1. © ABB Engineering Services RCM | What Works | Why How valuable is RCM in improving maintenance and thus business bottom line? Andrew Cliff Manager, Maintenance Engineering & Consulting 19 February 2007

2. © ABB Engineering Services - 2 Introduction This paper is the collection of my experience over 25 years in maintenance as both a client and contractor. This then represents seven sites, seven clients, five maintenance contractors and four different methodologies. The case studies discussed are: 1. Large, mature Pulp and Paper plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment Some conclusions are drawn on how to succeed

3. © ABB Engineering Services - 3 Six Case Studies 1. Large, mature Pulp and Paper plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

4. © ABB Engineering Services - 4 Six Case Studies 1. Large, mature Pulp and Paper plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

5. © ABB Engineering Services - 5 Integrated Pulp and Paper Plant $70 M per year maintenance spend Benchmark about $55 M per year Manufacturing OEE 76% for the site Benchmark about 85% OHSE performance improving from poor history Have tried many maintenance programs over the years to little benefit Culture rewards “fire-fighting” Culture rejects external influences Workforce and staff performance not rewarded for maintenance improvements Contractors 10 Staff 80 trades Small Projects Activity shuts 55 Staff Minor Projects General Eng 160Trades Core maintenance

6. © ABB Engineering Services - 6 Characteristics of the Site Major Hazardous Facility Highly complex, integrated multiple process site Complex production program (many products, multiple customers, challenging logistics) Capital intensive processes Plant ageing with predominantly old technology Workforce expensive, inflexible fixed cost with skills imbalances and attitude problems Staff knowledge, skills and attitudes may not always fit requirements Indecisive management, lack of supervision and planning

7. © ABB Engineering Services - 7 “Classical” RCM used Maintenance Improvement Program targeted savings of $10 M/year Actual cost of RCM $2.8 M over 24 months Planned savings 20% of total benefits targeted = 20% of $10 M/year Planned production improvement 5% = $10 M to $15 M/year $2.0 M annual savings accrue by less labour, material or sub-contract spending due to increased PM and decreased breakdown Other savings $3 MWork of low priority not done $2 MCapital work included in Capital budget $2 MWorkforce productivity $1 MMaterials and Sub contracts Total$10 MTargeted Savings per year Actual benefits$0Currently tasks loaded into CMMS but not being carried out. RCM not based on actual historical data.

8. © ABB Engineering Services - 8 $2.8 M invested in RCM program, very small benefit Using industry standard software and methodology Facilitated by mainstream consultants Contribution from most of the workforce and staff Most of the plant covered by the program Detailed database of proposed PM’s now exists Resulted in the PM’s not being done or done sporadically Significantly more PM work in the RCM plan than can be done (2.5 times the available man-hours) Relative benefit of PM’s often not considered Actual PM’s currently completed varies widely across site – average is poor Level of breakdowns quite high & shutdown scopes poor An RCM Project was carried out over 24 months

9. © ABB Engineering Services - 9 Optimise existing RCM PMs and focus on critical equipment Ensure comprehensive, accurate asset register & details, safe work procedures for PMs and follow on work orders and BoMs are all in place, or developed Conduct rationalisation in a facilitated way combining the chosen team’s knowledge, history, RCM work & expert input Review the Supervisor to ensure suitable knowledge, skills and attitudes (KSA’s). Train, or re-arrange as required (external/temp?) Empower work team under this supervisor to ensure that PM’s are always done on time Resource work team accordingly ie breakdowns done by augmented team of extra trades Ensure planning/scheduling & procurement are properly resourced and planner/scheduler is capable and keen Provide ongoing expert facilitation with the team and on the job Improvement model suggested-Select an area, run a PM optimisation program, concentrate resources

10. © ABB Engineering Services - 10 Six Case Studies 1. Large, mature Pulp and Paper Plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

