Maintenance planning, scheduling deliver to the bottom line

What are the savings if an organization moves from breakdown maintenance to more planned and scheduled maintenance?

04/04/2011


I recently received an email note from a client asking how they could demonstrate the business impact maintenance planning and scheduling would have on their business. The client asked if there was a figure they could use to demonstrate the value of planned and scheduled work and where did this figure come from.

I replied back that the “rule of thumb” that I use is that planned and scheduled maintenance work is three to four times more cost efficient than breakdown maintenance. I have used this number for years. I am not quite sure where this figure comes from but I do know it’s fairly well accepted in industry and is consistent with my experience.

In this particular case the client was persistent and wanted to know a little more about how to use this “rule of thumb”. Perhaps the best discussion of how this “rule of thumb” can be used comes out of John Campbell’s book titled “Maintenance Excellence, Optimizing Equipment Life Cycle Decisions”. In the introduction on pages 7- 9 he describes a simple process for quantifying the cost saving potential of improving the planning and scheduling process.

What are the savings if an organization moves from breakdown maintenance to more planned and scheduled maintenance? This is really what everyone wants to understand especially those in charge of the budget.

Why is it important that we quantify the savings or as some call it “the size of the prize”? Unfortunately management typically understands one language and that is the language of money. When a program or improvement effort can be quantified in terms of dollars and cents it makes it easier for management to justify the resources required to staff and implement the project.

Doing the math

The rule of thumb for determining the cost saving potential goes like this. Maintenance work can be broken down into the following “cost units”:

  • Work performed in a planned fashion such as preventive, predictive or planned corrective maintenance will cost $1.00 per cost unit.
  • Work performed in an unplanned, unscheduled fashion will cost $1.50 per cost unit.
  • Breakdown or Emergency work costs $3.00 per cost unit.

What the “work unit” represents will become clearer as we explain the calculation.

Let’s use an example. Our annual maintenance budget is $10 million and the work distribution is 60% planned, 20% unplanned and unscheduled, and 20% breakdown or emergency. What would a shift from 60% to 70% in planned and scheduled maintenance yield us in terms of cost savings?

Next, let’s break this down into “cost units” (CU).

  • 60% x 1.0 = 60 cost units
  • 20% x 1.5 = 30 cost units
  • 20% x 3.0 = 60 cost units

Total CU = 150 cost units

Now we divide $10m by 150 work units and we get $66,666 per work unit or $.067m per work unit. We will use this number in our calculation to determine how the costs are split between the three different types of “work”.

  • Planned work costs 60/150 x $10m = $4m
  • Unplanned Work costs 30/150 x $10m = $2m
  • Breakdown or emergency work costs 60/150 x $10m = $4m

Lets determine what the savings would be if we increased the amount of planned work from 60% to 70%. The shift in work units would look like this:

  • 70% Planned work      70% x1 x $.067m= $4.7m
  • 15% Unplanned work 15% x1.5 x $.067m = $1.5m
  • 15% Emergency work 15% x3 x $.067m = $3.0m

New total annual maintenance costs= 9.2m or $9,200,000

An improvement from 60% to 70% in the amount of planned work yields us $800,000 annually. If you factor in the downtime it could be much more. In some industries the cost of breakdown maintenance can be as high as 20 times the cost of planned maintenance when you factor in things like production losses.

The truth is, the benefits of planned maintenance are much more than costs savings. Some of the benefits of a well executed maintenance planning & scheduling process are listed below:

  • Increased uptime
  • Reduced inventories
  • Improved safety and health performance
  • Improved environmental performance
  • Improved maintenance and repair quality
  • Increased asset integrity
  • And reduced fixed costs

In today’s uncertain economic business environment you cannot afford to have an ineffective maintenance planning and scheduling process. The investment in the way you manage your work will more than pay for itself.

Tracy T. Strawn is vice president of international business for the Marshall Institute, a Raleigh, NC-based management consulting company that has provided maintenance and reliability consulting and training services to industries of all types, worldwide for more than 35 years. Email: tstrawn(at)marshallinstitute.com



No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
World-class maintenance: The three keys to success - Deploy people, process and technology; 2016 Lubrication Guide; Why hydraulic systems get hot
Your leaks start here: Take a disciplined approach with your hydraulic system; U.S. presence at Hannover Messe a rousing success
Hannover Messe 2016: Taking hold of the future - Partner Country status spotlights U.S. manufacturing; Honoring manufacturing excellence: The 2015 Product of the Year Winners
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Getting to the bottom of subsea repairs: Older pipelines need more attention, and operators need a repair strategy; OTC preview; Offshore production difficult - and crucial
Digital oilfields: Integrated HMI/SCADA systems enable smarter data acquisition; Real-world impact of simulation; Electric actuator technology prospers in production fields
Improving flowmeter calibration; Selecting flowmeters for natural gas; Case study: Streamlining assembly systems using PC-based control; CLPM: Improving process efficiency, throughput
Putting COPS into context; Designing medium-voltage electrical systems; Planning and designing resilient, efficient data centers; The nine steps of designing generator fuel systems
Warehouse winter comfort: The HTHV solution; Cooling with natural gas; Plastics industry booming

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role that compressed air plays in manufacturing plants.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me