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METHODOLOGY AND THEORY Measuring

maintenance
Measuring maintenance performance
performance using a balanced
133
scorecard approach
Imad Alsyouf
Department of Mechanical Engineering, School of Technology and Design,
Växjö University, Sweden

Abstract
Purpose – The purpose of this paper is to develop a strategic maintenance performance
measurement system.
Design/methodology/approach – In response to this purpose, a balanced scorecard framework
was adopted to assess the contribution of support functions (such as maintenance) to strategic
business objectives. A case study approach was used to test the suggested framework at a Swedish
paper mill.
Findings – It was found that by using the suggested framework it was possible to measure and
identify the cause-and-effect relationship of using an effective maintenance strategy, and assess its
impact on the company’s competitive advantages. For example, it was found that there is potential to,
ideally, improve the company’s return on investment (ROI) by 9 per cent. This figure represents a
projected US$8.4 million in lost profits, which are caused by planned inoperative time and overall
equipment effectiveness (OEE) elements. At least 14 per cent of the ROI potential improvements are
directly related to the maintenance function as lost profit, which is due to unplanned stoppages and
bad quality caused by maintenance-related problems.
Practical implications – Using the modified BSC provides a framework whereby the contribution
of support functions (for example, maintenance) to the strategic business objectives can be assessed.
The modified BSC makes it easier for the maintenance and production staff who are technically
oriented to communicate with top management in terms that managers understand, i.e. in terms of
money. Furthermore, this approach facilitates the making of cost-effective decisions.
Originality/value – The present study contributes to our knowledge of this process by changing the
status of the “maintenance function”. This is done by showing that maintenance is no longer a cost
centre, but should be regarded as a profit generating function.
Keywords Maintenance, Performance measures, Balanced scorecard, Sweden, Paper industry
Paper type Case study

Introduction
Many changes in the internal environment of certain companies are taking place.
These changes include the increased use of mechanisation and automation of
operations, such as flexible manufacturing systems (FMS); robots; automatic

This article represents one of the results of a project that was financed by the Swedish National Journal of Quality in Maintenance
Engineering
Board for Industrial and Technical Developments, NUTEK, and the following Swedish Vol. 12 No. 2, 2006
companies: StoraEnso Hylte AB, Volvo Truck Components AB in Köping, SKF-Condition pp. 133-149
q Emerald Group Publishing Limited
Monitoring, and ABB Alstom Power AB in Växjö. The author would like to thank all who have 1355-2511
participated in this project. DOI 10.1108/13552510610667165
JQME warehousing systems; automatic guided vehicles (AGVs); and the increasing trend of
12,2 using the just-in-time (JIT) and TQM philosophy, Yamashina (1995), Luxhoj et al.
(1997), and Suito (1998). These changes tie up much invested capital. For example,
companies within process industries and chemical industries, such as paper mills and
refineries, use extremely expensive and fully automated production lines, Swanson
(2003). Furthermore, there is increasing pressure to protect the ecological environment
134 from the danger of harmful industrial waste and pollution. This means that the
manufacturing plant should be used efficiently and effectively. The plant should
provide high quality products at a competitive price in addition to showing concern for
the environment and safety, Alsyouf (2004). Therefore, the importance of the
maintenance function has never been greater, due to its role in maintaining and
improving availability, performance efficiency, quality products, on-time deliveries,
the environment, safety requirements, and overall plant productivity, Ahlmann (1984),
Al-Najjar (1997), Riis et al. (1997), Ahlmann (1998), Mckone and Wiess (1998),
Bevilacqua and Braglia (2000) and Al-Najjar and Alsyouf (2003). Furthermore, an
increasing awareness of maintenance and its influence on both industrial enterprises
and society as a whole can be recognised. Many researchers and practitioners have
highlighted the total losses that are caused by maintenance omission or ineffectiveness
in maintenance, Ahlmann (1984, 1998), Jardine et al. (1996), Al-Najjar (1997), Davies
(1998), Ljungberg (1998), Luce (1999), Vineyard et al. (2000) and Holmberg (2001).
Nevertheless, maintenance is still considered as a cost centre. For example, 70 per cent
of the respondents of a survey conducted on 118 Swedish manufacturing companies
considered maintenance as a cost centre, Alsyouf (2004). Furthermore, little research
has been done to highlight the impact of the maintenance function on overall plant
performance, i.e. productivity and profitability, Ahlmann (1984, 1998), Russell (2001),
Kutucuoglu et al. (2001) and Al-Najjar and Alsyouf (2004).
A strategic approach to maintenance management has become essential, especially
in capital-intensive industries. For example, Kutucuoglu et al. (2001) cite studies that
emphasise the lack of linkage between maintenance and quality improvement
strategies with an overall neglect of maintenance as a competitive weapon. The
influence of maintenance actions cannot be viewed only by their effect on the
maintenance department, since the consequences of maintenance actions may
seriously affect other units in the organisation. Looking only at the direct maintenance
costs cannot show the complete impact of maintenance. Actually, there is a need for a
holistic performance measurement system that can:
.
Assess the contribution of the maintenance function to the strategic business
objectives.
.
Identify the weaknesses and strengths of the implemented maintenance strategy.
.
Establish a sound foundation for a comprehensive maintenance improvement
strategy using quantitative and qualitative data.
.
Re-evaluate the criteria that are employed in benchmarking maintenance
practice and performance with the best practice within and outside the same
branch of industry.

