Archive | October, 2002

260

1:49 am
October 2, 2002
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Understanding Maintenance Spending

Identify additional costs beyond the expense of keeping equipment operating.

Maintenance groups frequently are asked to perform numerous activities in addition to maintaining equipment and facilities. These activities are important to business functions, but often are not recognized by upper management as spending that is in addition to “maintenance spending.”

It is important to identify these additional costs, and make management aware of their magnitude and impact on the maintenance function. Maintenance group spending can be separated into three categories: maintenance, improvement efforts, and inefficiencies.

Maintenance
Equipment maintenance is, by definition, those activities that keep the equipment operating at current capacity and quality levels. “Maintenance spending” is, then, the costs associated with keeping the equipment and facilities in operating condition.

The maintenance function is charged with accomplishing this at the minimum cost. Those costs include preventive maintenance tasks, repair tasks that return the equipment to operating condition, addressing safety issues, predictive activities, and administrative needs that are operational requirements (e.g., costs of employee vacations). The blend of these activities should be monitored and adjusted over time to minimize spending and optimize uptime and asset condition.

Improvement efforts
Improvement efforts fall into several different categories. Cost-reduction projects are focused on reducing the cost of manufacturing and often involve modifying the equipment or the production process. Upgrades usually are focused on increasing production capacity or product quality, and often are preceded by trials, which can involve spending for temporary installations.

Modifications to the equipment often are aimed at reducing the cost of maintaining or operating the equipment. These may be capitalized or expensed. Major capital projects often have an expense-spending component and usually require support efforts from the maintenance group. There are also some administrative choices made that are designed to impact the business—training, special projects, and communications efforts are examples.

All of these efforts are discretionary by definition and are not “maintenance spending.” That is, the funds are not being spent to keep the equipment at its current level of performance. There is an expectation that spending on improvement efforts will improve the results of the operation through increased quantity, improved quality, or lower costs. So these types of spending are an investment in the future of the business.

As such, all modifications, upgrades, trials, cost-reduction projects, and administrative choices should be justified based upon their planned return on investment (ROI). This requires early identification of an improvement effort as such, and a different work approval process that requires detailing the planned benefit as well as the expected cost. A more stringent approval process that focuses more attention on justifying improvement activities, as opposed to in-kind repairs, is recommended.

Inefficiencies
Inefficient use of resources is likely to occur in all aspects of the asset management function. Overmaintaining equipment, waiting and travel time for employees, ineffective use of resources due to lack of planning, modifications and improvement efforts that have no payback, nonproductive meeting time, and many others will lead to poor utilization of resources. Managers should be sensitive to potentially wasteful activities and practices and work to eliminate them.

The potential causes of inefficiencies are, unfortunately, common in many workplaces. Poor work practices are a common cause of wasted resources because work practices, if not consciously reviewed and improved, can evolve into accepted practices that waste time and money on a daily basis. Lack of discipline in reviewing and approving upgrade, modification, and improvement efforts can cause many activities to take place that do not improve results, and sometimes lead to a negative business impact.

Finally, having too many maintenance or engineering resources can lead to inefficient and ineffective spending. These employees are going to stay busy and work to fill their time as usefully as they know how. This often means spending on activities that should not be done or are done more frequently than needed.

Management options
Capturing all asset care activities in a work order system will aid analysis efforts. Most work order systems will support categorizing work orders into work types. Capturing work performed into multiple work types that identify them as maintenance activities or improvement efforts will aid in understanding how the budget is being spent.

When these categories are identified, having approval processes in place based upon work order type and cost can lead to the appropriate scrutiny of the work being anticipated. Predictive, preventive, and administrative activities should be reviewed and approved annually to help establish the baseline for the budget. Repair-in-kind and safety issues are work types that should not require many levels of approval, unless the cost is quite high. All improvement efforts, however, should be subject to a disciplined approval process that ensures the spending will lead to a return.

At the same time, a closeout process should be established for modification work that ensures the equipment databases are updated at the conclusion of the work. Stores information, drawings, bills of material, and equipment histories should be updated when modifications occur to the equipment.

Establishing what is truly “maintenance spending” as opposed to other types can lead to understanding the cost of asset care for a particular production system. When a company has multiple systems that are similar in form and function, understanding these costs can lead to internal benchmarking as an improvement process.

