Battle of the Bulge: How lean is you maintenance department?
When the expression “lean" is mentioned, what thoughts are typically brought to mind? Is it to be able to do more with less? Downsizing? Cost reductions? If so, then the true meaning of lean is missed.
If a company is considered to be lean, it operates with a minimum of waste. Lean organizations have high levels of productivity and efficiency. Definitions of lean include the elimination of waste, whether the waste is excess inventory, wasted motion in the manufacturing process or defective products. While most lean initiatives focus on manufacturing, an increasing number deal with maintenance and reliability.
Instead of downsizing a maintenance organization or applying cost-cutting measures, lean drives out waste. Increasing labour and material efficiency is a basic approach to lean maintenance. Studies have shown that almost one-third of all maintenance expenditures are wasted. This waste occurs because maintenance resources are used in a reactive mode. The higher level of reactive maintenance that’s being performed by the organization results in a greater percentage of maintenance resources that are being wasted. How is the amount of wasted maintenance resources lowered? It’s not by reducing the size of the workforce, but rather by deploying it in a planned and scheduled mode.
When maintenance organizations use more than 20 percent of its MRO resources in a reactive mode, the opportunity to initiate lean principles exist. For example, it has been observed that “wrench time" in a reactive organization may be as low as 20 percent. In a proactive culture, the wrench time may be as great as 60 percent. In effect, this triples the amount of work that can be performed by merely concentrating on driving out non-value-added (waste) activities. While some organizations may try to use this as an excuse to attempt to downsize, they should first consider some other areas of waste reduction.
The use of overtime by proactive maintenance departments should be less than five percent. If an organization is working a higher percentage, is it possible to perform the overtime activities with resources that are now available at a straight-time rate? In most cases, this is accomplished by reducing maintenance work that’s being performed at a premium rate. Also, consider the amount of work that’s handled by outside contractors. With resources available from improved existing workforce wrench time, is it possible to reduce expenditures for outside contractors? Many companies have found that with higher levels of wrench time, they’re now able to perform work previously contracted out more economically than their contractors.
Is it possible that organizations have too many maintainers once they’ve implemented lean maintenance initiatives? Perhaps, however, going lean (i.e. preventive maintenance, effective planning and scheduling programs and high levels of workforce training) will take time to accomplish. Is it not likely that during this time there will be some workforce attrition that will assist in reducing (or eliminating) any forced dismissals?
Inventory and purchasing is the second area impacted by lean maintenance. A typical maintenance budget averages 50 percent labour and 50 percent materials. Although, a 60-40 percent split either way is acceptable. Material costs are related to the frequency and size of the repairs made to company equipment. The sheer number of parts, in addition to stores and purchasing policies and overall inventory management practices, contribute to the total cost of maintenance materials. Since some companies pay little attention to maintenance materials, inventories may be higher than necessary by some 20 to 30 percent. This increases inventory-holding costs and makes materials unnecessarily expensive. The inability of stores to service the needs of the maintenance department often results in “pirate" or “illegal" storage depots for just-in-case spares. This practice also drives up the cost of maintenance materials.
Consider the following maintenance-related waste that inventory and purchasing can create:
1. Craft technicians waiting on materials. Think of the time that maintainers spend waiting to get the materials to do their assigned jobs. This time can quickly add up to hours in just a single shift.
2. Travel time to get materials. How much time is spent going to the job and then the technicians find they need to go back to the stores to get parts? Or, how much time is spent getting the parts first thing at the start of the shift? Are there long lines of technicians at the store window during the start of a shift?
3. Time to transport materials. Sometimes finding the materials is the first step. Transporting the materials to the job can take a lot longer. This may involve finding a forklift or a truck to move the materials from stores or storage to the job site. This time can be even greater when there’s a crew of workers assigned to the job. As a result, maintainers have to wait for the materials.
4. Time required identifying materials. If stores materials lack numbering for identification and location schemes to enable the finding of the materials, considerable time can be spent. Without numbering the parts with a clear identifier, it’s confusing to find the correct parts. One small difference can easily render a part unsuitable for the intended use. Then travel and locating time begins again.