Therefore, the purpose of this paper is to develop a strategic maintenance performance

measurement model that can be used for tracking maintenance impact and showing
the linkages between operational and financial measures, holistically. A case study Measuring
approach will be used to test the suggested model. maintenance
This paper discusses the general framework of business processes and then
introduces an adapted BSC model, which can be used to measure maintenance performance
performance. Following this, the paper discusses the impact of the maintenance
function on the elements of business performance according to the BSC approach.
Finally, the study ends with the verification of the BSC approach at a Swedish Paper 135
machine, and with a number of conclusions.

Business processes
The general framework of business processes, its elements and the flow of materials
and information within the extended enterprise are illustrated in Figure 1.
The upstream organisation consists of various ingredients, such as the internal and
external suppliers; designers of products, components, processes, equipment, tools or
facilities, and also universities and research centres that provide firms with qualified
employees and the latest innovations and developments. The inputs consist of all the
resources that are necessary to produce the goods and services. These resources
include people, materials, capital, energy, data, information, methods and skills. The
value adding processes consist of all the utilities, i.e. the value and the usefulness that
the firm creates in its products or services for fulfilling a want or need (Lambert et al.,
1998).
There are also various types of utilities such as form, time and place utilities. The
form utility is the process of creating the good or service, e.g. product manufacturing.
The time utility is the value added by possessing an item or service when it is needed.
This applies to both internal customers and end customers. The place utility entails
having the item or service available where it is needed (Lambert et al., 1998). The
output of the value adding processes are the products and or services that should

Figure 1.
The framework of
business processes
JQME satisfy the customer’s needs and requirements, i.e. best value and minimum cost. The
12,2 operations task concerns the transformation process that involves taking inputs and
converting them into outputs, together with the various support functions (e.g.
logistics, maintenance and quality control) closely associated with this basic task. The
quality, efficiency and effectiveness of the operations processes affect the elements of
downstream organisation, i.e. the shareholders (owners), society and the company’s
136 customers.

Adapted balanced scorecard (BSC)

Kaplan and Norton (1996) suggested the BSC as a new framework by which a strategy
can be translated into operational terms, where measures of past performance are
enhanced with measures of the drivers of future performance. The objectives and
measures of the scorecard are derived from an organisation’s vision and strategy based
on four different perspectives: financial, customer, internal business processes, and
innovation and growth. The different measures across the four perspectives can be
linked in a series of cause-effect relationships to illustrate, for example, how
investments in employee training, would improve future financial performance.
Although the BSC concept has been adopted by industry as a base for strategic
management systems, however, many researchers, including (Neely et al., 1995;
Atkinson et al., 1997; Bontis et al., 1999; and Mooraj et al., 1999) have criticised its
concept. They have shown that:
.
It fails to identify performance measurements as a two-way process, since it
focuses only on top-down performance measurement.
.
It is unable to answer the question of what one’s competitors are doing.
.
It is rigid and limited to customers, and ignores other parts of the company, such
as the employees, suppliers, alliance partners and the local community, i.e. it does
not consider the extended value chain.

For example, Atkinson et al. (1997) illustrated that BSC is incomplete because it fails to:
.
adequately highlight the contributions that employees and suppliers make to
help the company achieve its objectives; and
.
identify the role of the community in defining the environment within which the
company works.