Identifying and controlling discretionary spending can lead to better management of spending and staffing levels. It also can lead to better understanding of the demands on the maintenance group for all the activities that are in addition to equipment maintenance. MT


David E. Liddle is president of Liddle & Associates, 18210 Enchanted Rock Trail, Humble, TX 77346; (713) 204-7492

Three Categories Of Spending

1Maintenance

Reason for spending: activities necessary to keep the asset running at its current capacity and quality level

Required or optional: required for continued operations

Types of activities: repair in kind, preventive tasks, predictive tasks, resolving safety issues, administrative needs (vacations, safety meetings, etc.)

Causes: business needs

2Improvement efforts

Reason for spending: activities that provide increased capacity, capability, or quality, or reduce the cost of production

Required or optional: optional discretionary spending (ROI should be calculated)

Types of activities: modifications, trials, upgrades and improvements, support for capital projects, expense portion of capital projects, cost-reduction projects, administrative choices (training, special projects)

Causes: business choices

3Inefficiencies

Reason for spending: ineffective work practices and activities that have no payback

Required or optional: optional discretionary spending (no ROI)

Types of activities: overmaintaining, modifications and improvements with no payback, unanticipated spending on capital projects, poor planning, travel time and waiting, nonproductive meetings and events

Causes: poor work practices, lack of discipline to calculate ROI, too many maintenance or engineering resources

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804

9:42 pm
October 1, 2002
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Maintenance and Reliability Practices Study

What MAINTENANCE TECHNOLOGY readers are saying about how they measure success, barriers to better maintenance, and outsourcing strategies.

What are the most important issues facing maintenance and reliability management?

What are the perceived barriers to success?

What functions are most likely to be outsourced?

To find the answers to these and other questions about the practice of equipment reliability, maintenance, and asset management, MAINTENANCE TECHNOLOGY and Rockwell Automation surveyed a sample of MAINTENANCE TECHNOLOGY readers.

We found that equipment reliability issues have been gaining importance, that maintenance and reliability improvement is most constrained by limited resources (manpower and budget), and that equipment maintenance is the least likely activity to be outsourced. It was found that uptime is the most often used measure of performance of maintenance and reliability activities, and that maintenance cost reduction was the least used measure. Other often used performance measures are equipment availability and overall equipment effectiveness.

Survey findings are outlined in the section “Current Maintenance Practice.” Information on survey methodology is reviewed in the secations “How the Survey was Conducted” and “Who Responded to the Survey?”.

Here is a point-by-point discussion of survey results covering maintenance responsibility, performance indicators, major issues affecting maintenance performance, and outsourcing strategies.

Uptime responsibility

In addition to maintenance and reliability, which function is most responsible for production equipment uptime? That was the first question on our survey. Operations was the top pick, by almost three to one—60 percent of respondents cited operations, followed by engineering at 22 percent and plant management at 14 percent.

Project involvement

Maintenance and reliability leadership plays a prominent role in decision-making for plant strategies and projects. According to respondents, department leaders are usually involved or always involved in plant improvement decisions 79 percent of the time; capital projects, 73 percent; equipment asset management, 73 percent; productivity improvements, 67 percent; and outsourcing, 64 percent, as noted in Fig. 1.

Team effort, mostly
Production equipment management and reliability is a team effort in most plants. As can be seen in Fig. 2, when it comes to production equipment management and reliability issues, maintenance/reliability, engineering, operations, and plant management groups are involved frequently or all the time in more than two-thirds of the cases. Finance, purchasing, and corporate management are involved significantly less.

As expected, the maintenance and reliability function is more involved—two-thirds of the respondents saying this group is involved all the time. Similarly, about one-third of engineering, operations, and plant management groups are involved all of the time.

Uptime is king
Success is most often measured by one metric: Uptime. Of the performance measures offered, more than two-thirds of the respondents indicate that the primary measure of success is related to equipment performance: Uptime at 36 percent, availability at 18 percent, and overall equipment effectiveness at 15 percent. As can be seen from Fig. 3, the financial and work process metrics of preventive maintenance schedule compliance, budget compliance, work backlog, maintenance cost reductions, and storeroom inventory levels are less often used.

