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Right-Sizing of a Maintenance Organization

by Christer Idhammar

One of the most common questions I am asked, especially from those that are new to maintenance, is, ”How do I know that we are right-sized within our maintenance organization?”

Many have tried to find a simple answer to this question. I myself have collected large amounts of data to find this simple answer. For example, number of motor drives, pumps or other common equipment within respective industries, in relation to the size of the maintenance workforce. Some believe that maintenance size should be based on estimated replacement value. It is common to say that maintenance costs should be less than 2% of estimated replacement value and the cost of employees is then a percent of that cost, often 30 to 60 percent depending on where in the world the facility is located. This is of course very difficult to determine because it is difficult to assess the replacement value of older facilities. In addition maintenance costs vary in each facility, even within the same company. Many of these costs depend on how rules are applied, for example, in some companies lubrication is seen as an operating cost and in other companies as a maintenance cost. The same thing goes for the replacement of machine clothing, refiner plates, etc. One of the biggest variations include the application of rules for what can be defined as a maintenance cost versus which capital cost. The variation here can be very big. A few years ago I worked with two competing paper companies. One company had maintenance costs of about US$55 per ton, the other had maintenance costs of US $120 per ton. The cost of manufacturing was about the same for both companies. The company with the lower maintenance costs later purchased the other company. Subsequently the acquired company adjusted the rules of capitalization and their maintenance costs ended up at the same level. Maybe the acquired company capitalized as much as possible because they knew they could be bought?

Even if Mark Twain insisted that there are three types of lies: lies, damned lies and statistics we have often successfully applied statistics in order to discover the correct sizing of a maintenance organization.

The chart below shows an example from a maintenance organization with 30 hourly employees. In 2006 they cut down the maintenance force from 30 to 25 people. Since nothing was done to improve maintenance processes the obvious result was extra hours in overtime and contractor hours increased more and more from 2006 to 2010.
 
The years 2008, 2009 and 2010 there was still a strong product demand at the same time as production reliability went down. I see similar examples over and over again. Short-term savings precedes long-term common sense.

Category

2005

2006

2007

2008

2009

2010

Own Paid Hours

62,492

53,118

52,995

53,400

53,296

53,218

Overtime

2,496

3,012

4,994

6,432

9,436

11,702

Contractors

5,912

5,414

7,912

9,837

12,493

24,276

Total Hours

70,900

61,544

65,901

69,669

75,225

89,196

Total hours have gone up from 70,900 to 89,196. The key here is to not analyze the number of employed people but rather look at all the maintenance hours and how they are distributed within total paid hours.

In this case a realistic efficiency improvement of 15% was calculated through the improvement initiatives that were necessary to implement. This leads to 76,000 hours being needed in the future. The implementation and results are expected to increase gradually within a period of four years. The natural attrition during these years is 5 people or 10,400 paid hours.

Overtime and purchased services will return to a normal level of 10% each. This means that the right amount of hours for a maintenance department is calculated to 60,800 or 29 employees. This will lead to four people being recruited in during four years.

By implementing and performing better and better maintenance processes, the maintenance department will reach the right capacity in the future. This is the only proven way to find the right level of maintenance size.