PHYSICAL ASSET MANAGEMENT HANDBOOK.doc

PHYSICAL ASSET MANAGEMENT HANDBOOK Fourth Edition, August 2006

By:

John S. Mitchell

Edited: John E. Hickman

Contributors: Professor J. E. Amadi-Echendu H. Paul Barringer, P.E. James C. Fitch Grahame Fogel Gina A. Lewis Mark T. Mitchell Robert J. Motylenski, P.E. Jack R. Nicholas, Jr., P.E. William T. Pryor Drew Troyer

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Physical Asset Management Handbook

Table of Contents Acknowledgements and Preface................................................................................................................. v I.

DEFINITION, OBJECTIVES, BENEFITS AND OPPORTUNITIES.......................................................................1 Background................................................................................................................................................................. 1 Physical Asset Optimization........................................................................................................................................ 2 The Asset Optimization Program................................................................................................................................ 3 Primary Benefits.......................................................................................................................................................... 4 Value Opportunities..................................................................................................................................................... 6

II.

PROGRAM NECESSITY, EVOLUTION AND CHARACTERISTICS..................................................................13 Physical Asset Optimization...................................................................................................................................... 13 Physical Asset Optimization Within a Typical Manufacturing Process......................................................................13 Evolution to Physical Asset Optimization.................................................................................................................. 15 The Requirement for Asset Optimization – View of the Boston Consulting Group...................................................19

III.

PHYSICAL ASSET OPTIMIZATION FOUNDATION PRINCIPLES....................................................................25

Basic Requirements.................................................................................................................................................. 25 Optimization Program Principles............................................................................................................................... 26 Program Objective.................................................................................................................................................... 30 Strategy Begins at Design......................................................................................................................................... 33 Procurement Directed to Optimizing Lifetime Cost...................................................................................................35 Quality Installation is Essential.................................................................................................................................. 36 Correct Operation must be Assured.......................................................................................................................... 36 Optimized Maintenance is a Necessity..................................................................................................................... 36 Reliability — The Basis of Physical Asset Optimization............................................................................................43 Failure Analysis (RCA).............................................................................................................................................. 47 Technology Integration.............................................................................................................................................. 48 Asset Optimization Requirements for Facilities and Structures................................................................................48

IV.

MAJOR PROGRAM ELEMENTS.............................................................................................................. 51

Change to an Opportunity Driven, Profit-Centered Organization..............................................................................51 The Basic Physical Asset Optimization Process.......................................................................................................54 Physical Asset Optimization — The Program...........................................................................................................58 Roles and Responsibilities........................................................................................................................................ 61 Financial Measures of Performance......................................................................................................................... 64 Barriers to Overcome Gaining Successful Physical Asset Optimization...................................................................66

V.

CURRENT BEST PRACTICES................................................................................................................. 69 Evolution of Equipment Management Practice.........................................................................................................69 An Equipment Lifetime Optimization Program..........................................................................................................82 Reliability Centered Maintenance (RCM)..................................................................................................................82 Failure Analysis......................................................................................................................................................... 97 Reliability Modeling, Prediction, Lifetime Analysis..................................................................................................101 Total Productive Maintenance (TPM)...................................................................................................................... 101 Six Sigma................................................................................................................................................................ 104 The Balanced Scorecard......................................................................................................................................... 107

VI.

AN OVERVIEW OF IMPLEMENTING A COMPREHENSIVE ASSET MANAGEMENT PROGRAM WITHIN THE POWER GENERATING INDUSTRY..................................................................................................................... 111

Definition of the Needs of the Project......................................................................................................................111 Cultural Context and the Dynamics of Change.......................................................................................................111 Understanding the Scope of the Opportunity..........................................................................................................113 Creating the Strategy to Address the Opportunity...................................................................................................115 Creating a Methodology to Measure Progress........................................................................................................119 Benefit Realization.................................................................................................................................................. 122

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VII. FINANCIAL RESULTS.......................................................................................................................... 125 Introduction............................................................................................................................................................. 125 The Imperative for Physical Asset Optimization......................................................................................................126 The Opportunity...................................................................................................................................................... 126 Profit Center Mentality............................................................................................................................................. 127 Selecting Financial Measures of Performance........................................................................................................128 Accurate Lifetime Cost Tracking (Activity-Based Accounting / Management)........................................................128 The Producer Value Model...................................................................................................................................... 129 Equipment Effectiveness......................................................................................................................................... 131 Leveraging Conversion Effectiveness..................................................................................................................... 132

VIII. LIFE CYCLE COST ANALYSIS.............................................................................................................. 135 Introduction............................................................................................................................................................. 135 Roles and Responsibilities...................................................................................................................................... 135 Science of Asset Life............................................................................................................................................... 135 Do the Analysis....................................................................................................................................................... 145

IX. METRICS AND BENCHMARKING........................................................................................................... 147 Introduction............................................................................................................................................................. 147 Benchmarking......................................................................................................................................................... 152 Use of Metrics in the Asset Optimization Process...................................................................................................156 Commonly Used Metrics, Advantages and Limitations...........................................................................................157 Avoided Cost........................................................................................................................................................... 174 Application of Metrics.............................................................................................................................................. 175 Benefits of Metrics................................................................................................................................................... 176 Measurement Process............................................................................................................................................ 176

X.

PROGRAM LEADERSHIP, VALUES AND ORGANIZATION.........................................................................181 Introduction............................................................................................................................................................. 181 Basic Leadership and Organizational Attributes.....................................................................................................181 Values, and Institutional Culture.............................................................................................................................. 184 Organization............................................................................................................................................................ 188 Results Based Compensation (Reward) System....................................................................................................195 Skills Management.................................................................................................................................................. 196

XI. EVOLUTION OF ASSET MANAGEMENT AT EASTMAN CHEMICAL COMPANY.............................................201 The Case for Change.............................................................................................................................................. 202 Learnings from the Pilot Phase............................................................................................................................... 204 Status Update: Where is Eastman today?..............................................................................................................205 Development of the Reliability Management Model................................................................................................207

XII. DATA AND INFORMATION..................................................................................................................... 211 Demonstrate Contribution, Value and Progress to Objectives................................................................................211 Information — Requirements and Use.................................................................................................................... 212 Functional Use........................................................................................................................................................ 214 Considerations Favor Open Information Systems..................................................................................................217

XIII. EXCELLENCE AT THE BASICS............................................................................................................. 219 Documentation........................................................................................................................................................ 219 Asset Hierarchy....................................................................................................................................................... 219 Asset Lifetime.......................................................................................................................................................... 221 Prioritizing Systems and Equipment....................................................................................................................... 222 Work Management.................................................................................................................................................. 225 Stores (Spare Parts) Inventory Management..........................................................................................................232 Outsourcing............................................................................................................................................................. 236

XIV. CONDITION ASSESSMENT TECHNOLOGY AND SYSTEMS.......................................................................241 The Basis of Condition Assessment........................................................................................................................ 241 Application of Condition Assessment...................................................................................................................... 245 Establishing a Condition Assessment Program......................................................................................................246

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XV. FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY......................................................249 Role of Oil Analysis................................................................................................................................................. 249 Oil Sampling Methods............................................................................................................................................. 251 Oil Sampling Frequency.......................................................................................................................................... 255 Selection of Oil Analysis Tests................................................................................................................................ 256 Monitoring Changing Oil Properties........................................................................................................................ 258 Monitoring Oil Contamination.................................................................................................................................. 263 Wear Particle Detection and Analysis..................................................................................................................... 268 Interpreting Test Results......................................................................................................................................... 270 Importance of Training............................................................................................................................................ 270

XVI. ELECTRICAL ANALYSIS: STATIC (OFF-LINE) AND DYNAMIC (ON-LINE)...................................................273 Condition Monitoring Technologies and Methods...................................................................................................273 Motor Condition Monitoring Technologies...............................................................................................................273 Advantages and Disadvantages of Off-line and On-line Electrical Testing.............................................................281 Recent Advances in Electrical Analysis Information Availability..............................................................................281

XVII. MANAGING THE IMPROVEMENT PROCESS.......................................................................................... 283 Creating the Environment for Transformational Improvement................................................................................283 The Transformational Improvement Process..........................................................................................................287 Transforming the Institutional Culture..................................................................................................................... 288 The Transformation Process................................................................................................................................... 290

XVIII. IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM.............................................................311 The Asset Optimization Process............................................................................................................................. 311 Define the Program................................................................................................................................................. 316 Analyze — Identify and Analyze Opportunities.......................................................................................................319 Prioritize — Benchmark to Prioritize Improvement Opportunities...........................................................................323 Plan — Develop Detailed Improvement Strategy and Action Plans........................................................................329 Do — Implement Improvement Plans..................................................................................................................... 334 Check — Measure and Manage Results................................................................................................................ 335 Improve — Implement Continuous Improvement, Identify and Strengthen Weaknesses.......................................336

XIX. ESTABLISHING A SUCCESSFUL ASSET MANAGEMENT PROGRAM AT A GLOBAL PHARMACEUTICAL COMPANY ....................................................................................................................................... 339 Objective................................................................................................................................................................. 339 Asset Management Strategy................................................................................................................................... 342 Additional Elements and Technologies................................................................................................................... 347 Reliability Centered Maintenance........................................................................................................................... 350 Performance Metrics and Reports.......................................................................................................................... 352 Requirements to Reach Next Level of Performance...............................................................................................357 Results to Date (2004)............................................................................................................................................ 358

XX. PHYSICAL ASSET OPTIMIZATION FOR CAPITAL PROJECTS...................................................................361 Building Reliability and Maintenance Expectations into Projects............................................................................361 Work Process Overview.......................................................................................................................................... 363 Work Process Elements.......................................................................................................................................... 363 Management Support.............................................................................................................................................. 364 Project R&M Goals.................................................................................................................................................. 364 R&M Program......................................................................................................................................................... 366 Define R&M Objectives For Critical Equipment And Systems................................................................................367 Designing for Reliability........................................................................................................................................... 369 Designing for Maintainability................................................................................................................................... 371 Plan Implementation Timetable............................................................................................................................... 372 Ensuring Reliability and Maintenance Performance...............................................................................................373

XXI. INDUSTRY BEST PRACTICES, RESULTS, ISSUES, CHALLENGES AND LESSONS.....................................375 Best Practices......................................................................................................................................................... 375 Results.................................................................................................................................................................... 376 Issues...................................................................................................................................................................... 378 Challenges.............................................................................................................................................................. 378 Lessons................................................................................................................................................................... 379

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APPENDIX A.

GLOSSARY...................................................................................................................... 381

APPENDIX B.

HANDBOOK REFERENCES................................................................................................ 387

APPENDIX C.

PRACTICAL ASPECTS OF IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM.......391

Applicability............................................................................................................................................................. 391 Establishing the Basis for a Physical Asset Optimization Program.........................................................................392 Directing the Physical Asset Optimization Program................................................................................................392 The Mission Statement........................................................................................................................................... 393 Reliability Metrics and Best Practices..................................................................................................................... 393 Begin The Physical Asset Optimization Program from Improvement Opportunities...............................................394 Program Implementation......................................................................................................................................... 394 Personnel Issues..................................................................................................................................................... 396 Thoughts about Maintenance.................................................................................................................................. 397 Sustaining and Institutionalizing the Physical Asset Optimization Program............................................................398

APPENDIX D.

PRACTICAL THOUGHTS REGARDING RCM IMPLEMENTATION..............................................399

Effectiveness and Value.......................................................................................................................................... 399 Elements for Success............................................................................................................................................. 400 Consider Streamlined RCM.................................................................................................................................... 402

APPENDIX .E.

SCORECARDS.................................................................................................................. 405

Scorecard Objective................................................................................................................................................ 405 Reliability Scorecard Overall Description and Content...........................................................................................405 Vibration Condition Monitoring Program Scorecard................................................................................................407 Lubrication Scorecard............................................................................................................................................. 407

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Physical Asset Management Handbook

ACKNOWLEDGEMENTS AND PREFACE The purpose of writing is to inflate weak ideas, obscure pure reasoning and inhibit clarity. With a little practice, writing can be an intimidating and impenetrable fog. Calvin; Literature of Calvin and Hobbes

I sincerely hope this book will convey strong, practical ideas, help you develop a plan to increase the effectiveness of your physical assets and add a little clarity to what is quickly becoming an area of great interest and potential value! In any book of this size and complexity that has developed over so many years there are many to thank. My sincere apologies if any of the many who have contributed are left out. First of all, thanks to all who made the first edition possible back in 1999: Bill Nickerson; The Pennsylvania State University, Applied Research Laboratory; The Best Manufacturing Practices Center of Excellence; the Office of Naval Research; CSI; now Emerson CSI, and all who were interviewed developing material for the first edition. To the people and companies who wrote entire sections — your outstanding contribution is invaluable and greatly appreciated. Contributors, in alphabetical order are: Paul Barringer:

Chapter VII, Life Cycle Cost; excellent, thought provoking ideas from a real expert!

Grahame Fogel:

Chapter VI; a terrific description of the development and implementation of an Asset Management program in a power generating company. Gina Lewis and Mark Mitchell: Chapter XI; an excellent summary of the Asset Management program implemented by an industry leader. Bob Motlyenski: Chapter XX; a thorough description of Asset Optimization for Capital Projects based on long years experience with Exxon. Jack Nicholas:

The excellent, comprehensive description of RCM in Chapter V, Chapter XVI, Electrical Analysis plus your encouragement over the years.

Noria Corporation:

Jim Fitch, Drew Troyer and staff: The truly outstanding Chapter XV, one of the best introductions to fluid analysis available, and the check off in Appendix E.

Bill Pryor:

The basis for the Vibration Condition Assessment Scorecard in Appendix E

Many thanks to all who contributed to this edition by reading some or all of the material and providing your excellent comments and suggestions for improvement. In alphabetical order: Boyd Beal, Grahame Fogel, Willie Gerrits, Steve Johnson, Jay Padesky. Several discussions with John Wood solidified ideas and expanded areas of particular interest to companies considering Asset Management / Optimization. Professor Joe Amadi-Echendu contributed significantly to the international flavor, greater awareness of cultural and social issues as well as expanding the concept of Asset Optimization into the public sector. Thanks to all the participants in the many Asset Optimization Workshops. Your questions and comments led to the reorganization and most of the added material in this fourth edition. It is fair to say that in every case I learned a great deal as hopefully you did as well. Special thanks to all the participants in the Sasol workshops, especially Willie Gerrits who made the workshops possible and Bram Whittaker who kissed the teacher! The time spent with you was most enjoyable and informative — keep up your excellent work! Thanks also to the many excellent presentations and articles that have been delivered on subjects associated with asset management over the past six years. Many notes, some on paper napkins, are incorporated in this text. If you recognize words that are not credited; I apologize. In all too many cases I failed to list the author / presenter, in most cases even the venue or date, on notes taken during many excellent presentations. Special thanks to Heinz Bloch who has added so much in terms of stimulating discussions and encouragement over the many years we have been friends.

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My greatest appreciation to a long-time, wonderful friend John Hickman who volunteered to edit the manuscript and did so magnificently. It has often been said that nothing tests a friendship like writing and editing. We certainly had difficult periods, early in the process seeking the optimum flow and organization for the first few chapters and later reading the same material for the umpteenth time! In the end friendship prevailed — thankfully! Speaking of editing I must acknowledge the contribution of another great friend, Tom Bond, who co-edited the first edition and contributed so much to the thinking described in the handbook. My prayers for comfort and strength to you and your family. Finally, a few paragraphs about the organization of the fourth edition handbook: The first four chapters comprise a basic introduction. They identify objectives, benefits and opportunities, define the program, describe the evolution to Asset Optimization, Asset Optimization principles and major program elements. The middle of the Handbook, Chapters V through XVI, describe the elements necessary to implement and sustain a successful Asset Optimization program. Woven within these chapters are two chapters describing actual implementation. Chapters VI and XI describe the practical aspects of implementing asset management within a power generating company and a ten year retrospective by an industry leader. Chapter XIX describes a third implementation to complete the user series. Chapters XVII and XVIII define the elements involved with implementing an Asset Optimization program. Five Appendices, including a Glossary of Terms, Appendix A, and Scorecards, Appendix E, provide some additional information including more detailed best practices. Hopefully, you will find the information useful, informative and of value in your endeavors. I’ll welcome comments and suggestions for improvements. John S. Mitchell August 2006

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Physical Asset Management Handbook

I.

DEFINITION, OBJECTIVES, BENEFITS AND OPPORTUNITIES

“Companies that refuse to renew themselves, that fail to cast off the old and embrace new ways could well find themselves in serious decline. Those who hang on to weaknesses for whatever reason — tradition, sentiment, or their own unwillingness to address the necessity for real improvement, won’t be around to see what the best have achieved.” Jack Welsh, former CEO General Electric

Physical Asset Management (PAM) is directed to a single objective — increasing the value and return delivered by the physical assets (Return On Assets) that are the source of revenue generation and profitability within process, production and manufacturing industries. The principles are extensible to include all the physical assets that make up the built environment. This Handbook is directed primarily to heavy industry; oil production and refining, chemicals, minerals, metals, paper and automobile manufacturing, electrical generation, transmission and distribution. It is equally applicable to the pharmaceutical, food, resources, transportation, telecommunication and other industries as well as public and private organizations — any entity that relies on a built infrastructure of physical assets as the principal means for operations and / or to meet mission and service obligations.

BACKGROUND Physical assets utilized as the means of revenue generation and service delivery are expensive, usually represent the major percentage of an organization’s capital investment in productive resources and are subject to unprecedented operational demands. Virtually all production and operating companies must achieve significantly improved productivity from physical assets to meet business and mission requirements. In many industries demand is creeping ever closer to capacity. In others excess capacity is becoming financially unsustainable. In all, the tempo and intensity of operations are continuously being elevated. Physical assets that form the production process must operate uninterrupted for longer periods at higher rates than ever before. Asset Management Asset Management is a general term that is commonly utilized in finance, real estate, building space, resource allocation and a host of other areas to mean maximizing utilization and return on assets, primarily financial. The term has been adopted by process, manufacturing, production, operating and service organizations to describe a concept of managing the lifetime utilization, operation, performance and effectiveness of physical assets. “Asset Management has become the Holy Grail to manufacturing,” ARC Automation News, August 27,1999

There are at least four published definitions for Asset Management: Plant Asset Management (PAM): The integration of on-line, real-time Condition Monitoring and analysis, combined with a predictive maintenance strategy such as Reliability Centered Maintenance (RCM). Automation Research Corporation The set of disciplines, methods procedures and tools to optimize the Whole Life Business Impact of costs, performance and risk exposures (associated with the availability, efficiency, quality, longevity and regulatory / safety / environmental compliance) of the company’s physical assets. Institute of Asset Management (UK)

The systematic and coordinated activities and procedures through which an organization optimally manages its physical assets and their associated performance risks. British Standards

To provide agreed level of service in the most cost effective manner for present and future customers. International Infrastructure Management Manual 2006 Edition Published by www.nams.org.nz

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Some consider the term Asset Management to be too generic when applied to physical assets in an industrial or operating environment. Physical Asset Management (PAM) may offer a more specific

Definition, Objectives, Benefits and Opportunities

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description of the concept, process, and applicability. However, as stated above the acronym PAM defines a system architecture in the control automation and information fields and is thus a bit different than the methods and objectives most are attempting to convey with the term Asset Management. Perhaps Physical Asset Optimization may be better yet. Physical Asset Optimization identifies both target (physical assets) and objective (optimized utilization, effectiveness and performance). From this point on Asset Management will be used as a general concept, Physical Asset Optimization refers to the specific program and aggregation of processes advocated and described in the Handbook.

PHYSICAL ASSET OPTIMIZATION The more detailed definition of the Physical Asset Optimization program described in this handbook is: A comprehensive, fully integrated strategic program directed to safely gaining and sustaining greatest lifetime value, utilization, productivity, effectiveness, value, profitability and return (ROA) from physical manufacturing, production, operating and infrastructure assets. Note that the preceding is a results definition, specifying what is expected and the target. Physical Asset Optimization is accomplished by: Deploying and institutionalizing a strategic, fully integrated, array of comprehensive transformational improvements to: organizational values, behavior and culture; the functional organization; process, practice and technology. These improvements are applied to business, management, organization, engineering, operating, control, work and logistics processes. Unlike many sequential or linear processes, the implementing sequence utilized by the Physical Asset Optimization program is determined by opportunities to create greatest value in areas such as improved availability and reduced spending. Physical Asset Optimization is applied to: Physical assets and systems such as machinery, heat exchange equipment, electrical transmission and distribution components, valves, controls, piping, structures, civil infrastructure, etc. Many organizations correctly consider their personnel, organizational culture, information and institutional knowledge as major assets. There is undoubtedly a great deal of value resident in these areas; however, asset optimization described in this Handbook is directed to physical assets. Personnel, organizational culture, information and institutional knowledge are considered from the standpoint of their major contribution to value rather than their value as physical assets. A Physical Asset Optimization program is directed to:  Establishing / maintaining full compliance with all safety, social and environmental best practices.  Gaining greatest business value through optimum availability, technical integrity, operating performance, capital effectiveness and least sustainable cost for specific market, operating and business conditions.  Applying systematic, value driven prioritization and opportunistic implementation of optimized improvements to the processes, practices and technology that determine the utilization, effectiveness and reliability of physical assets. It must be emphasized that Physical Asset Optimization is a business initiative. It requires a close partnership between Maintenance and Production and is directed to increasing value produced, minimizing waste in all forms. Asset Lifetime Physical Asset Optimization addresses the definition, acquisition, installation and operation of physical assets to ensure they operate safely, reliably, effectively and within performance expectations throughout lifetime. Asset lifetime: Span of time over which the asset is designed, acquired and utilized to fulfill its intended purpose, including end-of-life disposal.

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Asset lifetime is conventionally divided into four stages: 1. Specification, design and procurement 2. Construction, installation and commissioning 3. Operation 4. Disposal The total cost of ownership over the expected lifetime of an asset from specification to disposal is the lifetime cost. Within most production and manufacturing companies the design and procurement of capital assets may take a year or two. Construction, installation and commissioning may take another year or two. In most applications the typical production asset operates for several decades during which time it is expected to provide the efficient and reliable performance necessary to meet service delivery and revenue expectations. Decommissioning and disposal rarely lasts more than a year and except for some nuclear power plant assets, insulation, electrical and control system components, rarely involves anything more than tearing out and hauling away. It is important to recognize that the first two and the last stages of life are totally cost. The third stage is the longest and most important for this is the productive, revenue generating stage of asset lifetime. For this reason, substantial engineering attention is required during the first two stages to assure the asset is specified, designed, procured and installed for optimum productive lifetime. Addressed in more detail in Chapters VIII and XX, engineering for optimum operating lifetime includes assuring the design has optimum intrinsic reliability; robust and adequate margins for the service including correct materials for the service. Operability, provisions for efficient maintainability including common parts, ease of access and disassembly are other areas that must be considered and optimized during design. Industry leaders form an experienced team of Engineering, Production and Maintenance personnel to audit the entire design, construction and installation phases to make certain that maintenance and reliability considerations are designed and constructed in to the assets. A company commented that manufacturing facilities they had benchmarked outside of North America where the cost of capital was significantly lower had much greater design margins, more robust equipment, greater intrinsic reliability and operating availability than similarly sized facilities located in North America. With that stated, it must be emphasized that this handbook focuses primarily on the operating stage of asset lifetime where availability and effective performance are essential to meet mission and production commitments. Design, procurement and installation are covered in Chapters VIII and XX; disposal is not addressed in the handbook.

THE ASSET OPTIMIZATION PROGRAM Organizations who observe and understand what is happening within their business environment recognize that business performance has been optimized to a large degree with the greatest performance improvements already accomplished. Market conditions are driving including competition, minimum excess capacity and ever shrinking profit margins. An asset optimization process holds the key to reaching the next, essential level of corporate effectiveness. Technical audit assessments of the operations of a variety of organizations has indicated that a set of “first principles” is emerging and being refined to optimize the acquisition, utilization, control and effectiveness of physical assets. The processes, practices, technology and methods to gain maximum return from physical assets are widely known and readily available. The goal of tailoring an optimum, prioritized mix to create maximum value within specific business and operating conditions is a safety, economic, environmental and technological imperative for global competitiveness. A successful Physical Asset Optimization program depends upon two essential ingredients: 1. Senior management visibly committed to the program and energetically driving for its success. 2. Transformational improvement programs linked to strategic objectives and developed by the people who will be carrying out the activities — the only way to establish the initiative, institutional culture and values, ownership, enthusiasm and commitment necessary for success.

Definition, Objectives, Benefits and Opportunities

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The Physical Asset Optimization program is directed to ensuring that the physical asset infrastructure has the required availability, effectiveness, technical integrity and performance needed to meet mission, schedule, service, yield and quality commitments at cost, profit and delivery objectives. It ensures full compliance with safety and environmental requirements. From this point on the concept of Physical Asset Optimization and the implementing program may be abbreviated “asset optimization” — the meanings are identical. The Asset Optimization program employs proven processes and methods to convert the philosophy into a sound business practice. The asset owner and its stakeholders receive full value and return on their investment in capital equipment, while ensuring that the physical asset’s capabilities and features are fully exploited to safely manufacture a product and / or provide a service meeting environmental and quality standards at a competitive price. The comprehensive mix of improved processes, systems, practices, and technologies assembled within the Physical Asset Optimization program are implemented strategically and opportunistically. (Opportunistically defined as systematic implementation in prioritized order of value gain to achieve specific business and / or mission / service objectives.) Fully and properly implemented, a Physical Asset Optimization program leads to:  Safety, environmental and social excellence  Organizational, process and equipment effectiveness  Operating excellence and efficiency  Effective work and logistics (supply chain) management  Optimized spending and capital effectiveness. The Physical Asset Optimization program begins with the recognition that every organization and facility has a specific purpose, business and mission objectives; unique strengths, weaknesses and barriers to full success. This is the starting point — the initial state on which to build to greater effectiveness. Unlike many linear improvement programs that require beginning with a specific process or practice regardless of actual conditions, an asset optimization program begins at the point that creates greatest value fastest! Applied within a strategic, comprehensive program, the principles of Physical Asset Optimization are applied by facilitated teams that identify, formulate and implement the most effective strategy and plans for improvement. The improvement strategy considers current market, business and operating conditions, related opportunities and the site-specific environment including institutional values and culture, organizational structure and material condition. The Physical Asset Optimization program described in this handbook has two essential elements: 1. Identification and prioritization of improvement opportunities based on business objectives, organizational and site-specific conditions value generating potential and risk. Initial objectives are to move forward by implementing the most obvious opportunities for improvement as rapidly as possible, employ resources most effectively and demonstrate commitment to real improvement — all while building support, ownership and enthusiasm for the program. 2. Transformational plans for improving the institutional culture, organizational structure, processes and practice are formulated and implemented opportunistically by site personnel to gain greatest value quickly. This reinforces the commitment, enthusiasm and ownership necessary to achieve rapid gains and sustain the results for the longer-term. As a closing comment, it should be pointed out that the Physical Asset Optimization program is directed inward within an organization to assure physical assets have the availability and effectiveness necessary to meet all requirements for mission, product and / or service delivery in full compliance with schedule and cost objectives. To assure success there must be a parallel, outward looking, business, product and quality strategy, not addressed in this Handbook, to assure the products and services delivered to the customer meet all the customers’ expectations for performance and quality.

PRIMARY BENEFITS Asset optimization is an essential enabler for Lean Manufacturing. Improved asset reliability, performance, utilization and effectiveness; predictable lifetime, defect and work elimination are crucial

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elements of minimizing variation, redundancy and waste demanded within the Lean process, see Chapter II for more detail. In addition to an essential contribution to lean manufacturing, asset optimization has numerous specific benefits including:  Greatest value, return and effectiveness derived from physical assets for mission, business conditions, and objectives.  Maximized reliability and production availability of systems that are critical to operation, at minimum sustainable lifetime costs.  Optimized, sustainable spending on asset maintenance, minimum unnecessary maintenance activities.  Methodical problem analysis and elimination of defects that limit operation and cause spending.  Optimized capital requirements for a given production output or delivery of service.  Attention continually directed to highest value and priority opportunities for improvement.  Progressively increased effectiveness through continuous improvement.  Awareness, participatory ownership, and accountability promoted to meet objectives. Improve Production Availability Optimum production availability requires effective capacity management; assuring that capacity is available to meet future requirements. Essentials of capacity management include:  Meet Production expectations for output and time of delivery.  Meet, preferably exceed, business expectations for return on assets. Achieved by optimum production availability, minimum sustainable costs, operations at or greater than design efficiency.  Increase average production to as close as possible to maximum sustainable production; minimize the hidden plant. The hidden plant is discussed in more detail later in this chapter with additional information located in Chapter IX. In addition to increased output, additional requirements include higher quality, reduced tolerances, greater agility to meet delivery requirements, conformance within an increasingly restrictive regulatory environment and demands for increased profitability. In this operating and production environment, physical assets and systems must perform at unprecedented levels of availability, technical integrity and cost effectiveness that were not thought possible a decade ago. When combined with risk and regulatory considerations that continually reduce the envelope in which most production enterprises can operate acceptably, increased reliability — the basis for production availability and cost effectiveness — is essential to meet delivery commitments and financial expectations. Thus, as unreliability drives cost and risk, optimum reliability is a cornerstone of asset optimization. Predictable capacity, the ability to accurately forecast the availability of production (asset) capacity to deliver on time, cost and quality at the time of order derives from reliability and is likewise essential to the delivery of a product or service. These elements plus value are the focus of the comprehensive program of asset optimization described in this handbook. Reduce Operating Costs, Increase Capital Effectiveness Simultaneous with demands to improve operating effectiveness and revenue, are equivalent demands to reduce operating costs and increase capital effectiveness. The latter drives demands to reduce equipment design and operating margins, redundancy, production buffers and spare parts inventories. With all these demands, operating and manufacturing organizations must achieve new levels of “industry best” performance and safely extend the life and effectiveness of new and / or aging equipment — all with minimum expenditures.(41) Efficiency improvements are another large potential source of cost reduction. With an overall efficiency improvement of just 5 percent, a facility operating 50,000 HP (37.5 MW) of electrical power consumers can save more than $400,000 per year in utility costs (at $.025/kWh). At the bottom line, this is equivalent to $4,100,000 in added production (at 10 percent net profit).

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Definition, Objectives, Benefits and Opportunities

Meet Increasing Expectations for Quality, Reliability and Technical Integrity There probably would not be sufficient mechanics or repair space available if today’s population of automobiles adhered to the service requirements that existed 30 years ago. Who remembers the spark plug cleaning equipment that used to be a fixture in every service station? Today, 100,000-mile power train and 50,000-mile tire warranties are expected on many models. Furthermore these warranties are required under stringent fail-safe conditions! The same applies to industry. Equipment and systems are expected to operate longer between repairs. For example, industry-best Mean Time Between Failure (MTBF) for certain categories of process pumping equipment is pushing 70 months. Overhaul intervals have increased from approximately two years to six years and are being extended even further. Plants must operate for three to four years between major shutdowns in order to gain the availability, service delivery capability and production output necessary to meet profit objectives. Twenty years ago, today’s best practice for asset reliability and availability would have been considered totally unrealistic, wishful thinking. Move to Minimum Lead, Make to Order, “Demand Pull” Operation Meeting customer expectations in today’s climate of instant gratification requires innovative, agile, flexible, and reliable processes. Dell can deliver a custom configured computer in three to five days from receipt of order. The Toyota production process is capable of delivering cars to order in five days. The supply chain management system Toyota devised to fulfill this ambitious commitment stunned the industry. No one mentioned the imperative for maximum reliability of production equipment. The necessity to maintain — and often increase — operational effectiveness, revenue, and customer satisfaction, while simultaneously reducing capital, operating, and support costs is the greatest challenge facing operating and production enterprises. Success demands radical change from earlier organizational culture, functional organization, process and management concepts. Leading production and operating organizations recognize the essential nature of increasing the effectiveness of physical assets in the new operating environment. “…business is on the verge of an essential ‘next wave’ of asset productivity improvement — one that must go further and will be more difficult to achieve than past initiatives.” The Boston Consulting Group

VALUE OPPORTUNITIES For a profit-oriented industrial corporation, the potential value that can be created by asset optimization represents a significant improvement in gross profit and in capital based financial measures such as Return On Net Assets (RONA) and Return On Capital Employed (ROCE). Companies that have implemented improvement programs similar to asset optimization have reported simultaneously increasing production uptime by as much as 30 percent, improving safety performance and reducing spending by as much as 40 percent. To expand on the latter, authoritative sources report that North American industry collectively spends between $700 million and $1 trillion annually on production equipment maintenance, at least a third of which is unnecessary.(121) There is a big return by eliminating all forms of waste. The U.S. Department of Commerce reports that 40 percent of manufacturing revenues are spent on maintenance (asset care). For the average process and manufacturing company, maintenance costs may be larger than gross profit. Reports indicate that approximately 20 percent of industrial production losses, including the cost of lost opportunity, poor product quality, waste, scrap, downtime and slow time (diminished production) are caused by equipment malfunctions. As much as 50 percent of environmental incidents are reportedly caused by equipment (physical asset) failures. Collectively, the cost of production losses and environmental and safety incidents caused by equipment malfunctions is likely to be several times greater than spending on maintenance and repair costs.(129)

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Within asset optimization reliability is optimized for production / mission requirements, maintenance moves from spending to maintain operations to strategic capacity assurance. The first is reactive, the latter proactive. The ability to predict future capacity and deliver on time and cost is real value provided by an asset optimization process that reduces the necessity for buffer inventory and its adverse impact on capital utilization. In the manufacturing industries, unreliability necessitates costly inventory buffers that reduce capital effectiveness.(129) Capturing the Value Within many enterprises, the potential reward from asset optimization is in the tens, even hundreds, of millions of dollars — equivalent to 25 to 40 percent, perhaps as much as 50 percent of non-raw-material Operating and Maintenance (O&M) costs. For entities such as non-profit state and municipal organizations, the savings realized by implementing an asset optimization program will increase operating effectiveness, service delivery, budgetary flexibility and customer satisfaction. Industry leaders are developing comprehensive processes for asset optimization designed to increase their lead over competitors. Production and operating entities who may not yet recognize the need for anything beyond cost reductions, or the differences between short-term and permanent, sustainable reductions, are or will be at a major disadvantage. The concept and implementation of improved asset optimization described in this handbook is essential for gaining full operating effectiveness, return, and stakeholder value. With business, manufacturing, administrative, and logistics (supply chain) activities improving, asset optimization is the “final frontier” for achieving major gains in operating effectiveness, corporate profitability, and stakeholder value. Organizations that pursue this path will be winners in the years ahead. As the solution, many have and are proposing practices outlined in this handbook. Facts have demonstrated that alone, none are capable of achieving the full objectives. Only a comprehensive asset optimization program consisting of a mixture of best practices specifically tailored for a facility’s unique business, organizational culture, asset condition and organizational structure can create the necessary results from the existing conditions and environment. As the program progresses, specific elements from a combination of practices, methods and technology, together with organizational and cultural improvement are implemented opportunistically in a value-prioritized sequence. By employing best practices sequenced to create maximum value, asset optimization is capable of delivering the necessary level of business, financial and operating effectiveness for competitive success. Increase Production Utilization and Effectiveness Improving operating effectiveness enables production and manufacturing enterprises to meet commitments at less cost or deliver more at the same cost. Currently many manufacturing plants have an overall operating effectiveness around 50 percent. Industry best performers have an overall effectiveness above 80 percent and, in many cases, greater than 95 percent. Depending on the industry and process, most have significant opportunities for improvement. Within industry, the gap between current and potential performance represents “hidden” capacity and return that often represents a large opportunity for profit. (The hidden plant and Overall Equipment Effectiveness (OEE) are discussed in more detail in Chapter IX.) Increased production with constant fixed costs and high profit spot market sales are two additional opportunities — provided assured capacity is available. For many operating companies, the gap between current and industry “best practice” measured by OEE may be as much as 40 percent. Few may realize that asset availability and utilization that are less than industry best benchmarks mean they are actually operating a smaller than nameplate facility. Under these conditions, benchmarks such as cost per unit (pound, barrel, etc.) must either be adjusted downward, or availability must be raised to near industry best. A unit within a large facility was operating nearly 25% below internal benchmarks for the specific process. The message that they were operating a smaller than nameplate facility was not well received. They either had to get availability up to the world-class value or reduce expenditures to gain alignment with actual production output.

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This simplified example does not consider additional costs incurred by underperforming assets such as scheduling disruptions, missed deliveries and diminished capital effectiveness. The discovery of a “hidden” plant, nearly as large as the operating plant, surprises most corporations who can no longer afford this effectiveness deficit. Recognizing the capacity of the “hidden” plant drives initiatives to increase production from the existing asset base, while simultaneously reducing cost. Initiatives must address increased availability and / or production rate at equivalent or higher quality. A major automobile manufacturing facility operates two shifts, six days a week (equivalent to 13 regular time shifts), at about 50 percent effectiveness. One of the facility’s objectives is to produce an equal output in two shifts, five days a week. Meeting the objective will reduce manufacturing costs by nearly 25 percent. (129) Facilities significantly below industry best should be able to increase production and reduce costs by eliminating losses. Referring again to Chapter IX, losses that make up the “hidden plant” include downtime (scheduled and unscheduled) and slow time (reduced throughput), startup and transition losses, poor quality, waste in all forms, and scrap caused by equipment malfunctions. One unit in a large production facility significantly reduced startup losses and time to attain onspecification production by implementing relatively simple changes to the control system software. The value of increased output depends on many variables. These include market capacity, i.e., the ability to sell out production at a higher rate, quality assurance, and potential reductions in unit selling price as more production becomes available. A financial model, introduced in Chapter VII, is necessary to evaluate opportunities and value gained from increased production. Increase Stability and Reliability of the Manufacturing Process Producer facilities that seriously measure production effectiveness, and map steps to close the gap between average and best performance recognize the necessity, value, and benefits of process stability and quality gained by reducing variables and variation. Early identification of anomalies that could impact availability and quality has substantial value and benefits, including greater operating flexibility, more time to arrange alternative sources of supply and improved work and spare parts management. Industry leaders recognize that equipment reliability is an essential contributor to stability and minimum variation. A stable, reliable manufacturing process requires an adaptable organization as well as stable, reliable infrastructure and equipment. Meet Delivery Commitments An article in the August 6, 1999 edition of The Wall Street Journal described how a large power generating corporation was forced to declare force majeure and default on contractual delivery obligations during a heat wave. Within the power generating industry there are many incidents of this type where power, sold at $25 to $30 per megawatt-hour, must be purchased at $3,000 per megawatt-hour or more to meet delivery commitments. One power company reported that in June 1998, 50MW traded for 16 hours at $5,000 per megawatt hour (MW-hr.). A power marketer obligated to deliver power at $33.25 MW-hr. had to purchase energy at $1,300 MW-hr to meet contractual commitments. (7) As cited above, penalty provisions in many production contracts have major short- and long-term financial impact in the event of defaults caused by the inability to deliver. Several facilities describe operating conditions where there is virtually no margin between the normal operating value of a process variable and quality degradation. Under these constraints systems, equipment and infrastructure must be maintained and operated at peak performance to gain full profit. Industry leaders typically have a comprehensive strategy in place that links reliability of systems, equipment and infrastructure with market conditions, capacity management, facility and mission objectives. The strategy includes risk assessment and management (addressed in Chapter XIII) and utilizes layered measures of performance. This promotes optimized process, system, and component effectiveness and continuous improvement. One process company anticipates that 75 percent of the increased value objective will be gained by increased first-run quality and yield, cost reductions will gain the remaining 25 percent. A Vice President stated that companies cannot starve themselves to prosperity. (129)

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Reduce Spending Within the current economic environment and focus on bottom line financial results, all operating and production enterprises are faced with the challenge of reducing operating and support costs. Direct benefits of cost reductions are easier to determine as value recovered is directly reflected in bottom line profit. As organizations are pressured to reduce costs, they must produce the same or improved results (manufacturing productivity, utilization and throughput) with significantly diminished resources including fewer — often less experienced — people. In addition, increasingly restrictive regulatory and social constraints are consuming an ever-greater portion of management attention and capital improvement funds. All this contributes to reduced flexibility and greater pressure on operating margins. Maintaining the technical integrity and reliability of physical assets has traditionally been viewed as budgeted business costs, with spending details largely below the horizon of senior corporate and financial executives. Today’s climate of heavy pressures on profitability have caused operating, process, and manufacturing enterprises to reduce costs through measures such as workforce reductions, deferment of “non-essential” work, and outsourcing. All gain results, but are the results sustainable and is there a path forward for the continuing improvement that will be necessary to maintain prosperity? Many corporate executives order cost reductions without recognizing that unlike a business process, spending requirements to sustain physical assets are largely dictated by asset lifetime and the necessity for maintenance to retain the condition necessary for production. Unless asset lifetime is extended and the need for maintenance and repairs reduced, cost reductions achieved by command are temporary and illusory. Participants in asset optimization workshops throughout the world continually bring up management’s conviction that spending on physical assets can be reduced by command as a significant barrier to real improvement in their organizations. Many cite the difficulty of convincing management that reduced spending can only be achieved as a result of a solid strategic and tactical improvement program directed to improving reliability, eliminating defects and requirements for work. Optimum asset effectiveness can only be achieved through a well-implemented improvement program. Optimum asset effectiveness is a result, not a command! Industry leaders pursue cost reductions from a differentiating perspective. They recognize that increased effectiveness — driven by improved reliability — is a profit producer. And they view optimized asset lifetime as an integral, inseparable part of the manufacturing process where cost is only one measure of performance. In terms of effectiveness and value, considerations such as identifying, prioritizing and exploiting opportunities to improve availability, yield, first-run quality and on-time delivery are often more important than cost. The clear trend toward placing value on optimized maintenance is as close as the television. When Ford, Cadillac, and BMW began advertising automobiles that are essentially maintenance free — everyone followed. Why have power train warranties increased to 100,000 miles, engine checks to 20,000 miles or more; both well over an order of magnitude improvement in less than ten years? The simple answer is the investment in design to eliminate failure modes and the need for associated maintenance, e.g., electronic ignition, computer controlled timing, and the use of more robust parts, returns value to the purchaser and profit to the manufacturer. The lesson is clear. With vision, commitment, willingness to change, and modern technology, maintenance can be controlled and converted to a profit contributor. With these substantial opportunities for optimizing the utilization, performance and effectiveness of physical assets, a typical industrial facility can reduce annual maintenance expenditures by 30 to 40 percent or more throughout operating life; gain large increases in production and free substantial capital. As an example, General Motors reported that in 1994 its worldwide maintenance spending on production machinery and equipment totaled $4.7 billion — approximately 13 percent of the capital invested in the physical asset manufacturing infrastructure. The same report stated that a benchmarking survey disclosed that Japanese automobile manufacturers were spending approximately 3 percent of capital investment to sustain their physical asset infrastructures. (As a comparison, maintenance spending by the best in the petrochemical industry is approximately 2 to 2.3 percent of Replacement Asset Value (RAV) — a comparable metric.) Eliminating the gap between GM’s expenditures and the Japanese average would

Definition, Objectives, Benefits and Opportunities

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have improved GM’s annual profit by $3.6 billion — a move that unquestionably would have been welcomed by shareholders and perhaps avoided the problems they are experiencing in 2006. A supervisor in an automobile manufacturing facility neatly summed up these conditions: Until the early 1970s North American automobile manufacturers didn’t worry much about manufacturing failures or the cost of failures. The competition all had the same labor contracts, used the same manufacturing processes and equipment, had about the same operating effectiveness, and experienced similar failure rates. On this level playing field, costs were passed on to the customer. Then the Japanese arrived with a better product, and higher quality manufactured at substantially lower cost. To be competitive, North American automobile manufacturers were forced to simultaneously increase quality and reduce manufacturing costs and model cycle time. Everything had to change. The basic problem continues to this day! The difficulty of committing to and implementing real transformational improvements is demonstrated by constant stories of the continuing travails at General Motors and Ford. As another example of a comprehensive, enterprise-wide approach to asset productivity, a large chemical company had experienced an alarming seven-year decline in return on investment -due primarily to decreasing asset productivity. Consistently poor asset performance (nearly 4 percent below the cost of capital) led the company to conduct an extensive analysis of opportunities for asset productivity improvements across most of its divisions. One part of the review was a “top-down” exercise in which senior managers and project teams benchmarked each business unit against the performance of relevant industry peers. On the basis of this analysis the teams estimated that given competitors’ typical levels of asset productivity, the company would be able to improve its performance by about 25 percent — freeing up some $5.5 billion in assets. Assuming cash-flow margins held constant, this improvement in asset productivity could potentially produce a one-time increase in returns of roughly 50 percent and increase shareholder value by 20 percent, creating almost $6 billion in new value! Another study disclosed that the difference in refining industry profitability between the highest and lowest performing quartiles had increased from about 5 percent to 12 percent over 6 years. The divergence was not merely an industry average, but rather a difference in performance unrelated to industry average performance.(109) Industry leaders recognize that achieving a sustainable reduction in equipment O&M costs must be part of a larger strategic process. Reducing failures demands eliminating the underlying defects that cause failures! As defects are eliminated, large segments of the organization, along with idle capital tied up in redundancy, work-in-process, and spare parts, can be safely and permanently reduced. Negative cash flow resulting from failure events is minimized. Perhaps more important, eliminating defects increases operating availability and thereby gains additional — potentially greater — benefits of increased production effectiveness. The asset optimization process begins with the understanding that reducing failures, and therefore the need for and cost of work, is an essential step toward gaining full benefits, value and return. Many leading firms have plans in place to achieve these objectives; some are well on their way to fulfillment. Increase Effectiveness by Performing the Right Tasks Efficiently Throughout this handbook there are references to efficiency and effectiveness. It is important to establish the difference between the two. Efficiency is activity oriented, performing a given task well. A given task may well be performed efficiently, but the task itself may or may not be appropriate to the results required. Effectiveness, illustrated in Figure 1.1 is results oriented — performing the right task well. Asset optimization is directed to results — effectiveness!

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Performing tasks well

The Thepath pathtotomaximum maximumeffectiveness effectiveness Poor Poorprioritization: prioritization: excellence excellenceininPlanning Planning and andScheduling Schedulingwith with many manyfailures failures

Correct Correcttasks tasksperformed performedpoorly poorly

Performing the right tasks

Figure 1.1 Effectiveness Requires the Right Tasks Performed Well Industry-leading organizations are the most effective and experience fewer failures. Thus, not only can they accomplish more work with fewer people than their less effective peers, but they also have less work to do! Recognize Increased Consequences and Cost of Operating Variation and Failures Production interruption, safety (personnel hazard and property damage), and environmental incidents all cost more with continuing increases anticipated. Several process companies report that more than 50 percent of capital expenditures are required to meet regulatory and environmental requirements. Burning gas by flaring and operating the remainder of a hydrocarbon processing facility on inventory used to be an accepted practice while failures were repaired. Today’s reduced inventory, environmental regulations that prohibit flaring and obvious waste would quickly force a plant shutdown. This combination significantly increases the cost of a given failure. Improve Maintenance and Reliability Organizations are under pressure to improve the effectiveness and return on capital assets. Industry leaders are quickly recognizing the necessity, value and benefits of optimizing the return from physical assets — as demonstrated by the deregulated power generating industry. In this industry, managing a portfolio of mixed cost and efficiency generators to gain greatest return requires accurate lifetime prediction, optimized reliability management and an accurate assessment of risk. All are necessary to ensure availability (predictable capacity) capable of meeting commitments for power delivery. One power generating company developed 44 initiatives to improve performance. Boilers and boiler tube defects were high on the list of reliability problems. Condition Based Maintenance ranked in the top ten.(7) A manufacturing company implemented 25 quality improvement projects to eliminate manufacturing process limitations and constraints.(129) Accommodate more Complex and Expensive Manufacturing Equipment and Systems Physically challenging, semi-skilled manufacturing tasks are being replaced by automation, resulting in fewer people being required. Those employees who remain are no longer operating the production process, but are managing equipment and systems that operate the process. Automation demands higher skill levels for both Operations and Maintenance. Systems to manage a manufacturing process are co-evolving and becoming ever more interdependent. Real-time control systems and strategic supply chain management (Enterprise Resource Planning — ERP) systems must be linked with Computerized Maintenance Management Systems (CMMS) and other management and information systems. Full interoperability is essential for accurate current and predicted status of physical assets — the predictable capacity mentioned earlier (for more detailed information see Chapter XII and Chapter XIII).

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Maintenance is becoming more expensive — increased variation from organizational and reliability norms is very costly.(129) As stated earlier, many enterprises are finding that the gap between themselves and world-class performers may be as high as 30 to 50 percent of the total maintenance budget. (109) Improve Capital Effectiveness, Increase Return on Capital In many commonly used capital- and asset-based measures of effectiveness such as ROA, RONA and ROCE, profit is the numerator and capital the denominator. Thus, reducing capital employed (the denominator) has the same positive effect on measured performance as increasing profit (the numerator). It should be noted that in terms of ROA, RONA and ROCE capital reduction has the same leverage as spending reduction, and about ten times the leverage compared to increasing production (based on typical after tax profit). Within the asset care (maintenance) area, demands to reduce capital appear as pressure to reduce stocked spare parts (inventory). Many operating organizations have reduced owned maintenance, repair, and overhaul (MRO) spares by as much as 50 percent through outsourcing and supplier held consignment spares, see Chapter XIII for greater details. Achieving this major reduction, without affecting availability and production output, demands improved reliability, a capability to predict requirements well outside normal delivery time and a solid logistics management process. All must be gained within a comprehensive asset optimization strategy. In addition to the cost of non-performing capital assets, companies who have calculated actual costs estimate that spare parts inventory consumes between 30 and 40 percent of inventory valuation for storage, management, damage, loss, and obsolescence. Thus, a company with $5 million in spares inventory is paying a minimum of $1.5 million per year above usage costs for administration, handling, warehousing and loss. For companies seeking to maximize effectiveness, this cost must be reduced. Extending the service life of capital equipment is another important issue. Prudent asset optimization practices ensure that the equipment has a full and effective service life. Well maintained equipment often lasts far beyond the normal expected service life, thereby reducing the capital requirements for acquiring new (and expensive) equipment. Demands to purchase least cost (low intrinsic reliability) capital equipment is another area in which there are pressures to minimize capital. This leads to less redundancy, diminished design margin and reduced technical integrity in new facilities and requires older facilities to operate closer to design limits. Two corporations stated that investment in new construction, on a unit output basis, had been forced to 50 percent of prior levels by requirements for return on capital. The same companies are investing both time and capital to increase output from older facilities and to ensure that the reliability and effectiveness of new investments meet requirements for return on capital. (129) Although two 100-percent redundant pumps have been the standard for many industries, required return on capital may well lead to the construction of large, new facilities with single pumps in many applications. Enlightened companies will recognize that the unspared pump now has the same impact on production as other traditionally unspared equipment. They will also recognize the need to invest resources and funds to ensure that single-unit reliability does not compromise overall availability. (129) This philosophy requires a different design approach and investment to ensure the resulting reliability meets mission requirements. Equipment purchased may be slightly more expensive than a single unit in a redundant pair, but less expensive than the pair. (129) Under the circumstances described an asset optimization strategy, program and process are essential to ensure objective profitability.

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II. PROGRAM NECESSITY, EVOLUTION AND CHARACTERISTICS “Innovative practices combined with true empowerment produce phenomenal results.” Commander D. Michael Abrashoff, Former Commanding Officer, USS Benfold (DDG 65) (96)

Industry leaders are following similar, generic paths toward optimizing the utilization and effectiveness of physical assets. Although the program names, implementation details and some measures of performance vary across industry groups and companies (primarily overall costs and some specifics such as MTBF, Chapter IX), there are striking similarities, indicating the emergence of a consistent optimizing process. The process is quickly translating into substantial competitive advantages for enterprises that recognize and exploit its benefits.

PHYSICAL ASSET OPTIMIZATION Physical Asset Optimization implemented using the program described by this handbook, is an essential contributor to business success for process, production, manufacturing, power generating and service enterprises that are dependent on a physical asset infrastructure to meet revenue, mission and delivery requirements. Within these enterprises, optimum equipment availability, reliability, utilization and lifetime cost effectiveness are essential. Asset optimization is vital for accurate business and production planning. It assures that production capacity is, and will be, available to meet delivery commitments in full compliance with schedule, cost, and quality objectives.

PHYSICAL ASSET OPTIMIZATION WITHIN A TYPICAL MANUFACTURING PROCESS Asset optimization is a strategic, fully integrated, comprehensive program, institutional culture, organizational structure, optimized processes and procedures all directed to gaining greatest lifetime utilization, effectiveness and value from production and operating equipment and infrastructure. The asset optimization program ensures the resources that have been invested in plant and equipment assets achieve the maximum sustainable value in terms of safety, business and financial return, operating results, production, productivity and profit. The asset optimization program is based on a comprehensive strategy linking market conditions, business, facility, and mission objectives to availability, capacity management, reliability, risk and cost. A business initiative, the program begins by identifying opportunities to increase effectiveness and value, prioritizing these opportunities by value, return and risk. The prioritized opportunities are then used to develop and implement transformational improvements in organizational culture, organizational structure, processes and practices. In this way asset optimization builds from actual conditions, utilizes current strengths to greatest advantage, creates maximum ownership and assures results are gained as rapidly as possible. Within a manufacturing / production process asset optimization provides assurance that equipment and infrastructure assets are in effective, serviceable condition with the capacity / throughput necessary to meet delivery and business objectives at an optimum sustainable cost. Asset optimization must be a part of the information infrastructure defining asset condition, current and future delivery capabilities to business, management, production and process control and information systems, Chapter XII. Asset optimization is the essential unifying element between Operations / Production and Maintenance and a major contributor to the partnership that must flourish for maximum success. A typical production / manufacturing process is illustrated in Figure 2.1. The process is directed long-term by production management and controlled short-term by process control. Production Management — including Enterprise Resource Planning (ERP) and Manufacturing Execution System (MES), manage the supply chain, production schedules, flow into and out of the process. Process Control (Automation) — manages the content and performance of production processes and controls operating variables to meet rate and quality requirements.

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Business and Administrative Support Value-Added Manufacturing Process

Physical Asset Optimization

Finished Goods

Raw Materials

Supply Chain and Production Management ERP/MRP

Process Control Logistics Support

Predictable Capacity

Figure 2.1 Physical Asset Optimization Provides Predictable Capacity across all Elements of a Manufacturing / Production Process Asset optimization also maximizes stability (minimizes variation) to ensure that capacity is not only available, but also efficient and predictable. Thus, an asset optimization program provides the third unifying dimension — for without stable assets, capable of delivering effective and reliable production availability; there couldn’t be a manufacturing process to plan or control. Predictable Manufacturing Capacity Everyone who has been involved with making a product and operating physical assets knows well the chaos and inefficiencies associated with surprises: variation, unanticipated failures and unscheduled outages. All carry significant cost and production penalties. Plant personnel, from executive management to working level crafts often point to “surprises” as a primary performance deficiency within their organizations. Recognizing and understanding that stability, predictability and minimal variation are essential elements of world-class asset utilization and effectiveness, industry-leading organizations strive to achieve 100% predictability. A large facility in Southeast Asia had been struggling for over half a year to meet ambitious cost and availability objectives. A single unexpected outage, experienced on a Friday evening, eliminated all chances of compliance for the year, as well as performance-based bonuses. Another plant established the objective of less than one major unplanned event occurring over a two-year period. The objective was to be achieved within three years. Maximizing stability and predictability — minimizing variation — requires effectiveness across the entire organization. Within an asset optimization program institutional culture, organization, processes, practices and supporting technology are all essential, interrelated contributors to stable, predictable capacity. The benefits of predictable capacity include:  Greatly improved ability to meet mission and service delivery commitments for schedule, quality and cost; and minimized missed shipments.  Increased value delivered, reduced production costs, greater price competitiveness, and budget flexibility.  Increased asset utilization and effectiveness.  Increased first-run quality throughput.  Minimized production losses.  Reduced cycle time on customer orders.  Anticipation of equipment aging effects. Creates Value across the Entire Production / Operating Process In addition to an essential contributor to operating capacity and effectiveness, asset optimization touches and creates value across the entire organization, Figure 2.2.

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Business BusinessEffectiveness Effectiveness ROCE, ROCE,RONA, RONA,EBIT EBIT Administration, Business Systems, IT, HR

Production Operations Maintenance Asset Optimization

Finance, Capital Management

Safety, Health, Environment, Risk Management and Control Availability

Production Effectiveness

Reliability Production Rate Quality

Capital Effectiveness RONA

Production Planning

O&M Cost Optimization

Process Control Information Technology

Maintenance Management

Purchasing Training Administration

Spare Parts Management System & Operating Improvements

Figure 2.2 Physical Asset Optimization Creates Value across the Entire Organization By minimizing variation and providing early warning of problems asset optimization improves safety and environmental performance. It has a large positive impact on cost and capital optimization, both of which contribute to profitability and capital effectiveness. A synergistic partnership with Engineering, IT and HR lead to improved organizational effectiveness.

EVOLUTION TO PHYSICAL ASSET OPTIMIZATION The evolution toward asset optimization has been in progress for at least 30 years. The movement has been facilitated by rapid advances and synergistic integration of information and information systems, electronics, computing, automation and controls technologies. Advanced designs, more accurate stress and dynamic calculations and simulations as well as improved materials have all contributed to improved reliability and efficiency. Finally, improvements in the “soft areas:” organizational structure and business processes along with the recognition of the necessity for transformational improvement have created the institutional awareness of the need for and benefits of optimized performance and utilization across the entire organization. Until the mid-1970s, physical assets deployed in manufacturing and production operations were primarily managed to contain costs and comply with a budget within a cost center environment, as shown in Figure 2.3. Inspections and overhauls were scheduled based on manufacturer’s recommendations and past practice with little thought given to increasing effectiveness — or even the need to increase effectiveness. Most industries had excess capacity as well as operating and profit margins that were sufficiently ample to accommodate many small failures, an occasional large failure and production interruption. The pressure on public sector physical assets was likewise relatively low compared to the demands of today. There appeared to be ample capacity; delivery and service requirements were seemingly met without difficulty. Maintenance was generally reactive with emphasis on as repairing failures and restoring service as quickly as possible. Regular overhauls were typically scheduled on a time basis regardless of real need — which was largely unknown until the equipment was disassembled. Maintenance personnel were generally disconnected from a budget process that was typically based on prior years’ performance and spending.

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Necessity, Evolution and Characteristics

Pre-emptive activities to reduce the likelihood of failures that disrupt production and service delivery were conducted more on an ad-hoc basis, if at all. Apart from technical enthusiasts implementing specific programs focused on equipment, systems or infrastructure such as Condition Monitoring and Condition Based Maintenance (CBM) there was little awareness or motivation within the typical organization for the need, or even benefits, to be gained by improving asset performance and utilization.

Cost Containment

Cost Reduction

 Cost Center  Budget Compliance  Good Operating Margins  Excess Capacity  Reactive Maintenance  Scheduled Overhauls

 Reduced Resources People Expense Capital  Reduced Operating Margins  Less Spare Capacity  More Aggressive Objectives  Benchmarking, GAP  Availability  Cost: %/RAV, $/EDC, EFOR

Asset Optimization

 Maximum Return on Assets • RONA, ROCE • Value Driven  Safety and Environmental Excellence  Optimized Total Cost of Ownership  Sustainable Improvements  Maximum Effectiveness  Profit Center  Optimum Reliability • Minimum Variation • Proactive Maintenance

Figure 2.3 Evolution to Physical Asset Optimization The first real transforming change to occur was the shifting of focus to quality improvement and cost reduction. Reengineering and rightsizing were just two of the euphemisms for reducing cost, largely through personnel reductions. Manufacturing and production / operating facilities that had implemented technical improvement programs such as CBM were the best prepared for downsizing, although in many cases the very program that had gained effectiveness was itself downsized. The same basic evolution occurred in the public sector. As far back as the 1970’s, the pressure to reduce taxes and to improve service delivery led administrators to start seeking ways of controlling and utilizing public sector assets to better effect. For example, the UK Ministry of Technology appointed a committee, the committee for terotechnology, to investigate maintenance practices in the United Kingdom. This committee stated that: ‘The nature of the maintenance activity was determined by the manner in which plant and equipment was designed, selected, installed, commissioned, operated, removed and replaced. Major benefits could come to embrace all these areas, and because no suitable word existed to describe such a multidisciplinary concept, the name ‘Terotechnology’ (based on the Greek work ‘terein’ - to guard or look after) was adopted’. In 1975 the Committee for Terotechnology defined terotechnology as: ‘A combination of management, financial, engineering and other practices applied to physical assets in pursuit of economic life cycle costs.’ In some countries, the need to sustain ageing physical infrastructure took on higher priority for administrators. Government treasury departments initiated wider legislative framework for improved public accountability (see for example, the New South Wales (Australia) Treasury Total Asset Management Guide). Public-private partnerships became a widely accepted and recognized approach for development of large infrastructure assets such as airports, seaports, and road networks. Beginning in the 1980’s the larger commercial corporations began benchmarking to determine relative performance in an increasingly competitive manufacturing, production, process and operating environment. In terms of physical asset and work effectiveness, many were astonished to find a 30 percent or greater difference between their current performance and industry leaders. For most this was a wake-up call.

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In some cases, people recognized that many of the cost reduction initiatives being implemented were very short-term and could not be sustained. Numerous anecdotes emerged about corporate and plant managers who quickly cut expenses by reducing the workforce, eliminating programs, and deferring maintenance activities to well below sustainable levels. For a time, the physical assets in a typical facility survived on the momentum of previous practices — and produced substantially increased profit. The manager responsible was promoted as a hero just about the time the consequences of his actions began emerging. The replacement inherited major problems directly attributable to neglect under previous management. These problems were blamed on the new manager, making the previous manager look even more worthy of promotion! The successor was fired! The best executives recognize that commercial operating and production facilities must generate a profit greater than the cost of capital, plus a premium commensurate with the risk involved. With a 4 to 6 percent return on capital currently available with little or no risk, there is no incentive to invest funds in a process or manufacturing concern for less than several percent above the no-risk floor. If awareness is the first stage of change, during the 1990’s most industrial producers were shocked to learn that their industries and facilities were not returning the cost of capital. The inability to attract capital due to low returns eliminated investment for expansion or even improvements. As a result, a low return facility gradually falls farther and farther behind its higher return competitors. This is one of the factors driving the imperative to continually improve effectiveness, and reduce capital and lifetime ownership costs. The conditions described are very apparent in the deregulated power generating industry. Merchant power producers, targeted to the spot market without guaranteed delivery or fuel contracts, must be able to demonstrate a return of 25 percent or greater to attract risk capital.(129) Spot market operation mandates the reliability and agility necessary to take maximum advantage of opportunity demands when prices are highest. By the mid 1990’s there was growing awareness for the necessity to optimize the performance and utilization of production assets including all surrounding management processes. Availability and service delivery had to be improved and costs reduced. Improving information, production and business processes, control, logistics and work management with computerized systems was considered imperative. Enterprise Resource Management (ERP) systems, Manufacturing Execution Systems (MES), Computerized Maintenance Management Systems (CMMS) and programs such as Reliability Centered Maintenance (RCM) were heavily promoted as singular solutions. Lean Principles Applied to Asset Optimization Along about the same time, mentions of Lean Manufacturing began to appear in maintenance literature and conference papers. The concept of Lean originated in the Toyota Production System to describe an optimized manufacturing process. From these origins Lean gained a larger meaning describing the application of basic principles to other processes including maintenance / asset care. In this context Lean is essentially doing more, better with less expenditures and fewer resources. Greater system, equipment and organizational reliability, along with a quality oriented, minimum waste institutional culture and values are an essential foundation of lean. Lean can be defined as: An overall methodology to minimize the consumption of resources required for production by eliminating waste (non value activities), poor quality, unnecessary motion and inventory. Waste broadly defined as non-value added expenditures and activities. When applied to Asset Optimization, Lean principles include:  Minimized resources; inventory, cost and waste (effort, money, duplication, time)  Design for optimum lifetime effectiveness — robust design Benchmarking disclosed that some facilities had significantly greater design margins, in some cases as much as 50%, compared to others with the same capacity. The facilities with the higher design margins had greater production availability.  Quality installation  Optimized lifetime operating reliability  Stable, effective systems and equipment; operating and work management processes

Necessity, Evolution and Characteristics





  

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Maximum value delivered by optimizing flow, motion and first-time quality.  Efficient operation  Production availability maximized  Reduced spending —maintenance requirements minimized  Optimal asset lifetime, optimum maintenance, minimal failures  Highest quality work, minimum rework  Focused improvement initiatives Effective institutional values, culture, organization, operating and management processes institutionalized  Maintenance, Production partnership  Complete, written procedures — all involved thoroughly trained – Optimum deployment and use of effective practices: TPM, RCM, RCA, CBM and PM Step change transition to continuous improvement driven by small multi discipline, empowered action teams Prioritization to assure most effective use of resources Broad access to information and data

It is no coincidence that Lean principles are very much aligned with Total Productive Maintenance (TPM), Chapter V, as both share the same origin. From a larger perspective these are the same principles necessary to gain sustainable asset optimization that are detailed in this Handbook. Improving the Organization Although there might not have been any connection at the time to Lean, many who embarked early to implement solutions to meet the broad challenge of improving asset productivity and effectiveness learned they had to expand both the range and depth of the improvement process. Directing attention to improving the maintenance function failed without a genuine partnership and full alignment with production and other support functions as well as a deep commitment to improved effectiveness. Vital support functions include Engineering, Finance, IT and HR. Concentrating on improving work management did not produce needed results without a simultaneous effort to improve reliability and the technical integrity of physical assets. Improved maintenance strategies developed through RCM were expensive and only partially effective in meeting overall objectives unless accompanied by prioritization and a focus on eliminating organizational silos, design, acquisition and installation deficiencies. Many concluded that institutional values, relationships and culture were the real keys to success. Get the institutional values and culture right and everything else follows. The reverse, focus on improving procedures first, relationships and culture will follow, is not necessarily true. Individuals within an industry leading facility that was approximately two years into a major improvement program heavily focused on a single area lamented the lack of attention given to associated areas that proved necessary for success. For example, the improvement program was initially directed entirely to maintenance, specifically work management. Production involvement was scheduled for later in the process. After two years of excluding production, gaining production support for “a maintenance initiative” was proving difficult. Everyone agreed that the initiative should have begun as a maintenance / production partnership. Further, at inception the initiative should have addressed cultural issues such as “what’s in it for me” at all levels of the organization. As a result of these process deficiencies, the participation, support and ownership necessary to assure success were largely lacking at the working levels. Industry leaders and public administrators responsible for physical assets are recognizing that a real solution requires transformational changes to values, institutional culture, the organizational structure, processes, procedures and practices. All have to be addressed for any to achieve the required results. People must look at improvement from a holistic perspective of overall system performance to meet business and mission objectives. Insertion of improved technology, processes and practices has to be justified by specific requirements and opportunities to improve performance and financial results. Methods such as Condition Monitoring and RCM, management systems such as CMMS have to be viewed for their

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value and contribution within a complex tapestry of current organizational culture, and conditions, including those of physical assets, and business necessities. The answer, just gaining acceptance during the first decade of 2001, is some form of asset optimization that simultaneously encompasses all elements of improvement, from organizational culture to asset component, in a value-prioritized matrix. Industry leaders are recognizing that simultaneously addressing multiple opportunities is imperative to gain the synergy and results necessary for ultimate success. Is the asset optimization approach to transformational improvement difficult to implement and manage compared to a singular solution — absolutely! However, only with this perspective and method can success be achieved. A broad Physical Asset Optimization program is imperative.

THE REQUIREMENT FOR ASSET OPTIMIZATION – VIEW OF THE BOSTON CONSULTING GROUP In 1988 the Boston Consulting Group published an excellent exposition describing the requirement for Asset Management. The remainder of this section consists of extracts from the document, “Asset Productivity: The Next Wave.” (115) Notes in brackets [ ] refer to chapters in this Handbook where specific concepts are described relative to the asset optimization program. Business is on the verge of a major “next wave” of asset productivity improvement — one that will go farther and be more difficult to achieve than past initiatives. This next wave is being driven by several powerful trends:  Exhaustion of traditional cost cutting — Intense price competition has ratcheted margins downward in many businesses. This no-win game has sharply limited the ability of margin improvement to boost a company’s returns, forcing more and more companies to turn to increasing asset efficiency as an alternative.  The downside of rapid growth — Too often the pursuit of growth has come at the price of a neglected balance sheet. Ultimately companies must focus on improving asset productivity…to get more profit out of fewer assets.  Fundamental changes in industry structure — Companies can no longer subsidize poor asset performance in any single business activity by making that activity part of an integrated value chain. Vertical integration and asset ownership are no longer competitive requirements in many industries; new entrants are building successful business models based on minimal asset ownership and extremely high levels of asset productivity. [Chapters III and VII] The Next Wave of Asset Productivity Initiatives will Share Basic Characteristics:  Holistic rather than piecemeal — Efforts will be directed by a sophisticated understanding of asset productivity’s role in shareholder value creation as well as systemic interactions among asset classes along the entire value chain. This allows a company to capture the dynamic interactions among assets and the second and third order effects that can result.  Factored into portfolio and capital allocation decisions — Next wave companies will incorporate a sophisticated view of asset efficiency into strategic decisions about a corporation’s product and business portfolio and into the entire capital allocation process. Over time, increases in share price are a function of returns (relative to the cost of capital), and growth in the asset base of the business. There are two ways a company can boost returns. Either it can increase cash-flow margins or it can improve the productivity of existing assets — in effect doing more with less.  While asset productivity is an important driver of shareholder value, it should never be considered in isolation. Rather, its impact on other drivers of shareholder value, particularly growth and operating margins, must be factored into a company’s strategy and plans. Addressing these variables holistically and managing tradeoffs between them is essential to delivering superior shareholder return. [Chapter III, VII] Focus on Asset Productivity Makes Strategic Sense:  When a company is being outperformed by its peer group — In any particular industry, if a company slips substantially below the average asset productivity of its peer group, it risks a financial crisis.

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When a company has exhausted other avenues for boosting shareholder value — In this case the focus on asset productivity is more a response to the diminishing returns available from other pathways to shareholder value. When improved asset productivity is necessary to execute a new strategy — Many companies realize that in order to be more responsive to customers they must combine highly flexible manufacturing with low inventories and increased service. In others, a focus on asset productivity comes as part of an effort to free up cash to fund growth. When the industry value chain is deconstructing — Under the influence of deregulation, proliferating market mechanisms, and the new economics of information, more and more industries are deconstructing. In some cases, high asset productivity turns out to be a far more important strategic lever than the traditional value chain.

Identifying Asset Productivity Opportunities There are four basic steps to improving asset productivity: 1. Understand your asset structure 2. Disaggregate your business to identify key areas of need 3. Customize your benchmarking 4. Estimate the impact of operational improvement on shareholder value Understand your asset structure — Many managers still focus almost entirely on their Profit and Loss (P&L) performance. They carefully track volume, sales, and margin but give little consideration to the assets necessary to achieve the results. Therefore, the first step is to get to know your balance sheet. It is also necessary to dig deeper than the numbers provided by the typical balance sheet. Many of the conventions of “Generally Accepted Accounting Principles,” (GAAP) originally devised for tax purposes and for reporting information to shareholders, mask what is really going on in the operations of a business. For example, a typical balance sheet factors in depreciation when reporting the value of assets. But depreciated assets do not necessarily reflect the true operational value of the assets in question or their actual replacement cost. That fact makes it impossible to compare one company’s asset performance with its competitors’ and can distort managerial decisions about investment or growth by understanding or overstating actual long-term operating performance. A better approach is to use replacement-value accounting, which adds back depreciation and adjusts asset value to replacement value in current dollars utilizing latest technology. [Chapter VII] Disaggregate your business to identify key areas of need — It is important to identify the products or businesses where asset productivity is especially important and where improvement opportunities are most promising. So look behind the averages to capture differentials in performance across products, plants and entire business units. [Chapter VII, IX] Customize your benchmarking — Any comprehensive approach to asset productivity improvement must involve extensive benchmarking. However, companies need to make sure their benchmarking is relevant to the competitive situation of their business. Many companies find the process far less useful than anticipated, usually because of flaws in their approach. They don’t select the right peer set, don’t develop different peer sets for fundamentally different businesses, or don’t get to the causes that explain the performance of the selected benchmarks. [Chapter IX] To avoid this outcome, pay considerable up-front attention to ensuring that your benchmarking targets are truly comparable. Sometimes the relevant comparison will be, not with another company, but with a single unit (or even sub unit), of that company. In many situations, it also pays to look beyond the industry peer group for benchmarking candidates. This can be an effective way to investigate operational models from other industries that you can adapt and apply. It is also extremely useful to benchmark internally as well as externally. Internal benchmarking (which highlights variations in business unit performance) is especially effective for persuading line managers that improvement is actually feasible. The best response to the “it can’t happen here” reaction is to present data demonstrating that it already has. Estimate the impact of operational improvement on shareholder value — Once a company identifies potential operational improvement opportunities, it should strive to estimate the impact these improvements will have on shareholder value. While hard-and-fast predictions are impossible; there are

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methodologies for calculating the approximate impact of increases in asset productivity on total shareholder return. Linking operational efficiencies to value creation is an important way to build internal support for a company’s asset productivity initiatives. [Chapters V, VII] As an example of a comprehensive, enterprise-wide approach to asset productivity, a large chemical company had experienced an alarming seven-year decline in return on investment, due primarily to decreasing asset productivity. Its consistently poor asset performance (nearly four percent below the cost of capital) led the company to conduct an extensive analysis of opportunities for asset productivity improvements across most of its divisions. One part of the review was a “top-down” exercise in which senior managers, together with their project teams, benchmarked each business unit against the performance of relevant industry peers. On the basis of this analysis, the teams estimated that, given competitors’ typical levels of asset productivity, the company would be able to improve its performance by about 25 percent, freeing up some $5.5 billion in assets. Assuming cash-flow margins held constant, this improvement in asset productivity could potentially produce a one-time increase in returns of roughly 50 percent and increase shareholder value by 20 percent, creating almost $6 billion in new value. Meanwhile, a “bottom-up” effort led by the operating managers in each unit attempted to establish specific business-unit improvement targets that line managers could live with. Feasibility studies and root-cause analyses identified more than 30 business-specific initiatives that, if successful, would realize some twothirds of the original estimated savings. Some of the initiatives involved the redesign of specific business processes. Others recommended shedding nonproductive plants. Still others focused on building new systems for logistics management. Finally, some initiatives aimed at identifying the specific drivers of shareholder value in each business unit and incorporating that understanding into the metrics by which unit managers and their subordinates were measured. [Chapter IX] In some business units, the new focus on asset productivity led to a major reorganization of operations. One unit, for instance, had measured the asset productivity of each of its production facilities for years – but not of its entire production chain. This approach was not really suited to the needs of the business, which consisted of products with long, drawn-out production chains crossing many different facilities, and with no single plant dedicated to a single product. When the team finally did the work of analyzing asset productivity by product, it discovered that different types of products had very different patterns of asset performance. For instance, some products had relatively stable demand, which meant that they lent themselves to high fixed-asset utilization. By contrast, other products had highly irregular demand, which meant that it was important either to maintain some excess capacity or to build high inventories in order to meet peak demand. This insight led the unit to rethink the way it allocated production to its plants. Some plants were dedicated to stable-demand products with high fixed-asset productivity. Other plants specialized in fluctuating-demand products with low fixed-asset productivity but with fast and flexible logistics. The unit also reorganized its production and marketing organizations around this new product segmentation. The company’s asset productivity efforts continue. So far about 25 percent of the agreed-upon savings have been realized, totaling nearly $1 billion. In the two years following the commencement of the asset productivity improvement effort in 1995, the company’s stock performance substantially outpaced that of its industry peer group. Interactions among Asset Classes In some industries—chemical processing and papermaking, for example—improving fixed-asset productivity can come at the price of working capital productivity. Achieving full utilization of fixed assets often requires relatively rigid production scheduling. Unless safety stocks are increased (reducing working capital productivity), responsiveness to short-term demand is compromised. Tradeoffs can be modeled, allowing managers to explore implications of a range of alternatives. In many businesses, it is a common practice to use “consignment stocks”—inventory located at the customer site but remaining on the books of the supplying company. The customer takes possession of the inventory only at the moment of use. In effect, the practice of consignment improves the customer’s asset productivity at the expense of the supplier’s. [Chapter XIII] Some suppliers offset this disadvantage by writing contracts that include provisions for immediate payment on use. This practice greatly improves

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account receivables performance, offsetting the negative effects of consignment stock on inventory valuation. Building Line Management Commitment Unless asset productivity improvement is driven by the line with strong ownership at the working level, even the strongest program is unlikely to take hold. That’s why for many companies, especially those that have already had extensive experience in operational improvement, the main focus of asset productivity efforts will be organizational: creating the right mix of managerial roles, accountabilities, and support systems to ensure that asset efficiency receives the ongoing attention of line managers. [Chapter VII, IX] In building line management commitment to asset productivity, three things in particular are critical: Make the financial case and set the right level of aspiration — Asset utilization and productivity are critical business levers that should be an important part of what line executives manage. At far too many companies, however, they are still perceived as yet another corporate mandate imposed on the line. It’s not that line executives don’t understand on some level that asset productivity is important…it is just one of a variety of goals, sometimes conflicting, that they have to manage. In the absence of a persuasive financial case and clear accountability and ownership, line managers and plant level employees are unlikely to make it a primary focus of attention. Senior executives should avoid starting the asset productivity effort by dictating what kind of improvements they expect from the line. Rather, they should open a dialogue that allows them to make the case for why asset productivity is important to the company’s financial and strategic goals. Part of this dialogue with the line is an iterative process of setting the right level of aspiration for the company’s asset productivity improvement efforts. This aspiration will partly be the result of extensive benchmarking, as described previously. But it will also be based on a close examination of the fastest achievable rate of improvement given each unit’s strategic goals. In addition to asking, “How much can we improve?” ask, “How long will it take to get there?” Hold accountable, but don’t micromanage — The result of this dialogue should be a shared understanding of the order-of-magnitude improvements that are possible. The next step is to build an effective system for holding line executives accountable for achieving these goals. Clarity and simplicity are the key characteristics of an effective accountability system. That’s why it is usually a mistake to have managers commit to detailed operational metrics — so much improvement in days receivable, inventory turns, accounts payable, and so on. As desirable as such improvements may be, creating a whole new set of metrics adds complexity and limits executives’ freedom to manage the business. And it can result in counterproductive behavior: executives either manage exclusively to the new metrics — at the cost of neglecting other important priorities — or they never really focus on the new targets at all. [Chapter VII, IX] A better approach is to drive line commitments through a single, high-level, asset-related financial measure, then let each manager decide precisely how to get there given the specifics of the particular business. This is easiest to do when balance sheets are fully allocated among business units. But even when they are not, there are a variety of techniques that companies can use to simulate allocation or otherwise define those assets that particular line executive’s control. Finally, many of the best-practice asset performers link this top-level asset-related measure directly to compensation. [Chapter IV, VII, IX] Support through information and infrastructure — Once commitments to high-level financial targets are set, the final step is to provide the information and support that line managers will need in order to meet their goals. This is where detailed operational metrics are key—not as targets but as information to help line managers make smart and informed decisions. Armed with information about operational best practice, both outside and inside the company, each line manager can prioritize among improvement opportunities and make the tradeoffs between asset productivity and other business imperatives. [Chapter III, VII, IX] Another important resource that senior management can provide is a support infrastructure that makes it easy for line managers to learn from their colleagues, to take advantage of specialized expertise, and to incorporate best practice quickly. Indeed, once line executives are committed to the asset productivity improvement program and its goals, are held accountable for high-level financial targets, and are

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compensated for meeting them, they begin to look at staff support not as an imposition but as a crucial resource. They “pull” in staff support rather than perceiving it as something “pushed” on them. One Example A company designed a support infrastructure to help line managers meet their goals. One component was a set of new line and staff roles; these included a vice president for asset productivity, who reports to both the COO and the CFO, and business-unit champions, each responsible for a single unit’s activities in a specific asset class. Another element was a set of mechanisms for sharing best practice — for example, the establishment of three cross-unit asset improvement teams. Finally, the company developed models for enlisting the entire organization in the improvement effort and for translating high-level financial metrics into concrete operational goals.