Most important issues
Of the important issues facing plants, health and safety takes its rightful place as the most important. It is followed closely by equipment reliability and improving uptime.

Respondents were asked to rate the importance to their company of 10 issues on a five-point scale: not important, marginally important, important, somewhat important, and very important. The tallies for somewhat important and very important ratings are displayed in Fig. 4.

The six top-ranked issues, all with somewhat-very important scores of more than 80 percent are: health and safety (92 percent), equipment reliability (88 percent), improving plant/facility uptime (88 percent), improving quality (85 percent), environmental compliance (83 percent), and cutting manufacturing costs (82 percent). Lesser ratings were given to optimizing machine performance, maximizing utilization of plant equipment, integrating MRO into the supply chain, and continuity planning/disaster recovery.

More intensity now
Three years ago, respondents say, the six most important issues were the same. Equipment reliability was the 5th most important issue then. It is the 2nd most important issue today.

Although the top issues remained the same during the past three years, their importance has grown. The six top issues, ranked in order of their relative increase in “very important” responses from three years ago and now, are equpment reliability (105 percent), improving quality (86 percent), improving plant/facility uptime (82 percent), cutting costs (78 percent), environmental compliance (71 percent), and health and safety (58 percent). The relatively small increse in health and safety is explained by its importance three years ago when it lead all other categories by 10 points.

Room for improvement
Survey respondents spend more than three times as much effort on reactive maintenance as they believe they should. That was the result of a survey question asking participants to indicate the amount of time their company currently spends in reactive maintenance, routine/preventive maintenance, condition-based/predictive maintenance, and shutdown/turnaround work and how much time should ideally be spent in those categories.

The breakout for current work was 40 percent reactive, 32 percent routine/preventive, 15 percent condition-based/predictive, and 13 percent shutdown/turnaround. Ideally, respondents felt that only 12 percent of work should be reactive, and that routine/preventive should be boosted to 44 percent and condition-based/predictive to 33 percent. These figures are shown graphically in plot in Fig. 5.

Barriers to improvement
Lack of resources is the major barrier to implementing a more comprehensive asset management program. Over half of respondents identified lack of manpower (53 percent) as a major or insurmountable barrier followed by budgetary restraints (47 percent). Lesser barriers were: too busy reacting to machine problems to be proactive/strategic, lack of management understanding of maintenance strategies, level of maintenance employee training, and not sure how to justify improved best maintenance practices. The relative importance is shown in Fig. 6.

Justifying new equipment
To justify new equipment or process expenditures, most respondents rely on anticipated productivity improvements or return on investment. The survey asked respondents to select one or two of the following justification approaches: productivity improvement (54 percent), cost savings (38 percent), return on investment (50 percent), return on net assets (9 percent), and payback (24 percent).

Outsourcing strategies
Operations such as boiler/HVACR maintenance and facility management are commonly outsourced, while equipment maintenance is the least likely to be outsourced. Respondents were asked to rate their outsourcing of various functions by frequency: never, rarely, sometimes, frequently, and all the time. Functions outsourced frequently or all the time, in decreasing order, are boilers/HVACR maintenance (42 percent), facilities management, including building and grounds (42 percent), instrument maintenance (23 percent), equipment repair (18 percent), reliability analysis (15 percent), condition monitoring analysis (13 percent), storeroom and inventory management (11 percent), operations labor (10 percent), and equipment maintenance (7 percent).

The most common reasons cited for outsourcing equipment maintenance and reliability or repair activity are manpower (74 percent) and limited skills or experience (58 percent). Other reasons checked: not a core competency of the organization (33 percent), cost reduction (25 percent), regulatory compliance (25 percent), liability issues (22 percent), experience with outsourcing activities (19 percent), and greater accountability (7 percent).

When selecting an outsourcing vendor, respondents put knowledge at the top of the list of considerations. They rated considerations on a five-point scale: not important, marginally important, important, somewhat important, and very important. The ranking, in descending order by the proportion of respondents selecting somewhat important or very important are: knowledge (86 percent), experience (82 percent), performance (78 percent), business relationship (70 percent), reputation (69 percent), cost (55 percent), other available products and services (43 percent), and recommendation/referral (34 percent).

