Maximizing Maintenance Operations for Profit Optimization:

The Journey to Maintenance Excellence

February 2002

Establishing a Strategy for Profit-Centered Maintenance

By

The Maintenance Excellence Institute

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Division of Ralph W. Peters and PEOPLE Inc.

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Part IV: Path Forward to a Profit-Centered Maintenance Operation

Ralph W. Pete Peters The Maintenance Excellence Institute Division of Ralph W. Peters and PEOPLE Inc. 6809 Foxfire Place, Suite 100 Raleigh, North Carolina 27615 919-846-6019 RalphPetePeters@aol.com

http://www.PRIDE-in-Maintenance.com Introduction: Part IV provides a recommended strategy used successfully by The Maintenance Excellence Institute for manufacturing maintenance operations, as well as operations in both the public and private sectors including pure facilities maintenance operations, healthcare maintenance and even major contract maintenance providers where in house maintenance has been contracted out or privatized. This part defines three key elements that help turn improvement opportunities into visible profit-centered results. These elements all contribute directly to profit optimization and include how to: 1. Determine and quantify benefits and savings 2. Improve craft productivity, the most valuable resource 3. Define a path forward strategy to implement improvement opportunities This section summarizes the many direct and indirect savings opportunities and illustrates how one of those opportunities; increased craft productivity can be included as gained value. It shows how just one of many best practice areas from The Scoreboard for Maintenance Excellence; effective shop level planning and scheduling provides more than a 5 to 1 return on the investment for just one planner position for a 20 person craft work force. When maintenance becomes truly profit-centered, ranging from attitudes to actions, the profit optimization process has another very real element to include in the final tally. Determine and Quantify Benefits and Savings: Potential savings (both tangible and intangible) must be estimated and established at their most realistic levels. Maintenance must be given the best practice tools, the people resources, and capital investments to address the improvement opportunities and in turn are held accountable for results. There are a number of key areas where direct savings, cost avoidances and gained value can be established, documented. a. Gained value from increased craft labor utilization/effectiveness due to increases in wrench time b. Gained value from increased craft labor performance/efficiency c. Gained value of clerical time reductions for supervisors, planners, engineering and admin staff d. Value of asset/equipment uptime e. Value of facility availability or cost avoidance from be non-available f. Value of MRO materials and parts inventory reduction g. Value of overall MRO materials management improvement h. Value of overall maintenance costs reductions with equal or greater service levels i. Value of increased facility and equipment life and net life cycle cost reduction j. Value of increased direct labor utilization (production operations) k. Value of operations productivity increases (production operation) ____________________________________________________________
Ralph W. Peters and PEOPLE Inc.

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Craft Productivity: Lets look at one example related to craft productivity. Surveys consistently show that wrench time (craft utilization) within a reactive, fire fighting maintenance environment is within the range of 30 to 40 percent. This means that for a ten hour day there is only four hours of actual hands-on, wrench time. Typically, low craft utilization is due to no fault of the craft work force. Most of the lost craft labor productivity can be attributed to the following reasons: 1. 2. 3. 4. 5. 6. 7. 8. 9. Running from emergency to emergency; a reactive, fire fighting operation Waiting on parts and finding parts or part information Waiting on other information, drawings, instructions, etc. Waiting for the equipment to be shut down Waiting on rental equipment to arrive Waiting on other crafts to finish their part of the job Travel to/from job site Lack of effective planning and scheduling Make-ready, put away, clean up, meetings, troubleshooting, etc.

The Most Valuable Resource: Maintenance operations that continue to operate in a reactive, run-tofailure, fire fighting mode and disregard implementation of todays best practices will continue to waste their most valuable asset and very costly technical resource - craft time. Best practices such as effective maintenance planning/scheduling, preventive/predictive maintenance, more effective storerooms and parts support all contribute to proactive, planned maintenance and more productive hands on, wrench time. An improvement in actual wrench time from 40% to 50% represents a 25% net gain in craft time available and a significant gained value. When we are able to combine gains in wrench time with increased craft performance when doing the job we increase our total gain in craft productivity. Measuring and improving overall craft productivity can be a key component to justify an effective CMMS and other investments for maintenance improvement. Gained Value of 10% in Wrench Time: What if through better planning and scheduling, good parts availability and having equipment available to fix it on a scheduled basis, we are able to increase actual wrench time by 10 percent? What is the value to us if we get that 10 percent increase across the board for a 20- person crew operating now at 40% wrench time being paid an average hourly rate of $18 per hour. Total Craft Hours Available and Annual Craft Labor Costs Hrs. wk.

