hidden plant-strategic asset management

The Hidden Plant:

A Collection of Asset Management Articlespublished by S. Bradley Peterson

Strategic Asset Management Inc.25 New Britain AvenueUnionville, CT 06085

(800) 706-0702www.samicorp.com


(800) [email protected]

SAMI

Developing an AssetManagement Stratey

S. Bradley PetersonStrategic Asset Management Inc.

ABSTRACTMost large plants have $100s of millions in investment.They were all built with an objective to provide earningssuperior to risk-free government bonds. While thereare many factors which influence profitability, maximiz-ing output potential is often the single greatest opportu-nity, especially for low-margin, commodity-type busi-nesses. A typical measure of success of asset deploy-ment is Return on Assets (ROA).

Strategic Asset Management involves managing thecapital investment towards a long-term program ofincreasing the ROA. This is a top-down function ofsetting a performance specification for each majoroperating unit, identifying the critical components ofperformance, and systematically improving the keycontrollable variables of operation.

Managing assets strategically involves every functionin the plant working towards the same goals. Opera-tions and maintenance are rewarded for creating andutilizing the capacity of their units. Purchasing has itsmain goal as operating reliability, with cost as animportant but secondary goal. Engineering is based ontotal lifecycle value created, including product charac-teristics, maintainability, operability, and total cost peroutput unit.The improvement cycle is based on the OperationalReliability Maturity Continuum. This empirical modeldescribes five stages of mastery that create a founda-tion of improved performance with growth potential

continuing over a ten-year period. By describing therole of maintenance, operations, engineering, accountingand management in the improvement cycle, the plantcan guide creation of a strategic plan for improvement,tied with bottom-line performance expectations.

Once a business model is developed, each party setsgoals and works toward a combined action plan. Theinitial action plan is usually an improved planned mainte-nance environment, depending on the benchmarkposition on the Maturity Continuum. Implementationrequires the proper structure, measures, information andcommitment. Each major factor of implementation isidentified.

Once a proper maintenance process is established, theplant will continue improvement by adopting moreproactive maintenance approaches in a staged andmeasured environment. The key to success is knowingall the factors involved, and institutionalizing change inwork and process before proceeding with additionalstages of development.

WHAT IS STRATEGIC ASSET MANAGEMENT?Strategic Asset Management is a new model forextracting value from production assets. It represents acomprehensive, top-down approach to managing plantequipment and people for maximum profitability. Itssingle most important feature is in its fact-basedmanagement of the potential profitability of a plant,based on market conditions and variables within thecontrol of management. The scope of Strategic AssetManagement (SAM) begins with sales forecasting,through production planning, includes all facets ofmanufacturing, and ends with delivery of product to acustomer.

Copyright 2002 by Strategic Asset Management Inc. 3

We start with a view of the original purpose of theplant. Why did we build or purchase this plant, any-way? To provide employment? Yes, but only as a by-product. To satisfy customers? Yes, but as a means toan end. We built this plant because we believed wecould generate a greater return on capital thaninvesting in a government bond. By taking the risksassociated with manufacturing, we could apply ourknowledge, our systems, our proprietary process, andour people for solid profitable returns.

Our goal, then, will always be to manage our resourcesto gain profits, while safeguarding our people, property,community and environment. This means we need tounderstand the key levers to unlocking equipment assetpotential, by building our capabilities in a systematicway.

The rewards are straightforward. If we can use ourtotal resources better than our competition, we willproduce a superior, lower cost product with highermargins, have pricing flexibility to sell all of our productin a saturated market, and survive hard times while ourcompetitors fail.

DIFFERENCES WITH MAINTENANCE AND RELIABILITYOur vision and ultimate goal is to have the plant runningcontinuously at full rates, with no downtime and minimalplanned outages or turnarounds. Where do mainte-nance and reliability fit in this picture? Most plantstoday spend most of their resources responding toemergency repairs. How do we move from a repairculture to asset management?

This starts by aligning the vision of the entire manage-ment team. Who affects system reliability and through-put? Engineering? Purchasing? Operators? R&D?Production scheduling? Maintenance? The answer isobviouseveryone affects how well the plant pro-duces. Yet the functions seldom work towards thesame goals and rewards systems, leaving us frustratedin our attempts to make progress.

R&D, for instance, often design a process and equip-ment that dont use industry standard components norcomponents already stocked by the plant, and dontcoordinate with purchasing and engineering. Purchas-ing often knows little about the effects of their actions,whether the suppliers provide durable, maintainableequipment and parts. Rather they are rewarded most

often for cost savings, no matter what the effect onproduction. Engineers design equipment and processesto meet product specifications. Its rare that theyconsult with operators or maintainers about the ease ofkeeping the equipment and processes running. Whenthe new system is operational, they are off to their newproject. Production schedules are made to accommo-date a fast changing sales forecast, resulting in produc-tion run breakages, excess inventory, and stressedequipment. Operators do their best to assure theprocess is running. But if a breakdown occurs, whoyou gonna call? The last one on the listthe mainte-nance guys, who better get it back in production fast!And who are handicapped in getting the equipment onschedule, having the drawings and parts necessary,receiving a poor description of the problem, and work-ing under the gun!

Fixing the maintenance department or starting a reliabil-ity function arent going to create an industry leader.Only through sharing a future vision of plant operations,and multi-year plan of change and continuous improve-ment, can we make breakthroughs in creating value.

HOW DOES SAM DIFFER FROM TRADITIONAL MAINTENANCEIMPROVEMENT EFFORTS?Most maintenance improvement initiatives today arefunctional in nature. They compare, among a varietyof indicators, how well our company does against avariety of other companies, and endeavor to change theway maintenance is done. Whats wrong with that?

First, most of the other companies under comparisonare only marginally better than ours. Our conclusion: ifwe simply change certain practices, we will be as good(or bad) as the rest. There is no emphasis on thefinancial results we expect to see, no understanding ofthe core issues at work, no plan for major culturalchange, and little senior management involvement andcommitment. The issues to be worked are tactical, andseldom result in measurable progress, either in leadingor lagging indicators. We dont have a view of theresults of change on the financial performance of theplant, and end up spending money to improve mainte-nance based on faith that its the right thing to do.

The key requirements of successful plant-wide reliabil-ity improvement are these: An analysis of the potential production available in

Developing an Asset Management Strategy

The Hidden Plant by S. Bradley Peterson

4

the plant based on best demonstrated performance andoperating characteristics of best performing plants

Quantified current operating rates of each units,and goals for improving these rates

A business case with a three-five year horizonwhich identifies expectations for costs and produc-tion based on improvement efforts.

A multi-year plan that identifies the types ofchanges in practices and measurements needed toachieve the goals

A keen understanding that every function worksinterdependently to management equipment health

Accountability for delivering these results, tran-scending annual budget cycles

A tall order? You bet! This type of sustainable effort isexactly what distinguishes one competitor from another.

A comparison of current practices with Strategic AssetManagement practices illustrates the point:

DEVELOPING A STRATEGIC PLAN FORASSET MANAGEMENTSAM is based on several core principles. These shouldbe well understood before proceeding.

1. The plant exists only for one reasonto produce asmuch product as possible, to specification anddelivery schedules, at the lowest sustainable price

2. To improve will require fundamental changes in disci-pline and culture, beginning with the management team.Relationships and personal prejudices will be realigned

3. Everyone is the plant is on the same team and must worktoward the same goals

A shared vision of how the plant will work inthe future

A multi-year plan for mastering new skills inasset management

A business case that continuously createsbottom-line value

Functional Excellence Model

Operations owns production, maintenance ownsequipment

Maintenance excellence means efficient service(e.g. repairs) to production. A customer servicemodel dominated by operations. Most work isinside planning time horizon

Repair efficiency is the best measure of mainte-nance performance. No time to do it right, buthope there is time to do it over

Production runs at any cost. Dont have time toturn equipment over to maintenance as sched-uled.

Goals are set by functional managers, resulting incontradictory and self-defeating reward/recogni-tion practices. Most measure are lagging indica-tors, demonstrating past results

Purchasing excellence means having the lowestcost of items available

Pressure is on individuals to do better. No gaugesor tools of better exist

Asset Management Excellence Model

Operations owns equipment and is responsible forequipment health

Maintenance is a partnership with operations toidentify and work ways to improve equipmenthealth

Breakdowns represent an unacceptable manage-ment system failure, and require failure analysisof equipment and process

Production insists on and participates in assuringprevention and improvement activities

Goals are developed top-down in a cascadedfashion. Functions share lagging indicator goals(e.g. monthly production), and have uniqueleading indictor goals that support activities (e.g.% of PMs performed to schedule)

Purchasing and inventory managements highestgoal is parts service level and MTBF is pur-chased parts

Each piece of equipment has an operatingperformance specification, and gets the attentionnecessary for it


To achieve a shared vision, we begin by creating aStrategic Plan for Asset Management.