The BSC concept can, however, be used also to measure, evaluate and guide activities
that take place in certain functions of an organisation. Martinsons et al. (1999)
developed a BSC for information systems (IS). Kim (2004) used the BSC framework to
assess the business performance of information technology (IT) expenditures. Tsang
(1998) and Tsang et al. (1999) presented a strategic approach for managing
maintenance performance that is based on the four perspectives of the BSC concept as
suggested by Kaplan and Norton. Liyanage and Kumar (2003) presented an attempt to
develop architecture for effective management of operations and maintenance
performance, linking results to performance drivers and further extended them to
apply the BSC concept.
However, this paper introduces a detailed set performance measures for
maintenance based on an adapted BSC concept that suits the maintenance context
as a support function. The modified BSC’s model that is structured into three main Measuring
parts is illustrated in Figure 2. maintenance
The first part of the model, i.e. the downstream organisation elements, includes
three perspectives, namely, corporate business (financial), society, and consumer. The performance
strategic objectives of the enterprise should be set according to the vision and the
overall strategy of the organisation. In the corporate business perspective, objectives
that please the shareholders, such as improved profitability, reduced operating 137
expenses, or higher stock-value can be stated. Therefore, traditional financial measures
such as return on investment (ROI), operating expenses, and market share can be used.
With respect to the social perspective, safety, health and environmental questions are
emerging as the most important topics of discussion, because of the scarcity of natural
resources and the growing concern in the market, for “green” issues. For example, in
some countries (Sweden, Norway, Germany, Denmark, etc.), and in high environmental
risk industries (chemicals, plastics, automotive, heavy engineering, etc.) improvements
in environmental performance is considered one of the basic competitive priorities,
alongside lower costs, production lead-time, and higher quality, Giovanni and Giuliano
(1998). Therefore, within this perspective, certain objectives, such as introducing
“cleaner technologies”, i.e. equipment and plants with a reduced impact on the state of

Figure 2.
The suggested
perspectives of the
modified balanced
scorecard BSC
JQME natural resources, can be stated. Consequently, various measures that are aimed at
12,2 supporting managers in the assessment of a company’s environmental performance
can be used. These include:
.
Indices that highlight a company’s environmental efficiency in the use of
resources, e.g. the impact of the uptake of materials, and energy consumption.
.
Measures of the amount of waste resulting both from the company plants and the
138 usage of solid products, e.g. air emissions, waste water, solid wastes resulting
from scrap in the production cycle.
.
Indicators defining product durability, e.g. life cycle of different product
components.
With respect to the consumer perspective, first class companies rate customer
satisfaction as their top priority. For example, the number one objective in the strategic
plan for Toyota Motors Sales, USA, is “to be number one in customer satisfaction”, and
not to be profitable, expand sales, produce more units, or to increase their market share,
Berman and Klefsjö (2003). Customer satisfaction is related to the needs and
expectations of the customers that can be measured by several quality dimensions,
including reliability (doing what has been promised), responsiveness (willing to help
and provide prompt service), assurance (conveying trust and confidence), empathy
(ability to see through the customer’s eyes), and tangibles (equipment, physical
facilities). Note, however, that the importance of these dimensions can change
according to the context (Berman and Klefsjö, 2003).
The second part of the modified BSC model (i.e. the operations processes) consists of
two main perspectives: the production perspective, and the support activities
perspective, including maintenance, quality and logistics.
Concerning the production perspective, the main objective is to satisfy and
preferably exceed the needs and expectations of the customers efficiently and
effectively. The key dimensions of of production performance can be defined in terms
of quality, delivery speed, delivery reliability, price (cost), flexibility and
responsiveness, (see Neely et al. (1995), De Toni et al. (1997) and Willis (1998) among
others). A review and discussion of a selection of the most important measures relating
to quality, time, cost, and flexibility can be found in Neely et al. (1995). However,
regarding the support activities’ perspective, usually, there are expected difficulties
associated with establishing an effective measurement system for such types of service
functions. For example, Pintelon and Van Puyvelde (1997) illustrated that maintenance
performance reporting is difficult because of the fact that maintenance activity is
closely related to production activity and organisation (which in turn are affected by
other functions) and both the merits and shortcomings of the service rendered are not
immediately apparent.
Finally, the upstream organisation elements may include the human resources
perspective, and the suppliers’ perspectives, e.g. designers or education organisations.
In each dimension of the BSC, a set of strategic objectives that are derived from the
vision and mission of the organisation should be established.

