What is Life Cycle Cost?
Life cycle cost (LCC) is a financial estimate of the total cost of owning, operating, and disposing of a product or system over a specified period. In e-commerce, consumers can use LCC to evaluate the long-term costs and get more accurate financial projections. It can include charges, such as the initial purchase price, maintenance and repair costs, energy and operating costs, and disposal or recycling costs.
Significance of Life Cycle Cost
Life cycle cost helps businesses to improve durability, reduce maintenance, reduce risks, and lower operational costs. The significance of life cycle cost is as follows:
- Life cycle cost allows consumers and businesses to evaluate the long-term costs and benefits of purchasing a product online.
- By considering the LCC of a product, a business can make more informed and cost-effective purchasing decisions. They can choose products that will be more cost-effective over the long term.
Prerequisites of Life Cycle Cost
There are a few prerequisites that may be necessary for considering life cycle cost in the context of e-commerce:
- Time frame: It is also essential to specify the time frame over which LCC will be calculated. It can be a specific number of years or the product’s expected lifespan.
- Assumptions: Calculating LCC often involves making assumptions about future costs and conditions. It is essential to clearly define and document these assumptions to ensure that the LCC estimates are reliable and accurate.
Use Case of Life Cycle Cost
Suppose a consumer used a life cycle cost calculator to choose a cost-effective and energy-efficient washing machine from an e-commerce website. This saves money and reduces environmental impact in the long run.
