Which whole-life costing model should the CPO use to get the most accurate total cost of ownership?

A CPO is analyzing whole life cycle costing of a machinery. He realises that cost elements are not specific but come from a range of values.

Which whole-life costing model should the CPO use to get the most accurate total cost of ownership?
A . Simulation models
B. Optimisation models
C. Decision support models
D. Kraljic’s preferencing model

View Answer

Answer: A

Explanation:

There are three basic groups of WLC (whole life-cycle costing) models:

– Decision support models

– Simulation models: Life cycle cost is an essential approach to decide on alternative rehabilitation strategies for infrastructure systems. Monte Carlo simulation approach is used to develop a stochastic life cycle cost (SLCC) model and methodology in order to compare different rehabilitation scenarios/alternatives for infrastructures, such as water mains. This method assumes that some inputs are randomly variable in a range of values. – Optimisation models

Reference: CIPS study guide page 38-39

LO 1, AC 1.2