Archive | December, 1998


4:00 am
December 2, 1998
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Profit or Cost Center Mentality: Is the Difference Important?

About four years ago, Tom Bond and I began developing a series of expositions around the advantages and methods for operating the maintenance function as a profit center instead of the typical cost center. There were many comments on the concept. One individual stated that his corporate management would never accept the idea of maintenance as a profit center—everyone knew it was and had to remain a cost center.

That was then and now is now. Today we’re seeing papers and entire conferences promoting maintenance and, more broadly, asset management as profit-centered activities. Looks like we were just early predictors of a trend. As more attention turns toward profit-centered operation it might be instructive to examine the differences between profit and cost centers. More important, consider the benefits of moving functions traditionally considered cost centers into the realm of profit centers.

Stated simply, a cost center is concerned solely with controlling adherence to a budget. In corporate terms a cost center is charged with managing compliance to an operating cost budget that resides below the gross profit line on an income statement. Balancing your checkbook is managing a cost center. A profit center adds requirements for managing income from sales and cost of goods sold (CGS), called gross profit or gross margin. Those who have been privileged to manage both will agree that managing sales, sales income, and cost of goods sold, above the gross profit line, is considerably more difficult than managing expenses.

I maintain that instead of encouraging efficiency and optimization, the very nature of a cost center contains structural disincentives that work against optimization. Everyone recognizes, and many have experienced, the cost center rewards for working hard to control costs and ending the year well under budget. The amount under budget is added to the planned reduction and the result becomes next year’s objective. That’s the reason there is so much last-minute spending, wise or not, in a cost center. The reward works against optimizing, doing exceptionally well, and ending up significantly under budget.

There is another deficiency in a cost center structure. If you are restricted to managing budgets, why spend money on improvements or opportunities that may have a large impact on profitability at an increase in expenses? A cost center is not a charity.

Since profit is the measure of success in a profit center, investment and even adding operating costs can be allocated to improve efficiency and take advantage of unexpected opportunities to sell more and/or higher quality products. In a profit center, managers have the authority to reallocate existing resources as well as expend additional resources with corresponding accountability for results. A profit center not only makes it possible to justify the expenditure of additional resources in maintenance and operating costs to gain a return at the bottom line but encourages that type of activity.

Managers with whom I have spoken, especially those entering the brave new world of combined operations and maintenance responsibility, are, by experience, typically cost-center oriented. Most like the idea of a profit center, especially the flexibility to shift resources and make investments to gain added value. They are closest to the “big picture” and see the opportunities for agility and flexibility to take advantage of opportunities as both exciting and challenging. I’ve not spoken to a single person unwilling to accept accountability for profit-oriented decisions—provided the authority and rewards for added value are present as well.

Cost center management is really micro management. Cost center managers are restricted. A cost center eliminates any initiative to optimize and, as stated earlier, works against optimization. Profit center management moves in the other direction. Improvements, agility to meet unexpected opportunities, and creating maximum value are all encouraged and rewarded. Some companies are going in this direction. Although they might not be calling their evolving style profit-centered management, the concept, scope of authority, and accountability are identical.

Call the change whatever you like, but choose the direction that leads to optimization. It’s not the stifling atmosphere of a cost center that actively discourages innovation and optimization but rather a profit center mentality that demands innovation and value creation. MT
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3:58 am
December 2, 1998
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Identifying the primary link

bob_baldwinAt the recent executive member meeting of the Society for Maintenance and Reliability Professionals, representatives from host Shell Chemical Co. provided some insight into how they do maintenance and ensure reliability.
One of their tools is total productive maintenance (TPM), which they renamed Total Productive Equipment Management (TPEM). It was renamed to remove the word maintenance from the title. Otherwise, it would be easy for others to think the process doesn’t apply to them because it is a maintenance-only initiative.