Our first step is to identify the potential capacity of theplant, and the profitability available. We look at theoverall production map of the plant, and identify boththe theoretical capacity and the best demonstratedperformance of the unit. This is the most difficultquestion management will have to face, because theconclusion is so painful. In some cases the theoreticalcapacity may be double what we achieve, and evenbest demonstrated performance identifies a huge gapwith where the plant is today.

We can also identify maintenance cost structures andhow they must change. When equipment health isexcellent, there is less labor and parts required than fora continuous repair operation. Validating maintenancecost reduction potential is an appropriate place to usebenchmarking.

The additional production and reduced maintenancecosts lead us in two directions. First, we can summa-rize the business case, with benefits as well as cost, asshown in this illustration.

Capacity Analyis Identifies Potential Bottlenecks andShortfalls From Potential Production (lbs/hr)

Process 1

Permit MaxTheor. CapacityBest Month95-96 Avg. Rate

Gain/Loss FactorEquiv. Adj. Cap.

17,540

14,986

14,986

12,90513,57212,31610,822

-10.0%13,855

21,84211,6489,948

+10.5%24,026

13,21813,92412,58511,063

-6.2%12,671

12,45013,76311,79110,285

-4.5%14,087

58,42226,06520,612

27,238

12,338

Theor-Best Mo.Theor.-Avg.Best Mo-Avg.

5,202

2,648

1,2562,7501,494

11,8941,700

1,3392,8611,522

1,9723,4781,506

37,8105,453

Performance

2,554 10,194 32,357

Process 2 Process 3 Process 4 Process 5 Process 6

A Typical Benefits Case Would Cover These Areas

Cost Reduction ($M)Cost Reduction ($M)

Labor

Contractors

MRO

Total Cost Reduction

Additional ProductAdditional Product

Unit 1

KLBS

Profits ($ 0.20)

Unit 2

KLBS Cap

Profits ($ 0.60)

Total BenefitsTotal Benefits

Year 1Year 1 Year 2Year 2 Year 3Year 3 TotalTotal

$ 0.75 $ 1.00 $ 0.25 $ 2.00

$ 1.00 $ 0.50 $ 0.50 $ 2.00

($ 0.25) $ 0.75 $ 0.25 $ 0.75

$ 1.50M $ 2.25M $ 1.00M $ 4.75M

9,000 14,000 22,000 45,000

$ 1.8M $ 2.8M $ 4.4M $ 9.0M

5,000 8,000 14,500 27,500

$ 3.0M $ 4.8M $ 8.7M $ 16.5M

$ 6.3M$ 6.3M $ 9.85M$ 9.85M $ 14.1M$ 14.1M $ 30.25M$ 30.25M



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Second, we can identify operating specifications toachieve our annual improvement targets. Instead ofdo better, we identify uptime requirements at theequipment level to achieve total operating goals.Because equipment operates in series, our individualequipment uptime goals must be higher than unit goals.For example, if our unit goal is 75% of maximumcapacity, each major piece of equipment must be higher.For five pieces of equipment,

95% x 95% x 95% x 95% x 95% = 77%

We then identify specific goals and work necessaryover a multi-year horizon, at the appropriate level ofdetail.

We document our efforts in an Asset ManagementStrategic Plan, with the following outline:

The Summary is a concise extract of the importantfeatures of the overall plan, intended to give seniormanagement an overview of findings and expecta-tions

The Current Assessment is the status of ourplant, including our operating rates versus potential,overall maintenance and reliability statistics com-pared with world class performance, and a bench-mark against the Operational Reliability MaturityContinuum

Future Operations Vision documents how weexpect to operate in the future. What will we looklike? How will roles and responsibilities evolve?This is based on understanding best practices, andenvisioning their implementation in our plant.

Initiatives outline the major components of ourimprovement process over the next several years.They are described by intent, outcomes and pro-cess, rather than as specific plans.

The Business Case outlines the opportunities weintend to capture, both in terms of cost savings andadditional production, and the outlays required to getus there.

Plans and Resources Required outlinetimeframes, deliverables, measures, peoplesinvolvement and other resources necessary toachieve the goals.

Structure, Accountability and Measures showhow we will execute the individual project compo-nents, who is accountable and how we will measuresuccess

Next Steps identify how we will get started andrequest specific management actions

IMPLEMENTING STRATEGIC ASSET MANAGEMENTWe identify major stages of improved asset manage-ment, illustrated by the Operational Reliability Matu-rity Continuum. This tool helps us identify the neces-sary building blocks to improve our operational reliabil-ity. The major steps include:

1. Gain control of the work (Stage 1, DailyMaintenance)

2. Gain control of the equipment condition(Stage 2, Proactive Maintenance)

3. Create the environment to maximize thecontribution from your people (Stage 3, Organizational Excellence)

4. Systematically eliminate sources of poten-tial system failure (Stage 4, EngineeredReliability)

5. Assure alignment of financial operations,corporate leadership, sales and marketing,and customers (Stage 5, OperationalExcellence)


GAINING CONTROL OF THEWORKWhile there are manytheories about maintenancebest practices, most consult-ants will advise that planningand scheduling is the neces-sary starting point. We takea broader perspective,however. Improving Stage 1is implementing plannedmaintenance. The compo-nents of planned mainte-nance are illustrated below.

The results of implementingplanned maintenance are amuch better utilization of theworkforce, creating capacityto work on proactive mainte-nance activities.

Each additional stage buildson the successes and capabilities developed in theearlier stage. The most important part to emphasize,however, is that there is a logical and optimum progres-sion to all these pieces to improving asset managementpractices. In our experience, any other order bringssuboptimized results.

The First Step in Gaining Control of the Work is theDiscipline of Planned Maintenance

MRO MaterialsManagementMRO MaterialsManagement

Work InitiationWork Initiation PrioritizationPrioritization Planning andSchedulingPlanning andScheduling

WorkExecution &

History

WorkExecution &

HistoryMeasures &Follow-upMeasures &Follow-up

EmergencyWork

EmergencyWork ApprovalApproval

BacklogManagement

BacklogManagement

ContractorManagement

ContractorManagement

Preventive &Predictive

Maintenance

Preventive &Predictive

Maintenance

Integrated T/APlanning &Execution

Integrated T/APlanning &Execution Failure AnalysisFailure Analysis

Work Initiation/Prioritization

Planning& Scheduling

Work Execution/Review

MaterialsManagement

PreventiveMaintenance CMMS

Work ManagementProcesses

PdMCMMS Integration

Craft Skills Enhancement

Equipment History

PredictiveMaintenance

Failure ModeAnalysis

Proactive Maintenance

Craft Flexibility

Maintenance/OperationsIntegration

ExternalBenchmarking TPM

ReliabilityFocus

Concurrent EngineeringLife CycleAnalysis

RAMAnalysis

RCMEquipment

Simplification/Standardization

AssetManagement

Stage 5Operational Excellence

Stage 3Organizational Excellence

Stage 4Engineered Reliability

Stage 2Proactive Maintenance

Stage 1Daily

Maintenance


BENEFITS OF STRATEGIC ASSET MANAGEMENTFor all of this effort, what kind of payback can weexpect? From a non-financial perspective we will havea plant that runs as expected, fulfills customer orders aspromised, and where call-outs will be an exceptionrather than the norm.

As an example of the benefits achievable, we examinethe progression through the Operational ReliabilityMaturity Continuum for a refinery.

We choose a refinery example because it is creating apure commodity. There is little differentiation in rawmaterials price (sweet vs. sour crude prices generallyreflect the costs of refining) nor product price, whichare set by international markets. How then does onerefinery become dramatically profitable, while the leastviable barely break even? The difference is how wellthe assets are used, and the systems and peopleinvolved in the process.

This 150,000 nominal barrels/day refinery has a re-placement asset value of $1 billion, the cost of replacingthat amount of capacity, and a book value of $500million. The spread between the cost of crude and theprice of gasoline (for example) is $3.00 per barrel.Thus our maximum profitability is $3.00/barrel. Ourjob is to capture the greatest portion possible.Note that the maintenance budget evolves from $40

Refinery Example of Strategic Asset Management150,000 nominal bbls/day plant. RAV = $1,000M. Book value - $500M. $3.00 market spread.

Maturity Continuum Stage

11 22 33 44 55

Maintenance Expense BudgetMaintenance Expense Budget$40M $30M $26M $20M $16M4% 3% 2.6% 2% 1.6%

Annual VolumeAnnual Volume30M bbls 35M bbls 40M bbls 45M bbls 50M bbls

Margin/BblMargin/Bbl$.10 $.50 $1.00 $1.50 $1.80

Annual Operating ProfitAnnual Operating Profit$3M $18M $40M $68M $90M

Return on Invested CapitalReturn on Invested Capital.6% 3.6% 8% 13.6% 18%

million to $16 million in traversing from Stage 1 to Stage5. But more importantly, the volume of product in-creases with each stage. By lowering the cost (thenumerator) and increasing output (the denominator) therefining cost per barrel declines, and our margin in-creases. The product of increased margins and outputin each stage creates a geometric growth in profitability,returning excellent results on our invested assets.

