PHM Cost and Return on Investment

Prognostics and health management (PHM) provides an opportunity for lowering sustainment costs, improving maintenance decision‐making, and providing product usage feedback for the product design and validation process. This chapter discusses the determination of the implementation costs, potential cost avoidance, and the resulting return on investment offered by electronics PHM. An important attribute of most business cases is the development of an economic justification. Return on investment (ROI) is a useful means of gauging the economic merits of adopting PHM. Financial costs are part of the engineering economics of technology acquisitions. Implementation costs are the costs associated with the realization of PHM in a system, that is, the achievement of the technologies and support necessary to integrate and incorporate PHM into new or existing systems. The costs of implementing PHM can be categorized as recurring, nonrecurring, or infrastructural depending on the frequency and role of the corresponding activities.