Features of the adapted balanced scorecard

Unlike the tradition BSC model that is limited to the financial, customer, internal
business process and to innovation and growth, the approach put forward in this paper
considers other parts of the extended enterprise, including suppliers, employees and Measuring
the local community. It can be used to highlight the contribution that employees and maintenance
suppliers make to help the company achieve its objectives. Furthermore, it can be used
to identify the role of the community in defining the environment within which the performance
company works. In addition to well-chosen key performance indicators (KPIs) that
should be identified in a two-way process (top-down and down-up), the KPIs can be
used to control the performance of the enterprise and benchmark the business 139
performance practice with best practice within the same sector or other sector. This
provides the feedback information, which is necessarily for continuous improvements
efforts. However, the user should be aware of the possibility of facing a problem of
measurability when enlarging the scope of analysis to take into account society and
suppliers.

Measuring maintenance performance using the suggested BSC perspectives

Performance of the maintenance function depends not only on the efficiency and
effectiveness of the maintenance organisation, but also on factors such as the designed
reliability and maintainability of the production system.
In the following discussion, the impact of maintenance on the organisation
according to the suggested BSC perspectives are presented and discussed. Next, it is
demonstrated, in Figure 3, how productive (i.e. efficient and effective) maintenance can
contribute to the overall success of the organisation by illustrating the cause and effect
relationships among a set of performance measures based on the suggested balanced
scorecard’s perspectives.

Upstream organisation perspective: innovation and growth perspective

Blanchard (2004) demonstrates that a large percentage (e.g. 70 per cent for some
systems) of the total life cycle cost for a given system is attributed to operating and
maintenance activities. A significant portion of this cost stems from the consequences
of decisions made during the early phases of planning and conceptual design of the
system. Therefore, the reliability and maintainability of production systems must be
inherent within the early system design and development process if the results are to
be cost-effective, (see, among others, Husband (1986); Ahlmann (1998); and Blanchard
(2004)).
However, the reliability and maintainability of systems can be improved, depending
on how advantages related to experience from older designs are taken into account. It
is also very important that the designers are promptly informed about faults relating to
new equipment in use, since this enables them to take suitable measures to increase
reliability. Thus, a systematic feedback of reliability information from usage and tests
is important for the designer, Berman and Klefsjö (2003).
On the other hand, co-operation and mutual research projects with research centres
and universities can enhance the implementation of new productive maintenance
methods and innovations. This can be of help, too, in developing the employees’
competence that is described as a combination of knowledge, skills, ability,
willingness, interest, and personal characteristics. Therefore, for measuring
maintenance performance using the suggested BSC perspectives, we propose a
perspective named innovation and growth for the upstream part of the organisation. It
involves measures related to equipment suppliers, education firms and human
JQME
12,2

140

Figure 3.
The cause-effect of
maintenance impact on
business performance

resources. These measures aim at providing information that is needed for the
development and innovation process. They could include both quantitative and
qualitative measures, including:
.
degree of cooperation and communication with the original equipment
manufacturer;
.
degree of cooperation with research centres and universities;
. qualification of maintenance labour force;
. level of training and human resources development;
.
level of new investments in maintenance department.

The operations perspectives

The operations part of the BSC model includes two perspectives; namely, the
production perspective and the support functions perspective. With respect to support
functions, in this paper, they are considered from the maintenance perspective.
Maintenance perspective Measuring
Performance of the maintenance function is influenced by various factors. Tsang (2002) maintenance
identifies and discusses four strategic dimensions that are relevant to the maintenance
function: performance
(1) the choice between in-house capability and outsourced service;
(2) organisation of the maintenance function and the way maintenance tasks are
structured;
141
(3) the selection of maintenance policies;
(4) design of the infrastructure that supports maintenance.

