Cost Benefit Analysis for Maintenance of Rotating
Machines
Sreevidya Khatravath Nishchal K. Verma
Dept. of Electrical Engineering Dept. of Electrical Engineering
Ex. Student of IIT Kanpur IIT Kanpur, India
sreevidyak05@gmail.com nishchal@iitk.ac.in
Abstract— Cost effective maintenance of machines with fewer
breakdowns of machines increases production of an organization.
Selecting an appropriate maintenance strategy in wide variety of
maintenance strategies generates profits. Prior art search has
standalone analysis on machines or study on costs experienced in
machine maintenance. Interrelated study on machines and cost
incurred with maintenance of different individual parts is
limited. This work explains when an industry with rotating
machines should decide on PHM (Prognostic health
management) with cost effective maintenance strategies.
Computing, analysis of net revenue for any industry employing
rotating machines with measures on improving performance of
machines will be profitable. Parameters impacting machines
health, failure rate of machine, shell factor, repair rate its impact
on revenue of the industry, maintenance strategy which generates
maximum profit are proposed. Widely used maintenance
strategies i.e. corrective maintenance and preventive
maintenance (PM) are reviewed using proposed Cost Benefit
Analysis method.
Formulated equation of revenue analysis are tested with realistic
cost information of an air compressor such as cost involved in
labor for repairing machine, establishment of a maintenance
strategy, etc. Failure rate, repair rate, life time, etc. of
reciprocating air compressor and its components are suggested.
Case study on reciprocating air compressor is used to validate
results.
Keywords- failure rate of components, repair rate, availability,
individual component failure, condition based maintenance
I. INTRODUCTION
Cost Benefit analysis (CBA) is a process of estimation
evaluation and reduction of costs incurred during the
maintenance of machines. Economist Jules Dupuit has
initiated the concept, CBA in 1848.
Costs incurred during the health maintenance of machines
should be calculated to select a cost effective maintenance
strategy. To minimize expenses, plan the maintenance of
machine with information on individual components of
machine, their failure rate; break down time, utilization of a
component of machine, etc. which will minimise the
maintenance costs.
Researchers are mainly focussed on various maintenance
strategies with advantages of deciding on a specified
maintenance strategy. Mathematical model of CBA is created,
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Al Salour
Boeing Company
St. Louis, MO, USA
al.salour@boeing.com
using different maintenance strategies evaluation to
recommend best maintenance strategy with maximum return
over a period of time [1]. Improvement in the proposed
mathematical CBA model with factors impacting machine’s
health, case study on air compressor to validate the findings
are explained in reference [2]. Study of multi-unit model with
forecast on the different stages of machine’s lifetime till
complete breakdown is elucidated in [3]. Study on the
availability of machine, benefit analysis with suggested
availability of machine in [4] is utilized to study availability of
air compressor in this work. Maximum threshold repair time
of a system after which it is cost effective to order for new
unit, info on failure, repair time and reliability time of system
are expressed in statistical distributions in [5]. Availability
definition, failure and repair time are defined with probability
density functions in [6]. Correlation of failed and non-failed
components in a machine is studied in [7]. Estimating
availability of machines with cost optimization in maintenance
of a plant in [8] proposes equation of availability. Research [9]
calculates the return of investment of PHM. In [10] analysis of
cost benefits of recycling components is explained. Study on
corrective maintenance to decrease failure modes, criticality in
[11] helps understand corrective maintenance. Revision on the
existing maintenance polices in [13], predictive analysis of
critical equipment regarding its maintenance strategy in [14]
are useful. Research paper [14] shows time varying failure rate
of power distribution system. Periodic preventive maintenance
is forecasted with Markov models in [15]. Explanation on
benefits of Condition Based Maintenance (CBM), life time of
machines is highlighted in [16]. As well negative effect of
CBM, proposing CBM is not a cost effective maintenance
strategy in machine’s life time is elucidated in [21].
Literature on PHM didn’t suggest a cost equation to
calculate net revenue generated by machine. Comparison
among various PHM strategies is not emphasised, effective
usage of proposed models is uncertain.
This paper discusses the parameters of machine in net
revenue calculation of [1], followed by case study of a machine
using data in [1] and limitations of other models. Results are
analyzed and conclusions are drawn based on these analysis.
This paper is arranged as follows, section II discusses
features involved in net revenue calculation [1], section III has
case study with realistic data of air compressor. Analysis of
results is in Section IV and Section V has conclusion on
proposed revenue calculation.
 II. DEFINITIONS, NOTATIONS AND ASSUMPTIONS FOR production. Reference [1] shows net revenue generated by
ANALYSING REVENUE machines can be calculated as given,
M S F
Factors which impact revenue generation are as follows: NET REVENUE      LT i   RGPH i 
i=1 j=1 k=1
Establishment Cost (𝐸𝑐 )   IICi,j,k +  FMCi,j,k
(4)
To setup an industry manufacturing products, we need to have
+([BDT]i,j,k   NMHR i,j,k   AVCPMH i,j,k )
equipment plant and machinery i.e. capital costs and operating
costs. When revenue is generated establishment cost EC has + SPCi,j,k ( BDT i,j,k   RGPH i ) 
to be negated from generated revenue during production Where
Initial Investment Cost (IIC) i is the i th machine
For PHM, machines are maintained with different strategies  LTi is the life time of machine
such as Preventive maintenance PM, a Corrective maintenance RGPHi is the revenue generated by machine.
(CM) etc. cost incurred during installation of maintenance
strategy is IIC.
SPCi,j,k is the spare parts cost.