20 Crafts x 40

x 52 wks./yr. = 41,600 Craft Hours Available

41,600 Craft Hours @ $18/hr. = $748,800 Craft Labor Cost/Year

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Ralph W. Peters and PEOPLE Inc.

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Wrench Time and Actual Costs Per Hour at Various Levels of Craft Utilization Average Wrench Time Hours Per Craft Position 624 832 1040 1248 1456 1664 1768 1872 2080

Level of Craft Utilization 30% 40% 50% 60% 70% *80% *85% 90% 100%

Total Wrench Time (Hours) 12,480 16,640 20,800 24,960 29,120 49,920 35,360 37,440 41,600

Actual Hands On Cost Per Hour $60.00 $45.00 $36.00 $30.00 $25.71 $22.50 $21.18 $20.00 $18.00

Note: Maximum possible craft utilization is 80 to 85 percent considering paid holidays, vacation time, breaks, clean-up, employees meetings, craft training, etc. See Figure IV-1 For Example: With effective planning and scheduling we can achieve at a minimum a 10 point improvement in craft utilization. From a baseline of 40 percent up to a level of 50 percent we in effect get a 25 percent increase in craft capacity for actual work. Total Hours Gained in Wrench Time: 4,160 hours gained 20,800 hours @ 50% - 16,640 hours @40% = 4,160 hours gained Total Gain in Equivalent Number of Crafts Positions: 5

4,160 Hours Gained 832 Average Wrench Time Hours @ 40%

= 5 Equivalent Craft Positions

Total Gained Value of 5 Equivalent Positions: $280,800 hrs. wk. Wks $18.00 yr. x hr.

5 equivalents x 40

x 52

= $187,200 Gained Value

Valuable Craft Time Can Slip Away: With only a 10% improvement up to 50% wrench time, the 20person craft work force operating at 40 percent craft utilization baseline, the 4,160 hours of wrench time gained represents a 25 percent increase in craft labor capacity. The maintenance best practice for planning and scheduling requires dedicated a planner(s). An effective maintenance planner in turn can support and plan for 20 to 30 crafts positions. With only a 10 percent increase in craft utilization for a 20-person craft work force, can be much more than a 5 to 1 return to offset a maintenance planner position. Figure IV-1 on the next page illustrates How Your Valuable Craft Time Can Slip Away. ____________________________________________________________
Ralph W. Peters and PEOPLE Inc.

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Figure IV-1

How Your Valuable Craft Time Can Slip Away

Total Available Days: 52 Weeks/Yr x 5 Days/Week = 260 Available Days Maximum Without Overtime 260 Total Days 10 Days Holiday Per Year = 250 Days Now Available

250 Days/Yr 15 Vacation/Sick Days Average Per Year = 235 Days Now Available 235 Days/Yr 15 Days Break Time* Per Year = 220 Days/Year Now Available Bottom Line: 220 days 260 days = .846 = 85% +/Craft Time Available for Work Various Levels of Wrench Time 85% 70% 60% 50% 40% 30% 20% 10% = = = = = = = = Maximum Craft Utilization World-Class Wrench Time Very Good Wrench Time Good Wrench Time Above Average Wrench Time Average Wrench Time On Call: The Maytag Repairman On Call: The Maytag Repairman

Note*: 15 min x 2 breaks/day = hour/day x 235 days =117.5 hours 8 hours/day =15 Total days Per Year

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Ralph W. Peters and PEOPLE Inc.

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The planner(s) position is normally recruited internally and not replaced. The additional craft capacity and productive craft time that is gained can be used to: ! Accomplish deferred repairs ! Accomplish PMs being neglected ! Reduce overtime ! Accomplish work done by contractors ! Reduce need to add or replace staff

Develop and Implement Strategic Action Plan: Successful implementation of maintenance best practices is the objective and represents the culmination of doing an effective overall evaluation and having a well-defined plan of action developed from recommendation that evolve from it. The results from the evaluation sets the stage for a prioritized plan of action. A project team is then defined and a more detailed project plan with tactical and operational tasks/plans to support strategic plan implementation. The major phases of a strategic plan of action may look something like the following: Phase I: Establish Strategic Plan of Action Evaluate and Select CMMS CMMS Implementation Best Practice Development and Implementation Planning Phase II: Phase III: Phase IV: Phase V: Phase VI: Phase VII: Initiate Effective Planning and Scheduling MRO Materials Management and Procurement Improvements Storeroom Modernization More Effective Preventive and Predictive Maintenance Technology

