4 Wrong Ways to Reduce Maintenance Operating Costs
Companies enhance their productivity and profitability by performing appropriate maintenance on their physical assets. The assets need to operate optimally and be available throughout production cycles. Most organizations optimize their maintenance programs to lower maintenance, repair, and operations (MRO) costs. Excessive expenditure on equipment maintenance results in lower profit margins.
Total maintenance costs vary from company to company depending on the number and complexity of production assets. Despite these differences, the major maintenance costs are:
- spare parts and material costs
- labor cost
- energy costs
- overhead costs (rent, utilities, insurance)
- vendor costs
Some organizations treat maintenance operating costs as non-profitable expenditures. Maintenance cost is an investment that enhances the performance, extends the service life of critical production assets, and eliminates unnecessary downtime. There are several ways for organizations to reduce maintenance operating costs. They involve strategic, cost-cutting measures that streamline operations in the maintenance department. Where do companies go wrong in their quest to minimize maintenance operating costs?
1. Reducing or deferring maintenance work
Physical assets require frequent inspections and maintenance interventions to keep them in good working conditions. Every equipment manufacturer provides a list of recommended preventive maintenance (PM) activities based on production schedules. Some PM interventions include lubrication, cleaning, parts replacement, oil analysis, or visual inspections. Accomplishing these tasks requires a short period, yet they have immense impacts on the overall equipment efficiency.
Organizations that rely on run-to-failure maintenance strategies will deliberately overlook preventive maintenance intervals. They perform maintenance when equipment failure occurs. Regular maintenance activities are deferred to a later date. These approaches will save the company a reasonable amount of money in the short term. As equipment ages, maintenance problems pile up. The mean time between failures increases as breakdowns become rampant. When these breakdowns occur, the companies cannot meet their production targets. Parts that fail beyond repair require immediate replacement for production to continue. In the end, the company loses production time and spends an extra amount of money to procure spare parts and settle overtime wages for maintenance technicians.
Serious breakdowns can initiate irreparable damage to expensive production assets. When this happens, the company phases out the production asset before the end of its service life. High replacement costs expose the company to debts.
2. Substituting OEM parts with generic aftermarket parts
To reduce maintenance downtime, companies should maintain a lean spare parts and tools inventory. That way, they can respond to emergency breakdowns efficiently. The company manages the inventory directly or appoints a reliable vendor. Asset manufacturers recommend the appropriate OEM parts to use for maintenance or replacement. At the same time, aftermarket parts dealers manufacture a wide range of identical replacement parts which are cheaper.
For an organization with a large asset base procuring generic aftermarket parts could result in immediate cost savings. The company gets hold of more spare parts at a lower budget compared to original equipment parts. Although generic aftermarket parts will facilitate the continuity of production processes, they have some downsides. Generic spare parts do not have the same quality as the original spare parts. Some of these parts do not last as long as OEM parts and require frequent replacements. Machining and surface finish irregularities found in some generic spare parts may result in process incompatibilities. Such part defects affect production efficiencies and escalate safety risks within the production floor.
With low-quality generic aftermarket parts, companies end up halting production processes frequently. Inefficiencies due to part incompatibilities reduce the quality and rates of production. Low production means low revenues for the company.
3. Not adopting maintenance technology solutions
Improving the quality of asset maintenance requires continuous collection and analysis of maintenance data. Technology solutions like Computerized Maintenance Management Systems (CMMS), predictive maintenance, and asset tracking continue to revolutionize maintenance workflows by providing technicians with accurate and real-time equipment operating data. Companies have to invest a small amount for acquiring and maintaining technological solutions. They offer better visibility on the health and maintenance costs of different production equipment.
With all these benefits, some companies still shun technology solutions. Others approach a solution provider and opt-out once the solution trial phase elapses. By doing so, the company avoids acquisition and subscription costs.
As the business grows and acquires more assets, maintenance tasks increase. The company struggles to implement accurate and targeted maintenance of physical assets. They end up spending more money manually monitoring the state of equipment maintenance. In the end, the company defers more maintenance tasks, while labor and overhead costs skyrocket.
4. Downsizing the maintenance staff
A typical maintenance department contains multi-skilled technicians who perform a myriad of maintenance tasks on production assets.
For some organizations, reducing maintenance costs involves layoffs. The company retains a handful of skilled maintenance professionals. Working with fewer technicians in the absence of technological solutions increases the risk of equipment failures. The technicians have limited time to inspect and repair physical assets. It reduces the accuracy and quality of performed maintenance work . During emergencies, there is an immediate spike in maintenance workload. In return, the technicians spend all of their time taking corrective measures.
More production delays are experienced as the mean time to repair (MTTR) increases. In the future, the company is obliged to spend more money to rehire and train maintenance professionals.
Maintenance cost is more of an investment than an expenditure. Proper planning enables the organization to perform accurate and timely maintenance of production assets. Many short-term cost reductions in the maintenance department will cause significant losses and expenditures in the medium and long terms.
Author: Bryan Christiansen is the founder and CEO of Limble CMMS.
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