Condition monitoring: costs have benefits and benefits can reduce costs
15 February 2017
As the new year beds down and we find ourselves emerging from the usual post-holiday nutritional and financial hangover, there’s no better time to broach the subject of cost benefit and the tightening of finances.
Whatever stage you’re at in your financial year, despite recovering economies and buoyant industry sectors, the spectre of cost benefit looms large at all times in today’s business environment.
Whether it is the result of past lessons learnt or simply a continuation of your organisation’s prevailing culture and approach to expenditure, I’m betting that any reliability engineer, maintenance manager, engineering manager or production manager are, for the most part, expected to have a robust business case and justification to go with any purchase or investment they propose to senior management.
Capex or opex, having your facts and information correct, could mean the difference between getting that purchase order or tucking your tail and going back to the drawing board. Seeking additional investment in maintenance and reliability can be a challenge in many organisations, as they are more often than not seen as a necessary evil and wrongly perceived to add no perceptible value to the bottom line.
Importance of concise reporting on condition monitoring
In terms of a condition-monitoring (CM) programme, the key to overcoming this challenge is being able to clearly and concisely report on the cost benefit attached to your CM programme. This is easier said than done and will very much depend on how connected and integrated your CM programme is with other parts of your business such as production, energy, environmental and safety departments (not in order of priority.)
It may be hard to believe, but it is not uncommon for maintenance to have little or no understanding of the cost per hour of lost production.
Neither is it uncommon for the aforementioned areas of a business to be very compartmentalised – and not always pulling in the same direction. Let’s face it, there is no interest like motivated self-interest. That said, however, it is not impossible to bring those areas into your cost-benefit analysis so long as you have the right mechanism and some grasp on how a non-conformance in these areas impacts the business and more importantly sees its way to having a monetary value.
If the language of the universe is mathematics, then the universal language and enabler for all business is money and cost benefit. Profit and loss, gross margin, EBITA (earnings before interest, taxes, and amortisation, return on investment) and so on.
Time is money. Materials are money. Equipment is money. People are money. Each one is spent, used, purchased, crafted, designed or hired to perform a task and, ultimately, deliver a benefit. Having the right mechanism and the will to report on and quantify those benefits is a key enabler to ensuring the longevity and continued value that these items can deliver for your business.
I’m reminded of a line from a certain Monty Python film: “Apart from the aquaduct, sanitation, roads, irrigation, medicine, education, wine, public order and public health, what have the Romans ever done for us?” Apply the same thinking to your CM programme and you’ll soon end up with a lengthy list of benefits it has delivered to the business.
This is, of course, assuming that the output of the CM programme is being put to good use. But that’s a discussion for another day.
Anecdotally, everyone may know and have an appreciation for how the CM programme adds value to the business. But, more often than not, your word is not worth the paper it’s printed on, especially when sitting in front of a chief financial officer/manager and looking for additional budget or resources. As Deming said: “Without data, you’re just another person with an opinion.” The same holds true when demonstrating cost benefit. Harsh but true.
The above said, reporting and accumulating of cost benefit data is not impossible as long as you are realistic in terms of how accurate the figures are ever going to be. Do not be disheartened if your figures are challenged. This is a good thing in that it is promoting discussion on your CM programme.
You cannot paint with overly broad strokes but, as long as you are happy that your figures have some basis in reality, you cannot go wrong and should be confident when the numbers you present are challenged.
Demonstrating cost benefit of condition monitoring
Through your working knowledge of the plant and engagement with your team and computerised maintenance management system, the following pieces of information should be to hand when looking at the cost and cost avoidance associated with a repair or corrective action arising from condition monitoring data (see Fig 2).
Having the necessary information to hand is the first crucial step in preparing and maintaining an ongoing and up to date CBA (cost-benefit analysis) log. The next challenge is deciding how you can update, distribute and put this information into a format that can be included in your periodic maintenance and budget reviews.
You may choose to use Excel, Access or other means, but make sure that the information is organised in such a way that it can support various narratives that work best for you. The following are just some examples of items relating to your CM/maintenance programme for which you may be creating a business case with the help of a well-prepared CBA log:
- Remote/fixed sensor installation;
- Condition-based maintenance equipment upgrades;
- Planned downtime for plant and equipment;
Fig 3 is a screen shot of a CBA entry screen within AVT’s Machine Sentry. Information from the customer associated with each action raised, is entered into Machine Sentry™ to generate a cost-avoidance value associated with a proposed corrective action or developing failure mode.
Remember, most benefits to a business will incur an initial cost but not all costs will result in a benefit. The benefits that incur an initial cost are realised because they were supported by a considered approach and accurate data that can justify the investment before, during and after the purchase or investment is made.
If the latter turns out to be the case, this will more than likely be due to a rushed business case, inaccurate data or a failure to provide the right narrative with your figures. The next time someone asks you to ‘show me the money’, then show them the money and issue your CBA log.
Liam Doyle is the operations and business development manager with AVT Reliability. If you would like to learn more about Machine Sentry or would simply like assistance and guidance on how to integrate cost-benefit reporting into your condition monitoring programme, visit: www.machinesentry.com or www.avtreliability.com.