Should you focus on asset availability or cost reduction?

Should you focus on asset availability or cost reduction?

This is this a question that is asked regularly in your organization? For many maintenance managers, asset management is a delicate balancing act between maximizing availability while lowering maintenance costs. Asset availability and reliability are closely connected and discussed in a previous blog entitled How do Maintainability and Reliability affect Availability. In a nutshell, you can achieve better availability with better reliability. Traditionally, maintenance has been viewed as a cost center in an organization; it costs money to hire maintenance technicians and purchase the spare parts to keep systems running smoothly. When things are good, orders are flying out the door so money is thrown at maintenance to ensure equipment availability is maximized. We run large inefficient maintenance teams, spare parts and specialist tooling are same day or vendors are called in out of office at premium rates so equipment is back to production as soon as possible. However, when orders drop, maintenance budgets are cut and the same level of asset availability is impossible to maintain. Systems are left down for longer periods until repairs can be completed economically. It is easy to visualize in the following graph:

Reliability costs are the business costs of unreliable systems. If you perform little or maintenance, your assets will become unreliable and you may produce defective parts, you’ll miss important orders or you’ll consume more energy. There can also be other costs of unreliable systems like environmental and occupational health and safety costs. The net result is poor customer satisfaction and lost customers.

Maintenance costs are the cost of doing maintenance; be that reactive or preventive maintenance. If you perform more maintenance or spend more on maintenance such as holding spares, you may get better reliability and hence availability but your costs in doing so increase disproportionally to the increase in availability. A 1% increase in availability does not mean a 1% increase in maintenance cost. For example, you can increase the service interval of your car and it will make very little difference to reliability. It follows the law of diminishing returns. So, the most cost-effective situation is to operate at the lowest point on the total cost curve.

The difficulty for many organizations is to pinpoint where they are on the graph and identify what equates to the optimal position. Let’s say the optimal point gave an asset availability of 50% so the most cost-effective scenario is when systems are available to perform their function half the time. However, you may be celebrating an availability of 90% but your maintenance costs are through the roof.  This is the issue – many organizations do not recognize where they are on the curve so pump money into maintenance in the wrong way, hence why they are viewed as a cost center. Back to the original graph:

The solution is to shift the maintenance cost curve to the right by changing the way you do maintenance. In effect, you need to reduce related costs while maintaining or improving reliability. This key is to be smarter about how you manage your assets and maintenance resources such as knowledge, labor, and supplies. How do you do this?

• Switch from reactive to proactive maintenance. Reactive maintenance costs 3-9x times more than planned maintenance so switching to a proactive way of doing maintenance can dramatically reduce your costs while delivering better reliability.
• Track your maintenance activities in a CMMS. A CMMS is a great way to centralize your maintenance activities.
• Smarter inventory management can minimize stock on hand; reducing associated carrying costs and limiting the impact of part obsolescence, freeing up much-needed capital and increasing value for a company.
• Consider condition-based maintenance on critical assets in your production facility so issues are highlighted before they turn into something more serious. Use Fiix Monitoring to connect your systems directly to your CMMS and trigger work orders the moment safe operating limits are breached. Monitoring enables real-time work orders and notifications to be created from the meters, triggers, alerts, alarms and state data provided by equipment and control monitoring systems.
• Conduct ongoing training for your maintenance staff. Courses like CMRP will teach them best practices and help them better understand how to meet your reliability and cost goals.
• Improve your occupational health and safety policies – Maintenance related incidents that injure personnel, damage equipment or have a negative effect on the environment will increase expenditure through litigation or imposed government penalties.

These are just a few examples of what you can do to improve the way you manage your assets and strive for world-class availability of 90%+. In time, maintenance at your organization will evolve from a cost center to a value center, driving added value to the bottom line. In the final graph below, we have shifted the maintenance cost curve to the right by doing smarter maintenance. The net result is greater asset reliability at a lower cost.  Check out the Version 5 test-drive on our homepage and see how Version 5 can improve the way you do maintenance today.