4 Steps to Sustainable Maintenance Cost Reduction

Companies are always on the lookout for the next opportunity to improve their systems and processes. A key focus, for the most part, is on reducing expenses. It goes without saying that if costs have to come down, then budgets need to be cut. In asset-intensive industries, the maintenance budget is often one of the most substantial portions of the total.

With 20-30% of the total annual budget often spent on maintenance, you can easily guess whose budget is getting slashed. And while there is little you can do about the direction of the business, you can control the way you cut your costs.

We've all seen the classic approach. You might reduce the budget by some fixed percentage, say 20% of the total. Then defer some work, send some people home, and mission accomplished. Sure, most plants might survive for two, three, maybe even four years. But eventually, the lack of maintenance will start to creep in, along with its harms and risks.

The thing is, you do not have to do it this way. Instead, you can adopt a more structured, disciplined, and sustainable approach to reducing maintenance costs.

Maintenance Costs Are a Consequence

Before we go into detail, there is one thing to keep in mind about maintenance costs. Maintenance costs are a consequence. They are a consequence of the amount of preventive maintenance you do, the occurrences of equipment failure you experience, and the number of people working for you. In other words, maintenance costs are a consequence of how maintenance programs are set up and implemented.

Where Do You Spend Your Money?

When you think about it, it all comes down to how you spend your maintenance budget. In essence, you spend your money on three things:

1. Labor, whether done by your employees or contractors.

2. A sizable chunk of your budget goes into parts, which can be in the form of spares, consumables, or tools.

3. You will also likely spend a large part of the budget on external services. Examples of such services are contractors working in the plant, specialist services, or original equipment manufacturer field representatives.

Knowing these areas leads you to a straightforward approach to bringing down your costs. You want to do less work, be more productive, reduce the materials you buy, and purchase fewer services.

How Do You Spend Less?

While it seems simple enough to identify where the costs are coming from, the problem is identifying ways to spend less. What exactly are the ways to reduce work, materials, and external services? How can you pay less for what you buy? And how do you achieve all that while still maintaining your high performance and reliability?

At this point, you might be thinking that while it all sounds nice, it is also pretty much impossible. But don't give up just yet. If you look around any industrial plant and look carefully, you will recognize the tremendous amounts of waste generated. Interestingly enough, what you typically find is that waste is almost always in the same areas. In the following sections, we will get to take a closer look into these areas.

Four Areas to Tackle When Reducing Maintenance Costs

There are typically four areas that you need to tackle when it comes to maintenance costs. Keep in mind that you need to understand where your waste is coming from, then eliminate it. When you take away the unnecessary things, costs are going to come down and stay down.

The following list provides the framework of a process that you can use. These are four things you need to focus on to reduce your costs sustainably.

Wasteful Preventive Maintenance Program

First on the list is to address your preventive maintenance program. In most industrial sites, the preventive maintenance program is not optimized. Chances are the program has not even been reviewed in a long time. As a result, you will typically find wasteful activities and tasks in these programs. You might find activities that don't add value or activities done too often. Moreover, many of these tasks might aim to prevent failure modes that don't really matter so much to the operation. Some studies and literature show that somewhere between 40% to 60% of PMs add very little value.

Part of the problem is that a lot of tasks are usually poorly defined. In turn, they are not performed correctly and are therefore ineffective. Basically, you are wasting your time and effort by doing them. On the other hand, you will typically find that there is a substantial amount of tasks missing. These missing tasks could be the ones that prevent some of your major recurring breakdowns.

The tasks with little to no value inflate your maintenance spend for no good reason. A thorough and more recent review of your preventive maintenance program is one of the focus areas you need to tackle. If you do that and do it well, chances are you can reduce your workload by a considerable amount. That means taking away the wasteful work from your activities and immediately reducing your costs.

Low Maintenance Productivity

The next area that you need to look at is low maintenance productivity. In almost all industrial spaces, the average day of a maintenance technician can be full of waste. What you need to do is look at your maintenance technicians and how they spend their day. Recognize the time they spend looking for parts, waiting for permits, waiting for instructions, or waiting for equipment to become available. Low productivity is typically the result of not having a structured planning and scheduling process in place. Other times, the process may be in place but not implemented effectively.

For example, say that out of 10 hours, you are only getting three hours of productive maintenance time. With a disciplined planning and scheduling process, you should be able to increase that to at least 4.5 hours. That's a productivity increase without even hiring anybody.

Excessive Equipment Failures

The next area you want to tackle is excessive and repeated equipment failures. It is pretty common to find maintenance teams doing the same repairs again and again. There are types of equipment that you should not expect to repair that often, but you end up doing so. The problem is developing a maintenance culture focused on "forever fixing" instead of "fixing forever." In other words, instead of eliminating the defect, teams end up repeatedly performing the same kinds of repairs.

Remember that breakdown maintenance is an expensive way to run a business. It is not only time-consuming but also demoralizing. It drives an organization into a reactive maintenance culture. And a reactive approach is not the direction that you want to be taking.

You will usually find that only a handful of pieces of equipment or systems comprise the vast majority of your plant's breakdowns. In turn, these are what make up the bulk of your corrective maintenance costs. If you can target those crucial types of equipment and eliminate their failures, you can significantly reduce your corrective maintenance costs.

High-Cost Structure

Now, the last area that you can tackle is your maintenance contracts. Review the rates you have previously negotiated. It is quite common that companies specify requirements to service providers and contractors at a higher standard than what they need. That practice is wasteful, and it drives unnecessary costs.

You also need to check how you structured your contracts. Contracts and agreements usually do not have incentivization in place. In such structures, you will see misaligned goals between the two companies. You need to motivate your contractors and service providers to deliver a high quality of service at a lower cost. By eliminating the wastes in your processes and unnecessary requirements, the rates will come down.

