The smart business owner purchases equipment that requires little maintenance also ensures that the company's design, operating, maintenance, and procurement policies and practices all work toward getting a long-lived, long-running, never-failing plant.
Where The Losses Arise
It's clear to some long-serving maintenance supervisors the only policy that ought to be embraced in a company is to get equipment that doesn't fail.
The price of keeping equipment running is wasted money. Regrettably, we are forced to live inside the limits of our existing technologies, and for now, that means we only have the choice of purchasing equipment with components and designs that require upkeep.
That being true, it's smart business to look at getting equipment using a design that prevents failure and that needs little and easy maintenance.
From the chemical manufacturing industry, the world's best practice maintenance costs are 1.8% to 2.0% of the replacement value of the plant (the initial asset value incremented annually for inflation). At the worst operations, maintenance costs over 5 percent of the asset replacement value annually. 5% represents $50,000 annually for each $1,000,000 of asset replacement value.
These organizations are wasting $30,000 annually for every $1,000,000 of asset value.
The Effect Of Compounding The Maintenance Price
Taken as a yearly $30,000 amount and compounded over a twenty-year life in the company's weighted average price of funds (12% for the interest of the calculation), the complete opportunity cost involved is $2,162,000.
This is money not earned over 20 years since it was spent on additional repairs. If the $30,000 annual price difference between 2% and 5% more than 20 years has been brought back to its current worth today (in the 12% rate), it would equal $224,000. This is $224,000 from each $1,000,000 of asset replacement value not making a 12% return due to poor design, poor equipment, poor maintenance, and poor working practices.
It's a huge penalty for a business to pay due to inadequate design, buying, operating, and maintenance policies and practices. The characters are even more astonishing when put into tabular form on Table No. 1.
For every 1 percent of the replacement asset worth spent annually on maintenance over 20 years, $75,000 of each $1,000,000 of initial capital won't yield any dividend on the investment.
The best advice to every business person is to buy equipment that costs little or nothing to maintain. In actuality, they need to be demanding that the original equipment manufacturer develop new technologies for their equipment to acquire maintenance cost down to nothing.
With less maintenance, machinery can be obtained to function for more.
This translates into fewer spare parts, a smaller shop, fewer operators, maintainers, and fewer supervisors. The advantages gained from having a reliable, long-lived plant extends well beyond simply having lower maintenance costs.
If you are an investor, you might be better rewarded by placing your money into assets that need very little maintenance or intellectual companies with few current assets.
If your business involves using equipment, then you must buy excellent equipment requiring little maintenance.
Moreover, you must know employable people and train them to become the Best, most capable plant operators and maintainers you can afford so they can keep the plant running well. You aren't wasting as much of your business' funds money on upkeep.
Advantages of Annual Maintenance Contracts
Factory Maintenance
Why is maintenance -- demonstrated to be an integral element in extending equipment Life, lowering overall costs, and reducing downtime, -- so often overlooked in several surgeries until it becomes a crisis? There are several potential reasons:
- Deficiency of available resources -- time or employees
- Inconvenient timing
- Disorganization or lack of preparation
- Misunderstanding of the advantages and importance of maintenance
Often, a number of these factors will exist at the same time. They made a maintenance deficit that, if not addressed, can add up to a substantial amount of avoidable costs in emergency repairs, operations, part flaws, and facility security.
These maintenance issues don't arise due to purposeful neglect by facility management. They result from resource prioritization decisions and shortfalls that place core manufacturing processes on top.
How Do Manufacturers Address These Problems?
To solve these issues and ensure that care is performed as planned and required, many producers operate with outsourced providers and sign an annual maintenance contract. An annual maintenance contract, or contract maintenance arrangement, is a business arrangement for continuous maintenance, agreed on by the production center and a service provider.
Rather than ad-hoc or emergency care services, industrial contract maintenance covers all aspects of maintenance on a plant's critical assets, such as:
- Scheduled preventive maintenance
- Regular diagnostics and checkups
- Emergency repairs
- A dedicated workforce of experienced, certified technicians
- Documentation and procedure development
- MRO asset management, including storeroom management and inventory optimization
Moreover, a comprehensive annual maintenance contract may include smart technology implementation, training of the present workforce, security training, process implementation, and much more.
More Advantages of Annual Maintenance Contracts
An AMC (annual maintenance contract) offers numerous advantages for various manufacturing industries, notably aerospace, consumer packaged goods, building products, automotive, heavy equipment, paper/pulp, and tire/rubber fields. The advantages of a continuing annual maintenance service agreement include:
Predictable & Fixed Expenses
As-needed maintenance planning san quickly spirals into unforeseen costs that greatly influence the whole budget. With a comprehensive yearly maintenance contract, you can control and account for all maintenance costs on a long-term, fixed foundation. By decreasing variability in your maintenance budget, you can surely allot funds throughout the remainder of the company without fear of overruns in maintenance or shortfalls elsewhere.
Guaranteed Access To Maintenance Support At Any Given Time
An old cliché holds for care: the only thing you can anticipate about it is that it'll be unpredictable (unless you are using predictive maintenance technologies, obviously!) A maintenance contract ensures that you'll have an expert available to solve the issue regardless of the time or circumstance.
This provides a safeguard that in-house employees may not offer since it's often not cost-effective to keep round-the-clock expertise for every issue that arises. However, it's the job of a contracted partner to present multi-craft, experienced maintenance specialists who will fix all maintenance-related issues.
Logistical Improvements
A detailed maintenance contract takes a holistic approach to all elements of your maintenance clinic. This approach yields basic logistical advantages that are intended to enhance your bottom line.
Extended Equipment Life
Frequently, maintenance is treated as the practice of addressing breakdowns when they appear -- when it should be a continuous process with the principal intent of keeping equipment running in top shape for as long as you can. By providing the tools to consistently adhere to a highly effective predictive or scheduled maintenance plan, a long-term maintenance contract is intended to increase equipment operation, ultimately leading to greater production efficiency.
Reduced Downtime
Building on the advantages of adhering to programmed maintenance, Maintenance partners aim to reduce or eliminate downtime due to equipment failures. The long-term, holistic strategy of an annual maintenance contract can allow for downtime preparation, ensuring scheduled maintenance happens at the least disruptive times from the production program.
Peace Of Mind To Focus On Core Competencies
In a situation where management can't prioritize maintenance, There's a constant sense of unease and scramble to finish critical maintenance tasks, leading to negative effects on other operation elements. A maintenance contract removes this unrest by providing management, operators, and other specialized employees -- providing plant leadership the peace of mind to concentrate on core tasks and other bottom-line drivers, such as innovation and client services.