building a winning maintenance strategy

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Guy Delahay, Owner and Managing Partner at Mainnovation Inc., discusses building a winning maintenance strategy through the use of the Value Driven Maintenance methodology, a state of the art framework that calculates economic added value of maintenance using Net Present Value techniques and industry specific maintenance benchmarks. Organizations that have embraced this practice have been able to achieve impressive results including:30% Uptime Improvement50% Cost Reduction40% lower MRO stock valueView the slides to understand the steps invloved in building a winning maintenance strategy, such as understanding your Dominant Value Driver, utilizing KPI's and benchmarking, implementing Maintenance Best Practices, and exploring Value Drive Maintenance.

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  • 1. Building a Winning Maintenance Strategy with Value Driven Maintenance
    • Webinar September 27th, 1:00 - 2:00 pm EDT

Guy Delahay MSc Managing Partner [email_address] +1 917 562 5050 Mainnovation Inc. 445 Park AvenueNew York, NY 10022 www.mainnovation.com 2. Personal Introduction

  • Industrial Engineer, graduated in Maintenance Management(M.Sc. degree from Eindhoven University of Technology)
  • 25 years of experience in maintenance / asset management improvement projects
  • co-Founder of Mainnovation and co-author of the book on Value Driven Maintenance
  • Former Chairman of the Maintenance Association in the Netherlands
  • Regular speaker and chairman on international Maintenance Management Conferences
  • Heading the USA office in New York since January 2011
  • Married and 4 children
  • Hobbies: cars, hockey and music

Guy Delahay Managing Partner E: guy.delahay@mainnovation.com M: +1 917 562 5050 T: +1 212 836 4306 www.mainnovation.com 3. Introduction Mainnovation

  • Consultancy firm specialized in improving Maintenance, Reliability & Asset Management
  • Founded in 2000, since then steady growth of 30% per annum despite economic climate
  • Developers of Value Driven Maintenance (full intellectual property)
  • Recognized as thought leaders and pioneers in maintenance business intelligence
  • Offices in the Netherlands, Belgium, UK and USA

4. Our Service Lines Interim & Change Management Process Consultancy CMMS/EAM & BI Reliability Engineering

  • Audits & Benchmarking
  • Asset Management Strategy & PAS-55 Certification
  • Standardize & Improve Work Processes
  • Align Maintenance Organization
  • Skill Development & Training
  • Maintenance Excellence Programs
  • Training & coaching in RE techniques (FMEA, RCM, RBI, RCA, PMO)
  • Development and optimization of Preventive Maintenance Strategies
  • implementation of RCM++
  • MRO spare parts analysis
  • Asset Master Data Management
  • Securing continuity in changing environments
  • Integrate improvement agenda in day to day business
  • Change Management on the shop floor
  • Recruitment
  • CMMS Strategy Development
  • CMMS Software Selection
  • CMMS Implementation Support
  • VDM based KPI dashboards built in Cognos and BusinessObjects

5. Customer Experience includes: Infrastructure Manufacturing Other Chemicals Life Sciences (Waste) Water Transportation Energy & Utilities Paper & Board Dredging & Offshore Food & Beverages Oil & Gas 6. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy 7. What is your Winning Maintenance Strategy? 8. Poll Question 1

  • What is your most important strategic objective?
  • to serve Production the best way we can (without Production there would be no need for doing Maintenance anyway)
  • to stay within budget at all times
  • to become (or remain) a World Class / Best in Class maintenance organization(high score in a Maintenance Excellence program)
  • to make money for my company

9. The Maintenance Dilemma

  • too often Maintenance is treated as a cost centre (a necessary evil)
  • the Maintenance Manager is not able to convince the Board of the real value potential and the need to invest in improvements
  • hence, Maintenance suffers from budget cuts year after year. It s hard to keep the team motivated, to hire new talent and the workforce is ageing. Loosing grip by being forced to outsource work to third parties...
  • Why can t we convince the Board?
    • we don t speak the same language
    • our strategies are not S.M.A.R.T. enough

10.

  • first and only maintenance methodology that really calculates the Economic Added Value of Maintenance, using Net Present Value techniques and industry specific Maintenance Benchmarks
  • provides focus on the real performance killers and supports setting the right targets and priorities
  • creates a Continuous Improvement mindset with yearly improvement cycles
  • is adaptive to changing economic climates
  • boosts the speed of improving by using proven best practices and the full capabilities of modern CMMS / EAM systems
  • provides an all-inclusive Maintenance Management Framework, filling the gaps not covered by existing methodologies like TPM, RCM, ..

