Optimizing maintenance and reliability makes it part of the business plan
By Terry Wireman, Vesta Partners LLC -- Plant Engineering, 9/15/2008 1:00:00 AM
In Management 101, one of the first lessons taught is how to develop a business plan. the foundation for the business. Products and potential customers are identified, and a business structure is developed.
Application of that lesson to various strategic business units of plants and facilities has been slow. For example, consider the maintenance and reliability business in a plant or facility: How much of the “expense” in a plant is spent maintaining the equipment/asset base? How much of an influence on availability and asset utilization does the maintenance and reliability business impact? Extrapolating this one more step, how influential is the maintenance and reliability business in overall company profitability?
Experts in manufacturing have espoused for decades the viewpoint that maintenance – and by extension, asset management – is a core business process. However, unless it is considered a business and is professionally developed, it will continue to be considered an overhead, or a necessary evil, in most companies.
Implementing Management 101
How does one develop the maintenance and reliability business? If the principles learned in that Management 101 course were applied to the maintenance business, then the following process would be followed:
First, a mission or vision would be developed for the business, followed by an organizational structure to support it. This would include geographical deployment structures and organizational reporting protocols. Roles and responsibilities would be defined and staff levels determined.
Once these components were put in place, companies would develop a performance management system. The system would be linked to corporate objectives, which would include financial tie-ins, and be used to ensure the efficiency and effectiveness of the business.
While this approach seems to be common sense, how often is it used when it comes to the maintenance and reliability business? How many companies actually have clear goals and objectives for their maintenance and reliability businesses? In some cases, the goals are as simple as: Keep the production equipment running at all costs, or, fix it when it breaks; the insurance mentality.
If this is the goal or objective for the maintenance and reliability organization, then it becomes cost-driven, an overhead expense.
Conversely, consider if the objective for the maintenance and reliability business is this: Maintain the capabilities of the company’s assets to perform their designed function so the company maximizes its return on investment in the asset.
This view completely changes the focus of the business. It becomes asset-focused rather than production-focused. With this mission, it becomes clear that the maintenance and reliability business can impact availability and efficiency of the assets; with this focus, the business climate changes from one of expense to one of investment.
Who’s the customer?
Another dynamic shift in the maintenance and reliability business is also seen in the perception of who is the real customer for the business. If maintenance and reliability professionals are charged with fixing the company assets when they break, the customer is production or operations. If the goals and objectives are asset-focused, then the question must be raised, “Who owns the assets?”
It is clear that production or operations use the assets to produce a product. However, the real owner of the assets is the investors, whether the company is privately held or is a public entity. With this focus, the maintenance and reliability business becomes a partner in the overall corporate strategy, able to contribute to increased profitability by controlling expenses and increasing revenue.
If companies were honestly appraised of how they are using their maintenance businesses to increase profitability, it would be beneficial to consider research performed by Erik Brynjolfsson, a professor at the MIT Sloan School of Management. Brynjolfsson found an estimated $2 trillion in additional productive capacity – underutilized assets – in the United States, which does not show up in GDP statistics or on company balance sheets. Clearly his research shows that companies are severely underutilizing their existing assets. Based on the condition of the majority of maintenance and reliability organizations today, it becomes clear they are not viewed as partners in their businesses.
When Wall Street executives review companies, one factor that has gained popularity over the last few years is ROA, return on assets. In its simplest form, this is profits divided by the assets used to produce the profits. If, in fact, companies in the U.S. have $2 trillion in underutilized assets today, then the maintenance and reliability businesses need to be developed and optimized if companies are truly going to be profitable competitors in their respective marketplaces.
