Value driven maintenance

Maintenance is crucial in any organization. Without proper maintenance,

assets deteriorate over time causing a loss in quality of the output
produced. More importantly, it can also impact the safety of the asset or
the people that operate it. Traditionally, maintenance has been viewed as
a cost center in an organization; it costs money to hire maintenance
technicians and purchase the spare parts to keep systems running
smoothly. Too often, senior executives ignore the added value
maintenance can bring to an organization such as:

 A reduction in reactive maintenance costs

 Reducing costs to restart production after a breakdown
 Limiting production scrap
 Costs of downtime such as missed orders and lost revenue
 Customer perception/satisfaction
 Improved quality of products
 Reduced environmental impact
Not surprisingly, maintenance can add economic value to a business by
delivering maximum availability at the lowest possible cost. To view
maintenance as a value driver, senior executives must move from cost-
based thinking to value-based thinking.

Definition
Value-driven maintenance® (VDM) is not a maintenance type, but rather
a philosophy developed by the founders of Mainnovation, Mark Haarman
and Guy Delahay, for optimizing the value derived from maintenance at
any particular point in time. The decision to perform maintenance at any
time is based on cost/benefit analysis. It requires a delicate balancing
between the value that improved reliability can bring and the cost of
maintenance. This is summed up in the four value drivers below.

Value drivers
Asset utilization
Availability is the probability a system is functioning when needed to,
under normal operating conditions. When the system is alive and well, the
organization can continue to produce output and meet orders. Increasing
availability means more units can be produced with the same equipment,
generating more income while fixed costs remain unchanged. This
scenario is ideal in growth markets where demand outstrips supply. For
declining markets, increasing asset utilization in one facility could lead to
shutting down a sister plant while still meeting demand.

Resource allocation
Resources are spare parts, labor, contractor labor, and knowledge.
Whereas the consumption of those resources is covered under cost
control; the resource allocation driver focuses on smarter management of
those resources. For example, smarter inventory management can
minimize stock on hand. This reduces associated carrying costs and
limits the impact of part obsolescence, increasing value for a company.
The challenge for maintenance planners is to ensure there are adequate
resources when needed for preventive or reactive maintenance.

Cost control
Salaries, contractor fees, parts, emergency shipments and specialist tools
consume maintenance budgets. Reducing reactive maintenance and thus
limiting the need for external contractors, emergency parts and
technicians overtime can increase value by eliminating expenditure.
Determining the optimal cost-effective time to perform maintenance tasks
can further reduce costs. An effective preventive maintenance program
can also help achieve cost savings, however, as more and more
preventive maintenance is introduced, the cost savings eventually level
out before they start to fall. The cost of performing additional maintenance
exceeds the benefit.

Safety, health & environment

Can you put a price on safety? A good safety, health and environment
(SHE) policy is an important value driver for maintenance as it can have a
significant negative affect on future cash flows if done incorrectly.
Maintenance related incidents that injure personnel, damage equipment
or have a negative affect on the environment will increase expenditure
through litigation or imposed government penalties. A good SHE policy
also ensures that the license to operate remains intact. Losing the license
to operate means no income. The BP oil spill in the Gulf of
Mexico demonstrates the importance of SHE and the enormous impact it
can have on costs when it goes wrong.
VDM formula

Where is the added value of maintenance

In theory, the challenge for maintenance managers is to reduce related
costs while maintaining or improving reliability. Depending on priorities,
this does not always maximize value. In the oil and gas industry, the SHE
factor is critical. In highly competitive industries such as consumer
electronics, cost control takes center stage. Value can also depend on
time. For example, during the recent downturn, the auto industry switched
focus to cost control as demand crashed. This meant less preventive &
reactive maintenance and leaving systems down for longer periods until
repairs could be completed economically. As orders picked up, the focus
switched from cost control, to asset utilization.

With value-driven maintenance®, maintenance managers should focus

on the value driver that delivers the biggest return for their organization. A
good CMMS will compliment value-driven maintenance®. Once optimal
preventive maintenance actions are decided with VDM® analysis, the
CMMS can be configured to automatically trigger the work orders at that
optimal time.
Further reading
VDM – value driven maintenance® is a registered trademark
of Mainnovation. For more information on VDM® see mainnovation.com.