Value Driven Maintenance (VDM): 11. Definition of Value The sum of all free future cash flows, discounted to today Value = In case of sustainable cash flows, year after year, the following short cut applies: Net Present Value =CF 0+ (NPV) CF r r = Internal Rate of Return (IRR) or discount rate or hurdle rate (representing the opportunity costs of capital) CF 0= Cash Flow at year 0, CF t= Cash Flow at year t Net Present Value =CF 0+ (NPV) CF t (1 + r) t 12. Value Of Maintenance Value Potential of Maintenance =Sum of all free cash flows (discounted to today), derived from improving (either): A ssetU tilization (CF AU ) C ostC ontrol (CF CC ) SHECompliance (CF SHE ) R esourceA llocation (CF RA ) = CF AU+ CF CC+ CF RA+ CF SHE r Assumptions: - sustainable improvements, year after year - no SHE limitations for expanding production volumes Important: - calculate the potential for each driver individually - check the interference (positive/negative) - determine the Dominant Value Driver 13. Value Potential depends on: 14. Value Calculation Example Asset Replacement Value (ARV) = 200 million USD Current Maintenance Spendings = 10 million USD Maintenance Costs vs ARV = 5% (current score) the value of 1% improvement (incremental): 1% of 10 million USD = 0.1 million USD per year NPV = (0.1 million)/0,10 =1 millionUSD Sustainable Improvements Growing Market r = 10% = 0,10 the Performance Gap (Maintenance Cost vs ARV): Current KPI score =5% Realistically achievable in 2 years = 4% Relative change = | (current - new) / current | = | (5 - 4) / 5 | =20 % Value potential on Cost Control: =1million USD x20= 20 million USD (or 2 million per year) say C 0= 0.5 million USD, then: NPV CC= -0.5 + 20 = 19.5 million USDEBITDA ( annual profit ) = 90 million USD Current Technical Availability = 90% (technical uptime, maintenance OEE ) Assumption: growing market the value of 1% improvement (incremental): 90 million USD / 90 = 1 million USD NPV = (1 million)/0,10 =10 millionUSD the Performance Gap (Technical Availability): Current KPI score =90% Realistically achievable in 2 years = 92% Relative change = | (current - new) / current | = | (90 - 92) / 90 | =2,2 % Value potential on Asset Utilization: =10million USD x2,2= 22 million USD (or 2,2 million per year) say C 0= 5 million USD, then: NPV AU= -5 + 22 = 17 million USD 15. Remember

  • In most cases one value drive will be significantly higher than the others.Speed up business results by focusing on this Dominant Value Driver!
  • Dominant Value Driver changes over time
  • Dominant Value Driver may differ per plant, per line, depending on the Product Life Cycle
  • Calculation must be based on reliable, industry specific benchmark data

16. Examples of Maintenance Value Creation Reduction of maintenance costs with 2 mio EUR EBITDA improved by 20 mio EUR Maintenance cost reduced with 50% MRO stock reduced with 50% EBITDA improved with 15%27% uptime improvement (equals 15.000 trucks) 5% more uptime plus 7 mio EUR cost reduction 5 mio EUR benefits after first wave of VDM audits 45 mio USD improvement potential revealed for 30 sites Bengt SvenssonMaintenance Manager at Volvo Cars ..Thanks to the VDM concept, our plant in Torslanda Sweden has been able reduce costs by around SEK 340 per car or SEK 70 million per year. ..VDM is based onconstantly measuring and report back on anything that affects how assets are utilized . Without VDM, it is unlikely that we would have succeeded in implementing cost controls as successfully and quickly as we did.. 17. Maintenance can make the difference! BP almost collapsed after fatal Deep Water Horizon incident... DSM outperforms industry peers after implementing new vision and Operational Excellence program.. 18. Poll Question 2

  • In your organization and market situation, which value driver will have the biggest value potential?
  • Asset Utilization: more uptime, sell more products
  • Cost Control: reduce Maintenance & Reliability spendings
  • SHE: compliance with Safety, Health & Environment legislation
  • Resource Allocation: reduce Spare Parts stock level

19. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy 20. The VDM Roadmap to Continuous Improvement Value DrivenMaintenance (VDM) Project & ChangeManagement Vision Creation Operation 1. Start up 2. Current State Analysis 3. Future State Visioning 4. Improvement Agenda

  • Improve
  • Asset