To reinforce the importance of the basic equipment cleaning activity in the TPEM process, participants are given a colorful sticker for their hard hats. Around the perimeter of the main TPEM graphic is a chain of functional statements: Clean to Inspect–Inspect to Detect–Detect to Correct–Correct to Perfect–Perfect to Protect.

The chain is similar to the functional analysis processes I learned in value analysis/engineering courses I attended in the 1970s. Value analysis, developed by Larry Miles at General Electric in the late 1940s, is based on functional analysis in which equipment and process functions are described by an active verb and noun-object such as transfer fluid, reduce noise, clean equipment, or correct defects.

The process has evolved to include the functional analysis system technique (FAST) and various charting methods that systematize the relationships among functions to identify the primary function. The FAST diagram format that I prefer organizes functions in a flow-chart that chains secondary functions on the right to the next higher order function to their left.

The question “Why?” is used to pursue higher level functions and the question “How?” is used to collect secondary functions. In the TPEM example, moving from top to bottom in the example list (left to right on the diagram), the question “Why do we clean equipment?” produces the functional answer “To inspect equipment.”

The why question leads up the chain to the highest order function of “protect process.” The how question leads in the opposite direction to succeeding secondary functions. By asking “How do we correct defects?” about the function in the middle of the example TPEM chain, we identify “By detecting defects,” the next secondary function.

Functional analysis is fundamental to most improvement processes. It is unfortunate that so few people learn how to use it. More maintenance and reliability practitioners should use it to pursue the higher order functions that flow from the question: “Why do we maintain equipment?” MT


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6:26 pm
December 1, 1998
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Maintenance Staff Gains Fast Electronic Access To Drawings

Cedar River Paper Co., Cedar Rapids, IA, has piloted a software package that provides the maintenance staff with instant access to all of the drawings and manuals needed to maintain the plant. When fully implemented, the software will also help reduce errors by eliminating the possibility that maintenance staff might use an outdated paper manual to make a repair.

The paper mill recycles 700,000 tons per year of corrugated material and waste paper to produce the inner and outer layers of containerboard boxes. The plant’s containerboard machine #1 produces a swath 600 mi long and 25 ft wide every day of the fluted inner layer of corrugated boxes. Containerboard machine #2 produces linerboard, the outer layer of corrugated boxes. Both operations recycle a mix of old corrugated containers and waste paper. The plant has the capacity to recycle all of the scrap paper produced in Iowa. It employs 220 people.

Documentation problems
The designers of the mill provided thousands of AutoCAD drawings that frequently needed to be accessed during preventive maintenance or an unscheduled repair. Paper copies of these drawings were maintained in a central document control area. The plant was large so walking to the document control area took a considerable amount of time, then there was a wait while the person on duty located the drawing and copied it. The time required to get the drawings needed to fix a machine and return to the work area could easily be more than a half hour.
In addition, the suppliers of equipment to the plant provided several copies of paper binders containing instructions for maintenance and repair. At least one copy of each binder was supposed to be kept in the document control area while the other copies were usually located convenient to the machine. But manuals frequently disappeared from their assigned areas, which meant that the maintenance person had to go to the document control room in search of another copy.
Another problem with the old approach arose when updates to the manuals were received from machine manufacturers. The document control staff did its best to update the copies floating around the plant but often were unable to find every copy, so in many cases out-of-date manuals were used to order parts or perform repairs.

Evaluating alternatives
Cedar River Paper engineers led by Greg Hilton, senior project engineer, looked for a way to provide the maintenance staff with faster access to drawings and manuals. First, they considered a traditional document management solution based on a high-end database. They discovered that the cost of implementing such a solution could easily run well into seven figures including necessary hardware, software, customization, and training. Despite the magnitude of the savings that they were hoping to achieve, it would have been impossible to justify an expenditure of this magnitude.

Then engineers viewed a software package called Paragon Virtual Library (PVL) from FESTech Software Solutions, Findlay, OH, that uses proprietary dynamic pointer technology to provide a structure and access to existing information without requiring a database and deliver up-to-date information and documentation to any workstation on a local area network or wide area network. PVL also allows users to view and print documentation without the need for native applications such as AutoCAD, Microsoft Word, or Excel.

