As yet another year begins and we find ourselves in the midst of the usual post-holiday nutritional and financial hangover that most of us are faced with at the beginning of every New Year, so 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’s the result of past lessons learnt or simply a continuation of your organizations prevailing culture and approach to expenditure; I’m betting that any Reliability Engineer, Maintenance Manager, Engineering Manager or Production Manager for the most part, are expected to have a robust business case and justification to go with any purchase or investment they’re proposing to Senior Management.
Capex or opex, having your facts and information correct could mean the difference between getting that PO or tucking tail and going back to the drawing board. Seeking additional investment in Maintenance and Reliability can be a challenge in many organizations as they are more often than not seen as a necessary evil and add no perceptible value to the bottom line………..yeah right.
In terms of a Condition Monitoring Program, the key to overcoming this challenge is being able to clearly and concisely report on the cost benefit attached to your CM Program. This is easier said than done and will very much depend on how connected and integrated your Condition Monitoring Program 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’s not uncommon for Maintenance to have little or no understanding of the cost per hour of lost production.
It’s also not 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’s no interest like motivated self-interest. That said however, it’s 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 & Loss, Gross Margin, EBITA, ROI (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; yes you guessed it…deliver a benefit. Having the right mechanism and 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 certain Monty Python lm: “Apart from the Aqueduct, Sanitation, Roads, Irrigation, Medicine, Education, Wine, Public Order & Public Health, what have the Romans ever done for us?”
Apply the same thinking to your Condition Monitoring Program and I’ll bet you’ll soon end up with a fairly lengthy list of benefits it has delivered to the business. This is of course assuming that the output of the CM program 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 program adds value to the business; but more often than not your word isn’t worth the paper it’s printed on, especially when sitting in front of a CFO/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. Don’t be disheartened if your figures are challenged. This is a good thing in that it’s promoting discussion on your CM Program.
You can’t paint with overly broad strokes but as long as you’re happy that your figures have some basis in reality then you can’t go wrong and should be confident when the numbers you present are challenged. Through your working knowledge of the plant and engagement with your team and CMMS, 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:
Having the above 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 just make sure that the information is organized 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 program for which you may be creating a business case with the help of a well prepared CBA (Cost Benefit Analysis) log.
- Remote/ fixed sensor installation.
- CBM Equipment Upgrades.
- Planned down time for plant & equipment.
Below screen shot of 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 realized 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.
If you’d like to learn more about Machine Sentry™ or would like assistance and guidance on how to integrate Cost Benefit reporting into your Condition Monitoring Program visit: www.machinesentry.com or www.avtreliability.com.
Author: Liam Doyle
Operations & Business Development
Manager at AVT Reliability (Ireland) Ltd