SUMMARYImproving maintenance alone seldom brings resultsworth the efforts made. Strategic Asset Managementis a comprehensive program, exercised over a strategicplanning horizon, that systematically creates value fromthe plant investment.


8



SAMI

The Central Issue:How to Make Distributed

Maintenance Work

by S. Bradley PetersonPresident of Strategic Asset Management

ABSTRACTDuring the 90s, many plants have decentralizedmaintenance to a greater or lesser extent. While theseplants have seen many gains from being closer to theconsumer of their maintenance services, they also seeissues emerging. What are the criteria to choosecentral vs. decentralized maintenance? Which func-tions and activities are candidates? Finally, what doesthis consultant recommend?

HISTORICAL CONTEXTMaintenance through the last several decades, untilrecently, was a relatively monolithic central function. Itwas usually staffed for peak activities, and often hadexcess capacity waiting for the breakdown to occur.With the advent of international competition in the 80s,many maintenance staffs were cut dramatically, andover several layoffs became smaller than half theiroriginal size. These cuts were often made strictlyaccording to either financial rules (non-union companieslaid-off the most senior, expensive workers) or seniorityrules (union shops left seniority in place). In neithercase were skills and experience the major consider-ation.

Simultaneous with reducing costs, companies wereforced to increase quality, productivity and safety.These efforts focused on the manufacturing unit,looking to reduce variation in product, reduce productionbottlenecks, and assure safe work practices. Quality

theory told us to define who our customers are and getclose to them. Most plants defined operations as themaintenance customer, and in increasing accountabilityfor operating unit managers, gave them more control ofthe resources.

The initial result was a surge in machine operability, asoperations managers directed resources towardsequipment problems that had been chronic problems.The craftsmen dedicated to the units felt needed andlike they were making a more direct contribution thanbefore as part of a pool. They learned their unitsequipment intimately, and became more proficient andcommitted to unit performance.

What could possibly be wrong with that scenario?

EMERGING CONCERNS AND LIMITATIONSIn speaking with maintenance and operating leaders indozens of plants in this past year, we have heard anumber of repeated concerns:

There is no consistency to how units areperforming maintenance.

In most cases the dedicated crews are workingon schedule breakers because of the ease ofdeploying them. If there is a plantwide prioritysystem, it has no application to these crews.Rather, work is done to the same urgency asthe production schedule.

Planners dedicated to units do very little routineplanning. Instead they are expediters, on-callsupervisors, and when they do plan, it is foroutages.

Maintenance craft skills are deteriorating. Noone in the organization is assuring the continu-ing development of craft skills

The CMMS data quality is highly compromised.Some units may use the CMMS, and othersdont.


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The remaining central force feels alienatedfrom the unit-based maintenance crew.

The Reliability Engineering Team (usually thosewho perform the PdM function) are frustratedthat their success is limited to those units whosemanagers understand their value.

Important measures of planned maintenance,such as % planned work, schedule conform-ance and %PPM are declining or very stub-born at improving. Operating units have nostandard definitions of these measures, andmay or may not even measure and recordthem.

The first question to ask is, So what? If the produc-tion schedule is being met, is there any cause forconcern?

There is, of course, in any industry where cost is aconcern. How do you stay ahead of your competitionin most businesses? Produce to a quality standard forless than everyone else. No one weve spoken withconsiders the current practices to be efficient, even ifthey are seen as effective.

Is there a better way? If so, what is it?

Option 1Require operating unit managers to be better managersof the maintenance function and process

Option 2Recentralize maintenance

Option 3Develop an organization that optimizes efficiency andeffectiveness

We can rule out Option 1. Operating unit managersseldom have strong maintenance backgrounds, andwould be required to make balanced decisions. Pos-sible, but unlikely. Option 2 would bring back thebureaucracy, and would not benefit the overall organiza-tion. It may temporarily improve the control of thework (efficiency), at the expense of production (effec-tiveness).

A MODEL FOR ORGANIZING MAINTENANCEThe answer we suggest is based, in general, on cen-tralizing functions that create efficiency and controlof work, and decentralizing functions of workeffectiveness.

Functions of efficiency and control in maintenanceinclude:

Work prioritization for global resources Work planning Work scheduling for global resources Analysis of work done Preventive and predictive processes Maintenance of information tools Compliance with standards Central reporting Skills assurance

Functions of work effectiveness in maintenance include: Response to immediate needs Recognition and alleviation of equipment

chronic problems within the operating context Prioritizing and scheduling area resources

Based on this criteria, we see the following organizationmeeting both criteria:

Work Identification. Only the area can be expectedto identify the totality of the work. Problems notrecognized do not get attention.

Work Prioritization. Prioritization is a shared func-tion. The unit places a relative prioritization on thework. A global system of prioritization must be main-tained that works across all units, however, or there isno assurance that resources will be working on theright stuff.

Work Planning. The planning function is done prima-rily to improve efficiency. Planned work is typicallymeasured as requiring 1/3 of the labor time as un-planned work. The best model we have seen is to haveplanners centrally located, centrally managed, butdedicated to a unit(s). The planner is less likely to bediverted to other responsibilities, and more likely to havethe time for careful analysis. There are other benefits.During times such as vacation, there are backupsavailable to plan.

Planning is a discipline that is difficult to achieve anddifficult to maintain. It needs to be nurtured anddeveloped carefully. This is the greatest issue tomaintenance improvement in most plants.


Work Scheduling. Work scheduling is a sharedfunction between the the dedicated planner, the poolresource manager (usually the manager of centralmaintenance) and the unit leader/supervisor. Thesupervisor is free to schedule his own dedicatedresources against the planned work (allowing forunplanned work), and will receive additional resourcesfor work that is identified as global priority.

Work Documentation. A key to developing a valu-able history is complete documentation of the actualwork performed. This is done by the craftsman at theend of each job (to avoid the quit early syndrome), andreviewed by the planner for the area. The planner mustbe the coach to assure that work is documentedaccording to plant standards.

Work Analysis. Planners are the only staff in positionto understand and review the work. Part of workanalysis is done by simply reviewing the work docu-mentation. Standard job plans may be updated, chronicproblems flagged, materials and parts issues noted, andfuture RCM, FMEA or Root-Cause analysis needsidentified. In addition, planners become very familiarwith the analysis and reporting tools available throughthe CMMS, and can most readily scan history forrecurring equipment problems.

Preventive and Predictive Work. To assure thatPPM work gets done consistently, we have seen theReliability Team most effectively used reporting to acentral leader. As in planning, these people mustbecome specialists, and learning and helping each otheris a key to success. This function would report cen-trally.

Information Tools, Reporting and Compliance/Performance Audits. Providing information tools,such as maintaining the CMMS, reliability tools, makingthe reports for reliability and Key Performance Indica-tors, performing analysis and audits are all functionsthat would have central oversight or performed cen-trally.

AREA MAINTENANCEOne of our clients calls the craftsmen reporting directlyto the area Min. Crews, short for minimum crews.The concept is that they are able to handle the minimumaverage workload of the unit. One method to identifythe appropriate staffing level would be to examine the

amount of work done in the units during the 10 weeksduring the year in which the least hours are recorded bythe unit and staff to that level. The objective is to keepas many available to the central group as possible foroutage work, etc., and to staff just enough to keep theunits operating at an optimal level.

This group becomes identified with the unit where theywork. Their goals have less to do with typical mainte-nance KPIs, but directly with the production goals ofthe unit. As such, the often act as the SWAT team tohandle immediate work. They also work on the annoy-ing problems of the unit that would never hit the highpriority list of the central priority system.

Their interaction with operators is mutually beneficial.Operators more readily participate in maintenancetasks when the crafts performing the work are theirguys. The craftsmen learn the intimate details andidiosyncrasies of the units equipment, and becomeexpert in restoration of function. In the best cases, theyroutinely remove the sources of work (chronic prob-lems) from the units.

The downside of this union is twofold. First, thecraftsmen are not maintaining their skills because theirwork is Jack of all trades. Second, there becomes aschism between the area and central groups. We haveseen this problem resolved through a periodic rotation ofstaff through the area.

Scheduling of work is a primary responsibility of thearea. This is typically handled in a weekly planningmeeting between the unit-dedicated planner, the as-signed maintenance coordinator, and the unit productionsupervisor. The planner has issued a list of plannedwork available for work to the parties ahead of time.They come to the meeting with prioritized work liststhat they reconcile, creating the work list and schedulefor the following week.

