Chapter 14S - Maintenance

CHAPTER 14S
MAINTENANCE
Teaching Notes:
Maintenance is critical to Lean and TQM implementation. Poor maintenance leads to direct repair
expenses and other expenses resulting from lost production. The production line disruptions are
particularly important in lean environments. An effective maintenance program ensures that machines
are functioning and performing the operations so that quality of the product is not compromised. An
effective maintenance program can lead to improved capacity; reduced defects, scrap, and rework;
smaller inventories; higher productivity; and lower product costs.

Answers to Discussion and Review Questions

1.

The goal of a maintenance program is to keep the production system in good working order at
minimal cost.

2.

Breakdown costs would include:

a. Cost of lost production capacity (when machines are down, production capacity is reduced
accordingly).
b. Cost of employee idle time during machine down time.
c. Cost of producing defective units, scraps and/or rework.
d. Cost of repairs (labor and spare parts).
e. Cost of customer service.
f.

Cost of employee safety.

3.

Preventive maintenance may result from planned inspections that reveal the need for
preventive maintenance, according to the calendar (passage of time), or after a predetermined
number of operating hours.

4.

Predictive maintenance is an attempt to determine when to perform preventive maintenance

activities based on historical records and analysis of technical data to predict when
breakdowns are likely and schedule preventive maintenance just prior to that time.
Consequently, it is essential to have accurate, up-to-date records on which to base the analysis.
Records must include information such as date of installation, operating hours, dates and types
of insurance, and dates and types of repairs.

5.

Organizations use some combination of these approaches to deal with breakdowns: Standby or
backup equipment, inventories of spare parts, reliance on operators to perform some (usually
minor) repairs, and well-trained repair personnel who are available readily to diagnose and
correct equipment problems.

6.

a. Preventive maintenance: The Pareto phenomenon tells us that in any list of factors known
to contribute to a certain result or outcome (e.g., accident, injury, equipment breakdown,
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Chapter 14S - Maintenance

etc.), a relatively few factors will account for a disproportionate share of the result (e.g.,
90% of accidents are caused by carelessness). The importance of this is that preventive
maintenance efforts will be most effective when they are directed towards those few
factors (e.g., procedures, equipment, policies, etc.) that are most significant. Preventive
maintenance activities should be targeted toward those few parts that are known to count
for the largest percentage of breakdown and repair costs.
b. Breakdown maintenance: Similarly, the largest percentage of breakdown maintenance
costs will be spent on those breakdowns that account for the largest percentage of
breakdown and repair costs.
7.

The key points of this supplement that relate to maintenance of an automobile should involve
these concepts:
a. The need for maintenance
b. Preventive maintenance
c. Breakdown maintenance
d. Predictive maintenance

8.

As preventive maintenance increases, the probability of breakdown and associated repairs

decreases. In addition, preventive maintenance can be scheduled according to the availability
of maintenance personnel and to avoid interference with operating schedules. On the other
hand, breakdowns seem to occur at inconvenient times.

9.

When implementing a lean system, there is very little, if any, work-in-process inventory.
Therefore, the machines (operations) depend on each other for incoming materials and parts.
When a breakdown occurs, not only the failing machine shuts down, but also many of the
downstream work centers may shut down. Preventive maintenance will reduce the chance of a
breakdown and increase the efficiency of the system. A preventive maintenance program is
more important for a product layout than it is for a process layout. This importance is due to
the fact that there is much more dependency among operations for a product layout, especially
if there is no work-in-process inventory.

10.

As the level of investment in preventive maintenance increases, the likelihood of machine/

equipment breakdowns decreases if the machine is well maintained. Properly maintained
machines will produce fewer defects, which will result in higher quality products.

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Chapter 14S - Maintenance

Solutions
1.

Given:
The probability that equipment in a hospital lab will need recalibration is given in the table
below. A service firm will provide maintenance and provide any necessary calibrations for
$650 per month. Recalibration costs $500 per time.
Number of
Recalibrations
Probability of
Occurrence

.15

.25

.30

.20

.10

Determine which approach, recalibration as needed or the service contract, would cost less:
Step 1:
Determine the expected number of recalibrations without the service contract. For each
number of recalibrations, multiply the number of recalibrations by the probability of
occurrence and sum:
Number of
Recalibrations

Probability of
Occurrence

Expected Number of
Recalibrations

.15

.00

.25

.25

.30

.60

.20

.60

.10

.40

1.00

1.85

Step 2:
Determine the expected cost of recalibration to the cost of the service contract.
Expected cost of recalibration: 1.85/month x $500 = $925/month.
Service contract = $650/month ($275/month less).
Conclusion: Service contract costs less.

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Chapter 14S - Maintenance

2.

