How Much Does it Cost to Maintain?
When an organization is buying a new piece of equipment or developing an operational budget, this question always comes up:
How much does this thing cost to maintain and keep running?
Utilities, floor footprint, supplies and other considerations are easily determined but what about maintenance and upkeep? Are budgeted maintenance costs based on the local plant and processes or does the company rely on the “industry standards”? Can an organization compare actual costs to budgeted costs? Can management tell the difference between preventative maintenance and repairs? Is the organization spending too much or not enough? All this information should be available at the touch of a button. However, many companies struggle to determine the actual maintenance and repair costs of a specific piece of equipment. By utilizing the knowledge of plant through an accurate reporting process and setting up the information system to report maintenance correctly, companies are able to get a true financial picture of what it costs to run a machine.
The old saying “time is money” applies to maintenance. Cost, the language of an information system, is applied through time spent. If one looks at any information system, he or she will see a maintenance operation code. Checking the maintenance time entered for a specific piece of equipment, one normally finds that people spend an incredible amount of time (money) keeping their equipment maintained. In fact from the amount of maintenance time charged, management could get the idea that the equipment should be used for manufacturer’s demonstrations. (Computer systems are not immune as I have seen Macs with more maintenance time and cost charged than a printing press.) When totaled together, companies incur an incredible amount of cost on maintenance and repair but are not specific on where it is spent. However; when one talks to the operators, an entirely different story emerges. Most operators explain that they do not get enough time for preventative maintenance. It is the first thing eliminated during busy times and replacement parts are not available during slow times. Further, the operator can identify which machine in their area runs best and which one is a boat anchor. Cost was developed for the time reported by the operator. If the operator’s opinion is so completely different from the data, why do they still report maintenance time? The answer is that both groups have different objectives which must be joined to prevent management and production from talking two different languages.
So, how does the company’s management and operational employees get to speak the same language?
To begin, one needs to understand what maintenance means to the plant and how it is reported. This may sound silly but ask an operator. Depending on the number of operators asked will be the number of different answers received. In addition, he or she will tell you that a manager told them “if you can’t do anything else, do maintenance”. In these cases, operators are not following a preventative maintenance program but are trying to stay off the idle time radar. Companies want their employees to be busy at all times and have told their supervisors to enforce this. However, sometimes that message backfires. Supervisors will try to appear to maximize the time and make the mistake that all idle time is to be eliminated. The one area where time is not questioned in reporting is maintenance. Eventually, the message becomes clear to production: idle time or delays are to be reported as maintenance no matter what the circumstance. If an operator is waiting for materials, they will report that time as maintenance. If there is no work for an hour or two then they are charging maintenance. This way, no one will question why they appear to be “standing around doing nothing”. The operator is happy since his or her time is accounted for as busy. The department manager is happy because no one will question his or her management of the time. Upper management is happy because they believe that the equipment is being properly maintained and there is nothing to worry about. Everyone is satisfied and the maintenance dance continues. Eventually, the equipment wears out and needs major repairs. Data shows that the equipment received a large amount on maintenance at a substantial cost. Management now wants to know why they have to spend a tremendous amount of money (normally in an emergency situation) on top of the preventative maintenance cost entered into the system. Most plants work this way to a greater or lesser extent and this culture must be changed to get the necessary information.
To change the reporting culture, management and operators must be retrained as to the purpose of reporting. Accurate reporting must become the goal instead of covering up time. Correcting this learned reflex is easier said than done. Old habits and fears are hard to break but they must be changed to get the information. The floor employees must believe that the organization wants the information accurately reported and that they will not be punished for identifying events for what they are. Idle time and delays are just that, idle time and delays. Maintenance and repair is just that, not a time dump hole. Also, department managers must feel that the information is highly valuable and understand it is their responsibility to insure accuracy. They too must feel that they are safe letting the events be reported. The message needs to be constantly reinforced to the operators and managers that the data must be accurate. Managers will need to understand that the first time they tell one operator to hide their time with an incorrect entry, it will be the last time the entire department will report accurately. Word gets around and employees will do what the manager wants. This culture did not develop overnight and will take time to overcome. However, the returns on accurate information are well worth the effort.
Once the culture change starts, the company needs to make sure the reporting tools are up to the task.
All information systems use operation codes to define activities at specific machines or work stations. In the world of manufacturing, there are three distinct events that need to be recorded separately. Each event is unique and has a different impact on the equipment’s maintenance cost.
