The CBM Optimizer: Exakt

‹EXAKT› ™
The CBM Optimizer

Our Walk-Through Demo................................................ 2
Real Life ................................................................................................ 2
The Demo ............................................................................................. 2
Our Walk-Through Demo Begins .................................... 3

Our PDF Demonstration ....................................................................... 4
The Main Screen................................................................................... 4
Mathematical Models ............................................................................ 6
Inspections Table.................................................................................. 7
Events Table ......................................................................................... 9
Graphical Display................................................................................ 11
Cross Graphs...................................................................................... 12
Modeling.............................................................................................. 13
Preparing the Data ...................................................................... 13
The PHM Parameter Estimation Report ..................................... 20
Amending the Model ................................................................... 22
Groups and Time Intervals.......................................................... 27
Transition Probabilities................................................................ 29
The EXAKT Replacement Decision............................................ 34
Ask Our Experts.................................................................................. 44
Appendix One ..................................................................................... 45
Residual Analysis — Order of Appearance ................................ 45
Residual Analysis — Residuals Against Expectation................. 45
Residual Analysis — Transformed Residuals ............................ 45
Residual Analysis — Variance Stabilized ................................... 45
Residual Analysis — Summary Report....................................... 45
Appendix Two ..................................................................................... 46
Our
Walk-Through Demo
Real Life
It’s really more than a demo… this EXAKT demo reveals the real data from a
client’s replacement analysis. The customer is Cardinal River Coals (CRC),
in Hinton, Alberta, Canada, a major producer of coal… and like all Coal
extractors, CRC uses costly, maintenance-prone heavy equipment.
This analysis was on “wheel-motors”. Wheel motors are Electro-mechanical

motors that drive each wheel of their enormous trucks. Cardinal operates 26
trucks, with 55 wheel-motors and each wheel-motor is valued at around
$85,000.
The assets being analyzed, therefore, are worth $4,675,000. To say that
making the right replacement and repair decisions — deciding when to take a
unit out of service — is an important decision, is definitely an
understatement!
This demo will show you the steps taken to analyze CRC’s wheel-motor data,
and (with lots in between) will conclude with the impressive Pay-Off that
EXAKT delivered.
The Demo
Now… to the Demo. This Demo is designed to “walk” you, step-by-step,
through the sequences of EXAKT — from data input tables, through
modeling, displays, estimation… and finally to decision outputs, in everyday
language. We’ll show you what numbers went in, what happened to them…
and the results CRC obtained.
May we suggest you jot down any questions or comments as you go along.
Near the end of this demo we provide a link for an e-mail message to us for
the purpose of sending along your questions or comments. One of our
experts will promptly reply to you with answers to your questions, or
additional information that you may appear to require.
Now... let’s go to the Walk-Through demo, where, in just a few minutes you
can see how Cardinal River Coals’ data was handled, and the remarkable
results EXAKT produced.
‹ EXAKT› ™ The CBM Optimizer page 2

Our
Walk-Through Demo
Begins
EXAKT has been designed as two distinctive, linked programs. One program
is called “EXAKT For Modeling” and the other is called “EXAKT for
Decisions”. On your computer desktop, they have special icons, that look like
these.
The Modeling program is designed to be used when a particular asset-type is

initially set up for analysis. It’s used at the stage where the data pertaining to
the asset is being examined and diagnosed to make sure it’s “right”, in a
number of respects. For example... is it complete?... does it include any
strange-looking observations?... and are the measures pertaining to the
machine’s condition all statistically valid? EXAKT’S powerful statistical and
graphical analysis tools assist you in getting your data into shape.
Once a model has been developed, it becomes your permanent watchdog

examining each new set of condition as it arrives from whatever source. This
can include your vibration program, your oil analysis program, your
automated distributed control systems or any other performance data.
That watchdog is called “EXAKT for Decisions”. We designed this second

module to be simple and easily configured and integrated with all major
computerized maintenance management systems (CMMSs) and condition
monitoring software. In fact EXAKT becomes the “link” between these two
otherwise isolated programs.
You will see how both programs work, as we walk you through this Demo.

‹EXAKT› ™
The CBM Optimizer
Our PDF Demonstration

This Demo is designed to lead you, step-by-step, through the sequences of
EXAKT—from data input tables, through modeling, displays, estimation...
and finally to decision outputs.
In everyday language: We’ll show you what numbers have to go in, what
happens to them... and the results you’ll get.
On request, a “Working Demo” is also available. It’s the real program, and
with it you can input a prepared database set, and navigate at will around the
entire software package. The Working Demo requires more time, but
provides hands-on experience with the program, and a live database.
This PDF Demo is the best place to start. If you wish to obtain a copy of the
Working Demo, contact us.
The Main Screen

This is EXAKT’s main screen:
(IMAGE 1)
The pane on the left is a familiar file management and selection tool. Note
that our database has already been selected — CRC_WMOD.mdb. It is from
this panel that one can access EXAKT’s tables queries and programs.

