Reliable Plant July August 2008

ADVISOR
MAINTENANCE MANAGEMENT
THE CRUNCH: TOUGH TIMES
CAN LEAD TO MISGUIDED CUTS
Twelve to 48 months ago, you
started a reliability and maintenance
improvement initiative, and
now the cost crunch is on. We’ve seen
heavy downturns in the housing and
banking industries, and the crunch is now
at your doorstep. Your company has
decided to cut cost because sales are down
and/or the price of your product is down.
In this situation, you’ll find out if your
plant and company are serious or not
about improving reliability.
Companies tend to cut cost short term,
which, in many cases, increases the cost
significantly over a two- to six-year period.
This depends on how cost is cut. But typically
(depending on current equipment condition),
it takes 18 to 24 months for the short-term,
erroneous cost cutting to show up as
increased cost in the balance sheet, while
equipment reliability usually takes nine to 21
months to show in production numbers.
If you are unlucky, costs are even higher
two to six years from now and the same
type of cost cutting takes place again with
new management (the old managers may
have been promoted because they did such
a good job cutting cost for 12 months).
TOR IDHAMMAR
Torbjörn (Tor) Idhammar is partner and vice
president of management consultant firm
IDCON Inc. IDCON specializes in reliability and
maintenance management. He is responsible for
all IDCON projects and consultants, including
training and implementation support for
reliability management assessments, preventive
maintenance, operator-based reliability, planning
and scheduling, materials
management, and root
cause problem elimination.
He is the author of
“Condition Monitoring
Standards” (volumes 1
through 3). Contact Tor at
800-849-2041 or e-mail
info@idcon.com. Also,
visit www.idcon.com.
Which cost is cut?: When we decide to cut
cost in a plant or company, panic spreads.
Typically, the cuts hit, in order: 1) Any type of
travel; 2) Training; 3) Unavoidable maintenance
jobs (they get postponed); 4) External
resources (usually hired to help improve and
cut cost long term); 5) Overtime; 6) Handson
external resources; and, 7 to etc.)
Anything visible (books, filtered water, free
hats, lunches, etc.).
An interesting note is that an extension
of six hours to a shutdown due to poor
planning may cost a plant $100,000, but
it’s seldom questioned. Meanwhile, book
purchases are fiercely shut down. The
difference? Books are a visible cost while
the shutdown extension is a hidden cost.
To cut or not to cut?: Should we not cut
cost? No, you should. My point is that
focusing on cost itself rather than focusing
on what drives cost will give you the wrong
results such as short-term cost savings with
a long-term cost increase.
Example 1 – Let’s assume your size of
plant should have 95 hourly maintenance
people. Always be careful where these
numbers come from, but let’s assume the
number is correct or at least believed to be
correct. You have 110 people. It may seem
logical to immediately reduce the hourly
workforce. But, it’s often the wrong thing
to do. If you cut 15 people from your crew
without changing the way you work
BEFORE you do the cut, less preventive
maintenance (PM) and corrective maintenance
(CM) work will be completed. With
less PM and CM, reliability will falter. The
exception would be if your backlog is zero
and/or the people you are about to lay off
normally don’t produce.
A commonly used misconception is that
if we lay off people, the remaining
employees will pick up the slack. The
contrary is most commonly true due to
worsening plant morale and a lack of
incentive to pick up more work or do work
better.
Instead, focus on the things that drive
cost down in order to reduce the total
workforce and other costs long term.
Improved reliability will reduce the need for
spare parts and CM work. With increased
reliability, you can look at reducing the
workforce by attrition.
Example 2 – The other desperate costcutting
measure is to defer maintenance.
What works against this logic is that a valid
maintenance job can’t be avoided; it can
only be delayed. Unfortunately, a delayed
maintenance job will 99 times out of 100
be more expensive if it is executed later
rather than sooner.
Plant management never talks about
deferring maintenance. That would be
political suicide as soon as we have downtime.
Instead, the talk centers around
reducing overtime, contractors and people
– as if we currently spend money on those
items today as a luxury.
What do we do?: Cut cost the right way.
Stick with your initiatives (assuming they
are good). Increased reliability will drive
down cost. You may have to slow down
outside support and training, but don’t
stop it completely. Stopping an initiative
completely will send the wrong message to
the organization. If you stop it, your initiative
will be seen as another management
fad that failed.
Call your reliability process lean, Six
Sigma, TPM, asset management, TQM or
something else; you’ll find that it comes
back to the same things we discussed in the
1970s and earlier. Improved reliability and
reduced costs come through the interplay
of these words/actions: prevent, inspect,
prioritize, plan, schedule, execute well,
record, analyze and improve.
18 July - August 2008 www.reliableplant.com