The single biggest
challenge in the management of maintenance is to convince senior leadership
of the disastrous consequences of deferring maintenance and allowing a
machine to operate to failure (OTF). This is difficult because not every
deferred maintenance event becomes a breakdown event that reaches the
attention of the Executive Office.
The challenge is made even
more difficult when the mechanical and technical experience of the
leadership is not adequate to evaluate the maintenance situations that
demand their attention.
I have developed a tool
that moves the criteria for making a decision from technical data to a
financial ratio that is more easily understood. I call this tool
“Computing the True Risk/Reward Ratio for Deferring Maintenance”
is simple and easy to use and offers a method to compare the total cost to a
company for a breakdown event to the cost of early intervention to avoid the
At the simplest level of
use, the leadership must consider the total cost to the organization and not
just the cost of maintenance repairs. The indirect and intangible costs must
be considered also.
It is not possible to
know what a future cost might be, so you must take several historical
breakdown events and compute a ratio you can use in the future to make
When my clients take the
effort to gather all the costs associated with a breakdown event in their
organization they are surprised to find that the ratio is seldom less than
40:1 and usually much more.
They are surprised that
the Direct Maintenance Cost Ratio is usually about 15:1 in direct
maintenance dollars compared to early intervention.
They are even more
surprised to learn that the maintenance man/hours is also 15:1.
This means it takes 15 times longer to recover from a breakdown event than
an early intervention event.
Early intervention also
directly influences the mechanical experience needed to effect the needed
repairs because the skill set needed to change a radiator hose before it
fails is significantly different than those needed to rebuild an emergency
generator after it overheats just when you need it the most. Early
intervention allows more maintenance to be accomplished with less skilled
Examining the Indirect
Costs, you will recognize the obvious saving of Early Intervention over OTF
because these items would have never been needed and the money could be used
However, the Intangible
Costs, the real undocumented cost to the organization for a breakdown event
comes in the form of dissatisfaction and loss of confidence with the
stockholders and regulatory agencies. Bond and stock values suffer when
there are disruptions and disasters within corporate operating systems. To
be supported by the investment system, the public must feel that their
investment is going to be well managed before they approve investing more
Leadership in the business
arena must make the correct decisions when managing deferred maintenance. If
your True Risk/Reward Ratio for Deferring Maintenance is not sustainable
there is a simple solution.
Early Detection and Early
Intervention will produce the lowest maintenance cost per unit of production
possible. All other options will produce a higher cost.
If you see ratios that are
unacceptable, then all you have to do is support your maintenance effort by
instructing them to fix everything they find wrong as soon as possible. When
I say this, most financial people recoil and say, “You are asking me to
give the maintenance department a golden checkbook!”
My response is, “Yes!” If
you are operating in a breakdown maintenance mode, you cannot spend any more
money than you are already spending so give them the money when they need
If you use a technique
such a Vertically Integrated Maintenance Program (VM) to
attack the deferred maintenance in a systematic method and plow back the
40:1 in avoided maintenance spending and the 15:1 in recovered maintenance
man/hours you can create a self-financing solution to better asset
reliability, more uptime, and improved safety.
Compute and examine your
True Risk/Reward Ratios for Deferred Maintenance and if you do not
want to pay those penalties, then you must create and fund better methods of
Early Detection and Early Intervention. The return on the investment will be
Computing the True Risk/Reward Ratio
for Deferred Maintenance Newsletter
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