Partnering with your company to aggressively pursue reliability excellence will pay off all the way around. This maintenance expert shows you how it can be done.
Equipment reliability is a cornerstone of production stability and a primary driver of maintenance costs. “Reliability excellence” is the sustainable ability to manufacture products safely while meeting specifications and optimizing performance. Companies that successfully pursue reliability excellence can achieve remarkable improvements in their manufacturing performance. In maintenance alone, top performers’ costs are 10% to 15% lower than those of average performers – and 25% to 30% less than those of fourth-quartile performers. But, that’s just the tip of the value-creation iceberg. Even more importantly, highly reliable companies make better employers, better business partners and better community citizens.
Most companies in continuous process industries, however, do not recognize how crucial reliability is in gaining a competitive edge.Even when they do, few are able to capture its potential.The ones that do employ a holistic operating system that strengthens technical abilities, deploys disciplined management performance practices and establishes the right mindsets and behaviors from the executive suite through to the shop floor (Fig. 1). In addition, they aggressively pursue all three elements in an integrated way. These companies maximize equipment availability and optimize production levels. Their operating costs drop significantly because equipment failures are less frequent and worker productivity rises. Product quality improves because stabilized production operations eliminate the variations caused by frequent shutdowns and restarts. Increased stability also minimizes environmental problems such as air emissions and wastewater discharges. Plant safety performance also rises due to enhanced maintenance planning, coordination and execution that reduce unsafe, reactionary practices.
Furthermore, as these companies reach world-class reliability, their freedom in operating their facilities soars. This flexibility allows them to seize marketplace opportunities, increase revenues and further enhance their reputations. For example, a well-regarded and profitable European-based materials company uncovered hidden capacity across its network of facilities that equaled the production capacity of an entire plant. A global petrochemical producer optimized profitability by shipping its product to customers from its most cost-effective site.Not only that, its network’s reliability allowed this company to benefit from its competitor’s inflexibility. By providing products to the competitor’s customers when they needed them, the company enhanced its industry reputation as a preferred supplier.
Why we hear so few success stories
Some organizations never get beyond “fix it when it breaks”for their maintenance strategy. As a result, they become excellent firefighters–but they never develop the ability to eliminate defects based on root causes. One case in point: while a major North American pulp & paper manufacturer is adept at minimizing the length of unplanned downtime, it has never tried to reduce the frequent outages that drive that downtime. As a result, its maintenance costs remain substantially higher than best-in-class.
Another driver of this lack of success is that many companies still view maintenance as a “necessary evil.”At a major European steel mill, this approach was partially responsible for decreases in upstream production performance. In just a few years, overall equipment effectiveness (OEE) dropped by more than five percentage points–falling from an industry average level to substandard performance. As OEE decreased, production levels dropped and maintenance efforts focused solely on repairs and quick fixes to manage costs. The result? A vicious cycle of decreasing stability in the production process doubled unplanned downtime, negatively affecting yields, quality and costs.
The offshore platform of a global oil company provides another sobering example of the damage this view can cause.When crude prices dropped–as did the company’s profits–the platform cut maintenance spending significantly. This resulted in lower routine maintenance levels and more emergency repairs the year after the cuts. These unplanned shutdowns wreaked havoc with production schedules and pipeline flows.Within three years, reliability levels had dropped substantially and maintenance costs had surpassed the original spend. Even worse, missed and late shipments had seriously damaged the company’s reputation as a supplier.
How a company goes about avoiding the previously mentioned risks, achieving reliability excellence and gaining that much-sought-after competitive edge depends on its starting point. Companies that need to stop a performance decline often rely heavily on quick, simple, technical improvements, supplemented with some changes in management processes and mindsets. Conversely, those seeking to institutionalize their best-practice performance usually focus on enhancing management practices and mindsets, while continuing to pursue technical improvements (Fig. 2). No matter the starting point, successful companies all adopt a broad perspective. They pursue the previously described integrated approach that strengthens technical capabilities, applies more effective management practices and changes mindsets and behaviors. This ensures that they capture the maximum value afforded by reliability excellence.
Strengthening technical capabilities
Successful organizations start by improving maintenance efficiency and then using the freed resources–personnel and operating savings–to increase effectiveness (Fig. 3). Successful companies improve efficiency by:
- Using disciplined planning and scheduling to ensure that the right people use the right approach do the right jobs at the right time. Planners create detailed work plans with the specific steps, parts, and resources required for each job. Schedulers then use these plans to sequence the work and coordinate the multiple resources required.Weekly commitment and look-back meetings ensure that teams know what needs to happen in advance and that they identify learnings to improve future performance. As execution improves, schedules move from a few days outlook to forward-looking robust plans covering a 2- to 3-week horizon, further enhancing efficiency. A world-leading aluminum smelter in Canada plans 95% of its routine maintenance jobs and achieves a 90% schedule adherence rate. Overtime rates also are extremely low – only 2% of total maintenance hours.
