American Journal of Applied Sciences

THE APPLICATION OF LIFE CYCLE COST (LCC) APPROACH TO QUALITY FOOD PRODUCTION: A COMPARATIVE ANALYSIS IN THE PARMA PDO HAM SECTOR

Mattia Iotti and Giuseppe Bonazzi

DOI : 10.3844/ajassp.2014.1492.1506

American Journal of Applied Sciences

Volume 11, Issue 9

Pages 1492-1506

Abstract

In the international literature, the subject of the analysis of the cost of production is often confined to the analysis of short-term convenience. However, the quantification of the cost of production per unit of product has a particular importance in the processing enterprises, especially in the initial phase of choice that concerns realization of investments in facilities and technologies to improve productivity. About this general theme, the research applies the Life-Cycle Cost (LCC) approach to quantify the cost of production in the long-term operation in the processing of pig meat in the Parma PDO ham sector. The research considers not only the analysis of a single good or service such as a plant or a building, which is what frequently appears in LCC application, but also the quantification of the cost of an industrial production, in its whole cycle, during a long-run period. The research applies the LCC approach to a sector with high capital intensity for a typical food production. In the research, the application of the LCC shows that innovative firms that have made investments to improve business efficiency, have lower production cost in the long run; these firms are able to gain efficiency in the production cycle, as result of the investments made to reduce production costs, calculated applying LCC approasch. It then can be stated that the LCC approach represents a useful tool for analysis of convenience-cycle management of companies not only in the short period but even in the long run, particularly those operating in sectors with high capital intensity and with a long payback period of investments in fixed capital, as considered in the research. Moreover, it could be useful to deep the analysis applying the suggested LCC approach to a larger sample, even in other sector, to verify the usefulness of the LCC application in quantifying whole life cost.

Copyright

© 2014 Mattia Iotti and Giuseppe Bonazzi. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.