Cutting maintenance costs is easy. Just stop doing the work and the costs are gone. Most industrial plants will keep running longer than we think when we adopt this type of indiscriminate maintenance cost reduction. But chances are we've all experienced the longer-term effects of bad decisions when it comes to cutting maintenance cost like that. With COVID-19 the pressure is on once again as all industries struggle to work through this global economic downturn. But instead of indiscriminate cutting, how about this time we adopt a more sustainable way to reduce maintenance costs? Let me provide you with a simple framework with 4 Steps to Sustainable Maintenance Cost Reduction.
It's 2020 and Maintenance Budgets Will Have To Be Cut
These are strange and difficult times. Sure the world has seen darker days in its history. But due to this global pandemic, many lives have been lost. Many jobs have been lost.
Most if not all countries are experiencing harsh economic downturns.
The Bank of England has declared that the UK has not seen an economic downturn like this for close to 300 years.
A bit closer to home – at least for me – it was announced that Australia is officially in recession. The first time in 29 years.
I normally write about maintenance & reliability issues so you may be wondering where I’m going with this.
Here’s the thing.
In tough economic times, costs have to be reduced for businesses to survive.
Budgets will have to be cut.
And in asset-intensive industries, the maintenance budget is often 20% to 40% of the total annual budget.
Guess whose budget is going to get slashed?
Indeed the Maintenance Manager’s.
There is little we can do about the business environment we’re in, or the need to cut costs.
What we can do something about, as Maintenance & Reliability professionals, is how we ‘cut’ costs.
We’ve all seen the classic approach, just slice 20% or 30% off the budget.
Defer all the work.
Send people home.
Most plants can limp along for 2 or 3 years before the lack of maintenance starts to haunt the organisation.
And by then it’s often the next Maintenance Manager who has to deal with the consequences.
So how about we don’t do that this time around?
How about a more structured, more disciplined, and more sustainable approach to reducing maintenance costs?
It’s not that hard.
Let me share 4 steps to sustainable maintenance cost reduction:
Step #1: Improve Productivity
In a typical maintenance plant wrench time or productivity is 30% or so. A good maintenance planning & scheduling process should be able to take to 45% quite comfortably.
That should allow you to get the same work done with a smaller workforce. A smaller workforce means lower costs.
Yes, it’s unfortunate that some may lose their jobs, but that's better than letting the business go broke and everyone loses their job.
So get your planning & scheduling process fixed. I normally say it takes 12-18 months before you see real gains. But these are not normal times.
If you set yourself up for success and act fast, I believe you can cut implementation time down to 6 months and still ensure you have a sustainable solution that will last.
Want to know how? Join our online training in Implementing Maintenance Planning & Scheduling
Step #2: Eliminate Non-Value Added Work
Apart from a lack of productivity, many plants execute preventive maintenance programs that are full of waste. Full of tasks that don’t add value. Tasks that are done too often.
Typically an in-depth review of a Preventive Maintenance Program shows that some 30% of tasks can be removed because they simply do not add value.
This could be tasks that are simply not effective in addressing the failure mode. Or the failure mode is not credible – either way, you’re wasting your time with tasks like that, so eliminate them.
We also often see tasks that were added as a kneejerk reaction to an incident or failure. Usually these tasks only offer a ‘feel-good’ factor, rather than a real mitigation to a credible failure mode.
So eliminate them.
Another common problem is that a good chunk of your tasks (20% to 30%) are done too often. So take the opportunity and reduce the frequency of these tasks.
Now when you do an in-depth review of your Preventive Maintenance Program you're also going to find tasks that you should be doing, but you’re not.
So add these in, they will save you money in the long run.
In the end, experience shows that many Preventive Maintenance Program reviews reduce the maintenance effort by a good 30% or more.
You should be able to run a project to review and improve your PM program in 3 to 6 months to get you that 30% reduction in effort.
If you’re interested, we have a new course coming up early next year on Developing & Improving Preventive Maintenance Programs.
Can’t wait that long and want help to eliminate the waste in your PM Program?
Drop me an email, we can help.
Step #3: Eliminate Bad Actors
Once you have tackled these two major sources of waste you’ll have made a step-change in your maintenance performance and your maintenance costs should be coming down quickly.
If however – like many plants around the world – you are struggling with a very reactive maintenance environment due to continuous breakdowns then your costs are going to be high.
Experience shows that breakdown maintenance is typically 3x to 5x more expensive than properly planned and scheduled preventive maintenance. And in some industries, those ratios can be a lot higher!
So to reduce your maintenance costs you need to get rid of those breakdowns.
The best way to do this is to develop a simple Pareto analysis of the equipment that is costing you the most in terms of corrective maintenance costs.
These are your bad actors. For each bad actor analyse the maintenance history and conduct a series of root cause investigations to determine what you can do to eliminate the defects that are causing the breakdowns.
Often this will require design changes, changes in maintenance practices and/or changes in operating practices.
It can be time-consuming to go through this process so although it is essential to your longer-term success it may not always lead to quick cost reductions.
Step #4: Negotiate Better Rates & Prices
When it comes to maintenance we contract in services and we certainly end up buying a lot of parts, materials and consumables.
Almost always there is money to be had by negotiating better rates with your suppliers.
That could be as simple as asking for a discount.
Getting competitive quotes.
Or running a tendering process.
Also, don’t forget that it helps to understand what drives your supplier’s costs. Sometimes a simple change in terms in conditions can lead to significant cost reductions in your supplier’s supply chain that you could split if you change your terms and conditions.
Just one word of caution, be careful that you don’t end up going down the route of ‘buying cheap’. That will invariably end up costing you more!
So be clear about your specifications and requirements and make sure your supplier sticks to them.
Don’t know how to go about reducing the costs of your materials and parts?
This is not my area of expertise, but if you’re interested, drop me an email and I can introduce you to James Meads, who is a specialist in reducing supply chain costs. James is British, spent 17 years in procurement roles within multinational companies working in 3 countries. He is currently based in Bulgaria, but helps companies globally with improving their supply chains and reducing costs. In fact, James guarantees he can save you at least 5% of your spend with external suppliers.
So that’s 4 steps to follow to reduce your maintenance costs in a sustainable manner.
It’s not complicated, but… it is not easy either.
It can be done, in fact, I have delivered substantial maintenance costs savings in many plants around in the world.
And each and every time it has been based on these 4 key steps.
So, if the current economic crisis has put your company in a tough spot
… and you need to cut your maintenance costs urgently
… but you’re struggling how to do this
… so you’re looking for help with either improving maintenance productivity
… or optimising your preventive maintenance program
and want to work with me to reduce your maintenance costs then drop me a line right now or leave a comment below.
Have You Suffered from Indiscriminate Maintenance Cost Cutting?
Leave a comment below sharing your stories of how you've either been at the receiving end of indiscriminate maintenance costs, or how you managed to achieve sustainable cost reductions: