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Value driven maintenance
Maintenance is crucial in any organization. Without proper maintenance, assets deteriorate over time causing a loss in quality of the output produced. More importantly, it can also impact the safety of the asset or the people that operate it. Traditionally, maintenance has been viewed as a cost center in an organization; it costs money to hire maintenance technicians and purchase the spare parts to keep systems running smoothly. Too often, senior executives ignore the added value maintenance can bring to an organization such as:
- A reduction in reactive maintenance costs
- Reducing costs to restart production after a breakdown
- Limiting production scrap
- Costs of downtime such as missed orders and lost revenue
- Customer perception/satisfaction
- Improved quality of products
- Reduced environmental impact
Not surprisingly, maintenance can add economic value to a business by delivering maximum availability at the lowest possible cost. To view maintenance as a value driver, senior executives must move from cost-based thinking to value-based thinking.
Value-driven maintenance® (VDM) is not a maintenance type, but rather a philosophy developed by the founders of Mainnovation, Mark Haarman and Guy Delahay, for optimizing the value derived from maintenance at any particular point in time. The decision to perform maintenance at any time is based on cost/benefit analysis. It requires a delicate balancing between the value that improved reliability can bring and the cost of maintenance. This is summed up in the four value drivers below.
Table of contents
What is the VDM formula?
Availability is the probability a system is functioning when needed to, under normal operating conditions. When the system is alive and well, the organization can continue to produce output and meet orders. Increasing availability means more units can be produced with the same equipment, generating more income while fixed costs remain unchanged. This scenario is ideal in growth markets where demand outstrips supply. For declining markets, increasing asset utilization in one facility could lead to shutting down a sister plant while still meeting demand.
Resources are spare parts, labor, contractor labor, and knowledge. Whereas the consumption of those resources is covered under cost control; the resource allocation driver focuses on smarter management of those resources. For example, smarter inventory management can minimize stock on hand. This reduces associated carrying costs and limits the impact of part obsolescence, increasing value for a company. The challenge for maintenance planners is to ensure there are adequate resources when needed for preventive or reactive maintenance.
Salaries, contractor fees, parts, emergency shipments and specialist tools consume maintenance budgets. Reducing reactive maintenance and thus limiting the need for external contractors, emergency parts and technicians overtime can increase value by eliminating expenditure. Determining the optimal cost-effective time to perform maintenance tasks can further reduce costs. An effective preventive maintenance program can also help achieve cost savings, however, as more and more preventive maintenance is introduced, the cost savings eventually level out before they start to fall. The cost of performing additional maintenance exceeds the benefit.
Safety, health & environment
Can you put a price on safety? A good safety, health and environment (SHE) policy is an important value driver for maintenance as it can have a significant negative affect on future cash flows if done incorrectly. Maintenance related incidents that injure personnel, damage equipment or have a negative affect on the environment will increase expenditure through litigation or imposed government penalties. A good SHE policy also ensures that the license to operate remains intact. Losing the license to operate means no income. The BP oil spill in the Gulf of Mexico demonstrates the importance of SHE and the enormous impact it can have on costs when it goes wrong.
Where is the added value of maintenance
In theory, the challenge for maintenance managers is to reduce related costs while maintaining or improving reliability. Depending on priorities, this does not always maximize value. In the oil and gas industry, the SHE factor is critical. In highly competitive industries such as consumer electronics, cost control takes center stage. Value can also depend on time. For example, during the recent downturn, the auto industry switched focus to cost control as demand crashed. This meant less preventive & reactive maintenance and leaving systems down for longer periods until repairs could be completed economically. As orders picked up, the focus switched from cost control, to asset utilization.
With value-driven maintenance®, maintenance managers should focus on the value driver that delivers the biggest return for their organization. A good CMMS will compliment value-driven maintenance®. Once optimal preventive maintenance actions are decided with VDM® analysis, the CMMS can be configured to automatically trigger the work orders at that optimal time.
VDM – value driven maintenance® is a registered trademark of Mainnovation. For more information on VDM® see mainnovation.com.