11. © ABB Engineering Services - 11 Greenfield Iron Ore Mine and Processing/Loading Plant A state of the art mine, crushing, stacking, reclaiming and train loading plant was being tendered Solution needed to meet cost and production budgets over 25 years, and had the realistic, cost beneficial potential to expand to meet the anticipated steadily growing demand The tenderer used an RCM methodology including reliability modelling to develop a 25 year maintenance budget, production plan, and recommended spares holding Client awarded contract because of maintenance modelling The modelling showed the client where the actual bottlenecks were for future increases in production, thus enabling much quicker ramp-up in production at much smaller capital cost

12. © ABB Engineering Services - 12 Greenfield Iron Ore Mine and Processing/Loading Plant… Accurate modelling of spares requirements minimised expensive on-site holding of “insurance” spares The contractor spent 30 man-weeks using one external RCM consultant plus internal managers, reliability engineers, supervisors, and planners from relevant sites to develop the plan The external cost was $45,000 and the internal costs were distributed…with only $35,000 being costed to the bid The end client was quoted as saying: “The modelling clinched it…we have better information from you than we have from the designers, about how our plant will really perform for 25 years and where the risks lie”

13. © ABB Engineering Services - 13 Six Case Studies 1. Large, mature Pulp and Paper Plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

14. © ABB Engineering Services - 14 Waste Water Treatment Plant An existing 40 year old plant was being upgraded to handle 50% more waste water using modern technology thus retaining half the equipment and making the other half redundant The contract specified that the existing plant be run to exacting performance standards while the augmented plant was built and then “cut over” The 30 year “Operations and Maintenance Budget” was to be developed by co-operation between the successful contractor and the client, based on previous costs plus suitable adjustments for the impact of construction and the progressive commissioning of new plant/retirement of old plant No agreement could be reached until an RCM model was developed to represent how the existing plant had performed, and how the new one was guaranteed to perform This then formed the basis for agreement and provided the level of rigour and documentation that a semi government authority required to substantiate what turned out to be substantial increase in budgeted expenditure Little reliable data was available form any maintenance management system or cost reporting system due to the accounting rather than maintenance focus of the data collection to that point. Operator logs, interviews, engineer reports, reports on failures and contractor invoices were used as key inputs, along with manufacturers data

15. © ABB Engineering Services - 15 Waste Water Treatment Plant A key uncertainty was the cost to maintain the existing plant during the changeover, which was to take 18 months but ultimately took 4 years! In the end, an agreed annual maintenance budget was developed using reliability modelling software, and based on the agreed underlying condition of the assets at the contract commencement The lack of reliable data in the CMMS was a major cause of these difficulties The use of the modelling tool to identify most likely outcomes was the catalyst to drive negotiation around what the risks to plant performance and budgeted cost outcomes were, who was best placed to take them, and thus ultimate agreement The contractor invested a relatively on modest amount ($35,000 on consultants plus 8 man weeks of internal cost) to resolve an intractable problem with a $150M contract in very favourable terms

16. © ABB Engineering Services - 16 Six Case Studies 1. Large, mature Pulp and Paper Plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

17. © ABB Engineering Services - 17 Non Ferrous Metal Refinery Existing plant 30+ years old & beyond original design life Business decision to continue running under review for 10+ years leading to capital drought, and short term operating philosophy Recent commitment to double the plant capacity Little consideration given to the impact on the existing plant, or it’s capacity to support this The maintenance culture, systems and procedures will need to be “reborn” to deliver sustainable “best practice” The capacity for current staff to transform their attitude is uncertain. Existing contractors may be unsuitable The product value is at near record levels

18. © ABB Engineering Services - 18 SAFETY: We are experiencing on average 2 HSEQ incidents per area per year that are attributable to unreliable plant. A large percentage of maintenance work is completed with very short planning lead times PRODUCTION TONS: On average 65 tons per month are not produced or sent to tailings due to plant reliability. This represents $5,460,000 annually. MAINTENANCE COSTS : In the 12 months up to Oct03 80% of the maintenance workforce time is spent on reactive work. Year to date we have spent $14.5 M on breakdowns: PRODUCTION COSTS: Plant unreliability is leading to additional costs being incurred by production in order to meet production targets Currently – Breakdowns high, Costs high ReactivePreventivePredictive 80%18%2%

