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1 Journal of Achievements in Materials and Manufacturing Engineering

1 2008

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Need for incorporating reliability and availability in payback calculations

Shouri P. V., Sreejith P. S.

Journal of Achievements in Materials and Manufacturing Engineering

2008

Vol. 31, nr 2

816-821

Purpose: The paper presents a method of payback calculation based on the process valuation model by incorporating reliability and availability. The paper also presents a comparison of calculation of payback periods using the conventional method with the method that uses the valuation model. Design/methodology/approach: The value of the system is arrived by considering the present worth of expected future cash flows. The model takes into consideration the system availability, in addition to the other cost elements like investment cost, and maintenance as well as operating cost. Findings: Calculation of pay back using valuation model was compared with the conventional method. The valuation model method proves to be a better tool in making safe decisions. Practical implications: In order to arrive at the economic feasibility of the new proposal the benefits that can be derived over the lifetime as well as the operating and maintenance costs are compared with the investment to be made. However, quite often the change in reliability of the proposed new design as a result of the change in system configuration or change in system components or both of these factors are not taken into consideration. Originality/value: Any new proposal for modification of the existing process or equipments should prove itself to be economically feasible for gaining acceptance for implementation.