However, maintenance performance indicators are needed to provide management

with quantitative information that indicates the use of the maintenance function’s
inputs (i.e. efficiency of maintenance activities), and the extent to which the stated
goals are reached (i.e. effectiveness of maintenance actions), Pintelon and Van
Puyvelde (1997) and Arts et al. (1998). However, one has to consider a number of
different categories that are to be evaluated. These categories include organisation,
administration and human resources, craft and skill development, budget and cost
control, work management and control, shop level planning and scheduling,
maintenance approaches (i.e. strategies, policies, or techniques), and computerised
maintenance management systems (CMMS). By looking at the input-output model of
the maintenance function as a black box, then the efficiency of maintenance can be
measured for any input resource as the (theoretical) input divided by the actual input.
For example, the labour efficiency related to the execution of a specified maintenance
job can be measured as (man-hours planned to be used divided by actual man-hours
needed to finish the job). On the other hand, the effectiveness of the maintenance
function can be measured by dividing the actual output by the theoretical output. For
example, the availability of a machine (or a production line) can be measured by
dividing the actual production time (i.e. Planned production time minus downtimes) by
the planned production time. Thus, to measure the efficiency and effectiveness of the
maintenance function, one needs to collect parameters such as the number and
duration of downtimes (due to failures, planned stoppages and short stoppages) bad
quality, number of accidents due to maintenance causes, mean time to repair, and the
average spare parts inventory level.

Production perspective
The efficiency and effectiveness of the maintenance function affects the technical
performance of the production system. The technical performance of the production
function can be assessed by the overall equipment effectiveness (OEE) measure
suggested by total productive maintenance, (see Nakajima, 1988). However, two very
important factors that are not considered when calculating the OEE are the planned
stoppage time and the yearly vacations (De Groote, 1995). Consequently, the total
company performance should be measured by multiplying the OEE measure with a
new index called planning indicator (De Groote, 1995). The planning indicator can be
calculated as the theoretical production time, e.g. one year (8,760 hours) minus the
planned downtime, divided by the theoretical production time. We thus call the
measure that results from multiplying the planning indicator and OEE the total overall
JQME equipment effectiveness (TOEE). Using the planning indicator and its economic
12,2 consequences provides the management with more information about the cost
effectiveness of improvement suggestions, e.g. working three shifts instead of only two
shifts.
On the other hand, the capability of the machine to produce quality products, e.g.
products that satisfy the customer’s requirements, is highly affected by the
142 maintenance effectiveness (Ollila and Malmipuro, 1999). Furthermore, maintenance
affects the production cost effectiveness in terms of its effect on the consumption of the
various resources used in the company’s operations. For example, the labour allocated
for a production line might be idle during the stoppage time, and extra overtime hours
might be needed to compensate the production lost during the stoppage time.
Moreover, labour safety might be affected by accidents that occur due to maintenance
issues. The amount of raw materials used in production is influenced by the number of
breakdowns because of bad product quality caused by deterioration in a machine’s
condition, and start-up losses. Hence, the consumption of materials will increase due to
scrap and reworking wastages. Note too, that the spare parts inventory and
consumption will be affected by the implemented maintenance approach, e.g. a large
inventory of spare parts must be held in stores when using failure-based maintenance,
because the consumption of spares is then unpredictable.
Capital investments in the plant are influenced through factors such as equipment
or the useful life span of components, equipment redundancy, buffer inventory, extra
investment in facilities for buffer and equipment redundancy, and damage to
equipment due to breakdown. The energy consumed by the plant can be affected by
the condition of the plant, e.g. a worn bearing means more friction between the rotating
parts and results in more energy consumption. Therefore, efficient and effective
maintenance contributes by adding value through better utilisation of resources
(higher output), and enhanced product quality, e.g. reduced rework and scrap (lower
input production costs). In addition, effective maintenance avoids the need for
additional investment in capital and people since the capacity of existing resources can
be increased.

Downstream organisation
The impact of maintenance on the downstream organisation elements can be traced by
finding its effects on customers, society, and shareholders. With respect to the
perspective of the customer, customer satisfaction is the main point of the TQM
philosophy. Dearden et al. (1999) show that firms try to capture new customers, satisfy
them and retain existing customers by promising assurance of a timely delivery, which
in its turn depends on adequate production capacity with minimum disturbances, and
high quality products. Dearden et al. (1999) report that a company runs a 40 per cent
risk that a customer will change its supplier following a missed delivery. The base of
success in any competitive context is either having a cost advantage, or value
advantage such as image or reputation, or a combination of both.
With respect to the perspective of society, the impact of maintenance on society can
be traced through its effects on safety, health, the environment and ecology. The
environment is adversely affected by accidents and pollution, which may occur due to
the (improper) use, disposal or bad maintenance of an asset. Rao (1993) indicates that
environmental pollution caused by various unnatural causes is very high, but at the
same time losses due to industrial fire damage is running to millions of pounds in the Measuring
UK. These losses could have been avoided or reduced by effective maintenance. maintenance
Finally, regarding the financial perspective, the shareholders, usually, are interested
in achieving a profit. Therefore, the impact of maintenance on shareholders can be performance
found by analysing the effect of maintenance on the generated profit, which is usually
measured by indices such as return on investment (ROI).
143
Case study
The case study was conducted at StoraEnso Hylte AB, a paper company in Hyltebruk
in southern Sweden. The study was conducted at PM2, one of the company’s four
machines. This machine was selected for the study because of its valuable database,
particularly during the period 1997-2000.

