Breaking Down Objectives

The breakdown into the strategic level begins with understanding what the component parts of this objective are. The initial clue to how this could be done comes from the calculation itself.

In the case of Unit Costs the calculation is-

This calculation implies that there are two fundamental areas that can be targeted to achieve these objectives.

1. Enabling higher production with current physical assets

2. Reduction of direct maintenance costs

Understanding what the indicator is telling us is the first important element to this step; this gives clues as to where improvements can be targeted. Lower unit costs can result from raising production or lowering maintenance costs or a combination of the two. This does not necessarily mean a focus on direct costs only. In fact it may require a slight increase in maintenance costs in order to substantially increase productive output. The make-up of these two factors differsfrom industry to industry; however, the elements discussed here are generic and may apply to a wide range of industries.

Operational Maintenance Costs

Depending on industry type, and the company’s account breakdown, this area could include a vast number of sub-areas. Most elements, however, can be traced back to a combination of equipment performance and business processes. Poor equipment performance is identifiable by large volumes of reactive work, lower than expected availability and reliability, and higher than anticipated costs. In these cases there is a tendency to have over-sized crews, large stores holdings, excessive levels of overtime and frequently unachieved production targets. The development of strategy requires an understanding of where we are going vis-à-vis the corporate objectives, where we are today, and what is needed to make the desired levels of performance possible. This then serves to show the start and end points of the strategic plan.

If there is poor equipment performance, this could indicate one of two potential problem areas: either the way it is used or the way it is maintained for that use. In the case of long-term misapplication of maintenance activities, or misuse, the overall condition of the equipment may also become an important factor. This questions three of the operational aspects of the organization.

1. Is the equipment being utilized as it was designed to be used? This could indicate either deliberate or accidental overloading of the machinery, or alternatively it could reveal a large amount of over-capacity.

2. Is the baseline maintenance regime suitable for the way that the equipment is being used?

3. Are the assumptions made during the formulation of the maintenance regimes still relevant? This often represents stores holdings and lead times and other operating context issues such as regulations or productivity requirements.

In developing strategy, it is often the case that companies do not know these variables, or do not know them as deeply as is needed to extract further value from the assets. A particularly useful strategy for this objective may be as simple as to develop the capacity to know what the baseline levels of maintenance are.

If an organization believes that this is currently a known variable, yet there is still a large volume of reactive work, then this assumption needs to be questioned and reviewed. The creation of the baseline maintenance regime for a particular use of the equipment implies the creation of an adequate failure conse-

quence management regime. This in turn reduces equipment failures and

increases the amount of productive time that the machinery is available for.

This could be measured in a number of ways, but principally it would be a

measure of the numbers of equipment in the plant that have had baseline maintenance

regimes determined.

Baseline Equipment Strategies¹⁵

In analyzing equipment to determine the baseline maintenance regimes it is often the case that current maintenance tasks in place are focusing on the wrong types of maintenance or are over-maintaining equipment. In some cases maintenance regimes have disappeared for a combination of reasons and maintainers are reacting in a purely reactive manner.

The performance of this form of analysis may mean a re-direction of maintenance activities from tasks that are doing little or are counter-productive. However it may also mean that a rise in maintenance activity is needed in order to maximize the possible production from equipment.

In some cases it can be found that equipment is being operated in a manner that is beyond its original design parameters. This sort of analysis will uncover not only what the baseline maintenance regime is, but also whether or not the physical assets in place are capable of producing the levels of production that are being asked of them. In these cases there are two obvious alternatives: change the equipment or reduce the production expectations.

In reviewing primarily equipment performance, it is important to include a reference to the classical performance measures that are used throughout the world. These are availability and failure rate. For a 24-hour operation they are calculated in the following manner¹⁶.

Availability

Failure Rate (Mean Time Between Failures)

The use of these indicators, in this context, reveals the true nature of asset management, that is, providing maximum reliability for a predetermined cost.

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15 All measures and indicators within this chapter are analysed in detail within Appendix I

16 Both of these measures are explained and analysed in greater detail in chapter 6 and in Appendix I

High availability and low failure rates are required only to the level of performance that we require of our machinery. Spending large sums of money to achieve higher-than-required equipment performance may not be in the best interest of the cost effectiveness of the organization as a whole. However with most pieces of equipment or plant, maintaining a high level of reliability is not always very expensive, merely a matter of doing the right work, in the right manner at the right time, and using the equipment in a way that does not exceed its inherent capacity for work.

These types of measures are usually used at the highest levels of plant and then used to drill down to the systems, sub-systems and pieces of equipment throughout the plant. In the case of plants where there are mission critical systems or equipment, failure rate is usually monitored directly at that level.

As with all indicators it is not enough to merely establish the indicator itself. If we are to drive true performance improvement, then the indicators need to represent what is required by the organization. For example a haulage fleet may require a minimum availability of 87% in order to fulfill the next year’s production requirements. Similarly a manufacturing plant may require an overall failure rate of less than 20 hours in order to be able to fulfill the productivity requirements. If the organization drives to achieve more than 87% of availability on the existing fleet, this may create an increase of unit costs for the same amount of production output. However this is not always the case, an increase in availability, in this particular case, may lead to a reduction in the number of units required, therefore, reducing unit maintenance and operational costs substantially via increased performance.

Failure rate measurement highlights another area of equipment performance leading to high maintenance costs, that of repetitive failures. Many times, poor equipment performance is attributable to a small number of repetitive failures. While a complete maintenance analysis will deal with these in time, it is probably more effective to take some form of immediate action once these have been identified.

There may be a number of strategic level indicators that contribute to achievement of this competency. One may be the ability to identify and resolve these repetitive failures as they arise, another capacity would be that of reducing these to the minimal level possible. Some measures in this case may be as follows.

Identification of Repetitive Failures

(Trended to show performance over time)

An alternative measure could be

At the strategic level these objectives can apply to the entire corporation, a system or sub-system, or a producing unit itself. The level at which this indicator is defined is wholly dependent on the operating context and type of the plant where it is applied. Using some of the advanced business intelligence products on the market today, this measure can be produced at a company level and then used as a means of drilling down to the systems, sub-systems and equipment levels beneath.

There are of course a number of other important factors contributing to the direct maintenance costs outside of equipment reliability. These are often in the area of administration and business processes. Poor business practices can lead to larger work teams, larger than required stores holdings, long turnaround times and inefficient maintenance spending, to name a few areas. However most of these come under the heading of inefficient work practices.