Cost Catastrophes

This column in the previous issue talked about maintenance departments not having enough time to do preventive maintenance. This month, we expand on this subject by informing maintenance managers and directors on what is going on in their maintenance departments and what catastrophes are awaiting them right around the corner.

When maintenance departments don’t have the time to faithfully carry out preventive maintenance (PM), unannounced failures and costly repairs are going to increase well above normal and the price tag for this trend is going to rock the maintenance budget.

The previous column went into some detail on three topics on why PMs are not done: 1) Production is not releasing the equipment for maintenance work, 2) There are not enough available maintenance labour hours, and 3) Maintenance is too busy repairing breakdowns. The main issue we hear about repeatedly and see at many facilities and factories is number 2, not enough maintenance hours.

Recently, we have been setting up new computerized maintenance programs in several public sector facilities. These were turnkey implementations, where we did the complete maintenance plan for the whole facility. We inputted all the equipment and other necessary information into the program to make the maintenance software functional.

As we developed the preventive maintenance plan and schedule, we realized very quickly that the maintenance departments in these facilities did not have enough maintenance personnel to complete the scheduled PMs. Realistically, they would not be able to complete any more than 30% of the scheduled PM work.

This 30% included regulatory and safety-related preventive maintenance. After these PMs were completed, there would be no time left to inspect pumps, HVAC systems, or any other mechanical or electrical system.

Already, there were stacks of preventive maintenance work orders that had been generated from the previous CMMS and that had not been completed over the past year. Without enough man-hours, these pieces of equipment would run to failure (RTF) and would be repaired only when they broke down.

The electrician in one facility told us that there was absolutely no time to do any meaningful PMs, except for dealing with the backup generator, fire alarm and emergency light inspections monthly. The facility’s maintenance supervisor told us he had less than $100 left in his budget for the year due to fiscal cutbacks and unscheduled repairs.

So how much is this style of maintenance going to cost in the long run?

First of all, when equipment is left to a RTF scenario, it is going to cost a lot more to rebuild and repair it than if it was dealt with before serious problems occurred. For example, if the bearings in a motor are replaced when they first become noisy, then the cost is a couple of bearings and some labour to change them during a planned outage.

If the bearings are allowed to run to failure, the cost will most likely be much higher, due to the additional damage to the motor housing and armature (known as collateral damage) that may result, and the cost of the machinery being out of service. In many cases, the cost of expediting parts from vendors is outrageous, which adds to the repair expense. The end result is unscheduled repairs that eat into and increase the maintenance budget. (See the cost example below.)

This publicly owned facility, as well as many others, suffers from maintenance cutbacks both in personnel and maintenance budget dollars. When maintenance people retire, they are not replaced. When cost cuts are necessary, the maintenance department shares the burden with other departments. The inventory of spare parts is also kept to a bare minimum to help reduce the apparent overall maintenance cost.

These types of non-production facilities, however, generally have tandem equipment. In other words, they have a parallel system ready to swing into action if the primary system fails. For example, if one pump fails, it simply involves shutting it off, turning on a couple of valves and switching on a backup pump. Then the primary pump is repaired — if and when there is time and money available.

The question remains, though: Is this type of maintenance plan efficient?

Publicly owned non-production environments usually handle breakdowns differently than production environments, because no loss of production takes place. However, critical equipment does need to be maintained.

Practical example

Here is an example of how a boiler pump allowed to run to failure affects and costs a production facility versus a non-production facility. For this, we’ll use a pump misalignment problem.

If the boiler feed pump had been monitored for vibration, the misalignment could have been detected and the pump realigned during scheduled downtime. However, the plant did not perform condition-based maintenance. Instead, the pump failed without warning for the second time in eight years.

The effect of the undetected misalignment was to overload the bearings, resulting in premature failure and collateral damage to the pump and motor. There was no spare in stock to replace the pump, so the boiler was inoperable until the pump could be repaired and new bearings installed.

Due to inventory reduction, no replacement bearings were on hand. Instead, a frantic scramble began, in order to locate a supplier that had the hard-to-find replacement bearings in stock, and who could courier them overnight (at a substantial charge on top of the cost of the bearings). The search was successful and the replacement bearings arrived the next morning, at which time the pump was repaired, realigned and put back in service.

The boiler, which usually operated 24/7, was down for 32 hours, from 10 a.m. on the first day until 6 p.m. on the next day, resulting in lost production and revenues of $6,000 per hour. At the time the pump failed, $18,000 worth of products in process were ruined and had to be scrapped.

Doing the math

Here is how to calculate the overall cost of this scenario.

Production environment

– $0 for a replacement pump, which was not necessary because the failure could be repaired

– $2,000 for bearings and labour to repair the pump (collateral damage)

– $10,000 for spare motor swap-out and repair to original motor (collateral damage)

– $280 for laser alignment, which still had to be performed after the pump bearings were repaired

– $1,000 for expediting fees and air shipment to get the replacement bearings the next day

– $192,000 for lost revenue from 32 hours of unscheduled production downtime

– $18,000 to scrap products in process

Total cost of this failure: $223,280.

Non-production environment

In a non-production environment, the same cost is incurred, except for the loss of production and scrap products, resulting in a total cost of failure of $13,280.

A person could argue that this non-production facility repair cost is acceptable because of the money saved from the reduction of maintenance personnel and spare parts inventory. However, we need to realize that we have calculated the cost of one failure. Remember, there are stacks of PM work orders for the whole facility that have not been done. What will be the total cost when cascade failures begin to occur throughout the facility?

What it all comes down to is that RTF costs money. Cutting staff and spare parts looks good on fiscal reports, but in the long run, it reduces the overall condition of the equipment and does not allow maintenance people to do their job.

When the looming cost from this type of maintenance comes home to roost, it will definitely rock your maintenance world. 

Peter Phillips of Trailwalk Holdings, a Nova Scotia CMMS consulting and training company, can be reached at 902-798-3601 or by e-mail at peter@trailwalk.ca.