All excellent build's but most seem focused on the reliability expert's view of the asset not executive management. I strongly feel there's a need to bridge the gap between reliability performance and financial performance if funds are to be released to move forward with IIOT, digitalization, and AI objectives, and executive management controls the money. I love ROA for example because it ties financial impact to the asset but metrics like MTBF, while important the CRL's, falls on deaf ears with the CFO. I would also recommend concentrating on 3-5 critical metrics and never any more than 5. I visited industrials with more than 20 key metrics and asked what are the 3 most important and no one knew. They're all important! So, it seems too many metrics just dilutes the importance. Most of the major industrial gas plants I collaborated with had 3 key metrics; KWH/MCF because power was nearly 80% of their operating cost, availability of product to the customer because that's what they were paid for not reliability, and of course, safety.
My 2 cents.
Naples, Florida USA
Good topicIf we are taking about Asset Mnagement under an Asset Management system, the KPI should be related to the Asset Management Objetives.Be careful with long time effects, Risk should evaluated, there is a bing danger in evaluating just costs and performance..Best regardsJose Bernardo Duran
I think it is up to Maintenance Managers to align their objectives to the overall corporate objectives and learn to "speak the language" of business. Learn to understand budgets, balance sheets, cash flow statements, and be able to describe your team's impact on them. It is the role of the manager to translate HIS KPI's of Uptime improvement into the language of "additional available production time". I always hear that additional uptime doesn't matter if you're not sold out....well not being sold out is a KPI problem for the sales and marketing side of the business. You provide the opportunity, leave it to others to take advantage of it. The Maintenance Manager should also be able to explain to the maintenance team how their performance indicators translate to financial results for the organization. The Maintenance Manager needs to be able to calculate and present what the ROI is for proposed projects. In other words, Maintenance Managers need to become financially educated. I am fortunate as I left my "technical track" after completion of my Associate's Degree in Nuclear Technology (I am a retired Navy Nuke), and finished a BS degree in Management, so I got the full financial education that comes with that. I was somewhat of a Unicorn in the maintenance world.
Michael Meehan exposed the big real world problem. Maintenance and Managent don't often live in the same office. The education and expertise are too different for the two roles.Working as a consultant I have taken maintenance managers to plant managers to insist on ordering spare parts or scheduling shut down for maintenance or repair. My strategy was to take a printout of the request and when production refuses then give them the copy to sign. In 99% of cases they refuse so I would write on the printout "request refused by .... on date...." and sign it in front of them and then have the maintenance manager also sign. When the breakdown happened and it was "all the fault of maintenance" then copies of the note would appear. Plausable deniability was gone. On the next occasion there would be more cooperation from production.Its all about efficient operation, maintenance is a tool to achieve that.
Absolutely on the money. A key part of a maintenance manager's role is to tie their team into the organisational objectives so that they are in direct support of them. One of the best areas I've seen this is in the engineering teams on a cruise ships. Quite often you'd see senior and very competent engineers interviewing for a deputy chief engineer position but they hadn't quite made the shift in their minds that they weren't just responsible for a bigger team and more kit (though they were), they were actually the Chief Engineer's deputy which meant that if he/she were to fall ill or have to get off, they were it in terms of the leadership, motivation, whole ship focus and balancing the engineering priorities with hotel priorities to deliver guest satisfaction etc. An entirely different kettle of fish.Relationships are key to all of this and once operations staff see that you are really 'for' them and their objectives in the longer term (which are almost always the main purpose of the organisation anyway!) my experience is that they then start to help so that everyone is pulling in the same direction.
Been sharing with you Vic for a long time, meanwhile you was in charge to direct the efforts to implement the right reliability kpi´s globally in our company, it takes years to achieved it, I am sure that you leave your mark !!! because we continue doing well!Best RegardsDavid
Thanks for the accolades, David and thank you for putting what you learn into practice successfully managing one of the largest, most complex, and remote high pressure gas injection sites in the world. Your skills at maximizing margin with KPI's for asset maintenance, efficiency, sustainability, and safety not only has the recognition of executive management but also industry, Well done!
I so agree with this Vic. I started a process with a man at the Zurich University of Applied Sciences. He specialises in finding the links between different primary parameters and its money effects. We tried to find good links between the normal parameters found in maintenance, and the size of the budget. But it was difficult to get meaningful relationships. If there are anyone out there that has insights regarding this, I would love to take that process up again.
NIST addressed this a few years ago in a joint SMRP government relations project: Economics of Manufacturing Machinery Maintenance (link opens in new window) as part of the 'Manufacturing Machinery Maintenance' project (opens in new window). They reviewed and tied corporate KPI to maintenance activities including maintenance costs, preventable losses, and benefits of advanced maintenance strategies. They were also able to relate the following (from NIST web page):
Maintenance Costs: 2016 Machinery maintenance expenditures for NAICS 321-339 (excluding 324 and 325) were estimated to be $57.3 billion. Additional expenditures due to faults and failures were estimated at $16.3 billion and costs for inventory to buffer against maintenance issues costed $0.9 billion. In total, these maintenance activities costed $74.5 billion.
