Competitive Advantage

The simple reality is that maintenance departments are cost centers. Meaning, you cost your company money and do not provide “value add” to the end customer: maintenance does not create salable product, your job exists solely to support salable product.
Maintenance must, therefore, be managed as a competitive advantage. By changing organizational thinking to view maintenance as a competitive advantage, more innovative ideas are implemented. To affect this shift, maintenance is measured by the value produced. First-run output becomes a direct measure of equipment capability, therefore reliability.
Reliability value is measured by the maintenance cost of the best sustainable run output. Sustainable output length is organization dependent; common timeframes include 90 shifts, 3 months, outage to outage, etc.

Reliability Value Example
Best 90 shift output = 9,000 widgets
10 hours/shift yields 10 widgets/hour
Maintenance costs for timeframe = $500,000
Maintenance cost /widget = $55.56

Whenever maintenance costs are below $55.56/widget, the company sustains a competitive advantage. That advantage can be used in profit taking, or in lowering the product price to gain market share.

Maintenance decisions are now based on cost per widget. Consider the decision to enter into Condition Based Monitoring (CBM) at monthly costs of $10,000. To be advantageous, the program must guarantee an additional 180 widgets ($10,000/55.56 dollars/widget). At 10 widgets/hour, the program must improve equipment uptime more than 18 hours/month.

Under cost center thinking, a $10,000/month CBM program would be an unlikely approval. However, when viewed under the competitive advantage model, it can be approved because there is a tangible measure of success – hours of equipment uptime.

cost center graphic

Graphic: Cost / Widget

How have you justified reliability expenditures in your organization?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s