Measuring outsourcing success
Although cost issues are well down the list of reasons for outsourcing and vendor selection considerations, cost saving is the most popular method companies measure the success of outsourced equipment maintenance and repair activities. When asked to check the ways they measure outsourcing success, 62 percent checked cost saving, followed closely by overall equipment effectiveness at 57 percent and improved uptime also at 57 percent. Other success measures were return on investment at 32 percent, ability to apply predictive and preventive maintenance measures at 31 percent, and return on net assets at 9 percent.

Opportunity
We hope the survey results reported here can be used to help maintenance and reliability professionals and their peers in industrial plants and major facilities identify opportunities for improvement.

Overall, it is a call for action. It is the author’s opinion, after reviewing detailed survey data, that many maintenance and reliability organizations are caught in a bind. On the one hand, they recognize that the barrier to a more comprehensive maintenance process is lack of manpower and money. On the other hand, the only way to get more done with fewer people and less money is to install a comprehensive maintenance process with robust planning and scheduling capabilities.

The answer seems obvious—without positive change, the situation will continue to deteriorate. And positive change will probably not be possible without the commitment of additional time, money, and manpower. If done intelligently, there should be an attractive return on the investment.

As one maintenance sage once said: “Good maintenance costs money, but poor maintenance costs more.” MT


For further information about the survey, contact Robert C. Baldwin, MAINTENANCE TECHNOLOGY; (847) 382-8100; or Howard Mars, Rockwell Automation, Milwaukee, WI; (414) 382-0153

Current Maintenance Practice

Here are highlights from our survey:

  • Besides maintenance and reliability, 60 percent of respondents cited operations as the department next most responsible for ensuring production equipment uptime.
  • In more than two-thirds of plants, maintenance and reliability leadership is significantly involved in plant improvements, capital projects, and productivity improvements.
  • Production equipment management is a team effort. In many plants, engineering and operations are always involved (33 and 32 percent, respectively), but that is half the rate of maintenance and reliability.
  • Uptime is most often used by 36 percent of respondents to measure performance of maintenance and reliability activities. Other measures are equipment availability at 18 percent and overall equipment effectiveness at 15 percent.
  • Maintenance cost reduction is the most often used performance measure in only 5 percent of plants.
  • Health and safety is the most important issue in most plants—92 percent rank it somewhat or very important.
  • Equipment reliability is the second most important issue, up from fifth place three years ago. It is ranked somewhat or very important by 88 percent.
  • Limited manpower is cited as the number one barrier to the implementation of a more comprehensive asset management program—53 percent rank it as a major or insurmountable barrier.
  • Plants spend 40 percent of maintenance effort on reactive tasks, but see 12 percent as the ideal amount.
  • Boilers/HVACR and facilities management are the most likely functions to be outsourced—42 percent of plants do it frequently or all the time.
  • Equipment maintenance is the least likely function to be outsourced—7 percent of plants do it frequently or all the time. However, the figure for equipment repair is 18 percent.
  • The major reasons for outsourcing maintenance and repair activity are limited manpower and skills—74 percent of plants checked manpower, 58 percent checked limited skills/experience.

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How The Survey Was Conducted

Survey objectives

The survey was conducted to identify key issues facing maintenance and reliability management and assess needs and expectations with respect to asset management, as well as to determine opinions about outsourcing of maintenance functions.

Survey methodology
Potential participants, drawn on an nth name basis from a target list of MAINTENANCE TECHNOLOGY subscribers, were invited via e-mail to complete a 19-item online survey. Five items were directed at determining the demographics of the respondents, ten items to drawing out practices and opinions of maintenance and reliability personnel, and four items to learning about respondents’ opinions regarding outsourcing. A copy of the questionnaire can be viewed at www.mt-online.com/special/survey0205.

Because the survey was aimed at maintenance and reliability management, the target list was limited to subscribers in job responsibilities described as corporate/multiplant, plant/facility managers, and maintenance/reliability managers. The list was further segmented by business classifications: Raw materials processing industries, OEMs of manufacturing systems, transportation and communications (including aircraft, automotive, and shipping), instrumentation and control equipment manufacturers, fabricated metal and miscellaneous manufacturers, and utility services (electric, gas, water works, and sewage plants).