Labour cost
Research in [1] shows labour cost for a machine under
maintenance is calculated as given in (1)
LBCi,j,k   BDTi,j,k   NMHRi,j,k   AVCPMHi,j,k
(1)
Where,
i th Machine for jth maintenance strategy under k th fault are
i, j, k
th
 LBCi,j,k is the labour cost of i machine for jth maintenance
strategy under k th fault
 BDTi,j,k is the break down time
 NMHR i,j,k is the number of man hours
AVCPMHi,j,k is average cost per man hour
Ideally, labour cost should not consider machine’s break
down time in its calculation as it is cost related to amount of
labour work on machine. As BDT is already present in total
revenue loss (TRL), its addition will only increases the labour
cost as well dimensionality is incorrect. Labour cost equation
without BDT is represented in (2)
LBCi,j,k   NMHRi,j,k   AVCPMHi,j,k
(2)
Break down Time
Break down time is the time for which machine is in repair.
In [1] break down time is equal to number of man hours
working on machine, this is not applicable because practically
labour to arrive at failed machine takes time. Hence break
down time in TRL is different from number of man hours
required to repair a machine.
 IICi,j,k is the initial investment cost
 FMCi,j,k is the fixed maintenance cost
 BDTi,j,k is the break down time
Improved revenue equation for machine with labour cost (2)
is as presented in (5)
M S F
RN      LTi  RGPHi   [E ] c i
i=1 j=1k=1
  IICi,j,k +  FMCi,j,k
+(  NMHR i,j,k   AVCPMH i,j,k )
+ SPCi,j,k ( BDT i,j,k   RGPH i )  (5)
This change in labour cost increases the revenue than in [1].
Ageing:
Life time of a machine depends on the ageing parameter, some
machines like batteries have constant ageing, other machines
as air compressors ageing rate can be reduced by maintaining
machines. Ageing depends on multiple factors such as
temperature, in which machine is operating i.e. thermal
ageing, electrical component ageing, interaction rate between
different components, activation energy.
Different models were proposed to illustrate ageing
factor in [17]. Reference [22] considers Arrhenius equation to
show temperature effect on ageing. Other model in [21]
indicated the humidity and temperature effect on machine’s
life. Machine’s productivity gradually decreases by ageing
which is indicated with negative exponential.
According to [21] the ageing factor can be
represented as (6) with different parameters which effect
ageing of machine.

