Understanding the impact of maintenance and reliability on ROI

What impact does maintenance and reliability really have on ROI?  

It’s an interesting question, and one we sought to answer through a process that started with a metrics mapping exercise. It grew from there. The ideal scenario for any manufacturing business (even drilling wells) is to know what is happening within your automated operations. For this, you need to be looking at key metrics and then understand how those metrics impact the business. 

Maintenance is a business, and what we want to know as part of the ROI equation is the “Return on Assets” that we have invested in. Return on Assets is a profitability ratio that shows how much profit a company can generate from its assets. So how do we work that out? There are two ways: 

1. ROA = (Net Income / Replacement Asset Value) x 100 
2. ROA = (Operating Profit (EBIT) / Total Asset) x 100 

By looking at inter-related metrics and how they can impact the bottom line, we can help deliver an improvement in maintenance strategies that may have traditionally been done using an “open and inspect process” on field operations and equipment—both of which are labor-intensive and higher-risk. This approach will enable us to better understand how equipment is operating and establish a knowledge-based preventative approach to its maintenance. 

We want to be more efficient and reduce critical costs, such as non-contract labor. That’s because downtime is expensive and can have a major impact on an organization's operational efficiency, negatively impacting its bottom line.  

We seek to reduce unplanned downtime as much as possible, because not drilling or producing is the biggest issue impacting a business in the upstream sector. Taking a holistic approach to equipment maintenance helps identify any “bad actors” within the business. By identifying critical problems, we can focus on them instead of on every problem. 

IMPORTANCE OF DATA AND METRICS IN MAINTENANCE MANAGEMENT 

Good maintenance is about effective resource management, Fig. 1. Central to this idea is computerized maintenance management systems (CMMS). A lot of the information we need to make better-informed decisions is already available to organizations. However, experience shows that while they may have the information, most are not using it to their benefit or to increase the reliability continuum. 

Fig. 1. The importance of data and metrics in maintenance management is critical.

Many organizations don’t have Key Performance Indicators (KPIs) or metrics, which will often result in businesses firefighting—reacting to equipment problems when they arise. Because this is the way they have always operated, organizations often don’t realize how reactive they are or don’t measure the impact of that approach from a bottom-line perspective when equipment problems do occur. 

ESTABLISHING KPI’S FOR BETTER MAINTENANCE 

So, the question is, where to start? Numbers speak volumes. We need to start by setting metrics, establishing a baseline picture, so you can see a much more comprehensive process moving up the maturity continuum, Fig. 2. Everything revolves around a continual improvement wheel. The goal is to relate what we do with maintenance and reliability to the bottom line. 

Fig. 2. Where should we start? Numbers speak volumes, but we need to start by setting metrics.

KPIs help present a better business case. Some key KPIs could include: 

• Total maintenance cost as a percentage of Replacement Asset Value (RAV) 

• Availability—how often the asset is running or capable of running, compared to its operational schedule 

• Unscheduled downtime—the amount of time the asset is unavailable, due to repairs not on the weekly maintenance schedule (break-in work)? 

• Wrench time—the actual time that maintenance crews are affecting repairs. 

• Stockouts—the frequency at which parts are requested from the stock system but not available. 

By establishing and measuring KPIs, we can start to identify what is causing us the most loss. Any loss we can prevent is positive—both in time and money. Through this approach, we are better placed to measure Overall Equipment Effectiveness (OEE)—looking at the full productive time of equipment. 

Everything is related. If you want to run a business at a world-class standard, all this needs to be considered; this approach is both achievable and affordable. You should be aiming for 80% to 85% of planned maintenance work, with no more than 15% unplanned—not the 30%-40%-50% emergency work levels that are not unusual, where this process is not utilized.  

The more unplanned work you are forced to react to, the heavier the cost incurred. This is the most inefficient and the least safe way of operating, because the machine is dictating what we are doing instead of operators planning what will be done. 

Most manufacturing and production businesses will have the capability of undertaking this process themselves, but they don’t know where to start or what process to take. They know they want to be more efficient, but there are often cultural dynamics between maintenance, reliability and operations teams within the organization.  

You cannot move up the maturity continuum, if you are not planning and managing your maintenance and repair schedules. It’s about having a maintenance action before there is a functional failure. 

MAXIMIZING OEE FOR BETTER ROI 

The relationship between maintenance and OEE creates much greater outputs in the field, which ultimately feeds directly into the bottom line, helping an organization to run more efficiently, reduce unnecessary costs and enjoy a greater return on assets. 

Gain control of your assets. When addressing reliability, one size hardly fits all. Some organizations have well-developed programs and workflows and are well on their way to a higher level of performance. Others are still in the process of establishing a reliability program that can streamline operations without breaking the bank. 

By using independent experts, such as ABS Group, with knowledge and experience in asset reliability, businesses can develop plans with clear tasks, milestones and deliverables, based on your organization’s needs. 

About the Authors

TIM GILMER

ABS

TIM GILMER has worked with maintenance and reliability leaders in manufacturing to minimize asset failures and increase operational uptime. He brings over 25 years of experience working with organizations to improve their asset reliability. Mr. Gilmer has been involved with implementing reliability programs and critical tools, such as computerized maintenance management systems (CMMS), across multiple industries.