Uptime: The True Cost Of Preventable Failures

bob_williamson_thumb_thumb“Our preventive maintenance (PM) expenses seem out of line compared with our other mainte-nance costs. PM downtime also is eating into our production. Show me bottom-line benefits of all these PMs or we’ll be making some big cutbacks.”

Some say PM is expensive and a waste of time because “nothing is really being fixed.” All that labor time spent looking for problems, making some adjustments and buttoning things back up reduces production time and adds cost. This is the thought process of people who would rather run the equipment to failure and fix it fast than pay for PM downtime and PM labor.

So, how do you show the cost of NOT doing preventive maintenance? One way: Stop doing PMs for a year or so and measure the cost impact and equipment downtime. Whoa! I’m not recommending that approach—even though it would give you some solid numbers with which to work. No, let’s start thinking about the true cost of preventable failures with the help of a non-industrial analogy.

That’s just peachy
Peaches are a major business near my home. During harvest season, trucks haul load after load of the fruit up the hill to a regional farmers market.

Farmer Glen bought a new 2008 pickup four years ago. He really liked its shade of green, its design, its automatic transmission and its long bed. He got a real big engine because he often pulls a trailer. Farmer Glen is a believer in good maintenance on his truck—“preventative maintenance,” he calls it. He gets that pickup serviced like clockwork: Every 5000 miles, it’s engine oil and filter, air filter, tire rotation and chassis lubrication. Every year, or 30,000 miles, it’s automatic-transmission service. He checks the truck’s fluid levels and tire pressure weekly. And he keeps it real clean (inside and out).

Farmer Glen’s neighbor is another story. We’ll  call him “Farmer Pete.” Not to be outdone by his neighbor, Pete bought the same type of pickup, except it’s white. He’s not so good at taking care of it, although he cleans it out occasionally. Last week, at 120,000 miles, his automatic transmission failed and had to be replaced. The bill came to $3095 plus tax. As he remarked, though, “It’s a lot better to replace an ailing transmission once in four years than to pay for four years worth of expensive maintenance checks. Transmissions are bound to fail sooner or later.”

Farmer Pete made the mistake of discussing his “maintenance philosophy” with Farmer Glen one day. True to form, Glen got straight to the point: “Pete, you can’t afford a truck failure in our business, especially during peach season! Your automatic- transmission fluid and filter should be changed every 30,000 miles. Sure it takes about two hours, but I’ll schedule that type of service when I don’t need to use my truck to haul fruit. No telling when a poorly maintained transmission might break down.” (He figured Farmer Pete may have already come to grips with this concept, since most of his last crop had ended up rotting on the ground.)

Farmer Glen showed Pete his last month’s receipt for routine transmission service…

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Farmer Pete nodded as usual and walked away disgusted, muttering about the time he lost while HIS truck was being repaired. When he got home, he looked at last week’s bill for his transmission work…

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Pete continued anguishing over all the peach-hauling he missed out on while his truck was in the shop. Actually, this was the first time he really thought about all that lost time: He remembered waiting a day for a scheduled tow. Then, there was another lost day before the shop could work it in. At that point, the dealership had to wait three days for a new transmission to come from Raleigh. Once it arrived, the repair took another entire day! That was six days during peak harvest time! It became clear his “cost” was more than just a transmission replacement—he had a lot of lost sales, which translated into substantial lost income while the truck was down. Considering that a “cost” too, he tallied everything up…

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Then Pete realized that NOT doing the routine maintenance on his pickup transmission was, in fact, costing him $17,171.00. He could just kick himself! For $185.55 annually, he could have avoided the loss of $17,171.00.

Farmer Pete kept worrying: What if that transmission failed next week when he would be making three trips per day with a loaded truck and trailer? He shuddered at the thought, took out a pencil and paper and began calculating all over again…

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At that moment, Pete decided it’s best to take care of his new transmission along with the rest of the truck’s regular critical maintenance. Spending $185.55 each year could help him ensure between $17,000 and $40,000 in peach sales. That would be like investing the $185.55 and getting a return of anywhere from 9000 to 22,000%.

Farmer Pete learned the hard way. To him, “preventive maintenance” had always seemed like a total waste of time and money. Conversely, respect for that type of maintenance had been ingrained in Farmer Glen through generations of his family’s peach business. He took good care of the equipment that provided his family’s livelihood. He considered it to be a routine investment—not an expense that could be subject to cutting in tough times.

Bringing it closer to home

OK, so you’re not in the peach business like our referenced farmers. Still, there are eerily similar circumstances occurring every year in our plants and facilities. Some decision-makers question the return on the investments in preventive maintenance—and rightfully so. Various PM procedures are truly “non-value-adding” maintenance activities: performed too often or not often enough, missing the trouble spots and not scheduled efficiently.

Take, for example, a fairly new production machine. It makes a finished product, all except packaging. This machine has been “temperamental” at best, with lots of unplanned downtime, jams and loads of scrap product—2.9% scrap product to be precise. Hundreds of maintenance hours are being logged on this machine since it is less than a year old and plagued with startup problems.

How do you justify performing MORE maintenance, in the form of PMs, on this type of troublesome equipment when the work-order hours are already through the roof? Senior and departmental production management must be convinced that there is a compelling business case for stopping the chaos that surrounds this fairly new machine.

A business case for doing PM

This new machine was installed because the older ones it replaced were bottlenecks in the production process flow. It was supposed to eliminate the constraint and allow expanded production—in theory. In real-world application, the new machine is no more productive than the old equipment it replaced.

Despite being close to the plant goal, a scrap rate of 2.9% is just plain unacceptable, especially when products from this machine are finished ready for packaging. In this case, we must paint a picture of the cost of “scrap” produced by the new machine considering the following items:

  • A 2.9% scrap rate of finished products is costlier than a similar scrap rate of raw materials. Every stage of the manufacturing process “adds value” to what may become scrap.
  • At a 2.9% scrap rate, the pile of scrapped finished goods is more than a quarter mile tall! Ask if that’s acceptable.
  • Look at the manufacturing costs of each scrapped item. Document and quantify the interruptions of finished-goods packaging (late shipment penalties, lost sales, schedule and workload impacts, etc.). Ask if that’s acceptable.
  • Every time the new machine jams, it causes 12 scrap products. At this point, we have to ask, “What causes jams?”

If we merely focused our PM tasks on reducing the scrap rate, there would be a sizable return on that investment. Remember, though, that “PM” is not always the job of the maintenance department or the mechanics. There are also “preventive” tasks that must be performed by operators.

The bigger picture

When looking to justify time and money spent on preventing failures, keep in mind the impact on the bigger picture. Maintenance alone can’t elim-inate the causes of all failures. The operations side of the business must be engaged in making time available for PMs and participating in a joint effort to eliminate the most penalizing downtime, interruptions and other business-related losses.

Sharpen your “business case” for preventive maintenance and make it work for you. It’s time to replace the costly, reactive, repair, trouble-call maintenance approach. In other words, don’t let your peaches rot! MT

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