CONCLUSIONSArea maintenance has contributed a great deal to theeffectiveness of manufacturing among our clients inNorth America. In many cases, however, these plantshave dismantled the central organization. Reestablish-ing the efficiency and control functions under a centralorganization can help the plant improve the total amountof value-added work contributed by the maintenancestaff.

The Central Issue

Defining Asset Management

S. Bradley Peterson, USAStrategic Asset Management Inc.

Asset management is a term that has been getting a lotof press recently. The term implies many things tomany people, and there is no industry standard forapplication. Implied in the term, however, are somebasic concepts:

Business goals drive decisions regarding the useand care of equipment assets

Asset strategy is determined by operational consid-erations

Maintenance and reliability are means to a definedgoal, not an end in themselves

The intent is to optimize the application of allresources, not just maintenance

We have seen attempts to define asset management aslife-cycle cost management; it has been used in thephrase asset management reliability, which seems tobe redundant or confusing; we have seen the termsubstituted for maintenance or reliability practices. Wedefine asset management as a global managementprocess through which we consistently make andexecute the highest value decisions about the useand care of our assets.

Our approach is based on the Operational Reliability



SAMI


Maturity Continuum. This empirical model describesfive stages of mastery that create a foundation ofimproved performance with growth potential continuingover a strategic horizon. This model was described insome detail in the September 1997 issue of Mainte-nance Technology magazine entitled Developing anAsset Management Strategy.

BACKGROUNDMobil has identified reliability as a primary competitiveopportunity. Prior to working with SAMI, they haddeveloped the concept of Business-Driven Reliability,or employing reliability improvement where businessvalue is created. The opportunity lay in developing anoverall business process where the business plan wouldbe achieved by statistically assuring the underlyingreliability of people, processes and equipment necessaryto achieve the goals. And this would be assured at thelowest cost. While the goals may seem no differentthan other plants, the difference comes in the process,specifications and decisions necessary for implementa-tion, and ultimately the new behaviors exhibited by theworkforce.

THE ASSET MANAGEMENT MODELIn addition to the asset management concepts identifiedin the first paragraph, we identify several more:

TEAMTM must completely align the businessplan with plant realities, identifying specificequipment condition and performance gaps toovercome to achieve the plan

All of the work starts with an asset perfor-mance specification, based on supporting thebusiness plan; we perform the necessary workto sustain the performance specification, neithermore nor less

All measures, from a corporate ROIC (ReturnOn Invested Capital), to plant contribution, tounit production rates, to specific equipmenthealth requirements, to the supporting mainte-nance strategy, all cascade in alignment

The central focus of TEAMTM is the operator.He/she understands the manufacturing processand goals, understands and manages equipmenthealth to meet requirements, and gathers theresources necessary to achieve productiongoals

Implementing asset management is a process. Itcontains in it the following elements, and the decisionmodels to determine when to use them:

Empowered Workforce Reliability Centered Maintenance Work Management Processes Predictive and Preventive Maintenance Self-managed Work Teams Measures of Leading and Lagging KPIs

PeopleReliability

ProcessReliability

EquipmentReliability

ProductionReliability

LeadershipTraining & DevelopmentCommunicationPerformance Management

Business ProcessesWork Management ProcessesProduction Processes

Tools(RCM, PdM, PM, Statistical Analysis)AssessmentReliability Teams

Process Control



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Reliability Leadership and Planning Safety, Health and Environment Continuous Improvement Reliability Modeling and Equipment Risk

Assessment Cost of Unreliability Tracking Root Cause Failure Analysis Capacity/Business Objectives Modeling Lifecycle Costing/Engineering Activity-based Management

THE TEAMTM PROCESS MODELThe TEAMTM process model is illustrated here. Theflow is generally as follows, and explained in greaterdetail below:

1. We identify equipment criticality, condition,FMEAs, maintenance requirements

2. This information is taken into the annualplanning process. Plant-wide goals are set andpassed to the production units for validation

3. The production units prepare their productionand expense plans, identifying what resourcesare required to meet the plant goals. They alsoidentify improvement opportunities and re-sources. This information is passed back to theplant-level plan for review and consolidation

4. When budgets (activity-based now, not histori-cal) are set, the units create an annual plan forall work in the unit (not just maintenance, butoperations and engineering)

5. The work is done to the schedule6. Results are measured7. Corrective actions are identified and prioritized

with the currently identified work8. Any changes to the plant are modeled for

impact on reliability, and new configurations areincorporated into Plant Capability

PLANT CAPABILITYIn the Plant Capability segment we do front-endRCM on a processing unit. That is, we identifysystem and component hierarchy, we classify processand component criticality, we identify system failuremodes and effects analysis, determine critical equip-ment condition, and assign a maintenance strategy foreach system or component based on criticality andvalue. This positions us to prepare activity-basedmaintenance budgets, begins to identify equipment

conditiongaps,

MEASUREMENT&

FEEDBACK

ModifyProductionCapability

ANNUALUNIT/DEPARTMENT

BUSINESS PLANDEVELOPMENT

PERIODIC PLANTPLAN UPDATE PERIODIC UNIT

PLAN UPDATE

PERFORMTHE WORK

3

12

4

5

67

8

9

3

11

TEAM Flow Model

BUSINESSSTRATEGY

CONTINUOUSIMPROVEMENT

ANNUAL PLANTBUSINESS PLANDEVELOPMENT

PLANTCAPABILITY

TM


and provides the basic data to prepare a reliabilitymodel for the unit.

The operators and their supervision do all this work,after significant training. Initial training includesparticipating in The Manufacturing Game, which servesas a highly leveraged orientation and change manage-ment tool. It also initiates Action Teams, which modelthe type of team behaviors that will be necessary tooperate the units in the future.

We have simplified the equipment condition assessmentby equipment class type to be in a yes/no questionchecklist format that provides the basis for operatordaily care practices. The maintenance strategy isassigned via a simple matrix based on component valueand criticality.

Plant Capability, as shown by the diagram, is doneinitially and provides input to the annual businessplanning cycle.ANNUAL PLANT BUSINESS PLAN DEVELOPMENTTypical annual plans begin with Corporate setting afinancial target for the plant, followed by efforts of theplant to justify a lower target, or deciding how to livewith the goal. Most often this follows the I wishprinciple of goal-setting: in spite of not having made planlast year, we look for an increase of, for instance, 8%production this year, while decreasing the operatingbudget by 5%. Since the plant leadership team aretough guys, they are left to figure out what to do

differently. In most plants, decreasing budgets leads toless equipment attention, decreased equipment health,and declining production.

The process for capital investment is often even lessstructured; plant management finds out the capital planis due in corporate by Friday, and meets all day Thurs-day to determine which projects will be proposed, basedsignificantly on emotional commitment to specificprojects. This lack of structure is not seen as important,however, since this only allocates a bucket of money,and projects will be decided in earnest during the courseof the year.

Unit goals are often specified by numbers for whichthere is little accountability during the year. Rather, welook for record shift goals, or running wide open, notknowing the consequences on equipment, safety orcost.

Under TEAMTM this process changes dramatically.The first step is to determine the effects of increaseddemand on the units for throughput. What is theprobability of achieving the increased throughput goal?The chart below gives a viewpoint for productionprobability:

Depending on the units production volume requirement,we can select the appropriate maintenance strategywith to meet the probability of production required. Ifthe unit at its healthiest equipment condition is unable to

Maintenance Is Assigned According To This MatrixCriticality Proactive Maintenance ActivitiesHigh-1High-2Medium-1

Medium-2Low-1Low-2

High-3Medium-3Low-3

0 - $5,000

Time Based Useful Life,Schedule & Replacebefore Failure

Time Based Useful Life,Inspect, PM & ConditionMonitoring

RCM, ContinuousMonitoring, PredictiveMaintenance, PM &Root Cause Analysis

Predictive MaintenanceRoot Cause Analysis

Inspect, PreventiveMaintenance

Inspect, Run to Failure

Run to Failure Operational Maintenance Preventive Maintenance

$5,000 - $50,000 Greater than $50,000

(1) (3)

(4) (5) (6)

(7) (8) (9)

(2)

High Criticality- A process in which a service interruption would result in a CoUR event.Medium Criticality- A process in which loss of service for less than 8 hours and would

not cause a CoUR event.Low Criticality- A process, which operates intermittently and service interruptions, will

not result in a CoUR violation

ComponentValue



16

produce at that required rate, we design the capitalproject, along with the cost/benefit calculation. This isfed back into the planning process, to determinewhether the cost of maintenance or capital project isjustified to meet the rate requirement.

Thus we are able to iterate the goal setting process,based on facts and probabilities of achieving the goals.For instance, an 80% likelihood of achieving productiontargets would probably not be considered adequateassurance, and engineering steps would be taken inincrease the probability to acceptable limits.