Given:
The frequency of breakdown of a machine is given in the table below. Repairs cost an average
of $240. A service firm will provide preventive maintenance under two options: #1 is
$500/month and covers all necessary repairs, and #2 is $350/month and covers any repairs
after the first one.
Number of
Breakdowns/Mont
h
Frequency of
Occurrence

.10

.30

.30

.20

.10

Pay for All Repairs Approach:

Determine expected cost of the repair approach. For each number of breakdowns, multiply the
number of breakdowns by the probability of occurrence and sum:
Number of
breakdowns

Probability of
occurrence

Expected number of
breakdowns

.10

.30

.30

.30

.60

.20

.60

.10

.40

1.00

1.90

Repair Approach Expected Cost: 1.90 breakdowns/month x $240/breakdown = $456/month

Option 1 Cost:
$500/month
Option 2 Cost:
Determine expected cost of Option #2: PM contract costing $350 and covering all repairs after
the first one:
When there are 1 or more repairs, 1 of the repairs is not covered by the service contract (this
will occur when we have 1, 2, 3, or 4 breakdowns). We need to apply the probabilities to
calculate expected repair cost:

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Chapter 14S - Maintenance

Expected Repair Cost:

1 breakdown:

(1 breakdown * .30 * $240/breakdown) =

$ 72

2 breakdowns:

(1 breakdown * .30 * $240/breakdown) =

$ 72

3 breakdowns:

(1 breakdown * .20 * $240/breakdown) =

$ 48

4 breakdowns:

(1 breakdown * .10 * $240/breakdown) =

$ 24

Total Expected Repair Cost =

$216

Total Cost of Option 2 = Expected Repair Cost + PM Contract Cost

= $216 + $350 = $566/month
Conclusion: Pay for all repairsthis has the lowest cost ($456/month).
3.

Given:
Determine the optimum preventive maintenance frequency for each of the pieces of equipment
below if breakdown time is normally distributed:

Average Time
(days) between
Breakdowns
Equipment

Standard
Deviation

Preventive
Maintenance Cost

Breakdown
Cost

A201

20

$300

$2,300

B400

30

$200

$3,500

C850

40

$530

$4,800

Step 1:
Compute the ratio of preventive cost to breakdown cost for each piece of equipment (round to
a maximum of four decimals).

Preventive cost
Breakdown cost

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Chapter 14S - Maintenance

Step 2:
Find the z value corresponding to the ratio from Step 1 and use this value of z to compute the
maintenance interval. Round z and maintenance interval to two decimals.

Maintenance Interval = Mean + (z * Standard Deviation)

All calculations are shown in the table below:

Equipmen
t

Probability

Closest
Probabilit
y

Maintenance Interval

.1314

1.12

20 + (1.12)(2) = 17.76 days

.0571

1.58

30 + (1.58)(3) = 25.26 days

.1112

1.22

40 + (1.22)(4) = 35.12 days

$300
$2,300
A201
= .1304
$200
$3,500
B400
= .0571
$530
$4,800
C850
= .1104

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Chapter 14S - Maintenance

Enrichment Module: Maintenance Problems

The purpose of this enrichment module is to demonstrate further the various tradeoffs in maintenance
management by using realistic problems. In addition, these problems are designed to add richness and
variety to the material and problems covered in this supplement. These problems reinforce the
concepts students should have learned earlier, either in a basic statistics course, or in earlier chapters of
this book. These concepts include basic probabilities, frequency tables, converting frequencies to
probabilities, expected values, and finally, break-even analysis.
1.

ITL Inc. has been keeping track of breakdowns per month of their automated assembly line
over the past three years.
# of Breakdowns

# of Months This Occurred

10

Each failure (breakdown) of the assembly line will cost the company a repair cost of $650.
ITL Inc. is considering purchasing a preventive maintenance (PM) service contract.

The PM service contract will guarantee to cover all repair costs after the first breakdown
in any given month.

The monthly cost of this PM service contract is $600.

It appears that ITL Inc. has two options:
1. Do not buy the PM service contract and continue using the current repair program.
2. Purchase the PM service contract.

Determine the total cost associated with the two options listed above and make a
recommendation.

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Chapter 14S - Maintenance

2.

A local cutlery manufacturing company has been analyzing the breakdown/failure records of a
certain type of a cutting machine. This particular type of cutting machine had the following
breakdown record.
# of Breakdowns per Day

Frequency

72

135

90

45

18
360 days/year

Cost of repair for this type of machine is $80 per breakdown. The preventive maintenance
(PM) program would cost the company $30/day and would repair the machine free of charge
after the first breakdown.
a. Determine the total daily cost of repairs if the company does not implement the PM
program.
b. Determine the total repair cost if the company adopts the PM program.
3.

Use the information given in Problem 1 and determine the maximum amount that ITL Inc.
would be willing to pay for the PM service contract (i.e., the break-even point).

4.

Use the information given in Problem 1 to solve this problem.

ITL Inc. has been presented with the opportunity to purchase another preventive maintenance
(PM) service contract. In a given month, this particular contract will cover the repair cost of
the first breakdown. ITL Inc. will pay for any additional repair costs after the first breakdown.
This PM service contract will cost ITL $400/month.
a. Determine the total cost associated with this PM service contract.
b. Compare the PM service contract in Problem 1 with the PM service contract in this
problem. Which of the two PM service contracts should ITL choose, if any?

