Mapping Life Cycle Costing: Methods, Applications, and Management Implications

Abstract

Accurate investment evaluation requires looking well beyond the purchase price. As sustainability regulations tighten globally and stakeholder accountability pressures intensify, decision-makers need analytical tools capable of capturing the full economic picture of a product or service across its entire useful life. Life Cycle Cost (LCC) analysis provides precisely such a framework, enabling the systematic forecasting and evaluation of costs across all life cycle phases while explicitly accounting for future uncertainties. Rooted in the Life Cycle Thinking paradigm, LCC is conceptually complementary to Life Cycle Assessment (LCA), which focuses on environmental impacts, and Social Life Cycle Assessment (S-LCA), which addresses social dimension. Regulatory bodies, particularly within the European Union, have formally incorporated LCC into public procurement frameworks, enabling or, in specific sectoral contexts, mandating its adoption as an award criterion, thus accelerating its institutional diffusion. This regulatory momentum reflects a broader recognition that short-term cost comparisons are inadequate proxies for the true economic burden of long-lived assets and infrastructure investments, where operational, maintenance, and end-of-life costs frequently overshadow initial acquisition expenditures. Despite this growing recognition, LCC adoption remains characterized by significant methodological heterogeneity. Divergent cultural approaches to cost analysis, varying computational methods, inconsistent assumptions on discount rates and uncertainty treatment, and sector-specific adaptations have generated a fragmented landscape that complicates cross-sector comparability and benchmarking. This fragmentation risks undermining the reliability of LCC-based decisions when managers lack sufficient awareness of how methodological choices shape cost outcomes and, consequently, investment rankings. To address this critical gap, the present article provides a structured comparative analysis of LCC adoption across multiple industrial sectors, bridging the distance between the tool's considerable theoretical potential and its often-inconsistent practice. Such an investigation is an increasingly urgent priority: as sustainability obligations continue to reshape managerial decision-making worldwide, organizations that lack robust and methodologically sound cost assessment tools risk both competitive disadvantages and regulatory non-compliance. Understanding LCC approaches, their underlying assumptions, and their practical implications is therefore not merely an academic exercise, but a strategic imperative for practitioners operating in an era of tightening social environmental and economic accountability.