Download - Building A Winning Maintenance Strategy

Building a Winning Maintenance Strategy

with Value Driven Maintenance

Webinar September 27th, 1:00 - 2:00 pm EDT

Guy Delahay MScManaging Partner

[email protected]+1 917 562 5050

Mainnovation Inc.445 Park Avenue

New York, NY 10022www.mainnovation.com

http://www.mainnovation.com/

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 DelahayManaging Partner

E: [email protected]: +1 917 562 5050T: +1 212 836 4306

www.mainnovation.com

mailto:[email protected]

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

Our Service Lines

Interim & Change Interim & Change ManagementManagement

Process ConsultancyProcess Consultancy

CMMS/EAM & BICMMS/EAM & BIReliability EngineeringReliability 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®

Customer Experience includes:

InfrastructureInfrastructureInfrastructureInfrastructure

Manufacturing OtherManufacturing OtherManufacturing OtherManufacturing Other

ChemicalsChemicalsChemicalsChemicals

Life SciencesLife SciencesLife SciencesLife Sciences

(Waste) Water(Waste) Water(Waste) Water(Waste) Water

TransportationTransportationTransportationTransportation

Energy & UtilitiesEnergy & UtilitiesEnergy & UtilitiesEnergy & Utilities

Paper & BoardPaper & BoardPaper & BoardPaper & Board

Dredging & OffshoreDredging & OffshoreDredging & OffshoreDredging & Offshore

Food & BeveragesFood & BeveragesFood & BeveragesFood & Beverages

Oil & GasOil & GasOil & GasOil & Gas

Agenda

1.1.Understand theUnderstand the

Value OfValue OfMaintenanceMaintenance



2.2.Define the Define the Winning Winning StrategyStrategy


4.4.Monitor the Monitor the

Winning Winning StrategyStrategy



3.3.Implement the Implement the




What is your Winning Maintenance Strategy?

Poll Question 1

• What is your most important strategic objective?

(A)to serve Production the best way we can(without Production there would be no need for doing Maintenance anyway)

(B)to stay within budget at all times

(C)to become (or remain) a World Class / Best in Class maintenance organization (high score in a Maintenance Excellence program)

(D)to make money for my company

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

Value Driven Maintenance® (VDM):

• 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, ..

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 = CF0 +(NPV)

CF

r

r = Internal Rate of Return (IRR) or ‘discount rate’ or ‘hurdle rate’ (representing the opportunity costs of capital)

CF0 = Cash Flow at year 0, CFt = Cash Flow at year t

Net Present Value = CF0 +(NPV)

∑CFt

(1 + r)t

Value Of Maintenance Value Potential of Maintenance=

Sum of all free cash flows (discounted to today),derived from improving (either):

Asset Utilization (∆CFAU)Cost Control (∆CFCC)

SHE Compliance (∆CFSHE)Resource Allocation (∆CFRA)

=

∆CFAU + ∆CFCC + ∆CFRA + ∆CFSHE

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

Value Potential depends on:

Value Calculation Example

Asset Replacement Value (ARV) = 200 million USDCurrent Maintenance Spendings = 10 million USDMaintenance Costs vs ARV = 5% (current score)

the value of 1% improvement (incremental):1% of 10 million USD = 0.1 million USD per yearNPV∞ = (0.1 million)/0,10 = 1 million USD

Sustainable ImprovementsGrowing Marketr = 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:= 1 million USD x 20 = 20 million USD (or 2 million per year)

say C0 = 0.5 million USD, then:

NPVCC = -0.5 + 20 = 19.5 million USD

EBITDA (‘annual profit’) = 90 million USDCurrent Technical Availability = 90%(technical uptime, ‘maintenance OEE’)

Assumption: growing market the value of 1% improvement (incremental):90 million USD / 90 = 1 million USDNPV∞ = (1 million)/0,10 = 10 million USD

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:= 10 million USD x 2,2 = 22 million USD (or 2,2 million per year)

say C0 = 5 million USD, then:

NPVAU = -5 + 22 = 17 million USD

Remember

A. In most cases one value drive will be significantly higher than the others. Speed up business results by focusing on this Dominant Value Driver!