EXAKT will directly attach to data in your CMMS or from any ODBC
compatible corporate database. An ODBC interface is built into EXAKT to
facilitate the data transfer.
This pane also includes the means to get to a variety of tables, most of which
will be explained later.
The pane on the right contains the Procedures flow-chart. This flow-chart —
and others like it — are “maps” to enable you to keep track of where you are,
and where you’ve been... and where you might be going.
This is the database we’ll be
using — the CRC Cardinal River
Coals data
This is a map of the major

EXAKT Sections.
(IMAGE 2)
Before we get to the important model-building step, we want to illustrate a

procedure where EXAKT will check the database for errors and anomalies.
As part of this data-check we will obtain a report showing the basic statistics
concerning the data.

Here are what the statistics look like:
This display provides an opportunity to get an overview of the entire sample and
to check for consistency and obvious anomolies. The Number of Histories, for
example, should equal the Number of Beginnings – beginnings are the start-
dates of histories. A history a lifetime record having a beginning, various events,
and an ending. The ending may be an actual failure or a preventive removal.
Mathematical Models
EXAKT uses database tables which it draws upon for its “models”. A model is
a mathematical representation of the relationships between the age-related
failure information, and the key condition indicators. EXAKT uses the term
“covariates” — the readings obtained from condition monitoring such as oil
analysis, vibration readings, thermography, current analysis, pressure
monitoring and so on.
To arrive at the ultimate Decision-Optimization Model we initially build
what is known as a Proportional Hazards Model (PHM). The EXAKT
program does the model building for you, but along the way the user will
contribute added information.
The PHM — or Proportional Hazards Model — provides the risk of failure as
a function of both... (1) time, and (2) the key significant condition indicators.
The Decision Model blends the risk of failure with the relative costs of a
failure. That blend produces a model that will generate the optimum decision

for any given future set of condition measurements taken on that machine,
component or assembly. The model constitutes a “maintenance policy” that,
if consistently applied, guarantees the lowest long run costs of maintenance.
Building the PHM and the Decision Models is a straightforward process. The
user can easily follow each step of the procedure using the appropriate
EXAKT functions.
The procedure, in fact, is so simple that the user may be tempted to

invoke it prematurely before having adequately verified the data for
obvious errors. But It is critical that you first employ EXAKT's powerful
and friendly data evaluation tools to weed out and correct obvious errors
in the data.
Here’s why.
EXAKT will provide you with many clues and in some cases informative
statements about the data requiring your attention. An example of a
data record in error is one whose working age for a given inspection is
lower than that of an inspection on a previous date. This is a common
error due to mis-transcribing the equipment's hour-meter. Other
common errors are missing "B" (beginning) events. EXAKT will point out
all such errors for you to correct. You will spend most of your modeling
effort in rooting out these errors, and in the process, becoming very
familiar, indeed intimate, with the data. Experienced maintenance
people should perform this task or be consulted often in this data
"cleaning" phase.
As we said above...EXAKT uses a number of tables from which it draws

data for its “models”. Let’s look at some of these tables in order to see
the data EXAKT requires. We’ll start with the Inspections Table.
Inspections Table
The Inspections Table contains observed values taken from Condition-Based

Monitoring inspections. The Inspections Table (Image 4) includes a number
of headings for its columns.

WORKING AGE
Expressed in
cumulative hours
of the machine
part, assembly or
component that is
being inspected
DATE
Date of
observation
IDENT is the
identification number
of the item being
analyzed
(IMAGE 4)
You may then want to return to the Main Screen, and, to obtain a description
of your covariates you would click on VARDESCRIPTION.
(IMAGE 4)

When you get there, you will see that it is a table that provides you with a
place to record the names of the covariates, units of measurement, and
optional comments.
(IMAGE 6)
Events Table
Let’s look at the Events table. To get to it, you would click on EVENTS in the
left pane.
(IMAGE 8)

These event codes
represent significant events
- the beginning (B) of a
history, oil changes (OC),
and an “Ending with
Failure”(EF). The user may
include additional events
that will influence the model
(for example alignments,
mechanical adjustments,
and so on).
(IMAGE 9)
You’ll note it has columns similar to the Inspections Table... but the focus
here is on the data in the Working Age and Event columns. This data is the
real data from Cardinal River Coals’ CMMS records.
The Events Table provides lifetime data which allows you to see how long
the item ran (the Working Age) before it failed or until it was “suspended”
(explained below). Other rows record other events such as an oil change
(OC) or minor repair.
An ending-by-suspension event (ES) indicates equipment removal for

reasons other than failure. That could be for a preventive action or
simply due to expedience because the equipment was available (also
called opportunistic maintenance)
A TS event (temporary suspension) indicates that the unit is still

operating at the time of this analysis.
An EF event indicates ending by failure. EXAKT uses all of these events

together with the condition data to build a proportional hazards model
(PHM).
Here is the EventsDescription Table. There is no limit to the number of types

of events that can be defined in this table. The reason that one would include
a particular event is that the event is known to affect the covariates and
influence the risk of failure. For example an OC (oil change) event would
reduce all the wear metal readings to zero and reset the additive readings to
those of new oil. A shaft-coupling alignment event would reduce radial and
axial vibration readings to some lower value. These “covariates on event”
data are set up in the COVARIATESONEVENT table.

