The Costs of Replacement: High Direct Costs and Indirect Costs
When you are planning to refurbish a manufacturing facility, municipal building, office building or warehouse, you always have to consider the costs of painting versus the costs of replacement. While it is true that replacement is a very long term solution, it is also a very costly solution, both in direct costs and in indirect costs.
The direct costs of replacement are obvious. Materials, man-hours and installation eat up most of the project budget. Unfortunately, the project budget only shows part of the true costs of replacement. Structural components are by definition linked together. If you remove one component, you affect the remaining components. This drives up direct costs, usually after a project budget has been approved.
Compared to indirect costs, though, the direct costs of replacement are strictly minor league. Often, replacement strategies require downtime, and for an industrial facility, downtime is extremely costly. While machines and workers are idled, a company can lose tens of thousands of dollars or more every minute of every day.
Part two will address how to lower direct costs and indirect costs.