Every type of vehicle has risks associated with failure to perform its duty. While calculating the consequences of having a garbage truck in the shop is straightforward, the analysis for a fire truck is considerably more complicated.

Is economic analysis in PM worth it?

Dec. 15, 2016
PM economics provides information to make the best overall, long-term decisions.

Any activity to extend equipment life or detect failures that is not statutory is subject to these two important questions:

- Is it worth it?

- Should I spend time doing something else?

The second question concerns risk.

Let’s say we have two heavy trucks. One is a garbage truck and the other is a fire truck. Both trucks have risks associated with failure to perform their duty.

The garbage truck is a bit easier to analyze since the crew time and overtime is straightforward to calculate. The fire truck analysis is considerably more complicated. It is difficult to say what a downtime incident would cost without knowing the consequences or even the likely consequences.

In some worlds, both risks could be evaluated by dollars. In my world, any risk involving a high probability of death or environmental disaster should be rendered as close to a zero chance of happening as possible.

Macro View

Economics of preventive maintenance (PM) has three levels of view. The highest level is often referred to as the 30,000’ view or the macro view. In this kind of view, the organization decides if PM approaches make sense for the whole department, given the organization’s goals and the needs and requirements of the business or field.

To make that decision, an organization would look at the current costs of operation. It would project the costs of the operation with the proposed changes. Since any change costs money, the analysis would see how many months, or years, the savings – assuming there is one – would take to pay off the investment.

Conversely, many organizations would look at return on investment (ROI) – a measure of the percentage return on a particular investment.

If the speed of the ROI payback of an investment were adequate, then the decision would be made to change from the status quo to the new approach. Once that decision is made, the second level view looks more and more closely at what strategy is most appropriate individual machines or groups of similar machines.

100’ View

I use the term “100’ view” to describe the second level view. This view decides what strategy is most appropriate for a particular machine or group of machines.

Even if a decision has been made at the corporate or plant level to use PM and/or PdM (predictive maintenance) techniques as the dominant strategy, each machine or machine group has factors that influence how to handle it specifically. In some analyses, letting the equipment run to failure is the best bet.

Usually, the most important factor is the cost of having the unit out of service. A low or negligible downtime cost can scuttle a PM decision for that asset (substitute vehicle).

As before, the cost of the current operation for that asset or asset group is compared to the cost of running in the new mode. Given the investment level to bring the asset to PM standards, is there enough ROI to make it justifiable?

Third View

Once a decision is made about strategy for an asset or an asset group, the third level view is: What PM tasks do we perform?

In this task view – a micro view, the cost and consequence of each task is compared to the cost and consequence of the failure mode the task is trying to avoid. It is critical to choose the fewest tasks, the least often, that will achieve your goals.

The task view is the engineer’s view. The 100’ view could be called the maintenance manager’s view. The 30,000’ view is the finance manager’s view.

All views are valid and contribute to the understanding of what information is needed for the best overall, long-term decisions.

Joel Levitt is director of projects for Reliabilityweb.com’s Reliability Leadership Institute. Reliabilityweb.com provides the latest reliability and uptime maintenance news and educational information. He remains president of Springfield Resources (www.maintenancetraining.com), a management consulting firm.

About the Author

Joel Levitt | President, Springfield Resources

Joel Levitt has trained more than 17,000 maintenance leaders from more than 3,000 organizations in 24 countries. He is the president of Springfield Resources, a management consulting firm that services a variety of clients on a wide range of maintenance issues www.maintenancetraining.com. He is also the designer of Laser-Focused Training, a flexible training program that provides specific targeted training on your schedule, online to one to 250 people in maintenance management, asset management and reliability.  

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