19. © ABB Engineering Services - 19 Asset reliability across the site is variable, driven by a reactive approach to maintenance and a variable and often short term approach to operation. Recording of these key statistics is not currently carried out across the site Plant reliability improvements have been identified through equipment strategy studies including benchmarking. Asset condition has been allowed to run down to varying extents, encroaching on effective asset life, and raising the risk profile of some areas of the plant. Capital investment has been sporadic and small for renewal/replacement of a variety of assets. There have been many failed RCM or PM optimisation attempts Currently – Breakdowns high, Costs high…

20. © ABB Engineering Services - 20 Across the site there are “Silos” with a large variation and inconsistent approach to asset management. SAP plant hierarchy is incomplete and incorrect. BoMs are lacking, and vary significantly in accuracy and completeness. Task lists and instructions are lacking, and vary significantly in accuracy and completeness. Interactions required with other areas (materials, supply, engineering etc) Lack of clear accountabilities and responsibilities. Organisation and resourcing strategies reinforce doing breakdowns, allocating low priorities to preventive work resulting in it being dropped. There is quite a variety across site in the understanding of the current best practices used in achieving reliability, and the benefits which follow Complication

21. © ABB Engineering Services - 21 Benefits of Establishing and Maintaining RCM SAFETY Significantly improved outcomes through reduced risks less breakdown, more planned and scheduled work Lower risk to people in areas, and doing maintenance work PRODUCTION ( + $800,000 + annually) Increased production from more reliable plant Plant is more reliable leading to better recovery Less unplanned, maintenance related, downtime COSTS ( - $1,500,000 + annually) Reduced costs from improved reliability and work preparation Reduction in breakdown maintenance costs (outweighs likely increase in PM work by between 4 and 8 times) Reduction in inefficiencies of maintenance workforce through better preparation (BoMs and task lists/instructions)

22. © ABB Engineering Services - 22 Linking Equipment Criticality, Strategy & RCAs

23. © ABB Engineering Services - 23 RCM needs to be built into the management system Stand alone equipment strategy insufficient Cascading the action plan Information flows in two directions Support for reliability based maintenance is routinely provided at all levels, with clear accountabilities & responsibilities

24. © ABB Engineering Services - 24 Summary Implementation Plan – Action Steps Phase 2 Introduction Work White Paper Fair (communicate the ‘to be’ processes). Convert RBD to Capacity Model Configure SAP to support Process Develop Instructions, requirements and templates for each task Trial Criticality Analysis Process in Small Area Complete Back-end Process from Existing Work Construct Task Lists & Task Instructions Construct BoMs and Parts Lists Load Strategies into SAP Trial Criticality Analysis Process in Second Are Commence Full Process on High Business Benefit Area Validating/Updating/Revising RBD Data Analysis & Model Prep Team Training in RCMcost Modify SAP FL, EN FMECA Facilitation & Development Maintenance Strategy Review Running Model & Reporting Construct Task Lists & Task Instructions Construct BOMs and Parts Lists Load Strategies into SAP Arrange new schedules and additional resources Review and Refine Process Commence Full Process on Areas Simultaneously Monitor, Report, Analyse and Act to Ensure PM Work Done

25. © ABB Engineering Services - 25 Required Resources - Summary RCM Consultants Area based Reliability Engineers SAP planners Schedulers Technical writers Tradespeople Operators Total man-days = 2,631 Total cost estimate = $1.25 M

26. © ABB Engineering Services - 26 Project Dependencies Resources External consultants, REs, planners, trades & ops CMMS ready for strategy upload 2,631 man days Master Data Functional locations Failure Data Existing BOMs and Task Instructions Materials Computer access in each area Data Projectors RCM Software Finance $1.25 M

