As the United States manufacturing industry emerges from one of its most challenging decades in recent memory, many companies still struggle to improve growth and achieve greater profitability with fewer human and capital assets. The downturn taught manufacturers some valuable lessons about operational efficiency—particularly small and midsize firms that were generally hit the hardest.
Manufacturers have come to realize that success is no longer measured by having the best product or simply meeting production goals. They now must consider the fact that every purchase and every decision has a direct impact on their bottom line. With manufacturing and production equipment often representing a company’s single largest capital investment, it is only logical that the intelligent maintenance of such assets is central to any successful efficiency program or lean initiative.
A daunting task
For manufacturers generating annual revenues between $5 million and $500 million and having fewer than 1000 employees, improving efficiency can be a daunting task. One of the biggest challenges is that employees are often required to wear a variety of different hats, and may not have the luxury to stop production to analyze potential problems or think about how to do things more efficiently.
Another problem common in smaller companies is that many have never established a method to measure the value of maintenance activities and, therefore, often grossly underestimate the overall impact maintenance can have on the bottom line. For example, there is no transparency to the losses incurred from unnecessary downtime or late deliveries, and no tangible returns attached to maintenance’s role in avoiding downtime or making on-time deliveries.
Although small and midsize companies may not have the biggest capital reserves to make major purchases or implement new initiatives, they still have numerous opportunities to boost efficiency through carefully targeted technology investments and process improvements. In fact, manufacturing processes of all shapes and sizes can be improved, to some degree, using a variety of operational efficiency techniques—ranging from predictive maintenance programs and tools to collaborative partnerships with outside suppliers.
Much to their advantage, smaller manufacturers can learn from the experience of larger operations, including how to design and implement proactive maintenance programs scaleable to their particular needs. Following are some key strategies to consider.
Conduct an assessment
In order to map out an accurate maintenance strategy and develop some viable goals, first have a clear picture of what your maintenance needs really are, identifying your most critical equipment in terms of maintaining production. For example, unexpected equipment failures in some instances can be extremely costly, particularly in environments where a single hour of unplanned downtime can cost tens of thousands of dollars, perhaps more.
A good first step should be to conduct a broad-based assessment of your maintenance processes, as well as of any activities that support the manufacturing process. The goal is to identify any factors that inhibit equipment or operator performance. Often the root cause of a performance issue is hidden by how problems manifest themselves in the process.
For example, what mode are you currently operating in? Is it reactive? Do you have any predictive areas? What are the strengths and weaknesses of the organization, and where are your opportunities to improve? Where should you be spending your time? Your assessment also should involve identifying what resources you have in terms of personnel, experience, workload distribution, and available time.
This type of in-depth examination of existing tools and processes is designed to uncover opportunities to help increase both operator and machine efficiency, as well as assist with the adoption of more proactive maintenance activities. Once you have determined what you want to do and identified your deficiencies, you can start figuring out the most effective ways of filling those gaps, whether it is through restructuring internal processes or leveraging the programs and services of other organizations.
Shift to a proactive focus
It is a well-established fact that proactive maintenance is much less expensive than reactive maintenance. But moving from a reactive mode to a proactive approach can be a very difficult transition. Historically, in rough times, the knee-jerk reaction has been to opt for short-term cost savings. This includes curtailing maintenance spending, ditching predictive activities, and reverting to day-to-day fail-and-fix practices. In the end, short-term savings sacrifice longer-term gains.
With a reactive approach, spending decisions are shortsighted and less strategic because they often are made in response to emergency-type situations. In other words, the priority is to resolve the immediate crisis and get production back up and running as quickly as possible. At the same time, however, companies will highly scrutinize and often reject any spending toward predictive technology without first seeing the documented return on investment—even though they may have just dropped thousands of dollars on a potentially preventable emergency repair.
By transitioning from reactive to predictive maintenance, organizations can reduce their maintenance repair and operations (MRO) expenses by 10-30 percent, with virtually no negative impact on productivity or facility availability. The key, however, is that plants must be willing to make a small initial investment in proactive strategies and begin with the most critical processes and machinery. They then must be able to measure and document the benefits of such a program. This will help lay the foundation for future expansion.
Identify your starting points
All companies, and especially small and midsize ones, must carefully balance actual requirements against a wish list of predictive tools. And keep in mind that the best place to start may not always be with a technology investment. In fact, many of today’s successful companies are not necessarily those with the best manufacturing capabilities or the most resources, but rather the best manufacturing processes. Therefore, before investing in a solution, managers must clearly understand the problem they are trying to solve. Because no matter how big or small the maintenance function, or what types of tools are employed, there is no substitute for basic process implementation. This is true of plant floor equipment as well as storeroom management and component repair services.
The next step is to implement some basic predictive tools that can help identify potential problems much earlier in the failure cycle. Condition-based monitoring technology is a good example. The ability to clearly analyze temperature, vibration, and other critical machine condition data gives users a powerful advantage by allowing them to identify and correct potential failures before production is interrupted.