Data gathering
A special data sheet was designed for manually collecting the relevant technical and
economic information parameters from the company database. As the economic data
was confidential, the data used in the analysis was transformed using several suitable
factors that still allowed accurate analysis. To increase data reliability, all of the terms
were discussed, explained and agreed upon by the company personnel involved in the
case study. Furthermore, the data sheet was adapted to suit the terminology and
context of the company. The data that was collected covered all types of stoppages,
such as those caused by mechanical, electrical, hydraulic and instrument failures. The
technical data included parameters such as planned production time; planned
production rate; time and frequency of planned stoppages time, failures, short
stoppages, the quantity of poor quality products and percentage of poor quality
products and number of accidents resulting from maintenance deficiency. The
economic data included parameters such as fixed and variable operating costs, profit
margin, net profit, working capital, maintenance costs, and investments in
maintenance and spare parts inventory.

Model validation, analysis and results

The suggested BSC approach for measuring maintenance performance was validated
using the data collected from the case company. A summary of the cause-effect results
as calculated for one paper machine is illustrated in Figure 4.
It was found that, according to the innovation and growth perspective, the company
has reliable relations with the original equipment manufacturers, and a continuous and
beneficial co-operation with research centres and universities. The company is
implementing new maintenance methods and techniques to improve maintenance
performance, e.g. vibration-based maintenance (VBM). The average value of the yearly
maintenance cost (i.e. yearly maintenance budget) allocated for the PM2 machine is
about US$7.8 million. This value constitutes about 14 per cent of the total operating
costs for the PM2. On average, about US$57.5 thousand is invested yearly in
maintenance. The company has a highly skilled maintenance staff, e.g. more than 50
per cent of the investments in maintenance were spent on training.
With regard to the maintenance perspective, as it is usual with such a type of
industry, the machine is run continuously, 24 hours per day. However, one main
planned stoppage is performed yearly for major maintenance tasks. For the period that
JQME
12,2

144

Figure 4.
The cause-effect results
for the suggested BSC
approach used to measure
maintenance performance
on one paper machine

was studied, on average, this major stoppage lasted about 116 hours. On the other
hand, yearly vacations and holidays were 435 hours. This means that the average
yearly-planned working time was 8,209 hours. For about 5.8 per cent (i.e. 474 hours) of
the planned working time, the machine was stopped due to several reasons, such as
regular planned stoppages (83 hours), failures and unplanned stoppages (160 hours),
and short stoppages (231 hours). According to the production schedule, it is planned
that the paper machine be stopped every other week for technical production reasons.
The causes of the unplanned stoppages and the percentage of each reason with respect
to the total unplanned stoppages are illustrated in Figure 5.
The bad quality products due to maintenance causes were estimated by the
company’s team involved in the case study based on analysis of relevant records of the
study period to be about 7.5 per cent of the total bad quality produced, i.e. 4,592 tons of
paper. No accident was reported during the study period. On the other hand, although
the company uses a condition-based maintenance system that may increase the

