Cost assessment for implementation of embedded prognostic health management for electronic systems

Prognostic health management (PHM) is a method for assuring the reliability of a system by monitoring the system in real time as it is used in the field. As the system wears out, but before failure, information that facilitates decision making about the future use of the system is delivered to the user. In this paper, a cost justification has been developed for incorporating the additional circuitry needed to enable prognostics for electrical components directly onto a functional circuit board. Implementing PHM capability for circuit boards will add additional cost to a system, so high reliability systems where the cost of failure is high are easiest to cost justify for prognostics. Aerospace, defense and automotive, applications qualify as high reliability systems. Application domains that require high uptime, minimal amounts of unplanned maintenance, and controllable operating costs can also be cost justified for prognostics since they can benefit from the pro-active management of failures facilitated by PHM. Intangible criteria such as safety or the cost of human life also motivated the need for PHM, so often times projects are labeled strategic, and not subjected to the discipline of a financial analysis. This paper will show rigorous methods for assessing the decision to invest in PHM for electronics. The uncertain nature of research and development (R&D) and difficult to predict future economic conditions is not well captured by traditional discounted cash flow (DCF) methods. An approach known as the Datar-Mathews (DM) method will extend the DCF methods to be equivalent to a real options analysis and the Black-Scholes formula. The DM method is intuitive and uses concepts familiar to most engineers and technical managers.