Historically, manufacturers viewed advanced, integrated condition monitoring technology as too costly to be justified. Today, however, new portable, standalone handheld data collectors can provide quick and accurate analyses of machine conditions at relatively low cost, making predictive maintenance a more appealing and cost-effective option. Once information is gathered, it can be automatically downloaded from data collectors directly into asset management software, which analyzes the data, measures it against preset parameters, and provides advance warning of equipment abnormalities and potential points of failure.
The move toward predictive maintenance represents a significant shift in philosophy and resource allocation. In other words, do not simply fix a problem, but ferret out and correct the root cause of a machine or component failure. Go beyond acknowledging a motor bearing needs to be replaced. Instead, determine what exactly caused the bearing to degrade in the first place. It is a strategy to help find ways to predict similar problems in the future and prevent malfunctions.
At the same time, smaller companies also must be careful not to jump too quickly into advanced solutions until they have thoroughly evaluated the operation and support requirements of the application. For example, a company can implement the most sophisticated technology available and gather some valuable data. But if the manufacturer does not have the time or resources to properly analyze results and act on findings, why bother?
Building a strategy centered on potential gains and ROI can help companies cut costs and improve success rates. The key is to invest in technology and process improvements and start using them in critical areas where you know problems exist. This will enable you to build a database relatively quickly and identify enough potential cost savings to convince management to expand the program. In some cases, it is necessary to pass on some initiatives if the ROI is not there or the application is not high priority. If the numbers do not add up, wait a year, then re-examine the issue.
Start small and scale
For the majority of manufacturers, the transition to a predictive MRO strategy is often too monumental to be made in a single effort. Most manufacturers instead implement programs in phases, starting with the most critical machines and then expanding. This is particularly true in small and midsize companies, where limited investment resources require acting with restraint—starting small and adding new technology when the time is right.
At the same time, organizations are typically reluctant to invest in new maintenance technologies if they are not convinced of the return on investment. In situations where companies are trying to change a culture, hard evidence is required to alter the status quo. To that end, one of the best ways to build a good case for new maintenance initiatives is by accurately documenting past downtime situations and identifying actions that could have minimized the impact. In other words, be able to clearly explain how a problem could have been avoided if the right technology or the right process had been deployed.
By making minimal investments in equipment and resources, companies can show measurable results. With tangible benefits in hand, managers can build credibility and will be better positioned to justify larger investments and expand the activity on an incremental basis. The reality is that good maintenance techniques will always reduce a plant’s total cost to produce.
Even though the big players are able to make larger investments, many of them employ the same approach: Starting small and implementing test projects involving a limited number of critical equipment, then expanding gradually.
Case in point
In 1998, Intel Corp. began migrating toward a more predictive maintenance strategy, enabling maintenance technicians to maximize system reliability by identifying and correcting potential problems before equipment failed or interrupted production. Operating in an environment where a few hours of downtime can result in millions of dollars in losses, technicians at Intel used infrared scanning, vibration, temperature, and oil-composition analysis tools to monitor machine conditions and gather information necessary to flag conditions in the field, well in advance of a failure. But even in a large organization such as Intel, maintenance managers had to first justify the program on a smaller scale.
To demonstrate the value of its predictive program, the Intel maintenance team worked to develop a solid business case using metrics from its facility in Hillsboro, OR. They started by using real application examples and carefully documenting uptime performance results.
“To a large degree, we are dealing with an intangible when we’re talking about the potential of downtime events and the value of loss avoidance,” said Mick Flanigan, project leader at Intel’s Northwest Regional Operations facility. “In the end, after developing a justification using two separate methods, we were able to develop both hard, tangible results, along with significant ‘soft’ cost-avoidance projections.”
Today at Intel’s Oregon plant, where the predictive maintenance program was first introduced, approximately 4000 pieces of equipment (94 percent of the facility’s qualified equipment) are now involved in the program. Since implementation, Intel has found countless minor vibration issues and identified several hundred major vibration problems, helping the company avoid estimated lost-production costs of more than $1.4 million in 2002 alone, resulting in a five-to-one return on investment. Equally important, the program has helped Intel evolve into a more predictive-based maintenance organization. Instead of reacting to failures, Intel now makes informed decisions based on real need rather than performing calendar-based, “whether it needs it or not” maintenance.
Stick to your core
Speed and efficiency are important in making the transition to a predictive strategy. In today’s lean manufacturing environment, it is critical for companies of all sizes to focus on doing what they do best—making products. Whether applied across the maintenance organization or focused solely on a specific maintenance activity, a collaborative maintenance strategy is preferable to continuous fire-fighting and reactive quick fixes, which are more expensive and less effective over the long term. By engaging the services of outside partners to support noncore functions, manufacturers can more effectively maximize their production assets and are better positioned to adapt quickly to changing business conditions.