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III. PHYSICAL ASSET OPTIMIZATION FOUNDATION PRINCIPLES “… this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth. … But in a very real sense, it will not be one man going to the moon-if we make this judgment affirmatively; it will be an entire nation. For all of us must work to put him there.” John F. Kennedy Asset optimization is business oriented; profit centered and directed to attaining greatest lifetime effectiveness and value from physical production assets. The process begins at design and continues through procurement, installation and operation. It includes maintenance and finally ends at removal from service and disposal. Asset optimization includes safety, environmental and social responsibility, institutional values and culture, organizational structure and reporting, process, practice and technology. Activities and improvements are prioritized for the specific business and operating conditions. They are implemented opportunistically within a value matrix to gain greatest return from increased production capability and effectiveness and optimized spending. Metrics that link to business and financial objectives are employed throughout the asset optimization process to establish objectives, identify opportunities and measure progress. Information and management systems must be integrated and capable of effective mining to identify performance gaps as well as convey current status, predicted asset lifetime and capacity, effectiveness of operating, management and logistics processes. Asset optimization requires that maintenance is a vital part of production, partner of operations and managed as a core business activity to gain maximum asset effectiveness and return.

BASIC REQUIREMENTS The following ingredients are essential to ensure the success and best possible contribution of asset optimization:  Total understanding of the necessity and benefits for optimizing the performance and effectiveness of the physical asset base including the contribution of essential value to mission compliance, increased profitability, availability, production output, quality, and reduced cost.  Forceful, energetic top-level leadership totally committed to the program and its success.  Ambitious, optimistic, and achievable objectives established at working levels. To gain the ownership and commitment essential for success the people who are going to do the work must identify specific opportunities for improvement and develop the fulfillment plan.  Financial prioritization of improvement initiatives for greatest value and contribution.  Organization, practice, and technology changes implemented to address specific requirements.  Activity-based accounting to accurately assess real costs and value.  Layered metrics to measure and ensure compliance with interim and final objectives.  Information structure to monitor and display performance.  Rewards for results and value created.  Commitment to continuous improvement and identification of additional opportunities for improvement. Ensuring Success The asset optimization program must be driven top down, led middle out and accomplished bottom up. Some have called this process “Shared Leadership”. (122) Business conditions, specifically value creation and increasing profit, are the basis for prioritization and provide the sequence for implementing improvement initiatives. The process requires a clear understanding of the principal factors that determine and drive profit. Successful asset optimization typically requires:  An organizational culture shift to initiative, ownership and, accountability.  A streamlined administrative organization.

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Improved coordination and communications. Commitment to reducing the need for and the cost of maintenance. An optimized mix of processes practices and technology to accomplish the objectives.

Important actions necessary to derive maximum value and profit include designing for reliability and maintainability and eliminating root cause problems. The latter includes actions such as upgrading materials, improving the quality and integrity of basic requirements (lubrication, integrity checks) and providing better operator and craft training. Systematic elimination of minor deficiencies before they lead to major damage and interrupt production is the key to optimum asset optimization. Few would argue with a statement that fire prevention is far more cost effective than fire fighting.

OPTIMIZATION PROGRAM PRINCIPLES Obtaining the desired product at minimum cost is the goal of all manufacturing and production processes. As illustrated in the financial model contained in Chapter VI, a production process requires numerous contributing elements. In addition to raw materials, these include electricity, fuel, water, people, logistics, administrative and technical support, training, and services such as waste removal. Dealing with, controlling and optimizing the lifetime cost of ownership requires an understanding of what the actual life really is and how the operating environment, operations, and maintenance of the plant affect the bottom line. Are mission effectiveness and value determined by production availability (capacity), market conditions (demand), operating (conversion) and maintenance costs? Typically it will be some combination of two or more of these. The answer is vitally important, because it establishes the prioritization of opportunities within an asset optimization program, as well as the basis for deployment and allocation of resources. Safety is always a paramount consideration. Regulatory (environmental) factors have a strong effect, as do product and work quality. In the following sections some of these philosophical issues will be examined enroute to a description of the process itself in Chapter IV. As stated, an asset optimization program necessitates safety and environmental excellence and leads to improved institutional values and culture, organizational structure, process and equipment reliability, increased operating efficiency, improved operability and maintainability, effective work and logistics (supply chain) management and optimized spending. Institutional cultural issues that must be addressed during an asset optimization program include values, behavior, ownership and communications. Additional issues include a multi-skilled team workforce compared to the more common functional workforce; decentralized compared to centralized organization; core competencies that determine the necessity of in-house or a potential for outsourced work; personnel qualifications and training. For the purposes of this handbook, core competencies are defined as those that involve critical business or proprietary information, must be fully aligned with business decisions, deliver a direct contribution to the dominant value driver and cannot be obtained from multiple sources. Any aspect of the business operation that delivers a strategic business advantage must be considered a core competency. Asset optimization takes a holistic overview of the asset procurement; installation and lifetime care process. It defines the entire process from top to bottom. This leads to a prioritized view of equipment cost versus durability, compatible operating requirements, best practices for lifetime care, and similar issues. Those responsible for asset utilization and optimization have a vested interest in the success and continued viability of the organization. Soliciting input from reliability professionals may lengthen a decision process to some degree; however, a mutually agreeable consensus will increase the likelihood that all potential problems will be identified, an appropriate risk assessment will be made, and the final decision will optimize risk and costs. Business Driven Although most of the processes and practices necessary to assemble an effective asset optimization program are readily available, many organizations are not yet realizing its full value. One reason appears to be inadequate communications between reliability professionals and senior management. (The term reliability professional is used within the handbook in its broadest sense to include all involved in the asset optimization and care process). Many reliability professionals express frustration, believing that their past

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and future contributions to corporate success and profitability are endangered by management decisions that focus solely on short-term cost reductions. Seen from management’s side, a narrow focus on physical achievements and technology rather than business constraints, priority and results may inhibit the necessary dialog. Corporate executives and financial managers argue that customers, shareholders, and boards of directors are the primary driving force behind cost reductions. In the past, profit margins and excess capacity were typically sufficient to allow reliability professionals to pursue narrow goals without much discipline or requirements to demonstrate real value. With both profit margins and excess capacity being squeezed, future investment for productivity-improving technology and practices must be supported with compelling financial justification. As a result, reliability professionals must learn to speak business in order to translate results into financial terms that are credible and appealing to executives and senior management — executives are not going to make the translation from business to technical reliability! Asset optimization is a business process. There are permanent cost reductions, value, and profits to be gained through visionary, enlightened, transformational change. Maintenance can be controlled, planned, and optimized for maximum value. Maintenance cannot be deferred too long or ignored; deferred costs will reappear in the future, greatly multiplied in both financial terms and impact. The familiar “pay me now or much more later!” The choice is clear. Lead with asset optimization or wait until it is imposed by the same competitive pressures that forced adoption of modern manufacturing practices such as Lean, Just in Time (JIT) and Statistical Quality Control (SQC). Profit and Results Oriented Asset optimization is a results oriented lean process, rather than being activity and task protective. Opportunities, prioritization and measures of performance are financially based. Profit center, rather than cost center, principles direct the entire process. It incorporates and builds on the best attributes of Six Sigma, Reliability Centered Maintenance (RCM), Total Productive Maintenance (TPM) and others — assembled and optimized to gain greatest value within specific plant conditions and business / operating objectives. Profit Centered Management The need for asset optimization that differs from past practice is apparent to many professionals. (70) Costcentered management; the traditional method of asset care is directed to compliance with an operating budget. It is activity and task protective, risk adverse and contains structural disincentives for optimization. Everyone knows the reward for under budget performance in a cost center! In contrast, profit-centered management advocated within asset optimization is value and results oriented; encourages investment, and accepts added operating costs in order to increase value, improve efficiency and take advantage of opportunities. A profit center rewards agility and initiative and demands ownership, responsibility and accountability. A premium is placed on optimization. Investments and added costs are evaluated from the standpoint of results and return. A profit center is certainly healthier and better suited to asset optimization in a complex process or manufacturing environment. Asset optimization focuses on profitability and value gained over a lifetime of operation. The principles require seeking improvement opportunities prioritized by value. Opportunities mentioned previously include improved safety, reliability, production output, quality and capital effectiveness. Reducing cost by replacing or modifying equipment that is operating inefficiently is an often-neglected opportunity to create value. In addition to reducing operating costs, changes to improve efficiency often also improve reliability. Specific examples in the equipment area that can have very attractive returns include:  Assuring that operating conditions match design specifications.  Extending life by upgrading to corrosion resistant materials.  Considering replacement with higher efficiency equivalents.  Installing sealed bearings and / or bearing isolators to ensure contamination-free lifetime equipment lubrication.  Eliminating failures caused by pipestrain induced casing distortion and shaft misalignment.  Self-venting seal housings.(86)

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A facility has a pump improvement program in place that calls for installing a standard suite of reliability enhancing modifications whenever a pump is repaired. (129) There are dozens of such opportunities in every industry — all must be prioritized by financial return. An oil refinery increased profit tenfold simply by focusing on opportunity rather than cost. (129) Within the concept of asset optimization, maintenance (asset care) shifts from keeping individual equipment operating to optimizing reliability, ensuring process and system integrity and effectiveness. Directed to Gaining Maximum Value from Operations Insisting on maximum value over least cost is a long-term commitment that requires a top to bottom change in organizational culture. This is a concept that is difficult to establish as the normal way of conducting business. Return on Investment (ROI) and Net Present Value (NPV) are two conventional ways to calculate the relative value of projects and decisions in order to objectively determine maximum value. (NPV and ROI are lagging indicators, Chapter IX, results of profit center activities that indicate success only after the fact!) Framing operational issues and schedule impacting asset care decisions in value terms is a profit center mentality and greater challenge. For the typical organization trained to think of minimizing costs, the concept of maximum value may be unfamiliar. The profit center, value concept of reducing costs as a percentage of operating hours or production output in units — MW, pounds, tons, barrels, etc. — is quite different and leads to greater value than cost reduction. It automatically considers opportunities for increased production, yield, quality, and efficiency. The financial model and process presented in Chapter VII may be of assistance. Within the financial model, benefits from improved practice and technology are translated into financial terms so that decision makers can identify and will support the initial and sustaining investments to gain maximum value.(34) An industry leading company reports full access to cost and spending information through their ERP system. This has led to a worldwide corporate drive to establish cost per unit output as a KPI for all facilities. From a reliability perspective the organization is being asked for an investment in time, effort, resources (human and technical) and money to gain a return in terms of:  Improved safety and environmental performance  Increased production due to improved plant availability  Reduced maintenance cost  Improved overall efficiency and effectiveness All have a positive effect and will lead to a more profitable organization. The company advises that organizations that can obtain effectiveness information such as cost per unit output, and more importantly a trend over time, will have an excellent indicator of the effectiveness of the improvement program. Benefits of improved equipment management that are driven by asset optimization and translate into real financial value include:(34)  Reduced safety incidents, elimination of industrial injuries, improved environmental compliance.  Increased utilization, availability and production rate.  Improved quality.  Maximum conversion effectiveness — optimized cost.  Minimum failures, scheduled and unscheduled outages.  Reduced O&M costs.  Reduced energy usage  Eliminated maintenance actions, reduced maintenance costs.  Reduced spare parts inventory (increased capital effectiveness).

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Unifying Partnership between Maintenance and Production By definition, asset optimization imposes broad requirements and demands results that are well beyond the capacity of any single functional area. Perhaps asset optimization is best viewed as a unifying link between Production, Production Planning, Process Control and Maintenance that requires all functions fully aligned. Asset optimization provides the production capacity needed to assure that mission requirements can be met safely at optimum output, quality (yield), efficiency, and profitability. These concepts are illustrated in Figure 3.1. Note that revenue, asset utilization and cost are the three prime contributors to corporate / mission effectiveness, expressed as RONA and ROCE. Increase ROCE / RONA

Revenue Growth  Market differentiation  price  quality  response  Cash flow

Increase Asset Utilization

Reduce Total Delivered Cost

 Increase Capacity:  Improve  Availability/Uptime  Operation & Maintenance  Production Rate/Yield Effectiveness  Quality  Efficiency  Safety, Environmental Excellence  Capital effectiveness (spare parts)

Physical Asset Optimization

Figure 3.1 Physical Asset Optimization Focuses on Results Costs Controlled by Reducing Requirements for Spending Every company that produces a product, with the possible exception of Ferrari, must operate within cost constraints. From industry benchmarks and other data all companies know what costs are necessary to meet overall profitability objectives. They are also well aware of cost metrics for individual activities such as asset care (maintenance) and work management. In other words, industry benchmark costs define how much maintenance is affordable for a given business and level of production. If affordable maintenance is less than what seems necessary to keep the means of production operable, a plan must be developed and placed into effect to increase reliability and reduce maintenance requirements. The real question is not how much maintenance is considered necessary, but rather what is affordable for a given business. Again, this clearly points to a conclusion that eliminating failures — and the need for spending — is the only way to reach cost objectives. Eliminating Defects — the Key Imperative of the Physical Asset Optimization Process A reliability oriented culture of excellence that views defect elimination as a prime opportunity for improvement is the key imperative to increasing asset effectiveness and reducing spending. Eliminating defects addresses all the consequences of failures. Focusing solely on labor cost — as many do who are fixated on costs — immediately limits improvements to the labor component of a typical repair — approximately 50% of the total cost in North America! By eliminating defects, costs — both labor and material — are safely and permanently eliminated. Eliminating defects leads to corresponding reductions throughout the organization, including cutbacks in idle capital used for redundancy, work-in-process inventory, and spare parts. Negative cash flow caused by failure events is minimized, operating availability and production effectiveness increase. Supporting processes such as work management gain in quality and effectiveness due to the ability to concentrate resources and improve planning. Risk Assessment, Management and Control are Essential Risk Management, consisting of threat identification, assessment, prioritization and mitigation is an essential part of the process used by industry leaders to minimize surprise events. It is proactive in nature, and directed to identifying threats long before occurrence. Industry leaders understand that risk is not simply consequences, but probability of the failure event multiplied by consequences if the failure occurs. Risk Management involves taking solid action to reduce probability or consequences — optimally both.

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Industry leaders identify risk and recognize and mitigate problems that have not yet happened. The rest wait until failure symptoms occur to take action thereby risking costly “surprises”. Three events are illustrative: A refinery recognized that the lubrication and seal oil system on a vital compressor that could shut down a major part of the facility did not meet current design standards or practice. Controls were antiquated and many felt that the automatic start system for the spare lubricating oil pump was unreliable. Although there had never been a failure or outage attributed to this vital system, most with knowledge considered it a serious event just waiting to happen. Eventually the decision was made to replace the entire system. The task was thoroughly planned. A replacement was engineered, procured and installed successfully during a scheduled turnaround. Two pumps in hot hydrocarbon service were normally operated in parallel as a process reliability measure. The two pumps had flat head vs. flow characteristic curves and, in parallel, operated in a risky low flow regime. Both pumps had historically experienced high rates of bearing failures. The threat was well known. The plant depended on periodic vibration readings and an assumption that changes would be noted in time to recognize a problem and shut a pump down prior to failure. Eventually, a multi million dollar failure occurred when deteriorating conditions were not recognized quickly enough to avoid catastrophic failure and a resulting fire. A third facility requiring 120 percent capacity, decided to operate two 100 percent centrifugal pumps in parallel. The rationale was that at 60 percent each the pumps should be “loafing” and hence more reliable. They knew about but didn’t consider the risks inherent in low flow operation, the possibility that slight differences could cause one pump to assume more than half load, starving the other even further and the potential consequences of a low flow induced failure. An engineer stated that plant policy was not to consider risk in the economic analysis of projects to mitigate the effects of changes in operating procedures. Since without considering risk the cost of reduced equipment life was quite low compared to the gains from increased production, permanent corrective action couldn’t be justified. A failure to consider risk when changing operating conditions is irresponsible. Industry leading companies utilize risk ranking, described in more detail in Chapter XIII, to ensure that attention and effort are focused on the greatest threats and potentially most rewarding opportunities. The risk ranking process must be formulated such that only about 10% to 15% of total equipment and system assets are in the highest risk category. With a greater percentage of equipment in the highest risk category there is basically no prioritization or assurance that efforts are applied to the most needed areas. As a result, corrective efforts are diluted. In one case a facility conducted a “criticality” assessment, to identify systems that were critical to production. The criticality assessment, ignoring actual operating history, identified approximately 1,600 systems out of about 2,200 total systems as critical first priority for application of RCM. After about a year of effort by a dozen or so reliability professionals, optimized programs had been developed and implemented for approximately 200 systems — 13% of the total considered most critical. At that point the program was more or less abandoned due to priorities, demotivated participants, diminished resources and uncertain returns. Did the 200 analyses that had been completed cover the highest priority / risk systems or address the most threatening potential problems with greatest value recovery? No one knew — that issue hadn’t been addressed.

PROGRAM OBJECTIVE Maximize Return on Assets through an Optimum, Sustainable Lifetime Strategy Asset optimization focuses on the lifetime cost of ownership, which includes design, procurement, and installation. As an example, over a full lifecycle the acquisition cost for typical rotating equipment may be 10 to 15 percent of the total cost, lifetime maintenance may be as low as 5 percent with operating cost typically comprising as much as 85 percent.(25) A systems approach to the lifetime cost of owning physical production and manufacturing assets provides a means for managing every cost element at the margin to gain the highest returns on both new and existing assets. The objective is to maximize the revenue and related profit-generating potential of each and every physical asset.

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Visionary manufacturers have shifted awareness from the here and now to an extended time horizon. Physical asset management strategies based on total lifetime ownership have become a fundamental extension of competitive awareness.(25) Asset optimization provides the basis for collectively optimizing investment, resource allocation, and spending decisions to gain greatest lifetime return. The emphasis is on achieving maximum sustainable lifetime effectiveness from design, procurement, and installation through operation, maintenance, and eventual replacement or de-commissioning, Figure 3.2.

Cost

Goal of Physical Asset Optimization

Cost reductions below a level required for sustainable operation consumes the asset, and will eventually necessitate major refurbishment or replacement

Minimum Sustainable Cost

Consuming Assets (Decapitalizing)

Age Ageand andintensity intensity ofofoperations operationswill willshift shift minimum minimumsustainable sustainablecost cost

Lifetime Figure 3.2 Sustainable Equipment Asset Optimization As illustrated in Figure 3.2, the type and tempo of operations may raise or lower minimum sustainable costs. For example, operating above nameplate production rates may stress equipment and shorten lifetime. Likewise, shifts in operation to different raw material or fuel may accelerate corrosion rates and wear. Within the asset optimization process the trade-offs are known and demonstrated with a positive ROI. As another example, a decision not to paint and / or preserve a structure for corrosion protection may require replacement of the structure long before its designed end of life. Examples are readily apparent in nearly every major cold weather city. Cracks in concrete bridge abutments are allowed to persist. Water enters the crack, freezes and the crack expands. Eventually the crack reaches reinforcing steel, the combination of water and road salt causes corrosion and the deterioration accelerates. The section of concrete breaks off exposing the reinforcing steel to even greater corrosion. Ultimately the entire abutment will have to be replaced long before the end of design lifetime simply because a small amount of time and / or funds weren’t made available to seal small cracks! This example is all too typical. Cost reductions are often gained by deferring sustaining maintenance on capital assets. Probably few — if any — decision makers attempt to assess the risk of deferred maintenance(7) or calculate the Net Present Value (NPV) of their decisions. Many don’t want to be bothered; others are focused on expediency rather than economic value. The penalties for deferring activities such as painting, sealing cracks, correcting steam and air leaks, and repairing damaged insulation are gradual and spread over time. The negative impact on operating budgets and the real costs and consequences of such decisions do not become apparent until production is affected or a major failure occurs. With a bit of luck the imperative for action won’t be blamed on the individual responsible for the neglect. The following cases demonstrate that maximizing profitable operation requires a program for predicting lifetime and reliability improvement achieved by correcting defects while operating alternatives are available.

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One company lost 40,000 pounds of steam per hour during cold, wet weather as a result of defective insulation. When the loss began to affect production output, the obvious action of launching an effort to locate and restore defective insulation was ignored in favor of a capital project to install an additional boiler.(129) Another company eliminated lubrication rounds as a cost savings measure. After approximately six months, valves, dampers, and moving equipment began to stick, requiring expensive maintenance and, in some cases, replacement.(129) A third company determined that over lubrication was the cause of most motor bearing failures. Instead of optimizing the lubrication process for individual bearings they decided the best course of action was to cease lubricating motor bearings altogether! (129) In all cases the asset optimization process considers the tradeoffs and value gained to construct the most effective and profitable lifetime asset management strategy for operational requirements. Within the balance, knowledge of current life expectancy, the rate of consumption and real cost under a given set of operating conditions are critical elements of maintaining maximum lifetime effectiveness. Figure 3.3 illustrates the lifetime profile of typical operating and production assets ranging from process and manufacturing facilities to individual equipment. Shaded areas above the breakeven line represent the ability to meet mission requirements and profit. Interruptions, losses, and restrictions that prevent full compliance with mission requirements are shown as shaded areas below the breakeven line. Note that both the horizontal and vertical scales in this figure have been greatly exaggerated for the purposes of illustrating the concepts. Gradual Gradualloss lossin in production productioncaused causedby by process, operating process, operatingand and mechanical mechanicaldeterioration deterioration

Demand

Demand

Best Demonstrated Production Rate

Best Demonstrated Production Rate

Breakeven Breakeven Breakeven moves moves up up with with increased increased cost, cost, reduction in market reduction in market price; price; moves moves down down with with decreased decreased cost, cost, increased price increased price

Out-of-service Out-of-service for for restoration restoration

Breakeven As Asnew newcondition condition Improved Improved reliability reliability extends extends the the interval interval between outages between outages

Time

Time

a. Asset lifetime profile

Demand

On On occasion occasion itit may may be be advantageous advantageous to to operate operate temporarily temporarily below below breakeven breakeven to to meet meet delivery delivery commitments commitments

Best Demonstrated Production Rate

Breakeven

b. Improved reliability adds to profitable operation

Demand Best Demonstrated Production Rate

Profit Loss

Outage Outageduration duration reduced reducedby by improved improvedplanning planning and andscheduling scheduling Time c. Reduced outage duration increases profitability

Breakeven De-bottlenecking De-bottlenecking increases increases rate rate and and capacity capacity

Time d. Increasing rate adds to profitable operation

Figure 3.3 Intervention Improves Asset Effectiveness (129) A gradual loss of profit and operating readiness can be caused by a variety of defects. These include deteriorating efficiency (greater cost), corrosion, heat exchange limits, mechanical constraints such as

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speed restrictions resulting from excessive vibration, valve leakage, declining catalyst activity (applicable to the hydrocarbon industry) and a host of other problems acting alone or in combination. Improved design, care in installation, proper operation, and maintenance all contribute to extended life and asset effectiveness. However, every asset must eventually be removed from service for restoration. The only questions are how often and for how long. Three methods that can be used to increase profitable operation are illustrated in Figures 3.3b, c, and d. Increasing reliability by eliminating life-shortening defects extends the time between restorative outages, as shown by Figure 3.3b. Profitable operating life, illustrated by the area above breakeven, increases. Shortening the duration of restorative outages reduces the non-service time that subtracts from asset operating life, effectiveness, and profit, as shown in Figure 3.3c. Within industry, objectives to double the interval between planned restorative outages (overhauls / turnarounds) and halve the duration of an outage are not uncommon. One Operations Superintendent stated an objective of doing away with planned outages altogether by doing more restorative work during operation and accomplishing restorative tasks during unplanned shutdowns that occur due to events such as power interruptions. Figure 3.3c also illustrates operation with reduced capability below breakeven for some period of time. This type of operation at reduced capability is occasionally necessary to ensure successful mission completion, meet operating and delivery commitments, and preserve valuable customer relationships. A manufacturer faced with heat exchanger degradation determined that while production could be maintained, the loss of efficiency resulted in significant unprofitability. Question — halt production to repair the exchanger or continue at a loss to fulfill customer JIT requirements? The manufacturer concluded that customer good will had greater value than temporary unprofitability and continued to supply product at a loss until delivery requirements had been met. Figure 3.3d shows how increasing rate and capacity by removing bottlenecks will increase profitable operation, as indicated by the shaded area above breakeven. In this case, de-bottlenecking is defined as removing process, operating, quality, and mechanical impediments to full operation — reducing the “hidden plant” described in Chapter IX.

STRATEGY BEGINS AT DESIGN A 1997 article in Maintenance Technology stated that over 60 percent of equipment lifetime maintenance costs were caused by preventable errors during design, procurement, installation, operation, and maintenance, Figure 3.4.(108) Over 20 percent of these lifetime maintenance costs were due to design engineering and construction errors that could be avoided by appropriate design-related decisions.

Construction – 5% Non Preventable – 31% Management – 7%

Operations – 32%

Maintenance – 8%

Design and Engineering – 17%

Figure 3.4 Division of Maintenance Costs by Origin (108) In most facilities, rigorous design specifications are applied to critical equipment — typically large, unspared machines and other equipment whose loss interrupts production. Because of this scrutiny, critical equipment is usually quite reliable. It is designed with exceptional attention to detail, installed with great care and subjected to close attention and surveillance throughout its life. As a result, critical equipment typically operates for lengthy periods without attention or problems. Based on grouped

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lifecycle costs, critical equipment may be less expensive to maintain when compared to small generalpurpose machines. Although the cost of any given maintenance “event” is typically much less for generalpurpose equipment, the population is far larger and may consume more lifetime costs than critical machines. Chronic, repetitive problems that wouldn’t be tolerated on critical machines may be allowed to exist on smaller, spared equipment simply because they were designed that way! When lifetime costs are examined in detail it becomes obvious that chronic, repetitive failures, many caused by design defects and basically ignored, are a major opportunity for improvement. System Reliability, Availability, and Maintainability (RAM), including component life and ease of repair, are inherent characteristics that originate at design and strongly influence the lifetime cost of ownership. Lifetime costs must be assessed more fundamentally during the design process. Good design eliminates or minimizes problems, including the opportunity for operating mistakes. The process must ensure that improvements and problems solved on existing equipment are incorporated in the design of new equipment. Compromises to reduce cost often result in facilities and equipment that are difficult and costly to operate and maintain. Once a system has been fielded, no improvement of RAM performance can be achieved without significant expense. (45, 59, 62, 129)

Return on capital necessitates that new manufacturing facilities are designed with reduced operating margin and redundancy. As stated earlier, return on capital has necessitated as much as a 50 percent reduction in investment for capacity.(129) An incident that occurred in a new plant illustrates where design can go astray. Two deep-well pumps were installed to maintain level in a water storage tank open to atmosphere. The length and flexibility of the deep-well column caused the pumps to be highly unreliable with failures occurring nearly every month. Specifications disclosed that the design required pumping the tank empty when filled with ammonia-saturated water. While this condition could occur, it was extremely unlikely and could be accomplished with a portable pump if required. Plant personnel concluded that the installed pumps should be designed for normal conditions rather than unlikely, extreme conditions. The deep-well pumps were replaced with conventional in-line pumps. These pumps performed satisfactorily for years without any failures. Design Defects Identified and Eliminated Throughout Asset Lifetime A reliability evaluation involves statistically estimating lifetime reliability. (29) When design and other intrinsic defects are present during the operating lifetime, gaining sufficient reliability to meet production goals through maintenance alone may be prohibitive in terms of costs. (22) Intervention required for effective equipment management will range from relatively simple inspections on equipment with high intrinsic reliability to comprehensive Preventive, Condition-Based and Proactive Maintenance on complex, critical systems and equipment.(68) Asset optimization demands the elimination of design defects as well as defects introduced through fabrication, construction, installation, operation, and maintenance due to design weaknesses. Fundamental reliability-enhancing strategies including a reliability risk analysis are useful at design to ensure that in-service performance will meet lifetime expectations. Requirements must be incorporated in the design process. (22) See also Chapters VIII and XX. Maintenance and other support strategies are important, but they can only preserve the reliability that is built-into the asset.(22) A maintenance-only focus can consume inordinate resources when activities attempt to compensate for design or systemic weaknesses that are more effectively and efficiently addressed or eliminated in other ways. (22) Industry-leading reliability-driven organizations recognize that defects due to faulty design and installation must be eliminated This includes reduced lifetime brought about by off-design operation. In some cases components must be modified and materials upgraded. In others such as the pump example mentioned in the previous section, the equipment must be replaced altogether. Correcting design deficiencies is a prime objective of asset optimization. There are opportunities to reduce spending by hundreds of thousands of dollars in most facilities by eliminating design defects; for some it may be in the millions! Far too many organizations accept serious design defects simply because “it has always been that way.”

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In more than 40 asset optimization workshops conducted worldwide since 1997 nearly every participant cites major and continuing availability and cost problems due to uncorrected design deficiencies as a real concern. Maintenance Avoidance / Prevention Courtesy Heinz Bloch

Maintenance Avoidance / Prevention is becoming a key component in the effort to gain greatest asset effectiveness. Maintenance Avoidance is based on the principle, stated earlier, that a large percentage of maintenance requirements for specific equipment are determined by its design. It is noteworthy that many of the world’s most profitable companies share these beliefs. They know that avoiding maintenance by applying solid design, operating, repair and upgrade practices is more effective and less expensive than performing maintenance. That thought process starts at the inception of a plant with the knowledge that building-in maintenance avoidance is smarter than attempting to optimize maintenance on assets that are not optimized in design, Chapters VIII, XX. The most profitable best practices companies:  Know that it makes economic sense to justify, specify, buy, properly install and operate the right equipment to begin with.  View every maintenance event as an opportunity to upgrade. They will understand measures available to upgrade and will pursue upgrading whenever the measure is cost-justified. That requires training, grooming and nurturing of talent. To translate: It requires long-range thinking.  Practice root-cause (failure) analysis.  Have low tolerance for repeat failures and will not accept "mystery explanations." Translation: There is accountability.  Always pick the “ripe, low-hanging fruit” first. They make absolutely sure they have the “basics” right. Only then will they invest in sophisticated “icing-on-the-cake” or high-tech approaches. Maintenance prevention focuses on initial design and design improvements throughout life to improve reliability and reduce requirements for maintenance. (124)

PROCUREMENT DIRECTED TO OPTIMIZING LIFETIME COST Procurement based on low initial cost is false economy if unreliability, inefficiency, excessive maintenance and diminished quality quickly consume the initial price advantage. (25) Measures during lifetime to reduce cost of replacement parts and labor often result in reduced production availability and output and increased long-term costs. Relaxing material specifications, purchasing equipment sized to barely meet specifications, and challenged designs are examples of how savings at procurement can cause enormous losses during operation. A number of years ago several chemical companies decided to purchase two-section turbo compressors, despite the fact that prior designs had all included an additional third section. Procurement savings were in the millions of dollars. In every case, design problems delayed startup for months. And this was just the beginning. The compressors proved highly unreliable in service, shutdowns were frequent, repairs difficult, expensive and time consuming. With production losses of $250,000 or more per day, the companies quickly consumed the procurement savings and lost considerably more. The time lag between decision and results may mask procurement problems. For example, visualize the sequence of events following a decision to purchase lower cost components that turn out to have a significantly shorter service life compared to the components they are replacing. At least two years will elapse from the time the replacement components arrive, are installed, and begin to fail before a pattern emerges. (Whether the pattern will be recognized at all may be questionable.) Assuming the failure pattern is recognized, there must be some record of the change, why it was made, conditions prior to the change, and expected return. Otherwise, the failure pattern may continue without anyone recognizing the deterioration from prior performance. Some companies utilize site and corporate experience to select equipment based on highest efficiency and lowest lifetime cost.(25) A few apply offsets to quoted prices that compensate for the lifetime cost of ownership.(129)

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QUALITY INSTALLATION IS ESSENTIAL Quality installation is equally important to optimized lifetime cost. Industry leaders rigorously apply equipment installation specifications that include foundation preparation, base-plate leveling and grouting, pipe flange and shaft alignment, oil system flushing, pipe and separator cleaning. A 1996 paper described conditions in a chemical plant about five years after commissioning. Pumps were experiencing a high failure rate attributed to coupling misalignment. The failure analysis disclosed that the problem was due to inadequate grouting that caused pumps to quickly go out of alignment during operation. The difference between the low-cost grouting used in the installation and “best-practice” was calculated to be approximately $1,500 per pump. The added cost to perform the installation correctly during construction would have paid for itself in about eight months. The cost to correct the problem during operation had multiplied about sevenfold.

CORRECT OPERATION MUST BE ASSURED The 1997 Maintenance Technology article referred to earlier, Figure 3.4, stated that 32 percent of maintenance expenditures were caused by avoidable operating errors. A leading manufacturer determined that 28 percent of their maintenance costs were caused by abuse and poor operating practices.(129) Avoidable operating errors include those caused by difficult, unusual, or easily forgotten operating procedures. Many potential operating problems can be prevented by simple modifications. Posting special startup requirements near a start switch may avoid problems caused by forgetting infrequently used procedures. Drilling an internal vent into pump seal cavities to ensure that vapor cannot collect, warp seal faces, and produce dry face contact at start is an example of a modification that will prevent failures and reduced reliability during operation.(86) Maintaining a positive pressure on bearing cavities located in areas of high moisture to prevent lubricant contamination is another. Following a series of failures, one company found that warm up lines required and called for by start procedures at least ten years old had never been installed and no one had ever mentioned the discrepancy. Improve Operating Efficiency Electricity consumed during operation often comprises 50 to 80 percent of a motor’s total lifetime cost. With a reasonable mean time between repair (MTBR), the operating cost of a typical mid-size pump will be about four times the maintenance cost. Stated another way, a 5 percent improvement in operating efficiency will offset 20 percent of the average maintenance costs. Considering these figures it is essential to maintain the highest possible lifetime operating efficiency of driven equipment by assuring operation is close to Best Efficiency Point (BEP). In addition to power savings achieved by improved efficiency, facilities with a large number of pumps have reported substantial savings in maintenance costs by correcting off-design performance. In addition to operating less efficiently and consuming more electrical energy per delivered flow, a pump operating offdesign is likely to experience reduced reliability due to factors such as internal turbulence, cavitation, recirculation, and off-design pressures. Off-design performance is identified from equipment design conditions: temperature, differential head, speed and power. Match design conditions to the actual conditions observed on operating instrumentation (flow is usually unavailable). Many will be close to design parameters; some will be off; and a few may be way off. Begin with those that are farthest off design performance. How does power delivered based on motor current and speed compare to power required from pump curves? Conduct an economic analysis on corrective actions including replacement. Several organizations have gained substantial added profits from this simple process.

OPTIMIZED MAINTENANCE IS A NECESSITY Optimized maintenance is an essential part of asset optimization. Maintenance, life extension, corrective and repair work accomplished on physical assets, has a broad range of technical and conditional requirements. Maintenance must produce quality results and, at the same time, be highly effective with a minimum of wasted time and effort. Maintenance people must be motivated, have a high sense of

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initiative, ownership, and commitment to quality and improvement. They must be flexible and adaptable to change, often under circumstances that demand the application of a wide range of competency, skill, and technique. Maintenance must be sustaining with the following characteristics:  Broad based but focused  Oriented to improvements, eliminating the cause of failures, not simply repairs and fixing  Directed to minimizing the cost of unreliability and downtime  Emphasis on an organizational culture of initiative, quality, ownership and reliability Maintenance within asset optimization must be anticipatory. A minor defect is usually controllable and easy to correct. Left unattended, a minor defect can lead to an unexpected major failure with costly side effects that may impact safety, quality, and production. Early recognition and correction, avoiding failures that impact safety, production, quality, and the environment, is a key objective of asset optimization. As stated earlier focus on fire prevention, minimize fire fighting! By following the practices and recommendations of industry leaders, maintenance managers can demonstrate that their activities add to the financial success and profitability of the organization. Good maintenance ensures that the organization is able to provide high quality products and services that are delivered on time. Dynamic maintenance practices and programs support the products and services delivered by the organization and will be a positive influence on financial health and the organization’s future. This is especially true for organizations that aspire to the standards defined by the Malcolm Baldrige Award, the International Standards Organization (ISO), North American Maintenance Excellence (NAME) award and other national and international organizations that recognize excellence in all aspects of business. Stability, predictability, order, organizational efficiency, maximizing advance planning and implementing a reliability improvement program that will reduce the need for maintenance are a few of the necessary characteristics when optimizing the maintenance process. Key elements that should be incorporated to gain an effective maintenance program include:  The balance of cost versus value; initial versus lifetime cost must carefully considered at every step of the process.  The combination of reliability and economic analyses assures focus into areas with the greatest value and return Reliability is an inward goal — thinking in terms of profitability will lead to optimum reliability.  Every activity must have associated measures of performance (KPI’s). Without measures of performance there is no way to establish an objective. Without an objective there is no way to gauge progress and know when you have arrived.  Utilize predictive technologies wherever possible, including the determination of preventive intervals.  Apply improved methods to gain greater task and work effectiveness.  Design improvements, technology and surveillance must all be considered to alter failure probability and consequences (risk).  Form cross-functional, multi-discipline, action teams to seek out and implement permanent improvements. Many practitioners speak in terms of Maintenance and Reliability — M&R. Perhaps it would be better to reverse the sequence to Reliability and Maintenance — R&M — signifying that improving reliability leads to better and less maintenance. The asset optimization program includes provisions that ensure maintenance requirements are designed out, see Chapter VIII and XX, and those that cannot be eliminated altogether are made as easy and inexpensive as possible to accomplish. The order is very important. First, design maintenance out, then address maintainability, and finally implement a program of defect elimination.

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A Canadian Coast Guard Officer inspecting a cruise ship observed a timer-initiated, automated cleaning system for galley range grease filters designed to eliminate labor-intensive requirements for manual cleaning and a potential fire hazard when manual cleaning was neglected or deferred. (129)

A 1986 EPRI report stated that predictive or condition-based maintenance can potentially reduce overall, non-fuel O&M costs for a power generating utility by 5 to 10 percent and reduce fuel consumption by 1 to 2 percent. A power generating utility recently reported documented average savings of over $2 million per year during the last three years resulting from maintenance, availability, and heat rate improvements gained with predictive maintenance. A second power generating company reports that maintenance expenditures are approximately 65 percent of non-fuel O&M costs.(7) P/PM Technology, a now out of print technical journal devoted to practical applications of maintenance technology, reported that the savings gained from predictive maintenance represent only 10 percent of the total potential of long-term programs where the need for and the cost of maintenance is reduced. As much as 90 percent came from increased availability and production output. In companies where maintenance costs may exceed annual net profit, optimization is mandatory. Maintenance is a key component and contributor to success of the asset optimization program. Maintenance, when optimized for greatest effectiveness and value utilizing asset optimization principles, ensures the capacity necessary to meet production commitments and contributes significantly to site financial performance. Within asset optimization maintenance is viewed as an investment in future profits achieved through capacity assurance, improved throughput, quality and reduced operating cost. In short, optimized maintenance is essential to asset optimization and site profit. As previously mentioned, many corporate directors and financial executives view the maintenance function strictly as a business cost required to repair equipment, structure and buildings. Few think of maintenance as a profit center source of significant business value. Those who regard maintenance as a business cost rather than a value added activity should ask themselves how much value would be produced without maintenance? In too many cases, when expenses must be curtailed, the maintenance budget is the first to cut, and the last to restore. Incentives to increase effectiveness, replace inefficient equipment, and invest in new technology (which often incur installation and training costs) are often rejected strictly on the basis of cost. A facility that had historically experienced chronic problems with DC variable speed drives replaced one unit with an AC variable frequency drive as an experiment. Despite a demonstrated payback in approximately nine months, further replacements were rejected on the basis of capital prioritization. Had the facility been a bit more creative the local bank would have gladly financed additional replacements. Maintenance must be considered as the activity delivering immediate and future assured capacity — without maintenance there won’t be any capacity. (Minimum costs to sustain assets have been discussed earlier see Figure 3.2) There is another cost issue. A manufacturing or production facility must be able to operate successfully within a level of maintenance funding that is affordable for the specific business conditions. The issue is how much maintenance a business can afford — not how much is needed. If the need appears to be greater than what is affordable, a program must be pursued to reverse the situation. This is discussed in more detail in Chapter IV; benchmarks are discussed in Chapter IX. A manufacturing or production facility must be within a few percent of the costs of industry leaders if it is to remain competitively viable. There are five essential actions that must be accomplished to improve maintenance effectiveness: 1. Develop and implement a prioritized reliability improvement program specifically targeted to reduce the need for maintenance. This is the only way to achieve a permanent, maximum, sustainable reduction in spending. 2. Formulate and implement comprehensive Preventive and Condition Based Maintenance programs. 3. Embed an effective maintenance work management, planning and scheduling process.

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4. Demand organizational discipline to follow established processes and procedures. If Standard Operating Procedures are not written and religiously followed to include a strictly followed process for identifying and implementing improvements, practice and performance will slowly degrade. 5. Develop a comprehensive stores management program that optimizes stocking levels, procurement, storage and issue. It is essential to recognize that within the asset optimization process the sequence in which improvements are implemented is based on a value assessment process that prioritizes their potential value and effectiveness based on actual conditions, potential value, resource availability and probability of success. For example, if a Planning and Scheduling process is in place and is somewhat effective, beginning an improvement initiative with an effort to increase reliability may create the greatest value in the least time. If reactive, break-in maintenance is far too high, beginning with Preventive Maintenance (PM) and Condition Based Maintenance (CBM) implementation, especially the latter, may be the most effective action to increase value. Similarly, if data, institutional knowledge or a simple audit discloses a large number of lubrication induced failures and / or a lubrication program that is below standards, bringing the lubrication program up to best practice should be initiated without delay. If resources are available, several improvement initiatives can be started simultaneously. The management challenge is greater, but so are the rewards and speed of success. Maintenance — A Core Management Responsibility Within asset optimization maintenance must be a full participant in business decision-making and productivity reviews. Maintenance experience must be incorporated in key business process decisions — such as constructing or modifying facilities, acquiring new equipment, cost reduction initiatives, and changing manufacturing processes and tolerances — not simply notified as a new decision is being implemented. Maintenance involvement at the beginning helps ensure that lifetime optimization issues are addressed to avoid availability and operating problems, production bottlenecks, and sub-optimal maintenance costs. Industry leaders integrate the maintenance function into all levels of their organizations’ management review and decision-making process. This ensures that cost-effective business decisions are made with full input from all organizational elements. For the foreseeable future business emphasis will be on availability, throughput, quality, production cost, speed of delivery, and effective service support. When maintenance is not consulted, operating costs may be greater than expected, equipment reliability and / or performance may be less than required, and maintenance and repairs may take longer and cost more than they should. Unfairly, maintenance is usually blamed! By integrating asset optimization into the organizational decision process, potential problems are anticipated; availability and reliability concerns can be discussed and understood by all. When this routinely happens, the organization is well on its way to maximum effectiveness. Reliability professionals provide a critical assessment of problems and future needs associated with system upgrades and/or equipment replacement. The Maintenance Function The maintenance function within asset optimization is illustrated in Figure 3.5. In broad terms maintenance actions are originated in two ways: unplanned, reactive maintenance and planned maintenance. The best practice benchmark, detailed in Chapter IX, is 85 percent to 90 percent planned. Planned maintenance is defined as work that is fully planned and scheduled some time prior to initiation — generally one week. Referring to Figure 3.5, corrective maintenance may be planned or unplanned (emergency, break-in). Time based (PM), condition based (CBM) and proactive maintenance are always planned and hence far more effective in terms of labor utilization (wrench time). In some organizations time and condition based maintenance are combined under Preventive Maintenance (PM). In this handbook PM is strictly time-based maintenance.

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Foundation Principles

Life LifeManagement Management

Unplanned, Unplanned, Reactive, Reactive,Maintenance Maintenance

Planned PlannedMaintenance Maintenance

Reliability ReliabilityImprovement Improvement Life LifeExtension Extension

Progress

Corrective Corrective

Time TimeBased Based

Condition ConditionBased Based

Design Design Improvement Improvement

Proactive Proactive

Some may classify as Preventive

Figure 3.5 Maintenance Hierarchy Maintenance progress is achieved within asset optimization by moving from unplanned, Reactive Maintenance toward planned Preventive, Condition Based, Proactive and Life Extension. The gain in effectiveness as the maintenance process moves from reactive to Preventive and Condition Based is discussed in greater detail in Chapter V. Reliability improvement, in many cases a joint responsibility of maintenance and engineering, is targeted to eliminate the need for maintenance and hence spending for both labor and materials. The necessity for eliminating maintenance and requirements for work will be explored in detail in the next section. The Maintenance Process Among leading corporations, maintenance is considered an integral part of production and part of the process generating business value. Its importance to the timely, efficient, and effective creation and delivery of an end product is fully recognized. The process is well defined, as illustrated in Figures 3.6 and 3.7.(129) Just as a car needs tires, an effective and profitable manufacturing process must have an effective and well-run, maintenance program. The principles expressed in this section apply regardless of whether maintenance is a function within manufacturing, a stand-alone process composed solely of company personnel, outsourced to a third party or some combination of the three. Work Definition Scheduled work; PM, CBM, Corrective

Sustained Maintenance

Continuous Improvement Analysis

Work Scheduling

Work Planning

Work Complete

Close CloseOut: Out:Conditions Conditionsfound, found,Components Componentsaffected, affected, Work Workaccomplished, accomplished,Notes Notesfor forfuture futurerepairs repairs

Work Execution

Emergency, schedule break, reactive repairs

Figure 3.6 The Basic Maintenance Process(129) Referring to Figures 3.6 and 3.7, every facility accomplishes the Work Identification, Planning, Scheduling and Execution cycle in some form. Within the worst performers the entire cycle is primarily reactive. In a reactive facility, planning, limited to parts and tools required, is hastily and inefficiently accomplished by a first-line supervisor or a craft mechanic upon receipt of a work order. Mechanics or the first-line supervisor are generally responsible for safety checks and production line-up to accomplish the work as well as locating parts. In many cases, craft mechanics must be moved from a partially completed task to another higher priority task with significant loss of time and effort caused by the shift. The first line supervisor is constantly juggling priorities and people in an effort to keep the facility operating and satisfy production.

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This brief description does not adequately describe the chaos, wasted time and effort of reactive maintenance. Suffice to say reactive maintenance is a horribly inefficient and ineffective method that simply attempts to keep a plant operating — there is no time to think about improvements, making tomorrow better than today. Figure 3.7 illustrates the maintenance process showing areas in which improvements will affect expenditures and availability along with measures of performance. This is addressed in detail in Chapter IX. Metrics -- KPI's

Metrics -- KPI's

Maintenance Cost -- % ERV Maintenance Cost -- $'s

Maintenance Expenditures

Maintenance Rework as a % of Total Maintenance

Maintenance Efficiency

Maintenance Efficiency -Wrench Time

Work Crew

Work Order Coverage (Non Blankets) as a % of Total Manhours Worked Emergency Work as a % of Total Work

Equipment Related

Maintenance Completed

Backlog

Maintenance Labor as a % of Total Maintenance Cost

Production Availability

Scheduled Downtime

Production Related

Unscheduled Downtime

Uptime -- %

Unscheduled Downtime -- %

Unscheduled Equipment Downtime -- %

Materials

Planning & Scheduling Process

Work Orders

Emergency

Planned

Corrective

Preventive

Results Drivers

Schedule Compliance -- % Planning Accuracy -- % PM and PD as a % of Corrective + PM & PD

Predictive

PM and PD Compliance -%

Failure analysis complete

FMEA Mean Time Between Failure -- MTBF

Vibration

Lubrication

Reliability Improvement Process (Work Elimination Through Life Extension) Thermography

Motor Electrical

Alignment

RCFA Ultrasonics

Cathodic Voltage

Failure Analysis -- Corrective / Mitigating Action Implemented 3/08/04

Figure 3.7 The Maintenance Process within Asset Optimization Showing Performance Metrics The Maintenance Process must be Value Driven The maintenance process itself has traditionally been viewed and managed as a cost-center where adherence to budget is of highest priority and everyone knows — and avoids — the rewards for managing below budget! The asset optimization process demands a far more effective profit-center orientation and mentality that encourages balancing risk and reward to improve effectiveness and gain maximum value and return. Where small improvement projects are typically started late in a cost-center budget cycle on a cushion of deferred expenditures, the profit-center focus of the asset optimization process encourages an early beginning to maximize return. Reduced costs are not a command, but the result of comprehensive, prioritized improvements achieved through a rigorous, disciplined process. Within maintenance, asset optimization requires an objective, value-oriented, complementary mix of condition-based, time-based, proactive and even run-to-failure maintenance strategies. The mix and proportion are directed to gaining maximum value for the plant specific process, systems and equipment. Condition-Based Maintenance (CBM) is typically the most profitable type of maintenance short of reliability improvement that eliminates requirements for maintenance altogether. Time based Preventive Maintenance (PM) is utilized in situations where experience or safety considerations require time-based actions, or when the measurements required for condition assessment are either inaccurate, unreliable,

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or too expensive. Proactive Maintenance is applied at design and during operation / repairs to minimize the probability (risk) of problems. Reactive Run-To-Failure (RTF) maintenance must be based on facts conclusively demonstrating that this method is most effective when all factors are considered. RTF must not be a default when there is no strategy in place. In all cases profit centered prioritization is applied to arrive at an optimum mix and balance. The Maintenance Technology article cited earlier and summarized in Figure 3.4 states that 8 percent of maintenance expenditures are caused by errors in performing maintenance. Better maintenance practices could reduce maintenance costs by 20 to 40 percent and increase OEE by 5 to 20 percent. (56) The following will elaborate a bit on each imperative for optimizing the maintenance process: Necessities for a Solid, Effective Work Management Process There is abundant, proven software available that will enable anyone to implement a solid and effective maintenance work management, Planning and Scheduling process. Numerous articles, papers and full conferences have been published describing an optimum implementation. Demand Organizational Discipline In far too many organizations most, if not all, work requests initiated are written and submitted as a “do immediately” necessity. In many cases those submitting requests believe that without this designation the work will never be accomplished. It is easy to see how this mentality feeds on itself to make conditions worse. Installing a gatekeeper empowered to separate the work requests that actually justify break-in emergency work from those that can be safely deferred into the planning and scheduling process is an essential first step in ending a reactive culture. This person must be very familiar with production operations so the task may fall logically to a scheduler. When PM and CBM programs are in place, excessive reactive work indicates the programs are ineffective. Positive action must be taken to determine the cause of the reactive work, why it isn’t eliminated by the programs and develop corrective action. Periodic reviews of the maintenance backlog are useful in order to visualize the status, priority and aging of work requests. Non-overhaul work that doesn’t move through the management system to closure in one to two months may be unnecessary. An insufficient backlog detracts from the effectiveness of the planning and scheduling process. More details about work backlog and backlog management can be found in Chapter XIII. Change from Emergency, Break-in, Reactive to Optimum Planned Maintenance One objective of asset optimization is to minimize reactive, break-in maintenance. Industry leading facilities operate with reactive, break-in maintenance less than 15% of the total hours expended. Best-of– the-best will be around 10%. The most sophisticated will schedule about 10% to 15% of the weekly hours available for work on tasks that can be deferred knowing that some break-in work will be required. Work accomplished in a break-in, reactive mode is chaotic and highly inefficient. Referring to Figure 3.7, wrench time, explained in more detail in Chapter IX, will be about 50 percent to 60 percent in an industry leading facility compared 20 percent or less at a site relying primarily on reactive maintenance to keep operating. Thus, a facility mired in reactive maintenance will need about three workers to perform the work of one at an industry-leading site. Since a maintenance crew is paid for working hours and not efficiency, Figure 3.7, a reactive facility will pay far more for the same work accomplished as an industry-leading facility. The reactive facility is at an even greater disadvantage because the industry leading facilities have more reliable systems and equipment (greater MTBF) and thus also less work to accomplish! And this simple example doesn’t include additional costs such as degraded quality of workmanship due to haste and pressure, need for and cost of expedited parts and production downtime that are typical characteristics of reactive maintenance. If a facility has an excessive amount of reactive, break-in maintenance work the crucial question is how to move toward industry best performance. The question is not academic — no manufacturing business can survive long with maintenance costs two to three times the more effective competition!

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Evolve into an Optimized Preventive and Condition Based Maintenance Program PM and CBM, the latter often called Predictive Maintenance (PdM), are successful, proven practices that must be an integral part of any asset optimization program, Chapter V. PM injects maintenance tasks designed to avoid failure, for example visual inspections and scheduled lubrication. CBM relies on nonintrusive condition measurements taken during operation that accurately represent condition and are capable of identifying problems in their earliest stages. When discovered early minor defects are typically easily controlled or corrected at minimal cost. CBM measurements can identify the specific flaw, component(s) affected and approximate time until corrective action will be required. Industry-leading facilities utilize condition measurements very effectively to avoid outright failure or an unscheduled interruption in production. Over the years, industry has recognized that migrating from reactive or breakdown maintenance to condition-based maintenance has the dual advantages of increased effectiveness and decreased cost, Figure 3.8.

Fix it after it breaks, “overtime heroes”

Reactive

Preventive

Maintain before it breaks

Cost

Predictive / Condition Based

To Togain gainmaximum maximumeffectiveness effectivenessand and optimum optimumcost, cost,organizations organizationsshould should endeavor endeavortotomove movetoward towardProactive Proactive and andReliability ReliabilityDriven Drivenas asquickly quicklyas as possible. In many cases it is possible. In many cases it ispossible possible totoskip over Preventive. skip over Preventive.

Identify and correct specific problems before something breaks

Proactive Reliability Driven

Eliminate problems — eliminate source of breakage

Identify and eliminate causes of failure, minimize the need for maintenance

Effectiveness

Figure 3.8 Cost Advantages of Maintenance Types The EPRI chart cited earlier and shown in Chapter V, Figure 5.4, is used in many industries to demonstrate the relative improvement as maintenance evolves from breakdown, through Preventive to Predictive or Condition Based. Figure 5.4 extends the illustration to project the anticipated savings accruing from implementation of a profit-centered asset optimization program. Safely Extend Overhaul Intervals Power-generating companies are extending the interval between major turbine generator overhauls from four or six years to eight or more years. Turbo compressor overhauls in the oil and chemical industry have been extended from approximately four years to eight or more years. Extending the interval between, and reducing the length of, major equipment overhauls gains as much as 2 percent in operating availability and 30 percent reduction in maintenance costs. Safe accomplishment, with equal or better availability between overhauls, requires improved reliability and maintainability combined with regular condition assessment.

RELIABILITY — THE BASIS OF PHYSICAL ASSET OPTIMIZATION Definition: Reliability — The probability that a system, device, component or product will perform its required functions in a satisfactory manner for a given period of time when used under specified operating conditions in a specified environment. The achievement of predictable results with as little variation as specific circumstances permit. David L. Stringer, Brig. Gen. USAF at RCM / EAM 2006

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Expressed in this fashion reliability has three key results oriented objectives:  Satisfactory performance  Predictable  Minimum variation Reliability has a maximum intrinsic value that is established at design. (22) As has been detailed in earlier sections, a large percentage of lifetime cost and potential availability are determined during specification, engineering design manufacturing and installation. Several have stated that as much as 80 percent of lifetime costs are established at commissioning. Unproven, outdated, or fragile technologies typically result in unreliable equipment and processes.(22) A key element of the drive for optimum reliability is the recognition that design, procurement and installation deficiencies must be corrected to ensure that inservice production availability meets mission requirements (for more detail see Chapter VIII and XX. High intrinsic reliability is relatively easy to achieve with static equipment such as pressure vessels, piping, instrumentation and power distribution systems. It is much more difficult to achieve with complex mechanical equipment and valves that can be subjected to conditions such as lubrication contamination, turbulence, erosion, unbalance and misalignment.(68) A Ford Motor Company plant announced: “Zero Accidents, Zero Defects, Zero Breakdowns.” This is an illustration of the importance of production asset performance within a key industry. It may be the first time a trend setting, world class operating organization elevated the reliability of production assets to the level of safety and quality. Value of Reliability Figure 3.9 illustrates two failure curves, essentially p/f curves upside down. The first, leftmost represents an intrinsic reliability with approximately 50% probability of failure during the mission. If the curve represents unspared equipment, there is a 50% probability of interrupted operation / production — likely too high to be tolerated. Assuming the onset of failure can be identified, damage and the outage may be limited — but it will still occur. By increasing intrinsic reliability with a design or other fundamental improvement, the risk of failure can be substantially reduced. Optimum reliability has a clear value.

80% failure

Risk of failure

Failure FailureCurves Curves

Mission Increasing Reliability 20% failure Prediction Threshold Time

Figure 3.9 Value of Improving Intrinsic Reliability Optimizing Reliability A reliability evaluation involves statistically estimating lifetime reliability. (29) When design and other intrinsic defects are present, gaining sufficient reliability to meet production goals through maintenance alone may be prohibitive in terms of costs. (22) Intervention required for optimum production effectiveness will range from relatively simple inspections on equipment with high intrinsic reliability to comprehensive Preventive, Condition-Based and Proactive Maintenance on complex, critical machinery. (68) Occasionally, components and perhaps even entire equipment must be replaced in order to gain the necessary level of operating effectiveness.

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A reliability improvement program has three primary attributes: 1. Eliminate failures and the cause of failures. 2. Extend asset operating lifetime. 3. Reduce the cost of asset care by reducing the requirements for work. If a program is not directed at all three, it isn’t a reliability improvement program. As implied by the preceding, a reliability program is a proactive program. It must be managed proactively, constantly seeking opportunities to increase value through optimum reliability improvements. Once a defect is identified, RCA and FMEA are tools commonly used to develop corrective action. Design changes may well be required as well. The reliability program is constructed around a strategy consisting of the following as a minimum:  Overall objectives with specific business goals  Specific objectives of the reliability program  Prioritization of systems and equipment by risk  Plan to improve production and cost effectiveness Within the strategy there must be provisions for reliability analysis, RCA and FMEA as noted above, a process for reliability improvement including follow up to assure improvements are successful, and a strong reliability input to capital projects, see TPM, Chapter V. Design for efficient operation and maintenance (maintainability) is important, (22) see also Chapter XX. Many companies have experienced equipment-operating difficulties that have resulted in failures. Likewise, routine maintenance tasks can be complicated by factors, such as interference that require design changes. The cost balance of reliability is illustrated in Figure 3.10. (1, 22) For every process, system, and asset there is a point of optimum effectiveness that balances the cost of improved reliability with the cost of unreliable manufacturing. “Low Hanging Fruit”

Total Costs

Total Cost of Optimum Improved Reliability Effectiveness

Profit gained from improved availability

Cost to Improve Reliability Cost of Unreliable Manufacturing

Reliability

Figure 3.10 Optimum Reliability An example is illustrative: Variable speed DC motors used in a main production process were unreliable and costly to maintain. Replacing the DC motors with variable frequency AC motors essentially eliminated the problems. The AC motors proved orders of magnitude more reliable, far less costly to maintain and paid back the investment for replacement by increased production and reduced costs in less than a year. This case illustrates the advantages of looking beyond maintenance to lifetime reliability and cost. In this example, would a conventional maintenance improvement program have led to the conclusion, reached

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through asset optimization, to replace fundamentally unreliable equipment? Or would it have concocted more extensive and costly monitoring and maintenance actions to mitigate design deficiencies? Every organization should strive for the lowest cost reliability that meets mission requirements. (19) A level of reliability that guarantees availability when required is a key issue, see Timed Availability, Chapter VI. Required availability in a defined increment of time may range from 100 percent to less than 60 percent for spared equipment. Failure to operate within a defined production window often causes major loss. A food processing plant that fails during harvest season, resulting in spoilage losses, is one example. Failure of a power generator during a heat wave that forces the purchase of expensive replacement power on the spot market, or results in the default mentioned earlier, is a another example. Improved Reliability is the Only Way to Reduce the Need for Maintenance Spending A well-implemented Work Management, Planning and Scheduling, process can potentially gain approximately 15 percent to 20 percent reduction in maintenance costs through improved labor efficiency (wrench time). Optimizing stores management might gain a further reduction of about 10 percent. The key question for those mandated to reduce spending by more than 25 percent is where can the remainder be gained? As illustrated in Figure 3.11, the remaining cost improvement must come from improved reliability — eliminating defects and the need for maintenance. This is a fundamental value principle of asset optimization and the only way to permanently reduce maintenance costs. YEAR 1

95%

YEAR 2

YEAR 3

YEAR 4

82% 75% 67% Maintenance Spend Objective

Increase Efficiency

YEAR 5

60%

Eliminate Work

Value Added %

Contribution to Profit from Increased Availability Combined Savings Reliability Planning & Scheduling Materials

Reliability: Increase MTBF = Less Work Required, Less Reactive, Less PM / PdM EARLY YEAR’S BENEFITS COME FROM IMPROVED EFFICIENCY AND WILL SLOW IN CONTRIBUTION. LATER YEAR’S BENEFITS ORIGINATE FROM ELIMINATING THE NEED FOR WORK — AND ARE SUSTAINABLE LONG TERM.

Figure 3.11 Contribution of Three Elements of Maintenance Optimization Experience demonstrates that the best way to reduce cost begins by increasing system, equipment and component reliability. This leads to a reduction in requirements for work and hence the necessity for spending. Within a reliability improvement program:  Every repair is considered an opportunity for improvement  Equipment and components with substandard life are continually upgraded.  Upgrade procedures are continually reviewed and improved.  Surveillance is improved to minimize surprises.  Communications and follow up are embedded in the process to assure evaluations of potential problems, requirements for immediate and long-term corrective action are received, understood and acted upon.

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Improving reliability compliments both Planning and Scheduling and Stores Optimization. When improvement initiatives are started together in all three areas, reliability improvements begin bearing real fruit just about the time maximum gains have been achieved in the planning and scheduling and stores areas. In addition, and as shown in Figure 3.10 reliability improvements lead directly to improvements in availability, production output and profit. Reliability is sustained by adherence to designated standards and specifications. Reliability is enhanced by modification and improvement projects.(129) There is a general feeling in industry that reliability is a valuable commodity.(7) Any approach to reducing spending other than reliability optimization is temporary at best and gains only a portion of the potential value of defect elimination. Improved design, materials, operations, lubrication, and maintainability are examples of changes that increase reliability and reduce the need for maintenance. The asset optimization program includes a reliability management system that notes conditions found when equipment is being monitored, inspected or repaired, and tracks the cause for each equipment failure. Reliability management also includes reliability and risk analysis and continuous improvement. The key lesson is that by eliminating defects, improving reliability both labor and parts costs are removed — reliability improvement addresses 100% of the maintenance costs!

FAILURE ANALYSIS (RCA) Reliability analysis, including lifetime prediction (prognosis), and failure analysis and elimination provide the information necessary to extend life and avoid unplanned outages. Together, these lead to, and will be the cornerstone of continuous improvement. Continuous improvement progressively eliminates cause, extends life, and ensures full effectiveness and return from physical assets. Failure analyses, initiated by a variety of triggers (safety, environmental, one-time and cumulative cost) typically provide a great deal of avoidance information. However, pre-failure risk analysis, anticipation and early recognition are far more effective methods to improve life compared to waiting for failures. Waiting for failures to initiate corrective action is not a sound practice.(68, 76, 129) There is a growing recognition that many mission-jeopardizing defects that are responsible for reduced effectiveness and resource consumption may be separated in time and space by months or even years from the point where symptoms are initially recognized. This requires extensive documentation and a more holistic process of analysis and improvement. Three examples from an engine manufacturer are illustrative: A search for the cause of coolant leaks following delivery disclosed that the process of attaching a subassembly altered the engine’s integrity. (129) Correctly torquing a pipe fitting led to leaks much later in the process when the fitting had to be turned to obtain the correct angular position for the mating hose. Ultimately, this problem necessitated a re-design to remove two potentially mutually exclusive requirements. (129) Defects often appeared late in the process of machining a complex casting. As a result, a great deal of value-added machine time was lost, as well as the casting itself. Based on costs involved, an expensive 100-percent radiography inspection of all of the raw castings was justified. (129) A fourth example involved a series of bearing failures that were ultimately traced to a change in suppliers that had occurred more than four years earlier. The latter example identifies some of the considerations that must be evaluated before making changes. If the MTBF of a typical component is 4 years or longer, how long will it take to discover reduced lifetime caused by a change in suppliers, design or materials? By the time a problem is discovered all involved with the decision may have moved on. Ownership of reliability is a major key to success. Ideally, the individual(s) who are accountable for plant capacity should “own” reliability. An important point to remember is that reliability is a means to an end — not an end in itself.

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TECHNOLOGY INTEGRATION Technology is a prime enabler and necessity for asset optimization. Asset optimization requires that control, information, management and monitoring technologies are all assembled into an integrated, interoperable structure that is accurate and accessible; see Chapter XIV for more details. Technologies provide a basis and focus for strategy development. For example, technology must enable rapid identification of systems and equipment that have demonstrated the largest detriments to revenue, availability and spending (both historical and potential losses) objectives together with cause of the variations. Having all available within an accessible, web enabled structure provides better, more effective communications between all who need to know specific performance information

ASSET OPTIMIZATION REQUIREMENTS FOR FACILITIES AND STRUCTURES Asset optimization is normally associated with production equipment. All too often buildings, structure, heat exchangers, piping, piping supports and valves and other capital assets that are a vital part of the mission / production process are neglected. There is always the temptation to save by deferring sustaining maintenance. This only shortens lifetime and, when the end is reached, repair or replacement is likely to cost several times that of effective lifetime care. In these examples, what are the real costs of deferred preservation? Deferred preservation, such as painting, has a cost that can be expressed in NPV. One industry leading company has a procedure for estimating the cost of deferred structural painting at several stages of corrosion. Calculating NPV involves prioritizing requirements to obtain a clear understanding of the order of accomplishment and costs involved. This avoids, or at least identifies, the real cost of “savings” gained by consuming assets — the well known “pay a little now or a lot later” mentioned earlier. Buildings and equipment do not last forever and their continued use can often be too costly and adverse to the price of the product and customer loyalty. As an example, in the late 1970s and early 1980s North American automobile manufacturers finally had to come to grips with production costs. During the introspective analysis, executives finally realized that they were still manufacturing cars and components in production facilities that were built to suit practices used in the early twentieth century. The executives saw that the Japanese (and later, Korean) competition had constructed modern, very efficient facilities designed to gain the utmost from the latest manufacturing processes. These facilities, combined with advanced practices, provided the ability to produce high quality products at low cost. The response was to close many of the old facilities, completely modernize others, and, in some cases, build modern state-of-the-art replacement plants. The design and building of new vehicle assembly plants also accommodated the inclusion of new technology, the most notable examples of which were the installation of robotic welders and painting and movable carts that enabled teams to assemble large portions of the vehicle in a given location. There are several lessons to be learned from this example including:  An integrated approach in the design of new facilities can accommodate new technology and equipment management practices focused on providing a high quality, low cost end product.  There are numerous hidden costs in adding building modification upon modification in hopes of avoiding the cost of extensive repairs, modifications or development of new facilities.  EVERYTHING affects the quality, cost, and availability of the end product. Senior executives must understand the importance of the role of lifetime asset optimization in their operation / business and how a proactive program will positively affect the bottom line. Here are a few examples: Electrical: Electrical demand has grown dramatically over the years. New production equipment for capacity expansion (often computer controlled), variable frequency drives, computer networks, and other high technology information equipment are multiplying exponentially and placing burdens on the distribution system that were never anticipated. Electrical systems can remain in place for decades, in many cases a half-century or more. With the advent of computers, computer-controlled equipment, and systems, gross electrical demand and the need for conditioned power may exceed the electrical system’s

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current capacity. Without upgrading the system, equipment may not operate at peak efficiency and / or service life may be diminished. Roofing: Roofing systems have evolved over the years, including numerous, accurate diagnostic technologies that quickly assess the condition of the roofing material. Roofing failures are expensive and often incur additional expense in the form of damage to roofing support systems or equipment in the building. Periodically inspecting the roof, cleaning roof drainage components, and patching damaged areas increases service life of the structure, ensures an uninterrupted flow of work within the structure, and reduces maintenance costs. Without proper care, significant roof failure may begin in less than 20 years. One individual lamented that his company “never repairs roofs — we wait until they are about to collapse, then initiate a capital replacement project.”

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IV. MAJOR PROGRAM ELEMENTS “And gentlemen in England now-a-bed Shall think themselves accurs'd they were not here, And hold their manhoods cheap whiles any speaks, That fought with us upon Saint Crispin's day.” William Shakespeare, Henry V

Industry leaders are quickly beginning to recognize that asset effectiveness is a greater profit opportunity than a cost issue. In terms of effectiveness and value, areas such as opportunity exploitation, availability, yield, and first-run quality are often more important than cost. Industry leaders have a comprehensive strategy that links equipment reliability and utilization, i.e., availability and capacity management, with market conditions, facility and mission objectives. The strategy is translated into high-level plans that drive planning and resource allocation. The high level plans provide the basis for detailed operating plans and performance scorecards for the major strategic and functional performance areas of the business. It intertwines layered measures of performance and promotes profit-oriented process, system, and component effectiveness. Asset optimization is accomplished by institutionalizing a strategic, fully integrated, array of comprehensive improvements to business, management, engineering, operating and maintenance processes. It requires continuous improvements in technology, practice, process, organizational culture and organization. On new equipment, asset optimization begins at design with risk prioritized (Streamlined) Reliability Centered Maintenance (RCM) and Failure Modes, Effects, and Criticality Analyses (FMECA). When a facility, system or equipment has been in operation and has a history, asset optimization begins with identification and prioritization of availability, cost and organizational improvement opportunities. These include identifying unreliable systems and equipment, an assessment of the effectiveness of maintenance and operating practices, technical and financial risks and conducting Failure Analyses (RCA). High-risk systems and equipment that have experienced problems are evaluated first. (See Chapter XIII for details of risk ranking) Implementing improvements in a prioritized order to achieve maximum value is the objective.

CHANGE TO AN OPPORTUNITY DRIVEN, PROFIT-CENTERED ORGANIZATION A profit-oriented process balances immediate results with long-term prosperity. In many cases deferring or reducing costs in the short-term may have a negative Net Present Value (NPV) in the mid to long term. Postponing painting for corrosion protection is a commonly encountered example of short-term savings that can lead to severe, long-term problems. Examples of this short-term approach abound. Discussed in the last chapter, many highway bridges, particularly in large cities that experience below freezing weather for significant periods during the winter, are in declining condition from the effects of corrosion compounded by lack of preservation. Clear Statement of Objectives Asset optimization is an integral, inseparable part of the production and manufacturing processes. As outlined in Chapter III, design, procurement, installation, operation, maintenance and maintainability are all included in the asset optimization process to ensure that in-service reliability complies with business and mission requirements. Risk assessment, control and management are equally essential to successful asset optimization. The asset optimization process must begin with a clear statement of business objectives. What does executive management want the outcome to be? Is it increased production, greater effectiveness, reduced spending or some combination. Suffice to say that if executive management cannot state a clear objective, including measures of performance, the best program staffed with the best people can’t possibly get them there.

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A major corporation stated the following overall goals in terms of optimizing asset performance and utilization:  Control assets; spend resources most effectively — proactively rather than reactively  Apply funding based on enterprise needs; fund requirements that add greatest value in priority order  Move toward commonality of systems, equipment and components — reduce the number of different designs and suppliers The preceding doesn’t quite describe the specific outcome desired — it is more of what to do rather than what to achieve. Within an Asset Optimization program, executive management should define the outcome, perhaps amplified by what they consider important to achieving the goals, with specific business metrics. Build from Strengths Asset optimization builds from current strengths to gain “industry leader” operational effectiveness. Opportunities for improvement are identified and ranked (prioritized) by risk and value. Business objectives are linked from top to bottom of the process — from business and strategy to individual program effectiveness and training. Linked, layered measures of performance are utilized to promote optimized process, system, and component effectiveness as well as monitor improvements implemented by asset optimization. Within the asset optimization initiative there must be clear “sight lines” from top to bottom and bottom to top so that all involved see their contribution and how it relates to the overall objectives. Asset optimization demands safety and environmental excellence. A facility cannot have excellence in asset optimization without the cultural mindset required for excellence in the safety and environmental areas. At a kick off meeting for an asset improvement process the plant manager stated a clear objective of attaining a cultural and organizational commitment to asset performance equal to the excellence the facility had achieved in Safety, Health and Environmental areas. Everyone understood the message and exactly what was required. This leads to the necessity for excellence in the “soft” human issues of leadership, ethics, values, relationships, institutional culture, organizational structure and reporting, communications, team performance and change management. All are essentials for success. Production must be involved as a full partner from the outset of the asset optimization initiative. Supporting functions must all be aligned with and fully supportive of the initiative. Capitalize on Opportunities for Improvement Successfully improving asset effectiveness requires simultaneously addressing availability, production rate (yield), quality, conversion cost and capital effectiveness to demonstrate a solid financial return. Achieving an optimum balance among the five for business and market conditions is all-important. By focusing solely on cost, organizations risk reduced availability, production rate or quality, the conventional ‘profit’ related variables. One company, directing attention and efforts to quality improvements, found that a concurrent decline in availability had nullified quality improvements. (129) The balance will often vary with demand. Gaining short-term results at the expense of long-term prosperity can be counterproductive. Concentrating solely on reducing costs by eliminating people and programs, and outsourcing specific activities to low cost service providers may well reduce fixed-costs in the short-term. However, results gained in this fashion are typically not sustainable, may consume assets and result in hidden costs such as added management and supervision. Furthermore, there may be added fixed and variable costs in the future, when fewer options and operating alternatives are available — the often stated “pay now or pay much more later.” Finally, the loss of the institutional knowledge necessary to understand and evaluate the effectiveness of outsourced activities must be mentioned. (See Chapter XIII for more considerations involved with outsourcing.) It can’t be overstated that permanent improvement requires comprehensive changes to values, culture, organization, process and technology implemented in a logical sequence to maximize effectiveness and value creation.

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Industry leading facilities invest in productivity improvements when times are good. This provides a position of strength when economic conditions turn down. Participation from all Disciplines As illustrated in Figure 4.1, “The Physical Asset Optimization Process is the same regardless of discipline” the asset optimization process can be compared to a sporting activity played in a stadium with multiple entrances. Entry may be through several corporate disciplines. However, once inside the stadium there is but one objective and one set of rules on the field. Whether entry is from Finance, Information Technology, Maintenance or Operations the principles of asset optimization apply to all. All must be aligned in pursuit of a common goal. Business Businessand andFinance Finance Engineering Engineering

Information InformationTechnology Technology

Operations Operations

Control ControlAutomation Automation Maintenance Maintenance

Figure 4.1 The Physical Asset Optimization Process is the Same Regardless of Entry Alignment means that not only must Production and Maintenance be fully committed to the asset optimization partnership as a business imperative, but that Engineering and support functions such as Finance, Human Resources (HR) and Information Technology (IT) are fully supportive of the common goal and enthusiastic participants. Workshop discussions throughout the world often identify support functions that attempt to control rather than support as major barriers to gaining business objectives. Implement Organizational Changes North American industry is moving toward de-centralized, multi-function “team” organizations. Empowering people, requiring greater initiative, responsibility and accountability and broadening participation in the decision process builds the initiative, commitment and ownership necessary for success. The team approach requires a continuous effort to achieve greater communication and understanding. The typical production facility moving toward a de-centralized, multi-function “team” organization must focus increased attention to quality control, consistency, specialist functions and optimal use of tools and spare parts. This is similar to the collaborative principles advocated by Total Productive Maintenance (TPM) which are being used effectively by many industry leaders. In many facilities, skill levels and institutional knowledge are declining with early retirements, outsourcing, less emphasis on mechanical and problem solving skills in secondary education and fewer craft apprentice programs. Industry is responding with more training in everything from safety and basic skills to team building, communication, and specialized technology. Some industrial plants are forming training alliances with community colleges. Many industry leaders are following a similar process toward optimizing asset performance and utilization. Although implementation details and specific measures of performance may vary between industry groups, strong similarities are firm evidence that an optimizing process for asset optimization is coalescing. The emerging process will become a substantial competitive advantage for enterprises that recognize the opportunity and are capable of capturing the benefits.

