Basic guide to maintenance benchmarking

Benchmarking has become a common practice in all kinds of businesses, but nowhere is it more prevalent than in manufacturing.

01/01/1999


Benchmarking has become a common practice in all kinds of businesses, but nowhere is it more prevalent than in manufacturing. The idea of measuring yourself against the best is an attractive one -- one that the gurus say can lead to breakthroughs in how you run your business. But like many other great ideas, benchmarking can lead to frustration and disappointment if it isn't approached with proper understanding.

"Benchmarks are like the warning lights on the dashboard of your car," says William L. Hagan, Jr., vice president, A.T. Kearney, Inc. "When a light goes on, you need to look under the hood to see what the problem is. Benchmarks might identify an area that needs attention, but they won't tell you what needs to be done or how to do it."

"You need to know the reasons and drivers behind the numbers," Hagan advises. "It's easy to get caught in the trap of just comparing numbers, when in fact the lows or highs that represent best practices for some other plant might not be appropriate for your facility. Everything has to be looked at in context."

For example, Edwin K. Jones, a plant engineering and maintenance consultant, points out that world-class operations will typically outsource around 30% of their maintenance work (on a cost basis). But, he cautions, this idea should not be used as a target. Some companies have adopted a strategy of maximizing outsourcing in every possible area. Others prefer to build and protect their "corporate knowledge" by minimal outsourcing. Thus, in cases like this, a benchmark value may make an interesting comparison, but it is not necessarily an indicator of a best practice.

Other values may be what benchmarking practioners call "industry sensitive." That means they tend to run higher or lower according to the type of industry studied. Maintenance cost as a percentage of estimated plant replacement value, for example, is usually higher in discrete manufacturing plants than in continuous processing operations.

In his book, The Basics of Benchmarking , Robert Damelio points out, "A common misconception is that there are lists or databases of universally accepted best practices for a given industry, function, or process. But what makes a given practice better than another depends on the criteria you use to evaluate the practice."

With that understanding, benchmarking can indeed lead to significant improvements. According to a survey on The Benchmarking Exchange web site, 42% of responding companies have a formal benchmarking process, and almost all benchmarking activities result in the implementation of some changes. Properly used, it can lead to a program to realize superior world-class performance in the most efficient manner.

Definition

Benchmarking is a systematic, continuous process for measuring, evaluating, and comparing business practices against recognized leaders to determine the extent to which you can improve your organization's performance.

It is most useful as a first step in creating the recognition that change and improvement are possible or needed and when trends, rather than just absolutes, can be studied.

General approaches

- Internal benchmarking -- comparing processes within a company

- Competitive benchmarking -- comparing processes with a competitive company

- Function benchmarking -- comparing a function (e.g., maintenance) in one plant or company with the same function elsewhere

* Generic benchmarking -- comparing processes with an "unrelated" organization recognized for innovation or a specific expertise


Glossary of terms

Representative best practice. A typical value reported by outstanding plants. Not necessarily the "best of the best" or an absolute target. Representative range. Range of values typically reported by plants.

Representative best practice. A typical value reported by outstanding plants. Not necessarily the "best of the best" or an absolute target.

Representative range. Range of values typically reported by plants. Levels outside the range may represent particularly outstanding or weak performance.

ERV. Estimated replacement value. Usually the total value of the plant as used for insurance purposes.

Process industries. Industries that predominantly use batch or continuous processing to produce a bulk product (e.g., foods and chemicals).

Discrete industries. Industries that predominantly manufacture discrete parts, components, or units of equipment.

Total sales. Dollar value of a plant's annual product output.

Technician. Any maintenance worker performing direct maintenance labor. Includes mechanics, electricians, millwrights, etc. Often called "direct maintenance personnel," "hourly personnel," or simply "mechanics."

Maintenance cost/ERV. Ratio of total annual cost of maintenance to plant's estimated replacement value. A measure of dollars required to maintain value of the plant. Also a general indicator of maintenance cost effectiveness. A downward trend without real maintenance improvements can indicate milking of assets.

Total maintenance cost/total sales. Ratio of total annual cost of maintenance to plant's output. Indicates portion of revenues used to maintain assets. May also indicate maintenance cost effectiveness.

Maintenance labor cost/total sales. Ratio of total maintenance labor compensation to plant's output. Facilitates comparison and trending of the labor component of total maintenance costs.

Maintenance materials cost/total sales. Ratio of total annual cost of maintenance parts, materials, and supplies to plant's output. Facilitates comparison and trending of the materials component of total maintenance costs.

