Why You Should Not Calculate A Return On Investment Based on Wrench Time
More often than not, maintenance organizations that reach out to me have the same reasons to start looking at the planning and scheduling section of their maintenance process. They are either looking to address the lack of insight in resource availability, out of control backlog or management pressure to reduce the maintenance budget.
At present, over 75% of all business cases for planning and scheduling software are initiated with the sole focus on wrench time improvements that can be achieved with a scheduling solution (and perhaps process review).
It’s common industry knowledge that the average Hands on Tool Time (HOTT) or wrench time for a company is between 25% and 35%. Companies using best practice planning and scheduling processes report a wrench time of 60% and up. So where do these companies make up this difference?
Sooner or later this is going to attract the attention of upper management and C-level executives, especially in today’s optimization/savings focused economy.
It’s no wonder, if you calculate that for a workforce of only about 100 craftspeople, the potential savings of 35% quickly adds up. If we assume an average craftsperson costs $65,000 and calculate 35% savings for 100 craftspeople, the annual savings adds up to, hold your breath, $2,275,000 each year for just one site! From a management point of view, these savings go straight back up to the EBIDTA.
It’s easy to see why so many companies opt for HOTT improvements to justify their need for a planning & scheduling solution.
It’s fundamentally wrong and here is why.
Take an average chemical site for example (any large industrial site will work though), if you ask their CEO about the company’s mission statement for the year, you will likely get a nice marketing story that boils down to one thing: Sell more stuff.
If you dig a little deeper, you will probably also learn that he would like to sell more product AND spend less to make that product, while still maintaining the highest quality possible. At no point will you hear something about making sure that his 100 or 1000’s craftspeople throughout the company have enough work to do throughout their workday. Obviously, your company is not in the business of keeping employees busy for the sake of being busy, so why focus on it?
If things never broke down, there would not be a maintenance organization.
You may ask, “Isn’t $2,275,000 in savings good enough?”
It all depends on your corporate and maintenance strategy. In rare cases this strategy is acceptable. If your company is laying off employees systematically and/or production is significantly lower than normal and if you don’t want the quality of the maintenance support to decrease, simply optimizing your crafts people’s productivity can prove to be useful in the short term.
For the sake of argument, let’s assume the more likely case is that you are filled up with production orders and are firing on all production cylinders.
Each day of unplanned downtime will be very costly. If you can adopt a mature planning and scheduling process, supported by a solution that provides insight and allows for fast decision making you can use that 35% additional workforce to even greater good.
External contractors are costly. You could be looking at twice or sometimes-even triple the cost compared to internal resources depending on your service contract, contractor skills and duration. Having the right scheduling tool will give you the insight not only in the optimization of the work, but also in who is best suited to perform the work. While doing this we often see that a good 10% of your contracted work can be moved back to your internal resources, in effect doubling your savings.
NOTE: By scheduling out your contractors to a LEVEL resource load you will get a happier contractor and have the possibility to negotiate better terms.
So let’s assume you are improving 10% on your wrench time for that same amount of resources. This would be a $227,500 annual save. 10% of contactor work cost is double that: $455,000. By simply moving the work, you doubled your saving. Your business case is now not wrench time savings but contractor cost reduction.
You still have a potential 25% increase of labor to work with:
- Perform opportunity maintenance
- By having insight in the work orders coming down the line you can make use of opportunity maintenance and reduce the cost of work dramatically!
- Move from a reactive to a planned environment
- A reactive Work Order is about 7 to 9 times more expensive than the same planned Work Order. The more you can plan your maintenance, the cheaper your work becomes. Your MRO inventory will reduce and studies have shown that a more planned environment will directly result in a safer work environment with less incidents.
- Reduce and eliminate backlog
- Reducing your backlog will ensure you have control on all your work, HSE Work Orders are not being missed and the WO’s won’t come back to haunt you in emergency work later.
- For one strategy on how to do this, please see “Maintenance Backlog: Take Control with a Priority Index.”
- Ensure Preventative maintenance is performed on time and as foreseen by the reliability engineers
- People often spend a substantial amount of money on reliability solutions for the purpose of maintenance planning. These solutions often have poor or no scheduling at all and end up in the backlog effectively undermining the entire business case set out when purchasing those types of solutions.
- Complete more inspections and detect failures early
- And much more…
All these points will work like a multiplier on your savings; now you are no longer looking at resource availability and wrench time savings but instead are impacting your Overall Equipment Effectiveness (OEE). The multiplier is different for every company, but for many of my Oil & Gas customers for example, it’s a factor 4x and more.
The result of a well-planned organization reaches other areas as well; reducing MRO (=direct cash back to the organization), less injuries onsite, higher quality of product with less rework and more on-time production. Internally your eAM system adoption will grow, knowledge transfer is ensured, data will be available for quality analysis and people will spend less time planning and scheduling. All this, in turn, makes for happy end-users, customers, upper management and stock holders who like to see a company in control of their spend.
I’ll leave you with the following food for thought:
Are you paying your contractors for the time they spend on-site or actually performing maintenance activities? How much is this costing you?
Interested in learning more about Planning and Scheduling? Check out our “Are your Planning and Scheduling processes using Best Practices?” white paper.