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Achieving Operational Excellence Nancy Majure – EAM North America Revision 2.1 Proprietary and confidential. Property of QAD, Inc. Not to be distributed.

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Presentation on theme: "Achieving Operational Excellence Nancy Majure – EAM North America Revision 2.1 Proprietary and confidential. Property of QAD, Inc. Not to be distributed."— Presentation transcript:

1 Achieving Operational Excellence Nancy Majure – EAM North America Revision 2.1 Proprietary and confidential. Property of QAD, Inc. Not to be distributed or reused without prior written consent from QAD, Inc.

2 Maintenance and Reliability Overview Managing On-Time and Within-Budget Projects MRO Inventory and Purchasing – Getting Control of Operational Costs Optimizing Plant Performance and Improving Capacity Appendices Content

3 Understand and be able to express the benefits of improving Asset Management processes Take away tips that can be acted on today Develop a long-range vision to elevate your plant operations to best practice or even world class Goals of this Seminar

4 Maintenance and Reliability Overview

5 Acquisition Cost (or Capital Costs) -Internal Labor, Purchased Materials, Subcontractor Costs, Internal Material, Expenses -Obtained during Design, Construction, and Commissioning Total Cost of Ownership -Internal Labor, Purchased Materials, Subcontractor Costs, Internal Material, Expenses -Obtained during Operation and Maintenance Maintenance Cost -Acquisition Cost + Total Cost of Ownership Replacement Asset Value (RAV) -Usually from Insurance Carrier or Engineering -What it would cost to replace your facility Important Values to Know

6 First Step – Where are You? CM PM 100% 0% >85% <15% PM CM Reactive World Class Best Practices Stage 1 Run to failure No records Stage 2 PM Critical Assets (Cal) No CM recorded Stage 3 PM Program (Cal) Some CM recorded Stage 4 PM (Cal & DUOM) All CM recorded Stage 5 PMs and PdMs All CM recorded 1 BenchmarksBest Practice 1 World Class 1 Schedule Compliance30% - 50%>90% % Planned Maintenance10% - 40%>85% Production Breakdown Losses5%-12%1%-2% Maint Cost as % of RAV3%-9%2.5%-3.5% MRO Cost as % of RAV2%-4%0.25%-0.75% RAV = Replacement Asset Value, usually from insurance carrier

7 Benchmark – Very Reactive & Basic 1 BenchmarksVery Reactive (est.) Basic Maintenance Program (est.) Best Practice 1 World Class 1 Production Breakdown Losses25%-30%15%-20%5%-12%1%-2% Maint Cost as % of RAV25%-30%15%-20%3%-9%2.5%-3.5% MRO Cost as % of RAV15%-20%10%-12%2%-4%0.25%-0.75%

8 Benchmark – Simple Example QMI Manufacturing -RAV = $10,000,000 -Annual Sales = $100,000,000 1 BenchmarksVery Reactive (est) Basic Maintenance Program (est) Best Practice 1 World Class 1 Production Breakdown Losses$25 - $30mil$15 - $20mil$5mil - $12mil$1mil - $2mil Maint Cost as % of RAV$2.5 – $3mil$1.5 – $2mil$300k - $900k$250k - $350k MRO Cost as % of RAV$1.5 - $2 mil$1 - $1.2mil$200k - $400k$25k - $35k

9 Reliability (R) -The probability that an item will perform its intended function for a specific interval under stated conditions. (p. 20) -Strategic task -Design feature Maintenance (M) -Objective is to sustain asset reliability and to improve its availability (p. 4) -Tactical task Understanding Maintenance & Reliability

10 Ensure plant and its assets are available when needed in the most cost effective way with the highest quality to meet customer expectations Industry Leaders -Quality producers of product -With very competitive cost -Known to have the lowest maintenance costs as a percentage of RAV (p. 6) However... there is a cost to get there Maintenance & Reliability (M&R) Goal

11 M&R in Asset Lifecycle Commission Operate Maintain Retire / Replace Design Construct Project Controls Asset Management Equipment & Asset Life- Cycle Acquisition Phase: Budget Controls, Acquisition Cost, Reliability & Maintainability Operation Phase: Maintenance, Cost of Ownership

12 Managing On-Time and Within-Budget Projects – Capital and Expense

13 Budgetary control PLUS... Design -Reliability (measured by MTBF) -Maintainability (measured by MTTR) Construction -Standardized Spares -Accessibility Commission -FMEA -RCM -BOM -Maintenance Plan What is Project Control?

14 Types of Projects Capital -Profit enhancements -Increase capacity -Replacement Expense -Annual rebuilds -Marketing / Legal / etc. Customer Funded -Tooling -Prototype -Very common in Automotive Verticals ETO (Engineer to Order) Key Characteristic: Results in New Asset(s) Key Characteristic: No Assets created Key Characteristics: - Customer owns Asset -Customer pays you to build new production line to produce a part for them. -Customer will reimburse you for the cost to build the new production equipment. -When project is complete, the production line stays at your facility, BUT you do not own the production equipment – the customer does. Key Characteristics: - Build equipment to customer specifications -Scheduled reimbursement payments from customer -At completion of project, ship equipment to customer

15 Electronic approvals On Time, Within Budget Real-time financials Streamlined month end reconciliation Scheduled supplier payments Scheduled customer reimbursements True acquisition cost Designed using history Built-in reliability and maintainability Formal commissioning and hand-off Project Controls – Best Practices

16 Budget vs. Actual Performance Estimate vs. Actual Margin (customer funded & ETO projects) Month-end reconciliation (time and variance) Project close reconciliation (time and variance) Project Controls Benchmarks

17 Identify all data collection points for project budget controls & consolidate Ensure all costs are collected Determine average margin (ETO & Customer Funded) Review estimates vs. actual spend Formalize commissioning process Formalize asset hand-off Develop plan for continuous improvement Project Controls – Low Hanging Fruit

18 MRO Inventory and Purchasing – Getting Control of Operational Costs

19 MRO – Maintenance repair operations Repair parts plus... -Internally fabricated parts -Supplies -Consigned / Vendor-Managed -Free-issue / Company Catalog Goal is to ensure right parts are available -at the right time -at the right price -in the right quantity -to sustain availability of plant assets What is MRO Inventory and Purchasing?