Historically, companies would look to outside suppliers for support when something was being performed poorly or the processes in that function were out of control. In other words, it was a reactive response to unacceptable performance. However, the view today regarding collaborative maintenance is one that focuses on using it as a proactive measure that allows best practices to be accomplished in both core and noncore plant functions.
While there are a number of noncore activities companies can do on their own, such as repair services, inventory management, and warranty tracking, the question is, should they? Unfortunately, many maintenance functions are too often measured by how much they spend instead of their effectiveness in achieving cost savings for the plant—like stepping over a quarter to pick up a penny.
The first step is to look at the strategy of the organization. Where does it intend to invest money and people? If it is continually willing to cut corners on equipment, processes, and people within a particular activity, then that activity is likely a good candidate for a collaborative approach. Many manufacturers already have a MRO foundation in place, but with proper support and commitment from an outside partner, that function can be expanded in scope and effectiveness without losing valuable employees.
Real world results
In practice, a collaborative maintenance strategy can manifest itself in a variety of ways, such as direct access to technical assistance, customized employee training, storeroom management, and on-site support. Whether in the form of an on-site maintenance contract, telephone, or even Web-based support, these services can help companies reduce unplanned downtime and avoid production losses. That has been the experience for John Deal Coatings Inc., a manufacturer of pressure-sensitive adhesive products in Mt. Juliet, TN.
Shortly after a routine preventive maintenance visit by its outside service provider, the company’s pressure-sensitive coating line experienced a problem on second shift. Instead of calling it a night and potentially losing production time, the company called its field support engineer who had just been out earlier in the day to service the control technology on the production line. He resolved the problem and was able to get the line up and running, enabling it to continue production as scheduled the rest of the night.
John Deal Coatings, which runs 24 hours a day, five days a week, could have experienced at least 12 hours of downtime if the support engineer had not arrived until the next day. Instead, the problem was resolved that evening, and the line was down only for 3 hours. Quick resolution of the problem that caused the downtime event saved the company an estimated $20,000.
“The way I evaluate the value of the maintenance agreement is that all I have to do is use it one time and it pays for itself,” said Mike Barnabi, plant engineering manager at John Deal Coatings. “Having this contract in place is a no-brainer. It’s the best program I could have.”
Not only do maintenance and support services help manufacturers avoid costly downtime and prolong equipment life, they also can help companies reduce repair costs, improve inventory tracking, and increase warranty utilization rates. Such was the case for Continental Tire, the fourth-largest tire manufacturer in the world. In early 2002, the company’s plant in Mt. Vernon, IL, adopted a comprehensive asset management program with assistance from a collaborative partner. Within six months, the company began to save on its MRO expenses.
“We needed to operate in a more disciplined fashion and get a better handle on our inventory, warranty programs, and equipment reliability,” said Ed Stoller, head of plant engineering at Continental Tire’s facility in Mt. Vernon. “We didn’t have any available employees to manage our warranty situation, and we had a strong need to know what happens to every part that leaves the storeroom.”
The first area the company focused on was tracking part warranties and usage. By improving the processes for tracking inventory and managing warranties, Continental Tire found it had more control over its repair costs. To develop the system to support these new processes, the company brought in an outside asset management professional, who worked with the maintenance team to develop a strategic inventory management system for new and repairable spare part orders—one that would enable storeroom managers to analyze levels of spare part usage.
With the new system governing the approximately 17,000 sq. ft. of inventory sorted by type and vendor, storeroom managers use label tags and bar codes to track parts and equipment. When maintenance personnel request a part, a tag must be filled out, telling the use of the part, where it is going, and the identity of the individual who checked it out. Bar codes track repair rates and vendor warranties, as well as indicate if the storeroom needs to order replacement parts.
The inventory tracking data also helps Continental Tire consolidate repairs and track overall repair rates, and employees can use that data to be more efficient. For example, if a pattern of repairs occurs on a particular machine over time, managers and maintenance engineers can quickly identify the source of the equipment failure and repair it.
Within 18 months of implementing the program, Continental Tire has achieved several key results, including reducing its electronic repairs costs by up to 30 percent and increasing its utilization rate on warranties to 100 percent. As the company continues to improve its manufacturing processes, it continues to initiate projects to reduce its maintenance costs. The company’s next goal is to reduce total inventory by 50 percent within the next 5 years.
Gaining an edge
What manufacturers lack in capital and resources they must make up in speed, flexibility, and good strategy. With a proactive maintenance approach that focuses on reducing expenses, improving uptime, and optimizing production processes, manufacturers are able to parlay this strategy into more affordable products, higher profits, and a distinct competitive advantage. MT
Mike Laszkiewicz is vice president of the asset management business at Rockwell Automation, 1201 S. Second St., Milwaukee, WI 53204