Maintenance planning, scheduling deliver to the bottom line

What are the savings if an organization moves from breakdown maintenance to more planned and scheduled maintenance?

04/04/2011


I recently received an email note from a client asking how they could demonstrate the business impact maintenance planning and scheduling would have on their business. The client asked if there was a figure they could use to demonstrate the value of planned and scheduled work and where did this figure come from.

I replied back that the “rule of thumb” that I use is that planned and scheduled maintenance work is three to four times more cost efficient than breakdown maintenance. I have used this number for years. I am not quite sure where this figure comes from but I do know it’s fairly well accepted in industry and is consistent with my experience.

In this particular case the client was persistent and wanted to know a little more about how to use this “rule of thumb”. Perhaps the best discussion of how this “rule of thumb” can be used comes out of John Campbell’s book titled “Maintenance Excellence, Optimizing Equipment Life Cycle Decisions”. In the introduction on pages 7- 9 he describes a simple process for quantifying the cost saving potential of improving the planning and scheduling process.

What are the savings if an organization moves from breakdown maintenance to more planned and scheduled maintenance? This is really what everyone wants to understand especially those in charge of the budget.

Why is it important that we quantify the savings or as some call it “the size of the prize”? Unfortunately management typically understands one language and that is the language of money. When a program or improvement effort can be quantified in terms of dollars and cents it makes it easier for management to justify the resources required to staff and implement the project.

Doing the math

The rule of thumb for determining the cost saving potential goes like this. Maintenance work can be broken down into the following “cost units”:

  • Work performed in a planned fashion such as preventive, predictive or planned corrective maintenance will cost $1.00 per cost unit.
  • Work performed in an unplanned, unscheduled fashion will cost $1.50 per cost unit.
  • Breakdown or Emergency work costs $3.00 per cost unit.

What the “work unit” represents will become clearer as we explain the calculation.

Let’s use an example. Our annual maintenance budget is $10 million and the work distribution is 60% planned, 20% unplanned and unscheduled, and 20% breakdown or emergency. What would a shift from 60% to 70% in planned and scheduled maintenance yield us in terms of cost savings?

Next, let’s break this down into “cost units” (CU).

  • 60% x 1.0 = 60 cost units
  • 20% x 1.5 = 30 cost units
  • 20% x 3.0 = 60 cost units

Total CU = 150 cost units

Now we divide $10m by 150 work units and we get $66,666 per work unit or $.067m per work unit. We will use this number in our calculation to determine how the costs are split between the three different types of “work”.

  • Planned work costs 60/150 x $10m = $4m
  • Unplanned Work costs 30/150 x $10m = $2m
  • Breakdown or emergency work costs 60/150 x $10m = $4m

Lets determine what the savings would be if we increased the amount of planned work from 60% to 70%. The shift in work units would look like this:

  • 70% Planned work      70% x1 x $.067m= $4.7m
  • 15% Unplanned work 15% x1.5 x $.067m = $1.5m
  • 15% Emergency work 15% x3 x $.067m = $3.0m

New total annual maintenance costs= 9.2m or $9,200,000

An improvement from 60% to 70% in the amount of planned work yields us $800,000 annually. If you factor in the downtime it could be much more. In some industries the cost of breakdown maintenance can be as high as 20 times the cost of planned maintenance when you factor in things like production losses.

The truth is, the benefits of planned maintenance are much more than costs savings. Some of the benefits of a well executed maintenance planning & scheduling process are listed below:

  • Increased uptime
  • Reduced inventories
  • Improved safety and health performance
  • Improved environmental performance
  • Improved maintenance and repair quality
  • Increased asset integrity
  • And reduced fixed costs

In today’s uncertain economic business environment you cannot afford to have an ineffective maintenance planning and scheduling process. The investment in the way you manage your work will more than pay for itself.

Tracy T. Strawn is vice president of international business for the Marshall Institute, a Raleigh, NC-based management consulting company that has provided maintenance and reliability consulting and training services to industries of all types, worldwide for more than 35 years. Email: tstrawn(at)marshallinstitute.com



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