What techniques are used in WLC to determine the total cost of ownership?

The selection of simulation and optimization models as the correct technique for determining the total cost of ownership (TCO) in Whole Life Costing (WLC) is well-founded. Simulation models are valuable for assessing various scenarios and their potential financial implications over the lifetime of a product or service, enabling organizations to understand the variability in costs based on different variables and conditions.

Optimization models complement this by allowing organizations to find the most cost-effective solutions by evaluating and refining the numerous factors that contribute to total ownership costs, such as initial investment, maintenance, and operational expenses. By integrating these two approaches, organizations can gain a comprehensive view of TCO, enabling better decision-making and strategic planning.

Other techniques, such as descriptive analytics, while useful in summarizing historical data, do not provide the forward-looking insights necessary for assessing TCO. Similarly, market surveys and financial projections focus more on gathering external and predictive data rather than providing the detailed analytical framework needed for comprehensive TCO assessments. The combination of simulation and optimization effectively addresses the complexity involved in evaluating costs throughout a product’s lifecycle, making it a powerful method in WLC practices.