Survey response
E-mail invitations to participate in an online survey were sent May 6, 2002 to approximately 960 MAINTENANCE TECHNOLOGY subscribers. A reminder was sent on May 13 to those who had not yet responded. A second reminder was sent on May 15.

When the survey was closed on May 17, slightly more than 23 percent (229) of the 978 people invited (including pretest participants) had responded.

Survey sponsors
The survey was sponsored by MAINTENANCE TECHNOLOGY magazine and Global Manufacturing Solutions Group, Rockwell Automation, a global industrial automation company with headquarters in Milwaukee, WI.

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Who Responded To The Survey?

More than 80 percent of the respondents worked in maintenance and reliability (67 and 14 percent, respectively) followed by plant management (6 percent), production or operations (6 percent), engineering (3 percent), and information technology (1 percent). All the respondents, regardless of department, are involved in maintenance and reliability because that is one of the qualifications for receiving MAINTENANCE TECHNOLOGY magazine at no charge.

Respondents’ function roles were varied: 40 percent were in management (corporate, plant, maintenance, or engineering), 20 percent were in supervision, and 31 percent were engineers and technicians.

Large and small companies were represented. Nearly half the companies (47 percent) had annual revenue exceeding $1 billion.

Maintenance budgets ranged from less than $500,000 (22 percent) to more than $8 million (19 percent).

Respondents represented a variety of industries including petrochemical, food and beverage, electric utilities, and automotive.

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To what degree is your department leadership involved in decision-making for the following activities?

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Fig. 1. Maintenance and reliability leadership plays an important role in decision-making for a variety of plant initiatives.

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Within your facility, to what degree are the following groups involved in production equipment management and reliabiliy issues?

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Fig. 2. Production equipment management and reliability is a team effort, with maintenance playing the key role.

 

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At your plant, which of these is most often used to measure performance of maintenance and reliability activities?

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Fig. 3. Uptime or the associated performance metrics of availability and OEE are used by more than two-thirds of the respondents.

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How important are each of the following to your company today?

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Fig. 4. Health and safety leads the list of important issues facing maintenance and reliability personnel.

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How would you allocate the percentage of time your company spends on each equipment maintenance activity?

1002_rockwell_5

Fig. 5. Respondents spend 40 percent of their time with reactive work, but believe it should be only 12 percent.

 

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How much of a barrier are each of the following in preventing your company from implementing a more comprehensive asset management program.

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Fig. 6. Lack of resources (manpower and budget) poses the strongest barrier to maintenance and reliability improvement.

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203

8:44 pm
October 1, 2002
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Honoring the Schedule in Spite of the Plant Burning Down

In spite of the plant burning down? Well, not really. But victories are won on the shop floor every day by honoring the schedule even when new reactive work arises.

The operator and the maintenance supervisor are teammates and both have to work together on this issue. Neither must lie down and get rolled over.

Consider this scenario.

At 8:00 in the morning, the maintenance supervisor answers the “emergency” phone call this way.

“Hello? … Send some mechanics right now? Well, for an emergency, I certainly will, but can it wait until next week? Then the planner can plan the job and schedule it for next week. I’m already working on this week’s schedule. We made a commitment to Operations for the work we would try to accomplish this week to help reach a productivity goal. & You didn’t know about this job last Friday? That’s okay. That’s why we have operators to know when things happen. But do you think this job can wait until next week?

“… It can’t? Well, can it wait until tomorrow? Then the planner can plan it and I’ll work it into tomorrow’s schedule. I’ve already assigned everyone on my crew enough work for today to ensure each person does a full day’s work. That’s our productivity key. I’d sure hate to start reassigning folks. Can it wait until tomorrow?

“… It can’t? No problem. But can it wait at least until this afternoon? Then the planner can still plan it by looking in the equipment file to see what we did last time and make this job run smoother. Also, the planner can take a quick look at the job site and see if we need a special skill set. I’d hate to assign a mechanic if the job requires a certified welder. The planner can also estimate how long the job should last so I can coordinate this job with all the other work. Can it wait until this afternoon?

“… It can’t? I understand. Well, how about if I start it at 10 o’clock? A couple of mechanics already working on jobs now should finish about 10:00. Otherwise, interrupting a job in progress means spending extra time putting away parts and tools so they won’t be lost or time won’t be wasted later trying to remember what went where. Then no one’s work gets done. Look, can this job wait until 10:00?

