“Pay Me Now, or Pay Me Later”

What’s the point in fixing something if it isn’t broken. After all, industry experts say that waiting for a breakdown to
occur before doing repairs is the way most equipment managers go about things. They note that 80 percent of earth
moving equipment repairs are done after a catastrophic failure occurs - not before. It seems that Joe has a lot of
friends. But don't write off Bill so quickly.
Instead, let’s follow the loader repair scenario two different ways - before failure and after failure. For the purpose of
providing an accurate repair cost comparison, we’ll look at a Caterpillar 963 truck loader with a 150-hp Cat 3304
engine. All repair and rental costs - although approximations - are based on information provided by industry
professionals.
In the first scenario, the loader comes into the shop, as requested by Bill, for an in-frame engine overhaul - before a
failure knocks it out of commission. In the second, Joe keeps the machine on the job - that is, until eight weeks later
when the engine fails and he calls to say the loader needs to come in for repairs... and, of course, he needs it back in
service on the double.

Before-failure repair
To begin with, Bill’s good equipment manger. He knows that repair indicators - such as oil analysis, metallic-particle-
sensing magnetic plugs and conversations with operators - can tell him a lit about what’s going on inside the machines
in his fleet. He also knows from OEM guidelines and personal experience how many hours a particular component will
normally last in his application. As such, he schedules repairs before failures occur. Bill doesn’t like to gamble. He
knows that the longer he waits beyond his “window of repair opportunity,” the more chance there is for a catastrophic
failure.
Unfortunately, Bill doesn’t always get the cooperation he needs from some of his company’s production people. They
don’t realize that a good planned maintenance program actually enhances productivity ... but that’s getting ahead of
the story.
Bill knew from OEM recommendations and personal experience with this type and model of machine that in his
application it should have an engine overhaul at 10,000 hours. In addition, the last sequence of engine oil analysis
reports showed increasingly high concentrations of wear metals that indicated excessive rod or main bearing wear.
The report issued a warning that the track loader should be taken checked and replaced as necessary.
Because no replacement was available within his fleet, Bill made arrangements to rent another from his dealer during
the repair period. Because the repairs would require three full days of shop time, Bill brought the loader to the dealer’s
shop on Monday afternoon and picked it up on Friday. He rented the replacement loader for one week at a cost of
$2,000.
The 10,000-hour in-frame engine repairs included an inspection of the crankshaft, installation of new rod and main
bearings, and new thrust plates. In addition, the oil pump, water pump, cylinder head and turbocharger were
reconditioned; two worn pistons and cylinder liners were replaced; and a complete set of new piston rings was
installed. The total cost for parts and labor came to $3,500.
Because there was no lost production time other than the few minutes it took the operator to switch machines, the total
before-failure repairs, including rental of a replacement machine, cost $5,500. It seems like a hefty sum to fix
something that isn’t broken...but let’s see how Joe made out.

After-failure repair
In this scenario, Joe kept the loader on the job until the last turn of the crankshaft threw a leg out of bed. The piston
rod that came through the side of the cylinder block was strong visual indicator that the machine needed repair. It had
10,500 hours on the hour meter.
“Yup, it’s broke,” Joe said as he surveyed the damage. No one could argue the point.
Because the loader was completely disabled, it had to be towed to the transport vehicle located about a quarter-mile
away. The initial cost of the breakdown included the time the lowboy operator charged while he waited for the machine
to arrive.
Lost production time, though, was a much larger expense, and included not only the time lost when the machine broke
down with no replacement standing by, but also the time spent when a second machine was taken out of the
production cycle to tow the disabled loader the quarter mile to the lowboy. Almost a full day’s production was lost and
everyone involved was greatly inconvenienced.
A replacement loader was rented from the dealer, but because the unscheduled repairs were expected to take five
days instead of the three projected for schedules maintenance, the rental cost came to $2,800.
Once the loader was in the shop, it didn’t take the mechanics long to realize that more than crankshaft bearings
needed replacement - and that the repairs could no longer be done in-frame. The engine had to be pulled, the block
replaced with a reconditioned component, and a new crankshaft, all new piston rods, pistons and rings installed. As
the head mechanic pointed out, in after-failure repairs, few parts can be reused and most will have severe damage.
None of the pistons or piston rods in the damaged engine was reusable. In addition, new main and rod bearings, new
thrust plates, a reconditioned oil pump, cylinder head, turbocharger and water pump were installed, just as they would
have been during routine maintenance.
As a result, the bottom line of the repair invoice said $10,500 - triple the cost of before-failure repairs, without taking
into consideration the cost of lost production.
Because production time is often difficult to quantify, no dollar vale was assigned in these examples. Nevertheless, it’s
an expense that must be included in the cost of after-failure repairs to determine the true cost. Even without adding
the loss of production, the total after-failure repair cost, including rental of a replacement machine, was $13,300 - or
$7,800 more than the before-failure repair. However, as Joe was quick to point out, “We did get an extra 500 hours out
of it before it broke down.” Unfortunately, 500 hours at a cost of $7,800 is hardly good economics.