Figure 5.
The causes of unplanned
stoppage time on one
paper machine
availability of information about when the spare parts are needed, the average value of Measuring
spare parts inventory on hand was about US$6.4 million. Furthermore, there was an maintenance
increase of about 19 per cent in the spare parts inventory value during the three years
1998-2000 with respect to the base-year 1997. This increment is equivalent to about performance
US$2.3 million in the form of capital tied up in the spare parts inventory.
In relation to the production perspective, the average value of the overall equipment
effectiveness OEE is 91.4 per cent. However, this value is expected with such a type of 145
industry as is confirmed by Ahlmann (1998). This means that the company can be
classified as a first class company (Nakajima, 1988).
When taking the planning indicator into consideration, the total overall equipment
effectiveness (TOEE) is calculated at 85.6 per cent. On the other hand, we found that
the company did not face problems with late delivery to its customers, or with injury
due to accidents related to maintenance problems.
With respect to the downstream organisation elements, it was found that the ability
of the company to provide its customers with their orders on time was high. We also
found that no environmental penalties were paid, e.g. pollution fees, and the company
is able to provide its customers with a competitive price.
Finally, when considering the financial perspective. Since every ton of paper that is
produced can be sold. This means that for every minute the machine is stopped, the
company will lose the profit associated with the paper quantity that was supposed to
be produced during that period. On the other hand, for every minute the machine is
idle, the company is not utilising its fixed costs, such as facilities costs (e.g. machine
depreciation or leasing cost), labour, fixed energy, which means that the fixed cost
during downtime is a lost expense. We estimated the economic losses (potential
savings) incurred due to stoppages that are measured by the elements of the TOEE to
be about US$12.6 million. We considered these losses as ideal potential savings, which
can be recovered if the root causes of the stoppage have been eliminated. These ideal
potential savings consist of the profit losses (US$8.4 million), and the cost of unutilised
resources (US$4.2 million). Consequently, we found that the average value of the return
on investment (ROI) during the years 1997-2000, i.e. net profit divided by the capital
invested, was about 16.43 per cent. The calculation of ROI was for the whole company
based on their annual report using the profit and loss statement and balance sheet
reports. However, we assessed the economic consequences of the calculated TOEE
measured only by the profit losses for one machine (i.e. PM2). It was found that, ideally,
there is a potential to improve ROI by about 1.4 per cent, which is equivalent to about
US$8.4 million extra profits. The planned inoperative time represents the highest
contributing factor to the ROI potential improvement with 44 per cent, unavailability
(due to failures and planned stoppages) and quality losses are second with 19 per cent
each, and finally, short-stoppages with 18 per cent as can be seen in Figure 6.
At least 14.2 per cent (US$1.2 million) of the potential improvement of the ROI is
related directly to the maintenance function as lost profit due to unplanned stoppages
(i.e. failures) and bad quality caused by maintenance related problems. This percentage
will increase according to how the maintenance actions are linked to the causes of the
unutilised time such as short stoppage time, planned stoppage time, and planned
inoperative time. In addition, when the total maintenance costs (maintenance budget
and potential savings related to maintenance causes) for the PM2 machine were
analysed, it was found that the maintenance budget (direct maintenance costs)
JQME
12,2

146
Figure 6.
The causes of
unproductive time on one
paper-mill machine

represents 75 per cent of the total maintenance-related costs. The potential savings are
distributed into lost profit, 11 per cent; unutilised resources, 5 per cent; and interest
expense of the capital that is tied up in the spare parts inventory, 9 per cent.
More improvements in the value of ROI can be achieved by increasing the
maintenance effectiveness. This can be justified from the increase in profit margin and
decrease in operating costs, for example, less capital will be tied up in the spare parts
inventory, because of the concomitant decrease in the spare parts inventory level, and
from the decrease in machines that stand redundant.

Conclusions
Using the BSC approach that has been suggested provides a framework to translate the
company strategy into operational terms and to measure the impact of support
functions, e.g. maintenance, on the overall business performance. It makes it easier for
maintenance staff and production staff who are technically oriented to communicate
with top management in the language that managers understand, i.e. the language of
money. Thus, using the right economic factors, they can estimate the savings expected
from the productivity improvement suggestions, compare it to the investments needed
and make a cost effective decision.
Furthermore, by selecting suitable performance measures in each area of the BSC
suggested above, it is possible to detect deviations at an early stage, and to identify and
trace the root cause of the deviation, and thereby achieve cost effective and continual
improvements. Moreover, this model can be used strategically, to compare the support
function, e.g. maintenance, performance with best practice, and control the
performance of the firm, by identifying the company’s strengths, but also
opportunities for improvement. The model also establishes a sound foundation of
quantitative and qualitative data for a comprehensive maintenance improvement
strategy. We note that the application of the suggested model entails a number of
pre-requisites, such as the existence of a well-designed IT system at the company,
which will provide the required data. Finally, it was shown that maintenance can
improve the overall equipment effectiveness of production systems and consequently
enhance the competitiveness and profitability of the manufacturing company. Thus, it
was shown in a case study that maintenance is no longer a cost centre, but it can be a
profit generating function, especially in similar types of industry where the downtime
cost is high.
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Corresponding author
Imad Alsyouf can be contacted at: Imad.alsyouf@vxu.se

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