(IMAGE 10)
Graphical Display
With the working version of EXAKT, to see a graphical display of the
inspections information you would go to VIEW on the Menu Bar and select
Inspections.
The Graphical Display is a most useful feature of EXAKT, and offers many
attractive options. It is a display that fully-synchronizes inspections data with
a graphical picture. For example, you can click on any inspection record in
the right-panel inspections table, and when you do, the graphical point
corresponding the record will be identified on the graph by a vertical line.
Or vice versa — you can click on any point on a graph and the information
corresponding to it will be highlighted in the inspection table to the right.
Various sizes, colors and other display options are at your fingertips as well.
There is a graph for

every covariate —
Al, Cu, Cr, Fe, etc
By clicking on
any point on a
graph you may
highlight the
same value on
the table Clicking on any
point in the table
will highlight the
corresponding point
in the graph
(IMAGE 11)

Similar graphs are available for data from other tables. By using these tools
you can easily locate and correct anomaliesin this data cleaning phase of
your modeling exercise
Cross Graphs
Another of EXAKT’s powerful tools, the “cross-graph”, will reveal the data in
ways that will point out further possible problems or inconsistencies.
Furthermore the cross graph illustrates correlation between pairs of
numerical variables.
This Cross-Graph shows

the relationship between
Fe (Iron) and Working
Age
(IMAGE 12)
You can choose to examine the relationship between a particular covariate

— say, iron — and Working Age. Or you can choose to look at the
relationship between pairs of covariates — say, between iron and chromium.

This one illustrates the
relationship between Fe (Iron)
and Chromium (Cr)
(IMAGE 13)
This information can helpful in building the “model” — the important

mathematical expression that describes the relationships between the age-
related failure information, and the covariates.
Modeling
Preparing the Data

We’re now at the “Modeling” phase, where the user or analyst must work with
the information to construct models. These models are constructed for a
single machine or component, or for a fleet of similar equipment.
To do this you would return to the Procedures Window, and click DATA
PREPARATION.

Click here to
begin creating
a model
(IMAGE 14)
Your selection brings you to:
Your next selection
(IMAGE 15)

Click the ENTER GENERAL DATA button and this will bring up the following
dialog box where you enter the specified information:
Enter PROJECT TITLE –

A general description
Enter the general name of

the machine part,
assembly or component
(IMAGE 16) The Time Unit you’re

Enter a specific description
of the part or assembly–
working in.
Once the General Project Data has been entered, a click on the OK button
will bring you back to the Procedures window, where you will click on the
INPUT DATA WITH COVARIATES button.
Click here
(IMAGE 17)
Once you do this the data from the Inspections Table and the Events Table
will be merged to create two new tables to be used in model calculations. In a

“live” session, you culd look at the activity-bar in the lower-left corner of your
screen and see this activity in progress.
A brief explanation — what is the difference between Data With

Covariates and Data Without Covariates?
Data With Covariates is the sequence we are using for this demo. It
means that condition readings have been obtained and are available for
analysis.
Data Without Covariates means that condition readings are not

available — you have “events” information, and the table to go with it,
but you do not have “Inspections” information — but you may wish to
proceed, nevertheless, to analyze the need for replacement by using
only time-based failure (and suspension) data.
After the data have been loaded, click on the MODELING button in the Data
Preparation for Modeling View.
Next…click on
this button
(IMAGE 18)
Your Data Preparation View will change to the Modeling View, and you would
click on the Weibull PHM button —

This one
(IMAGE 19)
— to get to the Weibull PHM View. Here you would click on Select
Covariates

Click on
Select
Covariates
(IMAGE 20)

The Model Variables dialog box will appear:
(IMAGE 21)
This part of the model-building process requires a little explanation.
First, note that EXAKT requires a sub-model name. Why? It’s because the
user would likely look at several variations of a Proportional Hazards Model
(PHM) before finally settling on a particular one. Thus the models are
assigned different names to identify them throughout the modeling session.
In the dialogue box shown above, all the covariates are shown as “available”,
but unselected. In other words, no selection of any particular covariates has
been made yet. But to begin with actual modeling, it is recommended that all
the covariates be “selected” (i.e., moved into the selected box to the right).

The covariates are
selected by clicking this
arrow
Click OK to tell EXAKT

to create the first of our
two models — the
Weibull Proportional
Hazards Model (PHM)
(IMAGE 22)
With all the covariates now selected and in the right-hand box, you would
click the OK button. This initiates the model-building process.
The PHM Parameter Estimation Report
What’s happening now is that the Weibull PHM (Proportional Hazards Model)
is being created through an intensive multiple regression procedure with the
purpose of finding significant correlations between condition data and event
data, particularly failure event data. Once the model has been created, a
report will appear — PHM Parameter Estimation.
This report shows the parameter estimates for the “All-Covariates” model for
that particular machine part, assembly or component. Two tables will be
shown on the screen.