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THE BASIC PHYSICAL ASSET OPTIMIZATION PROCESS To summarize, the asset optimization process:  Extends from design, procurement, and installation through operation and maintenance.  Requires a results oriented profit centered mentality rather than cost center operation.  Connects and aligns operations, maintenance, technical, financial and support functions.  Begins from where you are (current conditions) building from strengths, correcting weaknesses, taking maximum advantage of opportunities to achieve greatest value in the shortest amount of time.  Demands optimized reliability achieved by defect elimination as the only way to achieve sustainable, optimized operation.  Assembles the different maintenance processes with mission-based financial prioritization for greatest effectiveness.  Provides processes, techniques, and measures of performance that gain ownership, compel broader responsibility for the value and return generated by capital assets.  Requires sustainable, continuous improvement. The Process The asset optimization process is represented by the circular process illustrated in Figure 4.2 following. It is exceptionally important to recognize that Asset Optimization is a business improvement process and imperative that demands Maintenance, Production partnership, full alignment and support throughout the organization from the very beginning of the initiative. History has demonstrated that internal maintenance organizational and process improvements can only go so far — a solid, constructive Production, Maintenance relationship is crucial for success. Figure 4.2 illustrates the progression of identifying and prioritizing opportunities; constructing a strategy and tactical action plans to address opportunities; injecting processes, systems, technology and resources; measuring results; and closing the loop with assessment of results and continuous improvement. It is important to repeat that the asset optimization program is opportunity driven from prevailing conditions to gain the highest return in the least time. It is not a linear progression that begins with a process or processes that may or may not produce greatest value for internal conditions and opportunities. This type of circular process is not new. It probably began with the Shewhart or Deming PDCA cycle utilized by the famed W. Edwards Deming. The PDCA cycle consists of four actions: Plan (what to accomplish), Do (initiate the strategy or plan), Check (evaluate the outcome), Act (on what has been accomplished). The idea has been borrowed and modified by many since. DMAIC: Define, Measure, Analyze, Improve, Control is utilized within Six Sigma; explained in detail in Chapter V. Observe, Analyze, Prioritize, Do, Measure (results) and Improve is another variation. There is even a military variant called OODA — Observe, Orient, Do, Adjust. All emphasize thinking and planning before doing. Thinking and planning are much less costly than doing! The basic asset optimization process illustrated in Figure 4.2 draws on all the preceding processes in the following five primary stages: 1. Define — Establish Requirements, Formulate Strategy. 2. Plan — Identify, Prioritize and Plan Opportunities for Improvement. 3. Do — Develop and Implement Improvement Action Plans. 4. Check — Measure Results. 5. Improve — Continuously Refine and Improve Results.

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Establish Business Requirements Collect Facts

Define

Define, (need to do)

Improve

Need to Do

Improve

Develop Strategy

Institute Continuous Improvement

Plan

(going to do)

Plan,

Check,

Going to Do

Check What

you Diddid) (what you

Do

Deploy People, Practices, Technology

Measure Results

Do

Figure 4.2 The Physical Asset Optimization Process Process Stages The asset optimization process builds on plant specific strengths and opportunities to achieve business objectives as quickly and effectively as possible. Proven practices and technology are introduced to capitalize on opportunities and implement a plan developed by site personnel. Define — Formulate Strategy The overall strategy for asset optimization will be developed to gain corporate and site business objectives — typically improved availability, reduced spending (cost) and greater capital effectiveness. If specific numerical objectives have not been defined, performance benchmarks for availability, cost and other top-level program objectives should be published and made readily available. Targets must include both numerical and qualitative performance objectives as well as time to achieve the objectives — for example, achieve an asset care cost objective of 2.3 percent of RAV in three years, improve employee work environment within a year, etc. When establishing top-level strategic objectives the gap between current and objective performance must be taken into account. For example, it probably isn’t possible for a facility spending 3.5 percent or greater of RAV on asset care to accomplish a sustainable reduction to a world-class value of 2.3 percent in three years while simultaneously increasing availability by 5 to 10 percent. It is better to establish an ambitious, but achievable, stretch objective that will gain enthusiastic support from all stakeholders. During this stage a mission statement is written describing objectives as concisely as possible (the elements of a mission statement are discussed in Chapter XVIII). Along with the mission statement, a procedure for assessing performance improvements must be devised and approved. It could be a financial model similar to that discussed in Chapter VII, or specific metrics. All this should be rolled into the structure of a formal business plan. The business plan will be completed during the planning and implementation steps to fully define the improvement process. The overall business strategy might state in general terms how the objectives will be met — improve reliability, minimize unexpected major events (failures). The amplifying program may delve deeper identifying organizational and other specific areas for improvement. Again, top-level objectives might include examples such as 85 percent of all work accomplished will be planned (one week in advance of work) rather than reactive, and 65 percent of work accomplished originated by Preventive and Condition Based activities. Here again gaps to best practice benchmarks drive the process, Figure 4.3, see also Chapters IX and XVII.

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Us

Best in Class

Practices Practices

Metrics Metrics

What Whatare are we wedoing? doing?

How Howwell wellare are we wedoing? doing?

GAP GAP

Metrics Metrics

Practices Practices

How Howwell wellare are they theydoing? doing?

What Whatare are they theydoing? doing?

Opportunity Opportunity Prioritization Prioritization Strategies Strategies Action Actionplans plans Implementation Implementation Results Results

Figure 4.3 Gaps to Best Practice Drive the Asset Optimization Process The demarcation between the strategy and tactical planning stages is a narrow one. In general, it is better to leave specific details of process, organizational and technical details of what is to be accomplished to meet the overall objectives to those who will be developing tactical action plans. That gains ownership and commitment for the improvement initiatives. Plan — Identify, Prioritize and Plan Opportunities for Improvement The planning stage converts strategic objectives to implementable improvement action plans. The planning stage has three identifiable steps: 1. Identify gaps between current and objective performance within asset related processes. How are assets, processes and people performing compared to benchmarks? Performance includes areas such as availability, reliability (MTBF), cost, work effectiveness and management, materials (spares levels, procurement, storage and issue). Chapter IX provides guidance. 2. Establish preliminary performance objectives for each gap. Determine the value improvement available from each gap closure opportunity in terms of its contribution to the strategic objective. 3. Prioritize opportunities by value potential (value of the gap), risk (probability of successful accomplishment), time and cost to achieve required performance. Select improvement opportunities that cumulatively total approximately 120 percent of the overall strategic objective. It must be noted that prioritization is extremely important. Getting off to a fast start with quick results, demonstrated financial return and real examples of what can be accomplished is absolutely essential to create the climate of ownership, enthusiasm, cultural acceptance and support that are needed for sustainable success. The new organizational infrastructure is typically formed during the planning step. This consists of steering teams, improvement champions and improvement teams. Training is commenced to acquaint the improvement teams with the latest practice and technology that can be applied to reach industry best performance. Details of how this and all stages of the asset optimization process are accomplished are contained in Chapter XVIII. Action planning begins by identifying, in detail, strengths to build on, barriers to success and the desired end state — including interim objectives for long-term improvements. The latter might include annual objectives for spending as a percentage of RAV over a three to five year period. This step is best accomplished in a facilitated workshop composed of management and crafts from all applicable disciplines — production / operations, maintenance, engineering; perhaps stores, finance, IT and HR. The action plan will designate a champion, list resources, best practices and training necessary for the implementation as well as coordination / co-operation, such as HR assistance for training, certification and resolution of any contractual issues, IT for information entry, management and access.

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Corporations leading the application of the principles of asset optimization state that work groups are the biggest motivator and contribution to success — when the need is understood and accepted, buy-in, commitment, and ownership follow.(129) Quite often workshops will conclude that changes to the organization, communications and reporting structure are high priority improvements that must be implemented before process and reliability improvements can occur. Added training for operators and crafts, more specific operating instructions and greater ownership are other frequently mentioned organizational improvements, Chapter XVII. In addition to overall objectives, it is wise to establish leading metrics to provide confidence that the improvement process is moving in the correct direction, Chapter IX. Leading indicators might include percentage of training completed, new practices and procedures installed and in use, percentage of PM and CBM routines developed and implemented and lower level compliance metrics such as percentage of total work (hours) covered by work requests. Do — Implement Action Plans Improvement action plans are implemented as soon as possible following completion and approval. Deploying improved practice and technology is the first step in the implementation process. This typically begins with training in areas such as reliability improvement, planning and scheduling, lubrication, vibration and failure analysis. Actual implementation is accomplished by teams, ideally on a small-scale pilot basis to work out any minor deficiencies, prior to full deployment, see Chapter XVIII for more detail about pilot implementation. One final point: asset optimization requires lots of data to identify and formulate objective improvement initiatives. Many facilities are data poor at the beginning of the initiative. As a result, it is imperative to implement a robust procedure for data capture as part of the initial improvement action plan. This will build the base of data needed to evaluate results and progress as well as form the objective basis for identifying the next round of improvements. In effect the improvement program builds its own history. The necessity for this step cannot be overemphasized. Check — Measure Results With improvement initiatives implemented and moving forward it is necessary to measure results periodically and compare actual performance to expectations. Did the improvements produce the expected results? The entire purpose of this step is to ensure satisfactory progress, increase ownership, support and enthusiasm for the improvement initiative, identify and resolve any barriers to success and initiate modifications to action plans where necessary. Implementation teams must have specific objectives with performance (numerical results and time) reviewed monthly as the improvement program lifts off. Production, Maintenance and Engineering Superintendents as well as members of the improvement program steering team (Chapter XVIII) should participate in review meetings. Human Resources (HR) should participate where organizational, cultural and / or contractual issues are involved in the improvement process. Others such as finance and engineering should be represented where improvement activities overlap with their responsibilities. On large sites with multiple areas / units, individual area / unit meetings should be considered for detailed discussion with a second level combined meeting for all units and the steering team. The second level meeting is directed to reviewing overall performance, identifying potential barriers and any mid course corrections that may be required. Participation by the plant manager and corporate executives is a powerful demonstration of commitment that goes a long way toward driving the initiative to success. Improve — Institutionalize, Refine and Improve Results Asset optimization must be a living program, continuously reviewed, refined and improved. Each successful improvement shifts opportunities and prioritization for additional improvements. Overall reviews should occur every six months or so depending on the state of improvements. The improvement program business plan should be reviewed annually and revised as required. In the longer term, improvements must be institutionalized such that results are permanently sustained. This takes time — as much as five to seven years for the major organization cultural shift required to go

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from reactive to reliability driven, planned maintenance with most activities originated by Preventive and Condition Based tasks.

PHYSICAL ASSET OPTIMIZATION — THE PROGRAM The asset optimization program is a hybrid that combines a tailored mix of elements from proven practices such as Total Productive Maintenance (TPM), Reliability Centered Maintenance (RCM), Six Sigma, Preventive, Condition Based and Proactive Maintenance. All are described in detail in Chapter V. Elements are assembled to produce a program that will yield greatest sustainable short- and long-term value under plant / facility specific conditions. As has been stated, asset optimization applies to physical assets — primarily equipment and structures used in heavy manufacturing and capital-intensive petrochemical, power generating, and rolling (paper, steel, aluminum) industries. Its principles are equally applicable to industries such as food processing, pharmaceutical, mining, cement, printing, shipping and others including service providers and the public sector that are dependent on physical assets to meet delivery, service and schedule obligations. Program Imperatives The asset optimization program is constructed on the premise that application of the processes, practices, and technology to gain optimum effectiveness is market, business, and site specific. Asset optimization is value and profit oriented. A site program begins with identification, prioritization and rapid exploitation of value opportunities — transformational “quick wins” that gain enthusiasm and support for the program — followed by continuous improvement to steadily elevate effectiveness. Paul O’Neil, Chairman of Alcoa, in a speech signaling change in his company noted: Continuous improvement is exactly the right idea if you are already the world leader in everything you do. It is a terrible idea if you are lagging. It is probably a disastrous idea if you are far behind the world standard…I believe we have made a major mistake in our advocacy of continuous improvement…we need rapid, quantum-leap improvement. An asset optimization program provides the tools for both step change transformation and continuous improvement. Essential Characteristics Top-down Vision, Drive, Support and Participation — beginning with a visible, energized commitment by the CEO, plant and functional managers to permanent, sustainable improvement. The CEO, plant and functional managers or their equivalent must lead the effort to introduce and drive asset optimization by originating overall objectives, framing the transformation initiative, providing visible, enthusiastic, inspiring leadership, aligning resources and focusing on long-term results. Executives and senior managers responsible for improving the effectiveness, utilization and return from physical assets must have some working knowledge of the application and benefits of component processes such as Lean, Six-Sigma, TPM, RCM, CMMS, CBM, Supply Chain, etc., to assure greatest effectiveness and results. This knowledge is necessary to gain the necessary alignment within the administrative organization and unlock full tangible and intangible benefits and return. Executives within industry leading companies and operating organizations continuously demonstrate their engagement and total commitment to the improvement process by action. It is astonishing to see how a plant manager’s demonstration of interest in the improvement process by occasional active participation in team meetings and congratulating program participants for efforts and accomplishments during tours of the facility energizes people and the process. Ambitious Objectives — that are optimistic, challenging, and crystal clear to all. Clear objectives ensure that funds and resources are invested to gain the greatest results and profit / return. Ambitious objectives ensure that all potential improvement opportunities are identified and considered, all elements of change are evaluated. Timid objectives and the incrementalism they encourage will not achieve maximum results. Comprehensive, Business / Mission-Centered Strategy — that optimally balances immediate results and long-term sustainable success. The strategy serves as a direct connection between the organization’s business / mission and its daily operations. The strategy must be opportunity driven and profit and results oriented. It must focus on optimum asset reliability for the business and mission, identify and assess risk and maximize capital effectiveness.

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Financial Model — to assess total return on investment for improvement initiatives. The financial model must be able to quantify risk and show changes in value return in response to variations in market, business, and internal conditions. Results must be presented in financial terms that are meaningful and credible to executives and management to ensure continued high-level support. Benchmarking — to define best practice performance and opportunities for improvement. Performance benchmarks, gaps to best practice and the resulting prioritized opportunities for profit and mission optimization assure an effective value, oriented strategy. Detailed Business Plan — that fully defines and prioritizes objectives, requirements, initiatives, time schedules, and measures of performance. The plan links corporate business objectives to the operating goals. It must be a living document that is reviewed and revised at regular intervals. Strong Leadership — beginning with senior management who direct the formulation of clear value and mission statements that provide the basis for action. High-level steering / leadership teams provide coaching, active guidance, barrier removal and the advocacy necessary to maintain support. Experienced, well-qualified champions who are respected, energized, committed, persuasive team builders, flexible, and eager to learn lead the improvement process. Working level teams develop and implement specific improvement initiatives and are accountable for results. Effectiveness-Oriented Organization — including multi-skill, multi-discipline, high impact improvement action teams supported by skilled, engaged technical specialists. Comprehensive Tactical Action Plans — consisting of prioritized improvement initiatives defined and developed by champions and improvement teams. Tactical action plans include specific deliverables, recoverable value, schedule of fulfillment, risk and accountability for each initiative. Action plans must also address the transition required to bridge the gap from current conditions to required results. Initiation and Management of Organizational Values and Culture, Behavior and Process Change — to establish the environment and conditions necessary for the major improvements required to gain maximum value and effectiveness. Implementation Beginning with Radical, Transformational Change — “One giant step” is often required to jump-start the transformation of organizational values, culture and practice necessary to achieve ambitious objectives including major gains in effectiveness. Values, organizational culture, practice, and the administrative organization must all undergo varying degrees of improvement, depending on objectives and the gap between current and required performance. Technology and Practice Selected for Optimum Results — as a means to create value. The asset optimization process is value and results driven — technology and practice are introduced to meet clearly defined, prioritized objectives. The technology and practice selection process must result in a valueoriented, complementary mix of proven methods and practices. Each makes a tangible contribution to enterprise objectives. As an example in the maintenance arena, Condition-Based Maintenance is used where most effective. Preventive Maintenance is optimized by a continuous review of task requirements and interval. Run-to-failure may be used as the result of a decision process, but never as a default. The application of each depends on the specific circumstances and the risk (probability and cost) of failure. Risk Assessment and Control — to identify potential future deviations from objective performance for correction in the present before they occur. One or both elements of risk — probability and consequences — must be controlled whenever possible. In many cases, reducing probability through the use of better materials, increased lifetime and improved technology may be the best method of control. In other situations, controlling consequences may be the best method of risk reduction. In some cases both may be addressable. Training for Success — focused on specific objectives needed to successfully implement the process in safety, technical, skills, interpersonal, and other areas. Training must be immediately reinforced with the opportunity to apply and solidify skills in a work situation. Note that industry leading companies provide 80 hours (4 percent) or more of training per year to each employee. Support from All Levels of the Organization — including an understanding and acceptance of the need for improvement and the importance of success across the entire organization. Personal objectives and performance must be aligned with the corporate strategy as part of the asset optimization process. All must be willing to assume new relationships, roles, and responsibilities. Ownership and commitment to

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the process is established and reinforced through fair treatment, consideration and respect for all involved, continuing communications, coaching and training as well as recognition for results. Incentivebased compensation is a strong motivator. Functions that may not be directly involved in the transformation; Finance, Human Resources, Information Systems, etc., must be made aware of objectives and their anticipated contribution, aligned to the transformational objectives and included within the asset optimization program communications process. Comprehensive, Fully Integrated, Open Information Systems — with the means to extract and combine data from a broad variety of sources. The information systems must provide quick, accurate access and “data mining” to identify deviations from required performance. Estimating and displaying current condition and status, an accurate assessment of asset lifetime remaining, the operational and financial consequences of any departures from normal, and recommendations for avoidance or mitigation are likewise essentials. The system must be able to communicate and exchange information with enterprise, production management, control, and logistic systems. If an effective information system isn’t present at the beginning of the improvement initiative it must be established in parallel. Results Measured and Managed — by collectively using benchmarks, metrics, and Key Performance Indicators (KPI’s) to measure progress, manage the improvement process and identify additional opportunities for improvement. Metrics convey corporate value and return (in terms of availability, production output, quality and cost objectives) achieved via improved reliability and overall effectiveness. Performance to metrics demonstrates value created and justifies the sustained investment in personnel and resources required to gain full results from asset optimization. Metrics are also used to monitor the performance of specific processes, systems, equipment, and components. Metrics are directed to specific results and cascade in a linked fashion from high to low levels. In this way process and programmatic improvements connect directly to overall business, mission, and performance objectives. Metrics, explained in more detail in Chapter IX, include:  Corporate — typically asset- or capital-based metrics linking performance to shareholder value, such as RONA and ROCE.  Production effectiveness — such as Overall OEE — the product of normalized availability (uptime), production throughput (yield), and first-run-quality, forced outage rate and availability.  Cost effectiveness — in terms of Maintenance Cost as a percentage of RAV, and costs per unit production (ton / pound, MW, barrel, etc.)  Equipment reliability — measured by KPI’s such as MTBF, total cost and unavailability by asset.  Work process, quality and management effectiveness — planned as a percentage of total work, rework or repair success to measure work quality, inventory value and stock outs to measure capital and storehouse effectiveness.  Program effectiveness — defects identified prior to failure and avoided cost indicate the effectiveness of programs such as condition monitoring.  Others — the amount of training per employee is a good leading indicator to demonstrate organizational commitment to, and progress toward, achieving objectives. Success Rewarded — with performance- and results-based compensation. Real rewards are necessary to effectively increase personal awareness, ownership and involvement in the improvement process as well as encourage responsibility and accountability for results. Performance-based compensation is generally based on organizational and team objectives. Compensation for advanced individual qualifications is often included, Chapter X. Commitment to Continuous Improvement — driven by prioritized failure analysis (RCA) that includes proactive identification, prioritization by history and risk, and action required to eliminate the basic defect. The asset optimization program strategy and implementation is adjusted and refined as necessary to ensure progress toward increased value by identifying and minimizing defects. Improvements Sustained and Institutionalized — based on the “new” way is the only way. Improved organization, work, and administrative processes must be continually reinforced through communications, training, persuasion, ownership, peer pressure, and rewards for compliance to objectives. The process is complete when there is no longer any institutional memory of the “old” way.

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ROLES AND RESPONSIBILITIES Management must recognize that successful change is often a slow process in which profits and value are gained through steady progress rather than quick fixes that sacrifice the future. Corporations and facilities moving ahead with successful change processes typically have three- to five-year plans with interim objectives to prove results and demonstrate progress. Executive and Operating Management Success requires energetic, visible commitment and consistency of purpose to attain permanent, sustainable improvement at the CEO and plant management levels, and a three- to five-year time horizon to meet objectives. Full participation in the initiative, which includes energetic involvement, and effective communication, is essential. Energetic, participatory involvement is much more than a few written communications, occasional attendance at meetings and answering questions. Patience is imperative. All of these qualities must originate at the top to drive the major changes in organizational culture, administrative organization, and practice that are essential to gain full benefits and value from asset optimization. Participatory involvement must include Lead Organizational Culture Change The organizational culture change required for success will not occur without energy, a sense of urgency, commitment, forceful drive, inspiration, and thorough involvement from senior management. Hollow words and a lack of real commitment are quickly apparent to everyone involved. Instead of the commitment and ownership necessary for success, everyone ducks waiting for the latest “program of the month” to roll past. The importance of senior management interest, continuing personal involvement, and communication cannot be overstated. Provide Consistent, Continuing Support Mature asset optimization is characterized by few problems, “surprises”. This is a sign of success; it does not indicate an opportunity to further reduce costs by withdrawing support from the programs producing the results. Removing emphasis and resources too soon from immature improvement initiatives is a temptation that must be avoided; for more detail, see Chapter XVI. With a shift in perspective, top-down commitment, effective implementation, continuing support, and processes and practices oriented to maximum value, best practice profitability achieved by a few today can be the norm for all tomorrow. Establish Ambitious Objectives Gaining maximum results from an improvement process requires the establishment of optimistic objectives. The individuals responsible for implementing the improvements should determine what can be gained if everything works as anticipated. The highest optimistic objectives ensure that all potential opportunities for improvement are identified and subjected to detailed evaluation and consideration. Setting objectives significantly above what optimistic implementers believe they can accomplish runs the risk of losing commitment, ownership, and maximum effort. Objectives that fall below the optimistic expectations can result in a change process that suffers from incrementalism, where many potential areas for positive change are protected by being placed “off-limits”. Requiring transformational improvement through ambitious objectives demands irreversibility and, thereby, helps institutionalize the results of the improvement process. Create Financial Awareness Virtually everyone in a corporation understands financial issues. With a little help and enlightening communications, most can relate corporate financial performance to the process they go through when deciding to purchase a house, an automobile or a motorcycle. Corporations who have taken the time to translate financial imperatives and considerations into understandable terms find initiative, commitment, and ownership for an improvement process much easier to gain and maintain. Senior management must convey the complementary importance of increased availability, production rates, and quality compared to cost reductions. The financial model presented in Chapter VII may help in beginning this process. Changes in relative importance and priority, in response to market and other conditions, must be communicated. In many cases, calculating the cost of waste in terms of production rate is an enlightening exercise.

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In a chemicals plant, the additional production throughput necessary to gain the profit equivalent of increasing pump average MTBF by one year required 104 percent availability! Flaring reportedly cost close to $1 million per month in another hydrocarbon processing facility. In addition to the waste, the highly visible flaring detracted from the commitment needed to identify and correct other sources of inefficiency and waste. “So long as the flaring is allowed to continue why should anyone worry about a few $5,000 to $10,000 repairs?” Invest for the Future Corporate executives and management must recognize that investment is required to permanently reduce costs. Reducing costs by deferring sustenance of capital assets is a temptation that must be avoided. Potential problems with the U.S. highway infrastructure (mentioned earlier and often discussed in the media) results from such ill advised cost cutting. Furthermore, many industrial facilities have achieved impressive, but temporary, cost reductions by mortgaging the future. Appoint the Right Leaders Management must appoint and support persuasive, committed individuals with the authority, respect, and accountability to instigate and lead the change process. Within the leadership structure, champions must be identified, encouraged, and empowered. Deploy a Mission-Centered Strategy The development of a solid, mission-centered strategy, with supporting measures of performance, must be directed and nurtured to ensure that everyone is pulling in the same direction. Within the strategy, management must verify that prioritization is on target and resources and funds are invested to gain the greatest results. Move to a Profit Center Mentality A profit center is results oriented. Management must encourage, facilitate, and support the evolution of asset care from a cost center to a profit center mentality. Improvements are encouraged and will occur — so long as they are supported with incentives for results. A cost center mentality is activity and task protective and resistant to change. To repeat an earlier statement, a cost center has institutional disincentives for improvement — everyone is familiar with the “rewards” for doing well and finishing under budget! Time based Preventive Maintenance (PM) is a good example. Within a traditional cost centered, task protective organization people typically resist optimization that results in less PM, regardless of whether activities produce real value. There are many reasons for this, including a fear that a reduction in PM is an excuse for downsizing personnel. With a profit center mentality value is the prime objective. Everyone recognizes that reducing low value PM makes time and resources available for higher value activities such as identifying and correcting equipment and organizational defects. Inspire and Manage the Improvement Process Business is constantly changing; however, corporate culture rarely embraces radical change. Reluctance to change virtually guarantees sub-optimal results. The successful are those who thoroughly understand the need for change, are willing to change, and are capable of initiating, driving and managing the improvement process while patiently awaiting results. Directing the improvement process, maintaining consistency of purpose once the process has begun, and injecting improvements carefully and incrementally are vitally important challenges for results-oriented management. Be Patient for Full Results Although improvements will be observed almost as soon as an asset optimization process is begun, full results will take a minimum of 3 to 5 years. Complete cultural institutionalization where all memories of the “old ways” are gone may require 7 to 10 years. Interim goals, typically annual, showing progress to key objectives and solid, demonstrable results, establish and maintain the confidence necessary to pursue long-term goals most effectively. Program Management Program management typically has to work at gaining influence upward in the organization. Influence includes credibility by action and interim results. In turn, credibility builds the upper management confidence and patience necessary to achieve permanent, sustainable results from an asset optimization

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program. People at this level must ask: “What can I do to maximize my influence and contribution both up and down the organization” and act on their conclusions. At the conclusion of an asset optimization workshop participants, primarily mid level managers and technical specialists, were asked the question “what can you do personally to contribute to the success of the asset optimization initiative?” Their answers, some of which are listed below, were very enlightening:  Lead by example. Walk the talk. Be a visible, positive speaking and acting leader. Advocate and drive the asset optimization initiative. Demonstrate commitment. Live the culture of Asset Optimization. Be an advocate for change.  Support and coach the team in asset optimization concepts. Assure all are informed and understand the importance, principles, process, roles and benefits of asset optimization and how they gain personally. Encourage teamwork and monitor performance.  Establish and sustain motivation through regular and better communications of the process, objectives and benefits. Develop a learning organization with empowered employees. Explain to all the required end state "world class standard".  Improve the relationship between Maintenance and Production with more communications. Engage with Production to create a mutual understanding of goals and strategy.  Remove barriers and facilitate solutions so that team members can participate and contribute fully in the asset optimization process. By following these guidelines, mid level managers can drive the asset optimization process, create the culture, motivation and ownership necessary for success and build the credibility with higher-level management needed to sustain the initiative. The Improvement Process Figure 4.4 illustrates the progression of identifying and prioritizing opportunities; constructing a strategy and tactical action plans; injecting processes, systems, technology, and resources; measuring results; and then closing the loop with continuous improvement. All are assembled in a site-specific implementation optimized for mission, business, and market conditions, as well as site and facility conditions and culture. Business/Mission Objectives

Identify Current State/Performance

Identify & Prioritize Improvement Opportunities

Develop Strategy, Improvement Action Plans

Implement Improvements

Organization Systems

Technology Resources

Continuous Improvement Measure Results • Improved Availability • Reduced Costs

Figure 4.4 Simplified Asset Optimization Process Long-term effects must be carefully considered when initiating change. Many companies have reduced their workforce as a means of cutting costs, only to discover that they have lost the knowledge and experience necessary to perform vital tasks safely and effectively. Communications are essential to answer questions, head off rumors and minimize resistance. During the implementation of any change, rumors inevitably become far harsher than facts or intentions. Replacing rumors with facts is essential, even when the facts may be unpleasant such as projected personnel reductions to meet long-term spending objectives. Time after time, manufacturing companies determine that a solid cost reduction plan can be met — or nearly met — by normal attrition through retirements and voluntary resignations.

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FINANCIAL MEASURES OF PERFORMANCE Financial results are essential to demonstrate the full value of asset optimization toward mission compliance, production effectiveness, and profitability. Demonstrating the value of equipment effectiveness must:  Account for business, mission, and market conditions; opportunities for increased production and/or quality; product margins and manufacturing performance.  Accurately represent the contribution of increased equipment utilization and effectiveness to production effectiveness, enterprise value and profitability.  Demonstrate the necessity for, priority of, and profit impact of investment to eliminate defects.  Promote commitment, ownership, and a profit-centered mentality.  Be credible to business and financial executives who control investment for asset optimization. Ideally, the financial measure or measures should apply top to bottom within an enterprise. The measure used by a senior executive focused on shareholder value should be consistent with and linked to measures used by line management, engineers, process operators, and craft and support personnel. All must understand the strategy, priorities and their individual contribution. Financial measures must provide clear direction and demonstrate the necessity to meet quality standards and perform assigned tasks effectively. Team athletics provide a good analogy. Everyone on the team must be focused on the final score. Individual statistics, no matter how overwhelming, are of no use if the team does not win. In fact, the lucrative individual incentives offered to many highly paid professional athletes, if not directed toward team victory, often have a negative impact. Business rules in the production and manufacturing world and profit is the score! The financial matrix must depict a real relationship between reasonable expectations for equipment and the impact on overall financial performance. The model that emerges from this concept must provide the ability to predict, and therefore, tune a process to achieve greatest effectiveness and mitigate deficiencies identified from the model. (18) A financial model designed to account for all of the value and benefits generated by asset optimization will be described in Chapter VII. One organization testing the model stated that the model agreed with actual results and added a great deal of insight into exact cause for non-compliance with objectives. They liked the concept of Timed Production Effectiveness (TPE) and commented that results were greatly dependent on how aggressively objectives were set.(129) Another company testing the model determined that completed and planned reliability improvement projects improved return over the cost of capital by nearly 8 percent.(129) Success Measured by Financial Results Reliability professionals within industry leading companies recognize that investments for improved practice, process, and technology will be approved only when justified by undeniable and compelling financial return. “Show me the money” is much more than a catchy line from a popular movie (Jerry McGuire). Metrics such as costs as a percentage of Plant Replacement Value (RAV) are used to benchmark spending on equipment assets, primarily in the petrochemical industry. Cost per Equivalent Distillation Capacity (EDC), is a similar normalized metric widely used within the refining industry, Chapter IX. Measuring maintenance effectiveness in terms of costs as a percentage of plant replacement value, in this case Estimated Replacement Value (ERV) was originated by DuPont. When the cost as a percentage of RAV metric was initially defined in the early 1990’s industry best was about 2.5 percent. The benchmark value has declined in the fifteen years since its origination. Today, maintenance costs of about 1.8 to about 2.3 percent of RAV are considered to be world class. For added detail refer to Chapter IX. DuPont reportedly reduced their index from 3.3 to 2.3 percent during the 1990’s, are gaining $400 million per year corporate wide in reduced costs and are aiming for 2 percent (see also Chapter XVI). The cost reduction results from a focus on excellence that emphasizes planning and scheduling, optimum materials management and procurement, a mixture of Condition-Based and Preventive Maintenance, and reliability improvement.

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Cost effectiveness, measured as a percentage of RAV, does not consider several influential factors and therefore should be applied with caution. Plant age, operating hours, and intensity of operations all affect costs and the optimum expenditures for a given operating regime. None are considered in the cost / RAV calculation. In addition, replacement value itself is difficult to estimate and typically inconsistent between companies — even production facilities within the same company. Professionals within industry leading companies have recognized that despite its shortcomings as an effectiveness measure, cost objectives expressed as a percentage of RAV are going to be demanded by many companies and take the following actions to assure best results:  Make certain the estimate of replacement value is consistent from year to year and that any changes are fully understood prior to reporting RAV based measures.  Recognize that the greatest utility for RAV based metrics is as a relative gage of improvements over time based on a constant denominator. Once the objective is set for a given plant, it shouldn’t be adjusted to conform with results at another plant without first assuring that the estimate of RAV itself is consistent between plants. A major company in the chemical industry was about midway through a cost reduction effort and on-track to gain objectives. Reducing the cost / RAV index from approximately 4.5 percent to their objective of 2.5 percent will gain savings of about $100 million at the bottom line. (129) Another company reported expectations for both increasing asset utilization and reducing maintenance costs expressed in the following table:(100) ROE

RONA

Increase Earnings/ Share

Increase asset utilization by 5 percent

3.5%

1.5%

$1.30

Reduce maintenance cost/RAV by 30 percent

1.5%

.8%

.60

Where ROE is Return on Equity and RONA is Return on Net Assets A third company estimates that maintenance costs can be reduced by nearly $500 million by implementing “best practice”.(35) Because the benchmark is so widely known, many companies require the use of costs as a percentage of RAV as the objective and justification for virtually all aspects of maintenance and asset optimization. Two progressive petrochemical companies went a step further to define their total labor hours available and workforce composition (by craft and position) using overall affordable cost (as a percentage of RAV at the benchmark objective), site average labor costs and the proportional costs of labor and material (approximately 50 percent-50 percent split in North America). From here they defined the labor hours available for Preventive, Condition Based and corrective maintenance using the percentages detailed in Chapter IX. When a facility goes through this exercise they typically find that historical requirements for corrective maintenance (repairs) and / or Time Based PM exceed the hours available from the workforce at the objective value of cost / RAV. This leads to the essential premise of asset optimization that eliminating defects, reducing the need for maintenance and rationalizing PM tasks and interval is essential and the only way to attain the cost objective. In some cases, facilities have found that the workforce level at the final objective cost / RAV can be gained by expected retirements and average historical attrition. This is a very desirable situation that must be communicated to people fearing layoffs as their reward within the improvement initiative, see Chapter XVII for more details about managing the improvement process. One company performing a demographic analysis of their workforce discovered that expected retirements and average historical attrition resulted in a personnel count that was less than the cost / RAV objective. This unexpected discovery led to re-activation of an apprenticeship program to meet the unexpected needs.(129)

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Four key points should be considered: 1. An objective to reduce costs as a percentage unit output (ton, MW, barrel) creates greater value and results than a simple cost objective. An objective of costs as a percentage of unit output requires addressing all contributors including increased production and reduced waste. Concentrating solely on reducing labor costs by eliminating people and / or outsourcing addresses 50 percent or less of the cost of maintenance. Alone, it is unlikely to produce permanent, sustainable results until the origins of spending — defects — are identified and eliminated. 2. A focus on defect reduction — through reliability improvement — is the most effective, perhaps the only, means to permanently reduce costs. Improved reliability simultaneously increases production availability, reduces repair labor and material costs and has the greatest impact on profitability. 3. The workforce reduction that may be necessary to meet final cost objectives must be accompanied with a plan and process to reduce the need for work. A workforce reduction without eliminating any work typically extends backlog and creates more inefficient and costly reactive work, see Chapters IX and XIII. 4. Real change must be accompanied by a means to determine long-term effects. As mentioned earlier, facilities have reduced their workforce to cut costs, only to discover that the knowledge and experience necessary to perform vital tasks safely and effectively had been irretrievably lost. Progressive leaders report that when all factors are considered — safety, quality, availability and production output to name four — optimum sustainable cost typically produces greater value than least cost.

BARRIERS TO OVERCOME GAINING SUCCESSFUL PHYSICAL ASSET OPTIMIZATION In any change process, some individuals will resist. In fact, organizational conflicts are typically more pervasive and difficult to solve than technical issues. Several companies stated that middle management and older crafts were typically most resistant to change and found change most threatening. Companies that have successfully implemented major process and organizational improvements accommodate resistance. Some valuable, productive employees simply cannot adapt to change. Skilled crafts accustomed to working independently or with a subordinate helper may not be able to maintain the same level of effectiveness in a peer team environment. There may be interpersonal friction and / or competition. Progressive companies will provide additional training, adjust the organization as required and create special assignments to retain the full use of loyal, talented individuals. However, individuals who openly oppose the improvement process and attempt to convince others to resist must be replaced. The dissonance they create can derail the entire improvement process. Discussions during asset optimization workshops conducted worldwide since 1997 have validated the asset optimization process and identified a number of barriers that must be overcome. Action required includes:  Greater management engagement, full understanding and total commitment to eliminate the fundamental sources of waste and lost profitability in order to take maximum advantage of opportunities for real, sustainable improvement.  An optimum balance between short-term cost reduction and the risk of mid to long-term consequences of neglected care (see Sustaining Cost in Chapter III).  Management recognition that permanent, sustainable cost reductions can only be gained with a successful program to improve asset lifetime and cannot be ordered by command.  Increased recognition of the potential and benefits of improving asset utilization and effectiveness that can be accomplished simultaneously with and are an essential element of successful cost reduction.  Recognition that the asset improvement initiative is a strategic essential and not simply another short-lived project commanded by management.  Management, organizational control and trust consistent with stated objectives of empowerment, ownership, responsibility and accountability.

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        

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A true partnership between Maintenance and Production. The maintenance function treated as a valued partner in the production process with real respect, prestige and stature in the organization rather than a service provider. Real attention to the “soft” issues of values, behavior, relationships, organizational culture the administrative organization and change management. See Chapter XVII for details. Full acceptance / buy-in for the asset optimization program at all levels of the organization. Full appreciation for the holistic, fully integrated processes, systems and organization necessary for success. Focus on value prioritized opportunities rather than single areas of potential improvement. Innovative implementation — directed to results rather than tasks and activities. Good communications, remove institutional and organizational barriers to teamwork and coordination. Solid, accessible information systems with the information necessary to accurately identify departures from required performance and prioritize opportunities. Full attention and effort to failure analysis and correction. What’s in this for me clear at all levels of the organization

The asset optimization program develops answers in all these areas to assure substantial rewards in terms of increased utilization and increased profit. Vigorously pursue the objectives, correctly implement the principles and practices outlined in this Handbook and you will gain the value and rewards.

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V. CURRENT BEST PRACTICES This chapter introduces and discusses some of the best practice maintenance and management processes that must be included in an Asset Optimization program. Reliability Centered Maintenance, Total Productive Maintenance, Reactive, Preventive, Condition-Based and Proactive Maintenance, Six Sigma, and The Balanced Scorecard all have their place within an Asset Optimization program and contribution to success. Assembled and applied opportunistically in prioritized order, these complementary practices contribute vital elements that collectively strengthen the effectiveness, utilization and value gained from physical assets. For example, Reliability Centered Maintenance (RCM) provides a systematic means to develop an optimum maintenance strategy for high-risk equipment, Total Productive Maintenance (TPM) shows the path to create an effective organization, including the essential Maintenance / Production partnership. Six Sigma includes a control stage to assure sustainability. A Balanced Scorecard assures that the interests of all participants are considered and weighed. The Asset Optimization program adds financial prioritization to the process to assure that practices are applied for greatest effectiveness and value within specific business, site and mission requirements.

EVOLUTION OF EQUIPMENT MANAGEMENT PRACTICE Over the last 40 years, equipment management has evolved from a largely reactive, “fix it when it breaks” approach through Preventive Maintenance to Condition-Based and Proactive Maintenance, as shown in Figure 5.1. Each stage in the process has been proclaimed as the solution that makes previous approaches obsolete. Preventive was said to eliminate, or at least minimize reactive. Condition Based Maintenance (CBM) was introduced to supplement Preventive. In the early 1990s, Reliability Centered Maintenance (RCM) and Total Productive Maintenance (TPM) were promoted as the “conclusive” processes, further clouding the issue. Identify and correct defects before surprised Constant surprises Impose process discipline Eliminate defects, Maintain before surprised minimize surprises

Eliminate sources, never surprised

Planned Reactive

 Fix it after it breaks! Overtime hero’s! - costly - risky - may be strategic

Preventive

 Scheduled by time - reduce failures - costly - may cause damage

Condition Based

 Preoperational action  Determined by to eliminate potential an objective sources of failure measure of need - effective - more effective - minimize failures - reduces failures - reduce maintenance - safely reduce PM Asset Optimization Preemptive action to optimize reliability, - reduce capital

eliminate defects, avoid failure - most effective - minimizes failures - reduce capital

Reliability Driven

Proactive

 Design, material, component changes to eliminate sources of failure - most effective - eliminate failures - minimize maintenance

Although Althoughthis thisand andmost mostgraphical graphicalrepresentations representations illustrate illustrateaalinear linearprogression, progression, an anorganization organizationcan canskip skip— — from Reactive to Condition Based from Reactive to Condition Basedas asan anexample. example.

Figure 5.1 Evolution of Equipment Management In the late 1990s, we learned that all of these processes have a place. Asset Optimization uses concepts and ideas from all the processes, assembled in a prioritized mix to build most effectively from current strengths to gain mission, business and operating objectives. Commonly mentioned objectives are a combination of Condition-Based and time-based Preventive Maintenance of 65 percent or greater, the division will depend on the process and

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equipment, and corrective less than 35 percent of the total. Industry leaders set an objective of less than 15 percent of the total corrective maintenance as break-in reactive maintenance on failure or threat of failure. These objectives are illustrated in Figure 5.2.

Percentage

Maintenance Eliminated

A survey disclosed the following objectives:  Reduce total maintenance by 50%  Shift the proportion of maintenance: Current Objective Corrective 65% 30% Preventive 25% 30% Condition Based 10% 40%

Corrective Maintenance

Preventive Maintenance

Condition-Based Maintenance

Current

Objective

Figure 5.2 Current and Objective Maintenance Work by Origin In the past, many optimization programs have been promoted on a technology basis, with little emphasis on their contribution to economic value. Condition monitoring is a good example. Should two pumps, one in light service with a good history of reliability and a second in mission-critical service handling an aggressive fluid, be monitored with the same type and number of measurements recorded at the same interval? Intuition says no; however, in many cases, programs fail to make distinctions based on service and history. A one-size-fits-all approach has a cost, because it must be based on worst case. This principle was illustrated during implementation of a condition-monitoring program on a commercial tanker: When asked what effect the failure of a specific pump had on operation, a crewmember stated they simply disconnected the pump, dumped the water in the bilge and then pumped the bilge with another pump before the ship sank! When cost of surveillance was compared to the probability, cost and consequences of failure the solution was obvious — allow the pump to fail then install the replacement stocked on board! All programs designed to achieve optimized asset effectiveness require “visible” investment and sustaining cost compared to the hidden, but much larger costs of reactive, repair on failure programs. With the growing emphasis on cost reduction, many find investment and ongoing funding for any optimizing or avoidance activity increasingly difficult to justify. One principal reason — only a few have successfully translated operating and technical results gained by optimized equipment management practices into credible value and benefits in the financial terms necessary to ensure continued high level support, see Chapter VII. Moreover, a successful asset optimization program has likely eliminated most mission-interrupting problems. The institutional memory of real costs associated with unexpected failures has faded. Without crucial justification linking equipment performance and reliability to financial return, many successful lifetime optimization programs such as Condition-Based Maintenance are being curtailed, even terminated, as cost reduction measures. The solution — develop compelling financial proof of the program’s effectiveness from the very beginning.

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Emphasis on cost reduction has several added liabilities. One is the loss of experience as skilled maintenance craftsmen and supervisors take advantage of incentives for early retirement. Only a few companies recognize how safe, reliable operation and the absence of problems are directly connected to the efforts, contribution, commitment, skill, and experience of individuals responsible for the results. As champions depart, their experience is lost and their programs are dismantled. All that has been gained — the progress and momentum in developing effective maintenance programs — could be quickly lost unless training and resources are allocated in anticipation of future needs. The following sections identify current practices for equipment management and summarize strengths and limitations that determine optimal use in an integrated program of Asset Optimization. As a preface it is important to understand the contributions of each best practice:  Lean Manufacturing — improve process flow, minimize waste  Maximize value delivered by optimizing flow, motion and quality. Minimize resources; inventory, cost and waste (effort, money, duplication, time)  Total Productive Maintenance (TPM) — improve organization, teamwork, ownership  Maintenance / Production partnership, small group activities, cleanliness, orderliness  Reliability Centered Maintenance (RCM) — establish maintenance requirements to address potential failure modes  Failure Modes and Effects (Criticality) Analysis — FME(C)A  Six Sigma — statistics utilized to identify performance deviations, sustainability  Root Cause Analysis, RCA — identification of failure cause for elimination  Planning and Scheduling (CMMS) — optimize work management, history  Materials MRO Stores Management — optimize spares, repair parts management  Condition Monitoring (CM) — define current performance  vibration measurement and condition assessment  fluid (lubricating oil) monitoring  Thermography  motor impedance, current analysis  ultrasonics; active and passive  Condition Based Maintenance (CBM) — maintenance on actual need  Time Based Preventive Maintenance, PM — maintenance on time (calendar or operating)  Based on statistical and historical lifetime  Proactive Maintenance — pre operation actions to reduce failure How all fit into a comprehensive Asset Optimization program is illustrated in Figure 5.3.

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Asset AssetManagement Management

Change ChangeManagement Management

Six SixSigma Sigma

Business / Mission Optimized Effectiveness

Values, Culture, Behavior

Knowledge & Skills Management

Functional & Admin. Alignment & Reporting

Results Based Compensation

Operations / Maintenance Partnership

Processes, Practices & Procedures

Physical Assets & Infrastructure

Organization

Work Management

Risk Assessment Reliability Improvement

TPM

MRO Stores Management

Maintenance Management System — CMMS

Asset Lifetime Optimization Strategy

Asset Optimization Program

RCA

Lubrication

RCM

PM

CBM

Proactive

Technologies

Figure 5.3 Values, Relationships, Processes and Technologies within a Comprehensive Asset Optimization Program Corrective Maintenance: Corrective action taken on failure or obvious, unanticipated threat of failure Corrective maintenance typically consists of problems, often identified by Production, such as loose bolting, leaks, insulation failures, instruments suspected out of calibration, noise from equipment, excessive temperatures, etc. Corrective maintenance may be planned (identified, planned and scheduled one week or more prior to action) or unplanned, break-in. The planned, unplanned category depends on the urgency of the problem. Correcting an insulation failure would typically be planned work. Smoke emanating from a bearing housing or an instrument that can’t maintain control would certainly initiate an emergency, break-in request for immediate, unplanned, work. Work that needs to be accomplished immediately is generally termed reactive or run-to-failure maintenance. All too many facilities operate largely reactive, run-to-failure. The old line: “If it ain't broke, don't fix it” is the perennial “run-to-failure” argument. Run-to-failure is simplistic, requires no forethought, and, at least up to the point of equipment failure, appears to require the least support. It is also the most stressful for all, including production and has morale implications throughout the organization. The total cost of failures, including safety and environmental, impact on production, repairs, and logistics, are typically spread among cost centers. As a result, the real cost of failures may be invisible to those who view failure avoidance as an added expense. Reactive, run-to-fail maintenance is by far the most costly and least effective form of maintenance and must be minimized for greatest effectiveness and least cost. Reactive maintenance pays little if any attention to ensuring that operating conditions are within design parameters. Consequently, actual equipment service performance and life span may be substantially below normal. Equipment is simply run until it either can no longer perform its intended function or catastrophically fails. At that time (usually around 2:00 A.M. on a holiday morning), the equipment must be repaired or replaced. Several years ago a large U.S. railroad allegedly operated its diesel locomotives until they could no longer pull their own weight. This is an example of true run-to-failure maintenance.

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Operating to failure has many side effects. It costs two to four times more than failure avoidance. (24) It is particularly expensive when an unexpected failure endangers personnel; releases toxic, flammable or polluting material; interrupts production; and / or causes collateral damage. The threat to safety and the environment from an unexpected failure is real, particularly when aggressive material is involved. Unexpected failures generally cause production outages and may inflict damage well beyond the affected component. A bearing failure that damages shaft, bearing housing, or rotor is a common example. There have been a number of cases where an unexpected failure of a relatively inexpensive part caused a major fire, loss of life, and interrupted production for months. In at least two cases during 1999, industrial facilities had their operating permits suspended following a failure and fire until they could demonstrate that they had taken action to avoid similar problems in the future. In some cases, reactive maintenance does make economic sense — as in the case of replacing easily accessible light bulbs. Some experts believe that driving the percentage of break-in reactive maintenance below 10 to 15 percent may be indicative of risk management that is too conservative. The decision must be based on probability, cost, and consequences — it must be a defined strategy based on highest value; not simply be a default in the event that funding for failure avoidance is not available. Since the 1950s, industry has generally agreed that reactive maintenance is costly, inefficient, often unsafe and should be avoided. Preventive Maintenance (PM): Maintenance tasks, including inspection, service and / or replacement, conducted at regular, scheduled intervals of calendar or operating time established to avoid failure based on average statistical / anticipated lifetime. PM is generally invasive and requires an outage and disassembly for visual inspection and / or overhaul / replacement regardless of condition. The intervals between specific PM tasks are based on average life. This is intended to provide a high probability that performance and material condition are maintained within required limits and that problems are identified and corrected before outright failure. PM tasks can be accomplished on calendar time (e.g., weekly, monthly, or quarterly, regardless of operation) or on a service life basis (e.g., hours of operation). Some who use the acronym PM for Preventive Maintenance may include time-based and Condition Based Maintenance (CBM) in the definition. Others include only time-based maintenance. PM is one of many terms commonly used in equipment management that must be strictly defined to ensure the acronym has the same meaning to all who are trying to communicate. For the purposes of this handbook, the term PM refers only to time-based maintenance. A PM program can be cost effective when:  Equipment operation is consistent.  Average life is predictable within a reasonable spread (which, in the case of industrial equipment, necessitates reducing outside effects such as shaft misalignment and contaminated lubricating oil to a minimum level)  Failures are well understood.  Useful failure statistics are available. Aircraft engines are an example. Some experts have advocated risk-based inspection intervals, the timing of which is determined by equipment condition and history. A frequently referenced study conducted by EPRI in 1986 reported lifecycle cost savings for PM in the range of 12 to 18 percent compared to reactive maintenance, as shown in Figure 5.4. PM significantly reduces Operations and Maintenance (O&M) costs compared to operate-to-failure; however, costly unexpected failures may still occur when the difference between average and minimum lifetime is large or external, localized conditions affect lifetime.

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Figure 5.4 Comparative Maintenance Costs (EPRI 1986) Advocates recommend a living PM program consisting of the following key elements: (24, 129)  Mandated tasks identified, documented and executed to ensure regulatory compliance.  Processes, procedures, tasks and interval periodically reviewed for applicability and effectiveness — optimized in terms of task and interval as required.  Consistency maintained and enhanced on a site, system, and component basis.  Complete task instructions for every PM including safety precautions, tag-out procedures, tools and parts required to maximize work efficiency.  Work completion reports including conditions found to provide basic information for effectiveness review.  New technologies (including Condition-Based Maintenance) applied to supplement or replace PM where effective.  Skills training to ensure accurate interpretation, quality work, and recommendations. There are cautions regarding the application of PM  No more than 20 percent of total failures are time based, wear out, in nature, see Figure 5.12. Thus, PM is an ineffective avoidance action for about 80 percent of probable failures.  Intrusive inspections are often conducted and components replaced unnecessarily with equipment in good condition.  Time based PM can introduce failures and variation into an otherwise stable process. Equipment in good condition can be hazarded / harmed and is frequently degraded by an intrusive inspection. Intrusive inspections are a real risk to equipment in good condition and should be avoided whenever possible.  As will be noted later, everyone has stories of equipment that was damaged during an intrusive PM task and returned to service in poorer condition than prior to PM.  Generalized failure statistics do not account for localized conditions such as the environment (temperature), operating regime, quality of installation, and service. At the component level of mechanical equipment, adverse external conditions such as excessive shaft misalignment, unbalance, and contaminated lubricating oil can significantly reduce the safe operating lifetime of affected parts significantly below statistical lifetime.(111) It has been reported that as much as one-third of PM expenditures are wasted. A study conducted in the UK in the mid 90’s revealed that about 50 percent of PM has no value in terms of failure avoidance, see Figures 5.5 and 5.13. (110)

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When evaluated on a benefit/cost basis, approximately 50% of PM tasks have essentially no value (110)

25%

50%

75%

PM Maintenance Tasks

Figure 5.5 Benefit/Cost of Preventive Maintenance Tasks (110) The widely varying environment and operating conditions found in most industrial facilities can result in broad component failure distribution. For example, within a site population of industrial equipment such as centrifugal pumps, the average lifetime may vary by as much as 600 percent or perhaps even more (12 month or less low MTBF, 70 month or greater high MTBF is not uncommon). The lifetime of individual components may vary by an even greater percentage, Figure 5.6. Thus, basing decisions to perform PM on a statistical average lifetime may result in excessive PM on equipment with high reliability / MTBF while allowing failures on low MTBF / reliability equipment — an average does not recognize distribution.

Figure 5.6 Pump Failure Distribution To minimize the risk of failures, personnel responsible for recommending PM tasks typically select PM intervals on the low side of average lifetime. As a result, some equipment will be over maintained with components replaced that were in excellent condition with substantial life remaining. In other cases, components will suffer failures within the PM interval. Intrusive PM based solely on statistical average lifetime doesn’t always prevent failures and, worst of all, forces equipment back to the infancy failure regime shown in Figure 5.13. Compared to work performed as needed, Preventive Maintenance, conducted at arbitrary intervals, is often unnecessary, overly expensive and labor intensive. As a solution, PM tasks are frequently altered to gain the same results with less expenditure of time and resources. In one instance, a PM program required sight glass disassembly and cleaning at regular intervals. Not only was the work unnecessary in most cases, sight glasses frequently leaked when restored to service. A simple change to inspect and clean as necessary, ensured regular inspection,

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produced the same end results, dramatically reduced the time and work required, did not hazard equipment in good condition, and ensured that dirty sight glasses were located and cleaned. There are many reports that PM conducted can and has been reduced by 30 to 40 percent without any loss in effectiveness by eliminating unnecessary tasks, altering some requirements, and extending intervals. In the mid 1990s, a U.S. commercial nuclear power generating station, which was about to close down as a result of excessive operating costs and other problems, initiated a thorough review of their PM program. They anticipated a 30 to 40 percent cost reduction without compromising effectiveness by eliminating unnecessary tasks, altering some requirements, and extending intervals. Another nuclear power plant embarked on a similar project to reduce the overwhelming number of manufacturer-recommended PM tasks that did not contribute value. In an industrial facility, persons performing PM tasks often reported normal conditions with no anomalies present. A review of past records disclosed that normal conditions, no work required, had been reported for years. Although the manufacturers objected, a decision was made to extend PM intervals by 25 percent. When nothing was amiss at the extended intervals they were extended again by another 25 percent. Ultimately, the facility extended intervals by as much as 400 percent, with no loss of safety and operability of the system. They might have gone further except for the “loss of nerve.” The U.S. Navy has reportedly extended overhaul intervals on submarine high-pressure air compressors from 1,000 hours to 5,000 hours with no adverse effects. In a related area, power generators have increased case opening turbine overhaul intervals from three years to six years or greater. How much longer overhaul intervals can be extended calls for a great degree of engineering judgment. Safely extending overhaul intervals necessitates added measures such as periodic borescope inspections of turbine internals. Several reliability engineers have commented that lifetime statistics have all been based on a four- to six-year overhaul cycle. As the cycle extends to eight years and beyond, will lifetime availability statistics remain valid? Will problems that were not life threatening at a six-year overhaul cycle cause an outage at the longer overhaul interval? These are questions yet to be answered. Stories abound where performance and condition were degraded and major problems appeared following PM. Many facilities have learned that performing an inspection and / or arbitrarily replacing components can introduce failures and often hazards equipment as a result of “infant mortality,” personnel or reassembly errors, and / or improper procedures.(12) A boiler feed pump — operating well and thought to be in good condition — had to be disassembled for an insurance inspection. The inspection, lasting all of 5 minutes, confirmed that the pump was in good condition. Following reassembly the pump leaked badly, performance had degraded, vibration had increased and the control system was unstable. The disassembly, inspection, and reassembly consumed nearly a week; restoring the pump to a satisfactory operating condition required an additional wasted week. As a final comment PM may be viewed as job security. When attempting to optimize a PM program it may be difficult to convince individuals who derive a significant portion of their compensation from performing PM tasks, that PM reduction and improved effectiveness is in their personal best interest. Although the origin of PM tasks was uncertain, one facility erected major barriers to any change including a requirement to perform a full RCM analysis prior to making any changes. As one example, daily PM’s were required on weekdays only — were they less necessary and did the equipment know that conditions were not allowed change on weekends and holidays? As a result of the difficulty to make changes, PM that everyone knew was unnecessary continued. To summarize, it is essential to review and rationalize Preventive Maintenance tasks frequently. Requirements and intervals must be optimized and / or PM replaced by more effective Condition Based Maintenance (CBM) where maintenance is accomplished on need rather than time.

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Predictive or Condition Based Maintenance (PdM, CBM): Maintenance action based on actual condition (objective evidence of need) obtained from in-place, non-invasive tests, operating and condition measurements Condition measurement and assessment technology, methods, and practice are proven beyond question. Applied correctly, all work well in a variety of situations for most facilities and people. Some successful programs are led and operated by engineers. Many more are operated very successfully entirely by crafts or former crafts. Michael Neale and Associates, a U.K. consulting firm, developed a method for quantifying the value of CBM in 1975.(21) As illustrated earlier in Figure 5.4, EPRI determined that CBM adds an additional 8 to 12 percent to the savings gained from a good PM program. Many companies report significantly better results; some state that a mature CBM program can save up to 50 percent compared to reactive, run-tofailure maintenance. The importance of maintaining accurate records of contribution cannot be over emphasized. Without accurate records of the returns from CBM, the initial and ongoing investment in diagnostic equipment, labor intensity, ongoing involvement and training to maintain proficiency may strain management support and funding. CBM has proven capable of identifying anomalies for correction early enough to minimize the risk and impact of operational interruptions. With that stated, people are beginning to recognize that CBM is still reactive, the warning of a problem simply occurs sooner — hopefully in time to avoid expensive failures, including collateral damage; permit avoidance action that minimizes cost and production losses and significantly reduce the cost of repairs. Carrying that thought to conclusion, greatest benefits are gained by coupling CBM and Root Cause Analysis (RCA) within a reliability program directed to eliminating defects. The concept of reliability improvement by eliminating defects is an essential element of a comprehensive asset optimization program. Defects are identified with CBM and RCA, eliminated by reliability improvements. Many leading companies in the process, paper, power generating and manufacturing, industries have shifted the majority of their maintenance tasks from time-based PM to CBM. Condition Based Maintenance is driven by asset health. Real returns — in terms of increased operating effectiveness and reduced costs — of five to seven times the annual cost of equipment and labor are typically reported across a broad range of industries as a result of CBM. CBM is composed of at least three identifiable activities: 1. Condition measurement: non-invasive measurements that define mechanical and operating condition, e.g., vibration, fluid condition (lubricating and hydraulic oil), operating performance (typically temperature and pressure), thermography, ultrasonic leak detection and electrical characteristics. Measurements may be recorded continuously (on-line) from installed transducers or periodically with portable (walkaround) equipment. They are applied individually and collectively depending on the specific equipment and expected failure modes, e.g., vibration, lubricating oil condition, thermography to detect bearing defects or degraded insulation (thermal and electrical), and loose electrical connections. Complex vibration measurements are often a prime measurement on complex rotating equipment for accurate condition assessment, earliest flaw detection (recognition), identification (diagnosis), and lifetime prediction (prognosis). These measurements are typically high bandwidth — a factor that influences the system design necessary to gain full use. This topic is discussed in greater detail in Chapter XIV. It is important to note that the rich condition content of complex dynamic signals require special methods for signal processing and comparison. These methods assure earliest recognition of a change in condition, provide essential information for problem diagnosis and estimating severity and are typically unique to application specific condition assessment systems. As on-line condition monitoring systems become more fully integrated with process control systems, the necessity to retain and fully utilize the rich content of dynamic vibration signals must be accommodated in the design. 2. Condition monitoring and assessment: individual and collective comparison of condition measurements, value versus time trends, and measurement arrays, e.g., Fast Fourier Transform (FFT) signatures, oil wear debris, Thermography pictures, motor current signatures and operating data to arrive at an appraisal of current condition, identify and analyze defects, and estimate remaining life (prognosis).

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A condition assessment system identifies mechanical and performance anomalies and diagnoses the nature and severity of the problem. Identifying requirements for maintenance in time to avoid, or at least minimize, a production outage assures highest production availability. By allowing all labor, tools and parts to be assembled within a normal planning / replenishment cycle, condition assessment is also essential for optimum maintenance and logistic (spare parts) management. The Asset Optimization process and its information system assure maximum production availability and effectiveness combined with optimized, least cost planning, work execution and spare parts availability. Production outages and the necessity for costly emergency repairs and expedited parts are minimized. Condition assessment is also directed at detecting and identifying degradation mechanisms. The cause of degradation can then be understood and either eliminated or controlled prior to significant physical deterioration of the equipment. This element of CBM enables problem detection and correction at a much earlier stage when alternatives remain available to mitigate the total cost and effect on production. 3. Repair and Maintenance Actions: based on condition monitoring and health assessment — the objective evidence of need. Root Cause Analysis Within the Asset Optimization program there is another essential component to CBM — the previously mentioned Root Cause Analysis to identify cause and the action required to eliminate the defect. This closes the loop to ensure CBM is not limited to repeatedly warning of and avoiding the same failure. Measuring and condition assessment are just the first steps of CBM. The process is not complete until design, operating and maintenance recommendations based on condition assessment information are implemented to assure that problems are fully understood and eliminated. For the purposes of this Handbook, RCA is treated as an essential part of the Asset Optimization program, separate from CBM. Avoided Costs Avoided cost is used by some facilities to estimate the true value of CBM. However, avoided cost — taking credit for events that didn’t happen — is often a difficult concept for management to accept. Many of the organizations that report a high value of avoided cost are operating with sold out production in areas where interruptions are extremely expensive as a result of lost production and / or penalties for non-delivery. These organizations typically base avoided cost on statistical consequences including safety, environmental and repair costs, impact on production revenue, and penalties. A base loaded power plant claimed avoided costs that were more than an order of magnitude greater than repair costs by including the historical production profit loss whenever a “found” potential failure was averted by condition monitoring.(129) Reference 91 in Appendix B addresses avoided cost in detail and contains a solid procedure for calculating avoided cost that was approved at a large nuclear power generating plant. Some disallow all or a portion of avoided cost if the condition would have been discovered by other means in time to avoid failure and production outage. At these facilities, spared equipment is typically excluded from avoided cost credits. Positioning avoided cost for credibility and acceptance at the executive level requires close cooperation and agreement between Operations, Maintenance, and Finance. Because of its controversial nature, avoided cost is simply disallowed by many companies. Considering cost distribution around an average and calculating the value potential to be gained by improving below average performers may be a better method of justification. It has the advantage of using facility numbers and is independent of industry baselines which are always treated skeptically by low performing facilities. For further information, see Chapter VII.

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Value of Predictive Information In addition to its value in CBM, the predictive information developed in the condition monitoring and assessment processes has substantial value on its own. Predictive information:  Uniquely predicts the ability to meet future production within time, quality, and cost commitments — Predictable Capacity.  Provides warning that minimizes the risk of failures, safety, and environmental hazards, and reduces the costs of primary and collateral damage. Condition Monitoring can identify growing anomalies in time to eliminate at least 75 percent of unscheduled shutdowns in a typical industrial application. Many industry leaders who are experienced with condition monitoring have eliminated unexpected equipment failures altogether. (21)

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Anticipates operating interruptions in time to minimize impact on mission / profit. Several individuals have described incidents where ample warning of an impending production outage provided time and negotiating leverage to arrange replacement sources of supply at attractive prices. Reduces and, in some cases may eliminate time-based PM. Provides information from which to manage logistics most effectively. With spare parts, personnel, and shop availability reduced by constraints on capital and operating expense, the logistics system requires a minimum of two weeks to respond efficiently. (129) Provides a great deal of the information necessary to assess requirements for and timing of scheduled equipment shutdowns and overhauls. In this fashion condition monitoring is one of the essential sources of information for a strategic / risk driven maintenance strategy. It must be noted that condition monitoring is not currently effective for determining the condition of many electrical, electronic and control components. It may not be effective for warning of material fatigue failures. In each area condition monitoring must be assessed for its effectiveness recognizing expected failure modes with experience and risk applied as required to develop the best overall strategy. Provides information for process and system reliability analysis — RCM, Failure Mode Effects and Criticality Analysis (FMECA) and RCA. Supplies knowledge of equipment operating problems and operator training requirements.

Several organizations have reported results similar to Figure 5.7, where maintenance costs decline in direct proportion to vibration amplitude.

Costs/Vibration Level

Vibration Level There is an optimum vibration level at which maintenance costs reach an effective, sustainable minimum

Maintenance Costs

Figure 5.7 Maintenance Costs as a Function of Vibration Level

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Condition Based Maintenance Can:  Warn of most mechanical problems in time to minimize unexpected failure, the risk and consequences of collateral damage, and adverse impact on safety, operations, and the environment.  Increase equipment utilization and life; minimize disruption to mission and schedule.  Reduce maintenance costs — both parts and labor.  Allow safe elimination of a significant amount of PM.  Minimize cost and hazard to equipment as a result of unnecessary overhauls, intrusive disassemble and inspect PM.  Increase the likelihood that components operate to optimum lifetime. In some cases, replacement prior to end-of-life is more efficient to meet operational requirements and optimum cost. A manufacturing facility with a large number of roof mounted, belt-driven ventilating fans concluded that simultaneous replacement during periods of low demand was more efficient than either condition-based replacement or replacement on failure. (129)  Reduce requirements for stocked spare parts.  Increase awareness of equipment condition.  Form the core of effective asset lifetime management.  Provide vital information for continuous improvement, work, and logistic planning. Condition Based Maintenance Cannot:  Eliminate defects and problems, or stop machines from deteriorating. (114)  Eliminate all PM, e.g., lubrication, leak inspections, gas turbine combustion path inspections, and thermographic inspection of electrical connections and insulation.  Reliably and effectively warn of fatigue failures (with current technology).  Warn of electronic failures within computer, automation, control, communications and information systems.  Reduce personnel or produce a major decrease in lifetime maintenance costs without a commitment to improving reliability by eliminating defects and chronic problems. Condition Based Maintenance is not a “silver bullet.” Some potential failures, such as fatigue, are not easily detected with condition measurements. In other cases, sensors may not be able to survive in the environment. Measurements to assess condition may be overly difficult, e.g., require major equipment modifications for sensor installation, costly, inaccurate, or unreliable. As a final comment, many believe that applying PM and CBM will magically reduce maintenance costs. While both optimally applied may reduce unexpected failures, secondary damage and some lost production, only reliability improvements will eliminate the defects causing the failures. That leads to RCA, Proactive Maintenance and reliability improvement by eliminating design defects. Proactive Maintenance: Typically non-repetitive activities and actions — such as precision shaft alignment and balancing, piping and coupling flange alignment, installation of lubrication reservoir filter breathers, bearing isolators and moisture traps — that are applied to equipment prior to and during operation to prevent problems, gain greatest reliability, and minimize failure. Proactive Maintenance begins with the identification of the root causes of equipment failures. This enables changes to processes, programs, and technology, e.g., design or metallurgy, prioritized by cost and return, to be defined and implemented to eliminate defects and extend equipment lifetime. (87) The proactive maintenance program must be directed to improving safety, predictability, asset lifetime and performance in a cost effective, technically defensible fashion. A facility has initiated a pump improvement program where a defined set of proactive improvements / upgrades are implemented whenever a pump is in the shop for repairs. In this way the entire population will be upgraded to latest specifications for optimum reliability in four to six years.

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Figure 5.8 illustrates another tangible benefit of a proactive improvement program consisting of precision balancing and alignment. Other benefits that must be considered include lower risk of production interruptions, greater operating efficiency and labor productivity, and reduced demand for spare parts.

Proactive reliability improvement program increases production, reduces maintenance costs Production

Maintenance Costs

Reliability

Figure 5.8 Improved Effectiveness Gained By Implementing Precision, Proactive Practices (87, 129) At the beginning of an initiative to implement CBM, many facilities found a large percentage of their rotating equipment had symptoms of shaft misalignment. Based on that information, proactive programs were implemented to eliminate the problem at its source. The program consisted of providing alignment training, purchasing laser alignment equipment, and realigning equipment to precision standards in a priority sequence. Within approximately two years failures caused by misalignment had all but disappeared.(87,129) Some may include review and improvement of practices and procedures as proactive maintenance. Included are:  Operating and maintenance (repair) procedures and checkoffs  Troubleshooting guides  Improved lubrication systems, Figure 5.9  Design criteria for new equipment (see TPM, early equipment management, later in this chapter, Chapters VII and XX

Figure 5.9 Bottom Sight Glass Installed as a Proactive Improvement to Detect Water in Lubricating Oil Photo courtesy Gerry Trodd

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AN EQUIPMENT LIFETIME OPTIMIZATION PROGRAM Many organizations have promoted the benefits in progressing from reactive to proactive to reliability driven equipment management as illustrated in Figures 3.5 and 5.1. Leading practitioners recognize that a comprehensive equipment management strategy will include a blend of Reactive, Preventive, Condition-Based and Proactive elements based on the specific circumstances, probability, and consequences (risk) of failure. As stated earlier, the decision regarding optimum methods must be made considering all relevant issues. Default operate-to-failure is typically the most expensive and least effective form of equipment management. However, operate-to-failure, reactive maintenance may be the most effective method of lifetime management for certain circumstances. Electronic systems are one example. There are numerous examples of small pumps and other equipment where the cost of failure, including probability and consequences, is less than the cost of condition monitoring and assessment over a nominal lifetime. An effective equipment optimization program requires:  Gaining support from the top by demonstrating a credible improvement toward corporate financial objectives (RONA, ROCE) by improvements in areas such as Overall Equipment Effectiveness (OEE) and conversion cost. (129)  Ruthless prioritization of efforts to gain greatest value and return.  Cultural and organizational understanding of use and benefits. Effective CBM must be a collaborative effort that includes constant communication and attention to gain cultural understanding of its use and benefits and avoid we-they divisiveness. (129)  Ensuring that people remain connected to equipment and not disconnected by measurements. (129)

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A commitment to continuous improvement directed to identifying, prioritizing, and eliminating defects

This leads to the next concept, how best to design an equipment management strategy for a given set of conditions.

RELIABILITY CENTERED MAINTENANCE (RCM) Contributed by Jack R. Nicholas, Jr., P.E., CMRP and Thomas H. Bond

Definition: A systematic, disciplined process to ensure safety and mission accomplishment through assurance of continuity of system functions. The RCM process defines system boundaries and identifies system functions, functional failures, and likely failure modes for equipment and structures in a specific operating context. RCM develops a logical identification of the causes and effects (consequences) of system (and) functional failures to arrive at what maintenance tasks to perform to assure an applicable and cost-effective asset management strategy directed to reducing the probability of functional failure. Reliability Centered Maintenance (RCM) was developed to optimize maintenance, availability and profits on commercial aircraft starting with the Boeing 747 and later all wide body jet aircraft. It was introduced in the early 1960’s as a fundamental methodology upon which to base and develop a maintenance program to replace the earlier time-directed, largely intrusive, maintenance programs used on commercial aircraft. Subsequently it was applied to other assets, both mobile and stationary as described by the late John Moubray in his book RCM II. “Reliability-Centered Maintenance has been applied to all types of manufacturing facilities, equipment and vehicles. These include oil refineries, steel and aluminum manufacturing plants, power generating facilities, railways, water utilities, mines, commercial and military aircraft, and nuclear submarines. RCM has also been applied in plants that produce automobiles, beer, cosmetics, textiles, fibers, paper, food products, cigarettes, office equipment, photographic equipment, and paint.1” A standard, discussed later, defines the Classical RCM process. There are many books and articles promoting the necessity and virtues of RCM. As a carrot, promises of a positive Return on Investment 1

Moubray, John, Reliability-Centered Maintenance RCM II, 2nd Edition, Industrial Press, N.Y., N.Y., 1997

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(ROI) in months are not uncommon. On the stick side of persuasion, some have gone so far to state that a failure to implement RCM may have legal ramifications in the event of mechanical malfunction or personal errors such as happened at the Union Carbide pesticide plant in Bhopal, India in 1984. RCM analysis is used to extract the experience and knowledge of operating and maintenance experts who understand how the equipment works and are familiar with its operating and maintenance deficiencies. It establishes a framework for anticipating, identifying, and developing proactive work tasks directed at maintaining system functions needed to assure safety and mission accomplishment. RCM requires task implementation and continuous improvement (a Living Program) to account for process and regulatory changes, experience, and new technology. (68,108) RCM recognizes that equipment follows differing failure patterns. One reference asserts that “when properly cared for, (over) 90 percent of equipment has an unlimited lifetime and does not follow the classical bathtub curve of failure rate versus operating age.”(12) The bathtub curve and other conditional probability of failure profiles are discussed later in this section. The original or classical RCM process has seven steps:(13) 2 1. Define assets, systems and required functions. Identify desired standards of performance of the asset in its operating context, Define all assets and system boundaries to be analyzed and all inputs and outputs through them, ideally in block diagram form. 2. Identify all reasonable ways the asset can fail to perform its required functions. Define functional failures and specific component failure modes that can defeat required functions. 3. Establish what causes each functional failure. 4. State what happens when each failure occurs. 5. Establish consequences of each failure. 6. Determine what should be done to predict or prevent each failure. Select the most applicable and cost-effective PM countermeasures for each failure mode. Applicable tasks include those that will prevent, mitigate, detect the onset of, or discover equipment failure modes. Effective tasks are the lowest cost tasks among competing options. 7. Determine what should be done if a suitable avoidance action is not practical. This may be a temporary measure used while a more permanent solution is found and implemented The classical RCM analysis process is illustrated schematically in Figure 5.10. The process blends history, risk analysis, and economic considerations with actual condition to estimate the risk and consequences of failure and identify optimal decisions.

2

Smith, A. M. Reliability Centered Maintenance McGraw Hill, NY., NY 1993 ISBN 0-07-059046-X

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Figure 5.10 Classical RCM Analysis Process Professor Andrew K.S. Jardine, PhD., in various papers and presentations, recommends using Proportional Hazards Modeling, a sophisticated multi-variate regression analysis procedure to optimize the content of a maintenance program. (20) A NASA version of RCM seeks to develop the optimum synthesis of corrective, preventive, condition based, and proactive maintenance strategies to provide required reliability at least cost. An RCM strategy being pursued by the US Navy asks the following questions:  Has a failure occurred? If not, could it occur? (This is the risk assessment step mentioned in an earlier paragraph)  Is the avoidance task applicable?  Is the task worth doing—does it increase safety, reduce the risk of mission failure, and pay for itself? RCM requires the knowledge and experience of a cross-functional analysis team led by a skilled facilitator or analyst. The facilitated team (team meetings) approach to analysis has been proven to work very well but is not the only way in which a valid result using the RCM methodology can be achieved. A skilled analyst can extract sufficient information from documentation and key subject matter expert interviews and validate the integrated results very effectively. Knowledge of current process performance, state of compliance, equipment history, and variability over time are valuable inputs to the RCM analysis. RCM analysis should also use (if it is available) resident information from a Computerized Maintenance Management System (CMMS), including PM routines and findings, field notes of conditions found and components affected, as well as observations on every piece of equipment to be addressed. (18) Some of the elements that are needed or are highly desirable, if available, to assure a successful RCM outcome includes:(124)  Knowledge of RCM methodology and documentation techniques and tools  Organizational management support for the entire project  Availability of the best and brightest cognizant plant personnel for the project  Trained and disciplined RCM facilitators (or analysts)  Cross-functional detailed equipment analyses  Interaction with manufacturing Failure Modes, Effects and Criticality Analyses (FMECAs), if available  Defined plans prepared (in advance of analysis) to implement recommendations  Manpower and budgetary support for implementation  Operator involvement with the project in as many ways as possible  Periodic review of project progress and resulting benefits RCM Projects often fail because the results of analysis, while perfectly valid, are never implemented. There are many reasons for this including the two most important ones: 1. Support (budget, manpower, management interest) for implementation not provided or not provided soon enough to assure project continuity 2. No “buy-in” by personnel not involved with the RCM project analysis, but whose support is needed at time of implementation So, an RCM project should be looked at from the start in its entirety to give it the best chance of success, as illustrated in Figure 5.11 following.

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Figure 5.11 RCM Project Process Using Classical RCM Analysis and Including Task Comparison, Consolidation into an Optimum Plan, Implementation and Establishment of a Living Program and Establishment of Links to Other Asset Management Elements Selection of tasks is often a stumbling point in an RCM project, especially if participants are not familiar with modern condition monitoring and predictive maintenance technologies. The tendency in such cases is to select time directed tasks, even though there is no known or knowable basis for their periodicity. One of the ways to arrive at the optimum maintenance plan for an asset is to follow the logic of the task selection process depicted in Figure 5.12. The logic provides for considering on-condition based task, then time directed (repair or discard and replace) tasks. All are evaluated on the basis of “cost effectiveness” with the task that is most cost effective being the one favored over all others. More often than not on-condition tasks will be the most cost effective, since no action other than monitoring is required until the condition directs a repair action.

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Can you effectively detect symptoms of a gradual loss of function?

NO

YES Is an on-condition task technically feasible and worth doing?

NO

Can you repair and restore performance and will this reduce failure rate?

YES

YES

Perform the on-condition task at less than the warning interval if most cost effective

Is a scheduled restoration (PM) task technically feasible and worth doing? YES Perform the scheduled restoration task at less than the age limit if most cost effective

NO

NO

Can you replace the item and will this reduce failure rate? YES Is a scheduled discard (replacement) NO task technically feasible and worth doing?

Run-to-failure Action depends on consequences

YES Accomplish the scheduled replacement task at intervals less than the age limit if most cost effective

Figure 5.12 Task Selection Logic to Arrive at the Optimum Plan for Maintenance If no applicable and cost effective task can be found, the only immediate option may be run-to-failure. If the failure mode has safety or severe economic consequences, a re-design may be required to eliminate or mitigate the consequences of failure. Here, too, on-condition options should be considered. Often, a low cost modification to a component or system providing for installation of some monitoring instrumentation can give early indication of the onset of degradation well in advance of a condition that constitutes functional failure. This makes the failure mode manageable. The rationale for adopting this approach is based on the idea that the less intrusive a maintenance program is the more reliably an asset will perform. Maintenance often creates the basis for failure, if not done correctly. As described in the following paragraphs, it was concluded by early study groups that “infant failure,” – failures shortly after manufacture, maintenance or installation was performed – was the dominant cause in commercial aircraft. Observers in other venues have reached the same conclusion, albeit without the statistical proof comparable to that from commercial aircraft fleets. RCM Principles Applied to the Selection of Condition Measurement Technology and Condition Based Maintenance A paper presented to the American Society of Naval Engineers (ASNE) described how the U.S. Navy applies RCM to select of appropriate tasks and enabling technologies. (114) Three of the major points from this paper are summarized as follows: 1. RCM’s rules are based on a realistic analysis of the failure process. The process of equipment deterioration is one element that is crucial to the appropriate selection of condition monitoring methods. 2. The effects of a failure are not always important enough to justify preventive action. For example, some systems are designed with redundant units, so that system functions will not fail when a single unit fails. If the failed unit can be identified quickly, repaired promptly and cheaply, devoting resources to prevent every failure may not be worthwhile. 3. When the effects of the failure are important enough to justify preventive efforts, the challenge is to predict failures with sufficient accuracy and precision to support scheduling appropriate repairs before the failure occurs. There are several ways to make such a prediction. One way is to base the decision on the item’s age. Before the days of RCM and CBM, this was often the only method

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used. However, age-based repair work has rightly lost favor as RCM and CBM have gained popularity, primarily because it tends to be appropriate (in RCM terms, “applicable”) for less than 25 percent of the failure modes that are encountered. While it should not be dismissed entirely, it cannot be the only tool in the toolkit of the maintenance program designer. Figure 5.13, taken from the original 1978 report on RCM by United Airlines for the U.S. Department of Defense and enhanced, illustrates six common failure modes or conditional probability of failure profiles. Note that of the six only three, with rising failure probability at end of life, can be mitigated with active intervention. The total of these profiles having any “wearout” is 11 percent.