“Demonstrations convinced us that this approach would make it possible to provide instantaneous access to every type of document in the plant and that implementation and training time would be very short,” Hilton said. “The elimination of the need for a centralized database and its simplicity reduced the cost of the system to only a small fraction of what would have been required to implement a typical document management solution.”

Library architecture
Many machine suppliers provided manuals in electronic format that could be imported into the PVL library, and an outside contractor scanned the rest of the machine manuals into electronic format.

The engineers developed an architecture for the library based on the same terminology and concepts that the maintenance staff already used to identify different areas of the plant. Hilton explained that this architecture uses a plan view of the plant as the basic method for locating drawings and manuals. “System users click on any area or machine to access reference materials,” Hilton said. “Once they enter an area they can select from the different disciplines including electrical, mechanical, structural, process, and instrumentation diagrams, and equipment specifications and drawings. They can also select other related files such as Microsoft Excel spreadsheets that are used to store records that document information on each roll such as why it was changed and how long it was.”

The engineers had no difficulty organizing all of the reference materials in the plant in a logical and consistent manner. This eliminated the need for hiring consultants, usually the greatest expense in any document management implementation. It also meant that the people who organized the database had intimate knowledge of how the plant worked.

The pilot showed that the maintenance staff could easily find the documents they needed from personal computers throughout the plant. Many members of the staff who were familiar with computers were able to start using the system on their own without any training. A one-hour class will be put together by the developers of the architecture and this is expected to be all that new users need to become efficient.

Search capabilities
While maintenance staff typically uses the tree structure described previously, the search capabilities of the PVL library provide an alternate approach. Users can enter keywords such as the name of a piece of equipment or its identification number to instantly find documents. For example, if they type in “pulper” they will get a list of all the drawings and manuals that relate to the pulpers in the plant.
Then double-clicking on the line item they are interested in will pull up the drawing or manual through the viewer that is bundled with the product. Once they find the item they need, they can pan around the drawing, move from page to page of the document, zoom into areas of interest, and make a printout to take with them to the work area.

Remote access
The new software will be installed on four personal computers that are already in different areas of the plant. When the maintenance staff member receives a work order, he or she will be able to walk over to one of these computers and locate and print out the drawings needed to do the job in a minute or two. The elimination of the overhead of a high-end database makes it possible for the system to provide virtually instantaneous response throughout the plant even though it runs on inexpensive personal computer hardware and contains about 25 gigabytes of information, nearly all the documentation required to run the plant.

Once the new system is fully implemented, the plant expects to see an improvement in plant operating efficiency, Hilton said. “Machine downtime will be reduced because maintenance staff will be able to get immediate access to the information they need to make repairs. The potential for errors will be reduced by the fact that the system always provides accurate and up-to-date information. Finally, the low cost, ease of implementation, and ability to run efficiently on inexpensive hardware makes it relatively painless to install the system and easy to justify its cost.” MT

Information supplied by FESTech Software Solutions, 807 S. Prospect St., Marion, OH 43302; (740) 375-4497; Internet

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5:22 pm
December 1, 1998
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The Central Issue To Centralize or Decentralize Maintenance

Maintenance through the past several decades was a relatively monolithic central function. It was usually staffed for peak activities, and often had excess capacity waiting for a breakdown to occur. With the advent of international competition in the 1980s, many maintenance staffs were cut dramatically, and over several layoffs became smaller than half their original size. These cuts were often made strictly according to either financial rules (nonunion companies laid off the most senior, expensive workers) or seniority rules (union shops left seniority in place). In neither case were skills and experience the major consideration.

Simultaneous with reducing costs, companies were forced to increase quality, productivity, and safety. These efforts focused on the manufacturing unit, looking to reduce variation in product, reduce production bottlenecks, and assure safe work practices. Quality theory told us to define who our customers are and get close to them. Most plants defined operations as the maintenance customer, and in increasing accountability for operating unit managers, gave them more control of the resources.