In the next step the non-
significant covariates (N),
will be de-deselected
(IMAGE 23)
One table is — Summary of Events and Censored Values
A sample of 50 wheel motors was available for analysis. There were 176
“histories” related to these, since a given wheel motor might have more than
one history, due to its being repaired or renewed, and brought back into
service as “new”.
This table shows us that on 88 occasions the use of a wheel motor was
terminated by failure, and on 41 occasions the wheel motor’s life was
suspended. (See previous explanation of failures versus suspensions). This
information comes from the Events Table, described earlier.
The other table is Summary of Estimated Parameters (Based on ML

Method). (ML means “Maximum Likelihood”.)
This table includes a number of columns pertaining to the statistical

estimation procedure. Only the first three columns need be considered by the
maintenance professional building the optimal decision model. (The other
columns are fully described in the appendix).
Please focus on the “Sign. (Significance) column, where you will note “N” and
“Y” codes. “N” indicates that a given covariate is non-significant. The
recommended procedure is to de-select these covariates one-at-a-time in

order of decreasing “p-values” until we arrive at a workable model – one that
contains only significant covariates.
Amending the Model
Many of the covariates (TO BE SELECTED LATER) are shown as not

significant so we will amend the model by de-selecting one covariate — the
one that has the highest p-value
This is done by closing the current Models Variables window, which will
display the Weibull PHM flow-chart, where, once again, the SELECT
COVARIATES button will be clicked.
This will bring you, again, to the Model Variables box where you will de-select
the covariate described above.
This is an iterative process which will be repeated until we arrive at a model

that contains only significant covariates. Image 24, below, represents the
model arrived at by the end of the elimination process. It contains only two
significant covariates, Iron (Fe) and Corrected Sediment (CorrSed).
Only two covariates —

iron and corrected
sediment — remain now
(IMAGE 24)
Once a model has been developed it is important to evaluate how “good” it is.
How closely does it “fit” the actual data from which it was generated in the
previous steps? If it does not fit well enough, the model should be rejected
since it will probably not provide maintenance decisions with an gadequate
level of confidence. The Goodness-of-Fit test provides an objective tool with
which to accept or reject the model at this point. To obtain this you would
click on Summary Report in the Weibull PHM flow-chart. The report looks
like this:

(IMAGE 25)
Note that the model, according to this (Kolmogorov-Smirnov) statistical test

method is “not rejected”.
Before we leave this stage of the demo, let us refer to the right-hand
panel of buttons called “Residual Analysis”. Under Residual Analysis
you will see options that provide you with various graphical measures of
goodness-of-fit of the PHM we have decided to use. These options are
explained in the appendix to this Walkthrough Demo.
After closing the Proportional Hazards Model, you will come again to the
Modeling Weibull PHM View of the Procedures window.

These options
are explained in
our appendix.
(IMAGE 26)
Clicking the TRANSITION PROBABILITY MODEL button displays Image 27 — the

Transition Probability Model view of the Modeling process.

Click here
(IMAGE 27)

Click on the COVARIATE BANDS button.
(IMAGE 28)
Covariate bands refer to the ranges of an inspection measurement which the

analyst feels are roughly related to the state of health of the equipment.
EXAKT will later calculate the probability of moving from any state to any
other state (the transition probability) in the next inspection period. EXAKT
proposes a set of default bands for each covariate. It Is recommended,
however that the analyst display each significant covariate in a cross graph
with time to visually determine the number of states and a reasonable range
for each state. Clustering of dense and less dense areas of points on the
cross graph help to determine the covariate bands. EXAKT will not allow the
analyst to select bands which do not have a significant number of points with
which to calculate the transition probabilities to that state.
What do the bands mean? These bands, or ranges, define the condition
measurement readings that can be interpreted as, for example, low,
medium, high and very high. That is, high contamination, low pressure,
medium voltage, low vibration — whatever the indicator is for the
condition that is being monitored.
In our demo, therefore, we have five bands for iron, and five bands for
Sediment. These are the only two covariates used in the final PHM.
We see the iron readings fall in the range between 0-to-2693 (see the
text at the bottom of the box) having intervals 0-50, 50-150, 0-400,
400-900, and 900 and greater. These are not default bands but were
selected on the basis of current practices at Cardinal River Coals and
reflect the severity of iron particles with respect to the condition of this
equipment.

Groups and Time Intervals
It is possible that two or more significant covariates are related to one

another. In that case the transition model will be more accurate if they were
“grouped” together. A trial and error process is provided at this point for the
analyst to test certain grouping hypothesis. EXAKT will calculate the
transition probabilities of the group and determine whether indeed those
covariates are related. If EXAKT rejects the hypothesis then the grouping
should be removed.
A pointer locates the Groups option on the image, above.
If different wear-metals were known to originate in entirely different parts of

the engine under analysis there would be of no physical reason to group
these different covariates together.
EXAKT can help you decide whether or not the groups you set up are
statistically significant. This can be determined by clicking on the Test
Grouping button on the Analysis menu of the Transition Probability Model
Procedures Window.
For the purposes of this demo, we will not create and test covariate groups.
Click OK. Go to TIME INTERVALS on the Transition Probability Model

Procedures Window. Our pointer locates it on the image, below.

