Editor’s Note: This is the third in a series devoted to selecting and integrating Computerized Maintenance Management Systems into manufacturing and maintenance operations.

Making maintenance profitable

by Kris Bagadia

Successfully implementing a Computerized Maintenance Management System (CMMS) is the key to turning maintenance from a cost into a profit center

The word “maintenance” is typically associated with negative connotations. Whether the word makes one think of a broken machine or a repair need, it is clearly linked with negativity and pessimism. On the contrary, maintenance is defined as “the work of keeping something in proper condition; upkeep.” Thus, maintenance is much more important than many people realize.

When examining the issue of maintenance, there are a number of questions to consider. How many senior managers come from maintenance? How many companies support maintenance R&D? How many interns are hired for the maintenance department? And how many maintenance courses do universities offer? The answer to all of these questions is very few.

Essentially, it shows maintenance is at a very low priority for most organizations. Another consideration is that maintenance is usually the first department that companies cut when downsizing. Such a cut can seriously damage a company’s long-term survival.

Cost center vs. profit center
In an effort to view maintenance as a positive activity, it is important to see it as a profit center instead of a cost center. A cost center approach is strictly concerned with adhering to the budget and decreasing expenses as much as possible. In contrast, the profit center model realizes that investment and operating costs can be allocated to improve efficiency. This increased efficiency naturally results in higher profits.

I have conducted numerous seminars on Computerized Maintenance Management System (CMMS). Based on responses from hundreds of attendees, I would guess that 90-plus percent of companies are operating their maintenance department as a cost center.

Importance of maintenance
Maintenance is the backbone of any organization where equipment must be maintained; whether it is a manufacturing plant, a facility, or a utility company. If your production machine is down and you cannot deliver products or service, serious consequences can result. Some of these include losing customers, money, and business. If you are dealing with a facility, equipment breakdown can mean poor service to other departments or customers, resulting in loss of money. With a CMMS in place, maintenance can save time and money for a number of industries. Maintenance is obviously too important to ignore.

Turning maintenance into a profit center
There are numerous ways companies can turn maintenance into a profit center. One is through “product quality with zero error.” Just as professional athletes must train to keep their bodies in excellent shape to be able to perform, this approach stresses keeping the machinery and facilities in the best possible condition. Thus, producing higher quality products will lead to a lower return rate. Typically, profits will increase.

Another way that companies can turn maintenance into a profit center is through “Overall Equipment Effectiveness.” OEE consists of three factors: Availability, Utilization, and Quality Rate.
• Availability is the percentage of time that the machine is available for production.
• Utilization essentially is the rating of the machine.
The manufacturer provides the design specification rating for the machine.
• Quality Rate refers to how good the final product is. Out of every 100 items produced, how many meet company standards of approval for distribution or sale?

Unfortunately, North American companies average an OEE of only 40 percent, which is less than half of what world-class standards consider acceptable. Whereas many companies simply buy newer machinery, it is much more cost effective to maintain the equipment you currently have. Higher OEE means higher machine capacity, which in turn means higher output leading to increased sales capacity. This is a good example of how maintenance can be turned into a profit center.

Another example of how companies can turn maintenance into a profit center is through Preventative Maintenance. Let’s say that for every hour of downtime, $1,000 is lost. Since it is not uncommon for equipment to be down for a few weeks each year, we will assume 100 hours per year. In this example, the company will lose $100,000 in the 100 hours of downtime. Multiply that by the number of machines per plant or facility, and the number could be staggering.

If appropriate PM was in place, then downtime would be minimized and a great deal of money would be saved. This is exactly how maintenance is turned into a profit center.

How can a CMMS help?
So what is CMMS? A Computerized Maintenance Management System (CMMS) is a computer software program designed to assist in the planning, management, and administrative functions that are required for effective maintenance. These functions include generating, planning, and reporting work orders; developing a traceable history; and recording parts transactions. CMMS can be used to assure the high quality of both the equipment condition and the output. Thus, CMMS is not just a means of controlling maintenance, it is one of the primary tools that improve the productivity of maintenance.

Benefits of CMMS
There are a number of benefits to using a CMMS. Some of these include increased labor productivity, increased equipment availability, and longer equipment life. Of these, one of the most significant is increased labor productivity. If the system provides employees with a planned job, the procedures, needed parts and tools, those employees will be able to work without delays or interruptions.

The employees will also work more safely, since job plans would include all safety procedures.

Some tangible benefits of a CMMS include: reduced overtime, less outside contract work, reduced maintenance backlog, reduced cost per repair, improved morale, better service, less paperwork, and a reduction in follow-up required by the supervisor.

Two other factors are inventory control and environmental control. The benefits of inventory control are reduced inventory costs, less excess inventory, and availability of parts. Experience shows that a reduction of 10 to 15 percent in parts stocked and consumed is possible.

Improved product quality results mainly from performing adequate predictive and preventive maintenance. By keeping equipment in good condition, product quality is enhanced.

In terms of environmental control, safety and compliance issues are both important. Preventing accidents and injuries as a result of proper procedures (documented by CMMS) can save companies a significant amount of money. Many industries must also comply with industry regulations. If your company requires such compliance, then you should select a CMMS that has similar provisions. In fact, meeting the regulatory standards can save you money that would be otherwise spent in fines for not meeting the requirements.

In conclusion, maintenance is a very important activity that should be viewed as a profit center. While many companies simply view it as an added expense (or a cost center), maintenance should instead be thought of as an important investment in a company’s future. There are also a number of benefits to a CMMS. The greatest of these are that it helps cope with downsizing and increases efficiency.

Krishan “Kris” Bagadia, president of Peak Industrial Solutions, is a Registered Professional Engineer (PE) and a Certified Plant Engineer (CPE). He has studied and taught maintenance systems for over 25 years and has authored several books on CMMS. He can be reached at 262-783-6260; e-mail: krisb@peakis.com.

This article appeared in the December 2006/January 2007 issue of MRO Today magazine. Copyright 2006.

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