5. Time required finding substitute materials. It’s difficult enough to find the right parts for a job. When they’re out of stock, it becomes important to determine substitutes. If the parts aren’t quickly identified as substitutes, substantial time can further be lost in locating these parts.
6. Finding parts in alternative storerooms. As organizations grow, it becomes necessary to maintain storeroom locations remotely to reduce the amount of travel time. This raises the problem of knowing what’s carried or in stock in each of these locations. If the stock is out in one location, how much time does it take to find out if it’s in stock in another location? This is important to prevent re-ordering the item, when an adequate supply might be on hand in a remote storeroom.
7. Time to prepare and process a purchase order. If a crew of maintainers is waiting on a part and it has to be processed through purchasing, a considerable amount of time could be lost and cost incurred. This waste can be eliminated with proper controls.
8. Time lost waiting on other crafts. Inventory problems may be compounded with an organization that works with strict craft lines. If one craft has the materials to start a part of the job, but one of the other crafts doesn’t, delays occur for the entire job and all craft technicians involved. This can result in a tremendous amount of lost labour. If you compound the aforementioned basic problems, the entire list of inventory challenges becomes almost overwhelming. This is why inventory controls must be in place if lean maintenance success is to be achieved. To be effective with your inventory systems, it’s necessary to understand how they should function and the information that must be contained in the system.
Good inventory controls enable companies to lower the value of their inventory and still maintain a service level of 95-97 percent. This efficiency allows maintenance departments to be responsive to the operations group, while increasing its own personal productivity. Successful companies have averaged 19 percent lower material costs and an overall 18 percent reduction in total inventory.
Intermediate lean maintenance
The transition to this phase changes the focus from maintenance expenditures to increased equipment availability. Increased equipment availability is the source of large savings for a company that applies lean maintenance. Studies have shown that increased equipment uptime may have an impact four times greater than just reducing maintenance expenditures. Downtime costs for equipment may vary from several hundreds of dollars to literally hundreds of thousands of dollars per hour. For example, one company has several production lines in its plant and downtime on each is worth US$1 million per 24 hours of downtime.
In some organizations, downtime levels can run as high as 30 percent or more. This downtime results in lost sales opportunities, unnecessary expenditures for capital equipment and generally puts the company in a weak competitive position. Enforcing lean maintenance policies/practices and using computerized maintenance management software (CMMS) and enterprise asset management (EAM) systems as tracking tools can dramatically reduce equipment downtime. Successful companies have averaged a 20 percent reduction in equipment downtime losses.
Two major types of equipment downtime losses must be recognized: capacity loss and capacity reduction breakdowns. Capacity loss breakdowns are the easiest to recognize because the equipment ceases to operate. This loss, typically called a breakdown, is the production stoppage or the stoppage of a service to the facility. The maintenance department responds in an emergency mode and works to quickly restore equipment operation or service.
Capacity reduction breakdowns are subtler in nature. As the equipment ages, it experiences wear. As the wear continues, the capacity of the equipment begins to decline. Unless careful monitoring occurs, the reduced capacity goes unnoticed or is accepted as normal. In production terms, this translates into slower operation, lower capacities and increased labour costs. It also leads to higher energy and operational facility expenses.
For example, failure to maintain adjustments and calibrations on heating, ventilation and air-conditioning (HVAC) systems may result in a 25 percent increase in energy costs. While capacity loss breakdowns are the easiest to find and repair, they represent the largest cost to most companies. In the majority of cases, capacity loss breakdowns are a technical problem; capacity reduction breakdowns are an organizational problem.
Capacity loss breakdowns are caused by the failure of an equipment component. Because most preventive and predictive maintenance (PdM) programs are designed to detect and trend normal wear, other types of wear will cause the majority of these breakdowns. These other types include “infant" mortality failures, random failures and failures related to poor operating and maintenance activities. If PdM and reliability programs are effective, these breakdowns will be minimal in nature.
Capacity reduction breakdowns are generally caused by neglect of a chronic equipment problem, which occurs over a long period of time and becomes accepted as a normal fact of operation. A typical example is equipment that produces a defective product when operating at any rate over 80 percent of design speed. Instead of taking the time and effort necessary to correct the problem, the organization issues a memo stating not to run the equipment over 80 percent of design speed. This approach results in a 20 percent reduction in equipment capacity.
