How engineers can conduct cost-benefit analysis for PHM systems

Jeffrey Banks, Karl Reichard, Ed Crow, Ken Nickell

Research output: Chapter in Book/Report/Conference proceedingConference contribution

23 Scopus citations


Individuals who work in the field of Prognostic and Health Management (PHM) 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 (ROI) 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 financial 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. The purpose of this paper is to provide a general methodology for conducting a preliminary cost benefit analysis that calculates an ROI for PHM implementation. The paper will 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 the PHM technology.

Original languageEnglish (US)
Title of host publicationProceedings - 2005 IEEE Aerospace Conference
PublisherIEEE Computer Society
Number of pages10
ISBN (Print)0780388704, 9780780388703
StatePublished - 2005
Event2005 IEEE Aerospace Conference - Big Sky, MT, United States
Duration: Mar 5 2005Mar 12 2005

Publication series

NameIEEE Aerospace Conference Proceedings
ISSN (Print)1095-323X


Other2005 IEEE Aerospace Conference
Country/TerritoryUnited States
CityBig Sky, MT

All Science Journal Classification (ASJC) codes

  • Aerospace Engineering
  • Space and Planetary Science


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