TRLi,j,k   BDTi,j,k   RGPHi,j,k 1.9 1 

 Ea  1 1  
(3)  T   Ff  3  K  Tmax  Tmax 
Where AR   1    e (6)
 T f 
RGPH is Revenue generated per hour by machine    F1 
Revenue Failure rate:
Profitability of a business is determined by the net revenue Choice of failure rate is important as it is important factor
generated per annum by any industry. Same is applicable to a for net revenue. Bath tub curve which is used intensively for
particular machine; net revenue generated by machine while in

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representing machine’s failure rate is not an accurate this is
explained in [21]
Failure rate 𝐹𝑅 (t) in reliability maintenance of machine can
be bath tub curve, Exponential distribution (7), Weibull
distribution function (9), Hypo-exponential failure (8)
function. Failure rate studied for particular components of
machine with Weibull distribution, genetic algorithm by Fatih
Camci [16] helps to know how maintenance policy is useful.
Bath tub curve
Failure rate has been defined as bath tub curve by
researchers. The graph fig 1 shows the bath tub curve [21],
[22], [23] explains bath tub curve representation of failure
rate.

Figure2: Exponential Distribution of Failure Rate

Figure1: Bath tub Curve of Failure Rate

The bath tub curve predicts that failure rate is high in

initial stages of machine’s life and similar high failure rate at
the end life of machine. Bath tub curve is inappropriate as
machine don’t fail in its initial life time with the same rate as Figure 3: Weibull Distribution of Failure Rate
they fail after ageing.

Exponential distribution
FR (t )  1  et (7)
λ here is the shape factor of machine which depends on
ageing of the system which impacts the failure rate. As system
becomes aged it is more prone to failure.

Hypo exponential Failure: [13]

2 - t 
FR (t )  1- e  1 e-  t
1 2

2 - 1 2 - 1 (8)
It is similar to exponential failure but this function can
reach a constant indicating end of life of machine Figure 4: Hypo Exponential Distribution function of Failure Rate

Weibull distribution function Choosing Weibull distribution for failure rate helps in
more explicit characteristics of failure rate of machines in any
  x k  industry. Depending on the explicit features of machine,
FR (t)=1-exp  -    failure rate distribution is selected
  λ   (9)

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Component Failure Rate IC : paper which indicated CBM has negative effects in [20]
indicates that there is risk in CBM. But any industry can have
Machines are integration of different parts; Failure of
an estimated risk factor which may be 0 or n.


