Page 33 - An Introduction To Predictive Maintenance

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FINANCIAL IMPLICATIONS AND

COST JUSTIFICATION

The simple process of financial justification for an investment project would normally
be to compare the initial and ongoing expenditure with the expected benefits, trans-
lated into cost savings and increased profits. If the capital can be paid off in a rea-
sonable time, and concurrently earn more than an equivalent investment in secure
stocks, then the project is probably a good financial investment.

The case for buying a new machine tool, or setting up an extra production line, can
be assessed in this way and is the normal basis on which a business is set up or
expanded. The purchase price plus installation, recruitment, and training costs must
be paid off within a limited number of years and continue to show a substantial profit
after deducting the amount of borrowed capital, operating cost, and so on; however,
the benefits from an investment in a condition monitoring (CM) system are more dif-
ficult to assess, especially as a simple cost–benefit exercise, because, to put it simply,
the variables are much more intuitive and less measurable than pure machine perfor-
mance characteristics.

The ultimate justification for a CM system is where a bottleneck machine is totally
dependent on a single component such as a bearing or gearbox, and failure of this
component would create a prolonged, unscheduled stoppage affecting large areas of
the plant. The cost of such an event could well be in the six-figure bracket, and the
effect on sales and customer satisfaction beyond quantification. Yet a convincing
financial case depends largely on knowing how often this sort of disaster is likely to
happen and having a precise knowledge of the nonquantifiable factors referred to
earlier. At best, whatever the cost, if it were likely to happen, it would be foolish not
to install some method of predicting it, so that the appropriate preventive action could
be taken.

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