27. © ABB Engineering Services - 27 Barriers to successful implementation Lack of understanding of value of RCM Structural impediment to PMs reinforces breakdown through prioritising breakdowns ahead of PMs Area Crews work on breakdowns, shuts, projects, mods, repairs and overhauls, often at the expense of PMs Limited resources thus means that “we get to do PMs if we can” SAP currently provides a range of barriers to effectively carrying out PMs Work of Precision Maintenance and Condition Monitoring people not well integrated with the area maintenance work schedule Potential under-resourcing of the Equipment Strategy work

28. © ABB Engineering Services - 28 To change the areas’ priority from breakdowns, overhauls and repairs, to PM’s, we suggest the following structural change be implemented as soon as practicable: Level 1 “Operating Plant Focus” - Operators and Area Maintenance Crews Minor remedial maintenance actions on equipment in service Functional and physical checks Adjustments and minor repairs (Glands, fuses, shear pins...) Lubrication and cleaning Level 2 “Preventive/Predictive Maintenance Focus” - Area Maintenance Crews Predictive actions (Condition Monitoring) Preventive actions (Routine change-outs and repairs) Breakdowns within the capability of the Area Maintainer and which are high priority or do not compromise the scheduled work Level 3 “Peak and Specialist Work” - Central & off-site crews/companies Breakdowns beyond the capacity of the area based crews Specialised activities/services (Compressor overhauls, PSV’s, I & C, hydraulics, motor/pump/gearbox/valve repair...) Peak work-load (Shutdowns, modifications, safety project work…) Solutions to overcome Barriers Change Levels/Roles in Maintenance

29. © ABB Engineering Services - 29 BarriersSolutions Lack of understanding of value of RCM Engage Operators and Maintainers in RCM process Structural impediment to PMs reinforces breakdown through prioritising breakdowns ahead of PMs Preventive /Predictive Maintenance Focus to be structurally embedded cultural change driven by implementing accountabilities with meaningful KPIs CMMS currently provides a range of barriers to effectively carrying out PMs Workflow Improvement goals to be implemented to support use CMMS effectively. Also align with corporate EMS Work of Precision Maintenance and Condition Monitoring people not well integrated with the area maintenance work schedule Training, coaching and on going support to improve Predictive Maintenance Potential under-resourcing of the Equipment Strategy Work Use the area Business Improvement teams to support Equipment Strategy development No measure of the effectiveness of the existing equipment strategy Validate new equipment strategy through RBD Barriers and Solutions

30. © ABB Engineering Services - 30 Six Case Studies 1. Large, mature Pulp and Paper Plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

31. © ABB Engineering Services - 31 Aluminium Smelter A review of maintenance strategies in one plant area resulted in 150% of the available man-hours being required to undertake PMs (follow-on WOs not estimated) Maintenance remained in breakdown, with few PMs done Scheduled shuts brought forward due to failures, so that PMs weren’t ready and parts/procedures were not ready An objective review using RCM principles focussed on critical plant reduced the number of scheduled shuts, and their duration, limiting the scope of planned work to high priority tasks but mandating that they be done The result has been a 25% reduction in breakdowns, leading to a 10% increase in production and the commitment to roll this process out across site

32. © ABB Engineering Services - 32 Six Case Studies 1. Large, mature Pulp and Paper Plant 2. Greenfield Iron Ore Mine 3. Refurbishment and augmentation to a Waste Water Plant 4. Establishment at a Non-Ferrous Metal Refinery with a new lease of life 5. Targeted implementation at an Aluminium Smelter 6. Basic strategies for Mining Equipment

33. © ABB Engineering Services - 33 Mobile Plant “It’s the thought process stupid” “Jumbo” drills particular focus – “RCM” cost $50k RCM lead by senior manager who had read the textbook, spread sheeted by bright young engineer Information supplied by operators, mechanics, engineers, planners and supervisors Savings immediate and sustained, breakdowns reduced Regular shuts costs reduced Emphasis on design out, better procurement, and optimising time based scheduling of change outs Annual value $300k for Jumbo Drills Only limited issues addressed - most value “left on the table”

