The more you focus on waste elimination within your company, the more readily you will see savings in both your everyday and longer-term costs.
By Preston Ingalls
In this article, I am going to provide you with 55 ways to reduce equipment costs. Some will have more impact than others; some will be easier than others. All 55 will help you to lower your equipment costs, netting a significant impact to the bottom line.
My 49 years in industry and 29 years as a fleet consultant have shown that the average heavy equipment fleet has no less than 25 to 30 percent waste in their maintenance costs. That is the “low-lying fruit,” with a little effort.
If you spend $5 million a year on equipment maintenance, this can result in a net savings of $1.5 to $2.5 million a year, straight to the bottom line.
A Significant Impact
Let’s look at the opportunities:
1. Hold a cap on overtime. Ten percent is a reasonable expectation for a busy group, and 5 percent is considered World Class. Static overtime becomes an expected part of the compensation if held steady for too long. It is best to put peaks and valleys in it to prevent reliance on it.
2. Hold meetings with the shops and field mechanics and stress the need to lower costs. Challenge them to come up with savings. You may be surprised by their ideas. Consider offering rewards for best savings.
3. Use this opportunity to weed out the “non-productives” In the work force. Poor performers cost in lost productivity, additional supervision, effect on their peers, etc.
4. Planning and scheduling work will improve maintenance wrench time or productivity on an average of 50 to 80 percent. You can cost justify a full-time maintenance planner if you have at least six craftsmen. A prepped job goes faster than an unprepped job. Dedicate and train one as a maintenance planner and it can actually double the amount of work you perform or enable you to operate at a smaller complement of personnel.
5. Invest in upgrading skills and training. Make sure that your mechanics and technicians have the necessary skill sets. Poorly trained craftsmen take longer to perform their jobs and produce more call-backs (rework). It will not be an immediate payback, but it will be a long-term one. Five percent of payroll dollars is normal, or 6 percent of total work hours. This also contributes to retention.
6. Train equipment operators or drivers in Basic Care. A well-trained operator can detect 70 percent of all potential problems on equipment if they are trained. They can also help offload some work from the shop and field mechanics.
7. It might be time for some coaching to improve efficiencies. Providing feedback on performance is an effective way to elevate mechanics’ and technicians’ abilities.
8. Eliminate “buddy jobs” if they are not really needed for safety. Do you really need to send two?
9. Assess the work better. Emergencies cost more. Is this job really an emergency? Can it be done later at a lower cost? Emergencies interrupt the flow of work and cost four to five times more to perform than non-emergencies. Target 2 to 3 percent as a reasonable amount.
10. Make sure there is adequate supervisory oversight. Work can take longer and cost more if it is not being sufficiently supervised. “Inspect what you expect” and audit to ensure quality and minimize errors. A supervisor needs to look for acts of omission and commission.
11. Use planning and scheduling process to have materials available on time without having to spend the extra to expedite (hot shot, overnight, etc.). Expediting costs are those costs above ground delivery costs and can be a major source of costs.
12. Improve inventory control by making sure there is an inventory count and record of all items along with their locations and that they have assigned bins. So much time is wasted searching and retrieving parts.
13. Make sure there are spending approval levels to avoid excessive spending and buying.
14. Use lower-cost labor to pick up and deliver parts (a parts runner). It is wasted costs for mechanics and technicians to do so and a lost opportunity as to what they could be doing instead.
15. Purge and merge parts. The cost for parts to sit there (carrying costs or holding costs), especially if the parts room is manned, averages 25 to 35 percent of the average annual inventory value. If you have an inventory of $500,000, you can expect to spend $125,000 to $175,000 of that each year. Verify that the supported equipment is still in service, and eliminate obsolete and rarely used parts (those that do not move or move slowly).
16. Track Turn Rates (how often inventory value turns) to improve efficiency and cost. Industry average is almost one turn per year, while World Class is two to four turns per year. This is calculated as total disbursements divided by total average inventory value.
17. Keep the storeroom clean and organized. Clutter and trash make it unsafe and difficult to search and retrieve.
18. Have a designated location for staged or kitted jobs for upcoming work. This reduces the cycle time to complete work by having a “go to” place for kitted work.
19. Produce standard kits for PMs (filters, belts, etc.) to shorten prep time.
20. Implement a reliability program that identifies and corrects defects through a Root Cause Analysis (RCA) process, reducing the need to perform certain activities. If I can eliminate the need, I can reduce my costs. This is proactive maintenance. It reduces the needs for parts, labor and downtime. ‘Five Whys’ or ‘Why-Why’ is a good start for an RCA process.
21. Use consignment parts as much as possible. You only pay for it when it is used. This is more important on low-cost commodity items like fasteners, etc. Use vendor stocking as much as possible, especially if the vendor is nearby. There is no use to stock it when it can be stocked elsewhere at someone else’s expense.
22. Centralize inventory control. Collect all the uncontrolled satellite stores (pigeon-holed and rat-holed parts) to eliminate ordering parts already available.
23. Use a Computerized Maintenance Management System (CMMS) to manage parts. Unmanaged parts usually will cost three to four times their value.
24. Label everything to make it easier to find. Time is money.
25. Look for bulk deals (grease, oil, etc.) by shopping around.
26. If you have more than 2,000 line items (individual SKUs), you can justify a full-time attendant/purchasing person to help control costs and secure your parts room from random and undocumented issues as well as theft. If you have that much inventory, you are already paying not to have someone there.
27. Develop Bill of Materials (BOMs) for each piece of equipment (at least crucial equipment).
28. Use cycle counting (randomly generated counts) by the CMMS to provide an ongoing count. This improves inventory accuracy.
29. Eliminate redundant parts and material from different suppliers. I have seen as many as five different drums of SAE 30 oil from different suppliers in the same shop.
