Cost concepts of planning and scheduling

Doc Palmer is the author of McGraw-Hill’s Maintenance Planning and Scheduling Handbook.

Most people are surprised to see maintenance costs go up (!) as they first implement proper planning and scheduling. Maintenance planning and scheduling help an existing workforce complete more maintenance work so, of course, they will use more spare parts each month than they did in the past. Let’s discuss a few planning and scheduling concepts related to cost. These concepts include consideration of parts, contractors, staff levels, reactive work versus proactive work, the “hidden factory,” and both engineering and purchasing decisions.

To begin with, the initial increase in cost due to using more spare parts is temporary. Most plants, even good plants, do experience a significant level of reactive maintenance. However, better plants recognize they have opportunities to do enough additional proactive maintenance to eventually wipe out much of the reactive work from even being necessary. These latter plants can become great plants when they force themselves to go beyond completing enough proactive work to be merely good. These plants often leverage planning and scheduling programs to increase labour productivity to complete more proactive maintenance even as current levels of reactive maintenance remain. These plants eventually end up doing more and more proactive maintenance and less and less reactive maintenance. For example, they find themselves doing more lubrication of bearings and less replacement of bearings and torn conveyor belts resulting as collateral damage. Soon, the cost of maintenance might even dip lower than the initial level of a good plant doing significant levels of reactive maintenance.

On the other hand, with an increased productivity of in-house maintenance, it might be possible to lower the overall cost of maintenance immediately if a plant makes much use of external contractors. The plant can take work away from existing contractors and do it in-house. Nevertheless, most plants do not complete enough proactive work, so plants should be careful not to merely replace contractors and skip an opportunity to do more proactive work. For this same reason, doing planning and scheduling to improve productivity so a plant can downsize its staff is ill advised.

Plants should be very careful not to decrease their maintenance expenditures at the cost of plant reliability. Maintenance is essentially an investment in reliability. The big money is in reliably producing a product at the plant. Doing more proactive work reduces reactive work. The “1:10” industry rule says that every dollar spent doing proactive work saves ten dollars on the bottom line. This profit comes mostly from having fewer reactive events, which would otherwise rob the plant of available and reliable production capacity. A pertinent nugget of industry wisdom is the adage that focusing to reduce maintenance costs reduces plant reliability, but focusing to increase plant reliability reduces maintenance costs.

The concept of the “hidden factory” differs a bit from the idea of increased productivity where proactive work replaces reactive work. Plants that use the planning function properly help apply learned knowledge, which reduces maintenance and resulting costs altogether. Planners institutionalize knowledge gradually over the years when they collect work feedback on mistakes made and better ideas for future maintenance. By improving work plans with lessons learned from the past, planners allow crafts to improve MTBF (Mean Time Between Failure) on individual assets. By way of illustration, consider that if better maintenance helped pumps last twice as long as before, then by definition, half of the reactive backlog has “disappeared.” The reactive work that would have otherwise occurred was the “hidden factory” chewing up labour resources on work that could have been avoided.

Finally, the “1:100” industry rule says that every dollar spent on making a better engineering or purchasing decision saves one hundred dollars on the bottom line! “Life cycle costing” expresses the same thinking. The big question is: how do engineers and purchasers know what brands, models and configurations of equipment do best at their plants? Planners provide a lot of information toward this end. They help to manage the work order system to collect vital work order information over the years. The best plants leverage planners to provide the files showing past experience.

So consider the value of proper planning and scheduling in both reducing maintenance costs and increasing production capacity.

Doc Palmer, PE, MBA, CMRP is the author of McGraw-Hill’s Maintenance Planning and Scheduling Handbook and as managing partner of Richard Palmer and Associates helps companies worldwide with planning and scheduling success. For more information visit www.palmerplanning.com or email Doc at docpalmer@palmerplanning.com.