34. © ABB Engineering Services - 34 Experience with RCM Poor Maintenance Control → implementing RCM is poor Pitfalls Workforce and staff “buy in” Loading plan into CMMS Lack of relevant failure data “Overkill” on PM tasks “Analysis paralysis” Benefits I’ve seen: Varies tremendously, often nothing but aggravation and frustration! Optimised maintenance cost (typically 5%-15% of annual spend) Improved equipment performance (typically 2%-10%, but worth over 5 times maintenance cost savings)

35. © ABB Engineering Services - 35 RCM needs focussed Reliability Engineers

36. © ABB Engineering Services - 36 Value Added Financial Performance FIRST YEAR OF CONTRACT Increased management includes reliability engineers, planners/schedulers, new CMMS, and RCM on Critical Equipment

37. © ABB Engineering Services - 37 Year -2Year -1 Year 1 Year 2Year 3 Production of “on quality” paper

38. © ABB Engineering Services - 38 100% 60% The site today Potential 58 % increase in productive & effective man-hours for 40% less cost Efficient & effective man-hours 100% 63% Paid hours 40% productive 10% over-manned 66% effective 66% productive 0% over-manned 95% effective Paid hours Ineffective work 24% 36% Unproductive work Unproductive work: training, meetings, waiting, travel, KSA, and work practices… Ineffective work: PM’s scope wrong or done too often, repairs done too soon, problems not designed out… How does RCM add value? OEE & Cost reduction?

39. © ABB Engineering Services - 39 How does RCM add value? OEE & Cost reduction? Operator/Maintainer MaintenanceLabour Material & Spares Other Capital 0 10 20 30 40 50 60 70 80 90 4 12 14 43 5 15 18 60 cents/tonne 85%76% OEE 2 2 -20% -20% -22% -28% 75% 100% 25 % Reduction +12 % Improvement 100 +0% Cost

40. © ABB Engineering Services - 40 Summary – Success with RCM Gain stakeholder agreement to: The concrete, substantial business benefits (“Size of the Prize”) The realistic payback period (cost to benefit over time) The overall cost, specific people and time required (Be conservative, by under promising and over delivering) An implementation plan which is practical (robust, tolerant of delays, and resource constraints/schedule dislocations) Combine external expertise (method, tools and problem solving the process) with internal support (cost effective, plant and process knowledge, ownership of results) Reliability/Availability Modelling is a very powerful and persuasive tool

41. © ABB Engineering Services - 41 Summary – Success with RCM Prototype the process: to train key participants in a small, controllable area of the plant using strong supporters to ensure it is properly carried through to demonstrate the real business benefits to learn of any barriers or hurdles which have not been foreseen and addressed in the plan, and to develop workable solutions to cement stakeholder support Project manage the process with regular communication/feedback with stakeholders Use RCM as a key tool to solve the problem of how to work out what work to do when, to which equipment (don’t try to use it as a cultural change process)

42. © ABB Engineering Services - 42 Summary – Success with RCM Roll out the process across the site at a sustainable pace The training and “workshops” explain and convince the stakeholders in each area before the process begins Identify and resolve critical organisation or individual issues: ensure that the high level of breakdowns does not prevent PMs being carried out (organise separate resources) overcome the resistance where individuals undermine the process through ignorance, personality conflict, loss of status, or loss of overtime if breakdowns are reduced ensure that the complete process is fully carried through so that PMs are actually loaded properly into the CMMS with BoMs and Safe Work Instructions, along with all significant “Follow-on” work orders Don’t try to roll out multiple improvement projects at the same time (ie Workflow Management, RCM, RCA implementation, CMMS upgrade, stores and rotables improvement, organisation restructure, KPI roll out…)