A high-cost gamble
There are those who will say that the second scenario isn’t fair. After all, Joe asks, “What if the machine didn’t break
down? Instead, my gamble pays off and we get an additional 1,000 hours on it before we bring it in for repairs. The
cost of those repairs is still going to be $5,500, but an additional 1,000 hours of production was gained. By waiting, we
save money. We get 1,000 hours for free.”
It may sound like a valid argument, but it’s flawed. In this situation, it’s known that a component is either worn out or is
wearing out. Joe reasons that because the before-failure repair will cost roughly the same no matter when it is done,
waiting an additional 1,000 hours is actually saving his company money.
He’s right - up to a point. If the engine overhaul takes place at 10,000 hours and costs $5,500, the cost of repairs per
hour of operation is 55 cents ($5,500 divided by 10,000 hours). However, by waiting an additional 1,000 hours, the
cost of repairs drops to 50 cents an hour ($5,500 divided by 11,000 hours). Thus, if a breakdown doesn’t occur, Joe
saves his company five cents an hour in repair costs over about five years - or enough to earn a hearty pat on the back
from the company accountant.
On the other hand, if a piston rod goes through the side of the block just as 11,000 hours roll into place, and repairs
cost $13,300, the cost of repairs per hour of operation jumps to $1.20 ($13,300 divided by 11,000 hours) - or enough to
earn a hearty kick in the pants from the accountant.
More than doubling hourly repair costs is eye-opening enough, but not as startling as the high-stakes gamble that
takes place in trying to reach the 11,000-hour plateau without a breakdown. If a failure occurs at exactly 11,000 hours,
the cost of repairs for that extra 1,000 hours is $7.80 an hour (the after-failure repair cost of $13,300 minus the before-
failure repair cost of $5,500 divided by 1,000 hours).
Look at it another way. If Joe wins the 1,000-hour gamble, he saves his company five cents an hour. If he loses, he
costs the company $7.80 an hour. Not very goods odds.
“The gamble isn’t the same as going to Las Vegas where you can put down five cents and maybe win $5.00,” .
“In the component overhaul casino, you’re betting $5.00 or more trying to win five cents.”
Unfortunately, it’s often hard to convince people to change their ways. As one management consultant points out,
“With equipment, there’s a run-to-destruction mentality.”

Preventing breakdowns
These before-and after-failure repair examples illustrate in graphic detail the staggering cost of deferred maintenance-
even without taking into consideration lost production time, which increases after-failure repair costs even more.
Equipment management professionals agree that by waiting until after failure, repair costs on engines, final drives and
other major components will typically be two to three times as much on all types of heavy equipment, not just track
loaders. As one manufacturer points out, “These differences between before-and after-failure costs are realistic-and
some are even greater.”
Fortunately, these same professionals say that 90 percent of after-failure repairs are preventable by, among other
things, following manufacturers’ recommendations, oil analysis, walk-around inspections, talking with operators, and
observing the machine in action.
Naturally, to achieve optimum repair cost per hour the before-failure repair point should be just prior to failure.
However, squeezing the nickels inevitably courts disaster. “It’s human nature to try to get that last little bit out of a
piece of equipment before sending it to the shop. In reality, though, the longer it runs, the lower the number of its parts
that will be reusable.”
Not only will fewer parts be reusable, but the core is also in jeopardy. As one professional notes, “If the engine blows
up and a rod goes through the block anymore-and now you’re talking megabucks.”
By scheduling before-failure repairs, many parts are reusable. By waiting until after-failure, many parts are destroyed
or otherwise rendered unusable.
Parts generally fall into three categories. “Some parts are designed to last the life of the component,”
“In the case of an engine, they’re the block, cylinder head, crankshaft, connecting rods and camshaft.
Then there are parts that are built to be reused, such as pistons and liners.
Finally, you have replacement parts like gaskets, piston rings and bearings. If you go into an engine before it fails, we
estimate that at least 50 percent of pistons and liners and 95 percent of connecting rods are reusable.”