- Standardizing and constantly improving work practices by codifying and disseminating best practices for each job. Feedback loops between mechanics and planners make it possible to improve future work plans and increase the mechanics’ skills.Companies audit jobs–e.g.,with videotapes – and leverage the results in brainstorming sessions that help streamline work plans for high-frequency jobs such as maintaining/ operating pumps in chemical plants and cranes in steel mills and aluminum smelters. These plans aren’t just more efficient–they serve as powerful training tools.A global steel producer reduced the duration of its weekly maintenance shutdown by 15%,without lowering reliability by applying and optimizing critical-path planning and creating a shutdown coordinator role. Successful companies improve effectiveness by:
- Building reliability into plant design to optimize equipment performance. By integrating reliability thinking and maintenance expertise into the initial design process and examining the total cost of ownership (the lifetime cost including repair costs and downtime losses), a European packaging manufacturer was able to reduce the maintenance costs of a critical line by 20% when compared to historical costs on similar equipment.
- Creating a tightly focused equipment strategy to minimize breakdowns in critical equipment and improve safety, environmental and cost performance elements. By developing preventive measures for this equipment, companies can reduce expensive emergency work and improve performance.Most companies under-maintain highly critical assets (usually 10% to 15% of the total) while over-maintaining non-critical ones.
Applying disciplined management practices
Tailored organizational structures improve consistency, efficiency and capability.However, best practice companies also establish rigorous performance management practices that measure site reliability performance versus selective key targets, and motivate employees and contractors to meet these targets. They:
- Use organization structure to optimize resources and build trust. A large U.S. refinery reaped a multitude of benefits by moving most mechanics into a single pool and centralizing staffing and leadership.A handful of unit-based mechanics and production maintenance coordinators responded to emergencies and ensured unit-specific needs were met. The result?Maintenance labor costs fell by $2 million to $3 million annually.At the same time, the responsiveness rate rose and a more unified, standardized maintenance approach emerged. The closer interaction between mechanics developed their skills more quickly, while performance improvements increased the trust between production and maintenance.
- Leverage performance management to reinforce reliability objectives. The heart of successful performance management lies in the employees’ ability – and desire – to translate goals into day-to-day actions. Companies must use a combination of key performance indicators (KPIs) to reinforce and reward the right behaviors. For example, at a major European steel producer’s melt shop, close monitoring of KPIs for planning and scheduling optimized maintenance schedules and increased mechanics’ productivity. In only eight weeks, the share of planned activities grew from 70% to 90%, and schedule adherence, which had not been previously monitored, increased from 75% to over 85%, a significant improvement. For another example, consider how a North American automotive steel producer is using creative contracts and variable pay to align maintenance partners’ goals with the site’s priorities. Partners can earn up to a 30% premium if they meet or exceed the goals; if they do not, they can incur a 5% penalty.Availability, quality and uptime have already improved.
- Leverage people development to enable trust and collaborative behavior. A North American- based global aluminum producer hires employees based on their ability to live the site’s values. Because they are expected to build multiple skills, they receive up to 900 hours of specific skill training upon joining the organization. They are encouraged to maximize their value to the organization by alternating between production, maintenance and other plant positions throughout their careers— which builds win-win conditions for employees and the company.
Establishing the right mindsets & behaviors
For performance improvements to last, employees must be owners of reliability—not mere participants. Achieving this takes time. It also takes company commitment to creating a culture of reliability excellence—whether through learning, leadership example or support for operations employees. Only then will improvements last and “us versus them”barriers between maintenance and production fall.
Although tactics differ, we find that bestpractice organizations share certain guiding principles:
- Values are more important than technical capabilities. A global metals producer recruits people who “know how to be rather than how to do,”believing that behaviors make a greater difference than technical skills. The company’s well-established recruiting process evaluates six core values: ownership, accountability, teamwork, autonomy, communications and flexibility.
- Production operators care for and own their equipment. In the best companies, line operators inspect, clean, and paint; some even decorate their equipment with family pictures. The real value of these activities does not come from lower costs – although this happens. Rather, it comes from recognizing that the operators know their equipment best and that these activities help them anticipate and resolve reliability issues.
- Production and maintenance are trusted partners. In poor-performing operations, finger- pointing tends to be the norm between the two functions. In the average company, the functions see their relationship as a suppliercustomer one. Best-practice companies, on the other hand, have developed real functional partnerships through transparent maintenance processes, joint accountability and aligned incentives. They recognize that both areas are equally critical in driving performance.As one metals industry plant manager eloquently put it, “Production produces ingots. . . maintenance produces uptime.”
Pacing yourself In summary, companies that aggressively pursue reliability excellence can achieve significant performance improvements, increasing uptime and flexibility while reducing maintenance and production costs.
Remember, though, that regardless of the starting point, reliability transformations take time—time to develop strong technical skills; time to create rigorous management practices; time to instill ownership for maintenance throughout operations. Therefore, continuous process operations need to pace themselves so they can tackle all three integrated elements discussed in this article (Fig. 4) and become top performers in their industries. MT
Alan Osan is a practice expert in the Manufacturing Practice of McKinsey & Company, where he focuses on operational and reliability transformations in the process industries, including chemicals, energy, refining, pulp & paper and utilities. Prior to joining McKinsey, he had held a number of increasingly responsible senior positions in the chemical industry–most notably with NOVA Chemicals and ARCO Chemical Company–during a career spanning more than 25 years. Telephone: (412) 804- 2777; e-mail: firstname.lastname@example.org