Preventable Losses: The 2016 losses due to preventable maintenance issues amounted to $119.1 billion: $18.1 billion due to downtime, $0.8 billion due to defects, and $100.2 billion due to lost sales from delays and defects. Additionally, an estimated 16.03 injuries and 0.05 deaths per million employees were associated with these maintenance issues.
Benefits of Advanced Maintenance Strategies: The estimated 2016 perceived benefit of adopting some additional amount of predictive maintenance was $6.5 billion from downtime reduction and $67.3 billion in increased sales ($73.8 billion in total). Other perceived benefits such as reduced defects are also likely to occur but were not monetized.
The top 25 % of those establishments relying on reactive maintenance was associated with 3.3 times more downtime than those in the bottom 25 %. They were also associated with 16.0 times more defects, 2.8 more lost sales due to defects from maintenance, 2.4 times more lost sales due to delays from maintenance, and 4.9 times more inventory increases due to maintenance issues. On average, 45.7 % of machinery maintenance was reactive maintenance. Those who relied less on reactive maintenance, and more on preventive and/or predictive maintenance, were more likely to use a pull (i.e., make to order) stock strategy and tend to be differentiators as opposed to being a cost competitor. That is, they rely more on their reputation and produce products on demand. The implication being that reactive maintenance reduces quality and increases uncertainty in production time.
Among those establishments that primarily rely on preventive and predictive maintenance (i.e., less than 50 % reactive maintenance), the top 50 % in predictive maintenance was associated with 15 % less downtime, an 87 % lower defect rate, and 66 % less inventory increases due to unplanned maintenance. Those establishments that relied more on predictive maintenance than preventive were more likely to have a pull (i.e., make to order) stock strategy and more likely to be a differentiator as opposed to being a cost competitor. Moreover, predictive maintenance is associated with higher quality products and shorter production times through reduced downtime. For those establishments that invested more heavily into preventive or predictive.
In addition, in tying our work on project implementation with our industry partners we tie energy and emissions (energy in general, emissions with companies that have ESG goals) to the activity. These are measurable values and maintenance activities were identified by the US Department of Energy in the 1990s as the number one method for decreasing energy spend by a corporation. Rutgers University energy extension center and the University of Illinois' Energy Resources Center identified a minimum energy reduction of 14% just through the application of a maintenance program from a reactive maintenance program. This was later implemented at the National Institutes of Health CUP with a combined predictive/preventive condition-based program on boiler and chiller systems with a resulting impact of ~50% reduction in overall energy spend (electric, gas, water) and was also proven with the US DOE's commercial/industrial 'Save Energy Now' program that started in 2005-2010(ish). The tools available for that program (developed starting in 1993-present) can be found: software tools, including MEASUR; Link to all other case studies, manuals, tools, etc. The initial impact of the Save Energy Now program at General Motors in the area of steam and energy, for instance, can be found on P. 42 of the August 2006 edition of Uptime Magazine (link here in separate window).Just some food for thought on this topic.
Howard, Thanks for sharing that great information. Every maintenance manager here should be saving those links and reviewing that data. These are the keys to selling a proper maintenance program to the senior staff. You also need to keep track of accumulated cost savings every month and learn how to "blow your own horn" and keep driving home the message of the benefits that maintenance excellence and dedicated asset management bring to the organization. Why? because that day is going to come when you have your plant humming along reliably (or relatively so based on beginning state) and someone is going to say: "Everything seems to be running fine. Why are we still spending so much on maintenance?" and you'll need to have good data and financial justification to continue to show the value of your team to the organization. The phrase "what have you done for me lately?" always applies.Michael Meehan
I presented on this topic at IMC 2021 entitled "Selling Reliability ROI & ROC" that some may find interesting. You can easily find it on Reliability.Web's website for IMC 2021 and simply type in Rioli. It's only about 40 minutes and may help with this discussion. Cheers!
Excellent builds, Jasper, Thanks! Another possibility why it's difficult to link asset maintenance to financial performance metrics is many industrials may be trying to define the link before defining the true cost of downtime, which I have found nearly impossible. I've walked into many industrial facilities and simply ask what's the cost of downtime and either they can't tell me or say, it must be lost sales. Defining the true cost of downtime for a facility actually takes a lot of work because it's not only lost sales but also lost product inventory, back-up product, distribution costs, overtime, contractors, spare parts, start-up power, penalties, litigation costs, and depending on the particular industry, maybe many more. It involves tough negotiations with executive management that have responsibility for the P&L to get sales, product inventory, and product back-up data but if you don't define the true cost of downtime, how can you possibly determine the ROI or ROC for an investment to improve reliability or the IRR for an investment to optimize maintenance? If you can't tell executive management what it cost for the facility to be down or out production, why should they give you any money to prevent it? Food for thought.
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