machine depends on the failure of parts T .Rate of individual
component failure is inversely proportional to total working RF  1 if CBM predicts accurately
n if CBM predicts inaccurately (15)
time of machine U t . [4] Here ‘n’ represents number of times CBM’s prediction was
T  inaccurate in a year or monthly revenue generation.
IC    
 Ut  (10)
Environmental Impact Tax:
Specific machine component will be replaced or maintained Industries such as nuclear power engineering, thermal
with the help of historic data of component failure rate. engineering needs to pay high tax [19] because of pollution
caused by machines. This impacts the revenue generation
Repair rate: directly.
Repair rate increases with failure rate, life span of machine. Ageing of machines increases tax as amount of pollution
Failure rate, repair rate are exponentially proportional [5] from machines increases with ageing. An industry which
doesn’t concentrate on individual parts of a machine, machine
RR (t )  FR (t)  e t C (11) maintenance may have to experience loss in revenue in terms
Where FR (t ) is the failure rate of machine of tax. Ageing factor 𝐴𝑡 directly impacts amount of taxation
β depends on training data (Tax) on the industry. Here C represents constant which may
C is dimensionless constant be zero or due to external factors like accidents leading to
β refers amount of exponential rate of increase of machine pollution and which then results in taxation
failures. Machine’s failed component is replaced by new ET  At  Tax  C (16)
component because of friction other parameters may wear and
tire; this may increase the repair time and repairs of machine. Upgraded Net Revenue Calculation:
Repair rate impacts labour cost as labour works for more time All parameters which impact machine’s health such as
to repair the failed component/machine. component failure rate, environment impact because of
pollution by machines, risk factor, etc. are used in the equation
Utilization Factor
for calculating revenue as shown in (17). Risk factor is
Effectiveness of machine is calculated using Utilization Factor associated with the choice of maintenance strategy and is
U F . It is a dimensionless quantity [2]. selected accordingly.
   R N ={(A  WT ×RGPH)-EC -[ IIC+FMC+SPC- ET
UF   
 f (t ,  )  +(f(t, )  RF  NMHR×AVCPMH) +(  BDT×RGPH)]}
(12) (17)
Expected Up time of a machine Payback Time:
U t is calculated by recording the machine’s working time per Investment in maintenance strategy requires an analysis of
day or hourly basis [6] returns for implementing a specific maintenance strategy.
Expected down time of machine: Payback time is a ratio of initial investment cost to net revenue
per unit time. Unit time may refer to yearly or monthly
Dt is calculated by timing the machines breakdown and repair revenue generated by the industry
time . This factor can also be calculated using life time and IIC
PT  (18)
uptime as shown. RN Unit Time
Dt  Lt  Ut
(13)
III. CASE STUDY
Availability:
Air compressor
Amount of time for which system is functioning without any
fault. It depends on expected up time and down time of Costs incurred in procurement, maintenance of
machine. Researchers of [4], [15] defined the availability of Reciprocating air compressor are used with realistic costs [1]
machine as machine working time to machine life time to compute revenue. Parameters and values are same as [1]
except few changes as mentioned in individual maintenance
Ut
A (14) strategy. Assessment on the best maintenance strategy from
Lt CBM, TM, CM will be calculated for air compressors.
Risk Factor:
Using maintenance strategy like CBM involves risk factor i.e. A. Corrective maintenance
prediction from sensing equipment about machine’s condition In Corrective maintenance (CM) strategy, machine is run
may go wrong. This results in loss of net revenue. Research until it fails to work. Then repair or replacement of machine is

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commenced. Parameters used to calculate net revenue for CM TABLE III:
is shown in table I similar to reference [1] Parameters used in calculating net revenue by CBM [1]

B. Preventive maintenance Parameters Values

Revenue generated per hour $200
In time based maintenance (TBM), machine is under Total number of operating hours
constant supervision aimed at fixed time intervals. Number of 720 hours
available
man hours labour on machine is not equal to break down time. 7.2 hours
Average number of hours in break down
Parameters used to calculate net revenue is shown in table II.
In condition based maintenance (CBM), machine is Assume number of man hours
6
managed with respect to its condition. Parameters used to Spare parts cost
calculate net revenue is shown in table III. $500
Time to repair machine includes waiting time for repair Average cost per man hour
crew to arrive at failed machine. Hence repair time and $100
number of man hour work on machine are not same as Initial investment cost (one time cost
considered in reference [1]. which includes hardware, software,
research, installation, training and $10000
TABLE I: maintenance of CBM)
Parameters used in calculating net revenue by CM [1]

