Page 41 - An Introduction To Predictive Maintenance

Financial Implications and Cost Justification 31

vendor will offer rental terms on the CM equipment, in which case the cost becomes
part of the operating rather than the capital budget.

2.3.2 Operating Cost
Once the unit has been installed and commissioned, the major cost is likely to be its
staffing requirement. If the existing engineering staff has sufficient skill and training,
and the improved plant performance reduces their workload sufficiently, then operat-
ing the equipment and monitoring its results may be absorbed without additional cost.
In our experience, this time-saving factor has often been ignored in justifying the case
for improved maintenance techniques. In retrospect, however, it has proved to be one
of the main benefits of installing a computer-based monitoring system.

For example, a cable maker found that his company had increased its plant capacity
by 50 percent during the year after the introduction of computer-based maintenance.
Yet the level of maintenance staff needed to look after the plant had remained
unchanged. This amounted to a 60 percent improvement in overall productivity.
Another example of this effect was a drinks manufacturer who used a computerized
scheduler to change from time-based to usage-based maintenance. This was done
because demands on production fluctuated rapidly with changes in the weather. As a
result, the workload on the maintenance trades fell so far that they were able to main-
tain an additional production line without any staffing increase at all.

If these savings can be made by better scheduling, how much more improvement in
labor availability would there be if maintenance could be related to a measurable plant
condition, and the servicing planned to coincide with a period of low activity in the
production or maintenance schedule? So, the ongoing cost of labor needed to run the
CM project must be assessed carefully and balanced against the potential labor savings
as performance improves. Other continuing costs must also be considered, such as the
fuel or consumables needed by the unit; however, these costs are normally small, and
recent trends have shown that consumable costs tend to decrease as more companies
turn to this type of equipment.

Combining the aforementioned initial costs and savings should result in an early
outflow of cash investment in equipment and training, but this soon crosses the
breakeven point within an acceptable period. It should then level off into a steady
profit, which represents a satisfying return on the initial investment, as reduced main-
tenance costs, plus improved equipment performance, are realized as overall financial
gains. Figure 2–6 indicates how the cash flow from investment in CM moves through
the breakeven point into a region of steady positive financial gain.

2.3.3 Conclusions
In conclusion, it is possible to say that the financial justification for installation of any
item of CM equipment should based on a firm business plan, where investment cost
is offset by quantified financial benefits; however, the vagueness of the factors avail-