The Time Intervals
button
(IMAGE 29)
Similarly to “groups”, EXAKT can test certain assumptions regarding the

covariate behavior in different time intervals in an equipment’s life. For
example during the first 1500 hours the probability of transition from low to
high may be different from that at another period, say beyond 1500 hours.
Once again the analyst can test various hypothesis in this regard.
Click on Time Intervals. This option allows you to set a time-period for the
values you wish to analyze. One way this can be useful is in taking into
account that the behavior of the condition-measurements might vary during
different stages of the unit’s life. The early part of its life (the run-in period),
the normal working duration (the major part of the unit’s life), and the final
stage of its life (the wear-out period) may need to be analyzed separately.
This option gives you the opportunity of doing so.

EXAKT can help you decide whether or not the time intervals you set up are
statistically significant. This can be determined by clicking on the TEST
HOMOGENEITY button on the Analysis menu of the Transition Probability
Model Procedures Window.
Transition Probabilities
EXAKT uses transition probabilities to build upon the PHM previously

created. They provide a further level of refinement to the ultimate decision
model. The transition probabilities are available to be viewed by the analyst if
necessary to more deeply understand the model or to test various grouping
and time interval hypotheses. Otherwise, it is not necessary to examine the
transition probability tables in order to build the eventual decision model.
Click on Transition Rates in the Rates Transition Probability Model

Procedures Window
to prepare the background information for the calculation of the transition

matrix — its long name is The Markov Chain Model Transition Probability
Matrix.
Clicking on Transition Rates causes EXAKT to calculate every single

probability of every significant condition indicator (covariate) going from any
given state to any other state before the next inspection. Not only that, it
calculates every probability of a covariate moving to another state conditional
on the states of the other significant covariates.
It is not necessary that the analyst use this information — it is available for
study, if necessary. Whether studied or not however, these “transition
probabilities” form a powerful part — together with the PHM — of the final
decision model.

Click on
Transition Rates
(IMAGE 30)

This brings up this screen... the Transition Probability Model Procedures
Window with the active DISPLAY MATRIX button.
The Display Matrix

button
(IMAGE 31)
Clicking on the DISPLAY MATRIX button brings up the Display Transition
Probabilities window.
From this window one may study the transition probabilities by using the
settings to display them in different ways. For example, we can ask EXAKT
to show us the probability of iron moving from any state to any others state.
Then we can set conditions to display iron’s transition probabilities, given
states of the other covariates. Once again, it is not necessary for the analyst
to study these transition matrices – but they are there for deeper probing, if
necessary.

Choose the variable you want to
see transition probabilities for
This button, if activated, will

command that only one
variable be calculated.
(IMAGE 32)
Click on the variable IRON in this example. Provide the approximate

inspection interval in the appropriate box, say 300.
You have the option of examining the transition probability matrix more
closely by considering also the influence of transitions of one covariate on
those of another. This is done by deactivating the radio button “ignore”. At
that moment you need specify a transition of the other variable.
If you deactivate the Ignore radio button, it means you want to see how the
transitions of one variable (covariate) affects another. For the demo, we will
provide no further detail here, but it is important to know that this option is
available.
Click OK. This will bring to the screen a report on the Markov Chain Model
Transition Probability Matrix.

White on-blue
numbers
reflect the
severity of the
condition. (The
high numbers
are “worse”).
64%
(IMAGE 33)
This is an example of a transition matrix for iron, where the other significant
covariate has been ignored.
Referring to the table above, we can see that the covariate under analysis is
iron, and that five levels of readings have been established. (That
establishment would have been done in the model-building phase we
covered earlier).
The five levels indicate the severity of the condition such as light
contamination to very heavy contamination. If the second level of severity,
where the readings are 50 to 150 indicate. say, “medium” contamination, the
table would tell you that there is a 64% (0.638362) probability of the
measurement being in the same range at the next inspection, a 19.3%
probability of it having worsened to the next higher level of severity (150-to-
400), a 3.3% chance of it having reached the next state (400 to 900) and a
0.6% of chance of it having reached the worst state (above 900) before the
next inspection.

The EXAKT Replacement Decision
Now click on DECISION MODEL in the Flow-Chart.
Click on
Decision
Model button
(IMAGE 34)
Clicking Decision Model causes EXAKT to build its most important output —
the Optimal Decision Replacement Model. The process incorporates all of
the work that went on earlier. — the data-preparation effort, the PHM, and
the TPM…together with the cost information. The Replacement Decision
Model emerges. The maintenance decision-makers may now confidently
apply this model as a “watchdog” to monitor future condition data, and to
deliver the optimal decision each time.

