Life-Cycle Costing (LCC) was originally developed by the U.S. Department of Defense in the 1960s to improve acquisition and procurement of for example weapons systems. In the 1980s LCC became popular as, for example, a tool for Life-Cycle Management (LCM) for products and the like. Then, in the 1990s LCC entered the environmental management domain.
Throughout the various applications of LCC two core aspects have remained the same; 1) include total costs and 2) consider the entire life-cycle of a system (product, service, infrastructure, etc.). Unfortunately, traditional LCC approaches cannot, for example, handle overhead costs well and often cash flow is confused with costs.
A new approach called Activity-Based LCC has therefore been developed and in my new book the theory behind is explained in details and illustrative, real-life case studies are provided. As the name indicates the approach is a derivative of Activity-Based Costing, but improved by introducing, for example, risk management concepts, Monte Carlo methods and links to performance measures such as Economic Profit when needed.
This new approach hold great promises as shown in my new book, as for example Senior Partner John-Erik Stenberg of Considium Consulting Group AS explains:
“Traditional cost cutting has always had a backward focus and created lots of negative reactions – both rational and irrational. In his new book Jan Emblemsvåg introduces a new forward looking life-cycle approach to cost management. Employing foresight instead of hindsight puts the focus on processes, uncertainty and risks and future value creation.
“The author’s strong side – besides having a good holistic concept – is the ability to express himself accurately and clearly on very complicated and sophisticated theory. Managers, consultants and others with interest in cost management will be enlightened and inspired by the book – and no doubt find it of great help in applying the methods and processes that are presented.
“The idea of turning uncertainty into an asset for managers is quite unique. Making budgeting less data oriented and more risk oriented is another good idea. The next step now is to make operative approaches and apply the theory in practical situations!”