Views on performance indicators

and benchmarking in industrial

maintenance

Life Science & Heath Care

Pankaj Kumar
pankaj19.k@tcs.com
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Views on performance indicators and benchmarking

in industrial maintenance

Abstract:
A hierarchical system of maintenance performance indicators is presented. Many studies
during the last ten years have revealed clear causalities between certain variables and key
figures. These causalities are valid in industrial maintenance as well as, in many cases, in
logistics. In addition, these causalities should be taken into account when utilising
benchmarking or forecasting. Many of the optional key figures are rarely used in spite of their
importance. The validity of several widely used indices should be carefully judged before
using them. In addition to benchmarking, the presented system also provides valuable
information for management in the process industry when evaluating the life cycle profits and
profits of future plants.

Key Words: Key figures, Industrial Maintenance, Dependability, Logistics, Benchmarking

1 Introduction
The significance of the availability performance of machinery has increased because of the
harder competition in many industrial branches. High availability performance is achieved by
three factors: (1) reliability performance, (2) maintainability performance and (3) supportability
(maintenance support performance) (SFS-IEC 50 (191)). Some writers have added an
additional factor, operator skills (e.g. Lyytikäinen 1987). Komonen (2001) has suggested that
“prevention of incorrect use” should be added as a separate factor to the formula. Industrial
maintenance is an important tool during the lifetime of machinery to achieve high availability
performance. Maintenance is a combination of all the technical, administrative and managerial
actions during the life cycle of an item intended to keep it in, or restore it to a state in which it
can perform the required function (SFS-EN 13306).

The main objective of this study is to introduce a hierarchical system of key figures for industrial
maintenance and logistics (supporting mainly maintenance efforts), to demonstrate causal
relationship between various key figures and to make suggestions concerning the use of
certain indices. Some suggestions concerning the exploitation of the previous research results
will also be demonstrated. The system of key figures, the derivation and confirmation of
causalities between various key figures and other remarks has been established in the earlier
studies by Kari Komonen (Ph.D. dissertation at Helsinki University of Technology in 1998,
research project in 1998 –2001 at Tampere University of Technology, yearly survey 2001-2002
with Finnish Maintenance Society and in 2001 with Nordic benchmarking project. Altogether,
the data used has consisted of more than 550 industrial plants in Finland.

There exist several methods for measuring the performance of maintenance operations: e.g.
(1) Priel’s (1962) indices of maintenance efficiency, (2) Luck’s (1956) method of measuring
maintenance effectiveness, (3) Finley’s (1972) indicators, (4) Newbrought’s profile, (5) VDI-
Richtlinjen (1991) and (6) Corder’s index of maintenance efficiency (one index). In Finland, the
standardisation team for key figures easily found more than 200 indicators for industrial
maintenance, but only 105 of them were included in the final version of the standard (PSK
7501 2000). Richard Dwight (1999) has taken the view that the standard of performance must
be in terms of the organisation’s goals and what is possible. As we see, the science of key
figures in industrial maintenance is well established in part and includes a number of well-
defined subsystems. However, relationships between different key figures or between various
subsystems and causalities in their behaviour are still little studied.
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2 The system of performance indicators

In fact, very often the systems of key figures are the lists of indicators, which are grouped
according to subject matters, but which are not in any way linked to each other. However, for
example the practitioners of Balanced Scorecard have in many applications been exceptions.
The aim of this chapter is to introduce the system of maintenance key figures, which avoids the
previously mentioned shortcomings. This system helps a user to grasp the purpose and
significance of various key figures.

The key figures of industrial maintenance can be classified in a hierarchical manner in the
following way (Komonen 1999, Komonen 2000)
(1) business-oriented objective variables (external to maintenance department)
(2) internal objective variables for maintenance
(3) exogenous variables (external conditions)
(4) intermediate internal objective variables (follow-up variables)
(5) action variables of maintenance function (means for improvement)
(6) internal descriptive (explanatory) variables