Develop and Establish Maintenance Planning Function Evaluate, Select and Implement CMMS Develop and Implement Storeroom Modernization, MRO Improvements Implement Other Maintenance Best Practices Measure Maintenance Performance and Validate Benefits with Maintenance Excellence Index (MEI in Part V) Continuous Maintenance Improvement

The Real Work is Implementation: Successful implementation is the ultimate objective that provides maximum value to your maintenance operation. It is very important to remember the 90-10 Rule for projects. Ninety percent of the real project work comes during the implementation and normally the easiest part is planning which is only ten percent of the work. Never underestimate the resources needed for implementation. Begin implementation with clearly defined plans for each area of the strategic plan as well as tactical and operational level tasks and actions. Never begin implementation without methods in place to validate results especially if you use external consulting resources. External resources at times might borrow your watch to tell you the time and then walk off with your watch before implementation. ____________________________________________________________
Ralph W. Peters and PEOPLE Inc.

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Profit Optimization is About Total Operations Success and Profit: Part IV has provides a recommended strategy used successfully for manufacturing maintenance operations, as well as operations in both the public and private sectors and even for major contract maintenance providers. It has looked at three key elements that help turn improvement opportunities into visible profit-centered results and support to profit optimization and include how to: 1. Determine and quantify benefits and savings 2. Improve craft productivity, the most valuable resource 3. Define a path forward strategy to implement improvement opportunities There are many direct and indirect savings opportunities and we illustrated how to capture one of those opportunities; increased craft productivity as gained value. Just one of many best practice areas from The Scoreboard for Maintenance Excellence; effective shop level planning and scheduling by a single planner can provides more than a 5 to 1 return on the investment for a 20 person craft work force. When maintenance becomes truly profit-centered, ranging from attitudes to actions, the profit optimization process has another very real element to include in the final tally for the total operation. You Can Get Maximum Value from Your Maintenance Operation: You can maximize your total maintenance operation for profit optimization by successful implementation of strategic, tactical and operation level actions. To find out the best approach for your organization, for help with planning the pilot evaluation and to receive a complete copy of this five-part series contact. Ralph Pete Peters The Maintenance Excellence Institute 6809 Foxfire Place, Suite 100 Raleigh, NC 27615 E-Mail: RalphPetePeters@aol.com Office: 919-846-6019 Fax: 919-846-9804 http://www.PRIDE-in-Maintenance.com

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Ralph W. Peters and PEOPLE Inc.

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Bio of Ralph W. Pete Peters

President and founder for Ralph W. Peters and PEOPLE Inc. a consulting firm with three divisions for total operations improvement; The Maintenance Excellence Institute (maintenance), The Manufacturing Excellence Institute (manufacturing) and The Institute for Public Service Excellence (governmental). His practical engineering experience and technical leadership in the maintenance, manufacturing and governmental productivity consulting fields has helped hundred of operations achieve manufacturing operations success and maintenance excellence in plant, fleet and facility maintenance operations. His scope of experience in governmental operations productivity has firmly established his personal capabilities and that of The Institute for Public Service Excellence to support value added government services. Pete is a senior member of the Institute of Industrial Engineers, the Association of Facility Engineers and the Society of Maintenance and Reliability Professionals He has been involved in manufacturing operations management, systems implementation, facilities management, maintenance and governmental productivity consulting for more than 30 years. He is retired from the US Army Corps of Engineers/NC Army National Guard (1995) with 28 years of service and serving in Viet Nam and during Desert Storm. Pete is author of the upcoming books; Profit-Centered Maintenance: The New Millennium Strategy for Maintenance Excellence and PRIDE in Maintenance. He is editor/primary author for The Guide to Computerized Maintenance Management Systems, Scientific American Newsletters LLC, author of the maintenance chapters in The Warehouse Management Handbook and The Future Capable Company from Tompkins Press and John Wileys new Handbook of Industrial Engineering, 3rd Edition. A recognized leader in the areas of implementing manufacturing and maintenance best practices, profit-centered maintenance, performance measurement, productivity improvement for government operations and providing value-added total operations consulting, He is also the author of over 200 articles and publications and as a frequent speaker has delivered presentations on manufacturing and maintenance-related topics worldwide. He received his BSIE and MIE from North Carolina State and is a graduate of the US Army Command and General Staff Course and the Engineer Officers Advanced Course. Clients from the manufacturing and maintenance sectors have included operations in the petrochemical, aerospace, manufacturing, mining, pharmaceutical, hand-tool manufacturing, utilities and automotive industries, in addition to construction fleet management, public transit operations and facilities management for healthcare, educational and governmental facility complexes.

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Ralph W. Peters and PEOPLE Inc.