ERV ($millions)/technician. Ratio of estimated replacement value, expressed in millions of dollars, per maintenance technician. Indicator of direct maintenance worker productivity. An upward trend can indicate either improvements in maintenance practices or a need for more personnel.

ERV ($millions)/maintenance and reliability engineer. Ratio of estimated replacement value, expressed in millions of dollars, per maintenance staff engineer. Indicator of maintenance supervisory and engineering productivity.

Work-order coverage. Percentage of maintenance manhours documented by work orders. A measure of recordkeeping discipline. A high percentage indicates that work-order data can be used to determine service levels and manpower requirements.

Schedule compliance (overall). Percentage of maintenance manhours worked as scheduled. An indicator of overall maintenance management effectiveness, including planning, estimating, scheduling, materials availability and delivery, tools management, etc.

Schedule compliance, preventive maintenance. Percentage of preventive maintenance manhours worked as scheduled. An indicator of preventive maintenance management effectiveness.

Schedule compliance, planned repairs. Percentage of planned repairs manhours worked as scheduled. An indicator of the effectiveness of planned repairs management.

Planned work (overall). Percentage of the maintenance workload that is known and planned in advance, including job planning, materials management, and resource scheduling. An indicator of overall maintenance management effectiveness. A high percentage is desirable.

Overall equipment effectiveness. Percent of actual operations against perfect production rates assuming no scheduled or unscheduled downtime, no defective product, and no reduced production rates.

Uptime. Ratio of actual production hours to scheduled production hours. A measure of unscheduled interruptions to production. Indicator of effectiveness of preventive and predictive maintenance in combination with other factors.

Availability. A ratio of the time equipment is actually available to the total scheduled equipment time. The availability ratio is computed by adding the scheduled running time to the scheduled idle time and subtracting the unscheduled downtime, then dividing that value by the sum of the scheduled running time plus the scheduled downtime plus the scheduled idle time.

Planned and predictive maintenance by operators. Amount of maintenance performed by equipment operators.

Maintenance labor cost/total maintenance cost. Percent of total maintenance cost attributable to direct labor. May be used as an indicator of manpower planning effectiveness.

Contractor cost/total maintenance cost. Percent of total maintenance cost attributable to outside contract work. Heavily dependent on strategy.

OSHA injuries/200,000 manhours. (Sometimes stated as OSHA injuries per 100 employees.) The standard indicator of safety program effectiveness.

Technicians/support person. Ratio of direct workers to support personnel, such as planners, clerks, storekeepers, etc. Indicator of manpower planning effectiveness.

Technicians/planner. Ratio of direct maintenance workers to personnel involved in maintenance planning (including partial headcounts for people who plan part time). An indicator of planning effectiveness.

Technicians/total workforce. Ratio of direct maintenance workers to total plant employment. Useful in specific comparisons between similar plants and as a trend indicator over time.

Maintenance craft classifications. Number of formally classified maintenance crafts represented in the plant. Heavily dependent on labor practices and plant strategy.

Preventive maintenance and predictive maintenance manhours/total maintenance manhours. An indicator of effectiveness of plant's proactive maintenance programs to ensure equipment reliability.

Emergency manhours/total maintenance manhours. Ratio of manhours to complete emergency work to the total maintenance manhours. Indicator of maintenance planning, control, and problem prevention.

"Wrench time"/Total maintenance manhours. Percentage of time that direct maintenance workers are advancing completion of a maintenance task. Includes time spent using tools; excludes idle time, planning, traveling, transporting, securing information, etc. Indicator of overall maintenance management effectiveness.

Stores value/ERV. Ratio of the value of parts and materials in maintenance stores to the plant estimated replacement value. A measure of working capital invested in local stores. Strongly dependent on maintenance materials management strategy.

Stores turnover. Ratio of annual stores disbursements to inventory value. Strongly dependent on stocking strategy.

Stores inventory accuracy. Ratio of actual inventory to "paper" inventory. Indicator of stores recordkeeping effectiveness.

Stores disbursements/stores personnel. Ratio of dollar value of disbursements to number of storekeepers. Indicator of "productivity" of stores operations and personnel.