Failures

Intervention may improve reliability Bathtub

Increasing failure rate end of life

Steadily increasing failure rate

4%

2%

5%

Time

Intervention point

Intrusive intervention does not improve reliability Low early failure rate, constant after Constant failure rate throughout life High infant mortality, constant after

7%

14%

68%

Percentage of individual equipment following curves from Nowlan & Heap

Figure 5.13 Six Common Failure Profiles and Percentage of Occurrence in Pre-Wide Body Commercial Aircraft Three other statistically significant studies done using the same methodology over the past 40 years have confirmed virtually the same conclusion.3 Profiles containing a “wearout” characteristic totaled no more than 20 percent in any of these four comparable studies. Profiles exhibited a constant or slightly increasing conditional probability of failure characteristic in 80 to 90 percent of cases. What this means is that, if there is no “wearout,” that time directed tasks cannot be nearly as cost-effective nor as applicable as are condition monitoring tasks and condition directed repairs. While you may not have such extensive failure profile data for the particular asset for which you may be responsible, any RCM practitioner with broad exposure in many different venues can with confidence state that non-intrusive, condition monitoring and on-condition tasking is the way to go wherever feasible and most cost effective. When constructing a Physical Asset Optimization program these failure profile realities must be taken into consideration.

3

The four studies from which failure profiles and statistics are taken are: “UAL Study” - DOD Report on ReliabilityCentered Maintenance by Nowlan & Heap of United Airlines, dated December 29,1978, which used data from the 1960’s and 1970’s and earlier papers and studies referenced therein; the “Broberg Study” believed done under NASA sponsorship (reported in 1973) and cited in Failure Diagnosis & Performance Monitoring Vol. 11 edited by L.F. Pau, published by Marcel-Dekker, 1981; the “MSP Study” - long title “Age Reliability Analysis Prototype Study”- done by American Management Systems under contract to U.S. Naval Sea Systems Command Surface Warship Directorate reported in 1993 but using 1980’s data from the Maintenance System (Development) Program; and the “SUBMEPP Study” reported in 2001, using data largely from 1990’s, and summarized in a paper dated 2001, entitled “U.S. Navy Analysis of Submarine Maintenance Data and the Development of Age and Reliability Profiles” by Tim Allen, Reliability Analyst Leader at Submarine Maintenance Engineering, Planning and Procurement (SUBMEPP) a field activity of the Naval Sea Systems Command at Portsmouth NH.

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Based on an appreciation of the failure process, RCM presents decision criteria for evaluating maintenance strategies: the presence of a dominant failure mode, task applicability, and task effectiveness Dominant Failure Mode Maintenance focuses on dominant failure modes — failure modes that are specific and reasonably likely to occur. The likelihood will vary to some extent with the severity of the failure mode’s effects. For example, if the failure mode is potentially lethal but highly improbable — a typical finding due to emphasis on safe design — it may be less “dominant” compared to a less severe failure mode with a higher probability of occurrence. For equipment that is already in service, the best way to find out whether a failure mode is reasonably likely to occur is to ask the people who operate and maintain the equipment. The people who work with the equipment are the people most likely to be aware of these potential problems such as the failures that go unreported, and the failures that have been reported but cannot be found in history databases. Failure histories only look backwards. They do not reveal “failures waiting to happen”. These include potential failures that either have been prevented by luck or haven’t yet occurred because conditions necessary for the failure to occur haven’t aligned. In either case, potential failures must be identified and the risk analyzed because most will eventually take place when the “right” combination of circumstances are aligned. In order for a Condition Based Maintenance or monitoring technology to meet the goals of RCM, it must provide affirmative answers to the following questions:  Does the technology monitor for condition leading to a specific failure mode?  If so, what is the failure mode?  Is it reasonable to expect that this failure mode will occur during the lifetime of the equipment? If the technology is monitoring a parameter that cannot be correlated to a specific failure mode on that equipment, no one will know what failure the technology is intended to prevent. If the failure mode is not likely to occur, there is no need to acquire or apply the technology to prevent the failure. Applicability RCM has rules for “applicability” for each type of maintenance task - time directed, condition monitoring and directed, and failure finding. First, any task must be technically feasible —enabling a person to find, mitigate or prevent an actual failure or degrading condition leading to failure. For time-directed tasks to be applicable (i.e., they work) the interval between failures (by calendar or operating hours) must be known with reasonable accuracy. Quantifiable condition measurement parameters may offer an advantage if they can be measured with sufficient consistency (including both the inherent errors of the measurement technique and also the errors that may be introduced by the person or automated tool performing the technique). In practice, a parameter is not always quantifiable. Condition monitoring technologies must meet the following applicability requirements:  The measured parameters must correlate to deterioration and related failure modes previously identified.  The parameters must be measurable. The measurements must be repeatable and sufficiently stable over time to serve as reliable triggers for corrective action. In addition, measurements must be sufficiently consistent over every unit in a specific population to assure that a given measurement more or less represents equivalent condition and severity of a problem every time.  There must be sufficient time between the discovery of a potential failure and the onset of actual functional failure to take appropriate corrective (condition-based) action.  If condition-monitoring interval using periodic measurements is less than the minimum time between warning and functional failure for a critical (e.g., safety related failure mode), on-line, continuous monitoring may be the best solution. These points are related — condition measurements must be accurate, consistent and available at the correct intervals (or continuously) for a condition monitoring technology to be used reliably to predict

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failures. Effectiveness RCM’s rules for “effectiveness” are based on the consequences of the failure that the task is intended to address:  For critical failures — the task must reduce the risk of failure to a tolerable level.  For all other failures — the task must be cost-effective (e.g., cost in lost production to find a hidden failure).  If mission or economics are involved — the investment required in executing the task (e.g., for capital and operating cost for a condition monitoring technology, including manhours, etc.,) should be less than the resources required to repair the failure after it has occurred. When failure consequences affect the mission of an asset, the alternative to technology may be redundancy (to cover the mission requirements of the unit that suffers unplanned failures). Here, the tradeoff is one investment (technology) vs. another (capital equipment). There is a third alternative — increased spare parts (or a whole spare unit). In any case, the decision between technology and capital equipment or spares must be based on risk, financial considerations and the confidence in the strategy chosen to avert functional failures and their consequences. Streamlining RCM Virtually everyone with RCM experience validates that use of the Classical RCM or more rigorous approach is the best way to determine what maintenance must be performed to assure results that exceed any approach to maintenance program formulation used before it existed. However, after many years of extensive experience applying it in a large number of assets, many RCM practitioners and users (as well as some potential users) have concluded that in too many cases, Classical RCM is too expensive and time consuming to justify the results gained in the majority of total assets. By 2006, as this is written, this conclusion has become general industry consensus. — Classical RCM is too resource and time intensive to be applied cost effectively across a broad range of industrial equipment. It is justified economically when directed to the most critical, high-risk equipment and systems in many fixed or mobile assets. To address this issue in commercial utility application “Streamlined RCM,” illustrated schematically in Figure 5.14(31), was developed in the late 1980’s and early 1990’s under Electric Power Research Institute (EPRI) sponsorship. The approach was to apply “templates” developed from nuclear powered generating plants to common systems in fossil plants. The EPRI contractor (Erin Engineering & Research, Inc., of Walnut Creek, California, now an SKF Group Company) later developed a broader set of templates for application beyond electric power generating utilities. Their version is called SRCM™. EPRI’s Streamlined RCM differs from Classical RCM in three principal areas: 1. The RCM process is preceded by a risk ranking to assure resources are applied most effectively to equipment and systems with greatest opportunities for improvement. 2. General templates are utilized to make the most of broad knowledge regarding failure modes and maintenance actions. 3. Analysis results are compared with existing maintenance tasks to arrive at an optimum strategy. Existing maintenance tasks that do not clearly address a failure mode should be abandoned if no other rationale for their application can be established. Templates or maintenance standards for specified components (motors, pumps, circuit breakers, transformers of specific design, manufacturer, application, capacity, etc.) include:  Typical operating conditions  Common functions  Typical functional failures  Alternative functional failure mitigation strategies, tasks and other items (e.g., redesign, changed operating procedures, etc.) resulting from previous RCM analyses

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Figure 5.14 The Streamlined RCM Process and its Relationship to Classical RCM

(31)

Risk ranking is designed to identify systems and assets that have greatest risk — threat to operational requirements and cost objectives — and hence opportunity for improvement. Applying Streamlined RCM to highest risk systems and assets in a sequential order assures that the time and resources available for RCM gain greatest value in terms of both availability and cost. Stated another way, every facility has systems and assets that are behaving well and seldom, if ever, experience problems. Whether it is design, installation, the operating context, to use a term from RCM, or the current maintenance program, these systems and assets don’t need immediate attention. Scarce resources are not expended on systems and assets that are performing well where there is little value to be gained. To assure greatest opportunities are addressed first and the number is manageable, the risk rank process must be forced to categorize no more than 10 percent to 20 percent of the total systems and assets in the highest risk group. One facility performed a “criticality” assessment, identifying approximately 1,600 systems out of a total of about 2,200 as most critical and having first priority for RCM. After about a year of effort by a dozen or so reliability engineers RCM had been completed on approximately 200 systems — 13 percent of the total considered most critical. At that point the program was essentially abandoned due to more urgent priorities, resource availability and uncertain return. Did the 200 RCM analyses that had been completed cover the highest priority systems or address the most threatening potential problems with greatest value recovery? Could streamlining have covered more? No one knew. It hadn’t been tried. The streamlining concept also traces its origins to the application of RCM in the 1970s and early 1980s on nuclear submarines. In 1971, after consulting with the originators of the approach to RCM at United Airlines and Boeing Aircraft Corporation, U.S. Navy engineers, with contractor support, began conducting thorough RCM analyses of 65 systems on Fleet Ballistic Missile (FBM) submarines. 4 The approach of this 4

Note that this was six years before publication of the U.S. Department of Defense-sponsored landmark text, Reliability-Centered Maintenance, by Nowlan and Heap of United Airlines. The text is out of print but reproductions from microfiche (for a fee) are still available in micro-fiche from the U.S. National Technical Information Center, in edited form published by Maintenance Quality Systems, LLC, Millersville, MD (for a fee) and from

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program was to increase the time between shipyard overhauls of these ships. The ultimate goals were to reduce lifecycle maintenance costs and increase availability for operations over the 25-year lifetimes of the missile submarines. The program was placed on a “fast track” and given highest priority in both budget and support. As each system analysis was completed, revised maintenance programs were developed and implemented in the fleet. To support conversion to condition-directed tasking, many monitoring technologies were developed and applied by dedicated teams of personnel stationed at ports from which the submarines deployed. Program engineers developed many different methods of predictive condition monitoring analysis. Although the initial program was successful, there was general recognition that the process could be made more effective in terms of both cost and resources. The tasks used for the first class of missile submarines were “ship checked” for differences on other classes of missile submarines, adjusted to account for the differences (configuration, operating profile, original equipment manufacturer, building yard variations, etc.,) and implemented, without additional extensive RCM analysis. This “streamlining” approach worked. By the late 1970’s the US Navy had proven the concept of streamlining RCM. A number of lessons had been learned, including:  Applying the principles of risk management as early as possible in the conversion to an RCMbased program significantly reduced the time and resources necessary to gain real benefits.  Concentration on mitigating only a few highest probability failure modes in systems brought significant increases in projected and actual overall reliability and availability of subsystems. Maintenance costs were reduced.  It was not cost effective to try to identify, or even possible to try to mitigate, all potential failure modes even in systems vital to mission.  There was extensive overlap in applicable functions, failures, and failure modes for similar pieces of equipment, even in different applications. Analysis time could be greatly reduced by concentrating on differences after a quick review of those modes already identified and documented for all applications previously studied.  The analysis phase of conversion to RCM is only a small part of the total effort required, particularly in a culture that is resistant to change. The overwhelming majority of effort is expended in implementing the results of RCM analyses.  Even the most thorough RCM analysis often did not identify all potential failure modes. The few that were missed could be readily managed by effective feedback and a follow-up program, referred to as an “RCM Living Program.” After applying the streamlining concept to 31 FBM’s, the Navy began using it more broadly in the 1980’s. It employed RCM on all newer classes of attack submarines (SSN’s) by using streamlining. Even though operating context for SSN’s was quite different from FBM submarines, context of many systems was the same. Post ship check adjustment of RCM–based tasks from FBM’s was enough to make them work on SSN’s. By 1988, RCM was implemented on 122 nuclear submarines, which included seven different classes of ships with many different builders and original equipment suppliers. On the first 31 of these ships, the FBM submarines, life cycle cost reduction (or avoidance) calculated at that time was 15 percent ($1.7 billion). Average ship availability was increased by 17 percent in the nominal life cycle. In addition, some ships of this group had life cycles increased up to eight (8) years beyond their nominal 25-year lifespan. Streamlining RCM requires the following actions: (7, 8, 31, 78) 5  Formulate a clear statement of purpose, intent and overall scope  Identify processes, systems, and components to be subjected to analysis  Develop a component analysis list (type, tag number, manufacturer, and model)  Gain complete understanding of system and component functions www.reliabilityweb.com for free download (23MB) 5 Nicholas, J. R. and Young, R.K. Advancing Maintenance and Reliability (Workshop Edition) Maintenance Quality Systems LLC Publisher ISBN 0-9719801-2-8

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Risk rank equipment to focus on highest risk equipment, first. Process, system and component selection is based on failure rate or significant problems determined by reviewing production and incident reports, financial and maintenance records and interviews to identify potential problems that may not have yet occurred. Prioritize prior to analysis (which systems to analyze) and during implementation (which failure modes to mitigate) based on risk. A Pareto risk analysis, shown in Figure 5.15, is often used; see also Figure 13.3. Focus Focusattention attentionand andeffort effort on on10% 10%toto20% 20%ofofequipment equipment with highest Risk Rank with highest Risk Rank

Risk Rank

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2

3

4

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Figure 5.15 Pareto Risk Ranking  

Focus on dominant failure mechanisms; low-risk, low-probability items are not pursued Use generalized component templates (or standards) to ensure that a broad range of potential failures and solutions are identified for consideration. Use of templates assures that analysis teams have access to earlier efforts of other groups using RCM on similar equipment and consider them during their analysis. The use of templates or maintenance standards starts the analysis process at a higher state of awareness of functions, failures, and failure modes. It is far more effective to modify templates that contain vast experience encountered in many different applications of common equipment rather than constructing maintenance analyses from ground up.

Referring to Figure 3.5, corrective maintenance may be planned or unplanned (emergency, break-in). Time based (PM), condition based (CBM) and proactive maintenance are always planned and hence far more effective in terms of labor utilization (wrench time). In some organizations time and condition based maintenance are combined under Preventive Maintenance (PM). In this handbook PM is strictly time-based maintenance. A template is a starting point that exposes best strategy alternatives for countering functional failures at a component level. Even experts may miss something. Templates are modified to accurately account for local experience, conditions of operation and environment. (8) Templates are customized and turned into parts of the RCM analysis for an asset by doing the following:  Consider criticality, consequences of failure, environment, duty cycle and other factors for the components being analyzed  Evaluate performance and document current equipment management tactics, including operating procedures; requirements for additional activities (e.g., condition monitoring, statutory or regulatory [e.g., OSHA 1910] activities, and insurance); and anticipated results  Evaluate for applicability and effectiveness all current tasks and periodicities needed to counter functional failures  Select maintenance tasks that are traceable to specific functional failures  Include all alternatives for reliability improvement, including design enhancement, operational procedure modification or equipment replacement The streamlined RCM project is completed by performing the following steps:  From the customized templates or standards derive a comprehensive surveillance, inspection and repair strategy that is specific to the asset being analyzed in its operating context. (The newly

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modified templates or standards may also be used in follow-on analysis at additional site(s) in the same organization or elsewhere.) Establish an audit trail for follow-on reference Add, delete, modify or consolidate tasks as appropriate to “optimize” the new program and minimize maintenance burden. Develop plans early (preferably before beginning the analysis) to implement results from a given analysis, so that benefits can be realized quickly and applied to other critical systems on the priority list Implement a “Living Process” or program for continuous improvement Link the Living Program to other elements of the Asset Management Program Modify the strategy to add more detail as required by experience after implementation of the RCM-based program

Requirements for success include:(8)  Clear, understandable goals, objectives, and expectations  Strong and continuous management support  Dedicated staff  Ownership  Processes and systems selected to gain best results  Strategic and rapid implementation  Accurate measurement of results By streamlining the RCM process, time and resources are utilized most effectively to pursue high value opportunities for improvement. This leads to essentially the same appreciation for potential losses and the optimum processes to reduce risk as Classical RCM. Leaders who have compared this approach to Classical RCM report arriving at the same results with about one-third to one-fourth the cost and time of analysis.(8) RCM Variants and Derivatives The RCM process can be classified into at least three variants / derivatives. Definitions are: Super-Classical RCM — A methodology that is more rigorous than the Classical RCM methodology described in the United Airlines report to DOD in 1978 RCM Variant — An RCM methodology that skips or combines steps found in Classical RCM or incorporates substitutes for or supplements to Failure Mode and Effects Analysis in order to reduce the time and resources needed for a project RCM Derivative — An analysis methodology that produces a non-redundant, RCM-like set of tasks (Time Directed Intrusive and Non-intrusive, Condition Directed and, Failure Finding) derived from what is already in the Preventive Maintenance and/o, Predictive Maintenance (PdM) Program or within the capability of PdM technologies used. In the late 1990’s two schools of thought were developing in the world of RCM. On the one-hand, there was a movement for greater rigor in the application of the RCM methodology in order to reduce the probability of a Bhopal – type disaster. On the other hand, for the same economic reasons that streamlining of RCM was developed, other supplier practitioners and services providers began developing offerings that promised to produce an RCM-based solution without the rigor required by the Classical RCM approach so that it could happened cheaper and faster. The relationship between Classical, Super-classical, RCM Variant and RCM Derivative methodologies is illustrated in Figure 5.16.

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Figure 5.16 Relationships between RCM Methodologies based on Rigor, Speed and Cost The table following outlines offerings from a sampling of suppliers of RCM services and some of their distinctive features, sometimes implied in the trade name of the approach and/or described in the “Key or Additional Features” column. Examples of Differing Approaches to RCM Offered Commercially Trade Name & Source

Methodology

Key or Additional Distinctive Features

RCM II – Aladon-Ivara

Super-Classical

Most Rigor, Certified Facilitators, More Understandable Terminology, Environmental & Regulatory Focus separate from safety

RCM by AMS Associates

Classical

Task Packaging, Living Program & Compatible, Proven Analysis Software (RCM WorkSaver by JMS Software)

RCM Blitz™ by Reliability Solutions, Inc.

Classical

Facilitator/Recorder Teams, Incorporates Spare Parts Analysis & Consequence Reducing Tasks

Value Based™ RCM by TM Power Systems Inc.

Classical

Monetary comparison of cost of maintenance with its benefit in the course of and as a basis for analysis

RCM by Core Inc.

RCM Variant

RCM Trim Software allows full life-cycle multi-template integration and reporting that is “simpler, faster, easier”

Abbreviated Classical RCM by AMS Associates

RCM Variant

Less documentation and no task comparison = Less time & lower cost for analysis6

Streamlined RCM by EPRI

RCM Variant

Templates derived from EPRI-Sponsored RCM Experience at Nuclear Powered Electricity Generating Plants and subsequently refined by use in other venues

SRCM® by Erin/SKF

RCM Variant

PERMON™ Software with integrated templates for analysis in multiple venues

RCM Turbo™ by Strategic Corporate Assessment Systems, Inc.

RCM Variant

Touted as the “only complete Windows™-based RCM tool” for fast & effective implementation.” Incorporates criticality assessment, optimized frequencies, work flow smoothing and extensive failure mode libraries. Exploration of alternative strategies by “what if” analysis as it applies to cost and reliability

RCMCost by ARMS Reliability Engineers

RCM Variant

Supplements FMEA with Weibull Analysis, Monte Carlo Simulation combined with RAM Modeling &, Queuing Theory for impact of logistics over expected system lifetime

PM Optimization by Fractal Solutions, Inc.

RCM Derivative

Limited to existing program where each task is evaluated for functional value, & impact on safety, operations & environment to arrive at an RCM-like basis for the PM program. Tasks with no value or impact are dropped

Experienced Centered Maintenance (ECM) by AMS Associates

RCM Derivative

Three methods used as “short cuts” to an RCM-like set of tasks based on effectiveness and applicability. Applied to “well-behaved” assets 7

Constructive critics have proposed a risk-based approach to RCM that is similar to an RCM Variant or Derivative.(105) Risk-based RCM builds from a structured, experienced-based review that establishes a business focus. Reliability Planning is the name given to another process similar to an RCM Derivative that moves an organization from reactive towards a more proactive approach by: (17)

6

Smith, A.M., & Hinchcliffe, G., RCM: Gateway to World Class Maintenance, El Sevier Butterworth-Heinemann Publishers, 2003 ISBN 0-7508-7461-X 7 Ibid.

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Identifying the most critical short-term tasks required for the largest initial improvement in overall machinery reliability Building a long-term reliability plan of all necessary maintenance tasks for all critical machinery Providing a method for continuous review and improvement of reliability plans as a greater volume of accurate data regarding equipment condition and failures is documented

Reliability Planning is designed to accommodate:  Increasing equipment age  Diminished numbers of personnel on staff  Decreasing budget  The need to reduce maintenance cost relative to finished product cost RCM and all reliability improvement initiatives require strong management support and a work process that supports the proactive strategy.(8) Implementation must be planned from the beginning of the improvement initiative.(31) The cost of failures and countermeasures must be tracked at the right level and detail.(8) Risk was a central focus of the U. S. Nuclear Regulatory Commission when it contracted for development of a study that provides for selection of risk-critical components using two different methods 8. The first uses results of Probabilistic Risk Assessment (PRA), a technique developed as a result of the Three Mile Island, Pennsylvania reactor incident in 1979. The other approach has a basis in PRA but does not use the results of a PRA study. Basically this requires determination of “what” maintenance to perform on nuclear reactor (primary systems) and cooling systems associated with accident mitigation using Reliability Centered Maintenance. Other “balance of plant” system maintenance requirements are left to the plant owner to determine. In the category of RCM Derivatives, a process called “PM and PdM Conversion” was articulated by Nicholas & Young9. The approach (not an offering such as listed in the table above) subjects the tasks in an existing program to five tests. The end result is a set of non-redundant RCM-like tasks and a set of “inspections of opportunity.” The latter are called out when the equipment must be opened for any reason and provide instructions for data recording of conditions found. Like Experienced Centered Maintenance, the last item in the table of offerings, this is applied to well-behaved systems. The purpose is to free-up maintenance and operating staff man hours for participation in more rigorous RCM analysis on critical systems. Thus, PM and PdM Conversion may be part of a broader strategy, involving application of different RCM methodologies to assets of varying criticality. JEA, the utility providing electricity, water and sewer services to the City of Jacksonville, Florida, incorporated this concept into their “Production Smart Reliability Initiative” for the St. Johns River Power Park fossil powered generating plant. The purpose was to make time available for “Streamlined RCM” analysis and implementation on six troublesome environmental control systems critical to their regulatory compliance obligations, the top priority at the time this was done in 2002. In many cases spending considerations dictate a reduction in maintenance tasks. Recall that RCM was originally designed to safely reduce PM burden to maximize availability for income production. In keeping with this intent, both RCM and TPM have to be managed to implement reliability improvements that will reduce maintenance burden while preserving or improving reliability and profits. The temptation to allow RCM and/or TPM to increase maintenance requirements must be resisted. The idea must be work smarter and less — not longer and harder! RCM Standards In early 1999, after several years of effort, a technical committee sponsored by the International Society for Automotive Engineers (SAE) produced a draft standard for defining what constitutes “Reliability Centered Maintenance.” The standard partially fulfills a mid 1990’s mandate by the Secretary of Defense for the U.S. military to have non-government standards replace military standards for supporting assets of the Department of Defense. The SAE technical committee on RCM was made up of members 8

Lofgren, E.V., Cooper, S.E., Kurth, R.E., & Phillips, L.B. Science Application International Corporation, A Process for Risk-Focused Maintenance NUREG/CR-5695, March 1991 9 Nicholas, J. R. & Young, R.K, Advancing Maintenance and Reliability (Workshop Edition) MQS LLC Publisher, 2006, p3-3-25 ISBN 0-9719801-2-8

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representing the U.S. military and some commercial parties interested in the outcome for a variety of reasons. For example, it provides a basis for commercial firms to submit bids for government, utility, manufacturing, transportation, and other sectors that are interested in conducting RCM in compliance with a recognized standard. The SAE RCM standard JA1011 - “Evaluation Criteria for Reliability Centered Maintenance (RCM) Processes” was adopted and issued in 2000. The standard provides criteria defining the “essential elements of RCM” and defines compliance with “full effort” RCM. This phrasing distinguishes full-fledged Classical RCM from “Streamlined,” or any other method (e.g., Total Productive Maintenance [TPM]) for developing a program leading to machinery reliability. In 2002 SAE Standard JA 1012 - “A Guide to the Reliability Centered Maintenance Standard JA 1011” was issued. This is a “how to” guide explaining what must be done to comply with the RCM (definition) standard described above. Another SAE standard, J1739 “Design, Process and Machinery FMEA” also issued in 2002 is a useful guide to accomplishing the central step in most RCM methodologies as well as other approaches to improvement in maintenance and reliability, such as Six Sigma. RCM Scorecards In late 2004, the concept of an “RCM Scorecard” was developed, in part to settle a controversy within the community of service providers, users and potential users of the various methodologies as to which approach to RCM was “best.” Under sponsorship of NetExpressUSA.com a preliminary document entitled “The RCM Scorecard” was published on the Internet in January 2005 for review and comment. In March 2005, at the RCM 2005 Conference in Clearwater Beach Florida, a workshop was held to refine the preliminary document and reach a consensus as to what its purposes should be and what it should contain. The workshop was attended by over 100 people from 16 countries, including several recognized experts in the field of RCM. The end result of this full day’s effort was a consensus on all parts of this 22 page document10. Objectives of this Reliability Centered Maintenance (RCM) Scorecard are to:  Provide prospective and actual RCM users, participants and other interested parties with a tool to help decision-making on whether or not to initiate an RCM project. Then, given the decision to proceed, one may use the scorecard guidelines to determine progress while the project is under way and benefits after it is completed. RCM Scorecard metrics, measures or Key Performance Indicators (KPI’s) use data collected:  When considering whether or not to conduct an RCM analysis on an asset (selecting 6 to 8 items from 33 metrics)  Prior to performing an analysis, (prior to the RCM Analysis Phase) using the metrics selected above and any others needed for goal achievement as a baseline for future assessment of benefits  During the RCM project Analysis Phase (selecting from 31 metrics) to determine the changes needed to convert a program to one having an RCM basis  During and after RCM analysis as resulting action items are implemented (RCM Project Implementation Phase) (selecting from 12 metrics to determine progress)  From the point after implementation begins and throughout defined period(s) when benefits are realized. During RCM Project Benefits Phase one uses the same metrics selected during the Decision Phase (and pre-analysis period) of a project for comparison.  Provide cognizant managers, supervisors and/or “champions” with a tool to help justify an RCM Project and to measure RCM project progress on a given asset or set of systems during analysis and implementation phases. In addition, it provides a basis for measuring the benefits derived from the overall RCM effort.  Provide a basis for comparison of differing approaches to RCM (which was the originally proposed solution for settling the controversy over relative “goodness” of various RCM methodologies mentioned at the beginning of this section). At about the same time an Australian, Daryl Mather, was formulating another “RCM Scorecard.” It was published in his book, The Maintenance Scorecard - Creating Strategic Advantage which became 10

The consensus RCM Scorecard is available for free download from www.reliabilityweb.com

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available in early 2006.11 He focuses “attention on the performance aspects of RCM analyses rather than only focusing on variable benefits cases.12” The five areas described in the text and an appendix fall under the headings of and suggest or define metrics for:  Performance (of equipment and the maintenance team)  Cost effectiveness  Policy effectiveness  Risk assurance  Project performance Conclusions Regarding RCM  All RCM methodologies, including variants and derivatives provide a logical approach to determining what (but not necessarily all) maintenance to perform for improved reliability and economic potential.  More rigorous RCM methodologies provide best value for the most critical systems, processes or components of an asset – probably not more than 20 percent of the total.  A variety of methodologies (e.g., Super-classical, Variant and/or Derivative) should be considered for employment when one of the goals is to convert to an RCM basis for all assets of a facility or vehicle.  A little RCM is better than no RCM.

FAILURE ANALYSIS Failure: Inability to meet the normal and / or specified operating characteristics of the component or system.(23) All successful and cost-effective failure analysis methods are characterized by a structured approach that gives focus to an otherwise scattered search for cause. The best failure analysis processes identify the root of a problem by guiding the analyst / user through a sequence of steps. (86) As illustrated in Figure 5.17 following, there are basically two types of failures. In a normal condition the capability of a component, system or asset to deliver is equal to or larger than the demand (need) as shown at the left. A failure occurs when the capability to deliver (can) falls below demand (need) as pictured in the center. This type of condition that has not yet resulted in a total loss of function is termed a partial failure. In extreme cases of total failure, the system or asset can’t deliver at all. The second type of failure is illustrated on the right of Figure 5.17. In this case, demand increases to a level greater than the system or asset is capable / designed to deliver. This type of failure / inability to meet demand generally occurs during a system uprate and leads to potentially risky actions such as operating centrifugal pumps in parallel. There are many publications and methods commercially available for failure analysis. All include a rigorous process for locating the actual, or root cause, of a given failure.

11

Mather, Daryl, The Maintenance Scorecard - Creating Strategic Advantage, Industrial Press, NY, NY, First Edition Feb 2005 ISBN 0-8311-3181-0 12 Ibid.

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Need Can

Can

Need

Need Can

Normal

Failure

Can > Need

Need increases > Can

Need constant; Can decreases to < Need

Figure 5.17 Failure Modes An integrated, comprehensive failure analysis process begins by defining the deviation, or stating the problem; what, when, where, impact. Next the process mandates, methodical analysis and definition of failure modes; cause and consequences. The cause, effect (what, why) path is followed until the underlying cause and permanent corrective action can be identified. Finally, solutions are developed and implemented to eliminate the cause and improve reliability. If an operating or maintenance strategy necessary to eliminate the problem is not cost effective, design changes are likely necessary. The typical procedure employs pre-existing or developed-as-you-go checklists and troubleshooting tables. It leads to the selection or determination of one of four failure agent(s): 1. Force 2. Reactive environment 3. Time 4. Temperature Components will fail as a result of one or more of these failure agents. All machinery failures fall into one or more of the following seven cause categories: 1. Faulty design 2. Material defects 3. Fabrication and / or processing errors 4. Assembly or installation defects 5. Off-design, unintended or especially hostile service conditions 6. Maintenance deficiencies, including neglect 7. Improper operation Failure Modes, Effects, (and Criticality) Analysis (FMECA) FME(C)A is a pre-failure systems analysis accomplished within RCM to identify and prioritize potential failures and formulate avoidance action. Failure effects are not just in terms of immediate severity but also how they might undermine the ability to meet future expectations. Followed through to implementation, FME(C)A leads to a maintenance strategy designed to proactively neutralize reliability problems and potential threats to successful operation. The FMEA process consists of the following:  System description  System function “what does it do”  Functional failure “what happens”  Failure mode “immediate cause”  Failure cause “root cause”

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Failure effects “consequences, penalty” Probability “how likely” Criticality “risk” Preventive, corrective measures

The FMEA process may identify design defects that cannot be effectively countered by a maintenance strategy. When that occurs the process must include a method for passing the defect along to Engineering for correction and follow up to assure that action is taken. The basic FMEA process is illustrated in Figure 5.18. Some benefits of the FMEA process include:  Cleans up existing CMMS data base  Develops and verifies asset hierarchy; assures accurate parent child relationship  Focuses resources on highest risk ranked equipment  Captures maintenance and engineering knowledge  Provides training to less knowledgeable personnel  Identifies and eliminates unnecessary maintenance  Increases satisfaction Function Function Functional Functionalfailure failure

Requirements Event

Mode Mode

Characteristics

Cause Cause

Root cause

Effects Effects

What happens

Compensating CompensatingProvisions Provisions Criticality Criticality Risk RiskAssessment Assessment

Alternatives Impact Probability X Consequences

Figure 5.18 Basic FMEA Process Root Cause (Failure) Analysis (RCA) Root Cause Analysis is a rigorous, logical and systemic post-failure analysis to determine the root cause and effect relationship of a problem. The process must include acting on the causes to minimize or eliminate reoccurrence of the specific and similar problems. Some have claimed that a prioritized, properly conducted RCA program and defect elimination can produce twice the business value of implementing an improved maintenance strategy. This is because RCA, by its nature, concentrates efforts and resources on real problems. In fact, both are required; RCA driving an improved maintenance strategy directed to eliminating defects, both equipment and process. The RCA program includes the following elements:  Documented means to determine the necessity for RCA  Formalized, detailed process for identifying root cause including data gathering, RCA team organization, accountability and documentation  Written instructions for follow up and the application of corrective action  Training requirements and certification for RCA facilitators; awareness training for crafts and management Numerous RCA processes are available commercially. All are designed to uncover the fundamental cause of a failure recognizing that there may be many contributors. RCA is used to identify opportunities for

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improvement and must involve the entire organization. (23) RCA may be conducted in three tiers for greatest effectiveness: RCA’s on major failures are generally accomplished by a facilitated multidisciplinary team including all skills (engineering, reliability professionals, operating and maintenance supervision and crafts) required for examining all aspects of the failure, conduct a thorough analysis and formulate definitive recommendations to avoid repetition. Implementing the findings is mandatory. Minor, repetitive events are analyzed by small teams. The analysis could be conducted by a single person, including crafts or a craft, operator pair. Minor, first-time failures may not call for immediate RCA, however, data should be collected and recorded in case the first-time failure repeats. Root Cause Analysis requires identifying in detail:  What happened  Why did it happen  Why wasn’t it discovered or prevented  Corrective action to assure it doesn’t happen again RCA must be conducted in accordance with a detailed, written procedure that defines when and how an RCA is conducted including the following:  Value threshold / triggers: safety, environmental, cost, production loss; one time and cumulative. Failure analyses are typically triggered by safety incidents and single failures that result in costly damage and / or production interruptions. Some facilities apply a cumulative cost criteria that requires failure analyses based on multiple smaller failures that total more than a declared cost, e.g., $10,000 cumulative during a twelve-month period.  Data collection process. It is essential to begin data collection, including interviews, immediately upon failure.  Detailed RCA process to assure identification of root cause  Organizational definition RASCI (Responsibility, Accountability, Support, Consult, Inform) for the process, Chapter X.  Named, accountable champion, trained and competent RCA process facilitators  All crafts provided with awareness training in the necessity, basis for, requirements and benefits of RCA  Selected crafts and professionals trained as RCA facilitators  Periodic review of proficiency, effectiveness of the RCA process  Requirements for communications and follow up  Reviews / audits of completed RCA’s, refresher training on lessons learned  KPI’s established; percentage RCA completed for major and minor events within 60 days  Mandatory follow up procedure to assure action is taken RCA includes identifying limitations due to design. The objectives are to identify any shortcomings in the intrinsic reliability necessary to meet operating requirements recognizing that intrinsic reliability may change over time due to changes in operation. Further, that intrinsic reliability is the province of design rather than maintenance.(23) For further information see Chapter III. One company applies RCA to identify the root cause of similar problems / failures experienced on multiple assets. It applies RCM / FMEA when multiple, apparently disconnected, failures occur on a single system or asset.(78) Another company maintains a continuous RCA process to eliminate complex and chronic problems. The company requires action on corrective recommendations. (129) Benefits of RCA include:  Significant savings by avoidance of future failures.  Employee ownership for improvements, contribution to reducing failures. Operators and crafts are an essential part of RCA, in many cases RCA can and should be completed entirely by crafts and operators.  Develop solutions to plant wide recurring problems.

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RELIABILITY MODELING, PREDICTION, LIFETIME ANALYSIS Weibull Analysis A Weibull distribution is often used to estimate lifetime. It can fit more failure patterns than an exponential distribution and flexibly describes increasing and decreasing failure rates. The Weibull distribution may be used to analyze weakest link subsystems where the system fails with the first subsystem failure. (23, 111)

TOTAL PRODUCTIVE MAINTENANCE (TPM) Total Productive Maintenance: Optimization of manufacturing / production processes and results through a Production Maintenance partnership and a localized knowledge-based stratagem developed and carried out in small groups. (110) TPM is a multi-discipline, team-based, plant improvement methodology. TPM emphasizes an operations / maintenance partnership and cooperation; autonomous, operator conducted maintenance (a process in which small multi-skilled work teams composed of equipment operators and maintenance accept and share responsibility for the cleanliness, performance and maintenance of their equipment — Operator / Maintainer CLAIR: Clean, Lube, Adjust, Inspect, Repair); small group activities; zero defects / zero loss operations and cleanliness. TPM gains rapid, continuous improvement of the manufacturing process through use of employee involvement, employee empowerment, and closed-loop measurement of results. (124)

TPM is a long-term strategic initiative and approach to production optimization, rather than a short-term tactical fix.(124) The original (Japanese) implementation is constructed around the following five principles (pillars): 1. Improving equipment effectiveness. 2. Autonomous maintenance performed by operators. 3. Preventive Maintenance by maintenance department. 4. Training to improve operation and maintenance skills. 5. An early equipment management program that injects reliability and maintainability into the design process to prevent problems occurring during new plant or equipment startup. A study of four award-winning Japanese facilities that had implemented TPM revealed the following: (92)  All four sites had substandard performance in the five years prior to implementing TPM.  Pride was evident in all cases; charts and banners were prominently displayed.  Each site took up to two years to study the concepts before making the commitment.  Pursuing TPM was the site’s primary maintenance focus — TPM was not just one of several improvement programs.  The plants viewed TPM implementation in stages: Putting the plant in “as new” condition was the first priority. It took nearly three years to achieve. Continuous improvement followed. The combination required thorough cleaning, a commitment to fund rehabilitation of equipment, followed by continuous improvement.  TPM was used as a tool to analyze task allocation between operators and mechanics. Improving overall effectiveness was the goal. In general, operators assumed responsibility for normal operation and daily maintenance. Maintenance took the lead for periodic and Preventive Maintenance. Maintenance was assigned primary responsibility for repairing breakdowns and improving maintainability.

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Skillrefinement, refinement,institutionalization institutionalization Skill SkillsTraining Trainingand andStandardization Standardization Skills ImproveEquipment EquipmentReliability–PM, Reliability–PM,CBM CBM Improve AutonomousMaintenance Maintenance Autonomous Cleaningand andlubrication lubricationstandards standards Cleaning

Perfecttotoprosper prosper Perfect

Correctto toperfect perfect Correct Detectto tocorrect correct Detect

Inspectto todetect detect Inspect

Generalinspection inspection General Initialclean clean----identify identifydefects defectsfor forrepair repair Initial

Cleanto toinspect inspect Clean

Figure 5.19 The TPM Process (112) To fit corporate objectives and organizational culture, TPM implementations in North America typically follow the process shown in Figure 5.19 emphasizing the following: (30, 39, 48, 93, 112, 124, 129)  Corporate process to maximize the effectiveness of production systems.  Cross-functional, multi-level steering team. The steering team will include managers, supervisors, support staff personnel and workers, all from various departments including maintenance, production, engineering, and stores.  Multi discipline team organization (maintenance / production partnership) constructed from the working level and dedicated to stable operation, identifying and solving problems, creating value and preventing losses over the life of the production system. Goal of zero accidents, zero defects and zero failures.  Essential to have operators and crafts working together productively and effectively  All departments involved in the process, including Engineering, IT, Finance, Purchasing and Administration.  Full involvement from all personnel — from top management to the working level.  Focus on production capacity, quality, delivery, revenue and spending optimization, work productivity and quality, capital effectiveness.  Initiative, ownership culture – Energized, committed personnel – Program champion(s)  Published Master Plan – Objectives – List of all activities – Time schedule for initiation and completion of defined activities – Estimated resource requirements – Defined roles / responsibilities for participants – Criteria for measuring progress and success  Safe, clean, orderly workspace  Initial cleaning.  Cleaning prioritized to gain greatest benefits from time expended  Proactive problem discovery and prevention  Sense of ownership and pride in work by operators, crafts and support staff Initial cleanup of the plant and equipment can require as much as 120 hours per employee and was often performed on an overtime basis. When problems identified during the initial cleanup were corrected, financial benefits up to 300 percent of the initial cleanup costs were realized.(124)

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Improve asset ownership through autonomous maintenance by operators / production. Autonomous maintenance is the process by which equipment operators accept and share responsibility (with maintenance) for the performance or health of their equipment. Autonomous maintenance includes:(124)  Development of cleaning and lubrication standards  Preventive cleaning measures  General inspection to identify and correct chronic problems such as leaks, loose bolting, missing guards, etc. Problem identification and correction is designed to demonstrate commitment to quality processes and workspace, minimizing waste, building pride and ownership  Process / operating discipline  Independent autonomous (minor) maintenance and adjustments Adjustments in organization, culture, labor agreements and attitudes are often required to gain full benefits from autonomous maintenance Optimized initial and continuing Asset Optimization routines based on calendar or operating hour (PM), usage (unit throughput), or condition (PdM/CBM) that cover entire lifecycle. Individual plants / units within a corporation may be granted authority to alter the program and increase or reduce the frequency of equipment management tasks to achieve greatest effectiveness for local conditions.(129) Maintenance effectiveness improved through focus on reliability and maintainability during design, manufacture and installation continuing with optimal lifetime management accomplished with a team-oriented equipment improvement program  Set reliability metrics that maximize equipment effectiveness  Monitor condition, predict failures, identify and correct root-cause Proactive activities to increase equipment reliability and maintainability  Work order prioritization and improved planning and scheduling  A continuous improvement process driven by a team consisting of skilled trades, production, and engineering, to improve equipment effectiveness  Zero-loss conducted through overlapping small-group activities  Process benefits workshops and skills improvement training for operations and maintenance Focus on and motivate by results: OEE, described in greater detail in Chapter IX is a KPI that originates in TPM. OEE, an effectiveness measure of availability, quality and production rate as a percentage of objectives, is widely used in discrete manufacturing to assess results. Results require:  Following the money: direct attention and efforts to consumers of highest costs, including lost production  Following the data: prioritize by types / reasons for failure, failure causes for ten highest cost consumers.  Following the interruptions: greatest process downtime and / or business interruptions Connecting the dots: identify worst performers for permanent corrective action

A company in North America condensed the principles into the following nine steps for improved productivity:(112) 1. Cleaning, cleanliness and order in the workplace. 2. Increasing equipment effectiveness (OEE) by focused improvement, locating failure sources, correcting the source of major losses. 3. Standard machinery inspection list. 4. Routine surveillance, service, adjustment, and repairs conducted by engaged operators. 5. Personal checklists and responsibility. 6. Improved maintenance efficiency and effectiveness. 7. Objectives for management and quality measures.

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8. Training for everyone involved to improve knowledge and skills. 9. Lifecycle equipment management; preventive, maintainable designs to assure greatest intrinsic reliability in new designs Essentials for success include:(39)  Top management commitment, visible support and involvement Continuing, visible commitment and support from the highest levels of management is required to drive major gains throughout the organization. (124)  Clear strategy  Production Maintenance partnership  Effective communications; objectives detailed, why necessary, understood and accepted  Employee involvement and empowerment (multi discipline improvement teams), strong pride and ownership  Prioritized implementation of improvements  Rewards and recognition for results (What’s In It For Me) One organization established an “Inspector Program” consisting of a single mechanical and electrical inspector for each critical area. The inspector, a skilled tradesperson, identifies and repairs / reports deficiencies. Such a program increases team ownership and accountability, avoids a proliferation of work requests for deficiencies that can be corrected quickly. (30) A company that implemented TPM reported a 30 percent reduction in maintenance costs in two years.(93) As a final point, it should be mentioned that a TPM implementation can benefit significantly from initial prioritization. By initially applying the TPM process, including cleaning, to systems and equipment with known deficiencies, the process gets off to a good start, quickly gains value and builds ownership and enthusiasm through results and improvement. Nothing succeeds like success!

SIX SIGMA Based on First Edition Contribution by Tim Murnane

Six Sigma: The use of statistical tools applied in a disciplined manner to identify and correct defects / problems and thereby improve productivity and effectiveness Although originally a quality process, Six Sigma has been extended to include business and asset optimization processes that can be analyzed and improved through statistical methodology. Six Sigma utilizes the statistical tools developed and popularized by Dr. W. Edwards Deming. A Six Sigma project is selected, defined, and quantified to meet specific objectives. A team is formed and mentored by a trained black belt who is accountable for results. Management and champions support the team and remove barriers. The final, control phase of the Six Sigma project is focused on institutionalizing the solution. Success is derived from optimizing a process and eliminating defects. Six Sigma is constructed on the premise that “Organizations that can’t describe their processes in the form of numbers can’t understand their processes.(123)” Technically Six Sigma is equivalent to 3.4 defects in one million tries, where a defect is anything from substandard production to misrouted luggage. Most industrial activities are at a Two Sigma (2S) level, which produces 308,537 defects (roughly a third) per million. The airline industry performs well above a Six Sigma level for safety. Airline baggage handling, drug prescription writing and tax advice from the IRS are said to perform at the 2S level. Achieving Six Sigma is often not the goal of individual projects. Instead, management intends to reach a defined goal that adds significant cost savings to the bottom line. Within Six Sigma companies the process comes close to a religion! To create synergy, shared goals and values and assure results and success, the Six Sigma initiative needs to infiltrate the mind-set and behavior of every employee in every corner of the organization.(123) Six Sigma is based on the DMAIC circular process illustrated in Figures 5.20 and 21.

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Define

Be ne f

it

Ca lib ra t

e

ize t im Op

Improve

Take Action

iz e

Measure Six Sigma Improvement Program

Cha ract er

Control

Analyze

Figure 5.20 DMAIC Process adapted from The Center for Excellence in Operations Inc. Webcast Define What is the problem?

Measure

Analyze

What is the current What are the major baseline performance? root causes of the problem?

What is your objective? Is the problem confirmed with data and facts? What is the goal for What are the financial improvement? benefits of improving?

What are the options for improvement?

What are the benefits of improvement?

What is the schedule for implementing the change?

What is the best option?

Improve

Control

Are their any barriers to How will you measure successfully results to confirm completing the improvements? improvement plans? What metrics will be monitored to measure success? Is there buy-in and support from all parties?

Does the improvement solve the problem? Are other actions necessary? How will improvements be sustained?

What are the steps to improvement?

Figure 5.21 DMAIC Details adapted from The Center for Excellence in Operations Inc. Webcast Six Sigma is promoted as a Total Quality Management type of initiative. However, as stated earlier, Six Sigma may be focused more on producing specific business results rather than achieving Six Sigma quality. Many industries have reached a mature stage where there is a need to integrate all the tools and techniques that have been learned in the past two decades. In the companies that have top-level executive support, Six Sigma can effectively integrate tools and techniques. It is process and results focused, rather than task oriented. Because it does not attempt task-oriented heroics, Six Sigma can be synonymous with the culture change that so many companies desire. Six Sigma is a relentless, endless companywide search for a better way to do everything we do. (123)

The three overall metrics used by Six Sigma are: Rolled Throughput Yield (RTY), Cost of Poor Quality (COPQ), and Capacity. Capacity is measured in a similar way to Overall Equipment Effectiveness (OEE) or Asset Utilization. RTY is the total number of defects divided by the total number of units produced. COPQ is the cost of failing to produce and deliver 100 percent quality to the customer the first time. Cost of Poor Quality is divided into five groups: (123) 1. Cost of failure in the field 2. Internal failure costs 3. Costs of appraisal and inspection 4. Costs related to improving poor quality 5. Opportunity cost of producing more products with the same assets These include waste, returns, rework, unscheduled downtime, yield loss, downgrades, costs to assure quality including inspections and quality testing, defective inventory, blending and special handling,

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claims, credits, and special shipping. The definition of COPQ is much more rigorous than quality from TPM. For many companies, COPQ is 25 percent of sales. Six Sigma companies commonly expect to halve this. See Results, Chapter XXI. The basic assumption behind Six Sigma is that process variability is the enemy of quality. The more variation in a process or product, the smaller the output that will meet specifications. The mission of Six Sigma is to relentlessly reduce variability that causes defects in products and processes by eliminating the root causes. Examples of asset optimization metrics in which variability must be minimized include MTBF, maintenance efficiency (wrench time) and schedule accuracy. Six Sigma projects are generally classified in two groups. Smaller projects are designated as Green Belt. Successful completion earns the individual responsible designation as a Green Belt. With successful experience demonstrated on one or more Green Belt projects, larger projects are developed for advancement to Black Belt. Personnel aspiring to Black Belt are typically given four weeks of training and then must successfully demonstrate applying the techniques to a project worth at least $100,000 (often more than $250,000). Training takes place in increments, typically one week per month. The prospective Black Belt is generally relieved from all other duties to concentrate time on the project until completion. Executive sponsors, project Champions and Master Black Belt mentors are other features of the program. Most companies and consultants do not recommend a Six Sigma initiative without high-level executive support. A number of companies adopting Six Sigma as a culture change have given it high visibility by appointing Vice Presidents of Six Sigma. General Electric reportedly has 15,000 middle managers serving full time as “black belt” teachers and facilitators and spends $500 million per year on Six Sigma training! (126)

There are eight phases13 to a Six Sigma project: 1. Project Definition: define needs and identify opportunities for improvement — a project must be quantified and have realistic boundaries 2. Map the as-is process 3. Define the process inputs and outputs 4. Process Measurement (a key step) — gather data including the number of defects 5. Process Analysis — analyze and test failure occurrence and modes 6. Establish expectations and develop an action plan for process improvement 7. Validate Improvements — key variables identified above are tested using Design of Experiments and other techniques 8. Institute process Control Plan— improvements are sustained and institutionalized so that backsliding does not occur. See Chapter XVII for details. The major tools14 of Six Sigma are:  Maps and Metrics — document key inputs and outputs  Cause and Effect Matrix — prioritizes key inputs  Gage Repeatability and Reproducibility (R&R) Studies — determines the measurement capabilities (accuracy and precision) for key outputs and inputs  Capability Analyses — establishes initial process performance to specifications  Multi-variable Analysis — provides quantitative clues for identifying inputs to leverage  Failure Mode and Effects Analysis — identifies high risk inputs and improvement actions  Design of Experiments — systematic study of process inputs to identify optimal process windows  Statistical Process Control (SPC) plans — documents all actions necessary to maintain world class performance Explanations of these tools can be found in any textbook on Statistical Process Control (SPC) and Total Quality Management (TQM).

13 14

Adopted from Sigma Breakthrough Technologies, Inc. training materials. Ibid.

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A caution regarding Six Sigma: Six Sigma initiatives are often very narrowly focused on one or more specific results. While gaining the immediate objective care must be used that an overall process or system is not sub optimized as a result. Two examples: A Six Sigma project was initiated to reduce production inventory in a multi product plant. As a direct result, production runs were shortened to closely coincide with delivery requirements even though there were orders in-house to deliver the same product at a later date. This significantly increased changeovers and downtime. The question whether the value gained by minimizing finished inventory was greater than lost availability and changeover cost (cleaning and, in some cases, changing components) was never addressed. Another Six Sigma project determined that maintenance costs could be reduced by removing supervision from night and weekend shifts that only had three or four people assigned. As soon as supervision was removed, productivity dropped significantly. Whether this was an actual drop or simply due to unrecorded work could not be determined — only supervisors were authorized to sign work orders. As soon as the supervisors were eliminated all documentation for night and weekend work stopped.

THE BALANCED SCORECARD The Balanced Scorecard is a management philosophy, management system, and method of measuring compliance to objectives defined as follows:(95) A method to translate an organization's mission and strategy into tangible linkages, interrelationships, specific activities and measures necessary for successful implementation. Reliability and maintenance issues can be integrated into an overall business scorecard or identified in a stand-alone scorecard. (61) The Balanced Scorecard addresses four essentials for strategic implementation: (95) 1. Vision — must be totally understood by those responsible for implementation and translated into meaningful objectives 2. Management Systems — must be connected to strategy and not solely directed to operating control and budget conformance 3. People — personal goals, knowledge building and competencies should link to strategy implementation 4. Processes — link to and leverage the drivers of business strategy The Balanced Scorecard is intended to supplement financial measures with criteria that measure performance from three additional perspectives: customers, internal business processes, and learning and growth, as shown in Figure 5.22. The Balanced Scorecard enables companies to track financial results while simultaneously monitoring progress in building capabilities and acquiring intangible assets that are collectively essential for continued success and growth. (94) The Balanced Scorecard can be the cornerstone of a new strategic management system that links lofty statements such as “best in class” and “the number-one supplier” into terms that provide useful guidance for action at the operating level. (94)

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Figure 5.22 Balanced Scorecard – Translating Vision and Strategy

(95)

The Balanced Scorecard links a company’s long-term strategy to short-term actions. Managers using the Balanced Scorecard do not have to rely on short-term financial measures as the sole indicators of company performance. The Scorecard goes beyond downsizing and cost cutting to introduce four new management processes that, separately and in combination, help to link long-term strategic objectives to short-term actions, as shown in Figure 5.23.(94) These are: Translating the Vision: Builds a consensus around the organization’s vision and strategy. The Balanced Scorecard sets vision and strategy statements as an agreed upon, integrated set of objectives and measures that describe the long-term drivers of success. Communicating and Linking: Ensures that all levels of the organization understand the long-term strategy and that departmental and individual goals are in alignment. Business Planning: The basis for allocating resources and setting priorities so that only those initiatives that move toward strategic objectives are implemented. Feedback and Learning: For monitoring short-term results from three additional perspectives and using the information to modify strategies.

Communicate Communicateand andeducate, educate, link linkrewards rewardsto toresults results

Communicating Communicatingand and Linking Linking

Establish Establishtargets, targets,align align objectives, objectives,allocate allocateresources, resources, establish establishmilestones milestones

Translating Translatingthe thevision vision and andstrategy strategy

Balanced Balanced Scorecard Scorecard

Business BusinessPlanning Planning

Clarify, Clarify,gain gainconsensus consensus

Feedback Feedbackand and Learning Learning

Articulate Articulatethe thevision, vision, supply supplyfeedback, feedback,strategy strategy review reviewand andlearning learning

Figure 5.23 Balanced Scorecard Links Strategy to Four Processes

(94)

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One facility uses a Balanced Scorecard type approach to link financial and strategic goals and to effectively communicate objectives to team members responsible for implementation. Plant teams that have greater influence / involvement / decision making have greater ownership, enthusiasm and productivity than less empowered teams. “Winning” results from generating employee enthusiasm and aligning plant and employee goals.(77) Elements for Success There are eight essential elements for Balanced Scorecard success: (95) 1. Strong, visible executive sponsorship 2. Balanced Scorecard is an integral part of the change process 3. Greater focus on long-term objectives 4. Build teamwork, align objectives 5. Measure results 6. Direct attention to factors that drive measures and results 7. Recognize that learning is an evolutionary process 8. Connect compensation to scorecard results

SUMMARY This Chapter describes many processes that can provide highly useful contribution to an Asset Optimization program. You have hopefully noted that all are complementary with very few conflicts. Thus, facilities needing to improve the Production / Maintenance relationship might begin with the elements of TPM. A facility concerned about the institutionalization and sustainability of an improvement initiative should examine Six Sigma, especially the control plan. If a specific element of Asset Optimization such as lubrication is considered deficient, the facility should look at Proactive Maintenance earlier in this chapter and the Fundamentals of Fluid Analysis in Chapter XV. In the final analysis, success is not measured by how well a single program can be implemented but rather the results that are gained by implementing elements of multiple programs to address specific problems and opportunities and elevate site performance.

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VI. AN OVERVIEW OF IMPLEMENTING A COMPREHENSIVE ASSET MANAGEMENT PROGRAM WITHIN THE POWER GENERATING INDUSTRY Contributed by: Grahame Fogel, Capaciometrics, Hout Bay, South Africa, [email protected]

DEFINITION OF THE NEEDS OF THE PROJECT Indonesia is a recent democracy, having emerged out of a complex political past that involved circumstances under which public assets had been undervalued and under maintained. Today, there is a National Priority to place the Indonesian economy on a footing that will allow it to compete with the other fast emerging SE Asian economies. One of the fundamental prerequisites for this is to provide an affordable, stable, dependable power supply. However, within Java Island, where the main concentration of industrial output and power consumption resides, the electricity demand curve is fast approaching the supply curve, and in some instances has indeed already surpassed it. As an emerging economy that faces significant economic challenges, including the devastation of the recent Tsunami, Indonesia has restricted access to capital. Therefore, any strategy that is developed to address the power situation has to ensure that what little capital becomes available is employed to:  Ensure the existing infrastructure operates as close as possible to its capacity; and  Improve capacity factors, where possible. PJB (PT Pembangkit Jawa Bali) is an Indonesian state owned power utility. It manages four major thermal generating stations together with two hydro generating units. It has a total generating capacity of 6526 MW. As a response to the national need to become a cost effective supplier, PJB has developed an asset optimisation and productivity program, the goal of which is to optimise asset contribution in order to become a more effective power generator. With the support of outside expertise, PJB developed a response to the situation and has implemented an integrated asset management optimization programme; abbreviated Maintenance Optimization Programme (MOP). PJB developed a broad definition of what constitutes an asset, as anything which creates strategic value. As such, four classes of assets were defined. These are: 1. Physical assets (the plant) 2. Human and work culture assets 3. Knowledge assets 4. Accessible capital (for improvements) In the following, we will describe the methodology and procedure that was followed in the design and implementation of MOP, the integrated asset management optimization programme adopted by PJB.

CULTURAL CONTEXT AND THE DYNAMICS OF CHANGE Delimiting Factors for an Integrated Asset Management Strategy Irrespective of the globalization of economies, fixed and human asset dependent production oriented businesses continue to operate within their specific cultural contexts. These contexts are highly formative and define many of the functional and behavioural characteristics of the businesses ‘soft’ assets - first and foremost, human workforce and knowledge and their degree of performance and utilization. Key factors that determine the mentality of any human being are the religious and / or philosophical belief system as well as the set of social norms and values to which the individual subscribes. In the case of PJB employees, these key factors include:  A majority Muslim religious orientation on Java Island, which has a strong influence and defines long term spiritual goals over short term material orientation;  The historical background of a paternalistic mentality, which is particularly deeply ingrained in PJB as a state-owned concern that until recently was protected from capitalist free economy market forces;

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Indonesian social and behavioral norms which value non-confrontation, politeness, conformancy and obedience, co-operation and group orientation, while generally despising of self-serving — let alone openly aggressive — pursuit of individualistic goals.

Under these conditions, the successful planning and implementation of a complex change oriented strategy faces two key challenges. One, key concepts such as ‘strategy’ or ‘accountability’ have to be communicated in terms that are culturally compatible to Indonesian (Java) mentality. 15 Two, the concrete strategy chosen — MOP — must be developed and implemented in as transparent a fashion as possible. This is a prerequisite for creating the necessary buy-in that will sustain the strategy’s medium to long-term implementation and impact. Accordingly, during the various workshops and training initiatives that were conducted throughout the organization three key aspects of MOP were constantly reinforced: 1. MOP is an integrated asset optimization programme. The programme fully acknowledges the dynamic interrelation of four asset types (physical, human / work culture, knowledge, capital) which interact throughout the business process. Within this scenario, MOP places particularly high value on the human and work culture dimension, and on so-called ‘intangible’ assets particular to the human domain. 2. MOP is a strategy driven programme. In other words, it is not just an import of ready-made solutions for pre-defined problems. Rather, MOP implementation constitutes of an ensemble of mutually enhancing change processes that share a common strategic goal. Each of these processes must run the full cycle of problem analysis, goal setting, potential benefit assessment, design and implementation of a customized optimization strategy for a particular asset, and strategy evaluation and adjustment. 3. MOP’s effective implementation at PJB is dependent on and at the same time bound to reinforce a significant change in work culture. ‘Work culture’ is defined by the de facto (not just the outwardly professed or prescribed) set of mutually acknowledged norms, aspirations, habits, motives and cognitive procedures. In a work environment this set of behavioural determinants effectively governs why people do what they do in the way that they do it. The impact of the third aspect on PJB’s day-to-day business practice cannot be over estimated. For the majority of PJB employees, successful MOP implementation amounted to a mentality change from a reactive (“follow procedures and orders”) to a pro-active (“think ahead and in terms of functional and business goals, take initiatives”) behavioural orientation. One can only appreciate the difficulty of this change process when taking due cognisance of the individuals’ cultural context, as outlined above. Would the investment in such a far-reaching, carefully introduced mentality change be worth its while for a company like PJB? Would it not be more practical to identify concrete technical or business process problems and then immediately enforce new standards and procedures of asset management practice? The answer to these crucial questions lies in the realisation by PJB of the long-term, sustained effect of effecting change in its intangible (‘soft’) assets. Provided the necessary resources are available, physical assets and other tangible elements of the operations domain can be changed or replaced at relatively short notice. However, the longevity of the effect of these interventions is also bound to be limited, among other by rapid technological development and the comparatively short life cycle of many fixed asset components. Conversely, investments into human assets and changes in the human domain may in general be slow to yield an initial effect. However, once successfully implemented they can be expected to be of sustained and long-term benefit. In an integrated asset management strategy, like the MOP adopted by PJB, both aspects go hand in hand. This relationship is illustrated in Figure 6.1:

15

Our reference to Indonesian culture and mentality is necessarily sketchy. For a multi-facetted overview on Indonesian business culture, see George B. Whitfield, ‘Cross-Cultural Training’ (http://www.expat.or.id/business/crossculturaltraining.html ; seen 19.01.2006)

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. Figure 6.1 Change Management Input-Output Ratio in an Integrated Asset Management Strategy These considerations formed the background to the MOP design and implementation process, which we will now outline in more detail.

UNDERSTANDING THE SCOPE OF THE OPPORTUNITY As a start to the strategy development and implementation process, a series of workshops was held in order to clearly understand the scope of the opportunity which MOP would address. During these workshops a set of Key Business Drivers was defined. These business drivers were ranked as to their impact on the business as follows:

Business Driver Increase process efficiency & reduce fuel consumption Increase asset reliability and availability Increase utilisation of potential installed capacity Procure quality spare part cost effectively

%* 23% 16% 8% 8%

Figure 6.2 Table of PJB key business drivers. * The % indicates the proportion of opportunity that this business driver represents. According to a Pareto analysis conducted, the top four business drivers contribute to over 55% of the strategic opportunity at PJB. This is represented in a traditional Pareto Analysis Plot shown in Figure 6.3.

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Figure 6.3 Pareto Representation of the Business Drivers Long Term Value

Productivity Strategy

Improve Cost Structure

Increase Asset Contribution

Growth Strategy

Expand Revenue Opportunities Enhance Customer Value

Customer Profitability

• Reduce input costs • Optimum maintenance mix

• Increased reliability • Spares

• Increase capacity & capacity utilisation

• Eliminate bottlenecks • Solve problems

Customer Relationship

• Ensure product quality

• Right price

Figure 6.4 Mind-map of the Broad Strategic Themes of MOP.

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From the understanding of the business drivers the management team concluded that a broad productivity and cost management strategy had to be put in place. A mind map outlining the interdependencies and synergies among the strategic themes that were discussed is presented in Figure 6.4. Three areas of value contribution were identified and researched. These were: 1. Additional revenue from increased sales 2. Improved thermal performance 3. Additional potential cost savings The investigation then reviewed the scope of lost opportunity costs and these were quantified as follows: Contribution Factor Lost Opportunity Cost Additional Revenue (from increased sales) > $25m (per year) Improved Thermal Performance > $7m (per year) Additional Potential Costs Savings > $1.5m (per year) Total lost opportunity costs >$33m (per year)

On understanding the lost opportunity costs, PJB management committed itself to embarking on a corporate program (MOP) to address and realise the opportunities. MOP was designed as a broad asset management strategy to galvanise actions broadly across the four main generating plants and the central head office support organization.

CREATING THE STRATEGY TO ADDRESS THE OPPORTUNITY Strategy by definition involves change, doing something different or organizing an existing activity in a different manner, in order to realise a high-level goal. More importantly perhaps, strategies are by definition complex: they integrate, control and orientate a multitude of contributing processes and tactical actions. Due to these characteristics, strategy development and implementation is by nature disruptive and demands key resources from an organization. Strategies therefore have to be clearly beneficial and developed from the top down in order to ensure alignment towards an organization’s high-level goals. The development of the detailed PJB strategy was initiated with a multi day strategy workshop attended by executive management and the Board of Directors. This workshop reviewed the options available for setting up the organization to become a low cost high productivity producer, and transformed its findings into an asset management strategy. The workshop had the joint purpose of informing participants of the “asset management opportunities” combined with strategy formulation. Expert facilitation of the workshop ensured the balance between information and formulation. Supporting the PJB mission — “The reliable electricity producer for today and tomorrow” — the strategy was further broken down into four supporting areas of strategic contribution: Reliability Strategy, Efficiency Strategy, Supply Chain Strategy and Fuel Strategy.

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Figure 6.5 Developing the PJB Asset Management Strategy The four supporting strategic aims are the core element of PJB’s asset optimization program MOP. In other words, PJB focused on MOP as the central strategy to support the ultimate financial goals. The final graphical representation of the overall strategy is given in Figure 6.6, in the form of the Global PJB Strategy Map:

Financial Perspective

Ensure Financial Strength of PJB

Profitability Strategies

Asset Development Strategies

Internal Perspective

Heath Safety & Environment

Optimised plant Performance

Acquire best in Class support For MOP Program

MOP

People & Work Culture Perspective

Develop a Strategy To align the Work Culture To the future needs of PJB

Exceed Distribution Companies Expectations

Strategy Implemetation Strategy

Create Solution for Materials Management

Financial Perspective

Reliability Program Strategy

People & Work Culture Perspective

Customer Perspective

Supply Chain Strategy

Price Strategy

Ensure Required Quality

Enhance PJB Public Image

Create Productivity Strategy for Human Assets

Develop skills Enhancement & Training Strategy

Design aligned Organisational structure

Figure 6.6 Global PJB Strategy Map and the Role of MOP as the Key Asset Management Strategy

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Accountability for the project was defined and delegated to teams and individuals using what is referred to as action tables. Action tables define a single point of accountability for the execution of coordinated strategic actions. An example of an action table is shown in Figure 6.7. Strategy name 1. Strategic aim: Why do we do this? 2. Critical success factor: What must be achieved? 3. Owner: Who is responsible?

Pak Budi

4. Actions: Which steps will we take? 5. KPIs: How do we measure progress? 6. Agents: Who must execute?

Figure 6.7 Functional Components of an Action Table The corporate strategy was then cascaded to the individual plants in order to create a focused and aligned approach to local issues. Each plant then went through the same process of developing its specific individual strategy in alignment with the overall corporate strategy. Throughout this process expert facilitation ensured there was close alignment to the overall strategy. Once the individual plant strategies were in place, an overall project implementation plan was drawn up in detail. To create orientation and a graphic understanding of the elements of the project a visual “Project Atlas” was created which is illustrated in Figure 6.6. The MOP Atlas provides visual representation of the whole program. The atlas has since been used as the main tool for developing awareness across the organisation. It also serves as a common reference for all discussions regarding the implementation aspects of the project. The MOP Atlas itself outlines six asset improvement themes. These themes are:  Strategy / Change Management which develops and manages corporate and individual unit strategies;  Business Process Improvement, which includes the work planning and control setup, CMMS/ERP alignment, business process integration and task execution/continuous improvement.  Reliability Improvement, which includes reliability modeling, system / equipment criticality analysis, failure mode & effect analysis, root cause failure analysis, equipment condition assessment etc.  Process Efficiency Improvement, which consists of development of a tuned heat balance model and the development of performance monitoring system  People & Work Culture, which includes the organizational alignment to support MOP, training need analysis, training execution and level of awareness development, implementation of an Intranet-based knowledge management tool.  Asset Contribution Measurement, including development of leading & lagging KPI’s to measure progress, development of a management “dashboard”, development of assessment and benchmarking framework.

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Figure 6.8 MOP Project Atlas PJB has a total of four thermal power plants and two hydro power groups that are scattered throughout Java Island. To ensure the alignment of unit strategy with the corporate strategy, a series of activities were set to cascade the corporate strategy into individual unit strategies. This is essential since each generating unit has unique characteristics and differing asset challenges. Orientation of the individual plant strategy towards the corporate strategy and the overall implementation plan as defined by the Atlas was ensured by mapping the corresponding elements as illustrated in Figure 6.9.

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PJB top-level strategy Optimized plant performance

Plant strategy

MOP Atlas Structural mapping

MOP = key methodology

Figure 6.9 Mapping the Plant Strategy onto the Corporate Strategy and the MOP Atlas In summary, PJB’s top-level corporate goal – to become the leading high productivity, reliable power producer on Java Island — translated into six strategic goals which had to be reached by developing and executing appropriate action tables. These goals were: 1. The development of an overall strategic management plan which provides direction and creates accountability towards the corporate goals. 2. Optimise existing maintenance tactics to ensure optimum reliability. 3. Develop and ensure conformance to best practice businesses processes, especially within work planning and coordination and thermal efficiency. 4. Ensure a continuous improvement process was in place, and to create a continuous improvement culture which identifies and solves priority problems. 5. Create a supporting work culture which is aligned with the strategic intents. 6. Create a management culture which is focused on execution, and an execution plan which is visible and defines the accountability of all role players.

CREATING A METHODOLOGY TO MEASURE PROGRESS In order to ensure that the strategy was working and to derive an overall accountability a measurement system based on key performance indicators (KPI’s) was developed. This measurement system had to take into account combinations of overall long-term goals with necessary short term intents. Moreover, the measurement methodology was expected to employ shorter term leading indicators as well as longer term lagging indicators. The complexity of these various indicators is symbolized in the form of the ‘KPI Ice Berg,’ Figure 6.10. It demonstrates that the outwardly visible ‘tip of the ice berg’ – productivity, performance reliability and revenue earned – is in fact measured in terms of lagging indicators.

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Figure 6.10 KPI Ice Berg – Leading & Lagging Indicators As the overall key performance indicators (KPI’s) for the project were all lagging KPI’s, they could be expected to take a period of time before changes were observed. Among these, five key strategic KPI’s were identified: EAF (Equivalent Availability Factor)  Function of unplanned downtime (reliability, planning, skills; measured by availability & downtime).  Planned downtime (planning; maintenance tactics, skills; it is measured by MTTR).  Derating (design capacity – actual capacity) — generating stability (reliability). NDC (Net Dependable Capacity)  A measure of the net power output; calibrated over defined period (measure of the ability to sustain stable net power generation).  It is a function of generating efficiency (system performance) and generating stability (reliability). Heat Rates  Efficiency of the transformation of the energy source to power. Key Spares Management  Hot parts, OEM issues, critical spares, capital deployment. Generation Costs  $ / KW hour produced. The project was faced with measuring short and medium term progress towards improved performance in the above categories, such that the combined influence of the effects would alter the lagging KPI’s. To achieve this, the influencing leading KPI’s were identified and encapsulated in a structure which would show their direct impact on the lagging KPI. This is illustrated in Figure 6.11.

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Corporate KPI Owner

People

Customer

Technical KPI Owner

Customer Reliability Service

On-time MTBF Delivery

Overall Performance

Customers Internal

Financial

Retailers MOP

Supply Consumers Chain

Efficiency Efficiency

Contacts Spares

Fuel Survey Supply

Shortages MTTR

Figure 6.11 Leading – Lagging KPI Hierarchy Today, many of the leading KPI’s are already indicating a positive change as illustrated in Figures 6.12 and 13.

Figure 6.12 Example of Improving a Leading KPI: Work Order Completion

Figure 6.13 Example of Leading KPI: Schedule Compliance

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In addition to developing and measuring the KPI’s, an assessment tool which accurately measures specific progress has been developed, so as to be able to precisely measure performance at any point in time. The assessment framework was developed during the first phase of implementation. It consists of ten targeted Key Performance Areas. Performance in any of these 10 areas can be measured with a degree of precision: 1. Strategy Management 2. Reliability Management 3. Work Planning & Control 4. Performance Management 5. Organizational Alignment 6. Material Management 7. Information & Knowledge Management 8. Continuous Improvement 9. Work Culture & Motivation 10. Life Cycle Engineering The assessment methodology is designed so that the assessor will be able to measure both business practice maturity and related KPI performance in each of the 10 areas. Assessment results are then used for management to identify both positive and negative performance and prioritise areas of attention.

BENEFIT REALIZATION Typically similar integrated asset optimization initiatives will show tangible benefits after 2 to 3 years of rigorous implementation. Therefore measuring leading indicators will enable PJB in the short term to control the progress towards the overall longer-term goals. Other tangible benefits were driven from Plant Efficiency Improvement Program. Here PJB individual plants have been able to improve their fuel consumption and dependable capacity by implementing computer based modeling using GateCycle platform. An example of the Heat Rate calculation can be seen in the following charts. MKCC HeatRate October Baseline 2+2+1

November Baseline 3+3+1 Estl Apr

HHV kcal/kWh

2500 2450 2400 2350 2300 2250 2200 2150 2100 200

220

240

260

280

300

320

Load MW Figure 6.14 Heat Rate Improvement Calculation at Muara Karang Plant In this example, the respective plant was able to save up to US$ 160,000 in the first 2 month of implementation, based on the fuel price of US$2.45/mmBtu. The savings are realized from a series of performance driven maintenance actions that are carefully calculated using Cost-Benefit Analysis.

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In the short term a series of detailed assessments were undertaken, using the assessment tool which measures both business practises and leading KPI’s. Current results show that the business practices maturity continues to grow along with implementation. An example of an assessment result is shown in Figure 6.15.

Figure 6.15 MOP Business Practices Maturity Assessment Result for Gresik Plant. A crucial benefit that has been realized from MOP in the domain of intangible assets is the gradual change in work culture within the PJB work force. Most managers up to supervisor level are demonstrably more conversant in MOP terminology and able to explain their respective activities in relation to strategic concepts and goals. New business processes also require the work force to spend more time to do planning and analysis. Furthermore, the implementation of the leading KPI’s & KPI measurement hierarchy has ensured that each individual can now understand their role in achieving the ultimate PJB strategic goal: to excel as: “The reliable electricity producer for today and tomorrow”. Grahame Fogel [email protected]

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VII. FINANCIAL RESULTS The capital market is the ultimate judge of success. Is a business growing and improving the effectiveness, productivity and return gained from capital assets? Noel Tichy (126)

In today’s process and manufacturing environment, tighter operating constraints, intense pressures to reduce spending, and declining resources all necessitate new methods to identify opportunities, prioritize and align improvement activities, and measure results. The comprehensive financial model introduced in this chapter is primarily designed to demonstrate essential methodology to prioritize opportunities, justify investments and credit results within a Physical Asset Optimization program.

INTRODUCTION Technology and practice have developed to a level capable of recognizing most equipment defects in time to prevent failures and minimize unscheduled interruptions in production. However, the measures of effectiveness have tended to remain subjective and intangible: Does equipment operate when needed, are production interruptions and unexpected failures few and far between, are problems corrected promptly, are operations superintendents happy? The concepts of avoided costs and “saves,” frequently cited as measures to justify advanced equipment management technology and practices, are largely intangible and disconnected from business and financial results. What is the profit impact of a failure that does not occur? More sophisticated companies have gained inter-departmental agreement for an average cost of avoided failures and maintenance actions. While this adds some objectivity, it does not answer the basic question. There is another challenge. After years of successful reductions, maintenance spending will inevitably flatten at a lower rate. At that point, some managers assume that most potential cost reductions have been harvested, and now the program responsible for these results can itself be harvested by reducing personnel and funding. Can this be true? Are production gains and cost reductions from enlightened equipment management practices permanent, or are sustaining efforts required? This is a very difficult question to answer without measures of performance linked directly to enterprise profitability. For all these reasons it is becoming increasingly difficult to justify investment in any asset optimization initiative. Lacking a counterbalancing proof of the value potential to be gained from reliability improvement, management is increasingly obsessed on reducing spending. An accurate basis that compares value improvement to spending reduction and includes financial consequences of sub optimal performance is an imperative part of an Asset Optimization program. Performance Measures Overall performance measures that combine availability, production output, and lifetime cost are necessary for prioritizing resources and assessing the effectiveness of optimizing efforts (this is described in detail in Chapter IX). Measures must originate from market conditions and business objectives, point to opportunities for increased profitability, and lead to optimized decisions and greatest value. They must be equally applicable for an entire producer unit, as well as individual components. Several overall performance measures are in use. Maintenance cost as a percentage of Replacement Asset Value (RAV), also discussed in Chapter IX, is often used in benchmarking and as a performance indicator. However, this metric does not consider operating intensity and age of equipment, both of which affect the need for maintenance and its cost. Overall Equipment Effectiveness (OEE), associated with Total Productive Maintenance (TPM) detailed in Chapter V, is another often-used measure of performance. It measures normalized availability, output, and quality, but it does not consider the cost to attain these results.

