It’s a process industry truism that looking after your assets ensures a return for the business. Tim Gilmer’s company opted to put that to the test with the help of some KPIs.
What impact does maintenance and reliability really have on ROI?
It’s an interesting question and one we sought to answer through a process that started with a metrics mapping exercise, and grew from there. The ideal scenario for any manufacturing business is to know what is happening within their automated operations. And for this, you need to be looking at key metrics and then understand how those metrics impact the business.
Maintenance is a business, and what we are wanting to know as part of the ROI equation is the ‘Return on Assets’ that we have invested in. Return on Assets is a profitability ratio that shows how much profit a company can generate from its assets. So how do we work that out?
There are two ways:
1. ROA = (Net Income / Replacement Asset Value) x 100
2. ROA = (Operating Profit (EBIT) / Total Asset) x 100
By looking at inter-related metrics and how they can impact the bottom line we can help deliver an improvement in maintenance strategies, which, traditionally, may have been done using an ‘open and inspect’ process on plant and equipment – both of which are labour intensive and higher risk. This approach will enable us to better understand how equipment is operating and establish a knowledge-based preventative approach to its maintenance.
We want to be more efficient and reduce critical costs such as non-contract labour. That’s because downtime is expensive and can have a major impact on an organisation’s operational efficiency, and ultimately negatively impact its bottom line. We want to seek to reduce unplanned downtime as much as possible, because not making product is the biggest issue impacting a business in the manufacturing sector. Taking a holistic approach to equipment maintenance helps identify any ‘bad actors’ within the business. By identifying critical problems, we can focus on them instead of on every problem.
Data and metrics in maintenance
Good maintenance is about effective resource management and central to this is computerised maintenance management systems (CMMS). A lot of the information we need to make better-informed decisions is already available to organisations, but experience shows that, while they may have the information, the vast majority are not using it to their benefit or to increase the reliability continuum.
Many organisations don’t have key performance indicators (KPIs) or metrics, which will often result in businesses firefighting – reacting to equipment problems when they arise. Because this is the way they have always operated, they often don’t realise how reactive they are or measure the impact of that approach from a bottom-line perspective when equipment problems do occur.
Establishing KPIs
So, the next question is – where to start? Numbers speak volumes. We need to start by setting metrics – establishing a baseline picture so you can see a much more comprehensive process moving up the maturity continuum. Everything revolves around a continual improvement wheel. The goal is to relate what we do with maintenance and reliability to the bottom line. KPIs help present a better business case. Some keys KPIs could include:
1. Total maintenance cost as a percentage of replacement asset value (RAV)
2. Availability – How often the asset is running or capable of running compared to its operational schedule.
3. Unscheduled downtime – The amount of time the asset is unavailable due to repairs not on the weekly maintenance schedule (break-in work).
4. Wrench time – The actual time maintenance crews are affecting repairs.
5. Stockouts – The fre- quency at which parts are requested from the stock system but not available.
By establishing and measuring KPIs we can start to identify what is causing us the most loss. And any loss we can prevent is positive – both in time and money. Through this approach we are better placed to measure Overall Equipment Effectiveness (OEE) – looking at the full productive time of equipment.
Everything is related. If you want to run a business at a world-class standard, all this needs to be considered; this approach is both achievable and affordable. You should be aiming for 80-85% of planned maintenance work with not more than 15% unplanned, not the 30-40-50% emergency work levels that are not unusual where this process is not utilised. The more unplanned work you are forced to react to, the heavier the cost incurred. This is the most inefficient and the least safe way of operating because the machine is dictating what we are doing, not us planning what will be done.
Most manufacturing businesses will have the capability of undertaking this process themselves, but just don’t know where to start or what process to take.
They know they want to be more efficient but there are often cultural dynamics between maintenance, reliability and operations teams within the organisation. You cannot move up the maturity continuum if you are not planning and managing your maintenance and repair schedules. It’s about having a maintenance action before there is a functional failure.
OEE for better ROI The relationship between maintenance and overall equipment effectiveness (OEE) creates much greater outputs on the plant floor, which ultimately feeds directly into the bottom line, helping an organisation to run more efficiently, reduce unnecessary cost and enjoy a greater return on their manufacturing assets.
When addressing reliability, one size hardly fits all. Some organisations have well-developed programs and workflows and are well on their way to a higher level of performance, while others are still in the process of establishing a reliability program that can streamline operations without breaking the bank.
- Tim Gilmer is director of reliability services at ABS Consulting