We will have a list of capital projects, each having aspecific return on investment, from which the manage-ment team will choose. The guessing game is elimi-nated; it is actually likely that more capital will beapproved since the justifications are so clear, and theplant debottlenecking efforts will be based on maximumutilization of existing assets, rather than substituting acapital project for good asset health practices.For each capital project we will review RAM, MORand MOC (reliability, availability, maintainability, man-agement of reliability, and management of change).The Management of Reliability will assure that theprobability of performing at specified productionvolumes for the unit is not negatively affected by theproject work.

ANNUAL UNIT/DEPARTMENT BUSINESSPLAN DEVELOPMENTThe unit will set objectives based on the overall plantobjectives, coming out of the initial pass of Prepare/Update Annual Business Objectives.

At this point the unit will determine the likelihood andbarriers to achieving the production goal, as well as themaintenance budget. They will model in detail the unitscapabilities, creating performance specification for eachsystem and subsystem, all the way to identifying therequired MTBF for components. Where there exists agap, we identify equipment upgrades, capital projects,and any changes in the maintenance program necessaryto meet the goal. We will create an activity-basedmaintenance and operating budget, since we know thespecific maintenance and operating strategies for eachsystem and component in the unit.

The unit then signals the plant leadership what the costsand barriers may be to achieve the goals, and decisionsare made regarding the variations. The importantaspect here is the precision with which decisions aremade. We know our capacity and probability ofoperation; we have a rationale strategy and associatedcost with every maintenance activity, and will report onthose activities and specific variances.

Given this level of specificity by the units, a planner willhave most of the information necessary to begin hiswork, and can prepare most work packages ahead oftime.

Maintenance and Capital Spending are Matched to Meet theProduction Volume Requirement

Probability

%

P r o d u c t I o n V o l u m e

100%

UnitProduction

Targets

1 23

Low Cost Maintenance Approach for 1

Higher Cost Maintenance for 2

Capacity Increase/DebottleneckingRequired


CONTINUOUSLY MANAGE WORKIn the Continuously Manage Work segment, weintroduce some new concepts. First of all the WorkManagement System, in addition to holding the mainte-nance work and resources, plans and schedules opera-tions and engineering work and resources. For in-stance, if an RCM study is planned for a piece ofequipment for this year, resources will be loaded againstthat as a task. The operators daily rounds are identi-fied as routine tasks, and reported as they are com-pleted. Engineers in most plants are critical pathresources, yet we dont schedule their time; in theTEAMTM process their tasks and priorities would bemanaged like the work of the craftsmen.

Another opportunity we grasp is scheduling all thework; this includes routine maintenance, responsivemaintenance; operator performed maintenance; majormaintenance, outages and shutdowns; engineeringwork. Fundamentally we need to plan everyoneswork, and by doing so, we are making judgements aboutthe priority and value of each task, start and stop times/dates, and performance expectations, measures andreviews.

At this time the reader may ask, Isnt this terriblystructured and data driven? Where is there room forspontaneity and interest? Our primary intent inmanufacturing is to set a standard that meets custom-ers needs, and to manage work and product to mini-mize variation. That can only be done with data andplanning. The fun comes in through the feeling ofcontrol and contribution by the hourly workforce, butbeing able to complete a planned task before startingseveral more, and by being consistently successful.More people than have participated in the past requirecreativity and better decision-making. Reducingvariation in the manufacturing process is everyones job,not just the managers and superintendents.

Because there are clear specifications for equipmenthealth and work management, measurement becomesmuch easier. It is performed by the hourly staff, whoare motivated to improve, as performance is directlyrelated to rewards and recognition. We will need tomake meeting performance targets pay well for thehourly ranks, just as management is measured andrewarded.

MEASUREMENT AND FEEDBACKReview of results is an ongoing task. Variances aretreated as opportunities to understand more about theequipment and the process. Because we have a directknowledge of cause and effort in our equipment, wewill identify necessary changes in our equipment, ourknowledge, and our processes. Most failures will beseen as caused by the management system, rather theindividuals who willfully fail to perform.

CONTINUOUS IMPROVEMENTBased on the analysis of the variance, we may find thatour maintenance routines are under- or over-maintain-ing equipment, that we are not eliminating systemicfailure modes and effects, that engineering projects aremore or less robust that anticipated. Any changes wemake need to be reflected back in the Plant Capabilitydatabase. We may also make changes that affect ourAnnual Profit Plan, which will be updated.

We also recognize that many failures are effects oflacking of understanding of equipment function, so wetake action to reduce our staffs actions as a source ofvariation.

PLAN UPDATESControl may be seen as desirable, but impossible, in ourever-changing world. Even a Stage 5 company hasunplanned downtime. Customers needs change.External forces buffet the plant, especially reactiveresponses to events. The question is not whether wewill respond to change, but how to do so most produc-tively.Our approach suggests that keeping to a monthly plan ishighly desirable. We can say in tune with the entireplant, and make changes in a planned fashion. One ofthe greatest causes of variation in production andequipment come when changes are made with littlecommunication, with little planning, and little consider-ation for other effects. For instance, we often hear thatdriving a process beyond prior limits without safeguardscaused an equipment outage. Or that one part of theplant made a change without informing the rest of theplant, and led to unexpected results.


The TEAMTM model calls for changes to be reflected inboth the annual plan and the unit production plan. If wehave a product that is currently selling at a high margin,and we want to adjust production levels, great! Butlets make the change in a planned fashion. We revampour annual plan to reflect volume changes; the unitshave a chance to respond to the efforts of the change,and to prepare for them. If we have been through thisparticular change before, we can safely make theproduction adjustments based on prior history. If ourequipment configuration has changed, or our workforcehas turned over, proceeding deliberately will maximizethe likelihood of achieving the desired goals, andminimizing unintended consequences.

Specifically, in addition to changing our annual plan andthe unit plan, we will work to understand the systemstresses that will result from the change. We will runthe appropriate models of RAM, MOR and MOC, aswell as our unit reliability models to try to foresee andaccommodate effects of the change.

RESULTS EXPECTATIONSMobil has made some very good gains, even though weare very early in the implementation process. From afinancial perspective, teams have identified more than$1 million is benefits, and the Cost of UnReliability hasa reduction trend in 1999 to yield $8-10 million. Astelling, though, is the enthusiasm and dedication of thehourly workforce. Their leadership recognize thebenefits of greater contribution, control and satisfactionthat comes to the workforce with this process.

The unit teams receive more training than ever before,and they are applying the training immediately. Be-cause this process leads to fundamental changes inmanaging activities, there are changes in virtually everyjob and core process in the plant. It is not a path for thetimid or those unwilling to change. Some of the resultsof the process include:

Corporate is using this project as part of themodel for all manufacturing facilities

The Operations manager has said, This is thebest return on any money I could have spent!

Union Official: We want our employees toshare in the profits, because they will be takingmuch more responsibility

Operator: For the first time I feel like I am notasked to check my brain at the door.

SUMMARYAligning plant resources to continuously maximizevalue and minimize variation has been an industry goalfor decades. Technology and human factors havefinally provided the tools necessary to close in on thisachievement.

Advanced and sophisticated plants, able to success-fully change and which have excellent leadership, arecandidates for the process we call asset manage-ment, or TEAMTM. We suggest that companiescomplete a minimum of Stage 3 performance beforethey embark on this program.

Recognizing that the concepts of asset managementwill grow and mature over time, we offer TEAMTM asa stake in the ground that provides a basis for discus-sion. We welcome readers input to continue to betterdefine this process.


18



SAMI

Designing the BestMaintenance Organization

S. Bradley Peterson, USAStrategic Asset Management Inc.

BACKGROUNDWe find a lot of uncertainty about optimizing plantorganization among maintenance and plant leadership.This is manifest by frequent change in the organizationdesign, typically swinging from centralized maintenanceto decentralized maintenance, and back again.

The result of this frequent change is the uncertainty ofleadership, responsibility channels and direction (otherthan the familiar and maligned reactive maintenance) ofthe new organizations accomplishments versus theaccomplishments of the former structure.

Improvement initiatives usually lose momentum aspeople get acquainted with the change of relationship,and look for new cues for how to act. If there hasbeen no communication plan executed as part of thechange, the craftsman has time to adjust to the newrole, and finds no reason to initiate anything new.Reactive maintenance maintains its tenacious grip.

Is there an objective method we can use to design theorganization? What are the major factors that influencethe design? We present a model in this article that usesorganizational competencies and improvement strategyas the driving considerations behind organization design.

CURRENT CRITERIA FOR ORGANIZATIONAL CHANGEWe find many organizations designed to fix a perceivedproblem, that in many cases raise more issues that theysolve. Rather than having a clear rationale, the designis made reactively. The intent of the design is moreimportant, actually, than the structure. (consider re-phrasing: The intent of the design actually becomemore important that the actual structure.)