The initial result was a surge in machine operability as operations managers directed resources toward chronic equipment problems. The craftsmen dedicated to the units felt needed and like they were making a more direct contribution than before as part of a pool. They learned their unit’s equipment intimately, and became more proficient and committed to unit performance.
What could possibly be wrong with that scenario?

Emerging concerns and limitations
In speaking with maintenance and operating leaders in dozens of plants this past year, we have heard a number of repeated concerns:

  • There is no consistency to how units are performing maintenance.
  • In most cases the dedicated crews are working on schedule breakers because of the ease of deploying them. If there is a plantwide priority system, it has no application to these crews. Rather, work is done to the same urgency as the production schedule.
  • Planners dedicated to units do very little routine planning. Instead they are expediters or on-call supervisors, and when they do plan, it is for outages.
  • Maintenance craft skills are deteriorating. No one in the organization is assuring the continuing development of craft skills.
  • The computerized maintenance management system’s data quality is highly compromised. Some units may use the CMMS, and others don’t.
  • The remaining central force feels alienated from the unit-based maintenance crew.
  • The reliability engineering team (usually those who perform the predictive maintenance function) are frustrated that their success is limited to those units whose managers understand their value.
  • Important measures of planned maintenance, such as percent planned work, schedule conformance, and percent preventive/predictive work, are declining or very stubborn at improving. Operating units have no standard definitions of these measures, and may or may not even measure and record them.

The first question to ask is, “So what?” If the production schedule is being met, is there any cause for concern?

There is, of course, in any industry where cost is a concern. How do you stay ahead of your competition in most businesses? You produce to a quality standard for less than everyone else. No one we’ve spoken with considers current practices to be efficient, even if they are seen as effective.

Is there a better way?
There are three possible options: (1) require operating unit managers to be better managers of the maintenance function and process; (2) recentralize maintenance; or (3) develop an organization that optimizes efficiency and effectiveness.
We can rule out Option 1. Operating unit managers seldom have strong maintenance backgrounds, and would be required to make balanced decisions.

That is possible, but unlikely. Option 2 would bring back the bureaucracy, and would not benefit the overall organization. It may temporarily improve the control of the work (efficiency), at the expense of production (effectiveness).

The answer we suggest is based on centralizing functions that create efficiency and control of work, and decentralizing functions of work effectiveness. See the accompanying section “A Model for Organizing Maintenance.”

Thus, the centralized functions would include work prioritization, planning, and scheduling; preventive and predictive processes; compliance with standards; central reporting; and skills assurance.

The decentralized functions would include response to immediate needs and prioritizing and scheduling area resources.

This organizational scheme would meet both criteria:
Work identification. Only the area can be expected to identify the totality of the work. Problems not recognized do not get attention.

Work prioritization. Prioritization is a shared function. The unit places a relative prioritization on the work. A global system of prioritization must be maintained that works across all units, however, or there is no assurance that resources will be working on the “right stuff.”

Work planning. The planning function is done primarily to improve efficiency. Planned work is typically measured as requiring one-third of the labor time as unplanned work. The best model we have seen is to have planners centrally located, centrally managed, but dedicated to a unit(s). The planner is less likely to be diverted to other responsibilities, and more likely to have the time for careful analysis. There are other benefits. During times such as vacation, there are backups available to plan.

Planning is a discipline that is difficult to achieve and difficult to maintain. It needs to be nurtured and developed carefully. This is the greatest issue to maintenance improvement in most plants.

Work scheduling. Scheduling is a shared function between the dedicated planner, the pool resource manager (usually the manager of central maintenance), and the unit leader/supervisor. The supervisor is free to schedule his own dedicated resources against the planned work (allowing for unplanned work), and will receive additional resources for work that is identified as global priority.
Work documentation. A key to developing a valuable history is complete documentation of the actual work performed. This is done by the craftsman at the end of each job (to avoid the quit early syndrome) and reviewed by the planner for the area. The planner must be the coach to assure that work is documented according to plant standards.