But before it can do that it needs additional information from you.
Primarily it needs the costs of a planned repair as well as those of a repair

that has been provoked by an unexpected failure. The costs of downtime,
overtime, and all other expenses connected to an unexpected failure should
be included in the latter.
Next, click on DECISION MODEL PARAMETERS.
Click here
(IMAGE 35)

You will display the Decision Model Parameters window.
Replacement and Failure Cost

Information is introduced here.
(IMAGE 36)
It is already partly filled in from prior information when we were in the Data
Preparation and General Data phase, much earlier.
You have an option to choose a replacement strategy:
Variant 1 assumes that it is feasible make a replacement between

inspections.
Variant 2 assumes that replacement can be made only at the time of a
scheduled inspection.
We have chosen VARIANT ONE, because the working reality of the equipment
studied at Cardinal River Coal was such that it was not possible to carry out a
repair or replacement except at regular inspection times. EXAKT will assume
that reality when it renders future replacement decisions.
In the “Cost” panel, 20 was entered as the replacement cost (parts and
labor). The value 60 for was entered for failure costs (parts, labor and
downtime). For the Cost Unit, $1000 was entered. This means that a
Planned replacement cost is $20000 and a Failure Cost is $60000. Note that
250 was entered for the duration of the inspection interval, and 500 for
regular maintenance event such as an Oil Change, corresponding to the
interval recorded in the Events Table.

Click OK. You will see the Cost Function graph.
(IMAGE 37)
This is a kind of “sensitivity” graph. In our demo, the flat shape of the line
shows that the replacement policy does not have to be strictly followed.
Costs are not greatly affected if the replacement time varies. The Cost
Function graph shows the minimum costs per hour we can achieve and the
cost per hour if we follow a failure-replacement policy.
Note the dip in the Cost curve. The deeper the dip, the more savings you
derive from using the Optimal decision model. The difference between the
low point on the curve and the dashed line equals the savings relative to a
run-to-failure policy.
You can also get at this graph by clicking Cost Function in the Analysis
window. For even more information, after opening the Cost Function Graph
you can click VIEW on the Menu Bar to choose VIEW FULL REPORT and get a
full report (including summary of cost analysis) along with the graph. You will
see this when you get to Image 40. Close the window.

Click on OPT REPLACEMENT POLICY to get the chart “Optimal Replacement
Age”.
(IMAGE 38)
The optimal replacement graph is the two dimensional embodiment of the

entire model which in fact can contain multiple dimensions. This "magic" has
been made possible by the clever use of a "composite" covariate which is a
weighted sum of influences of each significant covariate on the risk of failure.
The shape of the red, yellow, and green regions embody the cost, PHM, and
transition probability models. The result is a revolutionary way to judge a
given set of condition data to render the best (optimal) decision. (More on
this, below…see Image 42).
Close, and click on SENSITIVITY OF OPTIMAL POLICY. This displays the

Sensitivity of Optimal Policy graph.

Represents the
sensitivity of
the Optimal
Policy to
changes in the
cost estimate
for planned
repairs
(IMAGE 39)
Our publication, “The CBM Optimizer News”, explains the graph, this way:
This graph, Sensitivity of Optimal Policy — reveals, for your particular

operation, just how important accurate cost data is to the ultimate
replace-or-don’t-replace decisions. It allows you to get comfortable
with two things...one is how the cost-data precision affects the hazard
level (the level at which a replacement is recommended), and the
other is whether you should plan less, or more, preventive
replacements.
The curve shows whether or nor accurate cost data is required to

identify the optimal policy. For example if the cost ratio is between
about 8 and 12 — in the “flat” region — it indicates it is not crucial that
a precise estimate of the ratio of the cost consequences of failure
versus preventive replacement is required. On the other hand, due to
the steep slope of the curve between a cost ratio of 2 and 4, this
indicates that the optimal replacement decision is highly dependent
upon the ratio — and therefore efforts should be made to obtain an
accurate figure.
Here’s an even more detailed explanation —
In real situations, the actual ratio of failure and planned repair costs, may
not be well known. Furthermore the dynamics of industry are such that costs
can change with changing technology, production, and market conditions.
Therefore one would like to know, to what degree one's true costs and one's
optimal policy would change with changes in costs. Sensitivity analysis is
the method to determine this. The software generates a graph and
corresponding tabular data

Red Solid Line — If the actual cost ratio (CR) differs today from that
specified when the model was built, that means that the current policy (as
dictated by the Optimal Replacement Graph of Image 38) may no longer be
optimal. The red line tells how much, in percentage, more will be expended
above the calculated optimal cost/unit time for actual cost ratio by adhering
to the policy.
For example, if the actual cost ratio is 5 and we are using a model which
was based on CR=3, then the increase in optimal cost incurred by following
that (wrong) policy is around 6%. In other words the red graph represents
the sensitivity of costs to changes in CR.
Blue Dashed Line — Again, assume the actual cost ratio has strayed from
what was assumed when the model was built. Assume we were to rebuild
the model using the new ratio. The blue line tells how much the new optimal
cost would differ from that of the original model. In other words the blue line
represents the sensitivity of the optimal policy to changes in CR. (Note that
the sensitivity graphs assume that only Cf (failure repair cost) changes and
Cr (planned repair cost) remains unchanged.)
You can also call up a full report for this, as with the Optimal Replacement
Decision Graph, by clicking on VIEW on the Menu Bar, and choosing VIEW
FULL REPORT.
(IMAGE 40) These are the actual

