What Is Maintenance Really Costing You?

Can you quantify the financial impact of your maintenance programme on your business? Do you take into account not only the direct costs of maintaining equipment, such as labour and parts, but also the costs of not maintaining equipment effectively, such as unplanned downtime, equipment failures and production losses?

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The total financial impact of maintenance can be difficult to measure, yet it is a very valuable task to undertake. It is the first step in finding ways to improve profit and loss. In other words, it is the first step towards an optimised maintenance strategy.

In a 2001 study of maintenance costs for six open pit mines in Chile [1], maintenance costs were found to average 44 percent of mining costs. It’s a significant figure, and it highlights the direct relationship between maintenance and the financial performance of mines. More recently, a 2013 Industry Mining Intelligence and Benchmarking study [2] reported that mining equipment productivity has decreased 18 percent since 2007; and it fell 5 percent in 2013 alone. Besides payload, operating time was a key factor.

So how do you know if you are spending too much or too little on maintenance? Certainly, Industry Benchmarks provide a guide. In manufacturing best practice, benchmarks are less than 10 percent of the total manufacturing costs, or less than 3 percent of asset replacement value [3].

While these benchmarks may be useful, a more effective way to answer the question is to look at the symptoms of over- or under-spending in maintenance. After all, benchmarks cannot take into account your unique history and circumstance.

Symptoms of under-spending on maintenance include:

• Rising hidden failure costs due to lost production

• Safety or environmental risks and events

• Equipment damage

• Reputation damage

• Waiting time for spares

• Higher spares logistics cost

• Lower labour utilisation

• Delays to product shipments

• Stockpile depletion or stock outs

Other symptoms are explored in more detail in our guide: 5 Symptoms Your Maintenance Strategy Needs Optimizing.

In most cases, it is these hidden failure costs that have the most impact on your bottom line. These costs can be many times higher than the direct cost of maintenance – causing significant and unanticipated business disruption. As such, it is very important to find ways to measure the effects of not spending enough on maintaining equipment.

Various tools and software exist to help simulate the scenarios that can play out when equipment is damaged, fails or, conversely, is proactively maintained. A Failure Modes Effects and Criticality Analysis (FMECA) is a proven methodology for evaluating all the likely failure modes for a piece of equipment, along with the consequences of those failure modes.

Extending the FMECA to Reliability Centred Maintenance (RCM) provides guidance on the optimum choice of maintenance task. Combining RCM with a simulation engine allows rapid feedback on the worth of maintenance and the financial impact of not performing maintenance.

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This image depicts Isograph’s RCMCostTM software module which is part of their Availability WorkbenchTM. Availability WorkbenchTM and its modules are registered trademarks of Isograph Software. ARMS Reliability are uthorized distributors, trainers and implementors.

Armed with the information gathered in these analyses, you will gain a clear picture of the optimum costs of maintenance for particular equipment – and can use the data to test different ways to reduce costs. It may be that there are redundant maintenance plans that can be removed; or a maintenance schedule that can become more efficient and effective; or opportunity costs associated with a particular turnaround frequency and duration. Perhaps it is more beneficial to replace equipment rather than continue to maintain it.

It’s all about optimising plant performance for peak production, while minimising the risk of failure for key pieces of equipment. Get it right, and overall business costs will fall.

[1] Knights, P.F. and Oyanander, P (2005, Jun) “Best-in-class maintenance benchmarks in Chilean open pit mines”, The CIM Bulletin, p 93

[2] PwC (2013, Dec) “PwC’s Mining Intelligence and Benchmarking, Service Overview”, www.pwc.com.au

[3] www.maintenancebenchmarking.com/best_practice_maintenance.htm

 

 

Drew_Michael_ARMS_Reliability

Michael Drew

mdrew@armsreliability.com

 

 

5 Symptoms Your Maintenance Strategy Needs Optimizing

In these cases, there is much to gain by working through maintenance strategy optimization. To identify where your company’s maintenance strategy sits on the spectrum, you can perform a simple self-assessment that looks for the most common symptoms, which are described in detail in this guide.

If the symptoms are evident, then there is a strong business case to invest in maintenance strategy optimization.

The primary question in diagnosing the health of your maintenance strategy is a simple one. Does your maintenance strategy need optimizing?

Ideally, your maintenance strategy is already optimized. Perhaps it was, but is in need of a tune-up. Or, as is the case in many companies, maybe you are experiencing endemic symptoms that lead to:

• Recurring problems with equipment.

• Budget blow-outs from costly fixes to broken equipment.

• Unplanned downtime that has a flow-on effect on production.

• Using equipment that is not performing at 100 percent.

• Risk of safety and environmental incidents.

• Risk of catastrophic failure and major events.

To identify where your company’s maintenance strategy sits on the spectrum, you can perform a simple self-assessment that looks for the most common symptoms.

1. Increase in unplanned maintenance

A sure sign that your maintenance strategy is not working is the simple fact that you are performing more unplanned maintenance, which is caused by an increase in the occurrence of breakdowns.

2. Rising maintenance costs

In companies that apply best practice maintenance strategy optimization, total maintenance costs are flat or slightly decreasing month-on-month. These optimized strategies combine preventative tasks with various inspection and root cause elimination tasks – which in turn produces the lowest cost solution.

3. Excessive variation in output

A simple definition of the reliability of any process is that it does the same thing every day. In other words, equipment should run at nameplate capacity day in and day out. When it doesn’t, this is an indication that some portion of the maintenance strategy is misaligned and not fully effective.

4. Strategy sticks to OEM recommendation

Sticking to the maintenance schedule prescribed by Original Equipment Manufacturers (OEMs) may seem like a good starting point for new equipment. But it’s only that – a starting point. There are many reasons why you should create your own optimized maintenance strategy soon after implementation.

5. An inconsistent approach

Consistency implies lack of deviation. And this implies standardisation. When it comes to maintenance strategies, standardisation is essential.

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Cmms | 20.11.2015

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