As with any budget, you’ve only got a certain amount of money to spend on maintenance in the coming year.
How do you make better decisions so you can spend that budget wisely and get maximum performance out of your facility?
It is possible to be strategic about allocating funds if you understand the relative risk and value of different approaches. As a result, you can get more bang for the same bucks.
How can you make better budget decisions?
It can be tempting to just “go with your gut” on these things. However, by taking a systematic approach to budget allocation, you’ll make smarter decisions — and more importantly you’ll have concrete rationales for why you made those decisions — which can be improved over time. Work to identify the specific pieces of equipment (or types of equipment) that are most critical to your business, then compare the costs and risks of letting that equipment run to failure against the costs and risks of performing proactive maintenance on that equipment. Let’s take a closer look at how you can do that.
4 steps to maximize your maintenance budget
1. Assign a criticality level for each piece of equipment. Generally, this is going to result in a list of equipment that would cause the most pain — be it financial, production loss, safety, or environmental pain — in the event of failure. Perform a Pareto analysis for maximum detail.
2. For your most critical equipment, calculate the ramifications of a reactive/run-to-failure approach.
- Quantify the relative risk of failure.
- Quantify the costs of failure. Keep in mind that equipment failures can affect multiple aspects of your business in different ways — not just direct hard costs. In every case, consider all possible negative effects, including potential risks.
- Maintenance: Staff utilization, spare parts logistics, equipment damage, etc.
- Production Impact: Downtime, shipment delays, stock depletion or out-of-stock, rejected/reworked product, etc.
- Environmental Health & Safety (EHS) Impact: Injuries, actual/potential releases to the environment, EPA visits/fines, etc.
- Business Impact: Lost revenue, brand damage, regulatory issues, etc.
For a more detailed explanation of the various potential costs of failure, consult our eBook, Building a Business Case for Maintenance Strategy Optimization.
3. Next, calculate the impact of a proactive maintenance approach for this equipment:
- Outline the tasks that would best mitigate existing and potential failure modes
- Evaluate the cost of performing those tasks, based on the staff time and resources required to complete them.
- Specify any risks associated with the proactive maintenance tasks. These risks could include the possibility of equipment damage during the maintenance task, induced failures, and/or infant mortality for newly replaced or reinstalled parts.
4. Compare the relative risk costs between these approaches for each maintenance activity. This will show you where to focus your maintenance budget for maximum return.
When is proactive maintenance not the best plan?
For the most part, you’ll want to allocate more of your budget towards proactive maintenance for equipment that has the highest risk and the greatest potential negative impact in the event of failure. Proactive work is more efficient so your team can get more done for the same dollar value. Letting an item run to failure can create an “all hands on deck” scenario under which nothing else gets done, whereas many proactive tasks can be performed quickly and possibly even concurrently.
That said, it’s absolutely true that sometimes run-to-failure is the most appropriate approach for even a critical piece of equipment. For example, a maintenance team might have a scheduled task to replace a component after five years, but the problem is that component doesn’t really age -— the only known failure mode is getting struck by lightning. No matter how old that component is, the risk is the same. Performing replacement maintenance on this type of component might actually cost more than simply letting it run until it fails. (In these cases, a proactive strategy would focus on minimizing the impact of a failure event by adding redundancy or stocking spares.) But you can’t know that without quantifying the probability and cost of failure.
Side note: Performing this analysis can help you see where your maintenance budget could be reduced without a dramatic negative effect on performance or availability. Alternatively, this analysis can help you demonstrate the likely impact of a forced budget reduction. This can be very helpful in the event of budget pressure coming down from above.
At ARMS Reliability, we help organizations understand how to forecast, justify and prioritize their maintenance budgets for the best possible chances of success. Learn more.
