Quiet as it’s kept, maintenance is a strategic function, one that can be an important driver for corporate success. Or not. The following chain of events brought this truth home for me in a way that is worth sharing:
In the first quarter of 2011 I'd been thinking about how to invest some extra savings. I didn't know much about the upcoming year, but a few facts seemed clear:
- Energy would be needed in an ever-increasing worldwide wave.
- The "Arab Spring" was going to drive energy prices through the roof.
- With $100/barrel oil and $4/gal gas inevitable, the oil companies that could deliver product would have to be major winners.
Armed with these thoughts, I found the biggest oil supplier to the United States that had almost no dependence on Middle East oil. Thinking I was betting on a sure thing, I put my nest egg in the stock of an energy company, specifically, an oil refiner, and settled back in my desk chair to watch the ticker.
It turned out that Murphy was watching, too. When demand spiked later that year, a bunch of the refining capacity owned by my new partners was off-line. Surprise equipment failures at several sites had unplugged them just as world events had shifted in the company’s favor. With a clean shot at markets that would buy up everything they could produce and not quibble about the price, they were explaining missed deliveries.
The company is now restructuring instead of racking up record-breaking profits. And investors like me are licking our wounds after selling them off at about a 10% loss.
There it is — the power of reliability, or the lack of it, to drive our future.
Reliability and maintenance professionals need to take our rightful place alongside production, accounting, sales, and the rest of the groups that make up the organizational muscle of manufacturing industry. Given today's cost of installing new capacity, we can do financial magic. Our ability to increase the availability of existing plants delivers a financial jackpot to any company that has a healthy market.
In the energy industries, availability increases normally translate into higher sales that require only increased material cost to fund them. This is because plants are usually staffed and consuming MRO and energy costs even during the downtime they experience today.
Solid maintenance improvement can often yield a 10% or 20% throughput improvement. When the improvement occurs at material cost alone, it can often double the profitability of a production plant. Moreover, these benefits can be obtained with a year or two of maintenance upgrades, instead of the five or more years of permitting and investment that is often required to create new capacity.
At this point in the discussion, somebody usually says, “Hold on a minute. Where is this extra capacity going to come from? We produce within a few percent of our budgeted output every year.”
Sound familiar? The fact is that budget-driven production planning often creates a false sense of control when what it’s really doing is institutionalizing a level of performance that is well below the actual capacity of the system.
Hopefully, your organization already has an engineering capacity study on file. If not, the company needs one. The capacity study is an exercise that should be performed prior to the budget discussion every year. If the engineering capacity is available, there should be a healthy discussion of why the budget is not set at that level of output. It seldom is.
If the engineering capacity isn’t available, here’s a quick and dirty way to get a look at how much production your budget is leaving on the table.
- For each product line, identify the production constraint (bottleneck) operation or operations.
- Find the person in each bottleneck area who keeps records, formal or informal, of daily or weekly output.
- Review the records with their owner and find the most productive two or three weeks in the past year.
- Ask the million-dollar question: “What would we have to do to make those high numbers the norm for weekly output?” Be prepared to take notes.
There will be a lot of reasons — some valid, some not. Some will be internal issues in the bottleneck area and some will be outside influences. Whatever they may be, you will know there have been weeks when they didn’t slow the area down. Somehow, some days, the area beats them. Why not do it every day?
From this point in the analysis, there is no single solution. Maybe there aren’t enough customer orders. Perhaps the raw material supply is sporadic or seasonal. There may be labor issues that keep staffing in flux. Unreliable processes or equipment may be controlling output. All of these have solutions that are worth discussing. Many will be worth implementing. Whatever else happens, the discussion will be a healthy one for the organization.
It’s comfortable living in the shade of an easily achievable budget. But that way of life often leaves top management unable to see how competitive a plant can be. Over the long term, that isn’t good for anybody.
In the coming months we'll be talking about the kinds of opportunities that are waiting for companies that get control of their equipment health and start to use it as a competitive weapon. This is one of the ways that U.S. industry can use our skills and infrastructure to deliver new jobs and increased revenue.