How to frame the value of PM and PdM

Jan. 18, 2021
Knowing the ratio of corrective work identified by these programs is key to calculating cost avoidance.

Many of us maintainers are in a constant struggle to prove the value of our preventive and predictive maintenance programs. On one hand, these programs can be seen as a cost driver since a good inspection is intended to identify more work not reduce work. At face value, PM and PdM programs can appear to some managers to cost more to have the program and, in fact, is part of the reason inspections are sometimes reduced during times of cost reduction selections. So how do we show that we are in fact saving money instead? We must first make sure we identify that these programs are generating valuable work. We then need to communicate how that work equates to a cost avoidance.

About the Author: Rick Clonan

A simple way to accomplish this is through the SMRP Metric 5.4.12 PREVENTIVE MAINTENANCE & PREDICTIVE MAINTENANCE YIELD. The intent of the metric is to show the ratio of corrective work identified based on the amount of PM / PdM work that is completed. This metric can be measured as just PM and just PdM separately, or by combining them both into one single metric:

Corrective work identified on PM or PdM work orders (hours) / PM or PdM (hours) = Yield

This does not include deferred PM/ PdM work. For mature organizations with effective and efficient PM /PdM programs, this may be enough to show value to operations. However, it is important to understand what the ratio is telling us. To preface, PM / PdM program effectiveness is best examined based on asset class to get real value. 

  • Low reliability and low corrective work – This identifies a need for PM / PdM program review. The wrong things are being inspected or the frequency of inspection is not correct. Failure history can assist with PM optimization.
  • Low reliability and high corrective work – This could be poor maintenance repair practices. Assets are not being repaired correctly. Examine the job plan library for effectiveness. It could also be an indication of a need for redesign if component reliability is the culprit.
  • High reliability and low corrective work – Perhaps PM optimization can reduce the inspection frequency when the consequence of failure is not too high. 
  • High reliability and high corrective work –  This is clear indication of a need for redesign. (Also, an indication that the planning and scheduling function is working efficiently.)

For those organizations that require more to see the value of these programs, perhaps PM /PdM Yield can be explained in a different manner. If every failed component identified is left unidentified, it will eventually schedule itself and cause unintended downtime to operations. Understanding this and having the documentation of the work identified is a key component to showing the value. We now should have a record of unintended consequences in the form of a corrective work order. It is industry best practice to be able to attach failed tasks on a PM or PdM routine to a new corrective work order. Many organizations do this with a specific work order type in their CMMS. Something as simple as “PM-Corrective” will suffice for most instances.

Each corrective work order should have the estimated hours necessary to complete the work documented on the work order. Although this is only an estimation, we must also acknowledge that the estimated hours are based on the work being planned for the crafts, having all tasks identified, parts ordered, tools availability ensured, and safety hazards mitigated. The wasted time has been removed prior to the scheduling of the job. If the component were not identified to be in a failed state on the PM / PdM route then the component would have failed, perhaps stopping operations, and thus scheduling itself for repair. That repair would have been much more chaotic and lengthier because it would not have been planned ahead of time. We can then conservatively look at the estimated hours on each “PM / PdM Corrective” work order and quantify the amount of time we are giving back to operations. 

One metric I have used in the past to communicate the value of PM / PdM programs is to track the estimated hours of corrective work identified each week or month from those inspections. This metric can also be measured in the past tense using actual labor hours entered on the work order from executed work. Some maintenance departments are more comfortable reporting that number to operations. Just to be clear, labor hours (whether estimated or actual) may not be the actual amount of downtime required to make the repair. If this is the case, then downtime required can be used instead. This is particularly true in jobs that require more than one craft simultaneously to complete a job. To illustrate, a repair requiring two electricians for four hours should not be considered eight hours of downtime avoided, rather four.

I admit, it is difficult to set a target for this metric based on expectations. That is not the intent here. The intent is to show the value to operations in a way they can understand. This may also make it easier to communicate the risk of reducing or eliminating PM / PdM programs in the future. We all know the rate of production per hour in our facilities. Simply doing the math and adding up the estimated hours for the PM / PdM Corrective Work backlog can show a quantifiable impact to operations. How much product are we saving you by never shutting down your machine? Some organizations can quantify the amount of money lost for every hour of production downtime. This is a simple way to communicate the cost prevented to operations. 

PM / PdM Corrective Work estimated (or actual) hours × Units per hour (production rate) = Units Saved
PM / PdM Corrective Work estimated (or actual) hours × Cost of downtime per hour = Cost Avoided

The role of maintenance is to provide operations with capacity. The product we sell is runtime. Our customer is operations. By communicating the value of preventive and predictive work as a cost saving activity, we can reduce the need to just wait to make repairs reactively when operational capacity has been lost. We all want to break the cycle of reactive maintenance. As maintainers we understand the value of preventive work. Showing that value to operations means we need to speak their language when communicating. Units saved or cost avoided may be easier for them to understand than PM Yield, thus allowing them to truly appreciate the role maintenance plays in their facility.

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