savings obtained in this
The bottom portion of the Full real-life
Report, onanalysis
Cardinalfor River
Coal, shows the
Cardinal River Coal
potential savings obtained compared to a policy of replacing-only-on-failure
— an impressive 25.6%. In practice CRC replaced some wheel motors prior
to failure, but generally they replaced most motors only after failure. Thus the
savings shown would be in reality slightly less than they would have been,
had a consistent “roof” policy had been followed.
Incidentally, these savings were calculated using a cost ratio — (the ratio of
the cost of a operating replacement versus a preventive replacement) — of
“3”. If the ratio had been “5” the savings would have been nearly 44%, and if
the ratio had been “6” the savings would have been 50%!
We have now built our statistical decision model, and we are confident we
can use it for decisions. This will eventually be “saved”. Close your window.

(IMAGE 41)
Click on Decisions
Click on the DECISIONS button on the flow-chart.
In the case of the Cardinal River Coals data, this will display a list of wheel
motor idents from which you can choose an item on which you would like to
make a decision. By clicking on Decisions you will actually run the model for
any of the equipment in the database. Later, by using only the EXAKT for
Decisions Program you will be able to apply the model to any unit for
"automated" monitoring. This will display the Replacement Decision graph.
Again, you have the opportunity of getting a full report if you wish.

This analysis was
done retroactively.
The wheel-motor
actually DID FAIL
subsequent to the
last inspection
shown here. Had
EXAKT been
applied, the failure
would have been
avoided.
(IMAGE 42)
For the everyday maintenance practitioner who just wants to get an answer
to a simple question, i.e., should we keep on running, or should we replace
right now?”, he or she will turn to the EXAKT Replacement Decisions chart and
immediately find the answer on a clear unambiguous graph.
EXAKT assumes that regular inspections are being carried out, so the
position of the right-most dot on the chart will provide one of three
possible actions related to the inspection interval policy.
If your dot is in the green region, then the decision is to continue operating
until the next scheduled inspection.
If your dot is in the yellow region — Replace Before Next Inspection — it’s a
warning signal which says although you’re getting “close” to a possible failure
event, the risk of failure combined with the benefits of running a while longer
means that you may be able to delay replacement. It’s an invaluable help in
planning because it allows you to forecast the maintenance work-load and
down-time eventualities in the near-term.
If your dot is in the red area, EXAKT is telling you to Replace Immediately
because the risk of imminent failure is very high.
The Optimal Decisions graph. A disarmingly simple diagram that, in fact,

delivers the most profound and extraordinarily useful output of the entire
EXAKT software package!

Essentially, we have walked you through all of EXAKT. That is, you have
seen how a model is created, and you have seen several outputs pertaining
to decision-making. So why do we offer, in addition, a program called
“EXAKT for Decisions”?
The answer is that users have suggested they wanted a portion of EXAKT —
the modeling portion — to be un-available to persons other than the
modelers in the organization. This way, decision-makers — mangers,
planners, schedulers, maintenance supervisor, and so on — can freely use
EXAKT with no danger of altering or destroying the model. EXAKT for
Decisions, uses the established models for future decision making, but
leaves their originals intact.
Users of the “EXAKT for Decisions” program can generate all the output that
really matters. For example they can generate the Replacement Decisions
Graphs as already illustrated. They can also generate a useful Report that
displays all the assets, individually or grouped by, say, location, or type.
Here’s an example of such a report as it pertains to Cardinal River Coal.
(IMAGE 43)
The EXAKT decision module can be set up to automatically generate the

most current optimal decisions. The data is stored in an MS Access database
and can be accessed directly by your organization's own CMMS
(computerized maintenance management system).

Ask Our Experts
Earlier we suggested you note any questions that arose as you walked
through the demo. Here, now, is your opportunity to send them along to us.
Please include, at the beginning of your message – Your Name, Job-Title,
Organization, Telephone-Number, and Geographical Location (address not
necessary). We look forward to hearing from you. To e-mail us, click here.
Please note our e-mail address is expertquestion@oliver-group.com.

Appendix One
Residual Analysis — Order of Appearance

This chart demonstrates the difference between the PHM forecast and actual
observed histories. If the fit is “statistically good” it would be expected that
these differences — (i.e., residuals) — would lie within the 90% confidence
interval. In this example we notice that one censored observation and one
failure observation lie outside the 95% limit.
Residual Analysis — Residuals Against Expectation

This chart has taken the residuals on the previous graph and ordered them
by magnitude with the theoretical expected values being on the x-axis. A
perfect fit would have all observations lie on the 45° straight line. This is an
additional check on the goodness of fit of the PHM.
Residual Analysis — Transformed Residuals

The scaling has been transformed so that all residuals must lie in the range
0-to-1. The reason, essentially, is to facilitate interpretation of the residuals.
Residual Analysis — Variance Stabilized

This is another transformation and is virtually identical to the previous graph
but this transformation takes into account variations in data to compensate
for the increasing variance associated with larger residual values.
Residual Analysis — Summary Report

The report “PHM Goodness-of-Fit Test” gives a summary of carrying out the
Kolomorgov-Smirnov (K-S) goodness-of-fit test on the PHM.