Benchmarking processes

Three-phase program

1. Analysis (define project, form team)

2. Discovery (identification of best practices, recommendations for improvement)

3. Implementation

Four-phase program

1. Identify activities/processes to benchmark

2. Study/measure processes in your own company and other companies

3. Learn how to close the gap between your present and desired levels of performance

4. Develop and implement an improvement plan

Six-phase program

1. Decide what to benchmark

2. Plan the benchmarking project

3. Determine your own performance level

4. Determine the performance of others

5. Analyze the findings

6. Use the results

Eight-phase program

1. Determine which activities will benefit from benchmarking

2. Determine the key factors driving those activities

3. Identify companies with best practices in those activities

4. Study and measure those best practices

5. Measure your own performance and compare with best practices

6. Develop plans to meet or exceed best practices

7. Obtain commitment to implement plans

8. Implement plans and monitor results

Nine-phase program

1. Select practice or process

2. Identify performance

3. Train benchmarking teams

4. Measure performance

5. Identify benchmarking partner

6. Measure partner's performance

7. Identify performance gaps and priorities

8. Recommend and implement new practices

9. Determine results and remeasure

Ten-phase program

1. Identify what is to be bench marked

2. Identify comparative companies

3. Determine data collection method and collect data

4. Determine current performance gap

5. Project future performance levels

6. Communicate benchmark findings and gain acceptance

7. Establish functional goals

8. Develop action plans

9. Implement specific actions and monitor progress

10. Recalibrate benchmarks

Twelve-phase program

1. Determine who will use the information (clients)

2. "Sell" the clients on value of benchmarking

3. Test client commitment

4. Determine urgency

5. Define scope and type of benchmarking needed

6. Select and train benchmarking team

7. Coordinate benchmarking process with business plan

8. Develop and execute benchmarking plan

9. Analyze the data

10. Integrate recommended actions into business plan

11. Execute the plan

12. Implement continuous improvement

Twelve-phase program

1. Establish the scope

2. Develop the project plan

3. Select the key performance variables to benchmark

4. Identify potential participants

5. Measure your own performance

6. Measure performance of benchmarking participants

7. Compare current data

8. Identify best practices and enablers

9. Formulate your strategy

10. Implement the plan

11. Monitor results

12. Plan for problem solving


10 key indicators of maintenance performance

By Edwin K. Jones, PE, Plant Engineering and Maintenance Consulting, Newark, DE

- Mechanical availability (asset utilization)

The "business contribution" of maintaining personnel is to provide highly reliable equipment at the lowest possible cost. World-class plants are typically driving reliability rather than cost reduction. (Industry sensitive)

- Ratio of direct maintenance personnel to support maintenance personnel

World-class plants tend to fall in the range of 2:1 to 3:1 workers per support person. Support personnel are those who provide the supervision, parts management, planning, reliability improvement, equipment condition monitoring, and other supporting tasks for the "hands on" workers.

- Ratio of direct maintenance personnel to maintenance planning personnel

- Ratio of direct maintenance personnel to engineering and technical maintenance personnel

There is usually a correlation between this metric and a plant's equipment reliability and costs.

- Maintenance cost as a percentage of plant estimated replacement value

This value is a classic measure of maintenance cost. Unfortunately, by itself, it drives cost reduction behavior without necessarily reinforcing the need for improved maintenance practices.

- Ratio of plant estimated replacement value (in millions) to direct maintenance workers

This value is a measure of direct maintenance worker productivity ("How much plant and equipment,

in dollars, can each worker maintain?"). Many world-class plants fall into the range of $6-$9 million/worker. (Somewhat industry sensitive)

- Maintenance contracting cost as a percentage of total maintenance cost

This value is a measure for comparison, but without a "target" value. World-class plants don't shoot for a specific level; rather, they are disciplined in defining the role of contractors in maintenance, based

on business-related criteria. On average, top plants around the world contract over 30% of their maintenance work -- a little less in the United States. But, top plants are driven by a defined

strategy, not a target percentage.

- Stores parts and investment as a percentage of plant estimated replacement value

For years, the target for this measure was about 1%, but top plants around the world now routinely achieve ratios in the range of 0.25%-0.5%

- Stores turnover (ratio of annual disbursements to inventory value)

This ratio reflects stocking strategy and may run above or below 1 depending on the plant's strategy (for example, balancing risk against insurance stocks). Performance is measured against the plant's own target.

- Ratio of stores disbursements to stores personnel (dollar investment/stores person)

This value is a measure of "productivity" of the stores operation and associated personnel.


Benchmarking code of conduct

- Principle of legality

If there is any potential question on the legality of an activity, consult with your corporate counsel.

Avoid discussions or actions that could lead to or imply an interest in restraint of trade, market and/or customer allocation schemes, price fixing, dealing arrangements, bid rigging, or bribery. Don't discuss costs with competitors if costs are an element of pricing.

