Four common profit killers and how to avoid them
Superior maintenance operations may just be the difference maker
About 25 years ago, a veteran maintenance consultant posed to me the question, “What do maintenance people do?”
My immediate initial response was “They fix broken assets,” a response typical for that era.
The reality is maintenance technicians and their teams’ primary goal is to increase a manufacturer’s productive capacity and efficiency. In fact, maintenance is just as responsible for profitability as any other department for a manufacturer. Increased productivity is achieved by cost-controlling measures such as avoiding downtime, optimizing labor, avoiding stock-outs (e.g., missing a critical spare part when needed) and assisting in ensuring compliance and safety. These all promote profitability.
Fortunately, the dated perception of the grimy maintenance person only resurfacing once production resources are constrained is going away. Today these professionals are known for proactively keeping assets and facilities running smoothly and they often tie in with many departments — production, finance, engineering, safety and others. In many ways, they are the unsung heroes of an organization and they can have serious positive impact on profitability.
It’s also the case that manufacturers who implement software, best practices and use consulting services consistently show even greater profitability potential.
Common profit killers
There are numerous “buckets” of profit killers that plague manufacturers, especially as it pertains to maintenance operations. Some at the top of the list include:
- Labor: overtime, improper balance of work, wrong people for job, ineffectiveness
- Parts: stock-outs, poor ordering, poor management, loss/missing/theft
- Assets: downtime, poor quality (scrap/rework), energy usage, premature retirement
- Compliance: fees/fines, insurance hikes, bad will.
Each of these can be mitigated through superior maintenance operations, which will control costs and drive profitability. Organizations that use a CMMS computerized maintenance management system (CMMS) to help can experience operational efficiencies to include the following:
- More than 28% increase in maintenance productivity
- More than 20% reduction in equipment downtime
- More than 19% savings in material costs
- Nearly 18% reduction in maintenance, repairs, operation (MRO) inventory
Using software to control maintenance operations costs will ultimately drive profitability. A well implemented CMMS or solution for enterprise asset management (EAM) is key. When combined with methodologies like Total Productive Maintenance or Six Sigma, you’re on the path to continuous improvement and promotion of “lean” and efficient maintenance operations. All of this makes an organization more profitable.
Why software matters
Obviously, in today’s manufacturing maintenance environment, software is not just beneficial — it is essential. And in many compliance cases, it is mandatory. For example, ISO requires (among many other things) automated preventive maintenance. It is critical you have CMMS/EAM software that can help optimize your maintenance operations around asset management, work orders, parts and procurement, safety and compliance, reporting and analysis, and more. Many look to implement a CMMS to simply help automate manual tasks without realizing that the cost savings and profitability benefits will go well beyond their initial hopes and desires.
The general benefits of CMMS include:
- Asset preservation/longevity
- Minimizing unnecessary downtime
- Producing better products/environment
- Using less energy
- Optimizing maintenance planning.
All of these will ultimately drive profitability.
Avoiding the top profit killers
Let’s look at how each of these profit killers can be avoided.
Labor: There are countless higher-than-expected costs impacting your team if not managed correctly. One of the key profit killers to avoid is around poor team planning. In good times and bad, it is essential that the right person be assigned the right job at the right time. Poor team planning, improper prioritization, under-or over-utilization equates to higher labor costs and an unhappy team.
A CMMS helps with this. For example, proper prioritization of preventive and corrective maintenance work orders is essential, and you cannot just trust the legacy “priority” field.
Say you have a broken toilet near the break room: a diligent team member will happily add that in as a request tagging “emergency” work order. We all want a functioning bathroom, but there is likely another restroom in the vicinity. “Priority” on its own is not good enough. You must combine with the “asset criticality,” so you can truly see where the work orders truly rank. Notice the work orders below. The “Calculated Criticality” (also known as a RIME index) level-sets this scenario. By combining asset criticality with priority, a proper prioritization accurately shows work orders need to be done first.
In the case illustrated in the figure, a medium priority work order is outranking a high priority. This is appropriate as that asset is more critical to the organization. By properly prioritizing work orders, a team will get the most important jobs done first, helping to better organize staff and align maintenance priority with the assets that drive organization success (and profitability!).
Another area where CMMS can help is having detailed instructions — including checklists, pictures and videos — to ensure the team can perform the maintenance tasks (PM and CM) correctly and efficiently. This will lead to reduced meantime to repair, reduced work order completion times and quality work. As we continue navigating the COVID-19 pandemic, this is especially helpful as some team members may be out of office more often. Videos showing how they perform tasks will help when they can’t be there in person.
