A powerful combination

Financial statements and root-cause analysis tools can help you focus and solve the highest priority problems.

By PlantServices.com

Given the incredible capability of the modern computerized maintenance management system, reporting of problems and their root causes can take many forms.  However, equally critical is having the right environment and training that leads people to take appropriate actions.

Financial and management reporting

At the highest level, a summary showing actual versus budgeted costs on a monthly, quarterly, year-to-date, and year-over-year basis are essential for properly managing the business.  Any exceptions or longer-term trends, such as excessive inventory spending or creeping overtime costs, are highlighted through these standard variance reports. 

Management reports, generated at the same or greater frequency (e.g., by shift, day or week), also are critical to understand what is behind the costs.  For example, the excessive inventory and overtime spending mentioned above may correspond to unusually high downtime on one or more production lines. 

Many companies have discovered that sharing financial statements throughout the organization can improve operations and the bottom line significantly. Financial knowledge is a powerful motivator for fixing problems and driving improvement.  The key is to train as many people as possible to interpret financial statements and correlate them to the budget and appropriate management reports.  By drilling down on the appropriate management reports, the root cause of problems can be determined and appropriate action plans implemented. 

Following the example above, it may be determined that a loss on this month’s financial statement was ultimately caused by excessive downtime.  By sharing the financial situation with employees, they will better understand the gravity of this situation. As a result, this may spark them to a quick response, especially if their remuneration is related to the company’s financial performance.  Suppose further that by using the CMMS analysis tools available, the root cause is determined to be a combination of changing a spare parts supplier and improper training of new technicians.  Corrective action is then planned and executed.

If the culture is such that rewards and recognition are centered on achieving reasonable financial and operational performance targets, then employees will maximize their use of analysis tools, reports and training.

Getting senior management to share financial statements can be a daunting task in many companies, regardless of whether they are publicly or privately held.  This is because in the eyes of the financial staff, there is a separation between financial reporting to shareholders and management reporting.  In some companies, these worlds are entirely separate, with little or no attempt made to reconcile the discrepancies between the two.  It also is a significant investment in time and money to train employees to read financial statements and provide the necessary links to management reporting.  Finally, there is the confidential nature of monthly financial statements, especially in a private company.

Online real-time reporting

If we rely only on periodic financial and management reports, we can miss opportunities to discover problems in the interim. Therein lies the value of online real-time reporting—it’s provides an early warning to problems. Two key examples of online real-time reporting are condition monitoring and business intelligence. 

Condition monitoring reports on triggers or disturbing trends that result from constantly measuring time, usage, meters or events.  For example, oil levels in a machine can be monitored to determine when to change it. 

Business intelligence refers to a reporting tool that incorporates dashboards, stoplights, meters, tables, graphs and so on, to display data on an online real-time basis.  For example, users can customize their home page to show past due preventive maintenance procedures, equipment currently down, current work order backlog by priority status and a summary of emergency work for a shift.  At a more consolidated level, business intelligence also can report on the most current calculation of the key performance indicators, such as equipment availability, inventory turns and ratio of planned versus unplanned work.  In either case, most CMMS packages allow users to easily drill down on the data to help sort out the root cause of unacceptable performance.

The problem in today’s computer age is avoiding information overload.  There is no shortage of measures, and we can slice and dice the data as creatively as we choose. Thus, root-cause analysis can help tremendously in sifting through the countless data elements to find the highest impact opportunities.

Ad hoc reporting

Of course there will always be a need for ad hoc reporting for such things as preparing a response to a request for more information by senior management.  Most modern CMMS packages allow users to filter and sort the data, and save it as a standard report if desired. 

However, ad hoc reporting also is a useful tool for root-cause analysis.  For example, if an overtime problem surfaces on this quarter’s management report, ad hoc reporting can isolate the problem and identify patterns.  As a starting point, reports can be generated showing the number and duration of overtime incidents, summarized by shift and by craft, as well as the problem, cause and action codes recorded against each occurrence.  This may lead to further ad hoc reports and the use of the root cause analysis tools discussed in my earlier columns.

A final note

Although root-cause analysis tools and reporting are useful for identifying and exploiting opportunities for improvement, the real power comes from something far less tangible—motivation and focus. Operations, engineering and maintenance must make shop floor opportunities meaningful and exciting to the corporate office by showing their impact on key financial measures.  Simultaneously, management must show leadership to shop floor supervisors and employees by motivating and training them to prioritize based on financial impact.

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