Maintenance Business: Managing Maintenance as a Business
C. Paul Oberg, EPAC Software Technologies
In most businesses, success is easily measured by looking at the bottom line; but what’s the bottom line in the maintenance business?
To better understand how to evaluate maintenance business performance, it’s helpful to examine how businesses generate profits. Quite simply, businesses generate profits by providing goods and/or services at minimum cost and sold at a fair market price. Obviously, revenues generated from sales must exceed the costs. It is important to note that the customer determines the fair market price.
In the maintenance business, the customer pays for value; price is part of the value equation along with quality and timeliness. So, as we look at the maintenance business, price is something that cannot be ignored. For example, if internal electricians are charged to the department at $45.00 per hour and the comparable skill for an external resource is $30.00 per hour, it will not take long before outside electricians are being used.
It has been presented that customers demand value. Timeliness, quality, price and return on investment (ROI) are the components of value. Therefore, our performance measures should reflect how the maintenance business is providing value to its customers. Also, the maintenance business must develop internal performance measurements to assess its health.
Timeliness can be measured by average time to respond for a certain class of maintenance activities. Many maintenance operations have set goals for responsiveness given the nature of the work. For example, for emergency work, a goal might be one week. Again, these goals are established in concert with the customers.
It has also been discovered that the type of work may not be the only determining factor; in many cases, the equipment may determine a response time frame. For example, a breakdown in an operating room air filtration system is significantly more important than a breakdown of a hospital bed. Thus, our response goals are dependent upon not only the nature of the work, but the equipment as well. The average time to respond can be calculated by capturing the elapsed time between request receipt and the commencement of work. Once calculated, this measurement is indicative of how well maintenance is satisfying customers’ expectations of timeliness.
Schedule compliance is another means of monitoring customer timeliness expectations. In this metric, the scheduled start date or promise date of the work order is compared to the actual start date. Again, a simple calculation of actual versus promised; either it was started on time or it wasn’t. Customer communications and managing expectations are paramount.
Quality of work is not as easily measured as timeliness, however, quality can be measured through customer complaints, work review and repeat work. If the customer is not satisfied, it is hoped that the dissatisfaction will be acknowledged in some form. In many cases, the customer is required to sign a completed work slip accepting the quality of the work performed. Although this is a satisfactory form of acceptance, has satisfaction truly been measured?
Perhaps the best way to ensure quality is through a work review program where supervisory personnel review the quality of the work performed. These are formal programs that when properly conducted can provide valuable feedback regarding customer satisfaction and employee skills. A rating system is typically employed which recognizes the quality of the work and level of customer satisfaction. Finally, if a particular work activity is frequently being requested, it may be indicative of a multitude of problems. Remember, in the eyes of the customer, if it keeps breaking, it’s because it was not fixed and therefore, is a maintenance responsibility.
Price is always a topic for debate. How many times have you heard, “If I had known it was going to cost that much, I wouldn’t have done it!” or “What do you mean it cost $490 to replace that bulb!” Customers do not like surprises and they demand fair pricing.
Admittedly, in most internal maintenance operations, the customers find out what it costs after the fact and not before. It is amusing that as private citizens, we would not have someone perform any work without having some idea as to what it might cost, and then, we may even attempt to mitigate or negotiate.
In the internal maintenance business, how often are estimates provided? Are there established hourly rates for providing service for both labor and materials? How do these rates compare with external rates? Determining price performance is addressed largely by comparing the book rate versus the actual rate. The book rate is a blended average of hourly labor rates inclusive of benefits, whereas the actual rate is calculated by taking total labor dollars of direct activities (actual work time). The book rate is a quick comparison to the outside rate whereas the actual rate reflects utilization and rate.
As we examine our maintenance business, we must also identify our ROI. Identifying, quantifying and realizing benefits, is the goal of any business. Within the maintenance business, we can usually categorize benefits materializing in the areas of labor utilization/productivity, materials management and equipment productivity. Strategies for achieving savings in each area can range from simple to complex. However, experience has shown us that the simplest strategies yield the highest results.
As we continue to look for the elusive ROI for the maintenance business, companies have discovered that the greatest opportunity lies with improved equipment productivity.
These savings manifest themselves in the areas of increased equipment uptime/availability, improved product/service quality and finally, improved equipment/service reliability. Again, upon closer examination of each of these categories, additional distinctions can be made. For example, in the area of increased uptime, savings can be realized through the implementation of programs resulting from:
- Breakdown analysis
- Failure analysis
- Rationalizing PM frequencies
- Predictive maintenance
- Planning and scheduling of work
Likewise, in the area of improved quality, opportunities for improvement exist when specific actions are taken in:
- Failure analysis
- Preventive Maintenance programs
- Predictive Maintenance Programs
- Breakdown Analysis
And finally, looking at possible strategies for improvement in the area of improved equipment/service reliability, possible opportunities exist in:
- Improving the PM program
- Improving the PDM program
- Failure analysis supporting a corrective maintenance program
- Breakdown analysis supporting a corrective action program
Achieving an acceptable return on investment for the maintenance business is as critical as helping the maintenance customer achieve their return on their maintenance investment. The maintenance business is customer oriented and must provide value to the customers. The symbiotic relationship which exists between the maintenance business and its’ customers is a win-win situation. When the maintenance business is operating at peak performance and efficiency, then the maintenance customers will realize the value of their services as well as reap the rewards.
Managing maintenance as business involves managing expectations and balancing costs and service. Identifying maintenance cost drivers is an important factor is the cost and service-balancing act. Maintenance costs are largely attributable to labor, materials and contract services. Material costs can effectively be managed and controlled through inventory management practices, procedures and policies. Thus, we can reduce the volatility of the balancing act by concentrating on labor and contract services.
What drives labor cost is simply a matter of supply and demand. The demand portion is determined by the amount of work needing to be performed and when it needs to be performed. Understanding this will determine the supply side of the equation.
Time to revisit our mission statement! Is the maintenance business mission to provide resources when needed or is it to accomplish the work when resources are available?
Each response yields a different set of requirements. Therefore, “how much” and “when” are critical drivers. Is there a seasonality to demand? Are there periodic shutdowns? Are there slow periods or accessible periods for maintenance? Can the existing work force be supplemented with contract labor? The real cost drivers can easily be determined once everyone agrees on the mission.
All too often, the concept of maintenance management is thought of as synonymous with computerized maintenance management systems; that by implementing a computerized maintenance management system, results will magically appear. Long before computer systems, there were successful businesses because attention was paid to customers and the implementation of effective business processes to provide goods and/or services to those customers.
To achieve success in managing the maintenance business, identification, development and implementation of core business processes is essential. CMMS is only a tool to support the processes. No matter how big or small the maintenance function, there is no substitute for basic process implementation. Ask yourself, if you cannot define the basic processes, how can appropriate application software be selected? After all, one of the basic covenants of effective maintenance planning is determining the right tools for the job based upon the work and tasks to be performed. For those who have implemented a CMMS, which came first: the system or the process?
Managing the maintenance business presents the challenge of operating most service type businesses. Striking the fine balance between service and cost demands the best practices supported by the best tools. The effort required to implement a computerized system does not translate to results; effort put forth in the implementation of the right processes will yield results. In the final analysis, it’s results that count.maintenance of business
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C. Paul Oberg, EPAC Software Technologies