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THE IMPERATIVE FOR PHYSICAL ASSET OPTIMIZATION Definition To differentiate efforts for effectively managing production assets from those of a financial portfolio manager, realtor or transportation manager, more specific terminology is appropriate Terminology that differentiates physical from financial assets by defining applicability, objectives, a process, and measures of performance. All must be aligned to gain maximum value from the means of production. Asset Optimization is the name coined for the optimization process applied to production assets. Asset Optimization is a global, enterprise view of equipment optimization. It is directed toward increasing the worth, financial return, and value generated by assets — production equipment in a manufacturing, process, or production facility. This definition leads to a primary objective of Asset Optimization: Managing the means of physical production assets to gain greatest lifetime value. This means increasing availability — the ability to produce more product, Increasing yield and quality, producing higher margin products? Yes. How about reduced costs? Again, yes. Asset Optimization is directed to increased availability, yield, and quality and reduced costs. These are results rather than activities. With this perspective, sights must be elevated above cost reduction to all factors that influence the creation of lifetime value. Cost reductions are counterproductive if they lead to diminished financial return through some combination of decreased production availability, output, yield, and quality. Asset Optimization begins with the recognition that financial measures are the fundamental measures of enterprise success and the specific contribution of processes and programs. Asset Optimization extends beyond maintenance to include all factors that determine and influence lifetime cost of ownership. Proper design, installation, and operation are vital elements of effective Asset Optimization and will reduce costs. As mentioned in Chapter III, a recent study asserts that as much as 60 percent of lifetime maintenance costs are expended on preventable problems caused by faulty design, installation, operation, and maintenance practices. Surveys consistently demonstrate that facilities with highest reliability also enjoy lowest lifetime costs. The two are inseparable. Financial Orientation Analysts and investors state that the “value of a company is driven by its ability to generate increasing levels of free cash flows year after year.” Free cash flow is the level of cash flow generated by a business in excess of the investments necessary to sustain the current activity. A clear and credible connection between lifetime cost and profitability must be established for production equipment assets. Capital based metrics such as Return On Net Assets (RONA) and Return On Capital Employed (ROCE) appear to be better measures of the value creation process than Return On Investment (ROI). Some companies are using some variation on Earnings Before Income Tax (EBIT). In terms of evaluating the performance of specific asset optimizing functions, the capital based metrics offer a far better statement of contribution to organization and business objectives than cost-based measures such as cost as a percentage of RAV. Success begins with a change in mindset from reducing cost to gaining maximum value and profitability from production and manufacturing equipment.

THE OPPORTUNITY Many members of the maintenance and reliability community have viewed reliability improvements and technology advances, such as precision shaft alignment and predictive condition monitoring, as ends in themselves. This view, based on technical considerations, may have had merit in the past, but “times they are a changing.” Staff is being reduced. Senior level management no longer respond to emotional appeals. They do respond to a business plan clearly outlining costs and benefits Criteria for success are dominated by bottom line financial results. Without demonstrable financial justification, investments to improve practice and reliability, as well as investments for advanced technology to improve condition assessment and life prediction, have diminishing chances for management approval. In the equipment world, engineering judgment is rapidly

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being replaced by the burden of financial proof. “Show me the money” has become substantially more than a catchy line from a popular movie.

PROFIT CENTER MENTALITY This assertion leads to another concept: the advantages of shifting from a cost-centered to a profitcentered mindset, discussed in detail in Chapter III, as an essential ingredient of managing equipment for greatest lifetime value. A cost center contains no systemic incentives to optimize. If anything, there are institutionalized disincentives to optimize a cost center. Everyone knows the reward for finishing a year under budget! Pressure to reduce costs orients an organization toward protecting tasks rather than directing efforts to improving overall results. A profit center mentality promotes initiative, agility, optimization, and ownership. Investments and added costs are evaluated from the standpoint of results and return. The profit center mentality is clearly superior in a complex manufacturing or process environment. Many have based justification for improved equipment management technology and practice on ROI. A reported ROI of 7 to 10 times for predictive maintenance and other advanced equipment practices is not unusual. The reported average is somewhere around 4 to 5. However, there is a problem. Many companies reporting a high ROI from advanced practices have not observed a corresponding improvement in bottom line financial performance. Some have made this comparison with companies in the same industry that they know are not spending an equivalent amount for improved equipment management technology and practice. Performance Gap Why is there a difference between expectations, common measures, and bottom line results? There are several reasons:  Conventional ROI calculations for improved processes, technology and practice typically do not account for market and business conditions. Changes in either or both can have a significant impact on the return gained from an improvement initiative.  In general, there is no way of linking results to assumptions. Did a given investment produce the expected results and if not, why? Most enterprises track budgeted versus actual expense for large projects. Very few have the information, tracking, and accounting structure to accurately determine the profit / cost impact of programmatic changes such as improved reliability, planning and scheduling or lubrication.  The best practicing maintenance and reliability professionals are passionate, often overly optimistic, and may be totally consumed by technical results. Many have little appreciation of, or even interest in, the profit impact of their work. In times past, optimistic expectations and subjective benefits were sufficient. This is no longer true. As stated earlier, “Show me the money” is now the way the game is scored. There is a major requirement for accurate, traceable information, such as Mean Time Between Failure (MTBF), or an equivalent, for each individual system, asset and even component. The exact cause of a failure, components involved, and the cost in terms of both lost production and restoration to service are all imperative information that must be sortable by equipment type, cause, component, manufacturer, model and other criteria to detect patterns. If improvements are made in materials or practice (e.g., alignment), there must be a way to match results with expectations. If the two do not agree, information must be available to determine why. An effective financial model for equipment optimization must include the ability to prioritize the application of resources by financial return within an environment where opportunities far exceed resources. The model must be capable of comparing actual results to expectations, especially when changes and results occur over a considerable period of time. For example, the full results of improvements driven by a systematic program of Root Cause Analysis (RFA) and defect elimination may not be seen for several years. As stated in an earlier chapter, identifying the potential value recovery by improving poor performers to the population average (e.g. pump / motor MTBF) utilizes facility data and may well be far more credible to finance compared to citing benchmark performance as the objective.

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Many of the concepts presented require a great deal of testing and refinement. The central theme, that any investment for improvements in equipment reliability, practice, and technology must be traceable to bottom line financial performance, is indisputable.

SELECTING FINANCIAL MEASURES OF PERFORMANCE Financial measures of performance are essential to demonstrate the full value of Asset Optimization toward mission compliance, production effectiveness, and profitability. Financial measures must have four primary attributes: 1. Credible — to business and financial executives who may have little or no appreciation for the potential contribution of asset optimizing processes, practice and technology toward the creation of enterprise value. 2. Accurate — represent the value of increased asset utilization and effectiveness, taking into account market opportunities for increased production and / or quality, product margins, manufacturing performance and cost reductions. 3. Impartial — arbiter that indisputably demonstrates the necessity for, priority of, and enterprise profit impact of investment to eliminate defects. 4. Inspirational — promote commitment, ownership, and a profit-centered mentality Ideally, the financial measure or measures apply top to bottom within an enterprise. The measure used by a senior executive focused on shareholder value must be consistent with and linked to measures used by line management, engineers, process operators, craft and support personnel. All must understand the strategy, priorities, their individual contribution and how it creates value. Financial measures must provide clear direction and demonstrate the necessity to meet quality standards and perform assigned tasks effectively. Team athletics provide a good analogy. Everyone on the team must be focused on the final score. Individual statistics, no matter how overwhelming, are of no use if the team does not win. In fact, the lucrative individual incentives offered to many highly paid professional athletes, if not directed toward team victory, often have a negative impact. Business rules in the production and manufacturing world and profit is the score! The financial matrix must depict a real relationship between reasonable expectations for improvement and the impact on overall financial performance. The model that emerges from this concept must provide the ability to predict, and therefore, tune a process to achieve greatest effectiveness and mitigate deficiencies identified from the model. (18) A financial model designed to account for all of the value and benefits generated by Asset Optimization will be described in the next section. One organization testing the model stated that the model agreed with actual results and added a great deal of insight into exact cause for non-compliance with objectives. They liked the concept of Timed Production Effectiveness (TPE) and commented that results were greatly dependent on how aggressively objectives were set.(129) Another company testing the model determined that completed and planned reliability improvement projects improved a financial effectiveness measure by nearly 8 percent.(129)

ACCURATE LIFETIME COST TRACKING (ACTIVITY-BASED ACCOUNTING / MANAGEMENT) Activity-Based Accounting is necessary to accurately identify the cost and consequences of defects and to track the effectiveness of corrective action. The system must be able to associate and track total costs consumed by type (pump, motor, etc.), individual equipment, manufacturer, specific model, and part number. The ability to sort cost data in a variety of ways is essential to identify deviations from required performance and provides vital input into Pareto analyses of cost times occurrence that are needed to prioritize improvement initiatives. Activity-based accounting provides the vital information necessary to optimize design and gain maximum effectiveness by identifying unproductive, inefficient, or redundant activities for modification or elimination. Activity-based accounting will evolve into the Activity-Based Management that is essential for Asset Optimization.

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Some companies use lifetime cost to favor suppliers with high initial cost and low lifetime cost as well as penalize those with low initial cost and high lifetime cost.

THE PRODUCER VALUE MODEL Producer is defined as an entity for which the cost of materials and price of finished goods can be calculated. Each unit in a multi-unit power station, chemical plant, or oil refinery is an example. Others include one paper machine in a multi-machine mill and each line in a manufacturing facility. In many cases, the output from one unit is the input to another. Under these conditions, the calculation of transfer prices is allimportant to ensure an accurate, representative picture of value creation. Figure 7.1 illustrates the proposed Producer Value Model (PVM), its major elements and their relationships. The top tier represents the business process. It is constructed as a simplified income statement that begins with revenue from sales and concludes with a calculation of RONA, ROCE or Free Cash Flow (FCF). From the variables pictured, other financial metrics can be calculated. It is absolutely essential that the output of the PVM conforms exactly to financial measures utilized in your organization. The middle tier represents the production process including OEE measures of production and conversion cost effectiveness. The middle, production, and the top, business are linked by production yield multiplied by price of finished goods. Revenue, the product, is the top line of an income statement. Thus, the PVM uniquely links OEE, asset and cost effectiveness, to sales revenue and the business process. Within the proposed model, conversion costs are defined as “inside the fence” costs required to produce a given product. Categorized conversion costs are itemized in the lower tier of the model. These include all areas of production support costs including utilities, Operating and Maintenance, safety and environmental, administrative and waste disposal. Utility costs include fuel, electric power, and water as well as the cost of steam and compressed air produced centrally or within a process and distributed throughout a plant. Utility use should be metered wherever possible and not allocated. Administrative costs are apportioned. The costs of complying with safety and environmental requirements as well as any fines for non-compliance must be included. As illustrated in the model, some elements of the conversion process are strictly costs, e.g., administrative. Others have costs but also produce value. As an example, a reliability improvement program should reduce Operating and Maintenance (O&M) costs, will improve availability and thus contribute to production output, and can reduce inventory spares and, as a result, net capital assets.

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Figure 7.1 Producer Value Model The PVM facilitates “what if” opportunity assessments, such as investment to increase asset effectiveness, on the only measure that counts — bottom line profit! The effect of a change in product sales, transfer pricing and the cost of raw materials can be modeled to demonstrate a positive return within anticipated bands. Production yield and conversion costs are the links between conventional measures of asset effectiveness and financial results. Regardless of production effectiveness, an enterprise will not long survive if the cost of finished goods exceeds price. A facility testing the PVM learned that completed and planned plant, process, and equipment reliability improvements were on track to increase a performance equivalent between 6 and 8 percent. These improvements represent a gain of more than $100 million at the bottom line. (129) Regarding electric power use, recognize that between 50 and 85 percent of the lifetime ownership cost of a motor-driven pump is for electricity. Operating efficiency has a double impact: low efficiency will increase power consumption. The added stress of operating off the best efficiency point will result in higher maintenance costs and a shorter life. Value within Operations and Maintenance O&M costs include salary and wages, fringe benefits, repair parts, and consumables. In addition to improvement programs O&M itself can produce value. Good O&M practices have a positive impact on production output by increasing availability, production rate, and quality. Effective O&M practices reduce maintenance costs caused by operating errors. Good practices reduce utility costs by reducing fluid, air, and heat leaks and directing attention to the benefits of operating equipment at best efficiency. Likewise, good O&M practices reduce the risk of safety and environmental violations. By extending life and reducing requirements for replacement and spare parts, sound O&M practices also reduce the need for capital, a growing requirement in today’s financial environment. Industry leaders recognize that conversion effectiveness, measured as a reduction in conversion costs, can occur only by a reduction in defects. They also recognize that trained personnel are imperative to maximizing conversion effectiveness. Personnel must be trained to question current procedures in order to wring the last drop of efficiency from a given process. They must pay attention to detail, such as steam and air leaks, heat loss due to faulty insulation, inadequate lubrication, and pumps allowed to operate at far from best efficiency.

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In addition to demonstrating the value impact of practice and technology within a producer enterprise, the proposed PVM must possess other attributes. The ability to predict RONA / ROCE for a given investment at any level within the enterprise and then report on effectiveness (results) as the investment is implemented is one. Many practitioners believe that a large increase in production is more beneficial to profits than a reduction in costs. Because factors such as market conditions and product margins are considered within the PVM, these calculations will demonstrate whether increased production or reduced cost creates greatest value. ROI is not nearly as effective as either a predictor or a reporter, primarily because the assumptions leading to ROI may be difficult to evaluate after the fact. Additionally, conditions may change. In a real enterprise, the dispersion of producer value to individual pieces of equipment — and even components — is complicated by the existence of multiple products and the allocation of shared resources. Some may be intermediate products of another process; all require establishing internal product transfer prices. This demands an accurate allocation of costs between producers and users — activity-based accounting.

EQUIPMENT EFFECTIVENESS The PVM permits tracking any given investment and determining whether the investment had the anticipated impact and if not, why not, taking into consideration changes in forecast conditions such as market and price variations. As stated earlier, production effectiveness is often measured in terms of OEE. (To refresh, OEE is a normalized quantity representing net production yield. It consists of three components: availability, production rate, and quality — all expressed as a percentage of objective.) The values in the numerators lead to production yield. Many companies utilize OEE as a prime measure of equipment effectiveness. An OEE of approximately 85 percent or greater is considered world-class performance in the manufacturing industry. The number may be considerably higher in continuous process industries such as refining and chemicals. OEE has two weaknesses: 1. In terms of OEE, a process can be highly effective — and very unprofitable — if conversion costs are excessive. 2. OEE alone does not lead to opportunity or priority. By ignoring market and business conditions it is easy to focus OEE improvements on the wrong activity. Timed Production Effectiveness To incorporate the crucial importance of conversion cost toward enterprise profitability, an expanded OEEbased effectiveness measure has been proposed — Timed Production Effectiveness (TPE): TPE = production output x timed availability x conversion effectiveness TPE applies conversion cost to OEE that has been modified to consider the time window of opportunity driven by market conditions. Timed availability is defined as the amount of time a facility, system, or component is capable of producing a required result compared to the time windows in which production is scheduled or required. Timed availability imposes three conditions to the calculation of availability: 1. For a process or facility in which production is sold out, the availability objective is 8,760 hours (1 year) to create an incentive for minimizing scheduled outages. 2. For a process or facility in which production is not sold out, and for spared or redundant facilities, systems, or equipment, the target or objective is the actual time in which operation is required. 3. In the event that a system or component failure slows or interrupts production, the interruption does not end for the purposes of calculating timed availability until production is fully restored and on specification. Timed availability thus reflects the full impact of a momentary malfunction that stops or upsets production for an extended period. Timed availability is the most realistic measure of availability for all facilities and components. It is especially valid for those that must be capable of operating at 100 percent during a production time increment less than total calendar time.

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Production Output Production output is production delivered in specification divided by the production objective. The concept of a production time increment also is applied so that the term reflects output when required to meet scheduled demand. Because actual output can be greater than scheduled output, production output may be greater than 1. If off-specification production is sold at a lesser price, a constant is applied to account for diminished income. Quality also may be tracked as a separate quantity as in OEE. Some facilities measure and track the combined timed availability and production output as asset effectiveness. But asset effectiveness is only part of the story. For the full picture, conversion cost must be addressed. Conversion Effectiveness Conversion effectiveness, the third term in TPE, is a conversion cost objective divided by actual conversion cost. Note that the objective is divided by the actual to reflect increasing effectiveness when actual cost is less than objective. This is the inverse of effectiveness terms in OEE. Conversion effectiveness is used to measure the conversion efficiency of a specific component, unit, or facility. All applicable conversion costs — utilities, O&M, administrative, and waste disposal — must be included. Real Compared to Normalized Values Some companies prefer real over normalized values. If so, the denominator of conversion effectiveness divided by the numerator of production output results in conversion cost per unit of output, a valuable performance measure in itself. Other vital measures can be derived from TPE, provided the information structure is properly constructed. During several discussions of TPE, participants have mentioned the difficulty of obtaining accurate cost information. Organizations must strive to determine costs, regardless of difficulty. They must determine exactly how much it costs to deliver a given product. Activity-Based Accounting is a must. Lacking this knowledge, they can easily sell a product at less than the manufacturing cost — a critical mistake in today’s highly competitive climate where cents per unit may be the difference between profit and loss. Regardless of whether accurate cost information is available today, competitive survival will mandate it tomorrow. Those who cross the line between estimated and actual costs will have an enormous competitive advantage, as well as crucial information with which to ensure resources are always applied to highest value activities.

LEVERAGING CONVERSION EFFECTIVENESS Any discussion of the necessity of linking asset effectiveness to enterprise profitability must not neglect the leverage comparison between profit increases gained through increasing conversion effectiveness and production increases. Most process and manufacturing companies operate at a net profit after tax of less than 10 percent. This produces greater than 10:1 leverage in favor of improvements to conversion effectiveness that reduce cost. In other words, $1 million value gained through increased conversion effectiveness has the same impact on bottom line profit as $10 million of additional production. When availability is high and production is sold out, improved conversion effectiveness may be the only way to increase profitability. As an example of converting value to production, a consultant brought in to survey the control air system at a large amusement park concluded that air leaks consumed the capacity of one full air compressor. In terms of net profit, air leaks required the equivalent of 10,000 to 15,000 added paid attendance at the park. In a similar calculation at a sold-out chemical plant, the profit equivalent to increasing pump average MTBF by 1 year required an availability of 103 percent. There is also the dual contribution of increasing operating and maintenance effectiveness. In addition to the obvious advantages of reducing cost, and the leverage of increasing conversion effectiveness, there are other major contributions to value illustrated by the upward arrows in the PVM model. When production is sold out, increasing output by increasing availability or run-rate contributes significantly to profit. Some companies have been able to avoid capital investment for added production by recovering as much as 40 percent “hidden” capacity within existing facilities. In this situation many executives and

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managers don’t recognize that in reality they are operating facilities at an output significantly below nameplate. In addition, increasing production output with O&M costs held constant results in a per-unit reduction. Whatever the measurement criteria and benchmarks for conversion effectiveness, they must connect directly to unit profit objectives and be accepted by senior executives. Nothing else will gain support from those who control the funds. All involved with asset utilization and performance must incorporate financial awareness, prioritization, and tracking of results into their everyday activities. Without this vital dimension, potential improvements in technology and practice may never be funded or applied. Instead of enlightened Asset Optimization leading to greatest value, there will be a race to the bottom — immediate and arbitrary spending reductions without any permanent, long-term effects. The financial model must begin with business and market conditions, demonstrate conclusively the real value of improved practice and technology, prioritize investment opportunities, and track results — even when separated from results by a significant time interval. Furthermore, an ideal financial model must contain provisions for “what if” examination of assumptions under variations in business and operating conditions. The PVM appears well suited to this crucial task. Only with the awareness provided by an accurate financial model can modern facilities be managed to optimize the only parameter that counts — profitability. This Chapter is a revised and updated version of an article, Understanding Producer Value, by John S. Mitchell that appeared in the May 1999 issue of MAINTENANCE TECHNOLOGY, the magazine of plant equipment reliability, maintenance, and Asset Optimization, published by Applied Technology Publications, Barrington, IL. Used with permission.

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VIII.LIFE CYCLE COST ANALYSIS Paul Barringer, P.E. Barringer & Associates, Inc., The objective of Life Cycle Cost (LCC) analysis is to establish the lowest long-term cost of ownership (usually the viewpoint of the investor) rather than simply cheapest first cost (usually the viewpoint of project management). Roles and responsibilities for preparing the LCC details are described for petrochemical and refining applications. Practical tips for effective analysis and presentation are given.

INTRODUCTION Life Cycle Costs are all costs expected during the life of an item over some finite study period. This means costs associated with acquisition and ownership of a system over its full life must be estimated and timed for the year of the expenditure. The summation of all costs from project inception to disposal of assets must be described in terms of the time value of money, which is the driver, for knowing how much money will be spent in each time slot. Net Present Value (NPV), a financial term, is the most important single criteria for LCC. NPV takes into account financial impacts considering that money has other alternatives rather than being tied-up in a fixed asset or project. Engineering drives the cost study of alternatives for producing the lowest long-term cost of ownership which must include consideration for alternatives / trade-offs for completing tasks to achieve the most favorable NPV. Life cycle costs are affected by three important issues in addition to the obvious capital costs. These are: Installation and use practices are influenced by engineering and operations. Practices define loads, equipment defines strengths, and usage determines life of the components. Equipment life / death must be converted into money decisions (Barringer 1998). Component life and death are influenced by the grade of equipment carrying the loads. Equipment grades have finite load carrying capability that defines when / how components live and die. Death of equipment defines maintenance demands and equipment outages which denies use of the equipment for productive use. Load profiles during various segments of the use cycle are very important considerations. The simple use of “average” loads and “average” strengths are perilous decisions that generate inaccurate cost profiles and significantly influence life cycle costs. Be wary of the “average” generalizations — they are traps!

ROLES AND RESPONSIBILITIES Engineering thinks Accounting should produce the LCC analysis because Accounting is involved with money. Accounting thinks Engineering should prepare the LCC analysis since the three items mentioned above (installation / use practices, equipment grade driving equipment life / death, and load / strength profiles) determine equipment life and maintenance that converts to money. Accounting lacks the expertise to make the engineering calculations, but Engineering can produce most of the numbers needed for Accounting’s oversight review. Engineering must be responsible for preparing the life cycle cost analysis. Accounting is responsible for validating / auditing authenticity of the calculations. This defines the first set of roles and responsibilities for “who does what?” in LCC. Since Engineering has many disciplines, the life cycle cost problem must be broken into components for each discipline to solve, and then aggregated into the final LCC model.

SCIENCE OF ASSET LIFE All systems are born and all systems die following the principles of entropy. Entropy is the scientific principle explaining why batteries run down with time, why buildings will eventually fall down, and why components naturally progress from functioning to failed. System deterioration is inevitable and deterioration drives costs. Deterioration is slowed by preventive maintenance actions to prolong

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equipment life. When all life has been consumed and entropy has moved from order to disorder then maintenance replacements are required. Each step involves costs. Propaganda from universities says engineers build systems to never fail using safe engineering principles (unfortunately many people believe this propaganda). Universities also teach the principle of entropy that systems move from order to disorder unless interventions occur to prevent the disorder. Unfortunately engineers often lack ways to calculate the life and maintenance efforts for handling entropy changes because it’s too hard to quantify both life issues and maintenance issues — thus we ignore the effort and the costs. Since engineers “believe” their designs never fail, most engineers lack reliability / maintainability tools for calculating equipment life / death / maintenance. The inability to compute equipment failures driving replacement / repair costs means we’re trapped by our own propaganda — this makes life cycle cost decisions both faulty and difficult. Reliability problems are entropy driven failures. Failures cost money. Failures occur when a product or process cannot perform its intended function. Downtime is one measurement of equipment and process failures. The cost / price paid for failures is highly dependent upon the ground rules used for calculations. For example, a sold out manufacturing process has a high penalty cost for failures when product cannot be delivered. However, if the process is not sold out, failure cost may be much smaller. LCC techniques require a method for analyzing the failure data using appropriate cost profiles to reflect alternatives for converting failure problems into money decisions. The failure costs also need to reflect the reality that failures have different prices at different time in the economic cycle. Forecasting future failures is explained in The New Weibull Handbook (Abernethy 2002). The Society of Automotive Engineers (SAE) has been addressing the issue of life cycle costs (SAE 1999). Interest is driven by the automotive industries ~US$4-billion / yr capital expenditures. The SAE model is directly applicable to National Petroleum Refining Association (NPRA) activities. SAE’s guide embraces the concept of up-front engineering plus continuous improvement in the design / operation of equipment and machinery to work toward the lowest long-term cost of ownership through the use of Reliability And Maintainability (RAM) principles. SAE’s approach requires up-front engineering efforts to include the use of reliability and maintainability calculations leading toward lower life cycle costs. SAE’s advocacy for reliability improvement is to increase productivity and throughput by designing-out failures. Increased reliability implies fewer machinery and equipment failures to provide less downtime consequences and reduce production costs. SAE’s advocacy for maintainability improvement is to insure that reliable equipment is more failure free and repaired quickly and safely to reduce downtime. Both reliability and maintainability issues work toward reducing life cycle costs particularly when an organized engineering effort is driven by up front engineering calculation and not by engineering proclamation (this means making engineering decisions for plants and equipment based on the numbers — not opinions). In petrochemical and refining businesses, reliability and maintainability capabilities are growing. Sadly, most RAM effort comes after completion of the engineering design. Late arrival of RAM tools denies significant gains. Bigger gains in influencing LCC occurs from doing more and better engineering up-front as shown in Figure 8.1. Figure 8.1’s dashed line shows great opportunity for influencing LCC with up-front decisions. Little LCC opportunity exists for meaningful changes after the bricks and mortar are in-place as you can’t significantly influence the LCC outcome by making decisions after selection and installation of equipment. Figure 8.1 is similar to a guided missile where up-front decisions significantly influence the impact point. Life cycle costs of equipment or a facility begin with setting the design objective and then producing engineered numbers to design-in availability, reliability, and maintainability, which in turn, drive other decisions. First a few definitions:

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Production Engineering, And Manufacturing, Salvage And Commitment And Trends Figure 8.1Expenditure Commitment and Expenditure Trends Construction Conceptual Design

Demonstration And Validation

Acquisition Sustaining Cost Start expressed Operational availability is uptime asCost a percentage of uptime plusEnddowntime. Uptime is time Life Of Life for useful production activity where as downtime is not time as the Of system cannot be used for Lifeproductive Cycle Span production activities (the denominator for availability in continuous process plants is 8760 hrs / year). The issue is to set the availability value and to design the process / equipment to achieve the results.

Reliability is the probability that a device, system, or process will perform its prescribed duty without failure for a given time when operated correctly in a specified environment. Reliability is paced by the failure rate, mean time between failures, or the number of failures in a given time period. Failures define unreliability and absence of failures defines reliability. Restoration of failures contributes to downtime in the availability equation. Maintainability is the probability that a machine / process can be retained in or restored to specified operable condition within a specified interval of time, when maintenance is performed in accordance with prescribed procedures. Maintainability is a characteristic of design, installation and operation of equipment. Maintainability is influenced by the time allowed to perform the task and how frequently the task can be completed within the allotted time. Maintenance is an activity carried out to keep an item in, or restore it to, an acceptable condition for use or to meet its functional standard. Maintenance includes scheduled and unscheduled activities but does not include minor construction or change work. Setting the availability, reliability, and maintainability goals is an up-front business decision that drives design of the plant, equipment and process. The business team is responsible for setting the goals for availability, reliability, and maintainability with primary leadership from engineering plus support from manufacturing. Engineering is responsible for implementing design, by the numbers, with verification of the numbers by calculation to achieve the goals set by the business team. The lowest long-term cost of ownership is LCC resulting from the design with consideration for the trade offs. Implementing Reliability And Maintainability (RAM) tools into the design effort requires commitment, strategy, and action with planned activities during each phase of the plant, machinery, equipment, and process life cycle. Here are some examples of availability, reliability, and maintainability: Airliners are designed to achieve operational availability of greater than 97%. Airliner gas turbine engines are designed for not less than 25,000 hours per in-flight shutdown. Removal and reinstallation of commercial gas turbine aircraft engines is planned for 2.5 hours per maintenance event. None of these business-oriented statements were easy to accomplish. The criteria were driven by economics and the design effort. Up-front reliability and maintainability improvements lead to lower life cycle costs. Wise men will tell you buying cheap is usually no bargain. The problem with a mentality of “cheap first cost” is simple; the first small cost is not the last big cost. Often the mentality of plant and equipment is to spend a small amount up front and pay through the nose later because “it’s not on my watch” gamesmanship.

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One easy way to get the lowest long-term cost of ownership is to require the design team, project management, and signers of the authorization for expenditures to remain at the new or improved facility for a period of not less than seven years as a responsible member of the organization. This simple “ownership” requirement will avoid the usual buy cheap and pay later for many problems using a Pilate Pontus justification for lack of responsibility The new approach espoused by SAE in Figure 8.2 is for reducing life cycle costs by spending more effort up front for both the conceptual design (+1%) and detailed design (+3%) with emphasis on applying reliability and maintainability tools to reduce build and install costs (-3%) with greater cost reduction achieved (up to -15%) during operation of the facility. The way to save life cycle cost money is by using RAM tools to reduce the long-term cost of ownership.

Figure 8.2 Old / New Approaches to Lower Life Cycle Costs The structured up front effort in the concept and proposal phase emphasizes setting reliability requirements, maintainability requirements, defining what a failure is, and establishing the environment / usage issues as shown in Figure 8.3. The details for the RAM issues drive the way the equipment and process will look so the preliminary bills of material are set with many thoughtful decisions rather than based on only a few sketchy details. Development of the design follows conceptual design by defining loads to be carried with strengths established to fix the design margins to prevent the overlap of loads / strengths that drive many failures. Likewise maintainability designs are planned and goals set for the length of allowed downtimes and achievement of the goals is designed into the equipment and facilities. Reliability predictions are made to quantify the decisions with Monte Carlo models based on factual details of life / death experienced in existing facilities. Lessons learned are formally converted to hard copies and meticulously introduced into the detailed designs. Failure Modes and Effects Analysis (FMEA) are performed during the designs as bottoms up effort to find weakness while top down experience is introduced during the design with Fault Tree Analysis (FTA) to include operating experience into the design to attack roots of the problems for resolution on paper rather than in the operating plants. This effort is driven by both engineering and suppliers to make issues fact driven to price out the consequences for the important upfront decisions in Figure 8.3.

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Short List Of Reliability and Maintainability Activities Over Life Cycle

The Big Picture Tasks

Concept & Proposal

Design & Developemnt

Set Availability Requirements

X

Set Reliability Requirements

X

Define Environment / Usage

X

Set Maintainability Requirements

X

Define Functional Failures

X

Set Design Margins

X

X

Define Capital Budgets and Make Tradeoff Decisions

X

X

Make Reliability Predictions

X

Do Preliminary Cost of Unreliability

X

Do FMEA and Fault Tree Analysis

X

Design for Maintainability

X

Conduct Design Reviews

X

Do Critical Parts Stress Analysis

X

Make Machinery Parts Selections

X

Do Tolerance / Process Studies

X

Do Reliability Qualification Testing

X

Operation & Support

Conversion or Decomm.

X X

Do Reliability Acceptance Testing

X

Do Reliability / Maintainability Growth Improvement Collect Failure Reports and Analyze Provide Data Feedback

Build, Install & Commission

X

X

X

X

X

X

X

X

X

Figure 8.3 When RAM Tools are Introduced into Project Phases Details in Figure 8.3 are tailored for each project. More detail for some projects; less for others. Convert long term consequences into time when expenditures are expected and money to cover the expected costs into the future. This will balance the usual case of emphasizing the acquisition costs and going blind to the sustaining costs which give the top level cost details as illustrated in Figure 8. 4, described in Barringer and Weber (1996) which discusses the nuts and bolts of LCC. Furthermore LCC will also encourage truthful realization that contrary to good salesmanship, equipment and processes do fail and they require expensive nurturing for survival (you do recall the usual drill: “My equipment and processes never fail but you should buy this list of spare parts and plan for turnarounds every X-years”).

Figure 8.4 Cost = Acquisition + Sustaining Costs with Time Considerations Defining the costs into the annual periods into which they occur, i.e., time buckets for accumulating costs to implement Figure 8.4 often results in a knee jerk reaction: “If we lay down all the costs, we can’t afford to implement the project”. Such head in the sand mentality leads to “Enron Stories” to show “profits” on known losers. It is better to kill a losing project than build a sink-hole for cash at a later date with too little equipment of too low a grade that cannot function failure free for a highly productive process. Figure 8.5 shows how to convert the concepts into implementation tasks.

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R&M Practices For Concept & Proposal Phase Tasks For Phase 1: Concepts And Proposal Preliminary Availabilitly, Reliability, and Maintainability Planning Define The Availability, Reliability, and Maintainability Plan Implement Lessons Learned Specify Availability, Reliability, and Maintainability Requirements Define How Machinery Will Be Used Tailor the details to Specify Duty Cycles For Equipment avoid too little or too Define Environment For Machinery much emphasis on Define Continuous Improvement Monitoring R&M. Meet needs of Define Equipment Life In Throughput Terms the business. Make the Establish Data Collection Details For R&M effort cost effective! Develop Application Specific R&M Program Matrix Keep profitability in Develop R&M Program Planning Worksheet Details mind. Establish Criteria For R&M In Design Reviews

User X X X X X X X X X X X X X

Supplier X X X

X X

X

Design Review Objectives Concept Review: Focuses on feasibility of the proposed design approach with budget restrictions Preliminary Design Review: Verifies adaptability of evolving design to meet technical requirements Final Design Review: Validates the design and analysis are complete and accurate Build: Addresses issues from equipment build and runoff testing Installation: Do failure investigation of problems--Do continuous improvement Figure 5: BigFigure Picture 8.5 Of Tasks Concept Proposal Big For Picture of&Tasks forPhase Concept

and Proposal Phase

From the implementation tasks of Figure 8.5, flow the roles and responsibilities shown in Figure 8.6. Notice the leadership roles and the supporting roles along with the numerous details rarely studied in depth for most installations. First reactions at the detailed list in Figure 8.6 are typically one of alarm at the numerous up-front requirements — this is a standard engineering reaction. However, if you’re the investor, what do you want to know before you’re spending big money for bricks, mortar, and piping? The list of issues and details in Figures 8.5 and 6 provides ideas about where the extra up-front money goes for the additional conceptual engineering costs. The extra work lays the ground-work for better designed plants and facilities with consideration for the lowest long term cost of ownership to benefit the investors. Yes, the pain is greater for Engineering to do a more thorough job using new technology to enhance the plant and process for the purpose of making more money in the end. Also note that multiple areas of responsibility carry leadership efforts for LCC.

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Figure 8.6 Roles and Responsibilities for Concepts and Proposal Phase Moving forward to the design phase where RAM details impose greater effort and expenditures for quantification. This is shown in Figure 8.7 with each case requiring more / less depending upon the specific situation. Forward-looking companies are now addressing a few of these issues with interesting results. Seldom are these studies completed without learning something about existing facilities — usually the finding is the facility does not live up to the promised productivity and maintenance expectations. Usually improvements flow from the studies to make the new plants better and more productive.

Figure 8.7 Big Picture of Tasks for the Design Concepts

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Figure 8.7 shows concepts that drive design details in Figure 8.8 with roles and responsibilities. Note the suggested leadership role for suppliers in driving the design efforts. This, of course, will cost more money during the upfront effort with the expectation that doing the job right from the beginning eliminates costs during the construction and operation phase of plant and equipment. Short List Of Reliability & Maintainability Activities Over The Life Cycle Phases Legend: L = Lead Responsibility, S = Support The Process, I = Input To the Process, A = Approval Responsibility Users Tasks For Phase 2: Design And Development Verify Design Margins (Safety Factors) & Do Stress Analysis Specify How Critical Machinery Components Will Be Selected Do Failure Modes and Effects Analysis: Process FMEA Machinery FMEA Do Fault Tree Analysis & HAZOPS Do Design Reviews Do Tolerance/Process Studies Generate Reliability Block Diagrams For Reliability Analysis Do Accelerated Testing To Validate Critical Equipment Details Do Maintainability Design Details To Minimize Downtime Defines Maintenance Manuals, PM Requirments & CM Details Prepare Spare Parts List & Spare Parts Inventory Plans Prepares Details of Built-In Diagnostic Equipment For Maintainabiltiy Prepares Details of Captive Hardware For Rapid Maintainability Identify Spare Parts To Be Managed Based On Criticality Define Maintenance Procedures For Adjustments/Replacements/Repairs Define Visual Management Techniques For Workplace Awareness Define Modularity Of Physical and Functional Units For Removal/Replacement Define Accessibility Parameters Consider Life Cycle Cost Impact In Machinery Design

Supplier Engineering Operations Purchasing L S L S S S L L-FTA L L L L L L L L L S L L L L L

S S S S S S S S S S S S S S I i S I

L S L-HAZOPS S S S S S S S S L S I i S I

Figure 8.8 Roles and Responsibilities for Design and Development Phase Figure 8.9 shows the decreasing list of special RAM conceptual requirements for the build and install phase of projects. Figure 8.9 in turn drives a smaller list of issues to be addressed in Figure 8.10 for roles and responsibilities.

Figure 8.9 Big Picture of Build and Install Concepts

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Short List Of Reliability & Maintainability Activities Over The Life Cycle Phases Legend: L = Lead Responsibility, S = Support The Process, I = Input To The Process, A = Approval Responsibility

Users Tasks For Phase 3: Build And Install

Supplier

Engineering

Operations

Verify Alignment Of Specific R&M Goals During Testing

L

A

A

Do Preliminary Evaluation Of Process Performance To Eliminate Infant Mortality

L

I

I

Do Dry Run Testing In Vendors Facilities For A Specified Duration (e.g., One Day No Failure)

L

A

A

Perform Acceptance Tests

L

A

A

Collect Reliability Data During Supplier Acceptance Testing As Future Precusor

L

S

S

Collect Reliability Data During Acceptance Testing And In User's Plant After Installation

S

S

L

Do Root Cause Failure Analysis To Permanently Eliminate Failures

L

S

S

Collect Life Cycle Cost Data

I

L

S

Purchasing

Figure 8.10 Roles and Responsibilities for the Build and Install Phase Note SAE’s suggestion for vendors to demonstrate compliance of equipment in their own facilities for a one-day test run, under load, without failures. This occurs during the build and install phase where the effort is reasonably practical. This puts the onus on vendors to eliminate infant mortality problems with equipment prior to field delivery. Of course like chemical and petroleum operations, this is never easy for automotive manufacturing suppliers and of course alternatives for this requirement are allowed. Reliability & Maintainability Practices For Operation And Support Phase Tasks For Phase 4: Operation And Support

User

Supplier

Implement R&M Data Collection, Analysis & Feedback System From Startup

X

X

Implement Proactive Planned Maintenance Program For PM and PdM

X

Implement R&M Growth Program Using Data, RCA & Visual Displays Of Data

X

X

Implement Closed Loop Failure Reporting & Corrective Action System

X

X

Implement User/Supplier Data Exchange Of R&M Data To Reduce Cost On Both Sides

X

X

Implement Feedback Model On R&M Issues For User/Supplier Benefit

X

Figure 8.11 Big Picture of Operation and Support Concepts In working for the lowest long term cost of ownership, SAE recommends a continuing effort of involving the operations departments into RAM activities as shown in Figure 8.11 with roles and responsibilities listed in Figure 8.12. This is similar to Total Productive Maintenance (TPM) efforts that have demonstrated great cost reductions in the sustaining efforts as operations and maintenance department’s function in a teamwork environment rather than the usual adversarial relationship. TPM is described by Suzuki (1994). One USA refinery has actually won a Japanese award for achieving a top notch rating for their TPM activities (ConocoPhillips Refinery in Sweeney, Texas). This demonstrates this cost reduction methodology can be mastered by an American company. The final phase of the life cycle costing is planning for end of life. Figure 8.13 shows some decisions for consideration. No manufacturing facility lasts forever. Consideration must be given for the conversion or decommission phase of life. As remediation and decontamination efforts are looming for many facilities, this is now a major cost impact driven by the actions taken during design and operation of existing plants. It is unlikely that these costs will decline in the future and consideration should be given for future costs. Short List Of Reliability & Maintainability Activities Over The Life Cycle Phases Legend: L = Lead Responsibility, S = Support The Process, I = Input To The Process, A = Approval Responsibility

Users Tasks For Phase 4: Operation And Support

Supplier

Engineering

Operations

Implement R&M data Collection, Analysis & Feedback System From Startup

S

S

L

Implement Proactive Planned Maintenance Program For PM and PdM

S

S

L

Implement R&M Growth Program Using Data, RCA & Visual Displays Of Data

S

S

L

Implement Closed Loop Failure Reporting & Corrective Action System

S

S

L

Implement User/Supplier Data Exchange Of R&M Data To Reduce Cost On Both Sides

L

S

S

Implement Feedback Model On R&M Issues For User/Supplier Benefit

S

S

L

Collect Life Cycle Cost Data

I

S

L

Purchasing

Figure 8.12 Roles and Responsibilities for the Operations and Support Phase

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Reliability & Maintainability Practices For Conversion And Decommission Phase Tasks For Phase 5: End Of Life Decisions For Conversion And/Or Decommission

User

Supplier

Implement Retool Decisions For Make/Buy/Modify/Sell

X

X

Implement Remanufacture Decisions For Make/Buy/Modify/Sell

X

X

Implement Rebuild Decisions For Make/Buy/Modify/Sell

X

X

Implement Retrofit Decisions For Make/Buy/Modify/Sell

X

X

Implement Rework Decisions For Make/Buy/Modify/Sell

X

X

Implement Lessons Learned For Future Plant Improvements

X

X

Decontaminate/Dispose Of Unneeded Assets With Permits As Required

X

Figure 8.13 The Big Picture of Conversion and Decommission

Roles and responsibilities for end of life decisions are shown in Figure 8.14. The cost decisions for this phase are difficult to quantify with any high degree of accuracy. However, if you plan for conversion or decommission, it leads to more responsible decisions during life of the project for reducing contamination and waste products that are expensive to neutralize prior to disposal. How would this system work for forward looking organizations? Start with an objective such as: “We will build an economical and failure-free process that will operate for 5 years between planned outages with an availability of 98% (including lost production time during turnarounds), and 80% of all component failures must be capable of being repaired in less than 24 hours”. This requires pricing out alternatives for achieving the lowest long term cost of ownership using LCC techniques to achieve a highly available process which is free from failures and thus lacks instability of process changes so as to produce consistently large outputs as advocated by process reliability techniques described by Barringer and Roberts (2001). The purpose of planning for a failure-free process is to increase manufacturing productivity and manufacturing throughput recognizing the process is the king while individual equipment are the pawns for the strategy. This requires planning for, calculating, and understanding reliability principles as improved reliability tends toward lower life cycle cost. Short List Of Reliability & Maintainability Activities Over The Life Cycle Phases Legend: L = Lead Responsibility, S = Support The Process, I = Input To The Process, A = Approval Responsibility

Users Tasks For Phase 5: End Of Life Conversions And/Or Decommission

Supplier

Engineering

Operations

Implement Retool Decisions For Make/Buy/Modify/Sell

I

S

L

Implement Remanufacture Decisions For Make/Buy/Modify/Sell

I

S

L

Implement Rebuild Decisions For Make/Buy/Modify/Sell

I

S

L

Implement Retrofit Decisions For Make/Buy/Modify/Sell

I

S

L

Implement Rework Decisions For Make/Buy/Modify/Sell

I

S

L

Implement Lessons Learned For Future Plant Improvements

I

S

L

Decontaminate/Dispose Of Unneeded Assets With Permits As Required

I

I

L

Characterize Equipment Reliability And Maintainability

I

L

S

Collect All Data And Lessons Learned

I

S

L

Total Life Cycle Costs And Compare To Original LCC Objectives

I

L

S

Adjust Methodology If Required

I

L

S

Purchasing

Figure 8.14 Roles and Responsibilities for Conversion and Decommission The purpose of maintainability improvement is to design machinery and equipment that can be quickly and safely repaired. So reducing downtime of individual pieces of equipment so the risk of failing the process is low in both probability of failure and low in the $risk of exposure. This requires identifying planned maintenance actions and improving the reliability and longevity of equipment driven by economics. Planning for both quick and safe maintenance activities decreases the exposure for safety issues and exposure for financial damage from the required repairs. So why would you want to pursue this difficult path of introducing RAM technology into life cycle costing? The one word answer is money. By the way, forward looking companies are already complaining that the

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5 year failure free interval for the process is not good enough because they are planning for a 6 year time frame! Of course, the prerequisite for pursing this path for cost reductions is knowing, understanding, and using technology from the field of reliability and maintainability, which as been summarized in previous documents, see Barringer (1995). Many other papers concerning reliability and the high cost of unreliability from failures are available for download at http: / / www.barringer1.com / Papers.htm .

DO THE ANALYSIS Start with scenarios. Develop costs, by year, for each scenario. Use spreadsheets you can download from the Internet at http: / / www.barringer1.com / Anonymous / lcc.xls to minimize your effort. Building the scenarios is the grunt work for LCC. This is the point where you expect to perform one or two scenarios and have the task completed — don’t be surprised that you’ll miss your estimate of scenario quantities by one order of magnitude. Keep the details in spreadsheets so you have an audit trail and so you can quickly change the assumptions. If the task is an improvement program, you MUST find the NPV without any improvements (this is Accounting’s default position and Engineering’s most hated scenario). This “do nothing different” scenario establishes the datum for NPV (most of the NPV values will be negative as you cannot realistic assign the specific profits from a single portion of the system). Of course the most desirable scenario will be the least negative scenario and the difference between the winning scenario and the datum scenario will then be a positive number. When you’re finished with the multitude of scenarios, you’ll look back and say “Is that all there is to LCC? — sure is easy.” Keep track of your scenario details and use them for future building blocks. Finally, you’ve got to sell the program. This has two detailed requirements: 1. NPV scenarios (please note scenarios is a plural word!), 2. Engineers need their trade-off boxes with effectiveness on the X-axis and NPV on the Y-axis so they can explain the differences graphically. Effectiveness is explained in more details in the 1996 references shown below. The effectiveness equation can be comprised of meaningful elements of availability, reliability, maintainability, and capability as they are appropriate to the issues under study. Conclusions Many companies are quietly accumulating their failure data and building models of their operations. They are doing the fundamental tasks to build more reliable plants that deliver the lowest long-term cost of ownership for their investors. These improved plants are showing cost reductions and more stable operations without fanfare as the leading edge of a new wave of improvements becomes based on technology. An ancient Chinese warlord summarized the same type of issue succinctly 2000 years ago when he said “All men see the battles I win, but no man knows the strategy for my success.” In other words, don’t look for your competitors to advertise how they’re making more money with improved plants. They will not volunteer to tell you the secrets of their hard work in making better and more effective life cycle cost decisions though the use of reliability and maintainability technology. You’ve got to make a technology change to get a change in your performance. References Abernethy, Robert B, The New Weibull Handbook, 4th edition, published by the author, North Palm Beach, FL, (2002). Barringer, H. Paul, "Practical Reliability Tools For Refineries and Chemical Plants", National Refiners Association Maintenance Conference in Nashville, TN, May 21-24, 1995, download from http: / / www.barringer1.com / pdf / Prac_Rel_Tools_Refn_ChemPlt.pdf . Barringer, H. Paul and David P. Weber, “Life Cycle Cost Tutorial”, Fifth International Conference on Process Plant Reliability, October 2-5, 1996, download from http: / / www.barringer1.com / pdf / lcctutorial.pdf .

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Barringer, H. Paul, “Life Cycle Cost And Good Practices”, NPRA Maintenance Conference in San Antonio, TX, May 19-22, 1998, download from http: / / www.barringer1.com / pdf / lcc-gp.pdf . Barringer, H. Paul and Woodrow R. Roberts, “New Reliability Tool for the Millennium: Weibull Analysis of Production Data”, Hydrocarbons Process magazine, Vol. 80, No. 10, pages 73-82, October 2001, downloadable from http: / / www.barringer1.com / pdf / HPOct01.pdf . Reliability and Maintainability Guideline for Manufacturing Machinery and Equipment, Society of Automotive Engineers, 2nd edition, Document Number: M-110.2, search for the document number at http: / / www.sae.org, 1999. Suzuki, Tokutarõ, TPM In Process Industries, Productivity Press, Portland, Oregon, 1994 (This book on total productive maintenance was originally published by the Japan Institute of Plant Maintenance in 1992) BIOGRAPHIC INFORMATIONH. Paul Barringer, P.E. is a reliability, engineering, and manufacturing consultant. He is author of the basic reliability training course Reliability Engineering Principles, a practical financial evaluation course Life Cycle Costs, and Process Reliability which is a high level method of assessing and understanding process reliability. He has more than forty years of engineering and manufacturing experience in design, production, quality, maintenance, and reliability of technical products. He is a contributor to The New Weibull Handbook, a reliability engineering text published by Dr. Robert B. Abernethy. Barringer is named as inventor in six U.S.A. Patents and numerous foreign patents. He is a licensed professional engineer in Texas. His education includes a MS and BS in Mechanical Engineering from North Carolina State University, and he has participated in Harvard University's three week Manufacturing Strategy conference. Other details and technical papers on a variety of reliability and life cycle cost issues are available at http: / / www.barringer1.com. For other background or details, send e-mail to [email protected]. June 6, 2004 © Barringer & Associates, Inc. 2004 with permission for publication in Physical Asset Management Handbook, by John S. Mitchell

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IX. METRICS AND BENCHMARKING The great tragedy of science (is) the slaying of a beautiful hypothesis by an ugly fact. Thomas Huxley

Metrics are essential within the Asset Optimization program. Beginning with benchmarking they help management and plant personnel understand the business and mission requirements, identify opportunities to increase effectiveness, measure results of improvement initiatives and performance to objectives. Program metrics are linked so that improvements in program and work effectiveness connect and demonstrate contribution to achieving business and operating objectives. Asset Optimization metrics begin with business effectiveness measures such as RONA and ROCE. They include industry benchmarks such as cost per unit, as a percentage of Replacement Asset Value and Forced Outage Rate. Metrics cascade through overall, availability, yield, quality and cost effectiveness measures to the underlying work management, equipment and program effectiveness measures.

INTRODUCTION Necessity for Metrics Metrics are a means of objectively measuring performance and effectiveness. There are numerous sayings that capture the necessity for metrics:  You will only achieve what you measure.  You can't manage if you can’t measure.  Unless you are measuring you are practicing, not competing.  Without data you are simply another person with an opinion. Metrics are a double-edged sword. On one hand, metrics are necessary to establish objectives and measure performance. On the other, incorrect or disconnected metrics can mislead and result in unexpected, sub-optimal results. “People don't always use measures to get better; they manipulate measures to look better.” Wrong measures lead to bad decisions.(129) Top to bottom ownership demands answers to the question: “How are we doing?” Apart from toddler’s games, would any competitive endeavor be meaningful without some sort of scoring system? How is effectiveness measured? What motivates improvement? Corporations that are immersed in the asset optimization process report that scoring metrics are essential to increase interest, ownership, and enthusiasm for the process. A family of distinct metrics, all linked to corporate goals, is vital to the success of any corporate improvement program — certainly Asset Optimization. Metrics are necessary to identify opportunities, prioritize resources, and measure the results — progress and effectiveness — of improvement initiatives. Metrics help to better understand the contributors to availability, production output, quality, and cost, as well as what drives plant profitability. (62) A managing system with periodically updated safety, finance, effectiveness, cost, and quality metrics at both management and working levels is imperative. (129) Function Metrics and their associated financial results are key links between business and financial executives and the working level personnel actively engaged in asset optimization. Everyone engaged in asset optimization processes must understand how the business operates and the financial metrics that the business uses to measure results and track improvement. Metrics identify the starting point of an improvement program and provide performance objectives. They must be progressive, beginning with leading, behavior and process metrics such as training completed to establish that the initial steps of improvement initiatives are proceeding effectively with a high probability of producing the results required within the time allocated. These are followed by more activity and task

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based metrics as the initiative is deployed and placed in use. Finally, results metrics comprised of both performance and time demonstrate objectives have been met. Metrics provide the connection from improved asset performance, i.e., asset utilization, productivity and effectiveness, to overall operational and business performance, throughput, quality, and cost — all of which are essential mission / manufacturing objectives. Metrics are essential to convey the corporate value and return gained by improved reliability and overall asset effectiveness. Metrics are used to strengthen best practices; identify and eliminate poor practices. They also provide the basis for justifying the sustaining investment of personnel and resources required for successful asset optimization. There are basic issues to be addressed when commencing performance measurements including:  What is to be measured  Where is the data, is it readily available  How is the measurement made accurately  What does it prove / demonstrate  Who is responsible for the measurement  How will it be reported  How will it be used The asset optimization strategy is driven by corporate / mission objectives. This includes overall and performance metrics that cascade from high to low levels. The cascade assures that program objectives are consistent, activities connected and all asset performance, work processes and technical metrics contribute to the overall objective. The entire array of connected metrics must convincingly demonstrate the value of asset productivity improvements in terms of corporate objectives and financial performance. Metrics thus form the basis for virtually all activities including sustaining investments in areas such as staffing and training. From this brief description it is easily seen that multiple metrics are required to assess the performance and effectiveness of a complex, comprehensive asset optimization program. Metrics are crucial during the strategic planning process and are the only means of securing the resources needed to implement improvement initiatives.(62, 108) Asset optimization metrics must connect directly to corporate / mission objectives and demonstrate the contribution to manufacturing effectiveness. If the corporate goal is to gain greater uptime and / or quality, the metrics must directly relate to the goal. Activity metrics that aren’t related to the goal, e.g., percentage of Preventive Maintenance accomplished as a percentage of overall maintenance, may be counter-productive and lead improvement efforts in the wrong direction by encouraging low value tasks.(42, 108) Participation by all involved in the asset optimization process, especially when setting objectives, is essential to developing the commitment and optimism necessary to achieve goals. Industry leaders report that they are often surprised by the ambitious objectives and level of commitment that result from a clear needs statement conveyed as metrics to working-level teams tasked with developing action plans. To this end all key processes and practices must have at least one time and result metric to identify the objective. Likewise, each process and practice must have an owner who is responsible for meeting the objective(s). Characteristics Metrics must be understandable, directed to the requirements of users and controllable through work activities by those charged with compliance. At the upper levels of a corporation, asset and capital based metrics, such as RONA, are of greatest importance. At the working levels, RONA holds little meaning and is only marginally controllable. However, improving MTBF is both meaningful and controllable at the working level — and this improves RONA directly by eliminating equipment defects and associated spending (cost). Thus, effective metrics measure results that both managers and workers can control and improve. And this sense of control, span of ownership and contribution are vital to the overall optimization and improvement process. Employees at all levels in the organization must understand the metrics for which they are responsible and why the metrics are important. A valid comparison of performance measurements requires consistent definitions and rules. For example, is availability reduced when equipment that is spared or otherwise not required removed from service for

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maintenance? The causes of downtime — market effects (lack of sales / demand), operational considerations (shift to an alternate source for economic reasons), process difficulties, and equipment malfunctions (unreliability) — must be identified. Failure to properly identify cause will skew availability and reliability values and may lead to incorrect conclusions and prioritization of effort. (47, 62) Metrics must be concise. Focusing on too many areas at once may result in information overload and diminish the ability to direct limited resources to highest value activities. Classification Metrics can be classified into two groups. As illustrated in Figure 9.1, a vertical hierarchy cascades from top-level business metrics, RONA and ROCE, to program effectiveness. Within the hierarchy, many metrics are generally applicable across industry groups such as work management. Others, such as cost per unit production and MTBF are industry and even equipment specific. The differentiation is somewhat arbitrary and the metrics tend to overlap, see also Figure 9.12. Flow, linkage and consistency of purpose are of prime importance. In general terms, all performance measures must be supported by measures in the levels below that define, clarify and add detail to the metric directly above. As illustrated in both Figures 9.1 and 9.2, it must be possible to drill down through a stack of metrics, increasing explanatory detail at each level. For example, is a low value of RONA caused by Production Effectiveness (availability, run-rate, quality) or cost. If low availability is the culprit where and why? Likewise, cost; where and why are the deviations? In both cases a properly constructed metric hierarchy should allow identifying specific systems and equipment responsible for the deviations and the specific cause. Metric Class Strategic

Asset/Capital

Industry Performance

Operating Operating Effectiveness

Examples RONA, ROCE, ROE

Cost as a Percentage of CAV/RAV, EDC, Manufacturing Cost per Unit OEE, Asset Utilization, COPQ

Key Performance Indicators

Effectiveness

Safety and Environmental Indices, Manufacturing Cost per Unit, etc.

Reliability Management

MTBF, MTTF, MTTR

Work Process Efficiency

Planned to Total Work, Overtime as a Percentage of Total Hours Worked, Storehouse Stock Effectiveness, etc.

Program Effectiveness

Faults Detected Prior to Failure, Avoided Cost

Figure 9.1 Metrics by Class At the top tier, Return on Equity / Assets demonstrates the corporation’s ability to create shareholder value. As previously stated, this level must cascade to linked production and asset effectiveness metrics and, in turn, the elements that compose each of them. Further down in the hierarchy, work and program effectiveness metrics measure the contribution to profit and value (production or mission capability), identify costs (to support the budget process) and verify the effectiveness and return gained by improvement initiatives. Linkage must include the ability to “drill” down from a top tier metric all the way to the lower level metrics for the purpose of crediting the source of improvements and cause of deviations. At the technical level, metrics are used to monitor the performance of specific processes, systems, practices, equipment and components. Used largely by team leaders, engineers, and technicians, these metrics identify opportunities and measure the performance of the ongoing optimization and continuous improvement process. Figure 9.2 illustrates another way of looking at the same hierarchy.

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CORPORATE CORPORATE

RONA, RONA,ROCE, ROCE,TRR TRR

INDUSTRY PERFORMANCE INDUSTRY PERFORMANCE/ /EFFECTIVENESS EFFECTIVENESS Cost as a Percentage of RAV, EDC, Cost as a Percentage of RAV, EDC, EFOR, EFOR,Manufacturing ManufacturingCost/Unit Cost/Unit

OPERATING EFFECTIVENESS OPERATING EFFECTIVENESS OEE, Asset Utilization, RTY, COPQ OEE, Asset Utilization, RTY, COPQ

COST COSTEFFECTIVENESS EFFECTIVENESS

Labor Laboreffectiveness, effectiveness,cost cost/ /unit, unit,RAV RAV

RELIABILITY MANAGEMENT RELIABILITY MANAGEMENT MTBF, MTBR, MTTR MTBF, MTBR, MTTR

CAPITAL EFFECTIVENESS CAPITAL EFFECTIVENESS Spare parts inventory % RAV Spare parts inventory % RAV

STORES EFFECTIVENESS STORES EFFECTIVENESS Inventory turns, stockouts, Inventory turns, stockouts, delay delayfor forparts parts

WORK PROCESS WORK PROCESSEFFICIENCY EFFICIENCY Planned to Total Work, Overtime Planned to Total Work, Overtime as a Percentage of Total Hours, etc. as a Percentage of Total Hours, etc.

PROGRAM EFFECTIVENESS PROGRAM EFFECTIVENESS Faults Detected Prior to Failure, Faults Detected Prior to Failure, Avoided AvoidedCost Cost

Figure 9.2 Metrics Hierarchy Some separate metrics in three classes. Quantitative metrics described in this chapter; milestone metrics that define achievements by dates keeping the timing, tempo and accountabilities in place and qualitative metrics. The latter include objectives that can’t be quantified but describe the “nature or quality” of an improvement. Reference tables are advisable to add structure and orientation to qualitative improvements. An example might be the performance of an asset optimization steering team, Chapters XVII and XVIII. Working these three classes of metrics simultaneously provides balance and real accountability — e.g., measuring the performance and staying power of management driving the improvement program. Grahame Fogel Definition and Comparison A valid comparison of metrics within and between corporations requires precise, strictly defined terms. Beginning in the chemicals industry in the early 1990’s several metrics used to measure effectiveness have been expressed as a percentage of Replacement Asset Value (RAV) or Estimated Replacement Value (ERV). Maintenance cost as a percentage of RAV / ERV is one example. RAV / ERV was originally proposed as a broadly applicable, neutral measure that could be used as a normalizing factor across plants and processes. By the early 2000’s cost as a percentage of RAV / ERV had gained visibility at the senior management level and was being applied across a broad segment of industry as the top-level benchmark for maintenance spending. RAV / ERV is defined as the current expenditure that would be required to replace production capacity / output. Note that RAV / ERV is not the same as depreciated value. With increasing emphasis on cost as a percentage of RAV, many at the working level have begun to question whether a single Reliability and Maintenance (R&M) spending benchmark value can / should apply across industry or is the most accurate benchmark value industry, process and perhaps even site specific? What are R&M expenditures for optimum results? Can a single value of cost / RAV accurately identify expenditures that are too high in every case? What about too low for sustainability? Should maintenance cost per RAV be the final arbiter? If not, is there a method to determine an optimum level of R&M spending for best sustainable production effectiveness? Companies with a great deal of experience with the metric will state that RAV / ERV calculations are often inconsistent within the same company and are probably misleading as comparative metrics across companies and industries. Furthermore, optimum maintenance costs clearly vary by process; a water purification plant certainly should have significantly lower maintenance costs as a percentage of RAV than a facility processing sulfur or hydrochloric acid. This is seen in survey numbers where maintenance costs as a percentage of RAV that are routinely achieved by one facility are clearly out of the question for another.

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Plant age is another factor. Although some claim otherwise, an older plant typically has higher maintenance costs compared to a new plant as soon as the initial deficiencies have been corrected. Finally, geographic location will have an effect. Parts costs are typically higher in the Middle East and Southeast Asia locations, labor costs are much lower compared to North America. Many corporations / facilities use RAV / ERV as the denominator for key performance / spending metrics. Recognizing there are inconsistencies in calculation between companies, many limit RAV / ERV based metrics to initial objectives and measuring progress. Once an initial objective is established, the site must only assure that RAV / ERV is calculated consistently for the site throughout the improvement process. The conclusion: RAV / ERV metrics can be used for guidance as relative metrics to measure improvements, however, they are not absolutes that can be applied with confidence across industries and processes. For all these reasons any benchmark derived from an average claiming to represent best practice across a range of industries, locations and processes must be viewed with a great deal of skepticism. MTBF is another example. There are many definitions of “failure” that significantly affect the value of MTBF calculated by different companies. One company reported they spent days attempting to define a failure without reaching agreement. Another substituted a strictly defined “event” for failure. With some specified exceptions, anything that requires “lock out” is considered an “event”. They calculate Mean Time Between Events (MTBE) as their primary measure of reliability. Definitions should conform to industry conventions. They must include the metric itself, all of its components, and the method of calculation. Those who will use the metric and are accountable for results must understand and agree on the definition. Definitions should be printed and readily available to ensure consistency of application. Appendix A. lists the definitions utilized in this Handbook. Comparing metrics also requires consistency of mission, overall intensity, location / environment and even age.(62) Consider a new race car and an older passenger car. Even though both have an internal combustion engine, four wheels and operate on a road, major differences in mission, operating intensity and age significantly impact the ability to compare performance with measures such as fuel consumption and operating cost. This is the same caveat regarding metrics based on RAV / ERV discussed in greater detail earlier. As this is written in mid 2006, The Society of Maintenance and Reliability Professionals (SMRP) is establishing a consensus definition of frequently used terms. In addition to sharing a common definition of terms and metrics, facilities must assure metrics are measured and calculated in accordance with common industry practice. Metrics should be measured under consistent conditions within the process. For example, a determination of the average drive time from home to work may or may not include the time required one day a week to fill-up with gasoline. If it did, you might find yourself five minutes early on the days you didn’t purchase gasoline and ten minutes late on the day you did. This simple example highlights an important issue that is all too often overlooked. Metrics must represent the process. If the process changes, the performance metrics must also change. In the simplified example, the metric could be made more descriptive of the process; average driving time to work without accident delays, stops for gasoline, groceries or other errands. From this basis, one could calculate the average time required to fill up with gasoline, get groceries, etc. and estimate how many times per week errands / delays occurred to arrive at an accurate metric for both the normal process and the exceptions. There also must be consensus on the exact starting and stopping point in the process. Most frequent airline travelers have experienced this issue. Airline on-time departures are measured on the basis of pushback from the gate compared to scheduled departure. Planes are often pushed back ten feet where they remain for an hour or more due to traffic, weather or other delays. However, by the airline’s rules, the flight made an on-schedule departure! In the industrial world, metrics must be seen as a positive force driving improvements that are beneficial to all and not to attach blame. This is an essential step in tracking progress toward the necessary

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improvements. Otherwise metrics will be manipulated like aircraft pushback’s to ensure that performance, representative or not, is as high as possible.

BENCHMARKING Enlightened managers understand that optimizing asset performance and utilization is a key component of business success and a contributor to — rather than a detractor from — production effectiveness and profitability. In the long run, top-down, peer and working-level support are all essential for success. Benchmarking reveals the comparative performance required to attain organizational buy-in. Benchmarking — a systematic process for measuring “best practice” (to be) and comparing the results to current plant performance (as is) in order to establish performance objectives and identify opportunities for improvement.(35) Benchmarking enables companies to accurately identify world-class performance from unbiased, published values and assess their current performance relative to the “best”. (123) Almost every aspect of business can be improved. Industry leaders understand that while they have pockets of excellence they also have gaps where improvements are necessary. No single facility is excellent in every area.(22) Leaders also recognize that understanding the tools, techniques, and results from other companies is a vital part of the improvement process. Critical self-examination must occur on an ongoing basis to recognize opportunities for improvement and take full advantage of changing state-ofthe-art techniques. Benchmarking is a means to gain insight into competitive realities and define the objectives and measures of performance needed to initiate positive change and to manage for greatest effectiveness.(6) Numerical reference standards — benchmarks — that define best performance in key aspects of the Asset Optimization process must be established in order to recognize the need and opportunities for improvement. A realistic benchmarking effort is the first step toward understanding real conditions and recognizing opportunities for improving the effectiveness of an Asset Optimization program. Thus, benchmarks establish comparative standards from which performance objectives are set. Benchmarking must be done continually. Results of benchmarking must be incorporated in objectives for day-to-day operations so that organizations can begin to think differently about how they work and solve problems.”(123) By its nature the benchmarking process has many advantages including:  Promotes awareness and adherence to performance metrics, establishes objectives accountability for results  Forms the basis for data driven decisions, minimizes bureaucratic objections  Provides the basis for continuous improvement as expectations are defined, met and repeatedly elevated  The continuous improvement process becomes ingrained in the organization’s standard operating procedures and eventually the culture Categories Benchmarks are typically in four categories: industry, process, functional and program. (35) Benchmarks are obtained from surveys, exchanges with similar organizations or they may represent organizational goals and objectives. Fortunately, industry-best benchmarks for nearly every asset and work effectiveness area are published and readily available. Figures 9.10 and 9.11 contain a convenient tabulation of commonly used benchmarks distilled from multiple sources. External industry-wide and process benchmarks are valuable to assess performance. Each industry has generally accepted overall “world class” benchmarks that are useful for determining comparative performance, e.g., cost and value of spares inventory as a percentage of RAV / ERV or EDC, tons of steel production per availability hour and assembly hours per automobile. (108) From there, internal corporate or facility metrics can be established for each element within the overall process to prioritize and drive the improvement program. Regardless of the source, care must be taken to ensure that objective values set from benchmarks are realistic and attainable. Objectives that are unrealistically high will not gain the commitment necessary for

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success. Leaders report that allowing working-level implementation teams to establish performance objectives typically leads to ambitious goals, strong ownership and a high level of commitment to their attainment. Benchmarking Process The general benchmarking process, illustrated in Figure 9.3, has six essential steps: (9, 92) 1. Establish a comprehensive set of performance parameters that indicate contribution and compliance to principal business objectives. 2. Completely define each parameter; assure consistency with industry definitions. Establish “best practice” benchmark objectives; Figures 9.10 and 9.11 both contain typical measures and published benchmark values. Establish methodology for collecting own data. 3. Collect, measure and calculate current performance for each benchmark category from site information – Validate accuracy of the information – Establish current (as is) performance 4. Compare current performance measurements with “best practice” benchmarks; establish Gaps to best performance. 5. Assess and analyze results. 6. Identify areas of greatest opportunity for improvement based on potential value created by closing gaps Select Selectkey keyperformance performance/ /effectiveness effectiveness parameters parameterstotobe bebenchmarked benchmarked Establish Establishdefinitions definitionsand and“best “bestpractice” practice” values valuesfor foreach eachparameter parameter Collect Collectfacility facility/ /site sitedata datafor foreach eachparameter, parameter, establish establishcurrent currentperformance performance Compare Comparecurrent currentperformance performance totobest bestpractice practice— —Establish EstablishGaps Gaps

Assess Assessand andanalyze analyzeresults results

Identify Identifyareas areasfor forimprovement improvement

Figure 9.3 General Benchmarking Process(10) One company elected to benchmark internal quality, performance and effectiveness in six areas: (93) 1. Leadership 2. Planning and scheduling 3. Preventive and Condition-Based Maintenance 4. Reliability improvement 5. Spare parts management 6. Contract maintenance management Results of this process are illustrated in Figure 9.13. Industry best performance is represented by the outer circle, site best by the double line, team performance by the solid single line. Gaps between industry and site best are measured along a radial for each area.

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Power generating companies have traditionally benchmarked in areas, such as: (6)  Reliability, Availability, Maintenance (RAM) non-fuel operating and maintenance costs  Fuel costs and heat rates  Capital effectiveness Successful benchmarking begins with consistent definitions. Activity Based Accounting, Chapter VII and a chart of accounts delineating equipment, and preferably component level, costs are essential. Accurate records of availability, downtime and cause must be available or constructed from logs. Data requirements should be matched to data available for comparison. There is often a tendency to want too much data.(6) Benchmarking methodology must be: (6)  Plant, process and / or equipment specific  Cognizant of and account for data availability, reliability and accuracy  Easily understood  Repeatable  Capable of demonstrating cause, effect and results for a resulting improvement strategy  Useful for follow-on monitoring Figure 9.4 illustrates a corporate level dashboard with drilldown capability to individual plant, system, program, equipment and component metrics. With this information deviations from objective performance can be quickly spotted for correction.

Metrics Orders Backlog

RONA Safety Index

Share Price

Corporate RONA/ROCE

Environmental Index

RONA/ROCE RONA/ROCE

Prod. Prod.Effect. Effect.

KPI’s

Availability Availability

Yield Yield

Quality Quality

MTBF MTBF

Plant/Business Unit

Cost Cost

Cost/RAV Cost/RAV

Cost/Unit Cost/Unit

Efficiency Efficiency Pareto to identify distribution MTBF affects availability and cost

Work WorkEffectiveness Effectiveness Reliability Reliability

Effectiveness by Production Unit/Line Equipment Work Program

Figure 9.4 Corporate Dashboard with Drilldown to Performance and Effectiveness Metrics Identifying and Prioritizing Improvements The comparison to “best practice,” often called a Gap analysis (see Chapter XVIII), leads to an array of potential improvements directed to achieving “best practice” levels of effectiveness. (55) Within the Asset Optimization program, gap identified potential improvements are risk adjusted and prioritized in order of potential increased value.

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A more detailed diagram of the benchmarking process and how benchmarking fits into an overall improvement process is illustrated in the following figure. (35) Corporate Objectives Identify Key Performance Indicators Form FormBenchmarking BenchmarkingTeam Team Set SetBenchmarks Benchmarks Measure MeasureCurrent CurrentPerformance Performance Compare CompareAgainst AgainstBenchmarks Benchmarks Analyze AnalyzeVariances Variances

No

Performance PerformanceGap? Gap?

Yes Identify IdentifyImprovements Improvements

Recalibrate RecalibrateBenchmarks Benchmarks

Implement ImplementTrial TrialImprovements Improvements Monitor MonitorResults Results

Enhance EnhanceTrial TrialImprovements Improvements

Compare CompareAgainst AgainstBenchmarks Benchmarks Improvement ImprovementOK? OK?

No

Yes Implement ImplementFull FullImprovements Improvements Recalibrate RecalibrateBenchmarks? Benchmarks?

Yes

No Implement Continuous Improvement Program

Figure 9.5 Detailed Benchmarking and Improvement Process (35) In a multi-business enterprise there may be broad variations in performance resulting from factors such as design, type and intensity of processing. Industry leaders recognize that efforts should not necessarily be focused on the largest apparent Gaps. Value potential, difficulty, cost and time required to close a Gap all are considered during a risk assessment. Industry leaders utilize the risk assessment process to adjust opportunities for improvement and evaluate initiatives to determine which have the highest probable returns.(129) Typically there are far greater opportunities to increase profits than resources, and this process assures that resources are allocated to gain greatest risk balanced improvement. (129) One facility recognized the need for and potential value of permanent improvements to a spared pair of pumps that continuously cavitated causing accelerated seal and bearing failures as well as impeller and casing erosion. The pumps sounded terrible in operation, failed frequently and were a nagging concern to Operations. Operations had written numerous Work Orders to maintenance as well as requests for corrective action to Engineering. A detailed study disclosed that the solution required digging a pit to lower the pumps five feet with safety concerns or raising the tank from which the pumps were supplied by about the same amount. Neither solution was practical or cost effective. They simply had to suffer the inadequate design. Gaps to benchmark performance must be followed by a comprehensive improvement plan. The plan must include interim metrics and performance indicators.(52) Interim or leading metrics, explained in more detail later, include training complete, improvements deployed and pilot implementation completed. Leading metrics are used to monitor the continuous improvement process, verify progress to a longer-term objective, and indicate changing conditions and / or the need for additional action.

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Benchmarking is a continuous process where benchmarks are used as performance objectives to drive the improvement process.(35) When used as performance goals, individual benchmarks must fit the total improvement fabric. Anything less, e.g., total emphasis on spending reductions, often leads to temporary, short-term fixes that have an adverse long-term impact. (84) External Benchmarking External benchmarking is advantageous. It provides a means to get behind the numbers, to see how processes function and are conducted by leading performers to achieve industry best results. There are several rules of etiquette that must be considered when an external benchmarking process is considered necessary. Perhaps the most important being to refrain from requesting to see or examine any process or activity that your company would be not able or willing to share with an outsider. The chances are that others will be under the same restrictions. Benchmarking identical processes such as maintenance planning and scheduling or stores effectiveness with a non-competitive business avoids many of the problems associated with giving or receiving proprietary information that may be considered trade secrets. A large U.S. maintenance group recognized the need to improve its maintenance processes and response times. Working partnerships were developed with a national research laboratory, major university, regional power generating company and county department — all non-competitive entities. Over the course of the next year, the effort led to the identification of 21 distinct improvement ideas. Some of those challenged bedrock organizational values, long held work management policies and practices and even existing Federal regulations. All of the participants benefited from the experience. The effort led to the establishment of an informal assistance network that encouraged members to contact one another to discuss related issues. Over the course of time, each member organization excelled at some work practices that it could share with the others. Other such groups will likely have a similar experience. Benefits of Benchmarking Learning operating and business requirements and priorities for equipment management may be the most important initial benefit of benchmarking. Once the gaps to best practice have been identified, everyone involved in the asset optimization process should begin to explore opportunities and detailed initiatives for improving efficiency and effectiveness. To take full advantage of the benefits of benchmarking and metrics, key metrics (KPI’s) compared to benchmark objectives should be clearly displayed and updated at least monthly. Displaying metrics often has an immediate positive effect by elevating awareness, injecting competition, increasing enthusiasm and ownership and encouraging everyone to achieve the objectives.

USE OF METRICS IN THE ASSET OPTIMIZATION PROCESS Efficiency and Effectiveness Before proceeding further it would be well to review the definitions of efficiency and effectiveness introduced in Chapter I, Figure 1.1. Efficiency: Performing a given activity or task well e.g., high percentage completion of PM’s regardless of value Effectiveness: Performing the correct task efficiently, e.g., high conformance to industry best safety, availability and work quality benchmarks Efficiency is activity and task oriented, effectiveness is results oriented. Efficiency and effectiveness metrics at each level in the performance measurement hierarchy must focus on mission and business results.(129) Within the Asset Optimization program the primary focus of metrics must be on results — effectiveness. Thus, measuring the success of a program, such as CBM it is far better to rely on a results metric of defects detected prior to failure or even undetected failures (objective of zero!) rather than a task metric of

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measurements recorded. The same applies to PM: the key program effectiveness metric should be defects identified (e.g., PM origin of Work Orders) and failures avoided — not PM tasks completed. Benchmarking produces objectives, par on a golf course is a familiar example. Metrics are the score. There must be accountability for metrics and the status that the metrics represent. Some organizations consider it essential to assign people by name to each metric. (129) Metrics Keep Score Regardless of the starting point, the gap to best practice, keeping metrics moving forward in a positive direction is crucial. Displays and charts, Figures 9.10 and 11 should show progress to keep everyone enthusiastically engaged.

COMMONLY USED METRICS, ADVANTAGES AND LIMITATIONS Figure 9.1 illustrates a family of production / manufacturing company metrics — from asset and capitalbased metrics to process and program metrics. Metrics must link to each other and to financial performance of the enterprise at several levels. There must be a clear sightline from top to bottom. A proposed financial model illustrating the basis for metric is discussed in Chapter VII. For the purposes of this section metrics are divided into six groups: 1. Business operations effectiveness — corporate, business unit, plant 2. Operating and cost effectiveness — by industry 3. Overall Asset Optimization program effectiveness 4. Process effectiveness — work management and stores 5. Program effectiveness — PM, CBM, etc. 6. Equipment and systems effectiveness — MTBF Business Operations Effectiveness Corporate, business unit and plant effectiveness metrics are typically asset or capital based, measure creation of shareholder value and should have some linkage to share price. As the top tier, business metrics are the basis for strategic operating and cost objectives that, in turn, are gained by mission, production, cost, process and program strategies. Examples of business metrics include RONA and ROCE. Some companies use normalized capital effectiveness measures called Activity Value or Contribution Margin. Both essentially represent percent profitability above the cost of capital. One company using Activity Value requires results in excess of 20 percent of sales in good years and no less than zero in bad years. (50) Adherence to this objective means that the company’s profitability should never fall below the cost of capital. The company measuring Contribution Margin will close plants with negative results that are considered a drain on shareholder value. Other companies use Return On Equity (ROE) or Return On Assets (ROA) as a governing corporate metric.(129) At least one company using ROE recognized that in order to attract investment and build shareholder value it must demonstrate a better return on capital than others in equivalent industries. As stated earlier, a low return on capital deprives the company of the resources necessary to stay up with the competition. There is another category of metrics in this high level group. It consists of non-financial measures of operational performance that are essential for continued success. Examples of metrics in this category include:  Safety, Health and Environmental (SHE) indices  Plant performance — typically production and cost measures, Capacity Index, described later, would also fit here  Quality of supply, on-time delivery  Customer satisfaction  Employee satisfaction

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Operating Effectiveness Metrics — by Industry Overall effectiveness metrics are measures used to evaluate operating and quality performance. Examples include: Asset Utilization, Overall Equipment Effectiveness (OEE), Cost Of Poor Quality (COPQ), Uptime, Operational Readiness, Availability, Cost of Unavailability, and Downtime Overall Equipment Effectiveness Overall Equipment Effectiveness (OEE) from TPM is a commonly used metric that originated in the discrete manufacturing industry. OEE measures production operating and equipment effectiveness. (10,129) It is the product of availability (uptime), production throughput (yield) and first-run-quality. All are expressed as an effectiveness ratio of actual to objective performance. An OEE of approximately 85 percent or greater is considered world-class performance in the discrete and batch manufacturing industries. An equivalent to OEE may be considerably higher, above 95 percent, in continuous process industries such as refining and chemicals. When demand exceeds capacity, any reduction in OEE represents lost profit. (112)

One caution with OEE — availability must coincide with operating requirements. This is especially important when requirements to operate are less than 100 percent, such as a peaking power station. Timed Availability, discussed in more detail in Chapter VII, requires calculating availability relative to windows of required operation. Many North American manufacturing facilities report OEE’s at 50 percent or even lower. This indicates a “hidden” plant recoverable capacity of at least 35 percent, as illustrated in Figure 9.6. The hidden plant includes:  Downtime, scheduled and unscheduled  Slow time  Process-related rate losses  Quality and yield losses A lack of demand may also contribute to the hidden plant. (10) The idea behind the “hidden plant” is to exploit the opportunity and narrow the gap between average and best demonstrated production rate by attacking and eliminating losses of all kinds.

