assess the… Life cycle cost analysis (LCCA) is an approach used to assess the total cost of owning a facility or running a project.1. What costs are being compared to result in the lowest cost option for the 5-year project in Indonesia. 2. How do UL Certification and Defect Rates factor into the analysis. Case Study: In 2009, Cy Lo moved to Shanghai to start APLO, a company that manufactured lighting products usinglight-emitting diode (LED) technology. At the time, Lo did not know much about LED technology or itsapplicability. He was also not savvy about business practices in China. Understandably, Lo’s investmentssoon floundered, the company went into bankruptcy, and Lo returned to his native Taiwan.However, Lo did not give up. He went back to university to study LED technology and earned a master’sdegree. More significantly, he convinced his top six classmates to join him as core engineers to restartAPLO in 2011. After the Shanghai misadventure, Lo decided that despite higher business expenses,APLO would manufacture its products in Taiwan with more reliable and higher quality components,which were more readily available there. The new business would also concentrate on advisory andcontract work, advising clients on their needs in terms of sustainability, and would then manufacture therequired products according to planned project specifications.APLO decided from the start to focus on LED lighting fixtures and systems. LED lighting providedflicker-free brightness and durability to meet the highest environmentally conscious industry standards.The products contained no hazardous materials, such as mercury or lead. Because they used minimalamounts of energy they had very low carbon dioxide (CO2) emissions. APLO’s technology also includedadvanced features, such as optic lens, flexible angle tailstock, and maximum heat dissipation, whichserved to optimize lighting both indoors and outdoors. The fixtures had a light, smooth body surface thatprevented dirt, water, or snow accumulation. With referrals from satisfied corporate and general publiccustomers, APLO soon became known as a reputable supplier of LED lighting systems for offices,libraries, factories, tunnels, parking lots, streets, and private properties in countries as diverse as Taiwan,Chile, Ghana, Germany, Indonesia, the United States, and the United Kingdom.SHOWCASE PROJECTLo was a fan of Indonesia’s exoticism, among other qualities. With over 250 million inhabitants,Indonesia was in dire need of modernizing its infrastructure as it expanded economically. Having alreadybeen contracted for street lighting in several parts of Jakarta, Indonesia’s capital city, APLO decided to look for other projects across Indonesia. Not long after that, it won a tender to supply and install 30,000pieces of 60-watt ecological street lights in several towns within one of the country’s provinces. Lowanted this project to serve as a showcase for APLO’s products in order to win more contracts throughoutIndonesia’s 34 provinces.The street light model that conformed to the contract specifications consisted of 10 key componentsincluding a solar panel, LED tube, integrated circuit, capacitor, glass cover, and aluminium body. Each ofthe 10 components could be sourced from three to five reliable suppliers that met the exacting standardsAPLO demanded. Although these components were among the best available, they all had potential forinherent defects during the five-year guarantee period that the client had requested. For example,component #1 supplied by Sup11 (see Exhibit 1) had a probability ratio of 0.037 that it wouldmalfunction during the five-year guarantee period. If it did, APLO would need to replace that component.The street light system was designed so that malfunctioning of any one of the 10 components would bestatistically independent. Therefore, if any one component failed, it would not affect any of the othercomponents; it alone would need to be replaced.Some of the components required pre-assembly, which incurred additional labour costs. For example,component #3, supplied by Sup31, would cost APLO NT$2241 plus an additional $710 if selected for thestreet light project.The contract specified that at least seven of the 10 key components in the street light needed to becertified by Underwriters Laboratories (UL). The independent global testing body awarded certification toproducts and services that met its safety and integrity standards. In APLO’s street lights design,components #1, #4, #6, #7, and #8 were UL-certified (see Exhibit 1).Based on previous projects, APLO was aware of incompatibility issues and complementary features ofthe various components. For example, components supplied by Sup13 and Sup23 were incompatible. Thismeant that components by these two suppliers could not be assembled together in the project. However,components supplied by Sup21 and Sup42 were complementary. Therefore, if a component from one ofthese two suppliers was selected (or not selected), a component from the other supplier would also need tobe selected (or not selected). This was because Sup21 and Sup42 provided components from the samemanufacturer.THE CHALLENGEFor this showcase project, APLO set a budget cap of $5,400 per street light, which, according to Lo’scalculations, would be financially suitable. Based on this information, Lo had to determine which set of10 components, from the variations available for each component number, should be assembled to buildeach street light in this important project. A successful outcome could help assure APLO a bright future.Image transcription textEXHIBIT 1: COMPONENTS SHORTLISTED FOR STREET LIGHTS Component : Buppler|Defect Rate ULCerafled Extra Pre- Over 5 years (0-NO, 1-Yes Assembly CONtINTE! Supli 0.047 1,380.00 Sup12 1,668.00Suply 1,464.00 Sup14 0.018 1,620.00 Bup21 0.043 278.40 Bup22 0.013 289.20 Bup23 0.050 252…. Show more… Show more  Business Management Project Management MGMT 6143 Share QuestionEmailCopy link Comments (0)

Leave a Comment

Your email address will not be published. Required fields are marked *