Among the reasons we see for specific design are:

1. We see a lot of dissatisfaction with maintenance bythe plant manager or production. Results: Distrib-uting of decentralizing resources. Give me thecrafts, says Mr. Production Manager. Ill showyou how maintenance should be done.

2. In a desire for increased accountability, many plantshave gone to an autonomous unit-based structure,and divide all resources among the units to eliminateexcuses. Results: Decentralized resources. Itnow becomes virtually impossible to move re-sources between units.

3. In order to minimize costs, maintenance resourcesare moved to report to a production supervisor,eliminating the (perceived) need for the mainte-nance supervisor. Results: Distributing or decen-tralizing resources. Usually the production supervi-sor had a full-time job, and no maintenance experi-ence, leaving crafts on their own to find work to do.Over a period of time, craft skills deteriorate andincidents outside the unit increase (e.g. utilities).

4. Many plant managers are frustrated that mainte-nance seems monolithic, slow paced, every jobrequires excessive time to get done. Maintenancepeople fail to understand the business of manufac-turing, and dont seem part of the team. Results:Decentralize or distribute resources. Maintenance


20

becomes more responsive to unit or department needs.They learn the equipment, work to eliminate chronicfailures (because they are so tiresome), and nowfeel a part of the core business.

5. Maintenance costs seem to rise each quarter.More and more contractors are brought in forlarger jobs that used to get done in-house. Expedit-ing parts becomes more common, and plannersdont seem to find time to plan.Results: Resources are centralized, perhaps to thechagrin of the craftsmen, who often feel more partof the business out in the unit or department.

CRITERIA TO JUDGE ORGANIZATIONALEFFECTIVENESSRather than designing the organization to solve aspecific problem, we need a set of criteria to identify aneffective organization. We propose the following as astarting point:

1. You Have Control Of The Work Work is accurately and completely identified When work is written up, there is confidence it

will be done in a reasonable timeframe Activity is performed according to the priority

of operational criticality and safety Work scheduled is consistently work done Work is executed efficiently. Little waste

during the course of the craftsmans day Results of the work are properly recorded and

periodically analyzed for opportunities toimprove the system, or an individuals perfor-mance

2. Defects Are Routinely Being Eliminated Prevention is the bias of the maintenance

department (PM, PdM) Operations takes responsibility for equipment,

including routine surveillance, proper operatingprocedures (to minimize breakage), rawmaterials are appropriate for the equipmentapplication

Equipment health in maintained (lubricantsapplied, alignment checked, tensions main-tained, critical operating performance levels arecharted)

Materials management assures appropriate

service levels are maintained and lifecycle cost,rather than purchase price, is the primaryconsideration

Failures events are evaluated, prioritized,analyzed and failure modes eliminated

3. Maintenance Costs Are Minimized Jobs and skills are matched in the scheduling

process Jobs are planned (estimated, parts & tools

reserved, drawing available) & materialsavailable prior to scheduling

Equipment is prepared prior to crafts arrival tojob:a Cleaned, isolated mechanically & electri-

callyb Safety procedures observedc Proper shutdown and start-up procedures

observedd Operators perform tasks according to their

ability and the level of sophistication of thefacility (see Developing an Asset Man-agement Strategy, Maintenance Technol-ogy, September 1997, for a description ofthese stages.)

e Stage 1: Prepare equipment, identify work,learn equipment function, act ascraftsmans helper

f Stage 2: Perform Operational Maintenance(Surveillance, Lubrication, Adjustments,Cleaning)

g Stage 3: Perform simple maintenance (e.g.packing valves), troubleshooting, partici-pates in repair

h Stage 4: Work with defect elimination,participating in RCFAs, RCMs, etc.

BASIC TYPES OF ORGANIZATIONAL MODELSWhat are our options, then, to consistently provide thecapabilities listed above? Simply put, there are threetypes of organization design.

- Central Maintenance. All crafts and relatedmaintenance functions report to a centralmaintenance manager.

- Decentralized. All crafts and maintenancecraft support staff report to operations

- Distributed. A combination of the above.Typically centralized maintenance leadershipfunction, with maintenance and reliability stafffunctions reporting here. Crafts are in some


proportion allocated to production units and to acentral maintenance function.

MODELS FOR DECISION-MAKERSAll quality theory suggests one study the value chain,that is, where is value created in the organization.What value does maintenance (and its counterpart, thereliability team) create? And what organization enablesthat value?

While this list may not be comprehensive, it doesindicate that neither a centralized nor decentralizedorganization is ideal to accomplish all the value-addedrequirements of maintenance and reliability functions.

THE RELIABILITY MATURITY CONTINUUM

Stage I, Planned Maintenance, has as its primarygoals to gain control of the work and to minimizemaintenance cost. Often referred to as planning andscheduling, it attempts to maximize the effective use ofthe craftsmans time. This is done by assuring acomplete work package, tools, parts and permits areready before work is started. Also, by careful schedul-ing, we may perform several jobs on a piece of equip-ment when it is down, instead of just one. Defect

elimination is a by-product as well. By prioritizing jobs,and assuring the right parts and tools are available, wespend our time doing the most important things right thefirst time, rather than patching a patch.

Stage I Optimal Organization. Establishing andenforcing a common system across all units in a plantrequires strong central authority. Important new skillsmust be learned and continuously reinforced. Planners

VALUE MEASURE BEST ORG. STRUCTURE

1. Repairs Equipment Mean time to repair DistributedMaintenance Rework Distributed

2. Trouble-shoots Mean time to repair DistributedMaintenance Rework Distributed

3. Improves Operability Throughput Distributed

4. Improves Maintainability Mean Time to Repair Distributed

5. .Monitors Equipment Condition Throughput CentralizedMean time between FailuresMaintenance Cost

6. Overhauls, Capital Projects Efficiency, Schedule CentralizedCompliance

7. Controls Cost Maintenance Cost Centralized

8. Manages Materials Availability, Cost Centralized

9. Increases Reliability Throughput Centralized/DistributedMean time between FailureMaintenance Cost

Designing the Best Maintenance Organization


22

must be dedicated to their jobs, and while assigned byarea or unit, their concentration cannot be scattered bya variety of extra assignments. So until this newsystem is firmly in place as a way of doing business, thebest organization, we believe, is centralized.

Stage 2, Proactive Maintenance, is aimed at defectelimination, which of course reduces costs. It alsoincreases control of the work, because schedulebreakers decline as failure modes are eliminated. Thegoal of proactive maintenance is to eliminate commonfailure modes and effects across the entire facility. Wehave seen concerted efforts on rotating equipment, forexample, increase mean time between failure of pumpsfrom six months to four years, or one-eighth as manyjobs to perform. Consider this stage operating underthe 80/20 rule: 80% of the failures come from 20% ofthe failure modes.

Stage 2 Optimal Organization. Since we are lookingfor failure modes across the entire plant, and not in onlyone area, the reliability teams continue to be organizedcentrally. New skills must be acquired for crafts andengineers. Costs for acquisition of condition monitoringequipment need to be carefully evaluated for bestapplication and value. These decisions are best madecross-functionally, and executed centrally.

Stage 3, Organizational Excellence, now engages therest of the operation in Asset Health Care activities. InStage I, operators prepared equipment for maintenance;in Stage 2, operators helped to identify and diagnosechronic problems. Now in Stage 3, we ask operators tobegin to take ownership for equipment condition. Partof this ownership is to perform Basic Care activities,including lubrication, adjustments, obervation andrecording of operating parameters, and other tasks wemight label operational maintenance.

In addition, we now move a portion of the maintenancecrews to work under production. Why can we do this?We are in control. Our work management processclearly identifies, plans, schedules and assures properexecution of the work, and our proactive maintenancehas eliminated most of the common failures in the plant.We are now set to focus on cross training, craftsmenlearning the equipment from operators, and operatorslearning equipment care from craftsmen. We stillmaintain, at least for some time, the maintenance

supervisor, but the role changes to that of facilitator andcoach.

Stage 3 Optimal Organization. While we havemoved a portion of the craftsmen to the areas, wecontinue to maintain a central group for overhauls,turnarounds, shops, and common services. Planningand engineering continue to report centrally, but getincreasingly specialized as to their equipment responsi-bility. This is possible because there are fewer fires(schedule breakers) to put out. This organization is bestdescribed as distributed.

Stage 4, Engineered Reliability, is primarily unit-based, working on defect elimination on specificsystems, rather than common failure modes. As muchof this work is equipment unique, it further requires unit-based collaboration. At this point process engineers andplanners may report in to the units, depending oncomplexity of the equipment, and the amount of work tobe done.

Stage 4 Optimal Organization. While we havedistributed more resources to the unit or department, wecontinue to have a central maintenance manager whooversees systems. Examples of these systems may becraft training systems, the CMMS, a reliability reportingsystem, a maintenance cost system, etc. At this point,the size of shops or turnaround teams may diminish, andit is a good time to review outsourcing certain functions.This organization is best described as distributed.