Parameters Values Table V represents comparison between revenues of CBM

Revenue generated per hour $200 using different revenue generation formulae.
Total number of operating hours Initially if machine fails in 1 month time period, corrective
720 hours
available maintenance produces maximum revenue as shown in Fig 8
36 hours but in the long run CBM produces maximum revenue as
Average number of hours in break down
Assume number of man hours
shown in Fig10
34 hours Fig 7 shows the revenue change compared to other
Spare parts cost maintenance strategies. Graph shows condition based
$1000
maintenance is more profitable compared to CM, TBM as
Average cost per man hour revenue for CBM is highest at the end of 24 months.
$100
Fig 8 shows the cross sections of CM, TBM and CBM,
Initial investment cost
$0 because there is variation in revenues which is calculated in
dollars.
TABLE II: Then we used failure rate to be 0.005, repair rate as 0.025
Parameters used in calculating net revenue by TBM [1] [2] in (17).These values are considered arbitrarily but they are
different for different strategies as repair rate depends on
Parameters Values repair time. In case of CM in which machine parts are run till
Revenue generated per hour $200 its failure, it takes long time for repairing.
Total number of operating hours Fig 7 shows CBM is more beneficial than other
720 hours
available
maintenance strategies but here we see a significant increase
18 hours
Average number of hours in break down in revenue when we include failure rate, repair rate in net
Assume number of man hours revenue calculation fig 7.
16 hours
This results in more profits for any industry which analyses
Spare parts cost machines failing rate, and repairing rate as they both affect
$1000
revenue of machines directly.
Average cost per man hour
$100 In Fig 7 condition based maintenance generates less
Fixed maintenance cost
revenue initially but in the long run it is best maintenance
$1000 strategy with highest revenue.
Initial investment cost (Scheduled time) When revenue of machine is calculated, significant increase
$5000 in revenue for CBM, TBM is only after 2 years compared to
CM because initial investment cost of CBM, TBM are high.
IV. RESULTS & DISCUSSION In industries, normally machines don’t break down in
Calculating revenue provides different results from paper initial1 or 2 months of production, it takes at least one or two
[1] as we considered i=1, j=1, k=1 with variation in break years for increase in machine components failure.
down time and number of man hours working (Repairing) on CBM strategy is beneficial compared to time based and
failed machine. corrective maintenance in all models. In table V, by
Table IV shows net revenue as given in (17) which comparison of revenue generated by CBM for different
considers factors such as failure rate, repair rate. formulae demonstrates the advantage of using proposed
method to calculate net revenue.

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 TABLE IV:
Net Revenue with new parameters (10)

Maintenance
Strategy
Operation
CM TBM CBM
Period
($) ($) ($)
(Months)
1
142379 136942 133479.8
2
284874 279874 276874
3
427374 422874 420374
6
854874 852000 851000
12
1710000 1710000 1712000
24
3420000 3426000 3434000

TABLE V:
CBM Revenue generation comparison between different models

Operation Result of Result of Figure7: Revenue generated in 24 months (5)

Period Result of CBM using CBM using
(months) CBM in [1] formula (5) formula (10)
1 1,31,340 131540 133479.8
2 2,82,680 273080 276874
3 4,24,020 414620 420374
6 8,48,040 839240 851000
12 16,96,080 1688480 1712000
24 33,92,160 3386960 3434000

CONCLUSION
This paper computes the net revenue calculation (17) invested
in maintenance strategies by an organization to propose best
cost effective maintenance strategy. Net revenue generation by
an industry can be easily computed by the proposed model as
it accounts all factors which effect machine(s) productivity.
While estimating the costs incurred in the
maintenance of machines it is important to predict impact of
various factors like environmental effects, labor cost,
establishment cost, failure rate, utilization factor, machine
break down time, ageing rate, shell factor etc. These
parameters are studied and experimented to calculate which
factor majorly impacts revenue. Thresholds with respect to the
various factors are assigned depending on the impact on the
machine failure. Paper presents extensive study of these
factors along with experimental validation.
Paper concludes best cost effective maintenance strategy
and identification of main component(s) which leads to
machine failure.
ACKNOWLEDGMENT
We would like to express our earnest gratitude towards Boeing
Inc., USA for their funding support for this work through
research grant.
Appreciate all the help and support from Sonal Dixit
and Rahul Kumar Sevakula.
Figure 8: Revenue variations in CM, TBM, CBM (5)
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