Is Your Maintenance Organization Cost Effective?

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Most maintenance organizations do not really know how good – or bad – they are. It is more a feeling of “we are doing pretty good here”.

Maintenance costs are still the prevalent measurement and it is commonly believed to be too high. It is therefore the subject of being cut in every new budget.

Maintenance managers often raise concerns over this and my answer is always “ Do you know how good your organization is and do you know how good it can become?” “Do you have a quantified plan describing how you will close this gap?” The answer is very often that “We do not have that plan”.

Perhaps you do not need to do a detailed study to find your improvement gap. You could start by doing some snap shot evaluations of common performance Indicators to find your gaps.

A fact is that if equipment is operating the way we expect it to operate we are making quality product.

We call this Manufacturing Reliability and it includes Quality performance, Time performance (Availability) and Speed performance.

If each of these elements is 95%, the total manufacturing Reliability is 85.7 percent. Is this good or bad?

It depends on the manufacturing process we are measuring and some other variables such as capacity and number of grade changes.

In the table below are some observed best Manufacturing Reliability data based on Quality and Time performance. Time performance is based on 8,760 hours a year available time.

Manufacturing Process Reliability

Quality x Time

Linerboard 94% – 96%
Tissue and Towel 95% – 96%
Liquid Packaging 83% -86%

This performance indicator is a lagging indicator, or a results indicator. As maintenance performance has a major impact on equipment reliability this indicator is along with safety the most important indicator.

When an organization focuses on – and improving – reliability, costs will go down and safety will improve.

As a maintenance manager you need to know the value of reliability because that is the product, or revenue, of the work your organization do.

Below is a table that shows how the value of 1% increased reliability is calculated:

Average market price per ton over last five years $680
Less Average variable cost per ton over last five years $480
Contribution per ton sold, manufactured and delivered $200

If your present reliability is 89% and you are making 400,000 tons/year. Then 1% increased reliability is equal to 4,000 tons/year.

At a projected contribution of $200 per ton the value of 1% increased reliability is 4,000 tons x $200 = $800,000 per year. In addition you will enjoy better safety, lower maintenance costs and many other benefits.

Maintenance productivity

The international measurement of productivity is working hours per output unit. Here I use Quality Tons as out put unit.

Consequently maintenance productivity should be measured as maintenance hours per quality ton. The maintenance hours must include all of your own staff’s maintenance hours, overtime hours and contractor hours for maintenance. I like this measurement because it takes away currency fluctuations, pay scales, benefit packages, accounting practices etc. which throws of any cost comparisons and make those almost meaningless.

As an example a linerboard mill with a capacity of 600,000 tons/year, two machines, recycled old containers is good at 0.26 – 0.3 maintenance hours per ton. Number of grade changes, average vacation time are variables to understand.

These are some important lagging, or results indicators a maintenance organization should have a very good handle on. In your improvement effort the leading or action indicators are even more important. When these improve you will get the results described in this column.

 
Contact: info@idcon.com att. Christer Idhammar.
Direct Telephone: +1 919 723 2682. Please visit www.idcon.com  for more information.
Christer Idhammar

Christer Idhammar

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