October 16th, 2019
Preventative Maintenance: Avoiding the Train Wreck
Well here we are smack in the middle of the busiest month of the year, and one thing that continually surprises me this time of year is when I see the train wrecks that occur as a result of preventable equipment failure.
“The line went down and we got 3 days behind. So, we were scrambling, trying to run the one remaining line around the clock … forcing people to work late hours and paying overtime. Then when we finally did get both lines running again, we were forced to run 7 days a week to try and catch up! We are still behind! The stress level has been really tough on our employees. Some of them just quit and walked off the job, which complicates matters even further. The HR department tries to quickly fill the gap but that is extremely difficult given the shortage of skilled labor.”
These are real statements and problems that I hear all too often this time of year!
These scenarios can be prevented with a solid Preventative Maintenance (PM) program. It has huge benefits that go far beyond preventing the train-wreck scenario just described.
PM involves fixing machines before they break down. Engineers and maintenance staff can study the machines and learn which parts are more prone to failure. Having these parts on hand and replacing them at specific intervals helps ensure that the machine will provide uninterrupted service. It can also significantly extend the life of the machine, which can provide significant financial benefits, far beyond the cost of the PM Program costs.
The reason I mention this is that I often hear employees and even managers complain that they knew a certain part needed to be replaced but could not get approval to buy the new part. When you add up the savings involved in extended machine life as well as the cost savings involved in avoiding the train wreck, there is absolutely no justification for not having a PM Program in place!
Yes, PM programs actually offer a huge return on investment or ROI. The payback comes in many forms:
- Less overtime pay. Machines run more efficient and at peak levels when maintained properly. Chances of a breakdown are significantly lower. This reduces the likelihood of having to keep workers late and pay overtime.
- Lower warranty expense. Reject rates are lower when machinery is operating correctly. When you have multiple machines or lines, pressure is put on other stations to increase output if one machine goes down. Production rates on the remaining machines are pushed past the point at which acceptable quality rates can be maintained. This means higher warranty expenses in the months ahead.
- Extended life of machinery. Conducting proper PM extends the useful life of machinery, lowering the overall expense for replacement machinery during the time frame of the PM Program. For example, let’s say without PM, you have a machine that lasts five years and then needs to be replaced. But with proper PM, this machine can last 10 years. If it costs, say $7,500 annually to conduct the PM in order to extend the life of a $200K machine, is it worth it?
We can analyze the Net Present Value (NPV) and Internal Rate of Return (IRR) using an excel spreadsheet. Given a 10-year string of $7,500 in expenditures annually combined with a cash savings of $250K in year six as the machine runs past year six (lasting ten), the NPV of this 10- year PM Program is $47K with an IRR of 32%.
In other words, a sound PM Program is well worth it financially speaking. This does not even include the added benefits due to avoiding the train wrecks. You get a smoother running business, happier employees, and better quality. So, if your door and window factory is the type that seems to be running on the philosophy that if it isn’t broke don’t fix it, then putting together a sound PM program can be well worth the effort!