How engineers can conduct cost-benefit analysis for PHM systems

Jeffrey Banks, Karl Reichard, Ed Crow, Ken Nickell

Research output: Contribution to journalArticlepeer-review

36 Scopus citations


Individuals who work in the field of Prognostic and Health Management (PIIM) technology have come to understand that PHM can provide the ability to effectively manage the operation, maintenance, and logistic support of individual assets or groups of assets through the availability of regularly updated and detailed health information. Naturally, prospective customers of PHM technology ask: "How will the implementation of PHM benefit my organization?" Typically, the response by individuals in the field is: "Anecdotal evidence indicates that PHM decreases maintenance costs, increases operational availability, and improves safety." This information helps the prospective customer understand the practical benefits of the technology, but that customer stills needs more information to justify their investment in the technology. The customer needs a calculated return on investment (ROT) figure for their particular asset that provides financial assessment of the benefit of the investment. The data, time, and expertise required to conduct a rigorous cost benefit analysis makes the effort seem daunting to the average engineer with little to no fimancial analysis training. The reality is that with a cursory understanding of the asset operation, maintenance, and logistic issues, a useful cost-benefit analysis can be conducted by engineers without business school training. Our purpose herein is to provide a general methodology for conducting a preliminary cost-benefit analysis that calculates an ROT for PHM implementation. We discuss the general types of information needed for the analysis, the quantifying of expected benefits, and the types of supporting data required to validate the benefit assumptions as well as an outline for the costing of PHM technology.

Original languageEnglish (US)
Article number4811085
Pages (from-to)22-30
Number of pages9
JournalIEEE Aerospace and Electronic Systems Magazine
Issue number3
StatePublished - Mar 2009

All Science Journal Classification (ASJC) codes

  • Aerospace Engineering
  • Space and Planetary Science
  • Electrical and Electronic Engineering


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