Best Demonstrated, Sustained Production Rate

Scheduled Downtime Unscheduled Downtime

Production Output Objective Opportunity

Operations / Process Losses, Slowdown Out-of-Specification, Scrap

Average Production Output

Net Good Production

Figure 9.6 Real and Hidden Plants(129)

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Downtime can be broken down in a number of ways. One reference suggests dividing total downtime into the following five categories: (112) 1. Process 2. Changeover 3. Set-up and adjustment 4. Logistics 5. Sales 6. Waiting 7. Equipment failure A case can be made for adding rate reductions as part of category 1 and a 6 th category of maintenance, both scheduled and unscheduled. It is very important to document every minute of downtime and slowtime with the cause to an equipment level if possible. This provides essential input for identifying lost production in terms of equipment and cost. Several companies perform detailed analyses of lost uptime, yield, quality and margins caused by shutdown or slowdown, whether planned or unplanned. The analysis includes frequency of occurrence and consequences. The specific location of the loss in the business process is identified: sales, process (rate and quality), equipment unreliability, or indirects e.g. support structure, planning, administration, pricing and other variables such as abnormal catalyst deterioration, along with root cause. Monetary loss depends on specific conditions, plant and product.(112, 129) One facility was able to document lost production in terms of minutes downtime and cause for the previous two years. Presented on a Microsoft® Excel® spread sheet, Reliability Engineers could easily identify specific equipment that needed attention, the specific system or component at fault as well as the potential value of improvements in terms of production gain. The spread sheet was well worth reading as some entries were quite humorous. An industry leader records the individual terms that make up OEE but does not roll the terms into an overall measure of OEE. The plant states that understanding and correcting details within availability, yield, quality and cost metrics are highly important. They believe that an overall OEE calculation offers little added value and may be misleading because beneficial changes in one term may mask detrimental changes in another.(129) A third large company has ascertained average and corporate best availability by process and even specific model equipment. Since OEE can be increased with more robust equipment and increased maintenance, cost effectiveness should be added as a fourth measure of performance, see Chapter VII. Cost of Poor Quality Cost of Poor Quality (COPQ) from Six Sigma includes the full cost of all quality variations including inspections, remanufacturing, penalties for missed deliveries and lost customer good will, Chapter V. COPQ is calculated by yield affected, i.e., tons, pounds, etc., multiplied by price per unit of prime product. One company has established a COPQ objective of less than 10 percent of Cost Of Goods Sold (COGS). (112, 129)

Cost of Poor Quality is a stronger and more comprehensive metric than quality from OEE Combined, asset utilization, yield and COPQ are similar to OEE. Asset Utilization: Percentage of time a plant is in operation at Maximum Demonstrated Production Rate, perfect quality and defined yield. There must also be some method to measure delivery reliability, especially when the production output is part of a JIT supply chain.(112) Cost Effectiveness Metrics — by Industry Industry cost performance metrics provide a basis for determining comparative effectiveness. They are often established by upper level plant or corporate management as controlling objectives.

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Industry metrics include:  Maintenance cost as a percentage of Replacement / Estimated / Current Asset Value (RAV / ERV / CAV) — commonly used in the chemicals industry.  When the percentage RAV metric was initially proposed, leading performance in the chemicals industry was approximately 2.5 percent. Today it is probably around 2.2 percent depending on the process with some companies claiming less than 2 percent. One company computes costs per RAV for every production unit, rather than calculating costs per unit output.(129) Another company, reporting about 1.5 percent above the “world class” value, states that the gap represents a potential $32 million annual gain in profits. (10)



A downward trend in cost per RAV without corresponding increases in equipment effectiveness metrics probably indicates assets are being consumed.(92) Reducing defects is the only way to gain a sustainable reduction in cost per RAV.(129)



Cost and other measures as a percentage of Equivalent Distillation Capacity (EDC). EDC benchmarks, maintained by Solomon Associates, are universally used in the oil refining industry. Effective Forced Outage Rate (EFOR) — determined from an EPRI calculation and used in the power generating industry  EFOR: the probability of experiencing either a forced outage or forced de-rating when called upon to deliver load. Output — (tons) per availability hour is used in the steel industry Production cost and / or labor hours per unit production — (ton, pound, MW, barrel, automobile, etc.) is widely used across industry. This metric is advantageous in that it incorporates the benefits of increased production.



 

To repeat some earlier comments, inconsistent definitions and methods of calculation often add uncertainty to metric comparisons between companies. Values such as RAV may be defined and calculated differently by different companies and often between plants within the same company. Thus, industry benchmarks expressed as a percentage of RAV must be used with caution. RAV based metrics have other significant weaknesses. RAV metrics do not consider the process, age of the facility and operating intensity, all of which have a strong influence on costs. Finally, with the cost numerator as the sole controllable variable in the effectiveness calculation, reducing cost is the only way to gain a positive improvement. There are no considerations regarding the sustainability of continuing cost reductions, impact on availability or production. As one rather cynical person stated: “If a continuing reduction in cost as a percentage of RAV is demanded we’ll eventually have to shut down entirely!” The use of RAV based metrics are much more effective for tracking performance within a single company where the calculation is consistent.(129) A financial indicator such as Costs as a percent of Replacement Asset Value might be a meaningful corporate management metric. However, it is unlikely to inspire individual employees. Specific metrics such as maintenance costs for generic equipment, e.g., motors, pumps and compressors are understandable to employees, within their ability to control and contribute strongly to the business metric.(41, 108) As a final caution, several companies have noted that while a site overall cost per RAV may make sense, attempting to break the overall number down for individual unit benchmarks within the same site may produce some startling conclusions. A recommendation is to adjust individual objectives to most reasonable values within the overall. At two sites, defining individual unit cost objectives per RAV using replacement values supplied by Finance, resulted in unattainable cost objectives for some units while allowing greater than current spending for others. Based on the calculation, the former appeared highly cost ineffective while the latter seemed very effective. Considering other metrics and personal observation the reverse was true. Objectives had to be modified to gain conformance with actual conditions.

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Earlier chapters have warned of the dangers of short-term cost reductions at the cost of long-term quality and operational effectiveness. Such practices contradict the value or profit center mentality that is a core principle of Asset Optimization. If possible, cost per unit output is a better controlling metric as it encourages increased production availability as well as cost effectiveness. Life cycle profit (return on an asset) is an even better way to evaluate asset performance than life cycle cost. Establishing metrics based on life cycle profit will reinforce the necessary cultural change from a cost-centered mentality to the more constructive profit-centered mentality. (129) Overall Asset Optimization Program Metrics Appendix E contains detailed scorecards including a scorecard outlining all essential activities and tasks within a comprehensive Asset Optimization program. The program scorecard includes best-practice benchmarks and proposed weights. A consensus effort, the scorecard, is intended for use to define elements that should be considered for inclusion in a new program as well as provide a basis for auditing the content and effectiveness of an existing program. The scorecard divides a comprehensive Asset Optimization program into twelve program categories: 1. Results / Program Effectiveness 2. Definition, Charter, Organization, Administration, Training 3. Institutional Values, Culture, Relationships 4. Organizational Effectiveness, Knowledge and Skills Management 5. Reliability Engineering, Risk Management, Reliability Improvement 6. Reliability Modeling, Prediction, Lifetime Analysis 7. Reliability / Maintainability for New Equipment 8. Operating Performance Measurements 9. Maintenance Requirements and Program Development — RCM 10. Equipment Management Processes  Lubrication Program  Condition Monitoring, Condition Based Maintenance  Time Based Preventive Maintenance  Proactive Maintenance 11. Work Management Control and Execution 12. Materials Management, Stores Effectiveness Results of an actual program survey are illustrated in Figure 9.7:

Figure 9.7 Asset Optimization Performance Survey Results

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Capacity Index Over the past few years there have been an increasing number of inquiries asking about the availability of a single numerical metric that could accurately characterize and compare current and future performance, condition, utilization and effectiveness of physical assets across dissimilar facilities and processes. One person asking stated that his board requested a single number that would, at a glance, enable them to assess current and expected plant performance across a number of facilities located in several different countries. Capacity Index is the term coined provisionally in this Handbook to describe such a top-level metric. As conceived, Capacity Index would consist of three elements beginning at the equipment and system level: 1. Current mechanical condition; from condition monitoring and / or the process control system for control system components 2. Current operating performance and condition; from the process control system 3. Expected lifetime; based on change in condition and risk considering: – Operation within design parameters – Known and / or probable conditions that aren’t yet affecting current performance and condition, e.g., accelerated erosion, corrosion – Past operating and repair history The first two elements could be obtained automatically from systems in use at most facilities. At present, the third quantity would probably call for human judgment and have to be entered manually. As visualized, capacity index would be calculated at the system level attaching a numerical value for each component based on the above criteria. Index’s for each system component would be weighted based on importance to the system and risk. For example, a failure to a spared pump might not affect system function; its weight within the system Capacity Index would be low. On the other hand, the failure of an unspared machine, vessel, heat exchanger or control valve would halt the process. In this case the component Capacity Index would depend on risk — probability and consequences of failure combined with time and cost to restore service. Component weights would be combined into a system Capacity Index and further into process and plant Capacity Index’s using the same weighting principles. A second numerical value, plus or minus from zero, has been suggested to characterize changes. A plus value and conditions are improving; a minus value, conditions are deteriorating. How could conditions improve? As one example, operating or process changes often can be made to reduce stress on systems and components thereby extending life. Although a Capacity Index metric has been discussed and considered a good idea by everyone exposed to the concept, there is currently no proven implementation. There might be a way to combine the Capacity Index concept with the implementation developed by Eastman Chemical for their Asset Management Index described in detail in Chapter XI. The idea is worth pursuing. Pierré Swart at Sasol in South Africa constructed a proposed metric system level similar to Capacity Index. His very clever concept, illustrated in Figure 9.8, includes direct access to design and other documentation for the risk assessment.

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Figure 9.8 Proposed System Capacity Index,

courtesy Pierré Swart

Process Productivity and Effectiveness Measures In the asset optimization process, work (maintenance) and stores management metrics fall in this category. Work Management Work process performance measures are used to assess productivity and effectiveness in terms of work origin, percentage planned, adherence to schedule, work quality and other factors. They measure how effectively resources, primarily labor, are deployed to meet cost and effectiveness goals. As a result, work performance metrics, identify opportunities for improvement and define staffing, budget, and training requirements. Some measure maintenance effectiveness by the percentage of scheduled to total maintenance, others by metrics such as PM / PdM as a percentage of total maintenance. The logic behind the first is that optimized planning and scheduling maximizes maintenance productivity and effectiveness. As expressed earlier, Asset Optimization regards results metrics as being considerably more representative of value creation and success than activity metrics such as PM as a percentage of the total. It also should be recognized that a high percentage of preventive, PM, to total maintenance has little meaning if the tasks are unnecessary, of little value and / or improperly performed. The work process productivity measures outlined in the following paragraphs are based on planned maintenance defined as follows: Maintenance scheduled in advance of commencement by a specified lead-time (planning interval) that is typically one week. Some facilities require a two-week lead-time to qualify as planned maintenance. Typical work productivity effectiveness measures include:(10, 43, 84)  Labor utilization — hours charged on Work Orders as a percentage of total payroll hours (Work Order Discipline). Ideally the value should be close to 100 percent. Sites that utilize this metric and strive for accuracy state that maintaining 65 percent to 70 percent is a struggle and represents high performance. Some organizations report payroll hours from Work Orders and thus the number is always 100 percent. In the latter case, work effectiveness (wrench time) and planning accuracy become all important to answer the question — is work being accomplished most effectively?

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Planning accuracy — actual time expended as a percentage of planned time. This measure must be monitored closely by first-line supervisors and planners to assure planned time is as close as possible to the actual time required to perform a task with minimum wasted time. In addition to inadequate planning, deviations can be caused by additional defects discovered during the course of work that changes the scope of work. Many state cynically that planned hours are always reported as actual if the work requires less time than planned. For this reason some sites do not reveal planned hours on the Work Order. Planning Accuracy is a key factor for staffing, balancing work and assuring optimum work effectiveness. Only a few facilities measure planning accuracy, although studies show that those who do are 40 to 60 percent more productive.(82) Schedule Compliance — labor hours scheduled and completed as a percentage of total work accomplished. A large corporation in the hydrocarbon industry is achieving 70 percent compliance with a four-week rolling maintenance plan and 90 percent compliance with a oneweek schedule. Daily schedule compliance is the most important measure in work management. (19)

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Emergency, break-in work required as a percentage of total work. This is the inverse of the previous metric. Most industry best facilities have an objective of reducing unplanned or break-in work (defined as work scheduled during the same week as accomplished) to less than 15 percent of the total. Many leaders schedule 100 percent of available hours with 15 percent to 20 percent of the total consisting of discretionary work that can be postponed without disruption in the event of break-in requirements. One facility divides break-in work into two categories: Work that must be commenced immediately and continued to completion and work that must be accomplished within the planning interval but that can be delayed a few days for accelerated planning. Another leading facility performs a monthly Pareto analysis to identify prime causes of break-in (unplanned) work.(129) For an example, see Figure 9.14. Ratio of planners and first-line supervisors to crafts: Approximately one supervisor to 10 to 15 crafts, one Planner to 20 crafts. Percentage of labor and material cost. The ratio is roughly 50 percent labor – 50 percent material in North America depending on the craft, shifting to as much as 70 percent material to 30 percent labor in Asia and the Middle East. One facility uses the ratio of maintenance labor to material as a measure of labor effectiveness. They state that as maintenance becomes more proactive and changes toward failure analysis and prevention, the labor percentage will increase. (129)

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Time expended on standing / blanket work orders as a percentage of total work hours. Standing or blanket work orders issued for general repairs during a specified time are a convenient way of circumventing the process necessary to gain maximum productivity and effectiveness. In general, blankets should be limited to small tasks where records are not required such as insulation repairs. One organization states that standing Work Orders are used to cover non-specific routine work such as housekeeping, quick adjustments and meetings as well as small jobs that take no longer than 30 minutes and cost no more than $200 to complete. (125) Blankets must not be allowed for tasks such as pump, valve or instrumentation repairs. Labor Utilization i.e., wrench time — hours expended performing actual tasks as a percentage of total payroll time. The conventional definition of wrench time excludes time spent locating tools or parts, delays due to unavailability of equipment, travel to and from the job site, bathroom breaks and washing up. Wrench time is a very difficult measure to make and generally calls for observation and estimates. Fifty to sixty percent is considered world class many facilities average less than 30 percent. (129) At the low value of wrench time, two crafts are required to perform the work that is accomplished by one in an industry best facility. It should be noted that within a profit centered organization wrench time will include time expended on proactive tasks such as RCA.

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Rework — work hours expended on repeat repairs as a percentage of total work accomplished. Rework is typically defined as repair work repeated within a given time interval. Many organizations use one to two weeks; industry leaders will use four to six weeks as the time criteria for rework. Rework typically indicates faults or errors in the original work. However, the first line supervisor must be involved and exercise judgment to note successive work that may not be connected or where repair difficulties were known prior to commencing the original work. In one organization with very detailed records, rework could be broadly classified in two categories: The first, where time constraints, parts or the nature of the failure itself diminished the probability of a successful repair from the outset of the work. The second category consisted of clearly careless mistakes; bolts missing or not tightened properly, gaskets missing or cut during installation and similar quality defects. Repair Success — a positive metric that could replace the more frequently used rework. Repair success is determined by compliance to four criteria: – Actual hours expended within +/- 10 percent of planned hours – Restored to service meeting cost and schedule objectives – No startup difficulties caused by the work accomplished – No rework required Overtime hours — as a percentage total hours worked Work backlog — hours of work planned, but not yet scheduled divided by the number of craft hours available per week. Generally expressed in weeks by crafts. Backlog age — typically the average time since submission of all work in the backlog. The necessity of completing work that has been in backlog for more than a few months should be questioned.

Work Productivity Metrics must be consistent with and reinforce overall optimizing actions. For example, enlightened practitioners of work productivity optimization view repairs as opportunities to eliminate defects. They encourage RCA at the craft level, and consider the process as essential to improving equipment effectiveness. Stores Management  Storehouse stock effectiveness, i.e., service level, on time delivery — percentage of time parts are available when required  Stockouts — percentage of the time that material is not available  Transactions with a Work Order number — essential for process discipline  Orders placed by the Planner — essential for process discipline  Inventory value as a percentage of RAV. SMRP reports that 1 percent is a best practice benchmark. Some companies meet parts requirements at inventory levels between .25 and .5 percent of RAV. Best practice is reportedly .5 to .8 percent.  Inventory Quality Ratio (IQR) — ratio of active Maintenance Repair Overhaul (MRO) parts inventory to total inventory.(81) In Japan, stores disbursements as a percentage of total maintenance material appears in two distinct categories. Plants with a percentage above 50 percent are managing stores through Western-style storerooms. A cluster of Japanese sites with ratios of less than 20 percent are using dependable local suppliers in a consignment, just-in-time (JIT) environment.(92)  Stores value per stores employee — Helpful to benchmark requirements for storehouse personnel  MRO parts inventory turns — total value of issues during the year divided by total inventory value World class is reportedly about 1.5 percent. A facility expressed reservations that when inventory turns are used as a critical metric, all stock is lumped together. “Slow movers” may be hidden.(81) There is an additional consideration: Shifting to outsourced and consignment spares to reduce inventory value will typically remove the standard “fast movers”. Spares remaining are likely specialized and “slower movers” resulting in an undesirable increase in the inventory turns ratio. The two effects must be balanced and all involved understand the tradeoff.

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With good usage measurements it may be possible to safely reduce quantity stocked. This action will reduce total inventory value and, by so doing, increase turns. Inactive items — inventory items that haven’t been issued within a specified time period

A large manufacturer reports combined production and MRO inventory is approaching 21 turns with an objective of 85 turns. (Eighty-five turns represents approximately three days of material and (Work In Process) WIP on hand.) To meet 85 turns, MRO inventory must be addressed. (129) Increasing inventory turns via a reduction in slow moving spares, combined with a general reduction in the number and quantity of stocked parts, should be approached with caution. Care and discretion must be exercised to avoid scrapping vital, long-lead insurance spares that may never be needed until just after they have departed the premises. Program Effectiveness Program effectiveness metrics are used to measure the effectiveness of equipment management programs and systems at the facility, unit, or equipment level. These metrics demonstrate the value of programs such as vibration monitoring, fluid (lubricating oil) analysis, thermography and motor analysis as the first step in linking their contribution to corporate and facility results. Program effectiveness metrics capture, in objective terms, results that can be trended over time to track progress toward objectives and demonstrate improvement, e.g., percentage of predictive monitoring performed within one week of schedule. During two recent Asset Optimization workshops, participants were asked to indicate their satisfaction with existing Preventive, Condition Based and Reliability Centered Maintenance programs. The majority expressed a high level of satisfaction with the programs. A further question asked for an estimate of unexpected events, “surprises” that occurred annually. A consensus average was close to 10 and could have been higher except that the maximum number on the survey form was 10! How could this be — satisfied with activities when the results are poor? Answer: participants are in an activity and task oriented culture where doing is more important than achieving. That culture must be reversed and the focus placed on results. Specific objectives are required for each Asset Optimization program to enable program owners and managers to determine contribution and identify areas where adjustments may be required to increase effectiveness. The following are examples of program metrics:  Number of undetected failures “surprises” for each technology / program in use (e.g., vibration and fluid analysis, electric current analysis, thermography, and steam trap surveys) Note that this is a negative metric. One facility has established an objective of fewer than one unexpected event in two years.  Percentage of candidate equipment covered by an optimized maintenance program; an activity metric  Percentage of facility / unit equipment monitored with predictive technology; another activity metric In the following two metrics, benchmark values for PM and PdM compliance contained in Figure 9.11 are lumped together. This is done in recognition that the optimum division between PM and PdM will vary by plant and process. Continuous processing and power generating facilities with large rotating machinery will typically have a greater proportion of PdM compared to a plant with smaller machinery and equipment such as conveyor, packaging, bag and container lines that require more PM.  Preventive and Condition-Based Maintenance as a percentage of total maintenance. Preventive Maintenance completion percentage means very little if the work is unnecessary or lacks value. Effectiveness is more important than adherence to a program. Many caution about the use of this metric — it may result in flooding the system with worthless Preventive Maintenance tasks, especially if the Maintenance Management System is set up on numbers of Work Orders rather than hours expended.(129) In order to fully recognize the contribution of PM and PdM, Work Orders must be traceable to origin. In many facilities, work originated by PM and PdM tasks are coded as corrective and therefore not recognized as resulting from improved processes.

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Preventive and Predictive completion rate — Preventive and Predictive tasks completed within a specified time from schedule. One facility reports 65 percent of Preventive Maintenance Tasks are completed on time (within one week of schedule) and cite a 95 percent total completion rate. Predictive and Preventive Maintenance completion is tracked by crafts. Facility average overall vibration levels — several organizations report a direct link between reduced vibration levels and reduced maintenance costs. They monitor this metric as well as high exceptions as a leading indicator, Figure 9.11. Many will state that the prime importance of this metric is to form the basis for a “watch list” and to observe that the average is trending down indicating that repair processes are improving mechanical conditions. Equipment alarms: – Number of early warning alerts or alarms by unit or condition survey – Number of second warning danger alarms by unit or condition survey – Percentage false alarms

Equipment Effectiveness Equipment Effectiveness is measured by either Availability or MTBF / MTBR and MRO cost.  Availability — The time a system or asset is in an operable state capable of meeting all mission requirements. Availability must be maintained by system and equipment with the duration and cause of non-availability for the purposes of identifying opportunities for improvement. Some facilities monitor downtime, essentially the inverse of availability.  Mean Time Between Failure (MTBF), Mean Time To Failure (MTTF), Mean Time To Repair (MTTR) — illustrated in Figure 9.9, “Relationships between MTBF, MTTR and MTBR”. – Percentage improvement in MTBF / MTBR  Cost of maintenance, repairs and overhaul, single incident and cumulative Equipment effectiveness metrics are used to assess reliability and maintainability and identify problems. But are reliability and maintainability the best standards for measuring equipment effectiveness? If so, reliability must be related to performance and profitability. How is this accomplished if required availability is significantly less than 100 percent and / or there are system redundancies? Many companies are realizing that a large investment in improving component reliability does not necessarily translate into a measurable increase in overall function or system availability. For example, reliability improvements to a 100 percent pair of spared pumps may have little overall effect on system availability. However, reliability improvements to their automatic start switches may have major effects on both reliability and availability. Reliability investments must be focused on prioritized improvements that have a direct impact on system availability — in other words reliability optimized for the service, system and operating requirements. Consistent Consistent definitions definitions of of failure failure and and repair repair are are all all important important for for an an accurate accurate comparison comparison of of statistics statistics MTBF Mean Time Between Failure

MTBR/MTTF Mean Time Between Repair Mean Time To Failure MTTR Mean Time To Repair

Figure 9.9 Relationship between MTBF, MTTR, and MTBR

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Observations:  MTBR is MTBF minus MTTR and thus, is a better measure of reliability (poor maintainability results in a longer MTBR and therefore extends MTBF for a given MTBR)  MTTR is a measure of maintainability (i.e., how fast repairs can be completed)  When MTTR is relatively small in proportion to MTBF (the case for most industrial equipment), MTBF and MTBR are essentially equal.  Accurate MTBF/MTBR by equipment and component (model number) is necessary to be able to identify common failures spread across a population of equipment. If MTBF/MTBR is low, the cause, whether a few bad actors or an institutional problem such as poor alignment or balancing, must be detectable from the data.  MTBF and MTBR are plotted for similar equipment to locate process, environmental and installation variations that may affect failure characteristics. (129)  Equipment MTBF/MTBR may lose some usefulness as a result of the staggered life of components and the effect of external influences on component lifetime — corrosive or abrasive environment, harsh loading conditions, contaminated fluids (lubricant and hydraulic oil), misalignment, and unbalance.(129) In this case distribution is all-important. Amplifying the last comment, distribution around an average for a specific population is all too often neglected as a valuable measure of performance. Continuing with MTBF, a broad distribution within a similar group such as motors, centrifugal pumps, etc. provides valuable insight into opportunities for improvement. Any departure on the poor performance side of a population average and further away than 30 percent or so from the average value should be examined closely to determine cause. In many cases the discrepancy is caused by a poor design for the service or environment and may indicate the necessity of redesign and replacement. In others the problem has been found to be operating changes that weren’t considered in the original design. Some companies measure and track Mean Time Between Events (MTBE), where an event is any departure from normal operation that costs more than a specified amount of money. Two companies require a full RCA on individual equipment when the cumulative cost of repairs over a 12-month period exceeds $10,000.(129) Considerations Selecting Performance Measures and Industry Benchmarks Organizations must take care in selecting maintenance effectiveness measures. Too often maintenance effectiveness is judged on time to repair by the maintenance hero, rather the more effective MTBR / MTBF reliability measure.(112) Loss Margin is a better measure of effectiveness than either EFOR or MTBF. Neither EFOR nor MTBF identify the ability to operate when required. Loss Margin focuses on the correct objectives. (8) In the process and petrochemical industries, “world class” MTBF / MTBR for pumping equipment is reported to be approximately six years, ten to twelve years for motors. As stated earlier, numbers for “world class” performance must be used with some caution because of the varying service, environment and definitions of “failure” and “repair.” Generally, problems that require intrusive disassembly are “failures.” Under these definitions, a bearing, seal, coupling, electrical component, valve or instrument that requires replacement is classified as a “failure” and the corrective action a “repair.” Likewise, degraded performance that necessitates overhaul would be classified as a “failure.” Lubrication, adjusting packing and belt tension and instrument calibration would not be classified as “failures” with this criterion. Some organizations reserve the term “failure” and “repair” for intrusive events that require the “lock out, tag out” procedure. Events that do not require “lock out, tag out” are not classified as failures and, hence, are not classified as “repairs.” One company that uses this system does not classify a worn, frayed or broken drive belt as a “failure,” or its replacement as a “repair.” There are numerous other examples in a gray area that could be classified either way. Perhaps the best solution is to decide what information is required from the standpoint of reliability analysis (a case can be made that drive belt failures and requirements for instrument recalibration fit this criteria), define those as “failures” and designate the corrective action as “repairs.”

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It is often difficult to determining how to record “hidden” or impending failures that are identified and corrected during maintenance conducted for another purpose, e.g. during overhaul. As maintenance and overhaul intervals are extended, these issues assume greater importance. Figures 9.10 and 9.11, contain a tabulation of some best practice benchmarks. (35, 129)

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Maintenance costs % ERV / RAV

3.5%

Varies by production unit

Overall Equipment Availability

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95%- 97%

95% - 80%

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75% - 85%

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Schedule compliance

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85% - 95%

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8 w eeks

Overtime

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80% - 95%

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.12 - .15 in/sec

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85 percent  Planned Work: 90 percent; Emergency / Reactive Work 80 percent Labor Utilization / Work Order Discipline: > 90 percent Preventive and Condition Based Work as a percentage of Total Work (hours): 60 percent Hours reported on Standing / Blanket Work Orders: < 5 percent of total hours worked Work Orders closed with feedback: 100 percent Maintenance Backlog: 3 to 5 weeks Maintenance cost as a percentage of total sales revenue: < 3 percent (industry specific)

Graphical Displays Spider charts, are frequently used to compare the performance of multiple work and other process metrics with benchmark objectives. The spider chart is an especially good way to illustrates gaps to best performance, see Figure 9.7 for an overall program spider chart showing best, average and worst performance. A spider chart can also provide a useful display of Balanced Scorecard results, as described in Chapter V. One large manufacturer plots audited performance on a spider chart in the following nine areas, as well as providing an overall assessment, Figure 9.13.(129) 1. Planned maintenance 2. Continuous improvement 3. People, organization and culture 4. Supplies and tools 5. Planning 6. Training 7. Communication 8. Costs and benchmarking 9. Standards and documentation

Planned Maintenance Continuous Improvement

Total score

People, Culture and Organization

Standards and Documentation

Cost and Benchmarking

Supplies And Tools

Team Score

Planning and Scheduling Training

Communications and Feedback

World Class Performance

Figure 9.13 Chart of Plant Team Performance This manufacturer operates in work teams. Work teams evaluate each other annually as an auditing, learning and benchmarking process. The evaluation process begins when questions are submitted to work teams. The teams prepare written answers that are evaluated by other teams, who then conduct a four-hour verbal review. The score in each area and the overall are plotted along with benchmark objectives on the spider chart, shown in Figure 9.13, to identify gaps and gain potential. Comments and the spider chart are combined into a feedback document that includes a written evaluation and suggestions for improvement. The latter are

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focused on success — not criticism. The team evaluated has the option to apply improvement initiatives in areas other than metrics with the greatest gap on the spider chart and the team is accountable for results. Gaining the optimum mix of effort requires effort. (47,108). A petrochemical company uses a spider chart to evaluate performance in more general terms: Focused Empowerment, Compliance to Balanced Scorecard, Asset Management, and Maintenance Prevention.(129) Another company tracks linked metrics on a combination plot (e.g., Preventive and Condition-Based Maintenance completion and downtime). As Preventive and Condition-Based Maintenance are applied more effectively, an increase in completion should result in a corresponding decrease in downtime. If the cause/effect does not trend as anticipated, an effort is initiated to learn why.(129) Figure 9.14 illustrates graphical displays of individual KPI’s, in this case emergency Work Orders as a percentage of total work and backlog by crew. In this facility these charts are produced, reviewed and published weekly. Total Work Order Backlog 50000

40000

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0

Figure 9.14 Graphical Displays of Unplanned Work and Backlog Leading Indicators Leading indicators measure expectations of future improvements in performance. They are task or behavior specific metrics that are typically utilized to measure the progress of an improvement process as a first indicator of results likely to be delivered toward a larger or long-term objective. They respond more rapidly to change than results metrics, particularly in a large population where overall measures may not change quickly in response to effort. Leading indicators are very effective as the basis for proactive refinement if initial measures indicate results are likely to fall below objectives. The following are examples:  Measuring progress during the implementation of a large program might begin by measuring percentage of training completed followed by percentage deployment and initial results. Each metric in the sequence is a leading metric for the next and the results expected from the program as a whole.  The percentage of planned to total work could be used as a leading indicator for a reduction in maintenance costs. By driving to increase the percentage of planned maintenance, costs should decrease due to improved work efficiency.  Percentage deployment of a reliability improvement program should be a leading indicator for improvements in MTBF, availability and maintenance costs, reduction in Emergency Work Orders.  The MTBF of a large population may not change appreciably as improvements are applied to individual members. Improvements completed and MTBF of units with improvements could be used as leading indicators to assess effectiveness far sooner than changes would be observed in the population averages.

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Initiating a program of precision shaft alignment may require years to affect overall reliability measures such as, MTBF, MTBR. Leading indicators might be advanced alignment tools selected and purchased, training completed, precision alignment in use and the number of equipment precision aligned. A second set could be grouped MTBF’s or MTBR’s for equipment on which the reliability improvement initiatives had been applied identical to the third bullet. Leading measures are also an early indication where added improvements might be necessary.

Examples of leading indicators that are in use for work management include: (129)  Schedule compliance (discipline within the maintenance process leading to maximum effectiveness)  Backlog (too high and work isn’t getting done, too low; the planning task is compromised, crew size may be too large for the work load)  MTBF/MTBR on specific equipment with improvements implemented (progress to elevating MTBF/MTBR of a large population)  Percentage Preventive and Condition-Based Maintenance complete, percentage overdue (low compliance with proactive failure prevention activities may lead to unexpected outages)  Overtime hours worked (typically an indicator of excessive reactive work, poor planning and / or too small crew size)  Emergency work required (poor reliability, excessive variation)  Planning accuracy (maximize work crew effectiveness; wrench time)  Warehouse stock effectiveness (stock levels, replenishment interval, ordering process)  Percent failures subjected to RCA (proactive efforts to eliminate failures)  Hours of training per employee per year (work quality and effectiveness) The overlap with other categories is also apparent with this list. To demonstrate contribution and progress, leading indicators must connect through overall effectiveness measures to functional and enterprise financial objectives. (129) Indirect Metrics Indirect metrics are used to measure the impact of components of an Asset Optimization program on organizational imperatives such as safety and environmental incidents. They demonstrate the value of the Asset Optimization program to managers who may not be directly involved but are accountable for vital areas such as safety and environmental compliance. They also provide another means of demonstrating the value of an Asset Optimization program to influential decision makers who have little to no awareness of such programs. Some examples of indirect asset effectiveness metrics are:  Safety and environment incidents One company reports that 50 percent of all environmental incidents are caused by equipment failure.(129)  Environmental savings achieved through waste reductions resulting from Asset Optimization program initiatives  Energy savings attributed to improved equipment management within Asset Optimization

AVOIDED COST An assessment of the contribution of a predictive or proactive equipment management program should include the issue of avoided cost. Avoided cost is defined as the differential between the actual repair cost and the cost of repair had the equipment and / or system proceeded to failure, plus the estimated cost of downtime related to an unscheduled failure. In other words, it compares what actually happened to what most probably would have happened had the problem gone undetected. (21) Repeating some information presented in Chapter VII, Avoided Costs, policies regarding credits for avoided cost vary by company. One company disallows avoided cost credits if the impending failure would probably have been recognized during operator rounds and consequently would not have adversely affected operation / production. Some companies use an average cost of failure, taking into consideration the cost and probability of a failure causing added damage, e.g., gain agreement that 20 percent of the time a pump bearing failure results in shaft damage, and 10 percent of the time housing

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and / or rotor damage, with appropriate added costs. Others avoid the challenge by not allowing avoided cost estimates in the calculation of program value. A detailed procedure for calculating Avoided Cost is found in reference (91), Appendix B.

APPLICATION OF METRICS Significant thought must go into the process of selecting metrics to support the Asset Optimization program. The value of meaningful metrics cannot be overstated — the impact of metrics that are inaccurate or inapplicable cannot be understated. One must first identify the goals and objectives of the organization. Asset Optimization program metrics must connect to and demonstrate real value contribution to organizational business objectives. Therefore, the selection criteria must establish the path from corporate financial results down through overall, equipment and program effectiveness. The contribution at each stage must be understood and linked. Fundamental issues such as safety and environmental protection must also be identified so that the appropriate metrics will be selected. All key processes within the overall effort should have one or more metrics to indicate goal compliance and progress. In each case, the process owners and implementers must be involved in selecting metrics, as well as objectives and time to gain compliance. This first vital step toward ownership is the basis for data collection and the means to embed a continuous improvement culture. Organizational and systemic capabilities to collect and report metrics must be considered and optimized. Computerized Maintenance Management Systems (CMMS), Enterprise Resource Planning (ERP), financial and personnel systems should all be capable of automatically supplying the data needed for calculating performance metrics. If data is not available for each selected metric at the beginning of an Asset Optimization program, someone needs to find out where the data resides, and how it can be obtained and automated. If Engineering, HR, Finance or IT are obliged to spend time every month to extract and calculate data for Asset Optimization metrics, the task will quickly fall to the bottom of their priority list. Leaders spend the time and resources to fully automate the data gathering and reporting process so that people can focus on the highest value tasks of interpretation and developing improvements. There are shortcuts for those who have business and ERP systems in which information is difficult and expensive to access, including specialized applications capable of extracting data into a Microsoft® Access® database where it can be mined, manipulated and is available for easily constructed reports. Several leading organizations have constructed methods for batch extraction of asset and work effectiveness data from a proprietary database into Access. From there they have created the reports needed to assess asset and work process effectiveness; Figure 9.14 is a result. With this process data is readily available to Reliability Engineers for identifying equipment and systems that consume greatest cost and cause inordinate Emergency Work Orders. Reports can be constructed with little cost and effort by anyone with a reasonable working knowledge of Microsoft® Access and Excel. Some companies have one or more people dedicated to the task of accumulating and reporting metric information. The Asset Optimization process is directed toward adding value. Metric selection and reporting must be consistent with that principle. There are several rules to follow applying metrics:  Good metrics focus activities on maximum benefits and value added  Poor metrics can lead away from optimum activities, often to emphasis on low value tasks or even unintended results  Whenever possible, metrics should be positive, rather than negative (e.g., measure work quality, repair success, not rework)  The potential for conflicting metrics must be understood as exemplified by the stock reduction conundrum discussed under the heading “Stores Management”  Always examine complementary metrics together. For example, there’s no benefit in directing efforts to increase yield if quality is significantly below objective)

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Non-compliance with a metric should be followed by efforts to identify cause, full cost, and other effects of non-compliance. Many organizations use Pareto analyses for this purpose for an example, see Figure 9.15. Metrics must be used and kept current. Metrics that are not used regularly should be eliminated.

Finally, if the data necessary to calculate metrics in not available at the commencement of an Asset Optimization program, it must be developed and implemented before improvement initiatives are begun. This will ensure that improvement initiatives will build the history that is essential to conclusively demonstrate value. A facility two years into an asset optimization initiative did not implement any data gathering process to demonstrate the effectiveness and value created by improvements. As a result, they cannot demonstrate effectiveness and are concerned that two years of valuable history have been lost.

BENEFITS OF METRICS Benefits that should be associated with metrics to identify the real worth of an overall Asset Optimization program include:  Increased availability and decreased downtime with real numbers to document improvements — monitor availability and convert the increase to product value, reduced spending and / or increased production.  Increased throughput — demonstrated increases in product value gained from fewer outages, reduced slow time and other equipment delays  Increased product quality — with quality value calculated in terms of quality premium compared to COPQ losses, e.g., rejects, returns, discounted sales, and quality penalties  Reduction in maintenance costs — labor hours, parts, and consumable savings realized by minimizing failures and unnecessary PM’s, improving labor effectiveness  Reduction in breakdown costs — identification of “saves” and a reduction in average repair costs for a typical failure compared to repair costs prior to the Asset Optimization process when operated to failure  Increase in energy efficiency — calculated energy costs for production before and during the improvement process  Reduction in spare parts inventory — current value of freed capital resulting from reduced usage and better planning

MEASUREMENT PROCESS The following paragraphs outline a metric selection and measurement process to establish objectives within an Asset Optimization program. The establishment and collection of metrics must be clearly related to the organization’s business conditions, mission, and objectives and must identify opportunities for improvement. Objectivity and honesty are fundamental, but often neglected, aspects of this process. Everyone is familiar with some type of large-scale effort that was undertaken to prove or disprove what was already “known.” Like many important business decisions, the keys to a realistic measurement program are clearly stated objectives, understanding, consultation with all affected parties, and effective planning and training for all personnel, from shop floor employees to the plant manager and all corporate executives involved in establishing performance objectives, and monitoring results. The objectives, needs and concerns of each team must be recognized and accommodated in the design of the measurement process. This will help ensure that nothing important is overlooked and will gain more cooperation, support and ownership when the measurement process is installed. The top metric should be whatever the corporation / facility uses to measure business performance. For many this will be RONA. At the next lower level, many organizations use some variation on OEE (availability, production throughput and first-run quality) plus cost, typically as a percentage of RAV, ERV. Improvements required at this level to meet the top tier objective should be determined. A financial model of the type contained in Chapter VII is useful in performing the analysis. The analysis should lead directly

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to the selection of key operating, cost, process and program metrics for each of the categories illustrated in Figure 9.1. Benchmark values are necessary for each metric to establish objective performance. Objective values should be realistic and based on industry best practice and objective results. As quoted earlier in this chapter. “Participation by all involved in the Asset Optimization process, especially when setting objectives, is essential to developing the commitment, ownership and optimism necessary to achieve goals. Industry leaders report that they are often surprised by the ambitious objectives and level of commitment that result from a clear needs statement conveyed as metrics to working-level teams tasked with developing action plans.” If people conclude an objective is impossible many quit trying, so too ambitious an objective will not gain the support necessary for success. Conversely, an objective that is not ambitious enough encourages protecting the status quo and minor tinkering around the edges instead of the major transformation required to achieve the gains necessary in a typical production facility. The ideal objective is ambitious, optimistic and perhaps appears to be just a little beyond ones grasp — challenging, but achievable if everyone works together. A large amount of benchmark data is published and readily available from professional societies such as the SMRP, on reliability-oriented web sites, e.g. reliabilityweb.com, and within articles and texts that have been published on the subject. Figure 9.10 and Figure 9.11 summarize much of this information. Fellow professionals are generally more than willing to share benchmarks they use for variables such as cost, work effectiveness and MTBF — they may not be quite so willing to share how they are obtaining results. While there may be minor differences between sources of benchmarks, including this Handbook, and some may question whether the companies and facilities listing benchmarks are similar to their own, the key issue is not a few percentage points but rather the overall picture. A production availability of 60 percent is somewhere between 25 percent and 35 percent low regardless of the facility and process. We can argue about the added industry specific 5 to 15 percent when we have achieved 80 to 85 percent! The same is true for work effectiveness metrics. If schedule compliance is below 75 percent, emergency work greater than 20 percent and / or overtime more than 20 percent there is significant room for improvement. This is summarized in Figure 9.11. The important thing is to identify current performance, get started with an ambitious, but achievable objective and then fine tune as results are achieved. When all involved agree on what needs to be measured, how the metrics are defined and approximate objective values, the next step is to establish training and get started. Whether establishing an Asset Optimization program for the first time, modifying an existing process with new definitions or a more precise focus, sufficient time must be allocated to gather information, identify and prioritize improvement initiatives. At the beginning of the improvement process in a typical facility, time will be required to gather sufficient information to determine historical values for all metrics. Historical values are compared to benchmarks in a Gap calculation described earlier in this chapter. The Gap calculation identifies opportunities for improvement and provides direction for prioritization and implementation. As noted earlier, many facilities embarking on a major improvement program will not have the data or data structure to accurately identify opportunities or measure results. In some cases stores records may be the most accurate source of failure data (repair parts issues). When accurate data is scarce, the improvement program must begin from anecdotal information including known problems and risks, perceived opportunities and optimistic objectives. In this situation it is very important to fill the data gap with a collection structure and metric calculation methodology initiated simultaneously with the first improvement initiatives. This enables results to be tracked against objectives thereby providing the ability to verify progress. As improvement initiatives progress, results build the history necessary to assess performance. When the results measurement process is initiated, a basic decision must be made to determine how often data should be collected, by whom and how frequently the data should be reviewed. Technicians involved on a daily basis and managers directly responsible for the process should monitor detailed results at least weekly and no less frequently than monthly. Formal reports and charts of KPI’s are typically published monthly.

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In a new measurement process, most information should be considered suspect for the first two or three reporting cycles. This is typically the amount of time required for everyone to understand what is being measured, gain accuracy, and reasonably confirm that the data are being reported correctly. Process refinements, fine-tuning to gain consistency and additional training may be required. Thereafter, the real data collection begins. Performance data should be collected and analyzed for some period without further corrections, improvements, or fine-tuning of the measurement process. A stable system is necessary to prove the measurement process and obtain value from the data. A word of caution: This process requires significant effort. There is always a natural tendency to identify a large number of key factors for measurement and tracking. Experience indicates that the number of factors analyzed by an individual should be limited to about six and no more than ten as an absolute maximum. Attempt more and there is a danger of losing focus. People in one organization complained about the number of metrics in place to measure asset and program effectiveness. During a discussion, everyone concluded that the number assigned to an individual was of prime importance, not the total. Persons directly involved with a specific process may want to track more metrics. Despite the concern about losing focus just mentioned, additional metrics may add to an understanding of processes and problems, identify more areas of potential improvement, and provide background information to clarify the metrics being reviewed by operating and financial managers. Interim performance results must be established for all long-term objectives (typically spanning greater than a year) to assure satisfactory progress. As examples, three to five year availability and spending reduction objectives must be supported with interim annual, perhaps even quarterly, objectives. In a typical improvement program, objective results are not divided equally over the time period but rather are divided to reflect when results will be achieved. It is not unusual to have small improvement objectives during the first year as the program is getting off the ground, progressively greater annual objectives in the middle, tapering off at the end as most of the gaps are corrected and the program is fine tuned. The greater the number of factors that are being tracked, the more difficulty that will be experienced analyzing the results. Monitoring related metrics from different areas of an improvement program helps head off changes in one area that worsen conditions in another. As an example in the maintenance area, backlog, PM and PdM completion, break-in work and reliability metrics must be monitored carefully to assure that a spending reduction objective is not being gained by deferring work seen as indicated by an increasing backlog — pushing problems into the future. When measuring values such as MTBF, average and statistical spread are equally important, as shown in Figure 9.15. If the average is low compared to industry best and the spread small, there is probably a common, facility wide problem. A relatively tight distribution, with a few points significantly above and a few significantly below the average, leads to a conclusion of specific conditions that must be corrected. A facility with approximately 2,000 motor driven pumps calculated an MTBF of about 40 months. By removing the 200 worst performers from the population the average MTBF increased to about 65 months. MTBF of the 200 “bad actors” averaged about 10 months. The conclusion was obvious. “Bad actors,” equipment with chronic problems requiring attention and correction are found below the average MTBF — the further below the greater the opportunity for improvement. Equipment significantly above average longevity should also be evaluated to learn if reasons for superior performance can be replicated on other similar equipment. Control limits can be used to divide equipment into reasonable “below average,” “average” and above average categories to assure focus and concentration of efforts on the highest value opportunities. A limit graph similar to Figure 9.15 readily identifies equipment significantly better than and worse than normal, e.g., equipment with MTBF’s significantly greater than or less than the average. Plus or minus two standard deviations, covering 67 percent of all possible occurrences, may be used to define normal. The 16 or so percent on the low side of this band would be examined for specific problems that should be corrected.

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Subject the bad exceptions, low MTBF (red O), to RCFA first to determine cause of poor performance. Study above average performers (blue G) to learn reasons. G

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Figure 9.15 Control Band Adjusting the boundaries so that about 10 percent of the total population is above and 10 percent below the limits provides good prioritization for in-depth RCA or other analyses (FMEA) to determine why a specific unit deviated. For the initial year of the Asset Optimization program, efforts should be focused on improving the most blatant low performers. Initiatives designed to improve the median can be developed when the reasons for distribution within the control limits is better understood. As stated earlier, a clustered distribution around a low median may indicate the presence of a common problem. Before the advent of laser alignment, poor coupling alignment was a common, chronic problem on rotating equipment. Other facility wide equipment problems might include improper bearing or seal installation, poor lubrication, or unbalance. Some organizations that are experienced in this process are able to consolidate the type and number of failures on similar equipment in a Pareto analysis, as shown in Figure 9.16 which is an excellent method for identifying primary detractors from objective performance by number, cause and cost. It may be necessary to perform a Pareto analysis of Pareto data to identify the cause of problems such as bearing failures due to contaminated lubrication.

Figure 9.16 Pareto Chart At some point, a year or more after the formal measurement period began; further improvements may need to be implemented. The necessity for additional improvements may result from revised objectives and a corresponding change in prioritization. Improvements may also be required within the measurement

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process itself to identify conditions more specifically. Most often, defect distribution along the median is examined to identify cluster defects. Control boundaries also may be reduced slowly to identify more departures for prioritized study. With the cause and distribution of defects better understood, the improvement process can begin to address broader problems. The process must continue tracking all equipment effectiveness indicators, such as MTBF, availability, spending and Emergency Work Orders. As familiarity with the processes increases, corrective action will become easier and the contribution of equipment management to the effectiveness and profitability of the overall organization will become clearer. This is an essential step toward maintaining executive endorsement and funding. Special thanks to Boyd Beal, Jay Padesky and Grahame Fogel for your excellent comments and suggestions for this chapter.

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X. PROGRAM LEADERSHIP, VALUES AND ORGANIZATION “The new world will belong to passionate, driven leaders — who not only have enormous amounts of energy but who can energize those whom they lead and influence.” Jack Welch

This chapter addresses institutional values, leadership, organizational issues and skills management that are vital foundations for an Asset Optimization program. Necessities for formulating and managing the improvement process and implementing the program are covered in Chapters XVII and XVIII.

INTRODUCTION A successful Asset Optimization process has a number of key requirements in leadership and organization. These include interest, clear vision, continuous drive and participation from senior executives; ambitious objectives, financial prioritization, initiative, ownership and support throughout the organization. Organizational excellence is crucial. Training and skills management are essential in order to maintain and elevate knowledge and skills in all areas of Asset Optimization. A simplified sketch of the overall Asset Optimization process is illustrated in Figure 10.1. (11) Objectives

Current Conditions GAP

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Figure 10.1 Detailed Physical Asset Optimization Process

BASIC LEADERSHIP AND ORGANIZATIONAL ATTRIBUTES Some elements of leadership and organization are essential for the success of an Asset Optimization program. All must be present at the beginning of the process or developed early during its implementation. Commitment and Support Executives and senior management establish the climate and tone that are essential for the success of an Asset Optimization initiative. Direct involvement through personal leadership, engaged, active and energetic advocacy is essentials that can’t be delegated. Without full and visible commitment at the top levels of management, success is difficult, if not impossible to achieve.

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Clear vision, solid objectives, continuing advocacy, active guidance, organizational alignment and close attention are leadership imperatives to demonstrate the necessity, importance and value gained from the Asset Optimization initiative. Leadership must strongly communicate the vision, necessity of the process, what must be accomplished and actively remove barriers that are always present, and will certainly arise, during any change process. Industry leading companies drive the improvement process from the top. Leaders in this group recognize that continuous improvements to the institutional culture, organization, processes and practices are essential to keep pace in a competitive environment. Executives within industry leading companies are actively engaged, continuously communicating and promoting the necessity to achieve the highest level of excellence. They provide a vivid picture of the necessity and process that engages others to create the motivation, commitment and ownership needed for success throughout the organization. Appointing operational leaders and encouraging progress are also key functions of executive management. Executive management must assure that operational leaders have the personal skills, position, organizational authority and time necessary to achieve success. Operational leaders must be assigned clear objectives, including a timeline. Real accountability for results, rewards for success and penalties for failure are essential. Generally speaking, successful improvement programs are led operationally by an individual at the Superintendent level or above who reports directly to the plant manager. Insufficient / inadequate leadership is observed over and over again as a primary cause of improvement programs failing to meet expectations. At a staff meeting, a plant manager asked why he hadn’t observed improvements resulting from a major productivity improvement effort that had been in-place for about eight months. After a long, uncomfortable pause, one of the participants stated “improvements had not been implemented — there was too much resistance from the working level and insufficient interest and real leadership from management to overcome the barriers and get anything done”. While leaders may profess commitment and interest, responsibility of the actual initiative may be a secondary duty assigned to a very busy executive who doesn’t have much time to spare. As a result, the improvement initiative doesn’t get the attention required and is viewed by those involved in implementation as a low priority that can be avoided. Under these circumstances is it surprising that expectations aren’t met? Finally, executives within industry leading companies continuously demonstrate their engagement and total commitment to the improvement process by action. It is astonishing to see how a plant manager’s demonstration of interest in the improvement process by occasional active participation in steering and action team meetings energizes the people and process. Clear Vision and Objectives As an essential part of leading the improvement initiative leaders must provide clear objectives defining just what it is they want to achieve. Is the primary objective of the Asset Optimization program to increase availability and production output, reduce costs or some combination of the two? Leadership must specify the objective, how much and whether other objectives, such as improved safety and environmental performance, are included. Clear statements from leadership detailing why the objectives are necessary (competitive pressure) are vital to gain commitment and ownership. A US manufacturer discovered that a world-class commodity manufacturing facility in China could deliver product meeting all specifications to US customers at approximately 75% price of the US manufacturer. The immediate objective, essential to keep the facility operating, was to close the price gap to a maximum of 5% at an acceptable profit margin. Solid Overall Strategy In addition to defining specific objectives, leadership must establish the strategic basis for the plans that will be developed to achieve these objectives. Connecting business / market objectives to production, equipment, and component effectiveness is one example of a key strategic principle of Asset Optimization. Gaining permanent, sustainable improvements to both availability and costs by eliminating defects is another.

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Industry leaders recognize that producing the short-term results essential to satisfy business requirements within a long-term strategy of continuous improvement is the best and most certain route to success. Likewise, executives within industry leading companies recognize that permanent improvement requires initiative, commitment, ownership and constant effort. It is the reward of a journey — a result not a command — and takes time to accomplish. This may be a significant differentiator between the best and everyone else. Many professionals identify an executive mindset that improvement can be ordered by command as a major barrier to progress within their organizations. Total Organizational Ownership and Commitment Organizational ownership and commitment are continuing major challenges that require constant, highly visible effort and often strong persuasion. The necessity for success and value gain must be publicized throughout the organization. Everyone must be committed to the Asset Optimization process. Barriers, including active and passive resistance, lack of commitment, ownership and cooperation must be minimized. Without continuing, visible interest and attention, people affected by the improvement initiative are likely to conclude it is simply another “program of the month” that if ignored will go away. Everyone follows a leader, or at least observes a leader’s interests to remain out of trouble. If leaders don’t demonstrate real and continuing commitment by interest in and driving a change process, those who must do the work are unlikely to invest much emotional commitment, time or effort. The Asset Optimization program is too important to allow that to happen. Directed to Success Leadership attention to master the “soft” issues that establish initiative, ownership, commitment and support are crucial toward the success of Asset Optimization. These include commitment to business objectives, quality in all activities, moving toward a profit-centered mentality, defect elimination and productivity improvement. It must be recognized that Asset Optimization is a continuous process with many elements. Leadership must assure that all ingredients are present to assure success, Figure 10.2. If one or more ingredient is missing the entire process will fail. Vision

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Figure 10.2 All Ingredients must be Present for Successful Physical Asset Optimization Some have questioned why the third bar down has two gaps. The answer is that without resources there can’t be any skills. Recognition that Improvement Takes Time to Institutionalize To achieve objective results there must be a full commitment at the senior executive level to institutionalizing the Asset Optimization program. For the purposes of this handbook, institutionalization is defined as occurring when the objective end states have been attained and solid processes are in place

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governing all program elements. The optimized way is the only way and there is no institutional memory of “old way” pre initiative processes or practices. The possibility of falling back to a former bad practice is therefore minimal. Realistically, it will take five years or longer to fully institutionalize optimized practices implemented with Asset Optimization. Until that occurs, leadership must pay close attention, monitor metrics that might indicate backsliding and inject corrective action quickly if gains and / or interest appear to be eroding. Elements of the teams that have implemented successful improvement initiatives must be kept in place long after the initiative has been implemented to assure improvements are refined and sustained. A post implementation control plan to assure sustainability is essential. The temptation to demobilize the team and diminish effort on the first signs of improvement must be resisted. Many facilities declare victory and demobilize the implementing effort as soon as 80 percent or so of an objective has been attained. As a result, initiatives remain partially complete with full benefits yet to be realized. In many cases backsliding occurs. This can be a very emotional issue and source of frustration for all involved. To avoid this predictable pitfall, the Asset Optimization program plan must have a sustainability component to maintain effort through 100 percent completion and full institutionalization of the improvement process. It is imperative to keep the entire organization mobilized, engaged and focused on sustainable, objective results. To reduce the resources required as an initiative reaches maturity with results tracking objectives, people assigned can be reduced and the interval between oversight team meetings can be extended. The control plan mentioned earlier is detailed in Chapter XVII.

VALUES, AND INSTITUTIONAL CULTURE It has been stated that values drive behavior, behavior is culture and culture determines results. In order to succeed in this new environment, the organization must develop and adhere to a set of proven values. Positive institutional values that are necessary and frequently mentioned by workshop participants include:  Safety, honesty, integrity, fairness throughout; in all the organizations activities  Mutual trust at all levels; honest, open, fair relationships; positive attitude, good morale  Well defined objectives and responsibilities clearly stated within a cooperative organizational structure; objectives linked from top to bottom, bottom to top  Initiative, empowered ownership, commitment, responsibility, accountability up and down the organization, good discipline  Ownership, and pride in all activities  Results oriented, strategic focus, tactical excellence  Passion for the process and outcome  Determination — drive to achieve objectives  Intervention part of the culture — corrective action initiated when anyone sees anything wrong  Discipline and work ethic — awareness of the cost of waste  Accountability for results within ability to control  Leadership by example; consistent leadership, fairness, treatment; work with all, not simply stars and slackers, no favoritism  Organizational boldness; new ideas, constant improvement encouraged  People utilized to full capabilities:  Initiative, ownership, responsibility and accountability actively encouraged  People challenged, motivated to improve, exceed requirements  Visible demonstration that contribution is recognized, appreciated and valued, tangible rewards for those who respond and are successful — portion of compensation based on performance and results within new structure and new objectives

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Commitment to reliability, highest quality, consistency, stability across the entire organization; performing tasks correctly — the first time — in all aspects of work  Unified mindset that reliability, quality and stability, improving performance and consistency and creating value, are essential, the expected standard, not afterthoughts or secondary; deficiencies and defects are unacceptable  Repaired equipment looks (cleaner), feels and performs better  Pick up, clean up after a job  Shortcuts, “the easy way” avoided Solid partnership between Operations and Maintenance, good interactions, people work well together, all supporting functions aligned and engaged Prioritization — time, resources and efforts focused on highest value issues, opportunities and return Open atmosphere, excellent communications, consistent messages, constant dialog with people to improve the organizational culture Coaching, collaborative learning, questions and suggestions encouraged  Active knowledge sharing — most experienced eager to share knowledge rather than withhold for job security — build on and leverage institutional knowledge and skills  Proactive failure identification and elimination mindset — shifting focus from “doing maintenance” to eliminating cause and work reduction Eagerness for improvement, real concern; intolerance for deficiencies  Problems utilized positively as learning opportunities for improvement: eliminate defects, safely extend equipment life, work actively to minimize unexpected problems, every day viewed as an opportunity for learning / improvement  Direct efforts to problem solution rather than crisis maintenance — repair under pressure Celebrate success!

One company reports success gained by adhering to the following value principles: (99)  Employees have the right to be treated fairly, honestly and openly ― and must be assured that they will be  Management is obligated to manage in such a way that employees have the opportunity to earn according to their productivity, contribution and results  Employees should feel confident that if they do their jobs properly today, they will have a job tomorrow  Training must be made available so that all employees will have the opportunity to gain the skills necessary to perform tasks assigned and advance both skill level and position in the organization  Employees must have an avenue of appeal when they believe they are being treated unfairly. One company has a process that allows an appeal to move up to the general manager level. If the employee is still not satisfied, the appeal can be submitted to headquarters for final judgment. (129)

The company that has implemented the preceding principles states employees are: “…producing at the highest rates in the industry and earning wages as high as any comparable industrial business.” (99) Why are values so important? Many will state that current technology, processes and procedures are more advanced than the ability to gain full value from their application. The same people often cite removing institutional cultural and organizational barriers as the largest and most significant opportunities for improvement within their organizations. A strong effort to achieve optimum organizational values and culture at the beginning of a transformation initiative greatly facilitates gaining the necessary improvements in process and procedure. Essential improvements in process, procedure and habits will flow naturally if the correct institutional values and culture are in place to build on.

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Attempting to improve processes and / or procedures while leaving inconsistent institutional values and culture to be addressed later in an improvement process allows resistance to persist and significant barriers restricting success to remain in place — the initiative is likely to fail. Some specific values that will be explained in detail are:  Highest personal and organizational commitment to safety and environmental excellence  Reliability culture and performance equivalent to safety and environmental  Full ownership and accountability at all levels of the organization  High level of teamwork and mutual assistance  Focus on improving productivity  Costs controlled by eliminating defects and the need for spending Safety and Environmental Excellence The necessity for safety and environmental excellence has been stressed throughout the Physical Asset Optimization Handbook. It is an essential element of any successful Asset Optimization initiative. Stated simply, an organization cannot achieve industry-leading levels of asset effectiveness without industryleading performance in the safety and environmental areas. The institutional cultures, absolute commitment to performing safely and reliably, are one and the same. Repeating an earlier quote for emphasis, a plant manager stated the following: “We must attain a cultural and organizational commitment to asset performance equal to the commitment to excellence we have achieved in the Safety, Health and Environmental areas.” Reliability Culture and Focus The necessity for a reliability culture and focus is also heavily stressed throughout this Handbook as being the foundation for successful Asset Optimization. Increase reliability — availability improves, spending and organizational demands decline. This is the only way to gain the maximum, sustainable success. Ownership and Accountability Ownership throughout the organization is essential for success; ownership requires accountability and responsibility. Accountable process owners are a key principle of Asset Optimization. The question is where does ownership reside for a given activity or task. Asset Optimization asserts that ownership resides at the lowest level of control. Therefore, a crafts person is accountable for the quality of repairs. The first-line supervisor is accountable for how people are deployed but not necessarily for the quality of their work provided skills, experience and instructions match the task. The time is long past when a first line supervisor can participate directly in each task being worked by his or her crew. In many cases first-line supervision may not have come from craft ranks and therefore can’t supply direct task supervision even if they wanted to and had time. Industry leading organizations recognize all of this and implement training that equips people at all levels in the organization to perform quality work. They trust that those assigned a task will perform it correctly, ask for help when uncertain and closely monitor metrics such as utilization and rework. Trust but verify! Industry leading organizations recognize the loss of effectiveness and motivation that results from downskilling the most highly proficient as an expedient to make up for a lack of knowledge, training and organizational accountability. A highly skilled technical support engineer was asked why he personally supervised routine reassembly tasks on critical equipment. He replied that he was the one whose performance review and salary increase would suffer if a gasket wasn’t installed properly or bolts were not fully torqued. With accountability shifted in this fashion, what is the incentive for a craft mechanic to pay much attention to quality? The control and ownership, ownership and control twin applies equally through all levels of the organization. If a senior manager ignores an identified risk or potential problem, or chooses not to authorize mitigating action for any reason, including a lack of funding, he or she is accountable for the consequences.

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High Level of Teamwork and Mutual Assistance People with different functional responsibilities clearly must see themselves as partners in a team charged with achieving a common goal. A partnership is a two-way relationship where each partner is looking out for the interests of the other. A customer / supplier relationship is one way and typically does not gain optimum results. Pride will only take you so far. (129) Involvement is key to establishing ownership and buy-in to an improvement process. Industry leaders in both union and non-union environments strongly advise including working-level personnel on improvement initiative teams. “Given the opportunity, employee led leadership teams do unbelievably good strategic and tactical planning. Most important, they gain total buy-in for the plan, its implementation and results.” Fortune 250 company CEO Working-level participation in an improvement process results in fresh input, is the source of many opportunities, sometimes startling revelations, and provides access to a great deal of wisdom. Continued involvement with opportunity identification, prioritization, developing and implementing improvement initiatives, is vital for ownership, support and success. (11, 44, 129) Experience indicates that nearly all successful improvement initiatives are based on some sort of team approach. All must recognize that every organization contains vast experience and institutional knowledge — often untapped. In most cases, knowledge is present to identify the greatest opportunities for improvement as well as potential action. The process of inclusion builds enthusiasm and is the basis for the high level of initiative and ownership necessary for success. One company reported that: “Increased employee knowledge of the business environment, its ramifications for company success and job preservation through participation in the improvement process has promoted ownership and a desire to maximize opportunities.” (69) Another stated: “Ownership and commitment to the success of a change process is not easy to gain. Employees resist change. They will typically ‘ride out’ management directed changes because experience indicates the change will be forgotten in six months or the change itself will be changed. Employee involvement and ownership creation must be part of the overall strategy. Employees must know and believe why they must change and improve. A clear strategy paves the way to reality and the necessity for changes.” (129) Finally: “When a manager inquired why no one had ever mentioned the huge inefficiencies within the old system, the workers replied: You never asked!” GE Executive Industry leading organizations get that way by developing great teamwork and mutual assistance. Crafts who finish early at shift end will return to help teammates who haven’t yet completed assigned work. Teammates help each other and eagerly share knowledge — “that isn’t my job” goes away. Improving Productivity Improved productivity is defined as doing the right task efficiently. Used this way, productivity is work effectiveness. Improving productivity requires total involvement of the people actually doing the work. They know where real problems reside, are in the best position to formulate ideas for corrective action, and must have ownership for improvements to take hold. One company involved 50 percent of all maintenance people directly in the process to identify problems and opportunities for improvement and formulate action plans. (129) Productivity gained by optimizing PM has been discussed in detail in Chapter V. Organizations who have optimized PM routines report savings of 30 to 40 percent. PM optimization includes eliminating unnecessary and low value tasks, replacing time-based tasks with on-condition tasks, modifying tasks to achieve the same results with less expenditure of time and resources, and extending the intervals between tasks. Who besides those performing the PM work are better qualified to determine how a task

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can be performed more effectively or the interval extended when inspection after inspection reveals no change, nothing required. A supervisor in a large facility noted that daily PM’s were not accomplished on weekends and holidays when regular work crews weren’t present. Does the equipment follow the same calendar or does this experience indicate that daily PM’s can be extended to every other day, perhaps every third day / twice a week without any undue risk? The answer seems to be yes. The productivity benefits of detailed task instructions, including safety precautions, tools, and spare parts requirements are obvious. Task instructions recognize that even the best, most experienced and conscientious people will occasionally forget some details. Both productivity and safety increase when people have detailed, up-to-date check-offs at the beginning of a task. For this reason, and the potential consequences of an error, pilots are required to use checklists. Costs Controlled by Eliminating Defects and the Need for Spending Within the Asset Optimization culture, cost control is gained by improving reliability — permanently eliminating defects and requirements for spending. Every problem and every failure is viewed as an opportunity for improvement. In this way the entire organization becomes more effective. With reliability and asset effectiveness increased, spending requirements, costs and organizational stress are all reduced. The key question in not how much maintenance seems to be required, but rather how much maintenance is affordable for the business conditions. If the first is greater than the second, asset optimization is imperative to shrink costs to an affordable level. As a facility determines the level of affordable maintenance, it is not atypical to learn that current PM and CBM requirements can’t be fulfilled within the constraints of hours available determined by spending limits. Preventive and predictive requirements have to be reduced. A complete review for value contributed, potential substitution of more effective condition-based routines for PM and optimization of PM (tasks and intervals) is the first step along this path. Next, the organization has to determine where component or equipment upgrade measures might have an attractive return by reducing or even eliminating the activity (task) and increasing frequency (interval) of maintenance requirements. Everyone who has been in maintenance knows full well the huge production impact, cost and effort that follows any necessity for unexpected, emergency repairs on vital to production equipment. Defect elimination is essential to gain optimum reliability and a permanent reduction in costs. It is impossible to starve into prosperity. (129)

ORGANIZATION Throughout industry, organizations are being reduced in size. Staff reductions of 20 to 40 percent considered necessary to meet profit imperatives are not unusual. Successfully achieving such a radical change requires examining every aspect of the organization, management processes and work requirements.(129) Three observations describe many organizations: 1. Organizations are being “flattened,” fewer levels between the very top and working levels. (99, 129) 2. Demographics are clustered between young and old. The average age of professional staff and workers in many facilities is in the low to mid 50’s with few people between 40 and 50 years old. As experienced crafts and professionals retire, skilled resources are becoming stretched and scarce.(74, 129) 3. Along with diminished numbers the days of single skilled mechanics and technicians are coming to an end. One company determined that approximately 65 percent of lost productivity was caused by delays in matching specialized skills to tasks and getting the individuals in place to do the work.(129) Some characteristics of the new, more effective organizations include:  Internal structure and reporting, roles and responsibilities totally defined, see Figure 10.3, effective reporting chain, assurance that vital information gets to the correct decision makers and all involved, follow up process to make certain that it does.  Resources used most efficiently, solid teamwork.

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Organizational discipline — people utilized to their full capabilities within a clearly defined structure. Process discipline — written procedures for every process and task, followed, reviewed and updated. Focus on value creation — solid system for prioritizing efforts so that opportunities with greatest value potential are addressed preferentially. Full acceptance of the process and organizational structure, active improvements where and when necessary.

Many operating facilities are promoting relatively inexperienced people to fill supervisory and management positions vacated by retirements. These less qualified individuals may conclude that success in their new position requires them to be assertive and demonstrate control. They may not make inquiries or consider advice because the situation or circumstances are not fully understood and asking questions might appear indecisive and weak. This can lead to statements and ill-advised decisions that de-motivate experienced people who have been passed over for promotion. As a result, experienced people — who should be mentoring — conclude they don’t need to put up with these conditions and either minimize involvement or take early retirement, causing further erosion of institutional knowledge. In some facilities that have not adopted the team structure, the combination of flattening the organization and declining experience has resulted in inexperienced personnel being promoted to managers. They are responsible for too many people to provide effective guidance and often do not possess the personal knowledge and skills to conduct on-the-job training. In some cases, the manager-to-managed ratio, which was formerly 6 or 8 to 1, has increased to 20:1 with a less experienced manager. Leveraging shared expertise and knowledge must be the rule, not an exception.(129) Another issue, rapid promotion combined with incentive compensation that rewards short-term results, may encourage ill-advised actions that have severe consequences. As one example, reducing or eliminating Preventive and Condition-Based Maintenance will boost profit — for a short period as the momentum from previous good practice slowly dissipates. The manager will get accolades, a large bonus and promotion for the short-term results. The replacement will have to battle all of the problems caused by deferred and neglected maintenance. This makes the first person look even better to those unaware of how the results were obtained. At the working level, shifting requirements place a premium on skill levels: Many companies are seeking multi-skilled, reliability technicians capable of identifying cause and recommending and / or implementing corrective action. Often the employment interview process focuses not only on proficiency in hard technical skills, but also "soft" abilities such as problem solving, communications, persuasion, and team skills. (129) Staffing Levels Some industry leaders construct a spreadsheet analysis of the number and type of maintenance personnel at a final objective (e.g., cost / RAV). This is obtained by dividing labor cost at the objective by average labor rate (assume some split between parts and labor, e.g., 50 / 50 or 55 / 45 percent in either direction as an average in North America). Personnel composition can be detailed by an assumed ratio of planners to skilled trades (approximately 1:15, varying widely depending on process, type, and complexity of work), schedulers to planners (approximately 1:3), and even within skilled trades e.g. number of electricians, millwrights, pipefitters, welders, instrument technicians, etc. The spreadsheet allows “what if” variations in the ratios e.g., the potential increase in the percentage labor as reactive repairs are replaced by proactive failure analysis and failure avoidance. The analysis examines how the organization will function at the anticipated levels and identifies the need for training and improvement initiatives. (129) Corporations that have gone through this process attest that it demonstrates the necessity and advantages of eliminating defects to reduce both the costs of parts AND labor. A demographic analysis of the workforce often discloses that scheduled retirements and historical attrition will be sufficient to reach the staffing levels anticipated at the conclusion of an improvement initiative. In some cases the analysis discloses a shortfall. One organization found it necessary to reestablish an apprenticeship program to fill future personnel needs and preserve a great deal of institutional knowledge.(129)

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Organizational Type — Centralized vs. Decentralized In any discussion of organization and skills, the question of centralized or decentralized organizations arises. Typically, centralized organizations are characterized by greater specialization. Decentralized organizations — consisting of multi-function teams — have less specialization. Total Productive Maintenance (TPM) provides an excellent guide for the multi-function manufacturing team. However, in practical implementation there are other factors to consider. A central maintenance function is required for specialized tasks that either cannot justify a full-time individual within the manufacturing teams or where safety, quality, or other considerations demand specialization. High voltage electrical maintenance and centralized pump repairs are two examples. Within manufacturing teams, equipment management may have different priorities. When production is sold out, availability is a prime objective. If there is spare production capacity, cost is likely the prime consideration. This is totally consistent with Physical Asset Management. Core craft and operator-level personnel must be empowered with the practical knowledge, skills and authority to perform precision practices on a routine, day-to-day basis. (87) Many advocate shifting a centralized organization to a decentralized organization and vice versa. When questioned, they indicate that change is good for an organization, because it shakes-up traditional practices. Perhaps there is a larger truth hidden in the either / or between centralized and decentralized organizations. A hybrid containing the best characteristics of each may be optimal. The advantages and disadvantages of both centralized and decentralized organizations include: Centralized Advantages

Decentralized Disadvantages

Advantages



Better focus on enterprise objectives and requirements

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Less responsive to individual unit requirements

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Highly responsive to individual area requirements

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Greater control of personnel and quality

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Less individual ownership

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Strong ownership

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More efficient use of warehouse and tools

Disadvantages

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Difficult to prioritize on a facility basis

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Difficult to maintain proficiency in specialized areas

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Sub-optimum use of warehouse and tools

Hybrid organization In a typical hybrid organization individual processing units (specific definition will vary depending on the facility) have local day shift maintenance people assigned to perform routine tasks. Crew size and composition is determined by base loading. Total Productive Maintenance (TPM) provides an excellent guide for these decentralized unit teams. Trained specialists working from a central facility perform specialized tasks requiring specific skills, audit safety practices and unit processes to assure uniform performance and quality and augment unit crews during periods of high intensity, e.g., overhauls. An area maintenance superintendent concluded that the ideal crew was one that could accomplish all non-specialized PM / PdM tasks plus take care of normally expected minor maintenance. In this type of organization, the optimum location of responsibility for specialized tasks such as instrument calibration, lubrication, coupling alignment, and collection of predictive measurements always arises. As a general rule, routine tasks requiring average skills and tasks that are accomplished with sufficient frequency to assure proficiency are candidates for decentralization. Complex tasks calling for specialized skills that are not accomplished with sufficient frequency in an individual unit to maintain proficiency should be centralized. High voltage electrical maintenance, pump bearing, seal replacement and repair are examples of work that are typically accomplished by a central group. Each must be decided based on the circumstances at hand. What is best for one organization is not necessarily best for all. As improvements initiated by Asset Optimization take hold, many tasks that were performed with sufficient frequency to justify decentralization may begin to occur so infrequently that proficiency

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declines over time. For this reason the task division in a hybrid organization must be reviewed periodically and adjusted as required. Centralized organizations are typically characterized organizations usually have less specialization.

by

greater

specialization.

Decentralized

One company includes planners and schedulers in cross-functional unit operating teams. Their task is to know everything about specific equipment in its manufacturing context to ensure stability of the manufacturing process, the most effective equipment management strategy, and highest value improvement initiatives.(129) Another company outlined the necessity for specialist technicians to remain in work teams: “Specialist technicians must be members of work group teams to keep all members aware of the capabilities and benefits of the specialty, as well as maintain up-to-date knowledge of problems and concerns. Participation helps greatly with gaining buy-in and ownership for team objectives.” (129)

This is very similar to the autonomous process from TPM, mentioned in Chapter V. It provides a greater skill level, promotes teamwork and ownership and gains fast response to problems. A major pump repair serves to illustrate how the hybrid organization works. When the unit team determines major work is required, they assume responsibility for removal, including lock-out, tag-out and all safety precautions. The pump is delivered to the central repair organization with a work order indicating priority (required completion date), description of the problem(s), and estimate of the work required. The actual work is performed in the central facility. Some organizations use employees and some use contractors. Most employ a mix of the two, depending on the specific task. When the work is complete, the pump is delivered back to the unit team for reinstallation. Requirements for specialists to perform specific tasks on reinstallation must be considered and agreed upon within a formal, written task description. One facility allows a unit team to tag-out and remove most motors for repair, but requires a qualified electrician to reconnect the motor and check rotation following repairs. Another facility authorizes the unit team to reinstall a pump, but requires specialists to be present for coupling alignment. A major corporation has some plants where all operators are also skilled crafts. This structure minimizes the wait time for a craft person to solve small problems. To make this type of organization work safely, a comprehensive training program must be in place that includes safety, operations and crafts skills. (129) Another company has reduced shift maintenance workers by more than 60 percent through a cross-training program that enables operators to safely perform minor maintenance. This permits the transfer of many maintenance workers from shift work to day schedule, increasing their productivity and satisfaction. (Transferring from shift to day work has between a three four to one leverage depending on the shift schedule — one position transferred is equivalent to three or four people on days.) The sharing of work and ideas required for cross training has made both operations and maintenance far more aware of each other's requirements. (129) Assigning one or more skilled crafts to an operating team is another variation. Within this type of organization (again, similar in concept to TPM) crafts take care of small adjustments and repairs efficiently without a Work Order. It unloads the planning system where planners often state that a significant percentage of Work Orders can be accomplished efficiently without involvement of planning and don’t require the history provided by the planning process. Some companies that are evolving into team organizations recognize the need for Craft Advisors — skilled trades whose primary task is to train and work with others to ensure quality. Others shift skilled mechanics to operating roles where their skills are available to the team. (129) Specialists have another role within a team structure — quality assurance across manufacturing teams. Specialist responsibility for training and oversight in equipment management tasks such as operation, lubrication, post repair installation, and shaft alignment assures performance of consistently high quality. Organizations with hybrid team organizations caution that inter-team training must be supplemented with

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facility wide refreshers to avoid the slow degradation of skills and quality that may occur with inbred interteam training. A facility that had shifted to a decentralized organization on day shift with centralized support for some overtime, at night, on weekends and holidays found that gradual variations in procedures were occurring due to different preferences between units. This complicated off-hour support as crafts were often called upon to work in other than their home units. In many cases, tasks such as instrument calibration that had not been carried out in accordance with the unit’s procedures had to be repeated when day shift crafts returned. The gradual drift and departure from common site standards also complicated meeting ISO 9000 quality standards. The key to a successful hybrid organization is a task division that best utilizes the advantages of each structure, supported by ongoing training. A facility that has implemented this method reports simultaneously reducing repair costs by 30 percent while extending MTBR by more than 50 percent. (129) As a final comment in this area, training and organizational development must include refresher training and recertification to assure skills currency. Essential Organizational Characteristics Within industry leading organizations everyone understands their role and contribution toward objectives — the individual actually performing a task has accountability for successful completion. Responsibility, Accountability, Support, Consult, Information (RASCI) matrices, Figure 10.3, are typically used for unambiguous definition.

