Total Cost Assessment Methodology

Turton, David
(Arthur D. Little, Inc., Houston, TX)

As evolving technology, changing regulation and market competition force us to re-think our business, production and operating procedures we typically begin by focussing on the established economics of the product or process in need of modification. We readily focus on easily identified costs, such as capital, labor, materials and waste disposal. However, traditional cost models often ignore the real, but less tangible and sometimes hidden, environmental, health, and safety costs. Total Cost Assessment (TCA) is a multi-disciplinary, scenario-based costing methodology that compliments traditional cost models by facilitating an examination of all costs associated with a decision. Developed through the collaboration of several major chemical companies, TCA considers hidden costs, such monitoring costs, potential fines, remediation, and property damage. TCA also enables you to consider intangible costs, such as worker morale, community relations or costs borne by society-greenhouse gas emissions and the degradation of habitat, for example. The assessment consists of six main steps and a final feedback loop providing input into a company’s decision process. TCA enables you to answer questions, such as, “Should we use ethanol or another solvent in our process?” “Should our plant be located in an urban or a rural location?” “Where should our E&H dollars be focused?” “Is product A or product B more likely to have environmental, health, and safety consequences and costs in the future?”. While the assessment can be done manually, computerized tools are available, which are invaluable for complex processes. Companies such as Dow Chemical and Monsanto have used this method as a consideration in their decision making process.

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