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Chapter 14S - Maintenance

Problem 1
Option 1:
x

F(x)

P(x)

x*P(x)

# of breakdowns

# of months this
occurred

Probability of # of
breakdowns/months

.0833

.0000

10

.2778

.2778

.2500

.5000

.1111

.3333

.2222

.8888

.0556

.2780

36

1.0000

2.2779

E[x] = 2.2779 (Expected # of breakdowns per month)

The total cost of implementing the repair program without purchasing the preventive maintenance
(PM) service contract is:
E[x] * [Cost per Repair]
2.2779 * $650 = $1,480.64

Option 2:

Determine expected cost of Option #2: PM service contract costing $600 covering all repairs after
the first one:

When there are 1 or more repairs, 1 of the repairs is not covered by the PM service contract (this
will occur when we have 1, 2, 3, 4, or 5 breakdowns). We need to apply the probabilities to
calculate expected repair cost:

Expected Repair Cost:

1 breakdown:

(1 breakdown * .2778 * $650/breakdown) =

$180.57

2 breakdowns:

(1 breakdown * .2500 * $650/breakdown) =

$162.50

3 breakdowns:

(1 breakdown * .1111 * $650/breakdown) =

$ 72.22

4 breakdowns:

(1 breakdown * .2222 * $650/breakdown) =

$144.43

5 breakdowns:

(1 breakdown * .0556 * $650/breakdown) =

$ 36.14

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Chapter 14S - Maintenance

Expected Repair Cost =

$595.86

Alternative Method of Computing Expected Repair Cost:

P (X 1) = 1 P(X = 0) = 1 - .0833 = .9167
Expected Repair Cost = .9167 * $650 = $595.86

Total Cost of Option 2 = Expected Repair Cost + PM Service Contract Cost

= $595.86 + $600 = $1,195.86/month

Conclusion: Select Option 2 (PM service contract). Cost = $1,195.86/month.

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Chapter 14S - Maintenance

Solution to Problem 2
x
# of
Breakdowns/Day

Frequency

P(x)

x * P(x)

72

.200

.000

135

.375

.375

90

.250

.500

45

.125

.375

18

.050

.200

360 days

1.000

1.450

E [x] = 1.450 breakdowns/day

a. Total cost if the preventive maintenance (PM) program is not purchased:
Expected Daily Repair Cost = 1.450 breakdowns/day * $80/breakdown = $116/day
b. Total Cost: Expected Repair Cost + PM Program Cost

When the there are 1 or more repairs, 1 of the repairs is not covered by the PM program (this
will occur when we have 1, 2, 3, or 4 breakdowns). We need to apply the probabilities to
calculate expected repair cost:

Expected Repair Cost:

1 breakdown:

(1 breakdown * .375 * $80/breakdown) =

$30

2 breakdowns:

(1 breakdown * .250 * $80/breakdown) =

$20

3 breakdowns:

(1 breakdown * .125 * $80/breakdown) =

$10

4 breakdowns:

(1 breakdown * .050 * $80/breakdown) =

$ 4

Total Expected Repair Cost =

$64

Alternative Method of Computing Expected Repair Cost:

P (X 1) = 1 P(X = 0) = 1 - .200 = .800
Expected Repair Cost = .800 * $80 = $64
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Chapter 14S - Maintenance

Total Cost of Option 2 = Expected Repair Cost + PM Program Cost

= $64 + $30 = $94/day

Conclusion: Purchase the PM program. Cost = $94/day.

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Chapter 14S - Maintenance

Solution to Problem 3
Given from Problem 1:
Cost of Repair Program = $1,480.64/month
Total Cost of Option 2 = Expected Repair Cost + PM Service Contract Cost
Set Cost of Repair Program = Total Cost of Option 2 and solve for PM Service Contract Cost.
$1,480.64 = $595.86 + PM Service Contract Cost
PM Service Contract Cost = $1,480.64 - $595.86
PM Service Contract Cost = $884.78 (break-even point, i.e., the maximum amount that ITL should be
willing to pay for the PM service contract).
Solution to Problem 4
a. Cost of Other PM Service Contract:
This contract covers the cost of the first breakdown only. Repair cost still = $650/breakdown. PM
service contract cost = $400/month.
ITL will incur extra repair costs whenever there are more than 1 repair, i.e., when there are 2, 3, 4,
or 5 breakdowns. The number of breakdowns for which ITL will incur a repair cost =
Number of breakdowns 1.
Expected Repair Cost:
2 breakdowns:

(1 breakdown * .2500 * $650/breakdown) =

$162.50

3 breakdowns:

(2 breakdowns * .1111 * $650/breakdown) =

$144.43

4 breakdowns:

(3 breakdowns * .2222 * $650/breakdown) =

$433.29

5 breakdowns:

(4 breakdowns * .0556 * $650/breakdown) =

$144.56

Expected Repair Cost =

$884.78

Total Cost of Option 2 = Expected Repair Cost + PM Service Contract Cost

= $884.78 + $400 = $1,284.78

b. Repair Program Cost = $1,480.64/month

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Chapter 14S - Maintenance

Problem 1 PM Service Contract Cost = $1,195.86/month

Problem 4 Part a PM Service Contract Cost = $1,284.78/month.

Conclusion: Select Problem 1 PM service contract. Its cost is lowest ($1,195.86/month).

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