Figure 10.3 RASCI Diagram Completely Defined Roles and Responsibilities Creative, skilled personnel must be continually challenged with new opportunities. The temptation for routine downskilling because he / she is an expert in a particular procedure / practice must be avoided unless the individual is utilized in a training role to impart knowledge to another. In one facility Reliability Engineers complained that their duties were limited to photographing failures, establishing meeting agendas, taking notes and writing reports. All felt their skills were not used, most were demotivated. Many supervisors considered Reliability Engineering a nonvalue activity. A clarification of qualifications, roles and responsibilities enlightened both sides as to the value contribution that could be made by Reliability Engineers. Supervisors promised greater communications and more active involvement in problems where reliability engineering could make a significant improvement.

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Highly Proficient at the Basics Industry leading organizations are highly skilled in all the basics, Chapter XIII. They have robust processes, practices and technology in place and / or planned and consistently meet highest quality standards in all their endeavors. Although value and requirements are well known, there are still plants that don’t have a formal process for Work Planning and Scheduling, a functional Computerized Maintenance Management System (CMMS) or standard operating and repair procedures to assure consistency and quality. Industry leaders will be aware of best practice benchmarks in all aspects of their asset care (maintenance) operations, Chapter IX. They regularly track current performance compared to industry benchmarks and key organizational objectives in order to identify areas of potential improvement and assure their results meet business objectives. Optimally Implemented and Managed Component Processes At industry leading facilities, the application and use of Preventive and Condition Based Maintenance (PM, CBM) and Root Cause Failure Analysis (RCFA) are all defined and documented with standard procedures detailing application and use. Processes, practices, detailed procedures and task (job) instructions are all in place and utilized effectively for work identification, prioritization, planning, scheduling and spares management. Procedures include safety precautions, tag-out procedures, installation, repair and operating practices. Specific task instructions include safety precautions, operating requirements, tools, step-by-step restoration and work practices, replacement parts, calibration, and acceptable tolerances as applicable. Detailed standard procedures and task instructions, including safety precautions, tools, and spare parts requirements assure that all activities are accomplished safely, effectively. They are key to consistent quality — particularly when an individual may perform a task infrequently or multiple individuals perform the same task, i.e., overtime and weekend repairs conducted by people who may not regularly work on the specific equipment. Task instructions recognize that even the best, most experienced and conscientious people will occasionally forget some details. For this reason, and the potential consequences of an error, pilots are required to use checklists no matter how many takeoffs and landings may be in their log book. Detailed task instructions become more valuable and necessary as institutional knowledge declines. They are essential when tasks are being accomplished by contractors who may not always recognize the vital nature of simple tasks such as replacing gaskets and making up flanges in a system that cannot be isolated during operation. Finally, standard procedures assure institutional knowledge is captured and available for use in training programs. Many of the most skilled will resist working from detailed procedures citing that their knowledge, skill, experience and proficiency make detailed procedures unnecessary. There is another, generally unstated reason: knowledge, experience and skill with tasks represent job security. Capture all the knowledge necessary to perform my tasks and I can be replaced by a lower paid, less skilled worker. Benefits of detailed task instructions were highlighted in a story related by a paper mill. Following replacement of a dryer roll bearing, three additional failures occurred at the same location in less than two weeks. After the second failure, mechanics were offered help but refused stating, “Buzz off — we’ve done this many times before and don’t need help.” After the third failure someone decided that perhaps they had better look at the instruction manual. They discovered that the initial replacement bearing had been installed backward where it had no ability to carry a thrust load. Instead of checking after successive failures, a new bearing was simply installed the way the old one came out because the mechanics “knew what they were doing.” This expensive lesson initiated an 18-month project to computerize all task instructions in a priority order based on task difficulty and the probability, cost, and consequences of errors. As the project moved ahead, detailed task instructions were attached to every work order. Mechanics were required to follow the steps and check whether changes were required or not. If changes were necessary, the mechanic was required to identify changes necessary to the instruction as part of the work order closeout. The facility found numerous benefits with the new procedure. Productivity increased significantly. Awareness

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of all safety requirements, tools and spare parts before arrival at the job site minimized time wasted waiting for operations clearance or seeking forgotten tools or parts. Quality of work increased. Since mechanics were required to recommend changes on completion of work, the task instructions became a living document that benefited from a wide range of experience. Another facility provided boxes on the Work Order for the mechanic to check whether task instructions did / did not require changes. Checking the box that changes were required initiated a second Work Order to develop the changes. Another example: Several years ago, a consultant brought in to oversee a complex shaft re-alignment introduced a new way of calculating changes. The foreman, accustomed to performing the task the way he had been trained, was not willing to make the radical changes identified by the unfamiliar procedure. Realizing that trial and error would take days to achieve the necessary results, the work crew was convinced to implement the changes while the foreman was away on lunch break. Upon return the foreman was furious, until he observed the results. Within a year the “convince me” foreman had written a detailed procedure for the new method, trained all the craftsmen in its use and supervised implementation throughout the facility. His procedure was so good that it was later adopted corporate wide. Reliability Engineering A Reliability Engineering function has been mentioned and is essential for success with asset optimization. Reliability engineering is the focal point for identifying deviations from objective performance and developing corrective action. The Reliability Engineer doesn’t necessarily have to perform all the improvement work personally but is responsible for forming improvement teams, making certain that objectives meet necessary results and following progress to completion. During an Asset Optimization workshop the following consensus job description was developed for a Reliability Engineer:  Owner / champion of the reliability process; leader of the reliability initiative and effort  leads the reliability improvement team  Intimately familiar with the plant, systems and equipment for which he / she is responsible  active participant in maintenance and production meetings Working Operations and Maintenance shifts for several weeks to a month each is an invaluable way to gain the intimate experience needed to perform the reliability function. At the end of the process the candidate should know the location and function of every system and asset, their history and criticality to the process.  Identifies performance deviations, ranks improvements by potential value gain  lost availability  excessive cost — one time and cumulative  emergency Work Orders  Owns and leads the development and implementation of reliability improvement initiatives  assembles skills necessary for development and implementation  monitors results, assures follow up  Personal characteristics  highly motivated, energetic, self starter, action and results oriented  courage of convictions, good advocate  credible in the organization  curious, good problem solver, intense desire to identify and solve problems  organized, good organizer  inspiring, capable of motivating others to action  Evaluated on results KPI’s  improvement in MTBF / availability, reduction of unexpected failures

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Workshop participants all agreed that practical maintenance and production experience is essential. One participant stated that in a former facility, reliability engineers all had 25 plus years experience. For someone new to the facility and / or job everyone agreed that working production shifts for at least a month followed by working maintenance for a month or so was highly advisable. Following this introduction, the new reliability engineer should have a sense of the facility, be able to visualize all the important equipment and know the process well enough to understand how each fits in. Challenge Individuals to Achieve Organizations become great because individuals within the organization elevate performance to levels they may have not thought possible. Inspiring leadership attuned to the small things that motivate subordinates is an essential ingredient. Too often leadership goes the other direction by habit. An experienced reliability engineer commented that he spent too much time on nagging small problems that didn’t have any adverse operating or safety implications. Correction was always so low on the priority list that these problems were never corrected. Allowing them to exist was inconsistent with the site’s emphasis on reliability and quality, the values necessary to meet the goals and demotivating to the individual. The engineer suggested an annual discretionary budget of about $75 K per year from which he could draw to eliminate these problems. The request was denied. What message did that send regarding the plant’s real trust and commitment to motivation and quality? Effective Change (Improvement) Process The importance of implementing and managing change effectively cannot be overstated. It is so important that an entire chapter (Chapter XVII) of this handbook has been devoted to the subject. Realistic Transition Plan It is relatively easy to formulate objectives and determine where a given facility should be in terms of benchmark performance. While it may be somewhat more difficult to objectively determine current performance, the two tasks can be accomplished in a couple of weeks, certainly no longer than a month. The real challenge is how to get from here to there and create maximum value quickly while doing it. That’s the Asset Optimization improvement process described in detail in Chapter XVIII.

RESULTS BASED COMPENSATION (REWARD) SYSTEM Most industry leaders recognize the need for merit compensation that shares the gains made in effectiveness with employees. In addition, a portion of individual compensation must be connected to results, and therefore placed at risk if results do not meet expectations. As outlined in Chapter XVII, results that affect compensation must be controllable by the people affected. Factors that affect profitability — cost of raw materials and utilities and the price of finished goods — are not controllable or even visible to the people responsible for asset performance and effectiveness. Thus, RONA is not a good objective basis for compensating Asset Optimization program performance and results. However, improving reliability, MTBR / MTBF, availability and reducing costs by eliminating defects are both meaningful and controllable at the working level and hence valid measures of performance for the purposes of incentive compensation. Leaders recognize that working-level employees immediately understand that achieving objectives for increased asset performance and effectiveness will reduce employment and perhaps even the size of “survivors’” paychecks. Fewer people and less overtime for those who remain are very predictable results of reducing failures and unnecessary work. As shortsighted as it may be, many employees view optimizing practices, such as CBM and TPM, as a direct threat to earnings and job security. Plans that address employment and compensation must be formulated and communicated in advance. Leaders must anticipate concerns by determining projected manning levels and workforce composition over the time planned to reach objectives. The change will be more palatable if accompanied by demographic data that shows anticipated retirements as well as historical rates of attrition. Many employees depend on shift differential and overtime earnings to maintain their lifestyle. Consequently, efforts to increase effectiveness by reducing overtime are resisted as a reduction in pay. The necessity to reduce overtime and gain greater effectiveness from unavoidable overtime must be approached with candor and understanding. Gaining support and success requires sensitivity to the real

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issues from an employee perspective. To get everyone on-board and supportive, management must devise a method of sharing benefits. This typically involves awarding a significant portion of the savings gained to the employees responsible. This includes incentive compensation for meeting improvement program objectives that that may result in reduced earnings. Everyone wins. Without this vital dimension, a good plan for improving effectiveness is not likely to gain support from those directly involved. One leading company planned compensation so that decreased overtime was matched by incentive bonuses based on compliance to objectives. A participant stated that most employees are making more money than ever before and getting more accomplished in less time (increased effectiveness). Workers are spending more time at home and are happier — as are their families — all adding to enthusiasm, morale, and commitment. (129) Another company states that: Incentive based compensation is key to success. Employees must know that the results of what they do and don't do will impact their compensation. (129) In several companies, shared gain / risk / reward compensation helps drive the optimizing process: Typical incentive programs place 5 to 10 percent or more of base compensation at risk as incentive for meeting objectives. Others set base compensation below norms with the gap paid for meeting objectives. An additional percentage, as much as 30 percent of base compensation, may be awarded as a performance bonus for exceeding objectives. Variable compensation is typically based on compliance to facility RONA / ROCE, gross margin, safety, first-run quality, cost, returns / warranty goals, and compliance to delivery schedules. One company stated that basing rewards on facility results is a deliberate attempt to encourage cooperation rather than competition between teams.(48, 129) All of these plans share a common attribute — pay for performance and results, demonstrated and applied contribution. They are focused on corporate, business, customer and quality requirements. (129) This concept was neatly summarized:(129) “Pay for quality production and take the cap off the ability to earn. Link each level into basic business success measures and require each individual to plan for their own future.” (99) Management compensation trends show a similar focus on value: A company connects bonuses and stock options to performance within the Strategic Business Unit and the business as a whole. Bonuses may fluctuate by as much as 50 to 150 percent per year. (73, 129) Another company sets base management compensation at 75 percent of competitors’ levels. Bonuses, based on ROE / ROA, are paid in cash and company stock and can reach as high as 300 percent of base compensation. (129) Without a risk / reward incentive compensation scheme, workers are often rewarded for the wrong things. For example, the maintenance hero who quickly restores an unexpected failure typically gains management acclaim, overtime compensation and possibly a bonus for correcting a failure that perhaps shouldn’t have occurred in the first place. The proactive worker who identifies and prevents a problem before it can occur is often invisible, ignored and uncompensated. Crafts are key; they quickly understand how the real reward system works, what's in it for them and respond accordingly. (129)

SKILLS MANAGEMENT Successfully making the transition to a hybrid, multi-skill organization constructed on self-directed, multidisciplinary work teams requires communication and initial and continuing training to maximize operational effectiveness. Organizational downsizing, diminished experience, and institutional knowledge likewise increase requirements for training. The day of the single skilled mechanic or operator is at an end. Increased training is imperative with declining experience and expertise. The US Department of Labor recently estimated that 19 percent of all workers will be 55 and older by 2012. Many companies are close to that today and anticipate a severe decline in experience and performance as older workers retire over the next five years without the

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opportunity to mentor their younger successors as was practiced as recently as 20 years ago. In addition, there is the well-publicized educational gap where potential workers are not gaining the basic skills necessary to move into highly skilled production and manufacturing positions. Training is essential to the success of Asset Optimization. Leading companies recognize that training contributes value. Within Asset Optimization training must be focused on specific competency objectives that are reinforced by opportunities to practice, gain and maintain real proficiency in the work environment. A corporation has a skills aptitude and knowledge testing process that determines who is most qualified and likely to achieve success in a given skill. Technicians are generally selected from skilled trades. A joint Union / Management team governs the testing, selection, and training process.(129) Training and Education — The Learning Organization The learning organization is a competitive necessity in the global economy. Every production organization must be knowledgeable and apply best practices across their entire range of activities. Performance must be close to world class. Anything less is a significant weakness that has, and will result in failure and closure of an entire operation. Training creates enthusiasm, ownership for improvement and results. Everyone has observed people coming back from training totally energized with many new ideas to apply toward improving effectiveness and productivity. Facilitating broad dissemination and rapid implementation in the “learning organization” maintains enthusiasm, builds ownership, improves performance and leverages the time spent on training. A group of people returning from a comprehensive training course all were very excited and highly motivated to apply their learning and implement a major upgrade of an existing program. Faced with a cost / value gained question they had to back up a bit and determine the savings gained compared to cost of implementation from actual information. It was a valuable exercise. Since a great deal of training is technical in nature there must be continued emphasis and focus on business linkage and results. People returning from training often must be reminded that process and technical improvements must contribute to business results. Requirements There are several essential elements that must be considered in developing and managing skills:  Speed of achieving “best practice” performance is a significant competitive differentiator that is highly dependent on the quantity and quality of training Can the best people be expected to perform a task correctly if they have never been taught and don’t know how?  Industry-best organizations devote approximately 80 hours per year per employee (4 percent of total hours) for skills training (80 hours are in addition to organizational, safety and special, e.g., diversity, training). More training is typically provided for specialized skills such as Automation, Instrumentation and Control (I&C) and Information Technology (IT). An industry leading company requires that every new employee receives 38 hours of training before starting on the job and states that if people need training it will be made available. (129) A second leading company mandates a minimum of 92 hours per employee per year and between 130 and 140 hours per employee per year for skilled workers. (129) A third company that doubled training over a five-year period reported gaining an annual reduction in maintenance costs of $2 million, including the cost of training. (87) Finally, a company reported that approximately 2 percent of annual labor costs are budgeted for training. This works out to approximately 40 hours per year per employee, approximately half the training time dedicated by industry-best. Two questions; with this activity metric are they aware that their training efforts lag industry-best, and are they gaining satisfactory results based on performance?  Training must be fully integrated into standard operating procedures — train from and to procedures

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Personnel in rapidly evolving disciplines such as Automation, I&C and IT must train for the major changes taking place in these disciplines There must be opportunity for immediate on-the-job application Training in asset optimization skills such as instrument calibration, CMMS operation, shaft alignment, and failure analysis must be followed immediately by the opportunity to use, exercise and improve the new skills on the job. Only by use are skills retained and improved. Periodic follow up after initial training is required to assess proficiency Periodic refresher training and recertification is necessary, especially for people who are primarily used to fill in for absence and vacations. Individuals trained in specialized skills for backup must have the opportunity to apply skills periodically in order to remain current. For example, an individual trained in condition monitoring, who is primarily in a backup role, should have the opportunity to take and analyze measurements at least monthly to maintain proficiency with the process. Employ performance based compensation — for successfully completing training, demonstrating performance with the new skills Maintain a skill matrix to indicate requirements for training additional personnel Training based on facility need — training not allowed simply to gain incentive compensation

Categories Training consists of education (why), skills (how), safety, quality, and task procedures: Training must address “soft” skills: personal skills (e.g., initiative organizing and decision making); team skills (e.g., communication, consideration, and compromise); and value skills (e.g., commitment, ownership, and work ethic). (112) Training directed at reducing defects (requirements for work) and instilling people skills (to gain consensus), is essential for moving successfully into an operating team organization. Training can be made more effective by addressing chronic plant operating deficiencies and bottlenecks. In this way people are working to correct real problems that are important to them. Training in this fashion gains enthusiasm for the solution and ownership for successful implementation. Lessons learned during this type of training are retained far longer than identical training addressing hypothetical deficiencies. (77) Training is conducted in a number of complementary areas. Within the training program it must be recognized that many elements are complementary and require multiple skills. For example, it is very difficult to train employees in the operation and use of the CMMS without sufficient computer skills. Areas of training within Asset Optimization include:  Safety and Environmental regulations, requirements and culture  Organization / team skills and performance  General computer skills Today, all production and manufacturing workers must have computer skills  Process / manufacturing technology Years ago every new employee was given indoctrination and training in safety, the plant’s manufacturing processes, function of different units and products before assignment to a work crew. In many cases all except safety has been dropped to the detriment of the employee’s performance and ownership.  Job skills; systems and equipment function, operating and repair procedures to assure highest quality in all areas  Skill (multi skill) needed for advanced levels. This is particularly important for facilities with multi skilled teams in which the lead may shift several times during a job with all members expected to contribute.

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Specialized processes — Instrument Calibration, Lubrication, Failure Analysis (RCA), CMMS, Job Plan Writing, Condition Monitoring (Vibration, Lubrication, Thermography, Ultrasonics, Motor Analysis), Shaft Alignment, The idea that many failure analyses can and should be performed at the crafts level is quickly gaining acceptance. For this to occur, all crafts need to be trained in the data requirements and benefits of failure analysis. Crafts who will be performing actual failure analyses need in-depth training in the process.

Safety, quality, and awareness training are mandatory for contract workers. Contract workers must also be trained in local procedures and task instructions and, if applicable, spare parts ordering and storage. Training Program One company states that an effective training and development program must have the following attributes: (129)  Regular, reinforcing training in safe work practices, hazard recognition, and prevention.  A focus on providing the means and tools to achieve manufacturing and corporate goals.  A system to assure the continuing development of employee skills and knowledge.  Training constructed around requirements for skills. Training must be selective and limited by opportunity to practice new skills. One company warns that making training available without clear needs for the new skilled people allows the training program to become a “dash for the cash.”  Opportunity to immediately utilize newly acquired knowledge and skills on-the-job  A means of achieving employee satisfaction, fulfillment and rewards for contribution  Retraining and recertification to assure skills retention and quality  Opportunities for multi-skilled crafts to contribute more to effective operation and gain appropriate rewards for results There is a difference between multi-skilled and cross-trained personnel. Too many “multi-skilled” implies craftsman-level skills in multiple areas. The term “cross-trained” is applied to people qualified to perform routine tasks in multiple areas but not necessarily at craftsman skill levels. Professional Education In any discussion of skills utilization and management, the reduction in skilled professional staff must be mentioned. Where even a modest-size facility used to have technical experts in a variety of disciplines, these people — if present at all today — are very often heavily overcommitted. There is little time for professional study and advancement or even identification of risk and opportunity as precursors to the development of well thought-out, permanent improvement initiatives. Many facilities and companies that profess a commitment to becoming industry leaders do not allow technical professionals to attend conferences and seminars. Conference participation, “networking,” the learning opportunities gained through the exchange of ideas and successes combined with the enthusiasm and heightened motivation that always results from peer discussions, far outweigh the cost and perceived “loss” of time. Conference participation is definitely a solid value opportunity in the asset optimization, continuous improvement culture required for business success.

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XI. EVOLUTION OF ASSET MANAGEMENT AT EASTMAN CHEMICAL COMPANY Gina A. Lewis (2000-2003), Mark T. Mitchell (2003-2006) Managers, Reliability Engineering & Rotating Equipment Group Eastman Chemical Company Many changes have occurred within Eastman Chemical Company in the four years that have elapsed since this chapter was originally written by Gina Lewis. The original chapter has been updated by Mark T. Mitchell in 2006 (updates are italicized). Setting a vision is difficult but is often easier than determining the most efficient path to reach it. One visionary manager at Eastman Chemical Company set the vision to proactively manage physical assets using optimally applied predictive technologies. It took 6 years, the formation of a new department, and the continual support of upper management to finally clarify the vision and document a corporate strategy to attain the objective. Proactively managing physical assets requires industry established tools such as predictive technologies and information systems, but also requires the less talked about resources such as money and manpower, training programs, opportunity, assessment tools and management champions. This chapter will attempt to present a series of learning’s that conclude by showing how all these tools interlock to provide a comprehensive Reliability Strategy for Asset Management. Update 2006 – While Eastman has been very successful in the development of strategies for and application of Predictive Technologies, we have found that technologies can only take you so far if the culture does not support the application thereof. The Reliability Department alone cannot carry the sole responsibility for a proactive mindset. Without a change in culture throughout the entire organization, the company remains in a largely reactive state, only sometimes acting proactively to avoid predicted failures. Introduction It is easy to become over saturated with information when looking to pursue “asset management.” Reliability and asset management seem to be beloved industry buzzwords for the maintenance, production, and management communities. It has become a very popular topic at conferences and has even spawned a series of new technical associations and certifications. How is the term “asset management” usually defined? Most literature or presentations tend to center around the one missing link, technique, process, or technology on which a program’s success hinges. Can asset management be achieved by a single process or technology? Experience within Eastman Chemical Company says NO. Achieving “Reliability” and “Asset Management” takes a number of industry tools, the proper personnel, and a change in culture organized around a clearly stated goal. There is no “one” tool, which can create success but rather each tool integrated with the others within a proactive, reliability oriented culture to support a common strategy. Eastman Chemical Company is currently a 7 billion dollar US chemical company with 12,000 employees supporting 27 manufacturing sites worldwide. Primary products are the marketing and production of chemicals, fibers and plastics. Within this diverse span of equipment and many discrete organizations, Eastman initially began its reliability journey 20 years ago with the development of a vibration analysis program. However, it wasn't until the mid 90's that "Reliability" became a buzz word for the company because of support from the Vice President level. Eastman Chemical Company’s Asset Management and Reliability efforts have been concentrated at its largest manufacturing site located in Kingsport, Tennessee. The Kingsport site includes four manufacturing divisions and one utilities division with approximately 7,500 employees. Site equipment ranges from small air conditioning fans to multi-million dollar turbine generators, from electrical room starters to high dollar control systems, along with all manner of piping and fixed equipment.

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THE CASE FOR CHANGE The 1980’s initiated a wide spread trend of industry bench marking. Specifically, Eastman, along with 40 other manufacturing companies, participated in Solomon’s Plant Reliability and Maintenance Effectiveness study. The Solomon’s study served as a wake up call, highlighting an opportunity to redefine maintenance from a cost center into a profit center. The most discussed standard used to translate between the different manufacturing industries was “Maintenance Cost as a percent of Asset Replacement Value.” Suffice it to say that Eastman was not content with their standing in the study. With the Chemical industry beginning their traditional cyclic down side, cost cutting became a common theme and this benchmarking data presented a very ready target. A site Vice President & World Wide Maintenance Manager drove the Solomon benchmarking study from within Eastman. This level of management support proved to be instrumental to the success of Eastman’s efforts. This Vice President brought three vital components to the initiative. He owned the Vision, Had the authority to command results, and Enjoyed a career stable enough to afford him the luxury of assuming the risk necessary to support a new initiative. His first act was to create a new Reliability Department and to communicate his vision. Update 2006 - While we still track Maintenance Cost as a percent of Asset Replacement Value, it is not considered a primary effectiveness indicator. Eastman now utilizes other measures to determine effectiveness such as our Eastman Corporate Reliability Measure (ECRM), where we track measures such as Process Reliability, Overall Process Effectiveness and Causes of Production Losses. Our mission in Reliability is to Increase Availability of the plant. Because Availability is a function of Maintainability and Reliability, we are in the process of developing measures to monitor our performance in each. Having these measures will allow us to better direct our Reliability resources. The Vision 1996 This vision was communicated in two parts. The discussion began with the display of two charts. The premise centered on Predictive, Preventive and Condition-based maintenance, Figure 11.1. The cost to perform Predictive or Condition Based Maintenance is very high at the beginning due to the capital investment, training, and manpower required at the initiation of such programs. However, once absorbed, this cost decreases and stabilizes unless an additional need for labor occurs. Eastman was in a good position having already absorbed the steep portion of this curve. The cost to perform time based Preventive Maintenance is fairly low in the beginning since potentially defective parts are being changed before causing catastrophic equipment failure. However, costs steadily increase as the preventive maintenance program begins to reach optimum deployment. Since set time intervals and previous history are conventionally the only inputs directing program decisions, it becomes difficult to limit the deployment of this strategy. With over-deployment, the company begins to incur unnecessarily high spare part costs and takes on the added risk of causing additional equipment faults due to unneeded human intervention. The Reliability Department was told that there was a system called an “asset manager” that would allow Eastman to perform condition-based maintenance. Management did not know where to find this system, companies who might be in business to support it, or whether it should be designed in-house. The vision had been communicated …. It became the Reliability Department’s job to find a way to align maintenance with the vision. While this concept is not new today, it was a very progressive approach in 1996.

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Predictive Maintenance

Maint. $$$

Maint. $$$

Time

Preventative Maintenance

Time Figure 11.1 Lifetime Costs

The second half of the discussion followed with a sketched version of Figure 11.2. Chemical processes are managed by sending process information (pressure, temperature, etc.) to a distributed control system (DCS). The DCS then sends corrective signals to the field to keep the process operating properly. Operations learn of a field problem when those pressures and temperatures cease to be controllable or acceptable. Operation’s next step is to immediately pick up the phone and notify maintenance that “something” is wrong. Maintenance, on the other side of the manufacturing house, has a number of predictive tools available. Tools, like predictive technology reports, work order history, etc…, but information systems are not linked to enable mechanics, planners, and schedulers to have early warning of the problem. As a result, mechanics snatch toolboxes and hustle to the field to diagnose the equipment. Once diagnosed, Diagram 1 maintenance sets about the repair, hoping parts and tools are available to complete the job. Reliability was challenged to find an IT tool that must exist somewhere which could continuously monitor equipment and notify of the mechanical, electrical or performance degradation associated with internal wear. Reliability was given the command: Go find it! This tool would allow Eastman to perform optimal condition based maintenance, known internally as “Asset Management.” Management’s vision was in place…. The Reliability Department possessed no firm knowledge of how to attain it, but at least the destination was known! Update 2006 - Eastman has added equipment history and reliability analysis tools such as Weibull Analysis to significantly improve the effectiveness of Maintenance programs. History is exceptionally important for it represents exactly how an asset has performed in its operating context as well as the highest probability failures. By combining accurate historical data with accurate reliability analysis tools it can be determined if a failure was infant mortality, random or wear out. If it is infant mortality, a proactive elimination program shifts emphasis to purchase and installation specifications and procedures. If it is random, predictive technologies are the most effective. If the rare case the failure is wear out, the analysis helps determine the optimum interval for Preventive Maintenance. With these advanced analysis tools, Preventive Maintenance can be shifted from suppliers recommendations to much more effective data driven tasks and intervals. This process results in an initial decrease in repair costs that are sustainable over time. An important component of this is that Eastman is making efforts to properly mark failure data information at the closure of a Work Order. This vital information is the basis of the failure analysis and is audited regularly for accuracy. Audit reports are sent to work crews as a means to communicate importance and assure capture of vital history. The Authority Solomon benchmarking highlighted Eastman’s need to reduce maintenance cost as a percent of asset replacement value in order to compete as an industry leader. Study results were shared at the executive level but not well publicized in lower levels of the organization. Resistance to change was strong, especially in production areas where production initiatives were easier to understand and embrace. Upper Management’s elevated position forced Reliability to become a company driven initiative, on equal footing with increased production, and second only to safety. Reliability programs driven from the bottom up had failed numerous times, especially when driven by the maintenance organization. Eastman needed a top

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down approach, if for no other reason, to communicate the benefits to middle managers who would not have slowed down to listen otherwise.

Non-Integrated Condition Guesswork Process Process Management Management

Asset Management

Temperature Pressure Flow Rates

Vibration Data Historian

Process Information

Oil Analysis

D C S

Infrared Etc. . .

Process Control MMIS Work Order

SAP History

Figure 11.2 Information Requirements Risk Assumption Doing things differently incurs a level of risk that can be absorbed by a number of individuals lower in the organization or by one person sheltering those underneath from higher in the organization. The Vice President position was able to absorb the risk so that the company could experiment, within reason, and either succeed or learn from failure. During a two-year period, company investment exceeded over a million dollars directed at piloting various “asset management” systems. Of these pilots, the first two returned $0.00 on investment. Had the risk been absorbed lower in the organization, all efforts would have ceased and the initiative would have been labeled a failure. Continued Upper Management support for efforts that attempted to attain the vision was successfully rewarded with the third pilot effort. The third effort returned a NPV of $.5 million deferred Maintenance Costs and a $1.3 million NPV increased production. Update 2006 - The system, when applied to a chronic problem, helped solve the problem, but front-end set-up was enormous. Once the problem was solved, the manpower needed to sustain it was not easily maintained. The Reliability Group had just added another IT system that Operations/Maintenance/IT was not interested in learning or sustaining. The system was eventually abandoned. The lesson learned was that attempting to solve a problem with tools rather than developing a strategy for sustainability runs a high risk of failure. Good ideas must have continuing organizational drive. Long-term management of an IT type tool must include a sustainability process similar to that of a DCS or PLC system.

LEARNINGS FROM THE PILOT PHASE The following have been the primary lessons learned during the ten years the program has been in effect:  Equipment tends to be well instrumented in support of process control, however, is usually poorly instrumented in order to support the physical asset’s health. It was found that in most cases, this is sufficient. Eastman found that most machine trains are instrumented adequately to proactively identify the equipment’s most prevalent failure modes.  Support from the Top Down is important, especially during initiation, but eventually, Buy-In from operations and lower ranks must occur for the effort to be sustainable. Allow the program or system to sell itself based on the value it provides to the user. Upper management tends to move frequently and cannot be counted on to sustain the effort.  Engineering costs and time requirements are a high percentage of implementation costs of Asset Management Systems during the early deployment stage. Capital alone will not resolve problems; an investment in human resources for long-term sustainability is key.

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Black Box processes, where the dynamics are not clearly understood, make excellent candidates. Even if the effort is ultimately unsuccessful, understanding of the process/system/equipment has most likely occurred to the point that a number of smaller improvements can be implemented.  Time based trends are very limited for general equipment diagnostics. Most trends need to be qualified by process run conditions so that similar events can be compared.  Update 2006 - It should be noted that Eastman is currently pursuing greater use of the process historian to correlate operating data with mechanical equipment data via Reliability Databases. With site personnel very familiar with the process historian it is relatively simple to establish rules that become part of the historian and thereby circumvent the necessity of supporting a specialized, “foreign” system.  Asset Management Systems are too expensive to apply to all processes and equipment.  The Goal should be to identify Chronic Problems, not the sporadic problems. Most things degrade with age. Unfortunately, the human sensory system cannot detect the subtle daily changes associated with “wear and tear” in equipment. On-line systems are great at keeping track of these small changes. If programmed properly, these systems can notify the equipment owner of the most cost effective time to intervene and bring the equipment into acceptable operating range. (This learning highlights a significant difference between an asset management system and a DCS system. A DCS is typically designed to disguise small deviations until they can no longer be compensated for. An asset manager captures these deviations so that causes can be determined and corrected.) Update 2006 - Eastman never reached this stage. The labor costs to set up the system for general use were prohibitive. As stated earlier, Eastman determined that Asset Management capabilities needed to be built into existing systems such as the data historian. It has significant capabilities and operations people use it very effectively. There are other systems in use and familiar to operations personnel that allow significant computing/statistical analysis capabilities.  Leverage the vendor’s knowledge; good vendors know how other companies are managing some of the same problems. Update 2006 - Any Asset Management system must have broad acceptance and long-term sustaining support similar to that of a PLC or DCS. 

System Technical Expectations  Compliance with industry standards such as OPC is essential, for both server AND client.  Data Collection Methods are critical to long-term success. Systems must be configurable, eliminating nuisance alarms, so that system observers know when to take action.  The system supplier must have web-based, net-workable system. PC Client Software can work in very small companies but again, limits accessibility to the information.  Whichever systems are selected, should, in general, be user friendly and not require extensive training for casual use. Most Important Learning:  Asset Management is a business strategy for managing assets!  Asset Management is not a computer system, a toy or a technology Update 2006 - Eastman Chemical has good plans for managing assets. If there has been one deficiency in the implementation, it has been the attempt to apply Asset Management practices and tools without building a long-term management strategy that included changing culture.

STATUS UPDATE: WHERE IS EASTMAN TODAY? Today, Eastman has learned to approach asset management by breaking equipment down into manageable groups. Once equipment has been divided into categories, i.e. Electrical and Instrumentation, Fixed Equipment, or Rotating Equipment, a set strategy can be applied. It doesn’t matter how categorization takes place as long as it provides an organization for strategies to be developed. Rotating Equipment will be discussed as an example. Eastman calls its strategy for managing Rotating Equipment, the Asset Management Index (AMI) process. All rotating equipment has been ranked using three components:

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1. Criticality Ranking – The Criticality Ranking is a measure of how important the equipment is to producing a product 2. Estimated Asset Replacement Value Ranking – This is a measure of risk. For example, with current process definitions, two spared pieces of equipment would each have a production criticality ranking of 3. The company is willing to take more risk with a $5,000 spared centrifugal pump than with an unspared multi-million dollar turbine generator. Due to the cost of catastrophic failure and time to repair, the turbine generator requires more predictive and Preventive management than does the relatively inexpensive pump. 3. Net Present Value of Average 3 year Maintenance Cost – This component is a measure of historical reliability. If certain equipment is costing a disproportionate part of the maintenance budget and/or manpower, this is a flag to intervene with a management strategy. AMI indexing results in rotating equipment falling into one of four buckets which allows an appropriate strategy to be applied from each of the individual buckets. Obvious to this discussion is that Eastman has a significant amount of data readily available. This was true for most of the 25,000 rotating equipment trains indexed at the Kingsport Site. This indexing of rotating equipment has also been applied at numerous small sites without requiring mounds of historical data. A series of simple questions can be asked of knowledgeable people for similar results. The corresponding strategies for each of the AMI levels are: Level 5 – Preventive maintenance, but otherwise, run to failure. Level 4 – Preventive Maintenance tasks and frequencies are established per Eastman’s Preventive Maintenance Standard. Focus is on devising the most cost effective means for maintaining equipment, a Run to Failure strategy may be adopted where appropriate. Level 3 – Standard Preventive Maintenance and Predictive Maintenance activities and frequencies are established per Eastman’s Predictive Maintenance Standard. Focus is on devising the most cost effective means of maintaining equipment, using Predictive or condition monitoring activities, when applicable. Equipment falling in the Level 3 category is evaluated for standard walk around analysis using Vibration analysis, Motor analysis and Oil analysis. Level 2 – Standard Preventive Maintenance; focus is on devising the most cost effective means of maintaining equipment, including the use of on-line technologies where economically justified. This includes on-line systems capable of scanning equipment and storing on-line trends of performance combined with walk around methods. Update 2006 - Today, wireless methods are becoming more attractive. Level 1 – Standard Preventive Maintenance and Predictive Maintenance activities should be designed through the application of some disciplined reliability maintenance approach to determine a least cost maintenance strategy, doing the right maintenance to the right equipment at the right time. This includes on-line continuous monitoring systems with built in intelligent alerts to notify the user when corrective actions should be taken as well as less expensive technologies where appropriate. An internal assessment of AMI Indexing produced the following summary: Results of AMI Workshops Asset Mgt. Level Level 1 Level 2 Level 3 Level 4&5

% Of Rotating Equipment Assets * 0.5 – 2 % 2–4% 24 – 30% 65 – 75%

* The Kingsport site contains approximately 25,000 rotating equipment trains with slight variation in results for the various operating divisions. The results can be loosely interpreted as: 65 to 75 percent of equipment should have the lubrication serviced on some frequency but should otherwise adopt a run to failure strategy. Approximately 25 to 30 percent of Eastman rotating equipment should be monitored at a set frequency using the walkaround technologies of vibration, oil and motor analysis. 2 to 4 percent of rotating equipment warrants creating trends using the plant historian for performance monitoring or scanning type device for mechanical

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monitoring and less than 2 percent of the plant’s equipment warrants a high level of monitoring with online protection and analysis. Level 1 equipment is the heart beat of the plant and may require mechanical on-line monitoring for machinery protection and trouble shooting. Protecting this equipment at such high cost must be justified by impact of failure.

Vision 2001 Update for Rotating Equipment:

Maint. $$$ Level 4 -Equipment

Level 3 -Equipment Time

Diagram 3. Figure 11.3 Revised Asset Management Vision The 1996 vision has been revised for Rotating Equipment in order to reflect the knowledge gained during the previous 5 years. See Figure 11.3. The original vision of condition based maintenance for all equipment is not practical with the tools and technologies currently available. Eastman now applies the AMI strategy and invests where it makes the most business sense. Similar approaches and strategies either exist or are being developed for the remaining two categories of manufacturing equipment within Eastman.

DEVELOPMENT OF THE RELIABILITY MANAGEMENT MODEL The depth of knowledge gained by having gone through the exercise of pursuing upper management’s vision eventually resulted in the development of a Reliability Management Model. The following management model summarizes how to approach reliability from a comprehensive business perspective, including infrastructure, predictive technologies, or any other process or tool thought to be related to reliability. Figure 11.4 is a pictorial view of Eastman’s Reliability Management Model fondly referred to as the “Tank Model.” It has become an effective tool for communicating the “big picture,” illustrating how each aspect of reliability ties into one solid approach to moving Maintenance and Reliability into a profit center!

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Reliability Management Model

Needs and Opportunity Assessment

Analysis, Prioritization, and Planning

Reliability Improvement Process Improvement

Defect Elimination

Asset Management Plan Development

Integration into Business Processes Capital Processes

Operations Processes

Maintenance Processes

Supportive Management System and Work Culture Changes

Business Goal Alignment/Vision/Strategy Management Awareness/ Training

Opportunity Assessment

Management Champion/ Leadership

Middle Management Commitment

Resource Allocation

Employee Training

Remove Costs from the System

Data Collection/ Information Systems

Diagram 4. Figure 11.4 Eastman Chemical Reliability Management Model Explanation of the Reliability Management Model Each sustainable effort must have a solid foundation or the effort will crumble when faced with challenges. It is believed that before a step change occurs within an organization, the following foundational areas must be addressed: Management Awareness/Training – Does “upper management” support the effort? Have they received adequate training so that they are not only aware of, but can communicate the reasons and benefits of supporting this effort? If Upper Management does not understand the impact and project time frame for financial return, support will erode and will either crumble or be crushed from the top down. Never assume “they should know.” Opportunity Assessment – What will the organization gain from this effort? Are we looking for increased production, reduced maintenance costs, consistent meeting of shipment deadlines? What is the big picture? What opportunity exists? This needs to be simple so it can be held up to the troops. There will be many details that will side tract the effort unless the one objective is clearly stated. Management Champion/Leadership – Someone within the organization must be assigned the responsibility of championing the effort. It is often said that if no one is asking about progress, how important can it be? When there are so many urgent things crowding the work plate, the “important” tasks can be pushed aside unless someone in management is tracking and driving the plan. Middle Management Commitment – It is not enough to have buy in at the top and support at the bottom; middle layers of management must be included in the training so that there is a consistent message throughout the organization. Middle management can kill the effort by simply ignoring it. Middle managers are typically pulled in so many directions that the new reliability initiative could get lost when stacked against the everyday task of shipping product through the door. Resources Allocation – Reliability pays for itself! True, but like any new venture, there are often up-front investment costs in order to enjoy the pay back. In addition to the capital required to acquire predictive monitoring technologies, correct defects, or reschedule production to make a process improvement, there is the need for manpower. Asking someone to work on reliability issues, in addition to their regular workload, will almost always fail. Reliability, by definition has long-term payback, unlike most of the urgent-less important things dealt with daily. The reliability initiative will not achieve desired payback unless the organization counts the costs up front and plans for the required resources. Employee Training – A reliability department was formed in 1996 with the directive of “go forth and make Eastman reliable.” Members of this new department required training in the various technologies and

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problem solving techniques. Management required training to understand the new language associated with “Reliability.” Operators, mechanics, and others required training to understand reasons for doing tasks differently. The training program should address the appropriate audience and should be flexible enough to meet various work schedules. Note also that is does not always need to be formal classroom instruction; informal mini-topics during team meeting are a very cost effective alternative. Data Collection/Information Systems – Data should drive decisions. Data should drive where root cause studies are conducted, how predictive technologies are deployed, and how resources are allocated. Some infrastructure to be considered: A Maintenance Management Information Systems (MMIS) to track equipment histories and aid the planning and scheduling function, a system to support the consolidated reporting of predictive technologies, a plan or system to track cost versus savings attributed to the program, a database to track root cause findings, etc… It is not necessary to have all these foundational elements in place before initiating a comprehensive reliability effort but know that their absence will make progress more difficult. Manpower and frustration will replace the investment of infrastructure if the cultural, human and change management elements of improvement are not in place within a sustainable strategy. Address these issues as early as possible and proactively decide the manner in which they will be addressed. This approach will minimize confusion and frustration and will help to sustain the effort. With these foundational elements in place, one thing is lacking. Reliability initiatives should be tied directly to both the long and short term business goals and have a vision and strategy to drive them there. Example: Eastman Chemical Company promised shareholders to shrink cost structure by the year 2000. Portions ($$$) of that promise were assigned to various organizations. Correspondingly, Maintenance received a significant portion. The Reliability Department worked with Maintenance to develop a targeted strategy for the reduction. Operations received a portion ($$$) with the direction to produce more product with existing assets. The Reliability Department worked with operations to define a plan to improve processing reliability. These plans were unified and were then communicated throughout the department and presented to all the various business units for understanding and support. All parties knew how their assignments specifically linked to the business goal and were met with full support by both operations and maintenance. Update 2006 - As a point of interest, the drive for improvement continues in 2006. Terms are bottom line improvements, gained by increased production/sales and reduced Cost of Goods Sold (COGS). With an objective of improvement at the bottom line, the results of improvements in both process and technology must be verified by Finance. Traditional measures such as avoided cost have lost relevance in today's culture. Needs and Opportunity Assessment With a foundation in place, the process begins at the top of the tank. A “needs assessment” is required at the business unit, process line, or component level. An example might be a combing of process XXX production line to determine sources of lost product. Corporate Reliability measures may be used to highlight the organizational need. A maintenance assessment may pinpoint the need. Analysis, Prioritization and Planning Once needs are known, they should be prioritized according to their ability to support the business goal. If the business goal is to increase production, that should drive the prioritization, if elimination of shipment delays, then process down time should be used to prioritize, etc… Reliability Improvement What is needed to make the improvement? Does the process require an operational change? Is defect elimination needed for the equipment, a production line, or an administrative process? Does the asset have a management plan? The answer to these questions will determine which tool to use in the resolution. Integration into Business Process Once solutions are known, they should be integrated into the associated Business Processes. This step often includes crossing organizational and functional boundaries.

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Example: A manufacturer’s pump currently causing problems in one area of the plant may be causing problems in other areas. If so, the solutions should be integrated throughout all affected systems. Results: Purchasing receives modified purchasing specifications. Component modifications become integrated into the stores process so that existing bad stock is cleared. The repaired equipment is temporarily placed on routine vibration monitoring to assess effectiveness of solution. Etc… Integrate the solution into all affected business processes! This block highlights the resources issue mentioned previously. If an employee is asked to add reliability to their current job description, it is doubtful they will have the time to follow all the integration issues to completion. This makes for a very frustrating job and only localized improvements. Determine the need. Prioritize according to the business goal and plan resources accordingly. Use the most appropriate tool to solve the problem! Build the solution into the way you do business. The only note is that Reliability is not just a maintenance issue. This model works whether trying to drive customer complaints down or increase pounds produced. If the steps are observed, the process will result in draining unnecessary costs from your organization. Conclusion This is how Eastman Chemical Company, at the Kingsport site, manages Reliability. Rotating equipment and fixed equipment are both managed by these processes and a strategy for E&I is under development. These strategies are being shared with all new sites via a corporate integration team as part of the 2001 cost reduction plan. Tennessee Eastman Division has seen a step change in maintenance cost and a corresponding increase in production output with the added difficulty of having fewer employees. It works! The difficulty for Eastman was getting organized to drive all the tools from a single business goal. Perhaps this rings true for your organization as well.

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XII. DATA AND INFORMATION Optimizing operations and maintenance requires everyone on the same page, at the same time, with the same information. Asset Optimization requires and generates rich data and information that must be provided by, and available to, a broad range of providers and consumers. Data and information provide the basis for identifying improvement opportunities that can be taken advantage of in the Asset Optimization program, measuring the effectiveness of improvement initiatives and assisting in vital operating and production decisions. The information structure includes a number of specialized applications that must communicate in order to derive and present vital information required for effective production and work management.

DEMONSTRATE CONTRIBUTION, VALUE AND PROGRESS TO OBJECTIVES Asset Optimization must be part of the overall business information and improvement process. The importance of information cannot be overemphasized. If a product is not delivered within time, cost, and quality constraints, this vital information must flow back into the Asset Optimization process as an essential opportunity for improvement. Decisions made by sales, marketing, and operations all affect opportunity and priority within Asset Optimization and likewise must be communicated throughout the Asset Optimization program structure. Asset Optimization is vital to verifying that the availability and effectiveness of physical production assets (capacity) is sufficient to meet requirements for product and/or service delivery. Production forecasts based on factors such as order intake, historical demand, season, weather, etc. must be supported with asset capacity forecasts based on actual condition and scientifically projected asset lifetime. This aspect of Asset Optimization provides far greater confidence that actual capacity will meet production demands when compared to the statistical averages commonly employed in “less enlightened” systems. As the sole supplier of accurate estimates of current and forecast capacity, the Asset Optimization process is a crucial element of realistic production forecasting. All involved in the Asset Optimization process, whether directly or indirectly, must share ideas about requirements, weaknesses and potential improvements. Likewise, all must participate in formulating reasonable, cost effective, and durable solutions. (112) The information process must be positive and directed to solutions — not used to assign blame. An “Executive Dashboard” illustrated in Figure 9.4 provides an overall view of the flow of Asset Optimization capacity and effectiveness information through an enterprise. Chapter IX discussed metrics and the concept that metrics “score” performance within a business environment. To effectively gain and maintain ownership for the improvement process, graphs of performance metrics should be widely distributed, displayed, and discussed in employee meetings. The organization should be sufficiently proud of the results to share performance indicators with customers. Customers gain confidence knowing that the organization is focused on improving all aspects of its business. Communicate successes, good ideas, best practices and lessons learned. One company encourages plants and people to describe experience and best practice on the company's intranet site. Other plants feed back yes / no / not applicable and comments. When an idea is accepted as a best practice, it is placed in a special section of the intranet site and other plants in the corporation are asked to commit to a timetable for implementation. So long as the idea is useful and applicable, it will remain in the best practice site. (129) Another company maintains an accessible list of corporate best practices in each of nine key areas. Each best practice includes a contact person responsible for additional information and improvement.(129) Employees ARE interested in performance information! Good performance represents success, satisfaction and job security. Most employees are interested in what they can do to improve performance, and delight management and customers. Involved employees should be able to see and be rewarded for the impact and value of their individual and group efforts. Experience indicates that displaying results

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encourages employees to offer even more improvement suggestions, regardless of whether or not they will be rewarded.

INFORMATION — REQUIREMENTS AND USE Information is vital for direction, prioritization, and measurement of results. Information required within an Asset Optimization program includes:  Current and projected performance and condition, projected lifetime (prognosis).  Equipment specifications, operating and repair history.  Operating and maintenance recommendations.  Task instructions.  Safety precautions.  Continually updated lifetime operating performance and costs. Sources, flow and use of information is pictured graphically in Figure 12.1. Decision Support What is the optimum course of action for a given set of circumstances?

Work WorkManagement Management(CMMS) (CMMS) • •Work Workrequired? required?What? What?When? When? • •Work WorkPlanning Planningand andScheduling Scheduling • •PM PMand andPdM PdMScheduling Scheduling • •Status Statusofofexisting existingwork work • •Material Materialrequests requests • •Work Workhistory: history:time, time,cost cost • •Work Workeffectiveness effectivenessmetrics metrics • •Reporting Reporting

Business, Business,Finance Finance(ERP) (ERP) • •Current Currentlifetime lifetimecost cost • •Operating Operatingeffectiveness effectivenessofofassets assets Production ProductionScheduling Scheduling(MES) (MES) available? • •How Howlong longisiscapacity capacityavailable available? • •How Howlong longisiscapacity capacityneeded? needed? Process ProcessControl ControlAutomation Automation • •Current Currentmech. mech.condition conditionby byasset asset condition • •Rate condition Rateofofchange changeininmech. condition • •Projected Projectedlifetime lifetime/ /Capacity CapacityIndex Index • •Problem Problemidentification identification/ /severity severity • •Process Processperformance performance Documentation Documentation • •Asset AssetRegister Register/ /MEL MEL • •P&ID’s P&ID’s Asset AssetMRO MROHistory History • •How Howdid didasset assetperform performinin the thepast? past? • •Cost Cost/ /MTBF MTBF

Stores StoresManagement Management • •Parts Partsinventory, inventory,replenishment replenishmentstatus status • •Parts cost Parts cost Reliability ReliabilityEngineering Engineering • •Ownership Ownershipofofthe thereliability reliabilityprogram program • •Opportunity Opportunityidentification identification - -Cost, Cost,Availability, Availability,Emergency EmergencyWO’s WO’s • •Risk Risk/ /threat threatanalysis, analysis,prioritization prioritization • •Defect Defectelimination eliminationplans plans

Condition Assessment

Condition Measurements What is Asset doing now?

Design DesignSpecifications Specifications What Whatisisasset assetsupposed supposedtotodo? do? • Status — current condition by asset • Health assessment, lifetime prediction • Rate of change in condition • Alarm on change in condition • Problem identification and diagnosis • Projected lifetime / Capacity Index

Figure 12.1 Information Sources, Flow and Users within Asset Optimization Information Availability and Distribution Data and information are the internal lifeblood of an Asset Optimization program and one of the most valuable products. Referring back to Figure 12.1, the information necessary for Asset Optimization is resident in Production and Enterprise Planning, Process Control, Maintenance Management (CMMS), integrated Business and Financial systems (ERP/EAM). Asset Optimization draws from and supplies data and information to all. Information defining asset status, current performance, availability, projected lifetime and cost are needed at the outset and throughout an Asset Optimization program. At the top of the information structure, full information must be widely available to advise executive, managerial and supervisory decision makers of the optimum courses of action to maximize profitability and return.

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An effective information system must provide information, not disconnected data, to management, support and crafts personnel where and when they need it. This requires not only interoperable computer systems, but also a reworking of the manner in which computers process equipment data and present it as information. Accurate information must be available to Production Scheduling and control systems to detail conditions that define immediate and long-term production availability and capacity. The work management function must have access to information such as stores records to determine the availability of repair parts. Reliability engineering and improvement teams need access to operating, maintenance and cost records in order to identify and prioritize opportunities for improvement. The least reliable systems and equipment, those with highest repair costs, lowest availability and responsible for the greatest number of emergency, unplanned Work Orders, all represent potentially high value opportunities for improvement initiatives. Technicians engaged in condition monitoring and assessment must be able to initiate work requests to correct anomalies that they identify, and follow up to assure corrective action is being taken. Data developed during the Asset Optimization process are, in many cases, the origin of information that is vital to production, production planning and supply chain / logistics management. Information includes current condition and projected lifetime as well as the presence and diagnosis of problems. A potential problem’s probable impact on remaining lifetime and / or production rate is especially important. This information is combined with information derived from control and other management systems such as operating efficiency, operating and maintenance history, status of work and spare parts availability for a complete snapshot of current and projected asset performance. As stated by the Maintenance Superintendent in a world-class refinery: “The road to solutions begins with identifying issues — and that requires accurate data.” Essential information that must be accessible within the information system includes accurate figures of payroll hours and overtime as well as all components needed to calculate metrics. All the information shown in Figure 12.1 is necessary and must be readily accessible. Information must also provide answers to the following:  What is a given asset designed to do?  What is it supposed to do? (expectations are often different than design)  What is it doing now?  What can it be expected to do?  Has it experienced problems in the past? If so how were they resolved? Combine all of this with detailed operating and maintenance instructions and instant communications. Experienced people with ready access to documentation achieve higher productivity and can accomplish more with greater efficiency. Information within a Typical Organization There is a growing awareness that corporate Information Systems / Technology (IS / IT) departments are becoming a powerful force in the selection and support of asset management technology; refer to Chapter XI for some practical experience. Several functions, including IT, Finance, Control Automation and Maintenance may claim ownership of information vital to the Asset Optimization program. The real question is who owns and defines technology requirements, access and reporting. Is it those who know the process, will use the technology, and are responsible for results or those developing the corporate information structure? The two must meet somewhere in the middle. It is vital to be able to accommodate and access a broad range of information originated within systems as diverse as finance, process control, work management, predictive monitoring and others. The key objective is for the corporate information system to support business, operational and maintenance objectives as effectively as possible. Effectiveness is more a question of access and ease of use rather than ownership. Data access for identifying opportunities and measuring performance is often an issue. Organizations with an integrated business and financial (ERP/EAM) system, typically controlled by IT, often require IT control of data access. If a user wants information the necessity is specified in a formal request submitted to IT.

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IT provides a cost and time estimate that if approved, eventually results in a report that may or may not, often the latter, meet expectations. The process is cumbersome and often ineffective. Alternatives for Access to Information The capability to data mine, analyze and discover opportunities for improvement by information users at the plant level is absolutely essential. Going through the process of data acquisition and analysis significantly increases local ownership, enthusiasm and commitment to the ultimate improvement objective. Question is whether IT provides the data or the tools to access the data. Many make the case that all the data required for asset optimization is available within a typical ERP/EAM and can be extracted by people who know the system. A common reply is that the information reasonably available directly from the ERP/EAM system isn’t sufficient for operational purposes and as users they don’t have the time or skills to locate, extract, sort and analyze the detailed information needed in the asset optimization decision process. Information users must rely on an overloaded plant expert or IT department for the data necessary to identify and refine opportunities for asset optimization. Not a good situation. Many agree that gaining the data necessary to develop improvement initiatives from an ERP/EAM system is overly complex and time consuming, requires a greater level of proficiency than should be required by an average user and detracts from the real objectives of locating opportunities for improving asset performance and effectiveness. A frequent comment is that the bulk of time, energy and intellectual effort available for Asset Optimization should be spent analyzing data and developing corrective actions rather than acquiring data from an ERP/EAM system. Fundamental information requirements for asset optimization include accurately sorting systems and equipment by parameters such as:  Maintenance cost over a specified time period  Lost availability / forced outage  Source of schedule break, Emergency Work Orders  Other elements that affect performance to individual station objectives The data acquisition and analysis may be performed by a central group of ERP/EAM experts who then provide results to the asset optimization team. As stated in the previous paragraph, direct discovery and analysis by information users rather than ERP/EAM system experts has numerous advantages and is a key determinant of full success. The best and most effective solution is for the ERP/EAM system experts to provide easily used tools that support business, operational and maintenance objectives as easily and effectively as possible rather than simply supplying data. The tools should allow the data mining and analysis task to be performed by personnel with no more than a few hours training, and possibly performing no more than two or three analyses per quarter. The use of Microsoft Excel for data access should be considered. Excel is easy to use, resident on all desktops and includes powerful sorting tools that are quickly understood by most everyone who uses Microsoft Office®. Constructing easily used access tools is a much better investment in time and resources than attempting to train numerous people who should participate in the analysis process to the necessary level of proficiency on the ERP/EAM system.

FUNCTIONAL USE Accuracy and consistency between information systems is a key element to the specification, success and evolution of an Asset Optimization process. Major differences often exist between the asset hierarchies utilized by Production, Maintenance and Finance. When this occurs, it is virtually impossible to extract comparable cost and availability data. Vital facility documentation such as P&ID’s (Process and Instrumentation Drawings) and the Asset Register / Master Equipment List must be up to date and accurate to what is actually installed. Each must be verified at the commencement of the Asset Optimization program. The Production, CMMS and Finance asset hierarchies must all be aligned. Implementation of the functional hierarchy must provide an accurate cost roll up from the component level as a minimum, to equipment, system, area, business unit and plant. The ideal configuration must also have provisions for cross roll up capable of identifying costs by equipment type and component in an

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entire area, business unit, plant and enterprise. In this way, common facility wide statistics for equivalent equipment life and cost, as well as deficiencies, can be identified and evaluated. Decision Support Decision Support is the heart and core of the Asset Optimization information system. It converts equipment operating and condition measurements into actionable, predictive information. The hierarchical model outlined in Chapter XIII, Figure 13.1, is constructed around the information exchange needed for decision support. The decision support process itself must accumulate complex static and dynamic operating data from a variety of sources for collective evaluation. This result is a comprehensive picture of current asset condition and predicted lifetime. Today, decision support is largely accomplished manually by experts. With links providing greater access to more data at less cost, increased resources can be applied to extending and improving the vital decision support process. Automated systems that are available from several suppliers provide more advanced screening, recognition of smaller deviations from normal, correlate multiple changes, identify problem severity and perform diagnostics. Adoption of these systems allows scarce human expertise to be concentrated on tasks with highest economic value — risk and failure analysis as well as developing corrective action for complex deficiencies. Accurate decision support increases cost effectiveness, allows tighter delivery schedules and provides the basis for more accurate business and financial forecasting. It reduces risk, capital and cash outflow for manufacturing (operations), maintenance and logistics planning and support. Business and Finance Business and Finance functions need access to all the information necessary to formulate and issue management reports. Top-level views such as site and unit RONA / ROCE, cost and production effectiveness should be producible automatically without human transfer. Production Scheduling and Control Both Production Scheduling and Process Control need information that accurately defines the condition and capacity of all production assets. The primary difference is the time horizon. Production Scheduling needs assurance that full capacity will be available to meet scheduled requirements — this may be days to weeks, months or even more. Shift change is the time horizon of most process operators — if we can make to the end of shift anything that happens after that is someone else’s problem! Between these two extremes there are many intermediate requirements for the same information. The information most useful to Production Scheduling and Process Control is typically a gross indication of current condition and accurately predicted lifetime. Problem diagnosis and the details on which the diagnosis is based are probably not useful or needed within production scheduling and control. One organization wanted a simple traffic light system that could be displayed on the control system mimic adjacent to the asset symbol — Green, OK; Yellow caution, anomalies present but OK to operate; Red; problems present that limit operation, action required. The same organization (a power generating company) advocated a second, condition rate of change indication consisting of a zero center display with plus and minus either side to indicate improving or declining condition. Their logic was that adjustments to parameters such as load (real and reactive power) often reduced symptoms sufficiently to continue operation through a period of high demand. They wanted to be able to make and view the effects of operating adjustments on degradation symptoms in real time. Another organization, also a power generating company, had implemented a similar system with drill down capability to allow operators to view comments, work orders and other documentation pertaining to abnormal conditions displayed on the control mimic. Operators could see up-to-date status and were given the capability to add comments and observations that could be useful in diagnosis and solution. A third company is linking equipment, monitoring and control systems to gain knowledge of the cause of variations. The objective is to utilize knowledge gained to achieve the predictability and stability necessary to deliver maximum value at an optimum cost and quality for the product mix. (129)

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Work Management Many organizations state a strong preference for full integration between Work Management and Condition Assessment systems. When asked for details of an ideal system, few can be specific. A Maintenance Management (CMMS) System is the repository for a great deal of information that is essential for both the Condition Measurement and Decision Support functions. However, since both CMMS and condition assessment systems are specialized applications with unique, exclusive functionality and displays, many have concluded that interoperability is better than integration. In this model, Planners and Schedulers have access to all diagnostic information that led to the issuance of a work request / notification (including the person making the diagnosis as some are typically known to be more reliable and / or excitable than others). Scheduling periodic predictive condition measurements is likely to become an activity of the Maintenance Management System. Completion and time required will be reported back for the purpose of cost accounting, similar to work order completion. As stated in the previous chapter, designating the origin of work within the Work Management system is all-important. In many facilities, work that originates from conditions discovered during condition monitoring is entered into the system as corrective. Without the condition monitoring origin it is impossible to determine the effectiveness and value produced by the program. The Work Management function needs direct access to inventory records to determine parts availability. In all integrated ERP/EAM / CMMS applications this is built-in. For scheduling purposes the Work Management system needs current status of parts and indication from stores when all parts required for a given job are available and kitted ready for use. Comments describing conditions found, components affected, probable cause, corrective action and anomalies or issues present upon completion of work must be noted in a permanent equipment history record at Work Order closeout. This information is invaluable for planning future work, e.g., a pump shaft or wear rings at maximum tolerances that will have to be replaced in the foreseeable future. The information must be searchable using numerical codes for conditions found, components affected, probable cause and corrective action. The information must be fully accessible to Reliability Engineers analyzing failure cause and repairs. Reliability Engineering Reliability Engineering needs access to virtually all asset related information. Operating and Maintenance records are essential for identifying assets that fail to meet availability requirements, consume excessive costs and are responsible for emergency work. In some cases, data and information necessary to define major deviations from performance objectives either doesn’t exist or is spread across incompatible applications where access isn’t readily available. Clever professionals find ways to circumvent the barriers. As mentioned earlier some have extracted data to Microsoft® Access® and utilized Excel pivot tables very effectively to mine, search and perform Pareto analyses to identify deficient assets from vital information such as spending, availability and emergency work required. From there they can utilize time most productively analyzing cost and availability history to identify potential opportunities and develop plans for improvement. Use of Access and Excel with all available data has an added advantage over fixed reports. The Reliability analyst / engineer may not know exactly what information is required in a given situation until the investigation is well along. Under these conditions it is imperative to have unrestricted access to all potentially relevant data together with the ability to search and sort in a variety of ways. It is also necessary to have an unrestricted ability to drill down into data and perform operations such as a second Pareto on Pareto sorted data. Although not illustrated in Figure 12.1, reliability systems, including Reliability Centered Maintenance (RCM), Root Cause Failure Analysis (RCFA) and associated analytical tools such as Pareto Analysis are included in Asset Optimization, see Figure 5.3. All must be fully interoperable with the condition assessment and maintenance management systems within the Asset Optimization information system architecture.

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Condition Assessment Referring again to Figure 12.1, a significant portion of the information needed by an Asset Optimization program to define current asset condition, predict future capacity and the ability to deliver, originates from specialized condition measurements. These include on- and off-line dynamic vibration; operating, and process measurements such as temperature, pressure and flow, fluid (lubrication and hydraulic oil) characteristics, motor operating current and static impedance characteristics; ultrasonic measurements and thermographic temperature images. Described in greater detail in Chapter XIV, mechanical condition measuring and monitoring systems acquire measurements such as dynamic vibration to define actual condition. The condition assessment system compares values and complex characteristics to pre-established thresholds, templates and historical data to determine if current conditions are normal. Most condition assessment systems alarm when changes from normal exceed preset limits. Condition assessment systems may include an expert system to identify the problem and assess severity. Some systems express condition as the green, yellow, red traffic light mentioned earlier, others as a numerical condition index. Rate of change in condition and projected lifetime are often derived from the same information. Many control system suppliers view asset condition information as just another measured variable that can be collected and transmitted over a network the same as scalar control values — temperature, pressure and flow. Some have proposed automatically initiating work requests upon alarm not recognizing that a process upset can produce hundreds of alarms. Within the controls community there needs to be greater awareness of the necessity and benefits of the rich detail resident within complex, dynamic signals, such as vibration for early detection of problems and accurate lifetime prediction. Similarly, there needs to be greater awareness of the major problems that can occur if condition alarms automatically trigger maintenance requests. The more sophisticated systems block additional alarms until the first has been acknowledged. Communications is a key issue that determines the effectiveness of a condition assessment program. Two large facilities that had condition monitoring programs in place suffered major, costly failures. In both cases the problems were known to condition monitoring technicians and had been reported for several months. In one case, the condition monitoring activity reported to Engineering — reports were submitted to the Engineering manager, copies to Production and Maintenance. Since reports were directed to Engineering they had always been written from a technical perspective with potential operating and maintenance considerations secondary. Being copy addresses, busy Operations and Maintenance superintendents didn’t pay much attention to the reports. No one checked to determine if any action was being taken to avoid failure — no one considered himself responsible beyond submitting a written report or for follow-up to ensure recommended action had been taken. Amplifying the last comment, effective follow-up, including ownership and responsibility must be an integral part of an Asset Optimization program. As this is written (early 2006) condition assessment information can and should flow automatically to process control systems. Likewise, people using the Work Management system should have easy access to all condition assessment information. Conditions requiring notification and / or correction should be submitted as Work Requests as soon as possible following identification and evaluation by a technician or analyst. The technician or analyst must have access to the Work Management system, empowerment to initiate a request for action when an abnormal condition is noted, procedural requirement to check status of the Work Request / notification and full accountability for ensuring awareness up to the point that a corrective Work Order is issued.

CONSIDERATIONS FAVOR OPEN INFORMATION SYSTEMS Many enterprises have recognized the benefits of connecting proprietary Condition Assessment, CMMS, and ERP/EAM systems in an integrated structure. There is a growing awareness of the necessity to present refined, actionable information obtained through collective analysis of data from multiple sources instead of single source data requiring confirmation and interpretation. For a number of years control, predictive condition assessment (vibration, fluid analysis, etc.), work management and enterprise information systems were developed independently. These independent, proprietary systems typically

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had totally different interfaces, operating characteristics and displays, could not readily communicate with each other and confounded individual users. One fundamental question that must be resolved is whether interoperability is better attained by proprietary or open connectivity. Many suppliers will claim benefits for using their proprietary asset management systems exclusively. Single source accountability, seamless integration within a larger network, e.g., control, optimized communications and data integrity are often cited as primary benefits. On the other hand, is a single supplier capable of offering best-in-class or even acceptable performance across the broad range of applications needed to meet requirements for asset optimization? Will a proprietary supplier guarantee to maintain interfaces in perpetuity at a reasonable cost? Finally, consider who owns the asset optimization system and data if access is controlled by a proprietary supplier? Open Information Systems All available evidence supports the superiority of open systems for exchanging information. Only a few years ago the telephone system was closed. All wiring and equipment had to be purchased, installed, and serviced by telephone company personnel. A strong case can be made that the decentralized, open environment that followed deregulation has been largely responsible for the explosive growth in telecommunications. Perhaps the growth would not have occurred at all in a closed environment. The June 14, 1998 Outlook Section of the Washington Post stated: “The greatest invention in the computer industry is not the Personal Computer but a standard open platform on which third parties can innovate.” An open system is: Capable of automatic communication (connectivity) and information exchange (interoperability) through widely accepted, published conventions without any proprietary or system-specific links. Open system conventions offer a number of benefits for exchanging Asset Optimization information, including:  The most flexible, effective and least expensive means to exchange equipment condition, work management and control information for the purposes of managing availability, reliability and lifetime cost of ownership  Freedom to assemble comprehensive, easily integrating equipment control and management systems from multi-source “best-for-application” components, without expensive, inflexible, and specialized system integration  Improved enterprise-wide awareness of results, benefits, credibility, and business value of optimized processes and practices through full participation in the information structure  Continuing, least cost upward growth and expansion to gain maximum advantages from improved technology and increased experience  Ability to concentrate resources and investment on highest value, core competency, application optimization, and advancement rather than low value platform and custom interface requirements  Reduced purchase prices via high-volume commercial components  Stimulation of new life, acceptance, expansion, and success into the equipment asset management and condition assessment fields by full participation in 21st century information processes. Since 1994, the Machinery Information Management Open Systems Alliance (MIMOSA) has been developing and advocating conventions that will permit purchasers to choose the best equipment management products with the confidence of full, open interoperability. As this is written in mid 2006, MIMOSA is gaining real traction as the proven necessity for, and benefits of, interoperability conventions become increasingly apparent. The MIMOSA joint Open O&M initiative promotes an integrated strategy that defines interfaces through which information system components can inter-operate. Interfaces should be widely used, nonproprietary, and based on Open O&M. This meets demands from business and industrial purchasers for open connectivity, interoperability, and the ability to migrate information from generation to generation of hardware, operating systems, and applications software. Companies’ large investments in information management technology are fully protected.

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XIII.EXCELLENCE AT THE BASICS "Being the best that you can be is possible only if your desire to win is greater than your fear of failure." Sammy Lee

Successful Asset Optimization requires that all applicable / related documentation is in place, verified and fully up to date. Basic documentation includes Process and Instrumentation Drawings (P&ID’s), Asset Register / Functional Hierarchy, Master Equipment List (MEL) and Bills of Materials (BOM). Equipment must be classified by risk to assure attention and resources are applied most effectively. The program requires core processes including Work Management and MRO Stores are functioning effectively at best practice levels of performance. Basic decisions must be made including criteria for outsourcing and functions to be outsourced.

DOCUMENTATION Crucial documentation and drawings must be verified and corrected to accurately reflect what is actually installed at the beginning of the Asset Optimization program. It goes without saying that building a major improvement program on incomplete and/or faulty documentation will prove a wasteful exercise in frustration. Foundation documentation includes: Process and Instrumentation Drawings (P&ID’s), Asset Register / Master Equipment List of all facility assets in a hierarchical system and Bills of Materials (BOM’s) for all assets. A facility utilized a group of operations and maintenance retirees to verify P&ID’s and the Master Equipment List. The process required approximately a year and uncovered massive, undocumented variations between what was depicted on drawings and what was actually installed. Maintaining record accuracy through the modifications and additions that occur in every production / manufacturing facility requires a document / configuration control process. Absolute adherence must be demanded to assure records are maintained accurately and up to date. Comparative checks occasionally determine that the Asset Register maintained by Finance is considerably different than the physical hierarchy utilized by Operations and Maintenance. It is absolutely essential to have full alignment or an accurate cross-reference between these important records so that specifications, Bills of Material, costs, operating, condition and maintenance records all refer to the same equipment. Without alignment, vital parameters such as costs and lost production availability may not roll up properly by unit, equipment and system. Tracking the cause of costs and downtime by asset, even unit in some cases, becomes difficult if not impossible. A facility that had outsourced maintenance of the Asset Register discovered that equipment being brought into the plant on new projects hadn’t been assigned to the correct units or system by the contractor. As a result, equipment numbers on the P&ID and Asset Register weren’t in agreement, costs and operating history were being assigned to the wrong unit.

ASSET HIERARCHY Asset Optimization uses a variation of the nine-layer enterprise asset hierarchy illustrated in Figure 13.1. The Asset Optimization hierarchy contains three to four more levels than some current asset hierarchies, such as the Operational Reliability Analysis Program (ORAP). (62) It adds an enterprise level at the top to permit results from multiple geographic plants or facilities to be rolled into a single measure of enterprise effectiveness. It also adds several levels at the bottom to facilitate more specific measures of effectiveness and identification of the cause of departures by components and parts affected. The hierarchy is presented below; specific enterprises may omit one or more levels of the hierarchy that are not applicable.

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Figure 13.1 Asset Hierarchy 1. 2. 3. 4. 5. 6. 7. 8. 9.

Enterprise: top level, corporation Facility / Plant geographic entity Unit / Platform: identifiable producer section within a facility or business unit System: a set of physical assets designed to perform an identifiable mission / function (e.g., generation, air compression, refrigeration) Subsystem: a system within a system (e.g., lubricating oil system on a turbine generator) Equipment Group: a complete functional assembly (e.g., a coupled motor / pump) Equipment Component: (e.g., pump, motor, turbine, compressor, speed changing gear) Assembly: consisting of one or more parts (e.g., valve, rotor, governor) Part: lowest layer with individual part numbers (e.g., shaft, impeller, wear ring, bearing, seat, stem)

There is another vital element in the asset hierarchy. Assets are generally nested within assets like the familiar Russian doll. In Figure 13.1 most levels of the hierarchy are assets with tangible value. There isn’t a single asset — the definition depends on the view. A single person / function is typically concerned with two levels in the asset hierarchy; the level for which they are directly responsible / accountable and the level below to identify contributors to objective performance, and where additional effort may be required to gain objective performance and effectiveness. For example:  Corporate generally considers the entire enterprise as a single consolidated asset for purposes of financial performance, ROA. Sites or business units are recognized as constituent assets to identify contributors and detractors from corporate objectives (see also Figure 9.4). If you don’t believe that you have never had the pleasure of belonging to a unit performing below corporate objectives!  A plant manager is generally responsible for performance of the overall facility. Thus the facility is the primary asset from this perspective. A plant manager will probably examine some measures of unit performance, including ROA, availability and costs, to identify units within the facility performing above and below objectives.

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Production and Maintenance Superintendents view units as primary assets and consider systems and equipment to determine where improvements need to be made. Reliability professionals are probably the first function that views systems and equipment as primary assets.

At the bottom of the hierarchy, individual repair parts within a storehouse are certainly assets and so appear on the balance sheet.

ASSET LIFETIME There is another important aspect of Asset Optimization — physical assets and components within a facility or unit have widely varying lifetimes ranging from forty years or more to ten years or less. Beginning at the unit tier of the hierarchy, there are at least four identifiable layers of assets, each having its own life expectancy and replacement strategy: First level: buildings, structure, large heat exchangers, pressure vessels, piping, major mechanical equipment, electrical distribution components and cabling are typically expected to last for the lifetime of the facility — with proper care. Second level: equipment such as electrical switchgear, motors, pumps, and valves will have functionally equivalent replacements available throughout the lifetime of the facility. Third level: control and similar systems and components have an expected supportable lifetime that varies from about 25 to 50 percent of the facility lifetime. During the facility lifetime these components and systems will be changed two to four or more times with upgraded, more effective replacements that may or may not be compatible with the previous system and components. In many cases there may be partial, sequential replacement that results in functionally equivalent equipment with widely varying ages and capabilities within the same facility. Some facilities will replace systems by units. Components and parts removed can be used as spares for the systems still in use. Fourth level: information systems and other components age to obsolescence quickly and, therefore, have an even shorter supportable asset life. Assets at this level such as computers and software may require replacement eight to ten times during the lifetime of the facility. The comment in the last paragraph regarding mixed vintage elements operating simultaneously applies equally here. The varying lifetime, “asset-within-an-asset” concept has substantial implications throughout the asset’s lifetime. The timing for actions such as inserting technology during an extended design process, developing optimum asset lifetime optimizing strategies, defining monitoring and overhaul intervals, the repair replace decision and managing spare parts to optimize quantity and avoid stocking obsolete parts are just a few of the activities affected. An investment for lifetime optimizing improvements, such as a more conservative design, better metallurgy, and improved coatings, requires a solid estimate of lifetime value. This must be accomplished via a financial analysis capable of capturing all possibilities. The optimum design investment should include provisions for replacing systems and components that have a known lifetime less than the primary asset. Design must also be flexible and capable of accommodating changes and improvements brought about by components that become obsolete earlier than the prime asset. This usually requires using standard control and similar components that will have a definite and inexpensive upgrade / replacement path. Spare parts management during initial, mid- and end-of-life stages will vary as the availability and price of parts changes over the lifetime of the asset. Accurate benchmarking and reliability assessment, discussed in detail in Chapter IX, depends on use, the geographic location and other factors. These include environment, type of operations, operating intensity, and others. All affect performance and reliability. Consequently, the optimum Asset Optimization strategy to achieve greatest value varies depending on specific conditions. For example, an electric motor that spends its operating lifetime partially loaded in an air conditioned environment can be expected to have greater availability and reliability, better cost profiles, and a different optimum Asset Optimization strategy than an identical model operated fully loaded on top of a furnace in the Middle East. This assertion was confirmed by a multi-location production enterprise who found that ideal maintenance costs as a percentage of RAV varied by a significant amount as a result of process intensity. (129)

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PRIORITIZING SYSTEMS AND EQUIPMENT The effectiveness delivered by an Asset Optimization program depends on prioritizing systems and equipment by risk including threat, consequences and opportunity at the very beginning of the initiative. This assures attention and resources are directed to gaining highest potential value. In addition to optimizing the asset optimization effort itself, early prioritization assures that expensive processes like RCM are applied to systems and equipment that have greatest potential need and hence return. Many use the term criticality for the ranking process. In common terminology, systems or equipment considered critical are those in which any failure affects safety or production. The problem with this use of terminology is that a large proportion of the systems and equipment in a modern production facility fit the definition and are thus considered critical. “If it isn’t critical to production it wouldn’t have been purchased!” When a large percentage of a population is considered critical, everything is high priority with the result there is no prioritization. Risk Ranking To overcome this deficiency, systems, equipment, and components must be risk ranked by the probability and consequences of a failure in the following categories:  Safety, health and environment  Mission, availability  Production output (throughput / yield)  Quality  Cost  Other; e.g., standards compliance in the food and pharmaceutical industries Risk ranking and management are essential elements of asset optimization. Risk ranking extends the idea of criticality to ask how probable is a failure? If a failure with large consequences is highly improbable the risk rank process will rank it somewhere in the middle. Thus, within a rigorous risk ranking process, systems or equipment ranked highest will have significant consequences and probability of failure, not just consequences. The basic risk ranking process is illustrated in Figure 13.2. Establish Establish analysis analysisparameters parameters

Equipment and system limits compared to process requirements

Identify Identifyhazards, hazards,risks risks Assess Assessrisks risks Derive Deriverisk riskranking ranking Develop Developaction actionplans plans totoreduce reducerisks risks

Industry specific procedures, probability, consequences

Remediation: reduce probability, consequences

Verify Verifyeffectiveness effectiveness Document Documentresults results

Figure 13.2 Risk Rank Process Most industry leading organizations assess risk within a five by five matrix, Figure 13.3. Consequences are placed on the vertical axis with safety; potential fatality, ranking highest, followed by a serious environmental incident / production outage / high cost, production reduction and low. Probability, from very low to high based on history, experience and judgment is from left to right on the horizontal axis. Systems and equipment are placed within the matrix based on past performance and future expectations. The two numbers representing positions on the probability and consequence axes are multiplied together.

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The product represents an objective, numerical value of risk. The matrix focuses attention and resources into highest risk equipment and systems resident in the upper right corner.

