Recent Comments

    Understanding Maintenance Spending

    Maintenance groups are frequently asked to perform many kinds of activities in addition to maintaining equipment and facilities. These activities are important to business functions, but are often not recognized by upper management as spending that is in addition to “maintenance spending”. I believe it is important to separately identify these additional costs, and make management aware of their magnitude and impact on the maintenance function. We will separate the spending of the maintenance group into three categories; Maintenance, Improvement Efforts, and Inefficiencies. 

     

    Maintenance

    Equipment maintenance is, by definition, those activities that keep the equipment operating at current capacity and quality levels. “Maintenance spending” is, then, the costs associated with keeping the equipment and facilities in operating condition. The maintenance function is charged with accomplishing this at the minimum cost. Those costs include; preventive maintenance tasks, repair tasks that return the equipment to operating condition, addressing safety issues, predictive activities, and administrative needs that are operational requirements (e.g. costs of employee vacations). The blend of these activities should be monitored and adjusted over time to minimize spending and optimize uptime and asset condition.

     

    Improvement Efforts

    Improvement efforts fall into several different categories. Cost reduction projects are focused at reducing the cost of manufacturing and often involve modifying the equipment and/or the production process. Upgrades are usually focused at increasing production capacity or product quality, and are often preceded by trials, which can involve spending for temporary installations. Modifications to the equipment are often aimed at reducing the cost of maintaining or operating the equipment. These may be capitalized or expensed. Major capital projects often have an expense-spending component and usually require support efforts from the maintenance group. There are also some administrative choices made that are designed to impact the business; training, special projects, and communications efforts are examples of this.

    We need to recognize that all of these efforts are discretionary by definition and are not “maintenance spending”. That is, the funds are not being spent to keep the equipment at its current level of performance. There is an expectation that spending on improvement efforts will improve the results of the operation through increased quantity, improved quality, or lower costs. So these types of spending are an investment in the future of the business. As such, I believe, that all modifications, upgrades, trials, cost reduction projects, and administrative choices should be justified based upon their planned return on investment. This requires early identification of an improvement effort as such, and a different work approval process that requires detailing the planned benefit as well as the expected cost. A more stringent approval process that focuses more attention on justifying improvement activities, as opposed to in-kind repairs, is recommended.

     

    Inefficiencies

    Inefficient use of resources is likely to occur in all aspects of the asset management function. Over maintaining equipment, waiting and travel time for employees, ineffective use of resources due to lack of planning, modifications and improvement efforts that have no payback, non-productive meeting time, and many others will lead to poor utilization of resources. Managers should be sensitive to potentially wasteful activities and practices and work to eliminate them.

    The potential causes of inefficiencies are, unfortunately, common in many workplaces. Poor work practices is a common cause of wasted resources, and often occurs because work practices, if not consciously reviewed and improved, will evolve into accepted practices that waste time and money on a daily basis. Lack of discipline in reviewing and approving upgrade, modification, and improvement efforts can cause many activities to take place that do not improve results, and sometimes actually lead to a negative business impact. Finally, having too many maintenance and/or engineering resources can lead to inefficient and ineffective spending. These employees are going to stay busy and work to fill their time as usefully as they know how. This often means spending on activities that should not be done or are done more frequently than needed.

     

    Management Options

    Capturing all asset care activities in a work order system will aid analysis efforts. Most work order systems will support categorizing work orders into work types. Capturing work performed into multiple work types that identify them as maintenance activities or improvement efforts will aid in understanding how the budget is being spent. When these categories are identified, having approval processes in place based upon work order type and cost can lead to the appropriate scrutiny of the work being anticipated. I think that predictive, preventive, and administrative activities should be reviewed and approved annually, to help establish the baseline for the budget. Repair in kind and safety issues are work types that should not require many levels of approval, unless the cost is quite high. All improvement efforts, however, should be subject to a disciplined approval process that ensures that the spending will lead to a return. At the same time, a close out process should be established for modification work that ensures that equipment databases are updated at the conclusion of the work. Stores information, drawings, bills of material, and equipment histories should be updated when modifications occur to the equipment.

    Establishing what is truly “maintenance spending” as opposed to other types can lead to understanding the cost of asset care for a particular production system. When a company has multiple systems that are similar in form and function, understanding these costs can lead to internal benchmarking as an improvement process.

    Identifying, and controlling, discretionary spending can lead to better management of spending and staffing levels. It can also lead to better understanding of the demands on the maintenance group for all the activities that are in addition to equipment maintenance.

      

    PENDING TYPES

    Type Of Spending

    Maintenance

    Improvement Efforts

    Inefficiencies

    Reason For Spending

    Activities Necessary To Keep The Asset Running At It’s Current Capacity and Quality Level

    Activities That Provide Increased Capacity, Capability, Quality, or Reduce The Cost Of Production

    Ineffective Work Practices and Activities That Have No Payback

    Required or Optional

    Required For Continued Operations

    Optional

    Discretionary Spending (ROI Should Be Calculated)

    Optional Discretionary Spending (No ROI)

    Types Of Activities

    • Repair In Kind
    • Preventive Tasks
    • Predictive Tasks
    • Resolving Safety Issues
    • Administrative Needs
      • Vacations
      • Safety Meetings
      • Etc.
    • Modifications
    • Trials
    • Upgrades and Improvements
    • Support For Capital Projects
    • Expense Portion Of Capital Projects
    • Cost Reduction Projects
    • Administrative Choices
      • Training
      • Special Projects
    • Over Maintaining
    • Modifications and Improvements With No Payback
    • Unanticipated Spending On Capital Projects
    • Poor Planning
    • Travel Time and Waiting
    • Non-Productive Meetings and Events

    Causes

    • Business Needs
    • Business Choices
    • Poor Work Practices
    • Lack Of Discipline To Calculate ROI
    • Too Many Maintenance and/or Engineering Resources