Opening windows
Not only do before-failure repairs save money in the parts arena, they also allow managers to schedule equipment
repairs.
“Preventive repairs put the equipment manager in control of the situation when it comes to scheduling downtime. For
instance, if an engine is consuming more oil than usual, and it’s approaching an 8,00-hour repair interval, then there is
a window of opportunity that allows the manager to put himself in control of the repair, rather than the opposite. Within
reason, an equipment manager can decide when to do the repair and to a certain extent he is in control of the cost of
those repairs, when compared to after-failure repairs. In short, repair before-failure keeps you in control of your
destiny.”
“If you don’t plan repairs,” “the component will plan them for you. If you work with your production people, you can
plan around their needs to get the overhauls done on time.”
This window of opportunity allows an equipment manager to choose when to do required maintenance. To help
prevent equipment tug-of-wars, production and maintenance personnel can meet to see when equipment needs are
greatest-and when they are lowest-and schedule maintenance accordingly.
Most users know from their own experience that a certain model of machine in a given application gets to a certain
point in its life when it’s near the wear-out period. “When a component gets to that point,” he says, “it’s time to start
planning for downtime. When a machine is getting into that period of its life where the components need an overhaul,
an equipment manager can look for the most convenient time to do the overhaul.”

Realistic goals
Most equipment management professionals agree that equipment should be maintained at a level in which 80 percent
of repairs are planned in advance. As one consultant notes, “A shop full of equipment waiting for unplanned repairs is
a good indication that your maintenance program is a failure.”
The goal of doing 80 percent of repairs in advance of a breakdown can best be achieved through a combination of
preventive and predictive maintenance. Some managers have embraced preventive maintenance and are using
software programs to schedule things like oil changes, filter changes and inspections. However, a more sophisticated
extension of preventive maintenance is predictive maintenance.
Take, for example, a new piece of equipment added to a fleet. From past experience, the equipment manager knows
that, on this particular size and type of machine, he will get 10,000 hours out of the engine and power train, 8,000
hours out of the final drive, and 3,000 hours out of the tracks (if they are turned at 2,000 hours).
This information is entered into his computer so that when the piece of equipment approaches its hour-life
expectancies, maintenance intervals and inspections intensify. It comes into the shop if no indicators point to a repair.
Unfortunately, it’s estimated that less than 2 percent of contractors in the United States use an effective combination of
preventive and predictive maintenance. “that’s the only way you can achieve 80 percent before-failure repairs.”
“Reduced expense dollars directly equal increased profit dollars. For example, you’re doing a good job if you’re
making a 10 percent profit in today’s business environment. That means if you increase income by $10,000, you’re
actually increasing your profit by $$1,000.
“On the other hand, if you eliminate a $10,000 after-failure repair by spending $5,000 before failure, then that $5,000
difference goes directly into the profit statement. Any repair savings are directly related to the bottom lime, but
incremental income goes through the regular profit versus expenses scenario.”

Good maintenance programs also enable managers to identify optimum equipment disposal points. If an equipment
manager is doing maintenance and repairs on time and capturing those expenses in his database, then he can watch
the expense curve rise compared to the revenue curve. This will allow him to note when expenses exceed revenues.
In other words, he will know when it is time to replace the machine-before it’s time to replace the machine. It’s also
important to note that good maintenance actually extends the replacement cycle.
“The piece of equipment you buy is a very important investment,” :There also are two things that are as important as
your investment: to keep your machines running to make money for you and, while they are running, to achieve the
lowest possible cost per hour.

“To help achieve these goals, there are three logical and practical steps an equipment manager can take. First,
maintenance and service can extend the longevity of the equipment. Second, before-failure repairs have proved to be
the most economical way to lower owning and operating costs. Last, minimizing and dealing effectively with after-
failure repairs. In this business, some are inevitable. They’re going to happen and usually will occur at inopportune
times. However, a good maintenance program can pretty well predict when a particular component is nearing its life
expectancy.”

Taking advantages

What, then, are the advantages of before-failure planned repairs?

 Good maintenance programs increase fleet availability and productivity, which means less equipment is required
to achieve a given level of production.

 When 80 percent of repairs are planned, maintenance managers have time to stop for the optimum repair bid or
parts price.

 Repair before failure extends component and part life.

 Planned repairs allow flexibility in arranging the repair schedule, often reducing labor overtime charges.
 Planned repairs reduce rental expenses by minimizing the need to rent standby equipment.

 Good maintenance programs enable the user to identify optimum equipment disposal points before major repairs
happen.

The bottom line is this, as one manufacturer notes: “running to failure always costs more, usually a lot more, than
taking steps to prevent failure.” A Finnish proverb makes the same point more succinctly: “What you do not repair, you
destroy.”