“… It CAN? That’s great! Okay, 10:00 it is. Give me the work order number. … What? … Of course you have to write a work order for everything, even a ‘come-in-the-middle-of-the-night’ emergency. I guess if you radioed me from the field about a fire, I would enter a work order for you while I was radioing my crew to scramble. But you’re in the control room. Go ahead and call up the work order module, press ‘insert,’ and tell me the work order number. Then you can fill out the request while I go and tell the mechanics. … Oh yes, we need the work order even if we don’t plan or schedule it. This work order will allow the mechanics to record feedback. Inventory parts and anything else we learn about the job will be useful next time we work on this equipment. We don’t want to re-invent the wheel for anything. Plus, you can’t do any kind of equipment analysis if you don’t collect the information during the year on work orders. … Okay, got it. We’ll take care of it.

“And listen, by the way, I don’t mean to give you a hard time about this emergency and work order thing. I want you and anyone else to call me immediately anytime for an emergency or other problem. I’d be glad to reassign my entire crew at a moment’s notice if I have to in order to handle an emergency. But if every week we drive seriously toward completing a week’s worth of work, we can usually get everyone’s work done in two or three weeks.

“And if we ever drift back into simply waiting for operators to call with urgent work, we tend to take care of just that work and then sit back on our heels feeling we’ve ‘done our job.’ Then productivity drops and anyone who wants anything done in a reasonable amount of time has to call and say that he has an urgent job.”

There were several victories in this conversation between operator and maintenance supervisor.

Victory for the operator insisting on assurance of the proper response to the true priority of the work.

Victory for the supervisor keeping the crew working as productively as possible under the circumstances.

Victory for culture. MT


Doc Palmer, PE, CMRP, works in the maintenance department of an electric power station. In the early 90s, Palmer was responsible for overhauling the existing maintenance planning organization. Publisher McGraw-Hill subsequently sought out Palmer to author the Maintenance Planning and Scheduling Handbook published in 1999 and now in its fifth printing.

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188

8:39 pm
October 1, 2002
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Just Getting Started

bob_baldwin

Robert C. Baldwin, CMRP, Editor

Interesting thing about anniversaries, the ones that end in zero always seem to trigger more memories than the others. As I look forward to the Tenth Annual SMRP Conference October 27-30, 2002 in Nashville, TN, my thoughts are drawn to the organization’s first conference, as well as the 18 months that preceded it.

Representatives of 20 companies met March 23-24, 1992 at the Chicago Ritz Carlton Hotel to lay the groundwork for a new professional organization: The Society for Maintenance & Reliability Professionals (SMRP).

The group, assembled at the invitation of HSB Reliability Technologies and MAINTENANCE TECHNOLOGY magazine, developed a mission statement and organized committees to develop bylaws and membership criteria, nominate officers, and plan society activities such as a conference.

In October, a year and a half later, the group held its first conference in Nashville. It was superb, with three concurrent tracks packed with informative sessions. Perhaps the most important ingredient of its success was that the program was developed by practitioners for practitioners. That is mostly still true today.

The conference, as well as its sponsor, has continued to grow and thrive. Attendance this year is expected to reach 500 people, and SMRP has nearly 1000 individual members and 100 executive (company) members.

This is truly great progress, but it is only a drop in the bucket. There are more than 160,000 industrial sites in the United States, plus thousands of commercial and government sites, all with some type of maintenance organization.

SMRP has done a great job of getting top maintenance organizations together to discuss best practices. But where are the others?

How many potential members are there? If the distribution of best practices follows Pareto’s 80/20 rule, 80 percent of the best practices “wealth” is “owned” by 20 percent of industrial sites. That means 32,000 industrial sites possess significant best practices and would have much to contribute. So SMRP’s membership directorate has plenty of opportunity.

Speaking of opportunity, I hope the editorial staff of MAINTENANCE TECHNOLOGY magazine will have an opportunity to meet you in Nashville this month at SMRP’s Tenth Annual Conference.

If not, I hope you consider yourself among the top 20 percent and will sieze the opportunity offered by SMRP to share maintenance and reliability best practices at future conferences, workshops, and meetings. MT

rcb

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