The first event is scheduled maintenance. Scheduled maintenance activities are events that a company knows it needs to do to keep the equipment on-line and functioning at peak performance. This would include anything recommended by the equipment manufacturer and plant requirements for upkeep. Think of it as changing the oil in your car and vacuuming the carpets. This is time and money that the company knows it is going to need to spend and is normally included in the machine’s budget. If reporting is limited to only those activities, and not idle time, then management can see the actual cost of upkeep, compare it to the budget and can plan accordingly. The best systems can identify what type of maintenance is being performed (Startup, Daily, Weekly, Monthly, Annual, etc.). A bonus for this reporting structure is that it puts the data into the system and eliminates the need for the normal hand-written log books. Everyone can see what has been done, what needs to be done, and reduces the data entry time requirements on the operator. Management can use the data to develop a real-time operating budget for each production center based on the actual reporting.
The next event is when something breaks during production and the operator fixes the machine. This is an emergency in which job production is disrupted and work grinds to a halt. The operator leaps into action and fixes the problem. Managers are glad that the operator has the wrench and is able to fix the problem and production resumes. However, the event was not planned; it was expensive and should not be reported as a normal cost. It needs to be identified and reported on its own. Normal maintenance costs are this much but emergency costs are this much. Preventative maintenance costs are tallied for the budget and the emergency event, with its associated costs, are recorded for later evaluation. As with scheduled maintenance, the more searchable information entered into the system defining the repair, the more likely a department manager is able to know what to fix. Justifying repairs for a machine that has recurring problems is easier when a total of the disruption cost is available to management. By separating the emergency cost from the normal maintenance cost, a picture begins to emerge as to the actual operation cost of the work center.
The final event is the worst possible situation and needs to receive the full attention of management. The machine is broken, the operator cannot fix it and someone else needs to come and repair it. Not only is the machine down disrupting production but it will take longer to repair. The organization incurs the expense of the idle crews and the outside service. This event needs its own special designation and should be easily identified within the system. Like operator repairs, vendor repair events should be reported with as much searchable detail as the system will allow. Expensive vendor repairs must be visible in the system so that these events can be documented and given the attention they deserve and not hidden in the preventative maintenance reporting.
Each of these events needs a specific operations code so that the events can be identified for what they are and how much they cost. To prevent confusion, each code should be defined in writing and given to the operators and managers. A written procedure eliminates the “I think the code means this” problem and promotes standardization of the data. Also, the reporting data needs to be policed by the managers so that the data is as complete as possible.
Once data is gathered this way, the information becomes an incredible tool which management and production employees can put to good use.
Using the information.
With the information separated by their respective operation codes, management has the information it needs to determine the true cost of operating a piece of equipment.
As the data is being entered, preventative maintenance cost is being accumulated. This becomes the first factor of the total cost equation. Management and operators can determine if the preventative maintenance program is being followed, what is the schedule and how much it is costing. This figure can be compared to the budgeted amount or the “industry standard” used when the machine was purchased.
Next, operator repairs, vendor repairs and down-time costs are highlighted instead of being lost in a single operation code. These events become unique in the system and can be examined separately with their associated cost. Management can develop cost trend analyses, cost comparison studies and take effective corrective action. Over time, management can determine the effectiveness of the maintenance dollars spent.
With proper reporting from production, major financial leaks can be identified quickly allowing management to take action based on the operator’s expertise. Recently, a company was using a certain piece of equipment because the raw materials were cheaper. It appeared that the company was saving money every time a job came through. Besides the manager, who was a former employee of the vendor, stated the machine was the best on the market. As the system came on-line, it became obvious to the operators that the equipment was not performing to expectations. The prescribed maintenance program required more time than the vendor stated. In addition, the machine would break down during production requiring the operator to repair it or get on the phone for vendor service. Maintenance, operator repairs and vendor repairs costs increased substantially. After a few months of operating the machine and capturing cost, production reported that they were spending over $30,000 a month in maintenance, operator repairs and vendor cost. The detailed report painted a picture of operators spending a lot of time with the machine cleaning and repairing it. Also, breakdown dates paralleled production dates when the machine was most needed. The machine was removed and a replacement was purchased. The same system that had identified the financial leak reported that the new equipment had returned costs to the budgeted $4200.
Once true maintenance and repair costs have been identified by the operators and tallied by the information system, management stops guessing and starts knowing. The operators are now speaking the same language as management and everyone understands each other. Suddenly, events that were swept under the electronic rug are out in the open for everyone to see and the company can make informed decisions. The question of how much does a machine cost to operate is accurately answered by the people who know it best.
Artical PDF Download