Such fundamental business goals as ROI, life cycle profits or a profit margin belong to the
first level of hierarchy. The second level of business-oriented objective variables contain
such objectives of the production function as overall equipment efficiency (OEE), the costs of
production and quality of production processes. The internal objective variables of
maintenance function are metrics for the performance of maintenance operations: e.g.
availability of machinery, the sum of unavailability costs and maintenance costs
(“dependability costs”), maintenance costs as a % of estimated plant replacement value
(PRV)). Exogenous independent variables are indicators, which help management to
evaluate the state of affairs. These key indicators are factors, which are beyond the scope of
maintenance managers to determine, but which have a considerable impact on the objective
variables. Examples of these kinds of variables are the utilisation rate of production
machinery, production volume, the amount of production equipment, the integration level of
production process etc. Intermediate internal objective variables are performance
indicators, which should be measured and followed up, since they may give more information
about the development needs and may act as intermediate objective variables in order to
reach the main objective. For example the mean time to restoration (MTTR) is an
intermediate objective when the main objective is to minimise downtime costs. This is an
objective variable, because a maintenance manager cannot influence it directly. The action
variables of maintenance function are tools of maintenance managers, by the aid of which
objectives are reached. Preventive and improvement maintenance, outsourcing, operator
maintenance etc. are such kind of tools. Internal descriptive (explanatory) variables give
additional information, for example, about the cost and organisation structure, cost level and
capital intensity of maintenance function.

The system of key figures could be illustrated by several centric zones (Komonen 1999,
Komonen 2000), but here a matrix presentation is used.

Table 1. The system of key figures for industrial maintenance

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Objectives Internal Exogenous Intermediate Means, action Descriptive

of production objectives variables objectives variables variables
(maintenance (internal
function) explanatory)
e.g. e.g. e.g. e.g. e.g.
* availability * utilisation rate * MTTF * preventive maint. * inventory turnover
OEE * (unavailability * technology * MWT * planned maint. * proportion of
costs+maint. * structure of * MTTR * spare parts mehanical
costs) / PRV production system * MTTM * contracting rate maintenance
Fundamental e.g. e.g. e.g. e.g.
business * maintenance * utilisation rate * MRT * preventive maint. * material costs
objectives Production costs / PRV * technology * MTTR * planned maint. * allocated hours
e.g. ROI, BSC costs * maintenance * scale of a plant * MTTM * contracting rate * unit labor costs
costs / output * structure of * flexibility
production system * spares / PRV
e.g. e.g. e.g. e.g. e.g.
* internal customer * technology * MWT * feedback to clients * age structure of
Quality of satisfaction * structure of * MTTM * multi-skilled workers personnel
production * planning rate production system * Accidents * keeping promises
processes * job satisfaction * Absenteeism * improvement
* Claims maintenance

There are several ways to organise various variables and key indicators in a matrix and each
variable may have many roles in a system. Key figures should also be chosen according to
the needs of each plant under consideration. Thus, the above table is just an example.
However, exogenous variables cannot be chosen according to the needs of users, since they
are valid or not valid irrespective of these needs.

In the earlier studies we have tried to find causalities between various indicators. Causal
relationship between action variables and intermediate objective variables or between action
variables and maintenance objectives is important in the planning of maintenance. From the
benchmarking and company planning point of view it is also very important to know the
impact of exogenous independent variables on the internal objective variables, because it
enables to distinguish the influence of those factors which are beyond the scope of
maintenance management to determine.

A similar model of key figures has also been designed in the final draft of PSK 7502 for the
internal logistics of a plant by Jari Viertävä (PSK Standards Association)and Kari Komonen.
In this case internal logistics serve particularly the maintenance function of the plants. The
key figure matrix of logistics has been illustrated in Table 2.

The result presented in Table 2 as in Table 1 are examples. The tables do not include all
possible indicators. Owing to lack of space some variables are in the form of a ratio and
some in the form of a concept. However, for all presented variables it is possible to construct
an indicator in the form of ratio or index.
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Table 2. A key figure matrix for the internal logistics of plants

Business Internal Means, action Exogenous Descriptive

objectives objectives variables variables variables

e.g. e.g. e.g. e.g.

Capital * spareparts / PRV * spareparts in * scale of a plant * change in

collaboratory stores inventory level

e.g. e.g. e.g.