Work analysis. Planners are the only staff in a position to understand and review the work. Part of work analysis is done by simply reviewing the work documentation. Standard job plans may be updated, chronic problems flagged, materials and parts issues noted, and future RCM, FMEA, or root cause analysis needs identified. In addition, planners become very familiar with the analysis and reporting tools available through the CMMS, and can most readily scan history for recurring equipment problems.

Preventive and predictive work. To assure that this work gets done consistently, we have seen the reliability team most effectively used reporting to a central leader. As in planning, these people must become specialists, and learning and helping each other is a key to success. This function would report centrally.

Information tools, reporting, and compliance/performance audits. Providing information tools, such as maintaining the CMMS, reliability tools, making the reports for reliability and Key Performance Indicators (KPIs), performing analysis, and audits are all functions that would have central oversight or be performed centrally.

Area maintenance
One of our clients calls the craftsmen reporting directly to the area “Min. Crews,” short for minimum crews. The concept is that the crew is able to handle the minimum average workload of the unit. One method to identify the appropriate staffing level would be to examine the amount of work done in the units during the 10 weeks of the year in which the least hours are recorded by the unit and staff to that level. The objective is to keep as many staffers available to the central group as possible for outage work, etc., and to staff just enough to keep the units operating at an optimal level.

This group becomes identified with the unit where they work. Their goals have less to do with typical maintenance KPIs which are efficiency and complaince-based, but more directly with the production goals of the unit. As such, they often act as the SWAT team to handle immediate work. They also work on the annoying problems of the unit that would never hit the high priority list of the central priority system.

Their interaction with operators is mutually beneficial. Operators more readily participate in “maintenance” tasks when the crafts performing the work are “their guys.” The craftsmen learn the intimate details and idiosyncrasies of the unit’s equipment, and become expert in restoration of function. In the best cases, they routinely remove the sources of work (chronic problems) from the units.

The downside of this union is twofold. First, the craftsmen are not maintaining their skills because their work is “Jack of all trades.” Second, a schism grows between the area and central groups. We have seen this problem resolved through a periodic rotation of staff through the area.

Scheduling of work is a primary responsibility of the area. This is typically handled in a weekly planning meeting between the unit-dedicated planner, the assigned maintenance coordinator, and the unit production supervisor.

The planner has issued a list of planned work to the parties ahead of time. They come to the meeting with prioritized work lists that they reconcile, creating the work list and schedule for the following week.

Area maintenance has contributed a great deal to the effectiveness of manufacturing among our clients in North America. In many cases, however, these plants have dismantled the central organization. Reestablishing the efficiency and control functions under a central organization can help plants improve the total amount of value-added work contributed by the maintenance staff. MT

Brad Peterson is president of Strategic Asset Management Inc., 28 Hunters Crossing, Burlington, CT 06013; (860) 675-0439; e-mail; Internet

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5:20 pm
December 1, 1998
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Outsourcing as a Viable Alternative

With the present-day emphasis on increasing production while lowering overhead, manufacturers and service providers often turn to outside sources for their predictive and preventive maintenance needs. In Alberta, Canada, Yvan A. Lejeune is an example of how these relationships can work. Lejeune’s clients include oil and gas producers, food and beverage processors, distilleries, mining and forestry firms, and a variety of service providers.

He delivers all services associated with ultrasonics and vibration analysis, including bearing and valve analysis, dynamic balancing, laser machinery alignment, field repairs, and performance and mechanical analysis of engines, steam turbines, and compressors.

