Lawson has released findings from its new 2004 global enterprise asset management (EAM) benchmarking survey. The results suggest that inadequate maintenance strategies are resulting in unnecessary losses and missed profit opportunities for organisations.

The survey investigated maintenance practices within businesses such as the power, infrastructure and utilities, manufacturing, food and beverage, and pharmaceutical sectors.

Lawson believes the findings generally suggest a troubling disparity between the views businesses hold about the value of preventive maintenance and the actual commitment of sufficient resources or budget to these needs. As a result, Lawson believes that many businesses are failing to take advantage of what could be one of the few remaining truly untapped business benefit areas that can directly impact bottom line performance.

The benchmarking results of the survey show that for those businesses still asking whether preventive maintenance is worth the cost and effort, the real question now becomes how can they afford not to invest in preventive maintenance?

Over 85 percent of survey respondents agreed that preventive maintenance increases production and operations capacity, with almost two-thirds reporting that their preventive maintenance gave them a competitive advantage in their market. However, the proportion of actual spending committed to maintenance by the majority of organisations (from the total cost of operations) is less than 10 percent—with almost two-thirds allocating less than half of their maintenance budgets for preventive works.

Yet more than half of the respondents indicated that their individual annual production losses due to plant equipment failure could be anything up to USD 50,000. Even more troubling are those businesses that are counting their cost of lost production in the millions. Almost seven percent of survey respondents reported average annual lost production costs in excess of USD 1 million.

Lawson believes even these figures are understated since many organisations do not fully consider the true cost of downtime, which can include scrap, lost customers, higher unit costs, and additional labor and utility overheads.

“These days, businesses are under increased pressure to deliver more for less, with reduced resources and budgets. Yet areas such as preventive maintenance, criticality analysis and diagnostic management are still some of the few operational areas left that offer true improvement potential, and ultimately impact a company’s profitability,” says Brian Dunks, EAM industry solutions director at Lawson.

“For many businesses, a planned maintenance strategy is critical to reducing the risk of equipment failure and downtime, meeting industry safety requirements, and ensuring business continuity and plant availability in order to maximise productivity and, ultimately, profitability,” he says.

Lawson also believes that when an unavoidable breakdown does occur, particularly if it impacts more than 50 percent of a plant, it is imperative that organisations are in a position to react quickly to minimise the impact of the stoppage.

“Additionally, increasing the availability of equipment can also have an impact along the entire supply chain, such as enabling an operations group to complete customer orders on time to cost specifications, thus enhancing production and service levels,” Dunks concludes.

Prevention or cure?
Lawson believes a key problem is that many businesses still hold the perspective that maintenance is a cost rather than an investment in their business.

“Though viewing equipment failure, or even wear and tear, as a profitability inhibitor, some organisations still either find themselves working in a ‘fix-it-when-broken’ mode and have not yet moved into a more preventive approach, or in some cases are yet to be convinced of the extent of value a preventive maintenance plan offers,” Dunks explains.

“A ‘corrective’ strategy is not necessarily a negative thing. In fact, some businesses, such as power and utilities organisations, indicated a high reliance on redundancy systems as a backup rather than total reliance on preventive maintenance,” he says.

However, for those operating in conditions where lean organisations are dominant, or where safety and continuity is paramount (such as pharmaceutical/chemical businesses and facilities/infrastructure organisations), businesses need to understand the potential savings a simple preventive maintenance strategy can provide. 

Key inhibitors to change:

1. Management support
Poor comprehension of maintenance problems by other line managers is a growing problem, with an almost 8 percent increase in this view over the previous year’s survey. This trend was particularly prevalent across larger organisations.

“Advanced maintenance techniques such as reliability centered maintenance (RCM) and the value they bring are not earning enough support from broader management or recognition of the return on investment they offer,” Dunks says.

“However, the responsibility does not lie solely with the broader management team. It is time for maintenance departments to become more proactive in communicating some of the benefits of modern maintenance management techniques,” he says.

2. Funding issues
Lack of funding is also shown to be an inhibitor with 20 percent of respondents in each case indicating it as a major issue. 

Poor capital purchasing decisions were also cited as a contributing factor in getting changes to maintenance practices in place.

“These trends emphasize the need for ROI calculations for EAM, and for maintenance managers to better sell the end-game benefits to the decision makers in their organisations,” Dunks says.

3. Staff shortages
Shortage of staff resources were cited by some to be an issue, though this was more prevalent across European operations with 18.6 percent highlighting this compared to 12 percent in Australasia.

Customers that currently benefit from Lawson’s EAM solution include Zeochem, Astra Tech AB, Busco Sugar Milling Company, Tnuva, Pronova Biocare, Bluescope Steel, Dublin Port, IKEA, Nissan North America and Japan, LKAB, Francais de Mecanique and Stanwell Corporation Limited.

March 2005