* capital costs of
Costs * costs of logistics / * spareparts in * technology store
production output collaboratory stores * inventory level
on an average
e.g. e.g. e.g. e.g.
* automation rate
Efficiency * deliveries * direct deliveries to * scale of a plant * number of
per manhour users incidents

* number of
Service * prompt deliveries suppliers * scale of a plant * lead time of
* automation * Planned maintenance deliveries

Some of the key figures can be applied to benchmarking purposes only in limited
circumstances although they are very suitable for the follow-up of internal trends. Examples
of such kinds of variables are “mean time to failure” or “lost production due to breakdowns”.
These absolute values do not give an accurate picture of the effectiveness of a plant. For
example, the size of a plant should be taken into account before benchmarking.

3. Some views on the use of key performance indicators

There are several options to measure the success of maintenance function:

• maintenance costs / plant replacement value
• maintenance costs / output of a plant (kg, ton, km, m3 etc.)
• maintenance costs / plant turnover
• availability performance costs / plant replacement value
• availability performance costs / plant turnover

The ratio “maintenance costs / plant replacement” value tells us, how much it costs to
maintain a certain type and size of equipment or facility. When using this ratio we should
make a difference between the total costs of maintenance and the maintenance costs of
machinery. In certain branches the proportion of real estate of total fixed capital may vary a
lot, and therefore this index may give misleading results, at least, as far as the maintenance
costs of machinery are concerned. Altogether, the problem with the above ratio is the
determination of the replacement value. Very often the fire insurance value is a good
estimate of that. EFNMS (European Federation for National Maintenance Societies) WG7
benchmarking group has defined the replacement value as follows: “The term Plant
Replacement value (PRV) is defined as the amount of capital that would be required to
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replace the plant. This is not the book value nor the currency cost accounting value nor costs
to build a state of art replacement.” The advantage of this ratio is that it makes possible to
compare various kinds of plants within or between branches. The disadvantage of this ratio is
that it does not take into account the availability of production equipment (Nordic
Benchmarking Analysis 2001).

The ratio “maintenance costs / output” takes implicitly into account lost output and the both
factors can be defined quite exactly. The disadvantage of this ratio, however, is that very
often the output of the production is very difficult to determine physically. Thus, in many
branches benchmarking with aid of this index is difficult. In some branches, it may be
possible to use substitutes, for example the consumption of energy or raw material. Often it
has been stated that it is easy to have low maintenance costs, if you do not take care of the
longer term availability of production equipment. According to empirical studies (Finnish
industry 1999 and 2000), it seems, however, that “maintenance costs / plant replacement
value” and “maintenance costs / output” have the same tendency: the position of a plant in
the benchmarking analysis is about the same according to the both indicators. Of course,
there are exceptions. The relationship between these indicators has been illustrated in Figure
1, where a regression line for real cases has been drawn to demonstrate a relationship
between the variables.

INDUSTRIAL BRANCH xyz

Maintenance of plant's machinery
Maintenance costs / Output

Maintenance costs / Machinery replacement value

Figure 1. Relationship between ratios “maintenance costs / machinery replacement value”

and “maintenance costs / output”

The third ratio “maintenance costs / plant turnover” is an important performance indicator
from the company management point of view, but from the maintenance point of view it tells
very little of the efficiency of maintenance operations.

The fourth and fifth ratios “availability performance costs / plant replacement value” (or / plant
turnover) are explicitly used very seldom. The ultimate goal surely is that managers would be
able to calculate the dependability (availability performance) costs of plants. Therefore, at
least, unavailability costs, maintenance costs and investments on availability performance
should be included. However, in practice, usually maintenance costs and availability as a
time concept (%) has been followed. When optimising maintenance operations there is
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always a trade off situation with maintenance and availability. Therefore it would be very
important to know the total costs of availability performance. Total costs are, however, very
seldom calculated. A ratio “Maintenance costs / production output” gives some idea of the
availability performance costs of plants, but the information is then partly implicit. Exogenous
factors may have similar kind impacts on the total costs of availability performance as on the
maintenance costs, but the direction of the impact may change. As an example the
correlation between the total availability performance costs and utilisation rate of production
equipment has been illustrated in Figure 2 (Finnish industry 2000).

INDUSTRIAL BRANCH XYZ

(Unavailability costs + maintenance costs) / PRV

Max
Min
Mean+Std.deviation
Mean+Std.deviation
<= 88 (88 - 94] > 94 Mean

Utilisation rate %

Figure 2. Relationship between the total availability performance costs and the utilisation rate
of production equipment.