20 Integrate inventory, purchasing, and maintenance planning systems Utilize EOQ analysis to refine min/max/re- order points Secure inventory and improve physical layout Automate stock replenishment to free purchasing for more strategic activities Link parts to where used Understand difference in Indirect Inventory practices MRO Inventory & Purchasing Best Practices

21 Order processing costs can vary between $20 - $200 per order over the actual purchase cost Cost of stocking and holding an item in inventory can be as much as 30% of item cost per year Maintenance resources can spend as much as 20-30% of their time searching for parts Organizations that have high hidden inventory have a reactive culture MRO Inventory in a reactive environment can account for up to 50% of overall operational costs MRO Inventory & Purchasing Facts

22 Inventory Turns -Turns = (Inv Issue in year) / (Avg Inv) -Avg Inv = (Beginning + End) / 2 -Healthy value is around 2 turns per year for MRO Inventory Accuracy -Best Practice > 95% (p115) Maintenance Material Cost as % of RAV -Best Practice 2% - 4% -World Class 0.25% % Stock Out Rate -Best Practice 5% - 10% -World Class 1% - 2% MRO Inventory & Purchasing Benchmarks

23 Inventory & Purchasing – Low Hanging Fruit Secure and control access to inventory Eliminate personal stores areas Move free issue items out of crib Provide an inventory return area Tend to physical layout of stores area Identify all stocked parts Consolidate vendor base Negotiate contract pricing Begin developing justification for stores clerk Develop plan for continuous improvement

24 Optimizing Plant Performance and Improving Capacity

25 Ensuring that assets are available when needed at optimum capacity in a cost effective manner Drivers: -Increased output with the same assets -Reduced need for capital replacement -Reduced maintenance cost per unit -Reduced total cost per unit -Improved performance (cost, productivity, and safety) -Increased competitiveness -Increased market share What is Asset Maintenance?

26 Record all work – PM and CM Collect all costs to the asset and task level Plan work Schedule work Implement robust PM program -Predictive / Condition-Based -Technology to detect potential failure -Defined in FMEA and RCM activities Empower resources to report issues themselves electronically Change culture from reactive to proactive Asset Maintenance Best Practices

27 Unplanned work costs 2-3 times more to execute In general every hour of planning saves 1-3 hours in work execution Reactive emergency mode activities cost 3-5 times more than non-emergency Actual maintenance craft productivity can vary between only 30-50% of actual paid time An average of 80% of an assets Life Cycle Cost (LCC) is incurred during the Operate & Maintain phases An average of 40% of failures are due to operator error Organizations with high schedule compliance also have high uptime and asset utilization rates Asset Management Facts

28 Overall Equipment Effectiveness -OEE = Availability x Performance x Quality -Best Practice: 85% -World Class: 98% Schedule Compliance = Scheduled Tasks Completed / Total Scheduled Tasks -Best Practice: 30 – 50% -World Class: >90% Planned Work = Planned Tasks / Total Tasks -Best Practice: 70 – 85% -World Class: 85 – 90% Benchmarks

29 Reactive CM Unscheduled = Unscheduled Work Time / Total Time -Best Practice: % -World Class: <10% Overtime -Best Practice: % -World Class: <5% Benchmarks 2

30 Production Losses Due to Breakdown -Best Practice: 2 – 5% -World Class: <1% PM Compliance Target: PM Completed with +/- 10% of frequency -Example: 30 Day PMs should be completed within +/- 3 days of due date Benchmarks 3

31 Asset Maintenance – Low Hanging Fruit Identify all equipment & hierarchy Formalize a PM program Start the culture change Begin recording all work Select and Publish Monthly KPIs such as: -PM:CM ratio -Maintenance Unplanned Downtime -Top 3 Failures & Root Cause -% Schedule Compliance Initiate FMEA for most critical equipment to refine PM program Develop plan for continuous improvement

32 Conclusion – Where Do You Go From Here?

33 Determine Your Current State CM PM 100% 0% >85% <15% PM CM Reactive World Class Best Practices Stage 1 Run to failure No records Stage 2 PM Critical Assets (Cal) No CM recorded Stage 3 PM Program (Cal) Some CM recorded Stage 4 PM (Cal & DUOM) All CM recorded Stage 5 PMs and PdMs All CM recorded Functional AreaEstimated Stage Project Controls Purchasing Processes Inventory Controls Plant Maintenance

34 North America QAD EAM Director: -Nancy Majure Mobile: the EAM Community Forum at: Questions?

35 1 Maintenance and Reliability Best Practices by Ramesh Gulati, Industrial Press, Inc, 2009 Appendix – Footnote

36 Society for Maintenance and Reliability Professionals Reliability Web Uptime Magazine Plant Services Practical Plant Failure Analysis by Neville W. Sachs, P.E., CRC Press, 2007 Reliability Based Spare Parts and Materials Management by Don Armstrong, IDCON, Inc., 2008 Appendix – Other Recommended Resources


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