B. Dominant Value Driver changes over time

C. Dominant Value Driver may differ per plant, per line, depending on the Product Life Cycle

D. Calculation must be based on reliable, industry specific benchmark data

Examples of Maintenance Value Creation

Reduction of maintenance costs with 2 mio EURReduction of maintenance costs with 2 mio EURReduction of maintenance costs with 2 mio EURReduction of maintenance costs with 2 mio EUR

EBITDA improved by 20 mio EUREBITDA improved by 20 mio EUREBITDA improved by 20 mio EUREBITDA improved by 20 mio EUR

Maintenance cost reduced with 50%Maintenance cost reduced with 50%Maintenance cost reduced with 50%Maintenance cost reduced with 50%

MRO stock reduced with 50%MRO stock reduced with 50%MRO stock reduced with 50%MRO stock reduced with 50%

EBITDA improved with 15% EBITDA improved with 15% EBITDA improved with 15% EBITDA improved with 15%

27% uptime improvement (equals 15.000 trucks)27% uptime improvement (equals 15.000 trucks)27% uptime improvement (equals 15.000 trucks)27% uptime improvement (equals 15.000 trucks)

5% more uptime plus 7 mio EUR cost reduction5% more uptime plus 7 mio EUR cost reduction5% more uptime plus 7 mio EUR cost reduction5% more uptime plus 7 mio EUR cost reduction

5 mio EUR benefits after first wave of VDM audits5 mio EUR benefits after first wave of VDM audits5 mio EUR benefits after first wave of VDM audits5 mio EUR benefits after first wave of VDM audits

45 mio USD improvement potential revealed for 30 sites45 mio USD improvement potential revealed for 30 sites45 mio USD improvement potential revealed for 30 sites45 mio USD improvement potential revealed for 30 sitesBengt Svensson

Maintenance 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 on constantly 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..”

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..

Poll Question 2

• In your organization and market situation, which value driver will have the biggest value potential?

(A)Asset Utilization: more uptime, sell more products

(B)Cost Control: reduce Maintenance & Reliability spendings

(C)SHE: compliance with Safety, Health & Environment legislation

(D)Resource Allocation: reduce Spare Parts stock level

Agenda















The VDM Roadmap to Continuous Improvement

Value Driven Maintenance®

(VDM)

Value Driven Maintenance®

(VDM)

Project& Change

Management

Project& Change

ManagementVisionVision

CreationCreation

OperationOperation1. Start up1. Start up

2. Current State

Analysis

2. Current State

Analysis

3. Future State

Visioning

3. Future State

Visioning

4. Improvemen

t Agenda

4. Improvemen

t Agenda5.Improv

eAsset

Reliability

5.Improve

AssetReliability

6. Design Work

Process

6. Design Work

Process

7. Optimize

IT

7. Optimize

IT

8. Align Organisatio

n

8. Align Organisatio

n

9. ImplementFuture State

9. ImplementFuture State

10. StabilizeTransition

10. StabilizeTransition

11. Celebrate Success

11. Celebrate Success

12. Close-Out12. Close-Out

VDM Vision Phase

1. Start up1. Start up

2. Current State Analysis

2. Current State Analysis

3. Future State Visioning

3. Future State Visioning

4. Improvement Agenda

4. Improvement Agenda

• collect basic data• connect right people• communicate the why

Measure Current Performance:•KPI scores compared to industry peers•current practices•understand why you are there

Define Desired Future State:•identify your core competences•review running initiatives•learn from internal & external best practices•set realistic targets

Shape your Improvement Action Plan:•challenge scope, priorities & targets•choose best approach & team(s)•review business case

from Maintenance Value Drivers...

to Core Competences

Measure Performance with VDM KPIs

Benchmark with myVDM.com

• companies joining the VDM Benchmarking Program get secured login access to our online benchmarking database

• after on-site validation by our consultants, the data will be activated

• based on (sub) industry and other parameters, the tool will select the best set of benchmarking peers

• the tool will not only show your current performance at a glance, but directly calculate the improvement potential

• the tool will guide you through the process of defining your winning strategy

Example www.myVDM.com

your scoresindustry peers

Levels of Professionalism

Understand where you are today and which step you can realistically achieve

Clever use of Best Practices

• Once you know on which competences you need to focus, select the relevant (internal & external) best practices to compile your improvement action plan

RCM, FMEA, PMO, RCM, FMEA, PMO, PdM,..PdM,..

RCM, FMEA, PMO, RCM, FMEA, PMO, PdM,..PdM,..