The above relationship is empirical and it has been calculated for only one industrial branch.
Therefore the mechanism behind this phenomena is not clear. However, it can be stated that
availability should be high, when utilisation rate is high.

It is easy to accept the importance of high availability. It is, however, difficult to choose an
appropriate key figure to measure it. There exist many key figures to measure availability. A
very common definition of availability is MTTF / (MTTF+MTTR), where MTTF is mean time to
failure and MTTR is mean time to restoration. However, this definition does not take into
account downtime caused by preventive measures. In this paper we propose a slightly
different definition: “actual operating time / (actual operating time + maintenance related
down time that exceeds down time needed for operating purposes)”. An other alternative
could also be possible: “actual operating time / (actual operating time + maintenance related
down time). These definitions include also down time, which is needed for preventive
maintenance. In the previous definitions actual operating time is defined as a time, when the
equipment is performing its required function and downtime needed for operating purposes
refers set-up time, time used for the change of tools, cleaning of process equipment etc
(Komonen 2002). If the co-operation between maintenance and operating function is
emphasised, a ratio “actual operating time / (actual operating time + total down time)” would
be an appropriate one.

The latest study carried out in Finland concerning maintenance operation in the year 2000,
revealed that many of the key figures were widely followed. For example, the availability of
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production equipment and the costs of maintenance in relation to plant replacement value or
output were well documented. However, for example, indicators measuring the total
efficiency of the production system were less used (Table 3).

Table 3. The proportion of respondents, who reported various key figures in Finland for the
year 2000

1. Utilisation rate 93 %
2. Availability 74 %
3. Value of lost production 38 %
4. OEE 35 %
5. MTTF 39 %
6. MTTR 37 %

4. Empirical relationship between objectives and exogenous variables

The upper management of the companies should be interested in the structural causes
(exogenous factors) of the maintenance cost level in order to develop the operations of the
company. The maintenance management should be interested in the impact of exogenous
factors in order to draw correct conclusion concerning maintenance function when using
benchmarking.

In the studies mentioned before, a multiple regression analysis was used to estimate the
causalities between the independent variables (exogenous factors) and the key performance
indicators (objectives). Logarithmic forms of the variables were used in the analysis, because
the model to be confirmed was non-linear. Logarithmic transformations also have other
statistical and mathematical advantages (e.g. estimated parameters measure elasticity of
variables). The explanatory power of the model (adjusted R2) was high (mainly between 40
and 90 %) and estimated parameters were statistically highly significant (Komonen 2000). In
the case of the ratio “machinery maintenance costs / replacement value of equipment”, the
most significant independent variables were the following (the signs + and – indicate the
direction of the impact):

(1) Integration level of production system (which has, in practice, often parallel
impacts to maintenance costs as replacement value) (-)
(2) The amount of production equipment (replacement value) (-)
(3) The amount of output / production equipment (replacement value) (+)
(4) Shift work rate (+)
(5) Industry –dummy variables (industry specific factors) (-, +)

In the case of ratio “machinery maintenance costs / production output” results were similar,
but the direction of impact differed partly:

(1) Integration level of production system (-)

(2) The amount of production equipment (replacement value) (-)
(3) The amount of output / production equipment (replacement value) (-)
(4) The amount of output (-)
(5) Industry –dummy variables (industry specific factors) (-, +)

On the basis of the empirical examination and on the basis of estimated equations, a
benchmarking tool can be made. The commonly applied benchmarking procedure has been
the comparison of the average cost values of a particular industrial sector with a company’s
own costs. However, in the field of industrial maintenance this kind of benchmarking does not
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help very much. The “owners” of the best figures are too “proud” of their performance and the
“owners” of the poor ones are on the brink of despair. According to the results of this
research, the above-mentioned methods are inappropriate. Even the misuse of
benchmarking values and opportunistic behaviour are possible.

It is beyond the scope of maintenance management determining power to avoid, for

example, the lack of technical scale advantage. The same applies to shift-work rate in a
factory or the utilisation rate of production equipment. That is why, there exist several
benchmarking values in each industrial branch, one for each production unit. The
benchmarking values tell us, what are the expected maintenance costs in a particular
industrial sector in the case of a specific unit size, integration level, shift-work rate,
technology etc.