If this process is repeated over several years, the plant will soon need to invest in new equipment just to meet the necessary production rate. The problem becomes severe because management is focusing on short-term goals rather than long-range planning. When capacity reduction problems develop, solving them is more economical than reducing the operating standards. Management must examine short-term profits, however, in the light of long-term profitability.
Eliminating both capacity loss and reduction breakdowns is included in the lean maintenance concept. If this goal is to be realistic, however, a lean-based company must be committed to a program that’s designed to prevent breakdowns. Lean maintenance must address the different problems, both organizational and technical, which contribute to equipment breakdowns.
Advanced lean maintenance
The most advanced lean maintenance technique is the overall equipment effectiveness (OEE) calculation. The OEE looks at equipment from a three-dimensional perspective. The three dimensions are availability, efficiency and quality. Availability is the percentage of time that the equipment operates when it’s scheduled to operate. Efficiency is the design rate of operation compared to the actual rate of operation. The quality factor is the percentage of quality product compared to defects. Since lean maintenance has an impact on all three factors, it’s fundamental to any OEE improvement program.
The following is a good example of an OEE calculation. It involves an automotive plastic-injection moulding press that produced components on a three to eight-hour shift, five days a week schedule. This allowed for a total of 7,200 minutes for possible production. There was a planned downtime of 600 minutes per week (20 minutes for lunch per shift, plus two 10-minute breaks per shift). This left a net available run time of 6,600 minutes per week. The total downtime losses averaged 4,422 minutes per week. This left an actual operating time of 2,178 minutes. Calculating the availability showed it to be 33 percent.
When the equipment ran it’s 2,178 minutes, it produced 14,986 pieces. With a design cycle time of .109 minutes per piece, the operational efficiency would be 75 percent. There were 600 rejects during the week; the rate of product quality is 96 percent. When the availability is multiplied times the efficiency and quality rate, the overall equipment effectiveness was 24 percent.
If 85 percent is considered to be the goal for the OEE, then there’s a large opportunity for improvement. How do you convince peers and executives, however, that 24 isn’t good and it’s necessary to increase the OEE by some 61 percentage points? Encouraging management to make decisions with only percentage points for data is a daunting task. A better solution would be to present the improvement plan based on financial incentives. To do this with the OEE, it’s necessary to work the problem over, inserting the numbers that would be necessary to achieve an 85 percent OEE.
This shows that in order to have 90 percent equipment availability, the downtime losses can’t exceed 660 minutes. This will increase the operating time to 90 percent. With improved availability, the total output would increase to 51,770 pieces at a design cycle time of .109 minutes per piece. With the increased volumes, the quality rate rises to 99 percent and lowers the rejects to 518 pieces. The difference in production volumes between the 24 and 85 percent OEE is an increase of 36,784 pieces.
This figure is impressive, but still needs to be taken a step further. Each piece has a selling price of $10. Multiplying the 36,784 pieces times the $10, the net difference is $367,840 in revenue. This lost throughput figure would definitely get the attention of management. One additional step is to annualize the revenue differential. It would amount to just over $19 million annually. How’s that for a business case? What would a company spend to increase revenue by $19 million annually? Are you talking $1 million or $5 million? The expenditure becomes academic.
While the outlined case-study may seem unrealistic, this type of scenario happens all too often in companies. Without a clear understanding of how the OEE affects their asset base, many organizations make poor decisions when funding their lean maintenance initiatives. Companies will continue to be competitive only if they clearly understand how their assets should be used to support business goals and objectives.
Many organizations still view their maintenance departments as an overhead cost or expense item, but the opposite is actually true. Lean maintenance can significantly contribute to a company’s profitability. The question remains, however, whether management is willing to properly invest in lean maintenance to realize a significant return on investment. If companies continue to ignore the competitive advantage they can achieve with lean maintenance, they will struggle to gain valuable corporate market share.
Terry Wireman is the senior industry analyst for GenesisSolutions. You can reach him by email: firstname.lastname@example.org.