Reducing Maintenance Costs Sustainably

We've just tackled the areas where there are massive opportunities to reduce the plant's expenses. Take note that the focus is on eliminating waste instead of simply cutting the budget without a clear purpose. Keeping the significant focus areas in mind, these are the four steps you need to take to reduce your maintenance costs sustainably.

Improve Maintenance Productivity

First on the list is improving productivity. By starting with improving productivity, you can set yourself up to gain more capacity to start other improvements.

Let's start with an example. Say that your typical wrench time is sitting at around 30%. With proper planning and scheduling, you can increase this to 45%. That equates to an increase in productivity, equivalent to expanding your workforce by a third. Imagine not having to hire anyone but getting more work done and reducing your external services.

To build on this example, implementing maintenance planning and scheduling requires very little investment. As a project, this is good news for your leadership as it has an appreciable return on investment without spending a lot. Additionally, there are tools available online that estimate the dollar value you can gain from initiating such a project.

To kick off your project, you can start by adopting a standard approach to planning and scheduling. A proven framework can provide a solid foundation for your program. Where most companies go astray is in the implementation. Consider your initiative as a change management project. You need to apply project management and change management principles. It is not enough to have the processes in place, but more importantly, ensure to sustain those processes.

Eliminate Non-Value Adding Preventive Maintenance Tasks

The next step is to eliminate preventive maintenance tasks that do not add value. To do that, you can go into your CMMS and perform an analysis of your preventive maintenance program. With all the available information, you can generate some basic Pareto charts. These will show you the tasks that cost you the most money and the most labor. This seemingly simple task can provide valuable insight.

Now that you have an idea of your lists of tasks, you can get a team to focus on the priorities. For each preventive maintenance program, review the failure mode that it is supposed to address. Is the failure mode credible? Does the consequence of the failure justify the amount of work you are doing? Is the task even effective in dealing with the failure mode? Asking these types of questions will allow you to identify the wastes in your program.

In going through your review, ensure that the preventive maintenance procedures you retain are according to fundamental reliability practices. To do this, you need to involve the right people. That requires you to provide education and training while also building from your team's experience and expertise.

Eliminate Bad Actors

Bad actors are the few pieces of equipment that are responsible for the majority of your breakdowns. They lead to a massive portion of your breakdown maintenance and workload. The way to identify those bad actors is by again delving into your CMMS. This time, you want to analyze your corrective maintenance history and build Pareto charts using that information. The goal is to highlight the worst performers in terms of your corrective maintenance cost and effort.

After identifying the equipment behind your problems, you can get together with your operation and engineering teams and plan the next steps. Prioritize which pieces of equipment you want to tackle first. You will then need to perform root cause analysis procedures to tackle all the underlying causes. During this process, ensure that your root cause analysis truly gets to the root of a problem and not just a superficial one. Your goal is to identify process and system issues so you can apply a permanent fix. Addressing the root cause is a sustainable cost reduction.

Negotiate Better Rates and Contracts

Earlier we touched on evaluating your contracts and rates. First, internally go through the specifications and requirements in your contract. Then, sit down with your suppliers and service providers to understand what drives costs at their end. From those types of discussions, you can better see what you can reduce or eliminate. Think about win-win opportunities where you can reduce your costs while your supplier can increase their profitability.

Another thing you want to look into is the way you have structured your contracts. Incentivize your contractors and service providers to eliminate waste, become more efficient, and become more cost-effective. There is no other way around this but to go out there and ask. What you might find is that your key service providers are actually willing to support you on your journey. Good suppliers are dependable suppliers who understand the value of a long-term partnership.

What Should I Do If I'm Under Pressure to Deliver?

Unfortunately, there is no step to skip in the process to achieve a sustainable reduction in your maintenance costs. However, if you are in a real hurry to realize results, you might consider rearranging the sequence of the steps. Here are some tips on how you can do that:

• You can start by focusing your effort on your preventive maintenance program. If you need quick results, you can realistically eliminate 10-20% of your workload in a month or two.

• Next, engage your biggest contractors and see if you can renegotiate your rates. Reaching out to your key suppliers can be a quick win, and it never hurts to ask.

• Now that you have initiated those steps, you can start assessing your bad actors. This step brings your focus to your corrective maintenance costs.

• Tackling maintenance productivity typically takes the most time to accomplish. So if you're in a hurry, you might want to save this for last.

• Lastly, if you are really under pressure, you might even work on these improvements in parallel, not in sequence. But you have to remember that any organization can only absorb a certain amount of change at a time. So be mindful of the pace of developments occurring in your plant.

In the conventional sequence, the process is much easier to handle. You can have a more comfortable timeline to improve your productivity within your pace and capacity. While the standard series of steps is ideal, a rearranged approach can work in your favor if given a shorter period.

Conclusion

Rising costs are becoming a more relevant issue than ever. The challenge for companies is to reduce their expenses while maintaining the reliability of their operations. In other words, the key to an effective program is a sustainable approach to reducing costs. By focusing on the things that add value to your maintenance, you can eliminate wastes and increase your efficiency. You, therefore, improve your cost-effectiveness without having to settle for lower quality standards.

Note: This article is based on a webinar "4 Steps to Sustainable Maintenance Cost Reduction" by Erik Hupjé, Founder of RoadtoReliability.com. To view the recording of the webinar, click here.

Author bio:

Erik Hupjé is a maintenance and reliability leader with 20+ years experience in the Upstream Oil & Gas sector worldwide. He has worked in the oil, gas, and energy industry and has a range of experiences in asset strategy, reliability, maintenance improvement, technical integrity, process management, and more. He is the Founder of RoadtoReliability.com.