30. Identify critical or insurance spares. They are handled separately from the other parts and should be listed. There is a formula to help distinguish non-critical from critical.
31. Improve safety stock calculation—review and refine. It is the cushion when we could have variation in lead time or consumption for critical or high-value items where lost time is not an option.
32. Develop a rigorous adherence to inventory control. The process is a science, not an art. It is called MRO (Maintenance, Repair and Operational Supplies).
33. Minimize “human touch” as much as possible for fuel control—the more automated, the more accurate.
34. Fuel management technology can take many forms, including electronics that have helped reduce fuel consumption through direct injection, variable valve timing and other technologies. Fuel Telematics include GPS monitoring, fuel usage and burn rates, tracking driver behavior and equipment use.
35. Implement an idling reduction effort. It reduces fuel consumption and optimizes vehicle performance; reduces vehicle emissions to the environment; reduces noise pollution and needless engine wear-and-tear; reduces the loss of warranty coverage; cuts back on PM downtime (based on metered hours); minimizes regen cycle on Tier 4 engines; and improves residual (trade-in) value.
36. Run a report that shows each piece of equipment’s use against its target (budgeted or targeted hours). Analyze reasons for low use and improve or eliminate from the fleet.
37. Measure equipment against the cost to have and to hold (ownership and operating costs) as well as its ability to generate revenue. Use the adage … if it doesn’t pay—it doesn’t stay.
38. “Bury the dead dogs and feed the rest” when it comes to low-use equipment. Separate from the emotional need to have so much spared equipment and purge it. “Heal the wounded, shoot the stragglers.” It costs to keep equipment operational and can be a slow drain on the budget.
39. Shed non-value-added PMs; about 25 percent are often considered non-value-added or useless. That means you are spending money doing non-value-added PMs. Examine historical failure or breakdown records to determine what PM tasks add value versus are ‘rut PMs.’ Assess your experiences and history against the OEM’s recommendations—adjust as needed. Your history is a better indicator of PM needs than the OEM’s.
40. Extend PM frequencies. It may surprise you as to what you can do. Just track the changes to ensure no degradation or issues have arisen.
41. Look for every opportunity to outsource maintenance services. Like PM, tire service, etc. You cannot retain core competencies in every area, nor should you try. Look for those services that make sense due to the degree of specialization, uniqueness of facilities or equipment support, and frequency of use; outsource the remainder.
42. Maintain strong relationships with your outsourcing partner and manage them just as you would your own folks. Have routine planning meetings and periodic (quarterly or bi-annual progress review) meetings. Rate them on costs, quality, delivery, customer service, and innovative business improvements.
43. Help your major suppliers/vendors to improve. They may not know how to do this themselves, and you are only as strong as your weakest link in the supply chain. Show them techniques on how to improve their processes.
44. Charge all maintenance costs (labor and material) to equipment versus a cost center. Periodically analyze that cost for outliers and abnormalities. If it is out of sight … it is out of mind.
45. Maintaining good equipment histories on all equipment helps to identify problematic and costly equipment. Use PCR Codes (Problem-Cause-Remedy) to code each failure type.
46. Focus on 80/20 rule; 80 percent of your problems will come from 20 percent of your components.
47. Work orders should cover 100 percent of all work in order to have accurate costing for each piece of equipment. Compare each equipment piece to others in the same category to search for high-cost operating units.
48. Know how your maintenance costs compares to others (benchmark metrics). Compare maintenance costs as a percent of estimated replacement value, a universal measure of “am I spending too much on my equipment?”
49. Ensure that you have good maintenance practices. Maintenance systems are like accounting systems. There are some minimal expectations as to how they should work. The problem is that many folks have been promoted up from the ranks without a thorough knowledge of what that looks like. A mechanic becomes a shop supervisor who then becomes a fleet manager. You may need some outside help if you do not think your maintenance system runs as efficiently as it should. High operating costs affects the bottom line.
50. Develop a Pareto Chart of your most costly equipment (Culprits List or Bad Actors List) and find out why it is so costly in order to eliminate the costs (see Figure 3). Then Pareto costs within each. It is a good tool to show you the vital few compared to the trivial many.
51. Set goals to reduce costs on certain problematic equipment (i.e., 30 percent), and attack it with a small team with a 45-day time limit. These are called Breakthrough Teams and can be very effective in going after the culprits or bad actors to reduce costs.
52. Analyze the value of a centralized versus decentralized shop arrangement if you have multiple shops. In most cases, you can maintain a higher quality shop in a central location than trying to spread them out over multiple locations.
53. Consolidate lube types to minimize duplication.
54. Improve lube storage and handling since 50 percent of all lube-related failures are due to poor handling and storage practices. Store bulk storage inside controlled environments.
55. Color code lubrication from storage to the refill point. See Figures 1 and 2.
Meet Your Company’s Bottom Line
The more you focus on waste elimination within your company, the more readily you will see savings in both your everyday and longer-term costs. That act alone will most certainly translate to meeting your company’s bottom line, an achievement of which everyone on your team can be proud. | WA
For more than 48 years, Preston Ingalls, President and CEO of TBR Strategies (Raleigh, NC) has led maintenance and reliability improvement efforts across 31 countries for Toyota, Royal Dutch Shell, Exxon, Occidental Petroleum, Hess, Skanska, Bayer, Baxter Healthcare, Lockheed Martin, Unilever, Monsanto, Pillsbury, Corning and Texas Instruments. He consults extensively with heavy equipment fleets, heavy construction industry, and the oil and gas industry in the areas of equipment uptime and cost reduction. Preston is a contributing writer to seven trade publications, holds three degrees, has written more than 80 articles and published two e-books on lubrication. For more information or if you need planner training, visit www.tbr-strategies.com.