Stage 5, Operational Excellence, adds a dimension ofbusiness goals driving and determining all maintenanceand reliability efforts. We are now truly trying tooptimize the plant, and the role of the shift-basedteams increases. They now have primary charge ofmonitoring and maintaining asset health, as well asoptimizing production and yields. By this point, thereare few unanticipated equipment breakdowns, workmanagement is a way of life as is continuous improve-ment. Responsibilities are clear, but work practice isvery fluid, calling upon resources flexibly, but in acompletely planned manner.

Stage 5 Optimal Organization. The ownership ofresources is now a minor issue. Since nearly allmaintenance is preplanned, as much as a year inadvance, resources are assigned by priority of the work


needing to be accomplished. Much work will continueto be unit based, but the opportunity to share acrossunits is available, since the planning horizon is long, asthe discipline to make value-based resourcing assign-ments is in place. We think the best way to character-ize this organization is actually decentralized ormatrixed, but the level of self-management, disciplineand planning is so high, that organization charts arereplaced by a work management process that accountsfor all the resources in the facility.

SUMMARYIn summary then, the organization needs to account forthe intent of the managers. If a systems orientation forcontrol and cost are an issue, or if the solutions we arelooking for transverse the entire facility, we believe thesuccessful strategy will be centralized. If the issue isunit-based, then distributed is the highest value strategy.Finally, we believe that only a very mature, high-performing organization can be optimized with adecentralized structure.

Most of our readers will not have the luxury of makingimmediate organization changes to reflect this philoso-phy. Nor do we think they should, as the application ofthese rules must be done in the context of the capabili-ties, attitudes and history of the plant. We do think,however, that setting out a list of objectives before anyorganization change, and identifying how these will beaccomplished in a revised organization, is the key to anysuccess.

Designing the Best Maintenance Organization

Work Initiation/Prioritization

Planning& Scheduling

Work Execution/Review

MaterialsManagement

PreventiveMaintenance CMMS

Work ManagementProcesses

PdMCMMS Integration

Craft Skills Enhancement

Equipment History

PredictiveMaintenance

Failure ModeAnalysis

Proactive Maintenance

Craft Flexibility

Maintenance/OperationsIntegration

ExternalBenchmarking TPM

ReliabilityFocus

Concurrent EngineeringLife CycleAnalysis

RAMAnalysis

RCMEquipment

Simplification/Standardization

AssetManagement

Stage 5Operational Excellence

Stage 3Organizational Excellence

Stage 4Engineered Reliability

Stage 2Proactive Maintenance

Stage 1Daily

Maintenance



SAMI

Creating An AssetHealthcare Program

How to Assure YourPM Program is Effective

by S. Bradley PetersonPresident of Strategic Asset Management

ABSTRACTA key question in operating any plant is this: Are wedoing the right amount of maintenance? Are we doingthe right type of maintenance?

How do you know? Most plants we visit have devel-oped preventive maintenance programs over the yearsfor a hodge-podge of reasons. In some cases equip-ment PMs have been based on OEM recommenda-tions. In some cases, PMs have been developed inresponse to major failures. But we almost never findthat a systematic approach, based on manufacturingvalue, has been deployed to develop the care programfor the asset.

This article gives a step-by-step method to systemati-cally develop an asset healthcare program, resulting inthe necessary reliability to meet your business plan, atthe lowest cost. It discusses the concepts of assethealthcare, gives an overall closed-loop process todevelop your program, and identifies how to measuresuccess and make required adjustments

.TRADITIONAL DIFFICULTIESFor many years as I have given public and industrypresentations I have asked the question: How many ofyou (the audience) believe you have a good or excellentPreventive Maintenance program? Without exceptionthere are no hands raised in the audience.

What makes developing such a program so difficult?Other difficult things are accomplished in maintenanceimprovement: sometimes planning and scheduling areimplemented plant-wide with good results. Frequently astoreroom offers good service, while minimizing totalinventory cost. So why is preventive maintenance sodifficult?

The elements of PMs are well known. You need a setof tasks performed at a certain frequency, and thesetasks are scheduled and performed thoroughly byqualified craftsmen or operators. Some of the problem,of course, is simply trying to implement prevention in areactive environment. Work isnt planned, parts arentavailable, or the equipment isnt made available due tomissing production schedules. That isnt the problem,though, where good planning and scheduling exist. Sothe issue comes down to identifying the right tasks,and the proper frequencies.

Reliability Centered Maintenance (RCM) is oftenselected as the tool of choice for plants advancedenough to understand that the prevention tasks must beaimed at correcting specific defects or failure causes.This fails, too, because there is no plant in my experi-ence that has the resources or fortitude to performRCM studies on every piece of equipment or aspect ofthe facility. Risk-based RCM comes closer to themark as a tool, but still tends to look at specific equip-ment. It is not used to develop the plant-wide preven-tion plan.

REPLACING PREVENTIVE MAINTENANCE WITHASSET HEALTHCARE AS THE OPERATIVE CONCEPTWe think the first part of the issue is semantics ordefinitional: the term preventive maintenance, or eventhe more encompassing preventive-predictive mainte-nance fails as a concept. It connotes for most people,activities more than intent. For that reason we preferthe term Asset Healthcare.

When we examine the concept of healthcare as itapplies to people, we understand it to mean maintain-ing function, or the condition of the body to per-form certain activities. Likewise, we understand thatour objective in maintenance is to assure the likeli-hood (probability) that equipment can perform acertain function when required. We understand, too,that reactive maintenance cannot assure that probability,but only minimize the impact of failure. For thesereasons, we encourage a new concept (not of ourinvention, but not commonly used) of equipment orasset healthcare. Our preference is to use the wordasset because it applies to the facility as well as theproduction equipment. In most cases, failure of thefacility degrades our production capability in a similarmanner to equipment problems. Thus we encourageclients to start with the concept of assuring assethealthcare.

INTRODUCING PROBABILITY AS A NECESSARYCONCEPT IN DEVELOPING THE ASSET HEALTHCAREPROGRAMAnother concept we need to introduce is that ofprobability. We know that decreasing the frequency ofa failure mode increases the probability of performingthe intended function.However, without an intimate understanding of molecu-lar strength of every aspect of every component, andthe forces to which it will be subjected, we are left withuncertainty about the timing of a given failure mode.Thus our goal is to manage the probability of equip-ment performing its intended function.

Why is this distinction important? Because as weapproach the ultimate (100% assured availability) costsfor maintenance go up exponentially. Our goal is beingable to answer the important question: What is theappropriate type and amount of maintenancenecessary to assure a specified level of performancefor the asset?

All of our asset healthcare tasks (preventive mainte-nance) need to answer this question, or we will never

know if we have succeeded in our goals.THE ASSET HEALTHCARE CLOSED-LOOP PROCESSIn this figure we see a five-step process that describesa self-improving method for Asset Healthcare develop-ment and exection. Steps 3 and 4, Load and ScheduleWork and Prepare and Execute Scheduled Mainte-nance are typical processes in the Planned Mainte-nance Cycle, and wont get separate attention here.Steps 1 and 5, Create Measurement Process andReview and Analyze Variation, are also typical of anyclosed-loop process, but we will be identifying somenew concepts here, so they will be covered, though notin great detail. Obviously the step that will get the mostattention is number 2, Develop the Asset Care Pro-gram.

DEVELOPING THE ASSET HEALTHCAREMEASUREMENT PROCESSWe know we cant permanently improve what we dontmeasure. But in the plant environment the plethora ofindicators that can be measured are overwhelming.There is a compelling need to simply the measurementprocess, to make this manageable in an era ofdownsized workforces.

There are, of course, leading or process measures thatare required. These include PM (Asset Healthcaretaskor AHT) compliance, % AHT to total workhours, etc. We need a measure of results as well.

We wont dispute the value of those who measureUptime, or Overall Equipment Effectiveness.These are excellent measures and give an overview toany plant that deploys them. Where they may haveshortfalls is in identifying the cause of a problem. Theydont do much to identify the delta which needs work.

We have seen only a single plant that has maintained aplant-wide measure of Mean Time Between Failure.This requires a lot of data and continuous effort forreporting. It fails, however, to guide one from a busi-ness perspective: Where do we place our efforts andemphasis?

Figure 1

Review &AnalyzeVariation

CreateMeasurement

Process

DevelopAsset CareProgram

Load &Schedule

Work

Prepare andExecute

ScheduledMaintenance

Creating an Asset Healthcare Program



26

Instead of the above measures, wed like to introduce aconcept we learned from one of our clients: Cost ofUnReliability (CoUR). This is an extension of theCost of Quality concept used to measure deviations inquality theory. Figure 2 shows a graph of four years oftracking CoUR in a major facility with many operatingunits. One can quickly grasp, with clear evidence,where to place attention!