Appendix Two
The Estimates are used in the Proportional Hazards Model. The PHM is
as follows:
β −1
βt γ 1Z1 ( t ) + ... +γ p Z p ( t )
h( t ) =   e
η  η
where t denotes time, Z1 (t ) ,..., Z p (t ) are p condition variables and
β , η and γ 1 ,..., γ p are parameters to be estimated from the data.
To show how the values in the estimates column are used in the PHM
model, we will now substitute these values in the model, above.
3.693−1
3.693  t 
h( t ) =   e 1.337 nerf ( t ) +1.701 pitation( t ) +.0107 gobbing ( t )
18230  18230 
Sign — Indicates whether, from a statistical viewpoint, one or more (or
perhaps, none) of the parameters — (one in this case — gobbing) — is
not statistically significant in the context of estimating risk based upon a
PHM..
Standard Error — The values here are used to establish whether or not
the estimates in the second column are statistically significant.
Wald — The values here are obtained from the values in the Estimates
and Standard Errors columns through a transformation process.
DF — Degrees of Freedom. Tells us the Wald statistic is distributed
through a chi-square distribution with one degree of freedom.
p-value — This column is obtained from tables of the Chi-square
distribution and indicates whether the Wald statistic is significantly large.
If it is, the p-value will be small, demonstrating that the previously-
calculated estimate is significant, and a Y (for “yes”) would be produced
in the 3rd (Sign) column.
exp of est — Exponent of the Estimate... Along with the associated 95%
confidence interval on that exponent, provides the statistician with
additional insights into the significance of the estimates.

The CBM Optimizer: Exakt

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‹EXAKT› ™

The CBM Optimizer

Our Walk-Through Demo Begins .................................... 3

This analysis was on “wheel-motors”. Wheel motors are Electro-mechanical

‹ EXAKT› ™ The CBM Optimizer page 2

The Modeling program is designed to be used when a particular asset-type is

Once a model has been developed, it becomes your permanent watchdog

That watchdog is called “EXAKT for Decisions”. We designed this second

‹ EXAKT› ™ The CBM Optimizer page 3

The CBM Optimizer

Our PDF Demonstration

The Main Screen

‹ EXAKT› ™ The CBM Optimizer page 4

This is a map of the major

Before we get to the important model-building step, we want to illustrate a

‹ EXAKT› ™ The CBM Optimizer page 5

‹ EXAKT› ™ The CBM Optimizer page 6

The procedure, in fact, is so simple that the user may be tempted to

As we said above...EXAKT uses a number of tables from which it draws

The Inspections Table contains observed values taken from Condition-Based

‹ EXAKT› ™ The CBM Optimizer page 7

‹ EXAKT› ™ The CBM Optimizer page 8

‹ EXAKT› ™ The CBM Optimizer page 9

An ending-by-suspension event (ES) indicates equipment removal for

A TS event (temporary suspension) indicates that the unit is still

An EF event indicates ending by failure. EXAKT uses all of these events

Here is the EventsDescription Table. There is no limit to the number of types

‹ EXAKT› ™ The CBM Optimizer page 10

There is a graph for

‹ EXAKT› ™ The CBM Optimizer page 11

This Cross-Graph shows

You can choose to examine the relationship between a particular covariate

‹ EXAKT› ™ The CBM Optimizer page 12

This information can helpful in building the “model” — the important

Preparing the Data

‹ EXAKT› ™ The CBM Optimizer page 13

Your selection brings you to:

Your next selection

‹ EXAKT› ™ The CBM Optimizer page 14

Enter PROJECT TITLE –

Enter the general name of

(IMAGE 16) The Time Unit you’re

‹ EXAKT› ™ The CBM Optimizer page 15

A brief explanation — what is the difference between Data With

Data Without Covariates means that condition readings are not

‹ EXAKT› ™ The CBM Optimizer page 16

‹ EXAKT› ™ The CBM Optimizer page 17

‹ EXAKT› ™ The CBM Optimizer page 18

This part of the model-building process requires a little explanation.

‹ EXAKT› ™ The CBM Optimizer page 19

Click OK to tell EXAKT

The PHM Parameter Estimation Report

‹ EXAKT› ™ The CBM Optimizer page 20

One table is — Summary of Events and Censored Values

The other table is Summary of Estimated Parameters (Based on ML

This table includes a number of columns pertaining to the statistical

‹ EXAKT› ™ The CBM Optimizer page 21

Amending the Model

Many of the covariates (TO BE SELECTED LATER) are shown as not

This is an iterative process which will be repeated until we arrive at a model

Only two covariates —

‹ EXAKT› ™ The CBM Optimizer page 22

Note that the model, according to this (Kolmogorov-Smirnov) statistical test