Gatekeeping, Gatekeeping, PeakshavingPeakshaving

Gatekeeping, Gatekeeping, PeakshavingPeakshaving

OAC, 5S, RCA,OAC, 5S, RCA,OAC, 5S, RCA,OAC, 5S, RCA,

OEEOEEOEEOEE

Asset Based Asset Based BudgetingBudgeting

Asset Based Asset Based BudgetingBudgeting

Condition MonitoringCondition MonitoringCondition MonitoringCondition Monitoring

Risk Based Risk Based InspectionsInspectionsRisk Based Risk Based InspectionsInspections

SGA, RCA, FISGA, RCA, FISGA, RCA, FISGA, RCA, FI Cost DriverCost DriverAnalyisAnalyis

Cost DriverCost DriverAnalyisAnalyis

MRO SegmentationMRO SegmentationMRO SegmentationMRO Segmentation

See the VDM Book for an overview of best practices

Example of a Focused Improvement Plan

Case Study GlaxoSmithKline

• GlaxoSmithKline (GSK) is a leading global player in the Life Sciences industry

• GSK adopted VDM in 2006 as the framework for Maintenance Excellence Assessment throughout the Primary and Secondary Product divisions

• the VDM Audit Assessment approach is embedded in GSK’s Operational Excellence Roadmap

• Up to 2010, Mainnovation has conducted most of the audits. For repeating audits and small sites, Mainnovation has trained GSK certified auditors using the VDM Benchmarking Database

• To date, the benefits discovered by the program are at least 5 mio EUR per year.

Pharma

Case Study DSM

• Leading company in life sciences and high performance materials with over 100 plants worldwide

• DSM adopted VDM in 2002 as it provideda framework for the meetings of DSM Maintenance User Group

• DSM started an internal maintenance benchmarking & auditing program using the VDM Benchmarking Tool

• VDM helped to structure and enhance the maintenance work processes in their MANUFEX program

• 2007: 25% cost reduction (= $52M per annum) without jeopardizing SHE and Asset Utilization

• And they are still improving!

Chemicals

Agenda















VDM Creation Phase

5. ImproveAsset

Reliability

5. ImproveAsset

Reliability6. Design

WorkProcess

6. Design Work

Process

7. Optimize IT

7. Optimize IT

8. Align Organisation


Create Improved Competence

5. ImproveAsset

Reliability

5. ImproveAsset

Reliability6. Design

WorkProcess

6. Design Work

Process

7. Optimize IT

7. Optimize IT



Focus on your performance killers

• instead of full blown RCM programs or huge Master Data Management exercises, go directly after your trouble equipment and prove the value potential

Improve & Standardize your Way of Working

Best Practice Process Description

Linked to detailed reference materials

Linked to Organizational Roles & Skill Profiles

Case Study Volvo Cars

• Volvo Cars Manufacturing operates 4 production plants in Sweden and 1 in Belgium

• Volvo Cars is a recognized TPM champion but adopted VDM to respond to changed market conditions

• In 2006 the VCMS program was launched to standardize the work processes and IT systems. VDM was used to:

• validate the Maintenance Strategy of each plant and benchmark the performance

• develop a best practice maintenance process map

• develop a Global Maximo Template

• develop a dedicated maintenance game to improve change readiness on the shop floor to really embed the new way of working

• Volvo achieved 50% reduction in maintenance costs

Automotive

Agenda

1.1.Understand the Understand the


1.1.Understand the Understand the












Our view on Maintenance Business Intelligence

42

Yearl

ym

yV

DM

.com

Set targets Evaluate results and trend

Daily

/ W

eekl

yC

MM

S K

PI D

ash

board

Plan

Act

Do

Check

or or

download to Excel use KPI Report Generator in your

CMMS

use a preconfigured KPI Dashboard

solution

Case Study Conagra Foods

• Leading manufacturer of consumer food products with 30 (main) operating plants

• ConAgra Performance System (CPS) to standardize work processes, IT and organization (ONE company)

• The Planned Maintenance Pillar started offwith TPM, later adopted VDM

• VDM tools have been customized to ConAgra’s CPS setting. This includes:

• VDM benchmarking database

• VDM Process Map

• VDM RE Roadmap

• VDM KPI Dashboard

• Estimated project benefits: USD 45 million per year

Food & Drink

What is it (4)?

KPI score YTD is in red and the trend is negative...Cost go up rapidly starting in August/September...

Biggest spend is on Production assets, mainly spares for corrective work ordersinteractive report shows the cost split up per work order

Full drill-down analysis capability

Summary

Winning Maintenance Strategy

Value ofMaintenance

KPIs &Benchmarki

ng

Maintenance Best

Practices

VDM Inside

Understand your Dominant Value Driver

Understand how good you are & where to improve

Use proven best practices to innovate your organization

Measure your performance & improve continuously

Building a Winning Maintenance Strategy

with Value Driven Maintenance

Thank you for your attention!

Guy Delahay MScManaging Partner

[email protected]+1 917 562 5050

Mainnovation Inc.445 Park Avenue

New York, NY 10022www.mainnovation.com

http://www.mainnovation.com/

Download - Building A Winning Maintenance Strategy

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