Profitable Maintenance

In many manufacturing enterprises the maintenance function is seen to be no more than a necessary evil which adds cost but little value. It is seen to be the cause of many of the ills of the enterprise, responsible for equipment failures, spoilt product and inefficient processing - all of this at a cost which the enterprise finds hard to bear. In situations such as this the temptation is always to reduce costs by employing low skilled people and entrusting the management of the maintenance function to a manager who has no training in modern maintenance techniques. This approach is guaranteed, at best, to perpetuate the existing ineffective practices or, at worst, to create even more of a problem for both the enterprise and the unfortunate manager entrusted with the responsibility for the maintenance operations.

                Fortunately there are proven ways to turn the maintenance beast from being a blood-sucking drain on resources to becoming a positive contributor to bottom-line profitability. Even more fortunately the solutions are simple to understand and implement if there is a will to make the change happen. Like much in life, commitment to a chosen course almost invariably leads to success, whereas the reverse is almost certainly also true. Successful companies realised the obvious link between asset performance and the need for asset care a long time ago. Without exception the world class performers have developed maintenance strategies and practices which positively assist in their competitiveness. These strategies will fit equally well in small and medium-sized enterprises; in fact their implementation is often easier and swifter to achieve because of the lack of corporate inertia.

                A number of basic facts will help to clarify how the change can be made, and to help to size the prize that is on offer to an SME. If we take a hypothetical company which has assets valued at £5 million, total manufacturing costs of £1.5 million pa, maintenance costs of £150 thousand pa, and a gross margin of 20% achieved on sales revenues of £2.5 million. Two important maintenance performance metrics can be generated from these numbers.

The first metric shows that maintenance cost represents 10% of all manufacturing cost. The second metric shows that maintenance costs are 3% of the replacement value of the plant. With some variations due to the differing type of asset base, world class companies tend to operate at equivalent metrics of <8% and <2% respectively. In this hypothetical company, if the performance of its maintenance operations could be improved to similar levels the cost of maintenance would fall by ca £40,000 to £110,000 pa.

This would boost profitability by an additional 1 to 2 percentage points on the same revenues. In addition to the improvement in profitability, it is guaranteed that plant availability and Overall Equipment Effectiveness will also dramatically improve, which in turn will delay the need for capital investment and boost operator productivity. A further bonus is that the cycle becomes self-sustaining if implemented effectively. In most industrial environments where maintenance performance has not historically been quantified or measured, it can be assessed that the potential contribution to the profit line will be between 2 and 4 times the direct cost of the maintenance service, potentially equivalent to up to 30% of total manufacturing overhead being returned to the profit line (click here or on the icon to see an example of the PRIME cost escalation approach to "sizing the prize").  PRIME has recognised the beneficial nature of this improvement cycle in the approach it takes to maintenance improvement. It has also structured its approach to make sure that the programme delivers the simple wins quickly. To achieve this, PRIME  uses metric and diagnostic benchmarking to identify the areas which will generate the greatest return for effort. In those areas, tailored improvement programmes are designed, based on a two-front approach which addresses issues relating to both equipment reliability and to effectiveness of the operations and maintenance teams. Bringing the two threads together, and making the improvement process transparent to all levels in the organisation can harness the skills and experience of a large number of people to bring about significant results. 

Proven experience indicates strongly that simplification always brings about major rewards, and this applies strongly to the processes which apply to maintenance improvement. Reliability can be improved dramatically by using the acquired experience of craftsmen and operators to develop effective care programmes for equipment; only occasionally is it necessary to apply full-blown RCM to achieve results. Equally, the same approach will generate greatly enhanced teamworking and productivity, with the need for major investment of time and money into a full TPM implementation only necessary in a limited range of particular situations.

By way of an example to illuminate the value of simplifying the process, it is generally now accepted that less than 50% of all maintenance activity is necessary. The remaining 50% arises from such causes as poor design, inadequate skills and understanding of maintenance and production people, and poor decision-making by management. At least half of all of the unnecessary maintenance can be eliminated by the simple approach described. This will contribute the greater part of the performance improvement hypothesised in the company model described earlier in the paper.

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