Reliability-associated Cost Assessment and Management Decisions for Multi-state Systems

Abstract

Reliability is an important factor in the management, planning, and design of any engineering product. Today, in the global economy and due to various market pressures, the procurement decisions for many products are not based only on initial purchasing costs, but on their total life cycle costs (LCCs) (Dhillon 2000). Any important decision such as reliability allocation, spare parts storage, operation modes, etc. is based on total life cycle cost. Total LCC analysis should include all types of costs associated with a system’s life cycle. The main part of these costs for repairable systems is operation and maintenance costs. In order to repair a system we must buy corresponding spare parts, so we must pay money for spare parts purchasing. We also must allocate for spare parts storage and pay the repair team to repair the system. In addition, there are financial losses when a system interrupts its work because of failure and so on. All these costs together are usually significantly greater than the cost of purchasing a system. Below these costs will be called reliability associated costs (RACs). In order to perform effective life cycle cost analysis RACs should be accurately assessed. The reliability engineer performing such an assessment should have a basic knowledge and cooperate with specialists in many areas (including engineering design, finance and accounting, statistical analysis, reliability and maintainability engineering, logistics, and contracting). Creating the methods for correct evaluation of RACs is one of the main problems of practical reliability engineering. This problem is partially solved only for binary-state systems. Unfortunately, for MSSs almost every individual practical case requires carrying on special research and very few research works have been devoted to this problem till now. As a result, managers often do not even recognize the problem’s existence. Therefore, there is a significant contradiction between the great theoretical achievements of reliability theory and their relatively rare successful applications in practice for MSSs.

In this chapter we present the history of LCC analysis, its principles, and corresponding standards. It will be shown that RAC is really a main part of LCC for the majority of repairable systems. The methods described in the previous chapters will be applied below in order to assess RAC for MSSs for some methodologically important cases. Based on this, the corresponding optimal management practices are established. It is shown that significant amount of money may be saved as a result of correct reliability management of MSS’s.