Hello all,
I don't understand why we need to standardize the cost with the lifespan, since the rollers are replaced before the end of their lifespan and everything concerning their qualitative differences should be captured in the average shifts with downtime caused by defective roller that in my understanding should depend on replacement frequency. Can anyone help?
Hi Mathis,
You need to compare apples to apples. As in, your units when comparing anything needs to be the same.
The roller's have different lifespans...therefore there are replacement costs. As a result, you need to understand the annualized costs.
Let's put it this way: Does it make sense to buy a washing machine at Walmart? It costs just $200 so it must be a steal compared to $1,000 machines at other stores!
Well, if it breaks in 1 year and the other machines last 10 years, your annualized spend is $200/yr compared to $100/year.
Make sense?
I fully agree with your reasoning. However, I have problems with the cost item "Average shifts with downtime due to defective roller": I think that the average shifts with downtime due to defective roller should depend on the replacement rate (if not, it should not be scaled at all). However, it is not clear to which replacement rate the numbers in the table refer. If we are talking about average shifts with downtime at a replacement rate of each 16.7 tons, the costs should decrease with an increase in the replacement rate, i.e., the more frequently we replace, the less likely we are to have defects that cause downtime. If the numbers in the table already refer to the optimal replacement rate (or the required one) for each individual roller, these costs should again, in my optionion, not be scaled at all. I don't see why we need to scale this item up with increasing units. Thank you very much for your help!