Page 59 - Root Cause Failure Analysis

50 Root Cause Failure Analysis
Labor Incremental labor costs should include all unusual costs incurred to operate,
maintain, or repair the machine or system being investigated. These costs should
include overtime premium, contract labor, outside vendor or shop support, and any
other costs above the normal operating and maintenance budget that were incurred as
a result of the abnormal behavior of the machine or system.

Capacity Loss Many equipment and other process-related problems result in
decreased product output, or capacity. In the cost analysis, capacity losses should
be defined both in terms of production units (Le., tons, pounds, etc.) and actual rev-
enue losses (i.e., dollars). Using both of these measures provides a true picture of
the situation.

An accurate estimate of the total downtime, including testing following the repair and
reduced-capacity startups, is essential for this phase of the evaluation. However, the
normal tendency is to estimate the actual time required to repair, replace, or modify
the system but to omit the inherent problems that will be encountered during the startup
process.

Startups following any major activity, such as a repair, upgrade, or modification,
rarely are trouble free. Production capacity almost always is lost while “glitches” are
corrected. In some cases, the losses caused by startup problems are signijicantly
greater than those incurred simplyfrom the maintenance activity. There are two via-
ble ways to determine this cost.

The first is to use the plant’s business plan to obtain the planned production rate for
the area or system under investigation. Most business plans define a rated or planned
capacity, usually expressed in terms of production units per time (i.e., poundshour).
The logic used to develop these capacity rates vary from plant to plant, but typically
they are a weighted rate based on demand, seasonal variations in business, and histor-
ical data. In some cases, the rate will be substantially below the actual design capacity
of the system.

The second method is to use the design-capacity rates defined in the design review.
This approach is more accurate since it is based on actual design limitations. The
functional specifications of each production system within the plant define minimum,
mean, and maximum capacity rates. In most cases, the mean or average capacity rate
is used when developing the cost analysis. This approach is conservative and easily
can be justified.

Delivery-Schedule Slippage Although capacity loss is a critical element because of
its impact on cash flow and profitability, another important consideration is the deliv-
ery schedule. Customers expect on-time deliveries and may cancel orders if schedules
are not met, adding further impact to the cash flow and profitability. Therefore,
extreme caution should be exercised if the downtime required to implement a poten-
tial corrective action has a significant effect on delivery schedules.