“Chiefly, I’m hired for my expertise and high-tech equipment,” said Lejeune. “For a majority of clients we are consultants. In addition, we provide routine inspections of machinery, make repairs, do installations, and solve problems that evolve with machinery in the diagnosis, correction, and repair stages. One of our biggest selling points is that we keep thorough and accurate records of the condition of all equipment, tracking them over time.”

ue-systemsIn conjunction with headphones, the ultrasonic instrument isolates bearing noise from competing machine noises. A data collector can be interfaced with the instrument and the signal can be viewed as an FFT.

Troubleshooting with ultrasonics and vibration analysis
Lejeune uses ultrasonics in conjunction with vibration analysis to pinpoint the exact source of many problems. However, while ultrasonics is a technology with a variety of applications, according to Lejeune, vibration analysis alone is applied mostly to rotating machinery.

One of the most common uses of both technologies is to determine the degradation of bearings. In most situations, a facility is not even aware it is having a problem with worn bearings. But routine analyses on a quarterly basis reveal the problems.
Lejeune said two of the most frequently asked customer questions are: “Is the bearing damaged and in need of replacement, or is it simply a matter of lubrication?” and “How often and how much grease should we use in an electric motor?”

“My answer always is that it depends on the rpm of the machine and its usage,” he explained. “The average customer goes out every three months and gives his motors four shots of grease whether they need it or not. But overlubricating bearings can be even more harmful than underlubricating them. Ultrasonics is the only way of truly determining if the grease has gotten to the bearing safely and economically.”

Lejeune uses ultrasonics in combination with vibration analysis to check for bearing problems. “Vibration analysis alone is not a reliable test to determine bearing damage,” he explained. “Ultrasonics has capabilities outside the range of a standard vibration transducer.”

Equipped with headphones, Lejeune uses his portable ultrasonic instrument (an Ultraprobe 2000 manufactured by UE Systems, Inc.) fitted with a probe to acclimate himself to sounds. An ultrasonic instrument quickly and accurately pinpoints bearing degradation, leaks, or other irregularities that are inaudible to the human ear. By touching the test area with his instrument, Lejeune hears a bearing problem as a grinding sound and observes the intensity on the instrument’s ballistic meter. The closer his instrument is to the bearing housing, the more accurate the reading. Since ultrasonics is a localized signal, a bearing noise can be isolated from competing machine noises. Frequency tuning enables the user to tune in to the resonant frequency of the test subject while dramatically reducing background noise interference.

For further analysis, Lejeune then interfaces the ultrasonic instrument with his data collector, bringing the signal in and viewing it as an FFT. Next, he takes calculated bearing frequencies and superimposes them across the vibration spectrum to determine whether there is a defective bearing or a simple lubrication problem that he can deal with immediately.

Lejeune also uses ultrasonics to conduct valve analyses on large reciprocating compressors and engines. “The ultrasonic signal is brought into a dedicated analyzer set up with a trigger pulse that synchronizes the top dead center of a selected cylinder, either on an engine or compressor, to fire the ultrasonic trace at that position,” he explained. “This enables us to examine the trace and determine whether we have a valve that’s malfunctioning, leaking, slamming too hard, or staying open too long or not long enough.”

Outsourcing pays off
A plant engineer at a major distillery in Alberta reported measurable improvements since Lejeune started a machine analysis program there five years ago.
Production of vodka quality spirit increased from 63 percent to 94 percent by the end of fiscal year 1996 due to fewer equipment failures. Process downtime dropped 55 percent due to reduced maintenance requirements. Call-ins were down 35 percent, and equipment repaired by outside contractors showed improved reliability due to the company’s quality acceptance program. The company also noted improved communications between the production and maintenance departments, according to Lejeune.

Finally, as a result of the program’s success in Alberta, all five of the distillery’s sister plants in the United States and Canada started their own predictive machine analysis programs.

“Clearly, well-managed predictive/preventive maintenance programs are beneficial to a company’s bottom line,” Lejeune concluded. “But when time and staff are in critically short supply to make these programs work, outsourcing makes good financial sense.” MT

Information supplied by Alan S. Bandes, vice president, UE Systems, Inc., Elmsford, NY 10523; (800) 223-1325.

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