The business impact of good planning and scheduling
It is a common practice for organizations to neglect good planning and scheduling processes when it comes to maintenance and reliability activities. It is common to hear statements like, “We tried that before — it just didn’t work” or “We feel it is better for each person to plan and schedule their own work.” These statements are typically made when planning and scheduling efforts run into a roadblock and it is easier to quit trying to plan and schedule rather than remove the roadblock.
The major reason organizations never overcome the roadblocks to planning and scheduling is they never calculate the true cost benefit for planning and scheduling maintenance work activities.
One of the first areas to consider when examining the cost impact of planning and scheduling is the “wrench time” or productivity of the maintenance technicians. In a typical reactive or unscheduled environment, the wrench time is typically in the 20 to 25 percent range. In a best-practice planned-and-scheduled environment, the wrench time will typically be in the 50 to 60 percent range. While the percentages may not excite senior managers, this changes when they are converted to financial terms.
If you have a 20-person work force, working at a 20-percent rate of productivity, you will average 8,320 (2,080*20*0.2) annual productive hours while actually paying for 41,600 (2,080*20) annual hours. If the same workforce would work at a 50-percent rate of productivity, the actual annual hours would be 20,800 (2,080*20*0.5). The difference in hours between the reactive and best practice models would be 12,480 hours. If the rate of pay for the maintenance technicians were $30 per hour, the potential savings would be $374,400.
While some may be concerned this increase in productivity would lead to job losses, a couple of points would need to be considered. For example, how much work is there in the plant currently that is deferred or even undocumented? The increase in productivity would help to reduce this known (and unknown) work backlog. In addition, how much work is outside contracted? How much of the work could be brought back in-house at a lower cost with the increased productivity? A third consideration is how much of the current workload is worked as overtime? Best-practice planning-and-scheduling organizations target less than five percent overtime. If an organization has a higher percentage than this, it is another possible savings opportunity before workforce reductions are considered.
A second major area for consideration when examining planning and scheduling is the impact on maintenance inventory and purchasing. When an organization is unplanned, it put tremendous stress on the inventory and purchasing processes. Unscheduled parts require fast deliveries on short notice. It is quite common in a reactive maintenance organization to see a holding area, where Federal Express or UPS makes daily deliveries (sometimes twice a day). However, due to the unscheduled nature of the work, overnight deliveries can sit in the holding are for several weeks before being used. What is financial waste that is incurred due to this practice?
Also, in a planned and scheduled work environment, the part demand is known, the stock lead times are anticipated and the on-hand quantities can be reduced. In addition, the parts demand can be forecast, which leads to using multiple line item purchase orders, which lowers the overall cost per purchase order. Companies that transition to a planned and scheduled work environment, see a 15-percent lower overall inventory level and 15-percent lower annual material cost. For a company with a $1 million annual inventory expense, the savings could be over $150,000 plus lower overhead costs.
Equipment Capacity Savings
A third area, and usually the largest savings opportunity when implementing good planning and scheduling, is increased equipment uptime and throughput. In a planned and scheduled environment, there will be considerably fewer schedule conflicts with operations. The equipment preventive maintenance compliance will be higher than in a reactive environment.
Additionally, due to improved maintenance practices (due to good detailed job plans); there will be less unplanned downtime. While it is hard for companies to completely quantify this savings, case studies have shown it is typically four times the savings generated in maintenance labor and materials.
Maintenance planning and scheduling is the most effective tool a manager can have to control maintenance costs and increase equipment capacity. Since this is the case, how does a maintenance manager start a planning and scheduling program? This will be the theme for the next few newsletters.