Assets: Downtime is the king (and queen) of profit killers. Most manufacturers can calculate down to the minute what unplanned downtime costs them. The impact adds up quickly and can have catastrophic impact on profitability.
A good CMMS will mitigate downtime by identifying sources of chronic issues (root cause analysis) and ultimately stretch the life of assets due to better maintenance. Not only will this help reduce meantime to repair, it will hopefully avoid downtime in the first place. Promoting more preventive maintenance (versus corrective maintenance) will automatically promote more uptime. This is done with robust PM capabilities within your CMMS, including calendar and meter reading (usage) based PMs. Add an internet of things (IoT) interface to connect in real time with your assets and you will further help your profits.
Now let’s talk about stretching the life of your assets with a CMMS. Not only will they be more reliable and produce better quality products, longer lasting assets help push off capital expense to replace them. There is detailed analysis and reporting that shows repair vs. replace, identifies “bad actor” assets that need more PM, and other valuable information can reduce both operating and capital expenses – a major ROI for your CMMS investment.
Parts/Procurement: There is nothing worse than getting an asset released from production to perform a critical PM, only to find out you are missing a spare part to complete the job. Even worse, unplanned downtime undoubtedly occurs and missing that spare part will extend the profit-killing downtime. Stock-outs are a big profit killer and need to be avoided.
A CMMS can mitigate this problem in a variety of ways. Clear visibility into your quantity on hand, and most important, alerts when you run low are critical to avoiding a stock-out.
Setting up automated reminders of low inventory can help ensure having the right parts when needed. Customizing alerts to appear on a dashboard, mobile device or delivered via email makes it easy to stay in control. And in today’s COVID-19 reality, disruptions to the supply chain mean it could take even longer to get that part and you may pay dearly for it.
Another good helper in reducing parts-related profit killers is to optimize your quantity on-hand for parts using reorder points, min/max and part-usage analysis. Turbo-charge this with “just-in-time ordering.” Just be sure to consider the possible disruptions in the supply chain due to the pandemic. Striking a good balance of on-hand parts (especially to avoid previously discussed stock-outs) can be a challenge, but striking that optimal (but smaller) inventory always makes the finance department happy by reducing overhead and driving profitability.
Safety/Compliance: A well-implemented CMMS system is essential to regulatory compliance and insuring a safe work environment for the team. Any manufacturer that has lost its regulatory certification can tell you the pain (and expense!) that is caused through fees/fines, vendor and customer bad will/canceled orders, insurance hikes and other negative experiences. CMMS on its own does not ensure certification/compliance but makes the process tremendously easier and more effective while driving all the profit-killing avoidance discussed previously.
Stronger with services and best practices: Software and technology are essential to helping identify your profit killers and turn them around, but they are greatly aided by services and industry best practices. Your organization may already be involved in “lean manufacturing” initiatives such as Six Sigma, Total Productive Maintenance, 5S or similar.
5S is an easy one: we are all likely doing 5S disciplines in our personal lives given the “stay at home” orders we have been forced into. 5S (sort, set-in-order, shine, standardize and sustain) is a centuries-old process (going back to 16th-century Venice shipbuilding) that is foundational to all lean initiatives. I can tell you that my closets, garage and attic have benefited from 5S-like initiatives during this pandemic.
To maximize the return on your CMMS investment, it is essential to focus on a quality implementation and team training. In the 25+ years I’ve been around manufacturers and CMMS, the most common root-cause of an unhappy customer is related to poor implementation, poor quality data or lack of training. Yes, quality software with appropriate features is important, but it won’t help if it’s not set up correctly or if the team is not trained.
Avoiding profitability nightmares
Profit killers are rampant, but they can be avoided when you’re armed with the proper software, best practices and services for the battle. Don’t be intimidated — rely on the CMMS vendor to walk you through how this can help. Start with baby steps, and continuous improvement and resulting profitability will eventually lead to big leaps and driving away those dreaded profit killers.
Lean manufacturing and maintenance is always in fashion. As we continue feeling the impact of the COVID-19 pandemic in every facet of our lives, one thing is for certain: continuous improvement efficiencies allowing us to “do more with less” is critical in all times. When the pandemic passes, those who took advantage of the amazing CMMS efficiencies, amplified solid best practices and methodologies, and leveraged services to get implemented will be well ahead of the competition.