Refrain from the acquisition of trade secrets from another by any means that could be interpreted as improper, including the breach or inducement of a breach of any duty to maintain secrecy. Do not disclose or use any trade secret that may have been obtained through improper means or that was disclosed by another in violation of duty to maintain its secrecy or limit its use.

Do not, as a consultant or client, extend benchmarking study findings to another company without first ensuring that the data is appropriately blinded and anonymous so that the participants' identities are protected.

- Principle of exchange

Be willing to provide the same type and level of information that you request from your benchmarking partner to your benchmarking partner.

Communicate fully and early in the relationship to clarify expectations, avoid misunderstanding, and establish mutual interest in the benchmarking exchange.

Be honest and complete.

- Principle of confidentiality

Treat benchmarking interchange as confidential to the individuals and companies involved. Information must not be communicated outside the partnering organizations without the prior consent of the benchmarking partner who shared the information.

A company's participation in a study is confidential and should not be communicated externally without their prior permission.

- Principle of use

Use information obtained through benchmarking only for purposes stated to the benchmarking partner.

The use or communication of a benchmarking partner's name with the data obtained or practices observed requires the prior permission of that partner.

- Principle of contact

Respect the corporate culture of partner companies and work within mutually agreed procedures.

Use benchmarking contacts, designated by the partner company, if that is their preferred procedure.

Obtain mutual agreement with the designated benchmarking contact on any handoff of communication or responsibility to other parties.

Obtain an individual's permission before providing his or her name in response to a contact request.

Avoid communicating a contact's name in an open forum without the contact's prior permission.

- Principle of preparation

Demonstrate commitment to the efficiency and effectiveness of benchmarking by being prepared prior to making an initial benchmarking contact.

Make the most of your benchmarking partner's time by being fully prepared for each exchange.

Help your benchmarking partners prepare by providing them with a questionnaire and agenda prior to benchmarking visits.

- Principle of completion

Follow through with each commitment made to your benchmarking partner in a timely manner.

Complete each benchmarking study to the satisfaction of all benchmarking partners as mutually agreed.

- Principle of understanding and action

Understand how your benchmarking partner would like to be treated.

Treat your benchmarking partner in the way that your benchmarking partner would want to be treated.

Understand how your benchmarking partner would like to have the information he or she provides handled and used, and handle and use it in that manner.

NOTE: Identification of firms, organizations, and contacts visited is prohibited without advance approval from the organization.

(Source: The International Benchmarking Clearinghouse)


For benchmarking help...

These organizations provided significant data and other information for the preparation of this article.

A.T. Kearney, Inc.

Lincoln Plaza, Suite 4170

500 North Akard St.

Dallas, TX 75201

www.atkearney.com

Phone 214-969-0010

Fax 214-720-5900

A.T. Kearney is an international management consulting firm that offers complete manufacturing benchmarking support among its services.

Edwin K. Jones, PE, Inc.

Plant Engineering and

Maintenance Consulting

28 Quartz Mill Rd.

Newark, DE 19711

Phone/fax 302-234-3438

Ed Jones is an independent consultant with many years of experience in plant engineering and maintenance benchmarking.

Fluor Daniel, Inc.

100 Fluor Dr.

Greenville, SC 29607-2762

Phone 864-281-4400

www.fluordaniel.com

Fluor Daniel is an international engineering, construction, maintenance, and diversified services company. It has been active in benchmarking for a number of years.

HSB Reliability

Technologies

800 Rockmead Rd., Suite 180

Kingwood, TX 77339

Phone 800-984-0623

Fax 281-358-1871

www.hsbrt.com

HSBRT specializes in maintenance and reliability consulting. Benchmarking is among the many services it offers.

McGladrey & Pullen, LLP

1699 E. Woodfield Rd., Suite 300

Schaumburg, IL 60173

Phone 847-413-6247

Fax 847-517-7095

McGladrey & Pullen, a major accounting and consulting firm, administers PulseMark, a nationwide plant-based best practices survey of manufacturers, in partnership with the National Association of Manufacturers.

North American Maintenance Excellence (NAME) Awards

c/o Assoc. for Facilities Engineering

8180 Corporate Park Dr., Suite 305

Cincinnati, OH 45242

Phone 513-489-2473

Fax 513-247-7422

The NAME Awards are a nonprofit program to encourage maintenance excellence in support of production operations. Benchmarking is part of the awards process.





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