With the aid of the principles described above we are able to find benchmarking values for
various plants. These values may be expected values (kind of means in the class of certain
kind of plants) or best values (kind of means in the class of best plants). This principle has
been illustrated in Figure 3, where expected benchmarking values have been calculated
(Finnish pulp and paper industry 2002).

INDUSTRIAL BRANCH xzy

Machinery maintenance costs / produced tons

95% confidence limits

Actual maintenance costs of a plant

If a circle is below the diagonal, the cost

efficiency of a plant is better than a benchmark,
if a circle is above, the cost efficiency of a plant
is lower than a benchmark. If a crírcle is on the
diagonal, the actual efficiency is the same as a
benchmark.

Expected maintenance costs of a plant (benchmark)

Figure 3. Comparison of actual maintenance costs with expected costs (benchmark)

In Figure 3, actual maintenance costs have been compared with estimated benchmarking
values. The same kind of comparison can be made with the best plants in the class. The
deviations from expected costs could originate from conceptual differences, from calculation
errors or from real differences in working methods. This kind of quantitative exercise is
necessary for qualitative benchmarking.

5. Conclusions
For the improvement of availability performance and benchmarking, the use of the newer
performance indicators should be activated. These indicators should facilitate and intensify
co-operation between maintenance and operating functions. In order to draw correct
conclusions when using those indicators, more research concerning causal relationships
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between objectives and exogenous factors (and also action variables) should be carried out.
These causal relationships should be used when constructing benchmarking systems and
tools. The first version of this kind of a tool has been in use in the web-site of Finnish
Maintenance Society.

REFERENCES

Corder G.G 1968 Maintenance: Techniques and Outlook, Revised edition, British Productivity
Council, London

Dwight R. 1999 Frameworks for Measuring the Performance of the Maintenance System in a Capital
Intensive Organisation. University of Wollongong, Australia

SFS-EN 13306. 2001. Maintenance Terminology, Helsinki. SFS-Standardization. 56p.

Finley E. 1972 How cost effective is your maintenance organisation. Hydrocarbon process 1/1972

Komonen, K. 1998. The Structure and Effectiveness of Industrial Maintenance. Ph.D.

Dissertation. Helsinki University of Technology, Department of Industrial Economics,
Espoo in Finnish

Komonen K. 1999. A Benchmarking Tool for Maintenance, Kunnossapito vol. 9/1999 in Finnish

Komonen K. & Siekkinen V. 1999. The behaviour of maintenance costs. Report 2. Unpublished
report, Tampere University of Technology, Tampere

Komonen K. 2000. A cost Model of Industrial Maintenance for Profitability Analysis and
Benchmarking, Eleventh International Working Seminar on Production Economics, Pre-Prints Volume
2, p.167-184, Igls, Austria

Komonen K. 2002. Availability Performance Guarantees. Espoo. VTT. 42 p. BVAL73-021194. In

Finnish

Luck W.S 1956 Now you can really measure maintenance performance, Factory Management and
Maintenance. Vol 114, no.1 January

Lyytikäinen A. 1987 Handbook of availability performance. VTT Bulletin 678, Espoo, in Finnish

Newbrough E.T 1967 Effective Maintenance Management. New York, McGraw-Hill

Nordic Benchmarking Analysis 2001. Analysis on Maintenance and Production efficiency in Denmark,
Finland and Sweden for the year 2000. Danish Maintenance Society, Finnish Maintenance Society,
Swedish Maintenance Society. Rajamäki Finland. 37 p.

Priel V.Z (1962) Twenty ways to track maintenance performance, Factory, March 1962

PSK 7501. 2000. Key Figures of Maintenance for Use in Process Industry. Helsinki. PSK
Standardization. 18 p. In Finnish

PSK 7502. 2002. Key Figures of Logistics Material function (Proposal), Helsinki. PSK
Standardization, 9 p. in Finnish

SFS-IEC 50 (191) 1996. Electrotechnical vocabulary. Dependability and quality of service. Helsinki.
SFS Stadardization. 143 p.

VDI-Richtlinien 2893, Bildung von Kennzahlen für Die Instandhaltung. VDI-Handbuch Betriebstechnik,
Teil 4, Düsseldorf 1991