Fundamentally, CoUR measure the production value ofthe downtime for a department or a unit, and adds in thecost of repair, both labor and materials. We record andmaintain a database for those CoUR events greaterthan X dollars. X, of course, depends on the productionvalue of your plant, and your visibility and dedication torecording incidents.

Key data elements include:

1. Date and time of incident2. Location (Department, equipment center or

unit) and specific equipment number that failed3. Downtime and valuation of downtime4. Repair costs (usually the work orders that

apply)5. Failure reason code6. Failure description

Using the power of the database, all failures can besorted by location, size, reason code, etc. Also, for thisclient, when the cost of the failure hit a threshold (e.g.$100,000), a Root Cause Failure Analysis is required.

The advantage to CoUR is in the planning process.Practically, what has cost us money? Are therepatterns? Where do we focus our efforts? It becomesa practical scorecard overall, to see if our CoUR isdeclining, while also directing our work towards specificfailure causes. It records history in a way this isimpractical for a CMMS, without the limitation of ahuge data collection workload.

So, on to the task of creating the Asset Healthcaretasks appropriate for a plant or facility.

TYPICAL ASSET HEALTHCARE TASKDEVELOPMENT AND RATIONALEWe might spend a moment considering two questions.First, in the history of this plant, when were assethealthcare tasks created? And second, by whatmethods were they created?

We seldom find that greenfield plants develop theirprevention program before the plant starts operations.Usually this simply hasnt been part of the start-up plan.When it is, there isnt sufficient time or money given toits development. And where in isolated cases AHTswere created for specific equipment, it was usuallydone according to the vendors specifications, withoutthe benefit of experience within the operational context.

The next time we might see PMs developed is whenthere are significant failures that gain lots of attention.Sometimes these are one-time events, but reactionrequires we dwvelop a PM, and it gets generated every

Total Cost of Unreliability1995 to 1998

$0

$5,00

$10,00

$15,00

$20,00

$25,00

$30,00

PROCESS UNITS

M$

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Figure 2


month, forever. We may also put a team together todevelop PMs. These are done as well as possible, withbest guesses as to appropriate tasks and frequencies.These are usually the most valuable of the PM collec-tion that gets printed out each period and distributed tothe craftsmenWe want to change these methods forever. What weseek is an effective, simple, measurable system thatenables us to create a proactive maintenancestrategy for every piece of equipment in the plant.Currently RCM, in its many flavors, is identified as themethod to accomplish this task. In most applications,however, it is too cumbersome to apply to all theequipment in the plant. We propose a hybrid methodthat meets these characteristics:

Covers the entire equipment spectrum Applies easy to understand rules that can be

modified with experience Adds value during its development, not just in

the future state Minimizes data reentry Can be implemented by the hourly workforce

with minimal guidance beyond training

THE SEVEN STEPS TO DEVELOPING ASSET HEALTHCARETASKS

Our Asset Healthcare System used employs thesesteps:

Select and Install the Software Tool (AssetHealthcare System, or AHS)

Develop Hierarchy Develop Criticality Develop Equipment Condition Establish Strategies for Component Care Develop Failure Modes and Effects Develop Maintenance Activities

Working with one unit or department at a time, thesesteps develop the system of proactive AssetHealthcare. We discuss each one in overview.

1. Acquire, Install and Train in AHS Software.After working in many situations without a fullyfunctional software tool, we have found that thereis a better way. Find a good tool and use it to itsmaximum capability! We searched for andreviewed over 200 RCM software tools, andfound a handful that met our requirements:

Easy to use. Easy to learn. Complete training and documentation. RCM Cost/Benefit capabilities. Documents component and system criticality. Quick to implement plant-wide. Upgrades to the software. Links to CMMS Migrate CMMS info into RCM tool. Meet/comply with Corporate IS standards &

requirements. Applicable libraries of failures/tasks (specific to

the industry). Allows as much or little FMEA (Failure Modes

and Effects Analysis) detail as needed (not allplants need the same level of detail).

Uses Pareto analysis tool. Ability to conveniently group PAs (mainte-

nance tasks that can be completed at the sametime).

Monitors effectiveness of RCM with keyperformance indicators.

Convenient software support.

We use this tool for all purposes in the following steps.

2. Develop the Equipment Hierarchy. In manyinstances an equipment hierarchy exists inelectronic form somewhere in the plant, andusually is embedded in the CMMS. We suggestgoing as many as four to five levels in describingthe equipment hierarchy, depending on how fardown it is necessary to go to get to a maintainablecomponent. This may be a pump, motor, gearbox,or electrical panel. This initial identification of theequipment gives us the basis to develop a proac-tive maintenance strategy for every component.

One of the benefits of this step is the equipmentowners, the operators and the maintainers,perform this task. In doing so, they educatethemselves about the equipment, going overdrawings, listings, and manuals. We hear manypositive comments by the team during this task,which takes several days: I didnt know thatwas how it worked!, or Is there really a filterthere? Weve never cleaned it! Anotheropportunity is to identify to engineering where thedrawings are out-of-date, where changes haventbeen documented.

Figure 3



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3. Develop Criticality. In order to determine thelevel of maintenance a component should receive,we need to understand its value in the operatingcontext. To keep it simple, we ask How criticalis the process to which this is a part? Ouranswer set would be: a) Must be running all thetime, b) Must run most of the time and on de-mand, or c) Must run occasionally. One can alsouse CoUR as a gauge of process criticality: forinstance, using the value of any hour of downtimeas the range of criteria.

Once the process has been classified on critical-ity, we classify the component. In this case, weuse a number instead of a letter.

If, in any mode... Then:Shutdown of any duration causes a CoURevent of $100K per day

Assign the sub-system a criticalitycode of "H"

Shutdown causes a CoUR event of $10Kto $100K per day.

Assign the sub-system a criticalitycode of "M"

Any incident $1K to $10K per day Assign the sub-system a criticalitycode of "L"

Any incident below $1K per day Assign the sub-system a criticalitycode of N

If ThenFailure of the componentwill cause personnelinjury or a reportableenvironmental release

Assign the component a criticality code of"1"

The components failurewill result in a failureevent of $100K or greaterper day


The components failurewill result in a CoURevent between $10K and$100K per day


The components failurewill result in a loss ofbetween $1K and $10Kper day.


The components failurewill results in a loss ofless than $1K per day

Assign the component a criticality code of5

Figure 5

Figure 4


The result will be a table of equipment withassociated criticalities, all entered into the AssetHealthcare System, as shown in Figure 6.

4. Develop Equipment Condition. For severalreasons we now take time to evaluate thecondition of the highest segment of criticalequipment, at a minimum, all H-1s and H-2s.Our reasons to do this:

We can get an immediate impact on plant perfor-mance and safety where we can eliminatedefects on this highly critical equipment.

In some cases we will identify conditions thatrequire a longer term solution, e.g. a motor that isrun beyond its limits. This gives time to plan andschedule intervention before the equipment fails.

Evaluating the equipment, by the operations staff,creates the basis of ownership, and developingoperators inspections rounds.

This information is part of the annual planningprocess, to help determine the material and laborcosts and schedule required to meet plan for thenext year.

Once again we take a simplified approach. Foreach class of equipment, we create a templatefor evaluating component condition. Using asimple yes/no evaluation for each category wecan evaluate the overall condition of the equip-ment. An example is shown in Figure 7. Anyequipment whose composite health falls below athreshold, say 70%, is written up for attentionwith a work request.

Component Description TypeSystemCriticality

ComponentCriticalit

81LV00 Level Control Valves for C-8105 hydrocarbon Control H 581FC01 Flow control valve to C- Control H 581LV00 Control valves Sour water to injection Control H 5E- Trim Exchange H 3E- Overhead Fin-Fan H 1E- Overhead Fin-Fan H 1E- Overhead Fin-Fan H 181TC00 Overhead temperature Instrumentatio H 5Overhead Recvr Process instrumentation for C- Instrumentatio H 5GM810 Motor for coker reflux/gasoline Motor H 4GM810 Motor for coker reflux/gasoline Motor H 4

Figure 6



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Component Condition Worksheet

Asset Area Region 5 Classification Pressure Vessel (Spheres,bullets, separators, filters,reactors, fractionators)

Operating Unit Coker 2 Criticality H1System Fractionater Manufacturer Electro Welding Co Inc.Sub-System Frac Overhead Serial Number Natl Bd # 1046Equipment Number C8105 Overhead Rcvr

Done By Steven Kuckley Date 6/30/99

Operating Function/Standard/RangeTo collect condensed liquids and gases from the frac overhead cond coolers and provideAdequate NPSH for reflux and sw pumps.

Comments/Observations

Evaluation Criteria# Criteria Yes No Method/Measurement1 Does the components care appear to meet

plant standards?X Visual inspection

Check cleanliness & overa