Consequences

Major Event

R

K IS

Minimal Effect Low

High

Probability of Occurrence Figure 13.3 Risk Rank Matrix The reliability group within a company concluded that data sources, which were the origin of the risk ranking, should carry different weights. They developed a scoring system and performed sensitivity analyses to ensure a single data point was not driving system prioritization. Following an extensive comparison the resulting prioritization was accepted without disagreement. (127) Another company’s system for ranking business opportunities is based on return in terms of Availability, Production Output, Quality, and Profitability. Ranking is first conducted by processing unit. Processing unit rank is then multiplied by factors representing unit contribution to plant performance to arrive at a normalized plant-wide priority ranking. The system is designed to ensure discipline and that limited resources are applied to highest priority tasks across the plant. (129)

The latter company uses essentially the same system to prioritize corrective action (Work Orders). Work Orders are ranked by probability multiplied by consequences of failure if the work is not performed. The prioritization considers Safety, Environmental, Availability, Production Output, Quality, and Profitability. Ranking across the plant is also accomplished in about the same way. A third company went through a detailed prioritization effort to focus on highest return opportunities. Six initiatives were selected for action out of 300 opportunities identified. (33) The risk rank process must be designed so that no more than approximately 15 percent of the total site assets are classified highest priority based on history and risk. Detailed RCM or SRCM analyses should be considered for systems and equipment with known deficiencies to develop optimum improvement plans. All involved must recognize that risk rankings will shift with reliability improvement, work completion, market / mission requirements, and plant and operating conditions. This requires periodic reviews and adjustment.(129) Pareto analyses of failures and lost availability by cause and number of occurrences are useful for identifying systems and equipment with poor history that should require greatest attention. Criticality is often defined as consequences. The risk ranking process considers consequences and probability in the past (history) as well as estimates of potential (future) exposure, to arrive at a final numerical value.

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In the following paragraphs critical and criticality are consequences. Site-specific historical performance and reliability must be combined with expectations of future performance to determine probability. Risk Ranking — Systems An operating facility is composed of multiple systems. Some are critical to operation, meaning that any interruption immediately limits or terminates operation. The condensate and feed systems in a power plant, cooling, and lubrication systems (sub-systems, as defined in the Asset Hierarchy) are all examples. Safety considerations also determine production consequences. A fire protection system is classified in the critical category because of the potential consequences of a system failure when needed to fight a fire. Environmental systems should also be classified as critical when a failure results in an incident, forces production shutdown or could result in fines. The Safety, Quality, Effect, Action, Maintainability, and Support matrix developed from TPM and derivatives are very helpful in establishing prioritization. System prioritization based on product quality effects follows the same process. Some systems with little or no influence on availability or throughput may affect quality. These systems must be identified and their impact on all categories of performance assessed. Redundancy within a system affects its ability to meet mission requirements, Chapter V. Condensate and feed systems typically have two redundant (spare) pumps. Piping is generally not redundant and there may also be system instrumentation and control components with no back up. Risk Ranking — Equipment Unspared paper machines, power generating boilers, turbomachines, vessels, heat exchangers, transformers and electrical distribution systems are all examples of equipment that are critical to production. Everything else can be classified as either essential (meaning that redundancies limit the impact of a single failure) or having low impact. Operating conditions and mission requirements may shift the criticality. A cooling tower cell or circulating water pump that is not required in the winter may be absolutely essential for full production rates during high ambient temperatures of summer but not necessary at all during the winter. Many deficiencies and problems originate from inadequate design, fabrication, and / or installation and operation, as discussed in Chapters III, VIII and XX. If equipment, components, or materials are inadequate for the service, or subjected to operating conditions outside their design envelope, failures are inevitable. Corrective action is justified by increased profits gained from added production availability and reduced maintenance costs. Risk Ranking — Components Critical components within critical systems are often — but not always — obvious. An automatic start switch on a redundant pump is an example of the latter. The switch is probably an inexpensive standard item that is given no more than cursory thought — until it fails and the process suffers a major upset or stops altogether. Switches that provide warning before an automatic shutdown are another example of a potential “hidden failure”. If they fail to operate vital warning time is lost. How much functional consideration goes into purchase and installation? How often are these components tested? About a month after a thorough RCM analysis an innocuous switch within a complex process failed bringing down the entire plant. The switch had not been included in the analysis nor were there any tests or other maintenance routines to assure its function and integrity. After some study it appeared that system boundaries hadn’t been drawn to include all components. The question is, if the boundaries had been drawn correctly would participants have recognized the vital nature of the switch prior to failure? Asset Management Index Eastman Chemical, an industry leader in Reliability and Maintenance has developed a method for prioritizing equipment for condition assessment they call the Asset Management Index (API). As explained in detail in Chapter XI, the Asset Management Index is designed to optimize the application of predictive technologies to equipment in the most cost effective fashion. Equipment is ranked five categories. Each category is graded from one to five; the average is the API. Safety and Environmental impacts will move equipment up in the rankings.

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Within the API process criticality to production is not sufficient to justify a high ranking. As a vivid illustration of the effectiveness of the API process of prioritization, the following table is repeated from Chapter XI. Note that only 2% of the rotating equipment assets were considered highest priority! % Of Rotating Criticality Equipment Assets* Level 1 0.5 — 2% Most Critical Level 2 2 — 4% Level 3 24 — 30% Level 4 65 — 75% Least Critical * The Kingsport site contains approximately 50,000 rotating equipment trains with slight variation in results for the various operating divisions Asset Mgmt. Level

WORK MANAGEMENT Effective Work Management, Planning and Scheduling and Work Execution are essential foundation elements of Asset Optimization. This section is not an extensive description of all the elements of the Work Management process but rather addresses details that must be included to gain full value from Asset Optimization. Planned maintenance, work scheduled and accomplished in accordance with a plan, typically established and published one week in advance, is 50 percent more effective than unplanned, reactive work. It utilizes people far more effectively by assuring that skills, parts and the safety and operational conditions are brought together with a minimum of wasted effort and time. Work efficiency (wrench time) is maximized by minimizing the necessity to search for parts and tools and waiting for equipment to be available and cleared for work. The work management process is illustrated in Figure 13.4. Maintenance Spend

Production Availability

Work Fulfillment Process

Work Execution

Equipment History

Equipment

Work Efficiency

Scheduled

Production

Unscheduled

Issue

Maintenance Crew Order

Inventory

Materials, MRO Process

Scheduling

Risk Rank

Planning

RCM / FMEA

Predictive

Backlog

Planning & Scheduling Process

Routine

Predictive

Preventive

Emerg. – Break-in

Corrective

Work Origination Process

RCFA

Preventive

Proactive

Life Extension

Vibration

Lubrication

Performance

Motor Electrical

Thermography

Alignment

Reliability Improvement Process

Figure 13.4 Reliability and Maintenance Processes Contribute to Availability and Spending Objectives

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The Work Management process must be complete, robust, fully understood and followed by all participants and include accountability for results. There must be ownership and responsibility for transmitting information, particularly, when responsibility for vital repairs are handed over to an oncoming shift. An offgoing shift had replaced a bearing cap on a gas turbine and hand tightened the bolts. They did not notify the incoming shift that the assembly was incomplete. The new shift, assuming the bolts had been tightened, replaced the outer cover. Several days later when the turbine was started a massive oil leak caused an internal fire. When the turbine was disassembled the cause was obvious. The breech of responsibility to complete a task or pass along vital status when the task couldn’t be completed resulted in a four-day delay restarting a major production unit. When work management performance is below standards many will recommend centralizing an organization that is currently de-centralized and vice versa simply for the sake of change and to facilitate a needed cultural transformation. An alternative that might be considered is to centralize some non-core and specialty crafts; pipefitting, welding, etc. to maximize flexibility and decentralize crafts where specialized process, equipment knowledge and ownership are necessary for maximum safety and productivity. An area Maintenance Superintendent decided to size his crew for base load work, PM, PdM and corrective. Extraordinary and some specialized requirements would be met from a centralized pool of employees and contractors. Planning and Scheduling As stated in Chapter IX, industry-leading organizations operate regularly between 85 and 90 percent planned work with 15 percent or less as emergency break-in. Planning is complete when a job plan is issued and parts are on hand. Scheduling work for which planning is complete assigns people and a specific time for the work. Scheduling is typically accomplished by Production and Maintenance on Wednesday or Thursday for the following week. An experienced Production Coordinator, responsible for managing the interface, including WO prioritization, schedule coordination and assuring equipment is ready for work, is absolutely essential. With scheduling discipline, crafts typically will know the majority of the work they will be expected to accomplish before the close of a week for the week following. Improving Process Effectiveness Effective Planning and Scheduling requires the following:  Solid leadership, commitment, support and supervision for the process  Planners and Schedulers assigned full time, able to focus full attention on planning and scheduling. Approximately 1 Planner to 20 crafts  Values communicated, total commitment to use the Planning and Scheduling system to greatest effectiveness by Production and Maintenance  Full agreement on Work Order prioritization and overtime. Without discipline and mutual agreement every task becomes an emergency, every job that can’t be completed during regular working hours must be worked on overtime.  Sufficient training to assure total understanding and proficiency of the process and system. Many organizations that provide CMMS training neglect process training, Planners and Schedulers understand the software better than the function.  Full, complete configuration of the CMMS. Set up will require greater investment than software.  Equipment hierarchy accurate and in conformance with financial records  Master Equipment List verified and accurate  Bills of Materials established for all equipment  Standard job plans / task instructions complete, utilized, checked at each use and updated if necessary  Process discipline that requires following procedures, issuing and following Work Orders for all work.  Full use of best practices

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Work close out procedure that documents work accomplished, time required and reliability information (components affected, conditions found, probable cause, action taken) with searchable codes. Also required to identify potential future requirements or items of interest (e.g., wear, clearances near maximum) that might require attention the next time work is required Equipment and failure history, including calibration records, cost and availability, accurate and readily accessible for the purposes of analysis. Work Management KPI’s closely monitored, additional training if necessary to correct shortcomings Continuing procedure and performance audits to assure quality and consistency, training as required Rewarding Planned and Scheduled work rather than reactive “heroism.” Reactive work destroys a work management system.

The whole idea of Asset Optimization is to move toward greater reliability, fewer surprises, achieving predictable results with as little variation as circumstances permit and proactive avoidance. Move away from unexpected problems and the maintenance heroism necessary to quickly restore operation. Effective Planning and Scheduling is a necessity. Backlog Average backlog is a compromise between the time required for orderly Planning and Scheduling and fast response to requirements. An optimal backlog should be close to industry best practice of 3 to 5 weeks. Too long a time between notification and initiation of work can allow a simple, easily corrected condition to degenerate into a major problem. Although the extreme may not happen, the added nagging and communication may build the perception “that it takes forever to get anything done around here,” discourage the essential Maintenance / Production partnership and encourage the initiation of schedule breaking Work Orders. Examples include leaking gaskets that can be stopped by tightening if addressed soon enough, dirty oil and out-of-calibration instrumentation. Too short a time between Work Order initiation and expected commencement leaves little time for orderly planning, ensuring parts are on hand, and complicates the tasks of scheduling and crew balancing. A Planner commented that the necessity to track and maintain visibility of a large number of requirements and partially completed action items within an excessive backlog was a major burden that invited mistakes. This particular individual had developed a personal spreadsheet that he updated every Friday at home after work to assure he didn’t forget anything — a process that required approximately four hours of personal time. The initiative, commitment and ownership to job quality are highly commendable, however it demonstrates a serious process and system deficiency. Details Required by Asset Optimization There are a number of details that must be incorporated within the Planning and Scheduling process to gain full success from an Asset Optimization program. It should be noted that traditional maintenance management methods and systems focus on efficient execution; Asset Optimization directs attention to reliability improvement and work elimination in addition to process effectiveness, hence the following:  Eliminating defects, increasing reliability, reducing the necessity for work, especially emergency break-in work, is the best way to improve the effectiveness of the Planning and Scheduling process. Many organizations report that a significant reduction in WO’s, as much as 40 percent, is achievable through improved reliability.  The RCM process must be accessible and interoperable with the work management system.  PM and CBM tasks must be incorporated into and linked directly to work management. Typical work management systems do a good job of scheduling PM tasks; most aren’t nearly as good at CBM tasks.  Coding in use to accurately identify origin of work initiated by Preventive and Predictive routines. The origin of work must be accurately noted when a Work Order is initiated in order to identify the value contribution of Preventive and Predictive programs and accurately define the percentage of work in the Preventive, Predictive and corrective categories; a key work

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management metric. As stated in Chapter IX, work originated by Predictive and Preventive processes should total approximately 60 to 70 percent of the total hours worked. Many facilities incorrectly classify all work initiated from Preventive and Predictive programs as corrective, thereby underreporting their contribution to increased effectiveness. Optimum, standardized job plans to assure consistent quality, minimum waste, containing the following:  Safety precautions, lock out, tag out requirements, Personal Protective Equipment, PPE  Operating considerations, access, availability, system line up  Permits required  Detailed task instructions with reference drawings, specifications, clearances, etc.  Manpower and skills required  Tools and special equipment, rigging, etc.  Support equipment, tools, facilities  Special considerations: interference, etc.  Time required  Parts

When necessary, scope and expectations should be confirmed by walking / reviewing the job with the requester. Complete job plans combined with good scheduling minimize wasted time looking for parts and tools, waiting for equipment availability.  Periodic evaluation of the backlog and workload balancing to assure crews are optimally sized. Some facilities examine the balance biweekly on a four-week planning horizon. If the backlog for a specific crew gets too low they may transfer personnel to another crew with a greater backlog.  Component, Condition, Cause and Action codes in place and entered at Work Order close out Searchable (numerical) codes in four groups define the component affected, conditions noted, probable cause and action taken. Codes must have sufficient detail to form the basis for identifying site wide problems, e.g., failures due to improper lubrication, and for failure analyses. Codes must be established by equipment type, sorted and distributed such that only applicable codes will be listed for specific equipment, e.g., burned contact or transmitter out of calibration will not appear on the list of conditions noted that is supplied with a pump Work Order. A list of applicable codes should be attached to Work Orders — the craft mechanic completing the work makes the required entries at close out.  Active monitoring of reliability and quality metrics such as unit repair costs, lost availability, emergency Work Orders as a percentage of the total, MTBF, Rework; Chapter IX. These are key Asset Optimization metrics that must be monitored and acted upon regularly. Monthly monitoring, basing improvement initiatives on unit repair costs, lost availability and the source of emergency Work Orders is a typical best practice.  Failure analysis (RCA) process in place with a trigger mechanism to identify and initiate an analysis of chronic problems as a condition of WO close-out, Chapter V. Failure analysis must be an integral part of the work management process similar to lock-out, tag-out. A trigger mechanism must be established that will automatically identify chronic failures in terms of lost availability and cost — single event and cumulative. The latter to identify equipment with continuous small failures — the “death from a thousand cuts”.  Continuous review of Planning and Scheduling process effectiveness, including requirements for emergency work and schedule compliance. See Chapter IX for metrics. The Planning and Scheduling process and participants should be thoroughly reviewed at relatively frequent intervals to assure quality, consistent performance and efficiency in all activities. A large organization with multiple de-centralized planning and scheduling groups has a central audit group that conducts continuous reviews, training and coaching.

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Several planners have commented that many work orders they receive for planning could be handled far more effectively by someone specifically tasked to conduct minor maintenance. In concept this is similar to operator conducted, autonomous, maintenance within the TPM process. As an alternative, some facilities have considered / are using permanently assigned area mechanics tasked to perform minor adjustments and maintenance. The area mechanic will review Work Requests, decide which are minor maintenance that he / she can take care of and pass the remainder to planning. The area mechanic idea promotes ownership by assigning responsibility and accountability and the partnership with Production. The same caveat expressed for the loss of historical cost and reliability data when using Standing / Blanket Work Orders expressed in Chapter IX applies to the area mechanic concept. As reliability improves during the Asset Optimization program the planning process typically becomes more orderly and disciplined. Planners can utilize the time effectively to improve the process and the following:  Build / refine the equipment history  Prepare, refine and improve standard job plans  Check quality of completed work, incorporate lessons learned into job plans  Improve and optimize PM and CBM, assure the correct tasks are being performed at the correct intervals  Verify Bills of Material  Initiate more Root Cause Analysis, participate more actively in the process to identify and eliminate defects  Refine and optimize the Work Order system  Improve planning and scheduling methodology / execution Contingency Plans Contingency plans are another often-neglected aspect of the Planning and Scheduling process that must be developed within an Asset Optimization program. Contingency plans should be available for moderate to high-risk potential incidents. Contingency plans fall into two categories; plans for unexpected failures of major equipment and preplanned opportunistic job packages for tasks that can only be accomplished during a shutdown. Contingency plans for unexpected failures should include the following:  Identify specialized repair facilities, sources of long-lead unstocked parts and assemblies  Identify sources for unusual repairs such as metal stitching, large transformer repairs and rewinding  Negotiate shop turnaround. Some may pay an annual retainer to assure shop priority in the event of unexpected requirements.  Identify potential sources of used, surplus equipment. Facilities have found that equipment purchased on the surplus market offered the only alternative for returning to service within any reasonable period of time following a major failure.  A full job plan including personnel, material / parts, operating line-up required and special, potentially long lead, tools such as cranes. Opportunistic work packages are intended for tasks requiring shutdown that can be completed relatively quickly in the event of an unexpected outage due to power failure, lightening strike or some other unanticipated event. Opportunistic work packages take advantage of an unexpected outage to improve condition, extend life and avoid / minimize scheduled shutdowns Opportunistic work packages are fully planned and ready to work with parts reserved and available. Packages are typically assembled for 12, 24 and 48 hour duration. They are reviewed and updated periodically. The review includes the benefits of delaying production recovery for the various intervals in terms of the benefits of life extension and improved effectiveness. The key for success in this area is to have all alternatives explored, discussed and decided prior to an actual event. With this completed, resources can be mobilized and applied immediately without a costly delay, or worse lost opportunity, due to a lengthy decision process.

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A facility suffering through a nagging problem that would eventually force shutdown experienced a momentary power interruption in the middle of the night. Instead of delaying restart for the couple of hours necessary to effect repairs they restarted immediately. A major opportunity to avoid an additional outage and production loss was missed. A Production Superintendent concluded that his unit could eliminate scheduled outages completely by relying on preplanned tasks that could be immediately implemented in the event of an unexpected outage. Other facilities are using this idea in combination with performing more work during operation to extend the interval between planned outages and diminish duration. Planners and Schedulers. In industry leading facilities, Planners and Schedulers typically have the experience to quickly and accurately define tasks and recognize potential problems. They are also the primary users of the Computerized Maintenance Management Systems (CMMS) discussed in the next section. Planner Critical functions of a Planner include:  Review WO’s and develop manpower, skills and time requirements  Communicate with the job originator to review and verify work requirements  Determine material and parts requirements, assess availability in site stores, order as necessary  Determine requirements for special tools, support, e.g. rigging, scaffolding and facilities  Develop and verify Bills of Materials to ensure quick accurate access to parts requirements  Assemble and issue the job plan  Pass the WO to Scheduling when all parts are available  Verify completion with requestor at Work Order closure, confirm comments made and entered in CMMS Planners must be able to focus attention on future work. The inevitable involvement in daily crises detracts from the attention and quality time needed to deliver effective work packages. A typical complaint voiced by most Planners is the necessity for their involvement in expediting parts for Emergency, break-in work. Several Planners stated that the majority of their working hours were spent expediting parts required for immediate use. This again points up the necessity of improving reliability within an Asset Optimization program to limit Emergency, break-in work. Scheduler A Scheduler:  Review planned, ready to work jobs, identify jobs that can be worked from production requirements  Along with the Planner, schedules jobs for accomplishment based on system, equipment, tool and manpower availability  Communicate weekly and daily work schedules  Coordinate with production to ensure equipment is available for work, work is accomplished on schedule Computerized Maintenance Management Systems (CMMS) A Computerized Maintenance Management System measures, analyzes, and manages the entire maintenance cycle.(102) Specifically, the CMMS manages the work process, facilitates the flow of information, tracks costs and improves decision-making.(110) It has been stated humorously that with a CMMS companies can continue to do the wrong work, but do it more efficiently! The addition of an Asset Optimization program will assure that the right work is performed at the right time!

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In its Work Management role a typical CMMS facilitates the following functions:  MRO work management, including receiving Work Requests (Notifications) and issuing Work Orders  Task planning and scheduling  Labor resource management, including skills management, allocation of personnel and resources  Backlog management  PM management and scheduling  Labor and material budgeting, cost control and accounting  Purchasing and inventory (spare parts) control and management  Data management, equipment cost and repair history  Reporting KPI’s  Added functionality:  Managing RCM, RCA processes, incorporating results into task and schedule requirements  Condition-based task scheduling Reliability tracking Successfully implementing and utilizing a CMMS requires an institutional culture that values teamwork, quality, consistency and reliability; depreciates reactivity and siloed processes. To gain maximum utility, the CMMS must be properly configured. A full and accurate configuration requires time and resources to verify basic documentation and assure that the correct nomenclature, asset hierarchy, Bills of Material and task instructions are assembled into the CMMS. The configuration must assure the roll up and report information that will be needed for reliability analysis. A reliability analyst must be able to quickly identify and rank parameters such as repair costs, unscheduled downtime and number of emergency work orders originated for all equipment in a production unit. Information such as repair costs for specific components must be identifiable for a unit, across an entire site and within a multi site enterprise. Further, an analyst must be able to quickly identify equipment that is unreliable and / or consumes inordinately high resources. Finally, the analyst should be able to identify cluster problems by equipment manufacturer. Access to the CMMS must be sufficiently broad that everyone who needs information has access. In some cases security profiles are so strict that the people who need to see the data can’t. Typical CMMS’ are offered in a tiered functionality by facility requirements and size. A survey conducted by Plant Services in 1998 disclosed the following CMMS use: (102) Track critical equipment performance Budgeting Track integrated procurement Benchmark maintenance Use with PdM Regulatory and/or quality documentation Financial/ROI calculation

62% 39% 39% 34% 33% 31% 22%

In the same survey, 65 percent of respondents stated that preventing downtime of critical equipment was the most important benefit desired from a CMMS. Greater equipment uptime was cited by 55 percent of the respondents and 42 percent stated that controlling maintenance costs is the most important benefit of a CMMS.(102) Interestingly, 52 percent of those responding to the Plant Services survey want integration with PdM, and 50 percent desire financial / ROI capabilities. Companies clearly favor a broader scope, integrated solution for their traditional PdM and CMMS systems.(102) In response to these requirements, Computerized Maintenance Management Systems are evolving from specialty programs constructed to control work, to integrated management and information systems that support self-managing maintenance teams and link directly into business systems. The acceptance of this change by senior managers and maintenance personnel will require improved communications. Both parties must learn to communicate in terms the other understands. The maintenance practitioner must

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understand the necessity to provide essential information and communicate results in relevant business terms. Executives and senior management must learn enough of the process and technical vocabulary to ask relevant questions, understand the risk, and recognize the real value of results.

STORES (SPARE PARTS) INVENTORY MANAGEMENT Between 20 and 30 percent of the purchase cost of warehoused MRO spare parts are consumed annually by the cost of capital, warehousing, damage during storage, loss, insurance, and reserves for obsolescence. A company carrying $5 million in spare parts pays $1.0 to $1.5 million per year for the privilege. The Stores process is tasked as follows:  Manage MRO parts and supplies inventory in an as new, ready to issue condition  Maintain critical spare parts  Maintain consumable supplies. Many sites are moving to outsourced consumables where a contractor automatically replenishes open consumables at a regular scheduled interval. This avoids the necessity of inventorying and multiple purchase orders placed for inexpensive items.  Identify and maintain optimum inventory levels based on priority, usage and lead-time  Initiate outsource suppliers where practicable  Document cost and usage Contribution includes:  Cost effective acquisition and storage of repair parts in time to meet requirements  Accurate coding to minimize the potential of issuing an incorrect part  Minimizing emergency stock required for contingencies. Agreements with outsource suppliers can be very helpful.  Maintaining a cost effective min / max to meet requirements  Constant efforts to identify and reduce obsolete and inactive stock A detailed inventory in a large facility disclosed a significant number of parts for equipment that had been removed from service as many as ten years before the inventory. The problem was twofold: There was no procedure for reporting to stores when equipment was removed from service. Second, Stores did not routinely track usage to discover inactive parts. The drive to reduce capital explained in Chapter VII creates pressure to reduce the cost and quantity of stocked MRO spare parts, in some cases by as much as 50 percent. Leading enterprises are employing multiple strategies to reduce stocked spare parts, while simultaneously ensuring availability in the event of need. In most production enterprises, a simple delay in restoring production caused by the unavailability of a spare part will cancel all of the capital and cost advantages of reduced stocking. Stores cost optimization strategies include:  Reduced inventory; number and quantity (requires greater anticipation of need)  Supplier custody and managed inventory  Fewer suppliers; supplier rationalization  Less expediting (again, requires greater anticipation of need) The solutions are to increase reliability thereby reducing requirements for spare parts, transferring as many spares as possible to suppliers as consignment spares, and implementing information systems that improve planning and allow required parts to be ordered for standard delivery through normal channels. (81, 129) Centralized versus satellite, OEM, and supplier stock are clear opportunities for major capital and cost reductions. The first step in the process to minimize spare parts inventory is to reduce failures and the corresponding necessity for maintenance and spare parts. A second step is to greatly extend the interval between detection of a potential failure and the time corrective maintenance has to be performed. With the knowledge of requirements well within the normal delivery interval of a parts supplier, the number of stocked parts can be safely reduced. Some standard parts can be shifted to consignment owned by a

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third party supplier until use. Others can be eliminated altogether. Many facilities are implementing efforts to increase parts shared between multiple assets and thereby reduce unique parts. In some cases, slight design alterations may eliminate a single use spare and allow a process or equipment to share a component, such as a transmitter or bearing that is used elsewhere in the facility. Comprehensive Stores Management Program Stores management optimization creates real value in terms of both capital and expense. Better parts purchasing, custody, utilization and issue saves cost. Reducing the number of stocked spares reduces working capital. The following areas must be addressed:  Stocked spares rationalized for number and quantity: This to assure that stocked spares support operating equipment and are at levels reflecting anticipated need compared to normal delivery from suppliers. As mentioned earlier audits often disclose a considerable number of stocked spares for equipment that has long before been removed and / or levels that are excessive based on use. The petrochemical industry average for stocked MRO spare parts is reportedly 1 percent of RAV; 0.5 percent to 0.7 percent is world class. One leading company claims that its owned MRO spare parts are 0.25 percent of RAV. (129)  Seek less expensive methods for meeting requirements for repair parts: Consignment spares where a supplier either maintains a site stock that is not charged until use, or guarantees delivery within a fixed period following notification is an attractive alternative to owned spares.  Elimination of informal, uncontrolled spares often purchased and maintained by crafts personnel. Squirrel spares maintained “off the books” in this fashion are typically not stored to assure long-term quality and may become lost altogether when the purchaser moves on or forgets they have them. A diligent area stores audit at a large facility disclosed “squirrel” spares totaling more value than the official warehouse stores.  Repair and refurbish rather than purchasing new. In many cases, standard valves and transmitters, are examples, a supplier will collect and refurbish non-performing parts removed from service. As part of the arrangement the supplier offers rebuilt and tested replacements with an equivalent to new guarantee at a significantly reduced price compared to a new part. A large facility estimated an annual savings of $500,000 by employing this strategy Establishing categories / criticality is the first step in the process to reduce spare parts. This leads to a determination of optimal spare parts stocking levels and locations / custody. In typical process and manufacturing facilities, spare parts typically can be divided into four or more categories: 1. “Insurance spares:” Unique, high cost, long lead delivery capital spares required for insurance against failures that would cause a lengthy production interruption. For example, spare rotating elements for large turbomachines, gears and generators and special valves. 2. Spare parts that cannot be procured confidently through normal channels within a reasonable time interval beginning with identifying the need and necessity for the part. 3. Standard parts such as valves, transducers / transmitters, couplings, rolling element bearings and electronic control devices that are readily available through normal procurement channels in time to meet the great majority of requirements. 4. Low cost, high use parts and consumables. Spare parts in category 1 are typically maintained in stock. Sharing category 1 spares between multiple sites, and even multiple corporations, is often used to gain substantial savings. Proper storage and preservation, especially bearings and journals is essential. Real savings are available in categories 2 and 3. Some facilities offer incentives to suppliers to maintain dedicated on- or off-site spares, owned by and in custody of the supplier until use. An annual fee plus net 15 day payment on use is one successfully used incentive. A guaranteed delivery time from a suppliers stock is another alternative. In this alternative, parts are not allocated; the supplier depends on their inventory to meet the guaranteed delivery. Standard gaskets, bearings, and mechanical seals are examples.

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Many facilities are reducing storeroom inventory by shifting stocking to OEMs and suppliers with consignment either on-site or at a supplier site. Some companies no longer stock high cost, standard spares such as motors, bearings, seals, or couplings. They rely on one or more distributors. (76, 129) A facility that is outsourcing spare parts discovered a requirement to improve and expand specifications for warehouse facilities and storage procedures to assure quality, performance and reliability of parts received from outsourced suppliers. (129) When spares stocking is outsourced, limiting the number of suppliers makes the process easier to administer, facilitates communication, and provides greater assurance of meeting corporate standards. It is essential that suppliers know potential requirements with as much lead-time as possible, e.g., identify spare parts requirements when a defect is first discovered. (73, 129) A particularly clever operating company reduced in-house requirements for specialized spares — such as pump shafts — by paying an annual fee for maintaining stock material on-hand, assuring priority shop time for fabrication and guaranteed delivery from placement of order. In the event a replacement shaft is required, the operating company provides the drawing. The fee paid is based on cost of raw material rather than the cost of finished machining. In addition, a wide variety of shaft types can be covered with a single sized bar stock. The facility’s only additional requirement is to maintain the drawings. Demanding compliance with site standards for new equipment purchases, and modifying existing equipment to increase the quantity of common spares are additional methods for reducing the number of different parts stocked. Category 4 consumables are typically open issue small gaskets, pipe and tubing fittings, nuts and bolts. In a typical facility with outsourced consumables, the outside supplier checks and replenishes stocks at regular intervals and guarantees quantity. As stated this gains the best prices for bulk purchases, frees stores personnel from managing consumables and eliminates purchase orders for individual items. Many companies rely totally on distributors for consumables. (76, 129) Two elements must be in place to make a stores minimalization strategy work: (81, 129) 1. Increase reliability to reduce requirements for spare parts. 2. Implement predictive information systems that extend the interval between the discovery of a problem and the necessity for a replacement part. Together they allow parts to be ordered for standard delivery through normal channels. Stocking Levels Stocking levels are important within an optimized organization. In general, stocking levels are determined by criticality (impact of unavailability on production), probability and consequences of failure (risk), population of equipment served by a specific spare, and time for delivery via normal procedures and channels compared to need time. Stocking levels are most effectively based on these factors plus predicted usage rates, as shown in Figure 13.5. “When stocking level decisions are made, care must be taken to ensure production outages do not occur or extend as a result of a spare parts shortage (Stock Out). Some global companies are attempting to link spare parts worldwide by stock numbers. They will not stock anything locally unless it is the highest criticality. (129) Assuming insufficient spares levels to cover all potential requirements. When the need for a spare part becomes evident, the condition of all other equipment using the part must be reviewed in order to determine whether there are other latent defects that could have a higher priority use for the part within the lead-time for a replacement.

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Cost Outsourcing spare parts with guaranteed delivery reduces cost and risk of unavailability

No spares, high risk, low cost

Risk Optimum

Number of Stocked Spares

Figure 13.5 Risk and Cost Determine Optimum Spare Parts Stocking Levels Stores Metric Considerations Stores metrics are detailed in Chapter IX. When rapidly moving spares and some specialized parts, such as bearings and seals, are shifted to supplier-owned consignment stock, many of the spares remaining in the operating / producer organization’s warehouse may be slow moving, long-lead insurance spares such as rotating elements and large critical valves. When this occurs, the nature of the remaining parts may cause the inventory turn metric discussed in Chapter IX to trend in the wrong direction, toward fewer turns. Strong awareness of what is happening is required to resist ill-advised pressures to scrap very slow moving, specialized spare parts, which should never be scrapped without study, consideration and extreme caution. Finding that a recently scrapped spare part has a 24-week lead-time can cause major headaches following a failure! Optimized Spare Parts Management Process An optimized MRO spare parts management process used by several companies includes:  Direct supply and automatic re-supply  Accurate inventory and cost accounting  Parts kitting by Work Order to a secure storage for issue  Hourly personnel authorized to order small parts charged to a Work Order for direct delivery on a consumer charge card One company allows work teams to manage their own spare parts. Teams are responsible for stocked quantity and can alter and adjust replenishment levels. Parts may be housed in main or area satellite cribs provided they are in the main inventory system. (129)  Storage procedures, including PM, to assure quality standards at issue  Periodic review of usage to recommend changes to stocking and replenishment levels and identify slow movers and obsolete parts Optimum warehouse management procedures must be in place to ensure parts integrity and quality. Procedures must include storage requirements, e.g., vertical storage of long rotors, and PM routines performed on warehouse spares, e.g., periodically turning motor and pump shafts, to assure that warehouse equipment is maintained in first-class condition. (52, 129)

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OUTSOURCING Outsourcing can add significantly to skill flexibility and cost effectiveness. By outsourcing selected activities, a facility can concentrate employees to gain greatest performance and effectiveness within areas of core competency. As part of the decision to outsource the challenge is to identify core competencies that must be retained. Core Competencies As discussed in Chapter III, the definition of core competencies used in this handbook are those that require specialized and / or proprietary business, plant, operating or process knowledge; must be fully aligned to all requirements within a business decision process; deliver a direct contribution to the dominant value driver and cannot be obtained from multiple sources. A core competency is any aspect of the business operation that delivers a strategic business advantage. Core competencies must be protected and constantly improved. There is another factor; the ready availability of equivalent experience and skill. During the process of identifying core competencies it should be realized that outsourcing risks losing not only the competency itself but also the technical expertise necessary to understand the competency and evaluate performance. This includes the ability to assess quality and effectiveness and recognize the application of potentially valuable improvements. Ultimately the outsourcing entity can become totally dependent on the performance and recommendations of contractors without any inherent capability to judge and control quality or effectiveness. In some cases it may be possible for the outsourcing entity and contractor to find themselves in a position where the best interests of one is contrary to the interest of the other. One example: In the mid 1980's, condition monitoring contractors had been providing outsourced measurement and analytical services based on the time required to collect and analyze measurements with manual instrumentation. The introduction of microprocessor based walkaround data collectors and automated screening software initiated a shift to this new technology. The new systems reduced the time required to collect and analyze measurements by one-half to two-thirds. Condition monitoring contractors who had been billing for services by the time required found themselves in a very difficult position. They either had to increase the hourly rate, downsize their organization to reflect the increased productivity or double the client base. There was another alternative; charge by the number of equipment monitored rather than time. Attempting to maintain the same charges risked loss of the client to a new organization unencumbered by the past who could offer a significantly lower price. Some might say this is survival of the fittest; a more enlightened view might be that it is in the interest of both parties to share the benefits of unforeseen process and technical improvements. A key question is whether Purchasing will take the more enlightened view or move to low cost. Core competencies are typically in areas where institutional and process knowledge, skills, the importance of factors within the decision process, business objectives and contribution to business value all must be aligned. These must have an institutional focus and are protected and improved. Control and alignment might be key considerations in this area. Does the facility need the skill and control of the competency to assure the institutional knowledge necessary to make optimum business decisions? If so it should be considered core. In the second case, will company and contractor objectives be aligned for every conceivable business decision? If not the competency should be considered core. As an example of the second case, a contractor responsible for asset operation and maintenance, with incentive compensation based on cost and availability targets, is not likely to accept any added risk of increasing operating intensity to improve business return. Similarly, a contractor needing skilled personnel for a more lucrative contract could very well transfer key personnel at a crucial time. A large facility with all maintenance; including planning and scheduling, labor and even maintenance engineering, contracted to a third party experienced a high level of success for about a year following contract initiation. Gradually the experienced people the plant had come to depend upon were transferred to other jobs. Replacements were not nearly as experienced, knowledgeable or accessible. Although the contractor was in full compliance with the contract, the plant felt that the contractor was not meeting expectations. The collision between expectations and contractual obligations slowly eroded the relationship necessary to gain maximum results. Ultimately the contractor was replaced.

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Within the maintenance area, Instrumentation and Control (I&C) troubleshooting, some PM and PdM are generally considered core competencies. Outsourced contractors can provide readily available skills such as motor, valve, transmitter and pump seal repairs, pipe fitting, insulation, welding, rigging and carpentry plus augmenting labor during intense periods such as unit overhauls (turnarounds, shuts). Virtually all industrial organizations use some form of outsourcing for activities considered non-core. Outsourcing can be implemented at five identifiable levels, as shown in Figure 13.6. These range from supplying labor only through total asset operation and maintenance: 1. Specific specialized tasks: – Transmitter, motor, pump and / or valve repairs – Radiography, thickness, and condition measurements (e.g., vibration, thermography, and oil analysis) – Contract labor for specific, e.g., project, or general, e.g., pipefitting / welding 2. Labor plus work process management, planning, and scheduling (e.g., contract maintenance) 3. Parts management — ordering, ownership, and custody 4. Maintenance process redevelopment and implementation 5. Asset operation and maintenance with guaranteed availability (i.e., “power by the hour”) Outsourcing adds cost and skill flexibility. A facility can base load employees within core competency areas that require specialized process and operating knowledge. Instrumentation and Control (I&C), PM and most PdM generally fit in this category. Contractors provide non specialized skills such as pipe fitting, insulation, welding, rigging and carpentry, and can also augment labor during intense periods such as unit overhauls (turnarounds, shuts). Even the largest organizations that have historically relied on in-house personnel to perform equipment management tasks are likely to have some outsourced activities. Most facilities send motors to an outside shop for repairs. Some use outside shops for transmitter, valve and pump repairs. Work is accomplished by skilled specialists who are equipped to, and perform, the tasks most effectively. Outside contractors are often used for tasks requiring expensive, specialized equipment, such as radiography, thermography, and oil analysis. The number of facilities outsourcing predictive vibration measurements appears to be increasing. Asset AssetOperations Operations&& Maintenance Maintenance Process Redevelopment and Implementation

Spare Parts Management, Storage, Replenishment, Custody and Issue

Work Process Management, Planning and Scheduling

Specialized Services

Technology

Pump, Motor, Valve Repairs

PM, CBM/PdM, RCM, TPM, etc., Program Consulting and Services

Labor

Figure 13.6 Outsourcing Pyramid Pressures to reduce cost are resulting in more outsourcing. Many companies are already 50 percent outsourced and the percentage is increasing. An outsourcing contractor offers additional savings by spreading the costs of specialized technology and skills over a wider base. Several manufacturing companies outsource maintenance on all non-production equipment including HVAC systems, vehicle and equipment service and lubricant testing. Production equipment is all managed and serviced by employees. (129)

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In some cases outsourcing has been taken too far. So called “Master Contracts” negotiated by corporate purchasing for nationwide support often exclude local, highly responsive suppliers and service shops in favor of larger organizations. While the larger organization may offer some cost advantages they may be too far distant from an individual plant for the close relationship and personal direction that is all important when something unexpected occurs at an inconvenient time. In many cases, the effort a plant is required to expend justifying exceptions needed to operate effectively more than outweighs the potential cost savings of a master contract. Outsource providers must have the knowledge, tools, personnel, and control procedures to ensure delivery to expectations and standards contained within customer specifications. (18) The Japanese have integrated the functions of maintenance contracting, Just-in-Time (JIT) material supply, and process management by establishing true partnerships with one or more outsource contractors. These partnerships provide 50 to 100 percent of the labor requirements and up to 80 percent of material requirements. A site support team provides job prioritization, planning, scheduling, parts procurement, continuous improvement engineering, and operations liaison. Partnerships are strong and accomplishments are shared by plant and contractor personnel alike. The team approach is powerful and impressive and has a major impact on effectiveness. (92) Specialized Repairs and Expertise Many process, production, and manufacturing facilities are moving toward outsourced repairs and overhauls for transportable equipment such as transmitters, valves, pumps, and seals as described in the previous section. A few companies are contracting responsibility for pump seal availability to outside sources. In this type of contract, the service provider typically provides an on-site engineer or technician and guarantees availability and repair within a stated time for a fixed annual price per seal. All decisions, seal type, materials, and external services, e.g., flushing and parts stocking, are the responsibility of the contractor. At least one company is considering extending this method to complete pumps. Some operating companies are establishing on-site, specialized equipment repair facilities. A few are staffed and operated by contractors. Other operating companies send equipment to a contractor’s off-site facility. In both cases, the repair facility is typically responsible for spare parts ordering, inventory and custody. Automobile engine, transmission and component replacement is an established model. In this example a defective component is removed and returned as a core to a specialized remanufacturer that stocks all spare parts, performs the overhaul and supplies a remanufactured component meeting all specifications. The unit removed is remanufactured and eventually resold with an equivalent to new guarantee to continue the process. Facilities that have implemented this type of repair process typically state that it is more effective, produces better results and is less expensive than traditional on-site repair methods. Many believe that industry practices will evolve to this type of model. One leading company outsources pump repairs to an on-site repair shop staffed by the contractor, This follows the same principle used for motors and valves, with the exception that the shops are off-site. The shop repairs all pumps and owns and maintains repair parts inventory. The contract is open book and runs for five years. It is renegotiated annually based on standardized repair charges and an end-of-year guaranteed profit margin. This process has reduced pump repair costs by 30 percent, $5 million annually. (129) There are certainly exceptions to these generalized models. Some repairs and overhauls must be conducted in place. Large specialized machines such as paper machines, turbo compressor trains, turbine generators and feed pumps cannot be removed. The question in these cases is whether specialized repairs and overhauls that must be done on-site can be performed more effectively by employees or contractors. The typical answer is a combination of the two. Outsourcing professional expertise follows the same concept. Most operating organizations can no longer justify the time and ongoing training necessary to maintain the proficiency of an underutilized site expert in a specific area such as metallurgy or electrical distribution. Many operating companies have consolidated site experts into a central engineering group.

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The costs and training to maintain proficiency in a specialty can be justified when shared over a larger base. (129) Labor Industry is using more contract labor; and the experience seems to be mixed. The hourly rate of contract labor is typically less than that of employees with full benefits. However, many facilities utilizing contract labor cite hidden costs, such as parts and assembly quality control, diminished skills, added supervision, added requirements for safety and other types of training, lack of awareness of importance, e.g., a gasket failure that requires a total shutdown to replace, and mistakes that later impact on production. There are also union issues (mentioned earlier) that must be addressed, especially where the operating facility is non-union or utilizes multi craft work crews. “Educating outsource suppliers about the new requirements and demonstrating intolerance for not meeting standards has taken a couple of years.” (129) Work Management It is a large emotional step from contracting labor to outsourcing maintenance planning and scheduling. Although the skills required certainly can be resident in a contractor, many consider planning and scheduling a core competency due to operating and safety considerations. When an operating organization implements contract planning and scheduling, the work order system must include a detailed procedure that ensures optimum prioritization. As discussed earlier, the priority system must be based on safety, and impact on production effectiveness to ensure optimum application of resources. Business systems and work processes must be fully in-place, well defined, and organized for successful outsourcing. (129) Some facilities outsource work order initiation and measurements required for Preventive and Condition Based Maintenance to a remote supplier that performs all administration. The actual work can be carried out by employees or contractors. Full Process Responsibility A few operating organizations are combining total contract maintenance with parts purchase, custody, and ownership, typically under large, multi-year contracts. Some are fixed price with both incentive and penalty additions. Others are open book, guaranteed profit with incentive. A paper delivered in Europe in the spring of 1999 argued strongly for the former and against open book contracts. The new version of outsourcing replaces the former adversarial relationship between operator and service provider with aligned objectives and linked, common goals. Fixed price contracts are being replaced by structured risk and reward, guaranteed availability. (129) Asset Operation and Maintenance Full asset operation and maintenance, with an entity, typically the Original Equipment Manufacturer (OEM) guaranteeing availability, is frequently utilized for gas turbine generators. Several forces are converging to make this alternative more attractive. Achieving an advantageous return on capital for the operating company is most important. Leasing with guaranteed availability reduces capital requirements, and therefore increases return on capital for a given level of profitability. The increasing focus on core business is another consideration. Food processors have stated that their business is formulating and selling tasty foods, not maintaining equipment. Some electric power producers express similar thoughts. In each case, leasing the means of production, outsourcing operation and maintenance with availability guaranteed, rather than owning, is being given serious consideration. OEMs are recognizing that after-market support (repair, overhaul, training, service parts, and operation) is much more profitable than equipment sales. In fact, one recent estimate states that after-market support is three to four times more profitable than equipment sales. If these observations are correct, contracts that guarantee support services will benefit the OEM. Outsourcing in Physical Asset Optimization In the final analysis, outsourcing, regardless of the extent, does not affect the principles of Asset Optimization. It appears highly likely that future Asset Optimization will be accomplished with an optimal combination of employees and third party expertise used for facilitation, training and coaching. Employees build ownership and maintain invaluable knowledge about the institution, what happened,

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when, and what corrective action was taken. Some combination of employee staffing and contractors will be used to handle routine, day-to-day operating activities. Tasks such as major repairs and overhaul of transportable components; transmitters, valves, motors, pumps, and seals, will probably all be outsourced to specialized, central facilities. Outsourced labor will be used during intensive activities such as plant turnarounds and overhauls.

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XIV.CONDITION ASSESSMENT TECHNOLOGY AND SYSTEMS It’s that moment of dawning comprehension that I live for! Calvin, Literature Calvin and Hobbes

Condition assessment technology and practice is an essential core element for successful physical asset optimization. It is applicable to equipment such as pumps, motors, turbines, gears, valves, heat exchangers, electrical distribution equipment and even piping and structures. Condition assessment technology provides the best information to define current condition and performance and provides the basis for projecting future lifetime and availability. If an operating or production facility finds itself in a largely reactive mode, responding to unexpected events and failures, condition assessment is the best way to gain the foresight necessary to identify and evaluate anomalies in time to avoid the surprise of outright failure and operational interruption. For this reason, implementing comprehensive condition assessment should be given high priority at the commencement of a physical asset optimization program. Condition assessment must include modern technologies for measurement, information management and communications combined with intuitive, user-friendly displays. All personnel working directly with physical assets must have immediate access to vital operating and prognostic information developed by condition assessment. This includes current mechanical and operating condition, predicted (prognostic) lifetime and an estimate of risk; see Capacity Index, Chapter IX. In a world of limited resources, all are essential to assure the success of physical asset optimization.

THE BASIS OF CONDITION ASSESSMENT Condition Assessment utilizes an array of technologies and measurements that accurately represent the condition of operating equipment. Condition measurements are recorded in place without affecting normal operation. They are compared to normal and past values and examined for anomalies and trends to arrive at an assessment of condition and stability of condition. Methods of condition measurement, monitoring and assessment are well known, widely accepted, thoroughly understood and proven beyond question. Major equipment is automatically provided with condition monitoring instrumentation as a mandatory part of the control and protection suite. Nearly all essential equipment in industry best facilities has some sort of condition monitoring strategy in place for early warning of abnormal and / or deteriorating condition. With the advent of “smart” controls, condition assessment is quickly spreading to electrical distribution and process control systems. Benefits Overall considerations and benefits of condition assessment were detailed in Chapter V. An actual example of the cost penalty that can occur when condition assessment recommendations are ignored is shown in Chapter XIX, Figure 19.5. Condition assessment technologies Condition assessment technologies include the following:  Vibration monitoring — continuous on-line, scanned on-line and walkaround (principal difference is the interval between measurements)  Lubrication (fluid) analysis  Motor electrical analysis  Equipment and heat exchanger aerothermal, thermodynamic and hydraulic performance and efficiency  Infrared Thermography  Ultrasonics (passive valve, piping, vessel and trap leak detection, active thickness measurements)  Valve and controls action and response (hysterisis)  Visual inspections

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Many consider precision alignment and balancing as predictive technologies. For the purposes of this Handbook they are considered proactive activities. Vibration Vibration measurements can identify commonly encountered life-limiting defects such as rotor unbalance, coupling misalignment, mechanical looseness, and rolling element bearing flaws. In general, the amplitude of vibration is a measure of severity. The frequency of vibration and / or frequency patterns typically identify the type of defect. The presence of a specific frequency (e.g., bearing inner race defect), or frequency characteristics such as sidebands may also indicate severity. Figure 14.1 illustrates a series of vibration amplitude vs. frequency spectra recorded during a rolling element bearing failure. The appearance of high frequency energy at the right of the vibration spectrum beginning on 9/25 is clearly indicative of a rolling element bearing flaw. These energetic signatures continue to 11/11. From the spectrum recorded on 11/14 it is apparent that conditions have significantly worsened and the bearing will have to be replaced in the immediate future. In fact the bearing had approximately one more month of operating life before it had to be replaced. A skilled analyst can determine exact condition and estimate remaining lifetime from vibration spectra recorded in exactly the same way as Figure 14.1

Figure 14.1 Series of Vibration Signatures Recorded on a Rolling Element Bearing A bearing removed from the same machine (a high temperature ID Fan) following failure is pictured in Figure 14.2.

Figure 14.2 Failed Bearing Removed from High Temperature Induced Draft Fan The subsequent Root Cause Analysis of the bearing shown in Figure 14.2 determined that the majority of damage occurred when the motor driving the fan on which the bearing was installed lost electrical power.

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The heat from the fan shaft equalized through the bearing seizing the races and causing the outer race to spin when the fan was restarted. Operating procedures and reassembly instructions were modified as a direct result of this RCA. The necessary elements for establishing a vibration condition assessment program as well as the application and interpretation of vibration measurements are covered thoroughly in several comprehensive texts. Fluid Characteristics Methods of assessing equipment condition from fluid characteristics are detailed in Chapter XV. Fluid measurements are a very sensitive and accurate method for identifying wear and flaws on surfaces that are in contact with the fluid (e.g., hydraulic and lubricating oil). Electrical Characteristics Electrical characteristics provide insight into the electro-mechanical condition of motors and generators, such as loose or cracked rotor bars and asymmetric air gaps. Methods of using electrical characteristics to assess equipment condition are detailed in Chapter XVI. Operating Performance and Efficiency Operating performance and efficiency measurements provide insight into internal conditions that may not be visible in mechanical characteristics. Conditions include increasing clearances, distributed erosion/corrosion and build-up. Knowledge of load and efficiency is vital to identifying off-design conditions, calculating equipment operating cost and lifetime. Aerothermal and hydraulic performance and efficiency are calculated from combinations of process pressures, temperatures, flows, and specific gravity / molecular weight. Assessing heat exchanger performance from process measurements is relatively straight forward. The equations for pumps and gas compressors are well known and contained in many texts on mechanical equipment. Calculating performance on gas and steam turbines is more difficult. However, there are several computer systems available that perform turbine performance calculations. Pumps operating at part load conditions may consume as much as 40 percent more power than required. In addition to wasting energy, part load operation increases turbulence and stresses, that can result in a variety of premature failures, including mechanical seal, bearing, impeller, and shaft failures. (57) Many transmitters, control and electrical components are provided with means to identify anomalous behavior and report through the process control system. This adds to reducing variation, greatly facilitates troubleshooting and assures the planner and technician know exactly what is wrong as well as parts required when work is necessary. Systems are available that take this idea several steps further by examining all measured variables in a complex process, calculating a value for each from the remaining variables and then comparing the calculated value with the measured value. Differences are analyzed to identify process and component condition and identify anomalies. Thermography and Thermal Imaging Thermography employs a camera that is sensitive to infrared radiation. It produces images that show temperature variations as differences in color and intensity. Interpretation is intuitive and relatively easy. Cool areas are blue and purple; hot areas are yellow and red, Figure 14.3. Thermography is useful for identifying loose electrical connections in which increased resistance produces abnormal heating. It is safer, faster, more accurate, and less expensive than mechanically checking the tightness of electrical connections. One company checks critical line power supply transformers monthly with a thermographic survey. The survey is performed through IR transparent windows to gain safe access with the transformers powered. This test is accomplished without any interruption in service in a fraction of the time and cost that previously was required for mechanical checks. (129)

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Figure 14.3 Thermography Image of a Hot Bearing Thermography is also useful for identifying hot spots in electrical and thermal insulation. Electrical components, such as power line insulators, may overheat as a result of power leakage caused by dirt or salt build-up. Hot insulators readily show up in a thermal image and indicate the need for cleaning. Breakdowns in thermal insulation (e.g., in building roofs, furnaces, piping and heat exchange equipment) are readily apparent in a thermal image. Handheld temperature guns, Figure 14.4, are very useful for quickly checking temperatures on connectors, insulation, bearings and exchangers.

Figure 14.4 Handheld Infrared Temperature Measurement

courtesy Ralph Copp

Ultrasonic Measurements Active ultrasonic measurements are utilized to measure thickness. Passive ultrasonic measurements are employed to detect internal and external leaks through valves, traps, gaskets, and flanges; from and to piping and vessels. Ultrasonic measurements may also contribute to the condition assessment of mechanical components such as rolling element bearings and reciprocating compressor valves. The overall level of the ultrasonic signal is read on a meter for trending and heterodyned into the audible range so that it can be heard on headphones.

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APPLICATION OF CONDITION ASSESSMENT Most equipment is, and remains, in good condition for extended periods. Therefore, a major portion of the measurements required to assess condition do not change significantly over time. This leads to considerations regarding the type and interval of predictive condition monitoring measurements. Condition monitoring measurements and systems can be divided into a matrix of categories—protective and predictive, continuous on-line, and periodic off-line. Figure 14.5 primarily addresses vibration monitoring systems, however, the principles apply to condition monitoring in general.

Type of Monitoring Type of Equipment

Protective (API 670)

Predictive On-line

Off-line

Critical Non Critical Figure 14.5 Condition Monitoring System Applications Protection Systems Permanently installed, continuous, on-line protective systems are proven and universally required for monitoring large critical equipment (e.g., process turbo compressors, power generators, large pumps and propulsion turbines). Failures on this type of equipment can occur rapidly, may hazard safety, are always costly, typically interrupt production and may result in collateral damage. Protective systems must be continuous on-line to assure immediate response to sudden changes in condition. Requirements, performance and reliability standards for installed vibration and temperature protection systems have typically been governed by the provisions of American Petroleum Institute [API] Standard 670. More permanently installed on-line protective systems are being equipped with diagnostic capability. These modules are capable of performing more in-depth analysis for the purposes of earlier discovery of potentially threatening anomalies and providing a detailed diagnostic history to aid in determining risk, likely cause and corrective action. Most diagnostic modules include an expert system to aid discovery and identification of cause. Permanent, on-line protective systems may be installed on some smaller, non-critical equipment where condition can change rapidly with safety, environmental and / or mission consequences. Protective systems must respond instantly to potentially damaging changes in condition. In contrast, predictive condition monitoring systems are designed for a much more thorough and detailed analysis of complex characteristics for earliest detection of life threatening defects. By nature, the time required for predictive analysis precludes its use for protective monitoring. Predictive Systems Periodic, predictive condition measurements, recorded manually with portable equipment, are widely used where safety is not an issue, failures typically develop slowly and/or operating alternatives are available. Periodic vibration measurements recorded with walkaround data collectors, routine oil analysis, Thermographic and ultrasonic surveys are examples. Measurements are typically recorded on established routes at regular intervals. Since only a small portion of periodically measured condition monitoring values change, the ongoing expense necessary for periodic data collection with portable equipment may be considered excessive. The dilemma is how to detect the few measurement variations without recording all measurements.

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Permanently installed predictive systems significantly reduce the labor costs of periodic data collection and are advantageous in a number of circumstances. These include applications where safety or environmental considerations or restricted access prevent manual collection with the equipment in operation. On-line predictive systems are also used where comparing predictive and process data offers insight into cause and effect. (129) Disadvantages are primarily cost. Permanent predictive monitoring systems may have an installed cost as high as ten times the annual cost of manual measurement with portable instruments, depending on the configuration. To date, the large difference in cost between installed on-line and portable off-line condition monitoring systems has discouraged wholesale replacement of periodic manual measurements. A compromise solution uses permanently installed sensors that are connected to a field-mounted termination box, allowing manual, periodic data collection from equipment and components that cannot be accessed safely during operation. Many facilities are shifting some measurements to this configuration to improve effectiveness. Some facilities have been forced to reduce periodic condition monitoring without any replacement as a result of personnel reductions. When this occurs, prioritization is essential to ensure highest value and return for the remaining resources available.

ESTABLISHING A CONDITION ASSESSMENT PROGRAM Establishment criteria for a successful condition assessment program is discussed in Chapter XI. Detailed best practice criteria for vibration and oil condition assessment programs are contained in Appendix E. A typical condition assessment program must include the following:  Program governing procedure including objectives, organization, safety requirements, results required and performance measures / metrics  Application of condition assessment technologies, measurements and measurement interval standards by equipment type and risk rank  Procedure for establishing warning alarm levels and security protection of alarm values  Quality standards including measurements, measurement instrumentation and software  Procedure for reviewing measurements, identifying anomalies, diagnosis of problems, results reporting and follow up  Procedure and criteria for acceptance testing and baselining new equipment and following repair  Preservation / storage of data  Periodic effectiveness assessment based on results compared to cost of application  Training, proficiency and certification Application of Condition Assessment Technologies Application of technologies begins with constructing condition assessment templates by equipment type in order of risk rank. Templates must assure a representative and responsive picture of condition and include the following as a minimum:  Condition assessment technologies to be utilized by equipment type considering construction and components such as rolling element or fluid film bearings.  Number and type of measurements (continuous, periodic), sensors and method of monitoring for each measurement  Measurement / sensor / sample location, interval between measurements if applicable  Monitoring methodology: level/value, trend, bands, frequency spectrum, etc.  Connections to other systems such as the DCS  Recommendations / requirements for integrated, automated diagnostics  Methods for reviewing measurements, monitoring and trending results, identifying problems, diagnosing cause  Procedure for reporting results including follow up to assure results, operational limitations and any action requirements are received and fully understood

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Warning Alarm Levels Each condition assessment technology, program, monitoring system and measurement must have preset alarm points to warn of abnormal conditions. Typically there are two:  Alert or lower alarm to warn of an abnormal condition that should be watched more closely for continuing change  Danger or upper alarm indicating a serious deficiency, action required In many cases, an upward trend will initiate an alarm depending on the rate of change. Reviewing Measurements, Identifying Problems A condition assessment program is only as good as its ability to recognize change as early as possible, identify the cause, probable lifetime remaining and communicate information forcefully to all with responsibility. Since all condition assessment application programs include automated recognition of change and exception reporting it is essential that these are set up and fully utilized. As a quality check, groups of measurements should be checked manually at periodic intervals to assure that features such as alarm bands (vibration) and warning alarm levels are set correctly. Condition Assessment Displays Intuitive, easily operated displays of condition are necessary. Video games are a familiar example. Displays on successful games clearly convey status, condition, opportunity, threat, and even suggested action. Well-designed condition assessment displays allow personnel to quickly identify changes and abnormal conditions; focus their expertise on solving complex problems and improvements that reduce the need for maintenance – a more productive use of resources. Software programs capable of automatic analysis and displaying refined, easily understood information must be woven into the fabric of physical asset optimization. Corporate metrics, primary management and operating metrics, and Key Performance Indicators, Chapter IX, should be displayed on a management dashboard with capability to drill down for the exact cause of deviations. Condition Assessment Reports Information that remains within the condition assessment program uncommunicated is of no value. There are far too many cases of catastrophic failures that have occurred because information revealed by condition monitoring and assessment was either not transmitted or ignored by a busy manager because of a lack of emphasis. A condition assessment report should list the following as a minimum:  Equipment with problems in order of severity / deviation from normal condition.  Condition information expressed in tabular, coded form for quick examination, see Chapter XIX:  Equipment number and description  Problem diagnosis, assessment of severity — coded number / colored box from severe, action required immediately, to watch  Recommended action  Action required by date  Last reviewed, inspected, monitored  Changes noted; e.g., stable, problem worsening  WO written, number, date work scheduled  Comments  Details  Detailed diagnosis of problem  Operating limitations if any  Estimated lifetime remaining to failure  Interim corrective action, e.g., alter operating conditions  Recommended permanent corrective action such as design changes

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XV. FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY By: James C. Fitch, Noria Corporation

Every industrial organization has experienced the consequences of shoddy maintenance: contract penalties, junked parts, injuries, catastrophic damage, ballooning costs, missed shipping dates, irate customers, and sickly quarterly financial reports. Today, machinery and equipment can be maintained to achieve useful operating lives many times those attainable just a few years ago. For oil lubricated machinery, the opportunities surround what is commonly referred to as proactive maintenance. Carefully monitoring and controlling the conditions of the oil (nurturing) can systematically eliminate many of the root causes of failure. Case studies of highly successful organizations show that oil analysis plays a central role in this nurturing activity. For oil analysis to succeed, the user organization must first define the goals of the effort.

ROLE OF OIL ANALYSIS Some people view oil analysis as a tool to help them time oil changes. Others view it in terms of its fault detection ability. Still others apply it to a strategy for contamination control and filter performance monitoring. In fact, when a program is well designed and implemented, oil analysis does all of these things and more. The key is defining what the goals will be and designing a program that will effectively meet them. One might refer to it as a ready-aim-fire strategy. The ready has to do with education on the subject of oil analysis and the development of the program goals. The aim uses the knowledge from the education to design a program that effectively meets the goals. The fire executes the plan and fine tunes it through continuous improvement. Detecting Machine Faults and Abnormal Wear Conditions In the past, success in fault detection using oil analysis was limited primarily to reciprocating engines, power train components, and aviation turbine applications. The small sumps associated with this machinery concentrated wear metals and the rapid circulation of the lubricating oils kept the debris in uniform suspension, making trending more dependable. In recent years, industry reports have revealed widespread success using wear debris analysis to detect machine anomalies in stationary industrial lubrication oils and hydraulic fluids. The rapidly growing base of knowledge coming from the burgeoning oil analysis and tribology community has contributed to this success. Figure 15.1 provides a simplistic overview of the application of oil analysis—specifically wear debris analysis—in machine health monitoring. Specific methods are discussed later in this chapter. Condition-Based Oil Changes Each year, huge amounts of oil are disposed of prematurely; all at a great cost to the world’s economy and ecology. This waste has caused a growing number of companies to discontinue the practice of scheduled oil changes and implement comprehensive condition-based programs in their place. This, of course, is one of the principle roles of oil analysis.

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Figure 15.1 Overview of the Application of Oil Analysis By monitoring the symptoms of oil, we are able to respond to the true and changing conditions of the oil. Figure 15.2 illustrates this point. And, in some cases, reconditioning the oil—including reconstructing depleted additives—may be practical. Some oil analysis tests even provide a prediction of residual life of the oil and additives. Some distressed oils can be conveniently fortified or changed without disruption of production. In addition, those fluids that degrade prematurely can be reviewed for performance robustness in relation to the machine stressing conditions.

Figure 15.2 Monitoring and Responding to Oil Condition

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Monitoring and Proactively Responding to Oil Contamination While the benefits of detecting abnormal machine wear or an aging lubricant condition are important and frequently achieved, they should be regarded as low on the scale of importance compared to the more rewarding objective of failure avoidance. Figure 15.3 demonstrates this concept.

Figure 15.3 Wear Detection Is Secondary to Failure Avoidance When a proactive maintenance strategy is applied, three steps are necessary to ensure that its benefits are achieved. Proactive maintenance, by definition, involves continuous monitoring and controlling of machine failure root causes; therefore, the first step is simply to set a target, or standard, associated with each root cause. In oil analysis, root causes of greatest importance relate to fluid contamination (e.g., particles, moisture, heat, or coolant) and additive degradation. However, defining precise and challenging targets (e.g., high cleanliness) is only the first step. Control of the fluid’s conditions within these targets must then be achieved and sustained. This second step often involves an audit of how fluids become contaminated and then systematic elimination of these entry points. Often better filtration and the use of separators are required. The third step is vital—providing the feedback loop of an oil analysis program. When exceptions occur (e.g., over target results), this feedback allows remedial actions to be commissioned immediately. Using the proactive maintenance strategy, contamination control becomes a disciplined activity of monitoring and controlling high fluid cleanliness, rather than a crude activity of trending dirt levels. Finally, when the life extension benefits of proactive maintenance are flanked by the early warning benefits of predictive condition measurements, a comprehensive condition-based maintenance program results. While proactive maintenance stresses root-cause control, predictive maintenance targets the detection of incipient failure of both the fluid’s properties and machine components like bearings and gears. This unique, early detection of machine faults and abnormal wear is often considered the exclusive domain of oil analysis in the maintenance field.

OIL SAMPLING METHODS The success of an oil analysis program depends heavily on proper oil sampling. Experience has taught that correct sampling cannot rely solely on human instincts or judgment. In addition, published manuals on oil analysis often contain inaccurate or outdated methods. The sampling practice must be learned from those experienced in the trade. From a practical standpoint, optimum performance in oil sampling depends directly on succeeding in the following three areas:

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Selecting the Ideal Sampling Point In circulating oil systems, such as the one shown in Figure 15.4a, the best (primary) location is a live zone of the system upstream from filters where particles from ingression and wear debris are the most concentrated. Usually this means sampling on fluid return or drain lines. Figure 15.4b shows different options for sampling low pressure return lines. In the case of vented vertical drains from bearing housings, there is not a solid flow of oil (air and oil share the line), making sampling more difficult. In such cases, a hardware adapter called a sample trap can be effectively installed to “trap” the oil for easy sampling.

Figure 15.4a Optimum Sampling Point in Circulating Oil Systems In those applications where oil drains back to sumps without being directed through a line (e.g., a diesel engine and wet-sump bearing and gear casings), the pressure line downstream of the pump (before the filter) must be used. Figure 15.4c shows various options for sampling pressurized fluid lines. Where possible, always avoid sampling from dead zones such as static tanks and reservoirs. Splash, slinger ring, and flood-lubricated components are best sampled from the drain or casing side using a short inward-directed tube attached to a sample valve (see Figure 15.5). A vacuum pump may be required to assist the oil flow for high viscosity lubricants, as shown in Figure 15.4d.

Figure 15.4b Options for Sampling Low Pressure Return Lines

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Figure 15.4c Options for Sampling Pressurized Fluid Lines

Figure 15.4d Vacuum Pump Assists the Oil Flow of High Viscosity Lubricants Correct Procedure for Extracting the Sample Once a sampling point is properly selected and validated, a sample must be extracted without disturbing the integrity of the data. When a sample is pulled from turbulent zones—such as at an elbow—particles, moisture, and other contaminants enter the bottle at representative concentrations. In contrast, sampling from ports positioned at right angles to the path of the fluid flow in high velocity, low viscosity fluids results in particle fly-by. In such cases, the higher density particles follow a forward trajectory and fail to enter the sampling pathway. Machines should always be sampled in their typical work environment, ideally while they are running with the lubricant at normal operating temperature. Likewise, during (or just prior to) sampling, machines should be run at normal loads, speeds, and work cycles. This helps to ensure that the wear debris that is typically generated in the usual work environment and operating conditions is present in the fluid sample for analysis. Sampling valves should be flushed thoroughly prior to sampling. If other portable sampling hardware is employed, these devices need to be flushed as well. Once the flushing is complete, the sample bottle can be filled. However, never fill a sample bottle more than three-fourths full. The headspace in the bottle (ullage) permits adequate agitation by the lab. With many non-circulating systems, static sampling may be the only option. Often this can be done effectively from drain ports if a sufficient volume of fluid is flushed through prior to the actual sample, as shown in Figure 15.5. Alternatively, drop-tube vacuum samplers could be used, as demonstrated in Figure

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15.6a. Care should be taken to always sample a fixed distance into the sump. Using a rod with a marked standoff from the bottom of the tank is a reliable way to do this. Flushing of the suction tube is also important. To prevent cross contamination and mixing of fluids, never reuse suction tubes. Static sampling using a vacuum sampler can be improved by installing a quick-connect sampling valve to which the vacuum tube is attached. Often this will require drilling and tapping, preferably in the wall of the sump or the casing. The optimal location for valves is near return lines and where turbulence is highest. Installing a short length of stainless steel tubing inward from the valve is also helpful.

Figure 15.5 Sampling for Splash, Slinger Ring, and Flood-Lubricated Components

Figure 15.6a Using Drop-Tube Vacuum Samplers for Static Sampling Don’t Contaminate the Contaminant One of the main objectives of oil analysis is the routine monitoring of oil contamination. Therefore, in order to do this effectively, considerable care must be taken to avoid “contaminating the contaminant.” Atmospheric contamination that contacts the oil sample cannot be distinguished from the original contamination.

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Avoid sampling methods that involve removing the bottle cap, especially where significant atmospheric contamination is present. One effective method that ensures that particles will not enter the bottle during sampling is a procedure called “clean oil sampling.” It involves the use of common zip-lock sandwich bags and sampling hardware such as vacuum pumps and probe devices. Below is an outline description of this procedure, which is illustrated in Figure 15.6b.

Figure 15.6b Clean Oil Sampling Using Zip-Lock Bags with Sampling Hardware Step One: Obtaining a good oil sample begins with a bottle of the correct size and cleanliness. The bottle must be at a known level of cleanliness and this level should be sufficiently high so as not to interfere with expected particle counts. Some people refer to this as signal-to-noise ratio—in other words, the target cleanliness level of the oil (signal) should be several times the expected particle contamination of the bottle (noise). For more information on bottle cleanliness refer to ISO 3722. Step Two: Before going out into the plant with the sample bottles, place the capped bottles into very thin zip-lock sandwich bags—one per bag. Zip each of the bags such that air is sealed into the bag along with the bottles. This should be done in a clean-air indoor environment to avoid the risk of particles entering the bags along with the bottles. After all of the bottles have been bagged, put these small bags (with the bottles) into a large zip-lock bag for transporting them to the plant or field. Sampling hardware such as vacuum pumps and probe devices should be placed in the large bag as well. Step Three: After the sampling port or valve has been properly flushed (including the sampling pump or probe if used), remove one of the bags containing a single sample bottle. Without opening the bag, twist the bottle cap off and let the cap fall to the side within the bag. Then move the mouth of the bottle so that it is away from the zip-lock seal. Do not unzip the bag. Step Four: Thread the bottle into the cavity of the sampling device (vacuum pump or probe). The plastic tube will puncture the bag during this process, however, try to avoid other tears or damage to the bag (turn the bottle, not the probe or pump, while tightening). If a probe device is used, it is advisable to break a small hole in the bag below the vent hole with a pocketknife. This permits air to escape during sampling. Step Five: The sample is then obtained in the usual fashion until the correct quantity of oil has entered the bottle. Next, by gripping the bottle, unscrew it from the cavity of the pump or probe device. With the bottle free and still in the bag, fish the cap from the bottom of the bag onto the mouth of the bottle and tighten. Step Six: With the bottle capped it is safe to unzip the bag and remove the bottle. Confirm that the bottle is capped tightly. The bottle label should be attached and the bottle placed in the appropriate container for transport to the lab. Do not reuse the zip-lock bags. Three levels of bottle cleanliness are identified by bottle suppliers: clean (fewer than 100 particles >10 µm\ml), superclean (fewer than 10), and ultraclean (fewer than 1). Selecting the correct bottle cleanliness to match the type of sampling is important to oil analysis results.

OIL SAMPLING FREQUENCY The objective of oil analysis, like condition monitoring in general, is to find bad news. The objective of proactive maintenance is not to have any bad news to find. The machine and oil will generally give off silent alarms when problems first occur. In time, as the severity increases, these alarms are no longer silent and even the most rudimentary condition monitoring methods can reveal the problem. Of course, at

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this point, a great deal of damage may have already occurred. And arresting the problem on the run probably is no longer possible; the machine may have to be torn down and repaired. One of the extraordinary benefits of oil analysis is its incredible sensitivity to these silent alarms and the detection of incipient failures and faults. The methods for successfully performing oil analysis will be described later; however, insufficient oil sampling frequency is sure to reduce the effectiveness of the effort. “You can’t hear an alarm unless you are listening for an alarm” or “You can’t catch a fish unless your hook’s in the water” both demonstrate this notion. Too often we hear about oil samples being taken every six months or annually, yet vibration readings are taken on the same machinery every month. Scheduled sampling intervals are common in oil analysis. The frequency may be keyed to drain intervals or operating hours. The following table lists commonly recommended intervals based on operating hours for different machine classes. Recommended Oil Sampling Frequencies Equipment Type Hours Diesel engines - off highway 150 Transmission, differentials, final drives 300 Hydraulics - mobile equipment 200 Gas turbines - industrial 500 Steam turbines 500 Air/gas compressors 500 Chillers 500 Gear boxes - high speed/duty 300 Gear boxes - low speed/duty 1000 Bearings - journal and rolling element 500 Aviation reciprocating engines 25-50 Aviation gas turbines 100 Aviation gear boxes 100-200 Aviation hydraulics 100-200 Proper selection of sampling frequencies considers machine- and application-specific criteria such as those below:  Penalty of Failure: Safety, downtime costs, repair costs, and general business interruption costs should be considered. 

Fluid Environment Severity: Operation and fluid environment conditions influence the frequency and rate of failure progress. These include pressures, loads, temperature, speed, contaminant ingression, and system duty cycle.

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Machine Age: For most machines, the chances of failure are greatest for machines approaching break-in and after major repairs and overhauls. Likewise, the risk increases as a machine approaches the end of its expected life.

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Oil Age: Infant oils and old age oils are the highest risk. Infant oils are those that have just been changed and are less than 10 percent into expected life. Old age oils show trends that suggest additive depletion, the onset of oxidation, or high levels of contamination.

SELECTION OF OIL ANALYSIS TESTS After proper oil sampling has been mastered, the oil must be analyzed. Each test that is conducted by an oil lab adds cost to the program; therefore, an optimum selection of tests must be defined. There are generally two types of tests: routine and exception. A routine test is a scheduled test that is repeated with each scheduled sample, such as tests for viscosity, moisture, and particle count. An exception test is triggered by a previously non-complying condition or test result. It is conducted to either confirm a conclusion (diagnosis/prognosis) or to obtain further information that could identify the cause or source of the problem. Exception tests might, for instance, include specialized tests for

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confirming oil oxidation or abnormal machine wear. Figure 15.7 shows how routine tests can be combined with exception tests to provide comprehensive test bundles by machine application. To be thoroughly effective, a well-designed oil analysis program must encompass three categories of routine tests: (1) fluid properties, (2) fluid contamination, and (3) fluid wear debris.

Figure 15.7 Routine Tests Combined with Exception Tests Provide Comprehensive Test Bundles by Machine Application Fluid Properties Analysis This essential function of oil analysis helps ensure the fundamental quality of the lubricating fluid. The standard to which a used oil’s properties should be routinely compared are the new oil’s properties; a listing of each of the new oil properties should be a standard fixture on used oil analysis reports. Examples of common tests include viscosity, acid number, base number, infrared for oxidation, emission spectroscopy for additive elements, flash point, specific gravity, and rotating pressure vessel oxidation test (RPVOT). Fluid Contamination Analysis Despite the use of filters and separators, contaminants are the most common destroyers of machine surfaces, which ultimately leads to failure and downtime. For most machines, solid contamination is the number one cause of wear-related failure. Likewise, particles, moisture, and other contaminants are the principal root cause of additive and base stock failure of lubricants. Basic tests—such as particle counting, moisture analysis, glycol testing, and fuel dilution—are valuable and should be performed as directed by a well-designed proactive maintenance program. Fluid Wear Debris Analysis Unlike fluid properties and contamination analysis, wear debris analysis relates specifically to the health of the machine. Owing to the tendency of machine surfaces to shed increasing numbers of larger and larger particles as wear advances, the size, shape, and concentration of these particles tell a revealing story of the internal-state condition of the machine.

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Streamlining oil analysis can be effectively done when on-site oil analysis tools are available. For many machines, the particle counter serves as the best first line of defense. Only when particle counts exceed preset limits is exception testing performed. The best exception test is ferrous density analysis, such as a ferrous particle counter. When ferrous levels are high, a failure condition exists, triggering yet further testing and analysis. In addition to on-site particle counting, on-site moisture analyzers and viscometers also assess important root cause conditions.

MONITORING CHANGING OIL PROPERTIES Today there are a growing number of organizations transforming their lube programs from scheduled oil changes to condition-based changes. In fact, many companies claim that they easily pay for the cost of oil analysis from savings achieved through reduced lubricant consumption. Such progressive goals as these place a greater burden of precision on the selection of oil analysis tests and alarm limits to reveal noncomplying lubricants. Plants commonly interpret oil analysis results independent of the lab. The lab is relied on to provide accurate and timely data, leaving the interpretation of the data and the corresponding response to plant personnel who are familiar with the equipment, the application, and the operating conditions. Modern oil analysis software can greatly assist such programs. To reduce oil consumption, two plans must be implemented. The first plan is proactive in nature and relates to the operating conditions in which the oil exists. Improving the oil’s operating conditions will increase its expected life many fold. For example, with mineral oils, a reduction in operating temperature of just 10 degrees C can double the oil’s oxidation stability and double the oil change interval. An upcoming section discusses the proactive maintenance benefits of controlling oil contamination. The second plan to reducing oil consumption is predictive in nature and relates to the timing of the oil change. Basically, through oil analysis, key physical properties can be trended to help forecast the need for a future oil change. Restated, by listening to the oil, we can determine when it needs to be changed. And, if the need for an oil change occurs prematurely, an assessment of the oil’s operating conditions (e.g., cleanliness, dryness, coolness, etc.) and oil formulation should be revisited. The nature of the degradation will provide the basic clue in defining the solution. There are numerous modes of degradation of lubricating oil. These change the fluid’s many properties. Our intent is to recognize the change by monitoring the correct properties; overly extensive monitoring is wasteful. A discussion of common oil degradation modes and the properties that can best reveal them is presented below. In all cases, we must obtain a base signature of the normal properties in the new oil to benchmark the trended change. These reference properties should remain as a permanent fixture on the oil analysis report and include additive elements, neutralization numbers, infrared units (unless spectral subtraction is used), RPVOT minutes, viscosity, flash temperature, VI, and color. Viscosity Stability Viscosity is often referred to as the structural strength of liquid. Viscosity is critical to oil film control and is a key indicator to a host of ailing conditions related to the oil and the machine. As such, it is often considered a critical “catch-all” property in oil analysis. Essentially, when viscosity remains in a controlled narrow band, we can assume that many things that could go wrong, in fact, are not. Conversely, when viscosity falls outside of the band, an exception test is usually needed to identify the nature and cause of abnormality. Therefore, monitoring viscosity serves as a first-line detection defense for many problems. The importance of viscosity is reflected in the fact that it is often monitored onsite by the reliability team. It is used as an acceptance test for new oil deliveries and to verify that the correct lubricant is in use. When viscosity changes with in-service lubricants, the cause is either oil degradation or oil contamination. Oil degradation relates to changes to the base oil and additive chemistry (molecular changes). Contamination of an oil can either thicken or thin the oil depending on the viscosity and emulsifying characteristics of the contaminant. Figure 15.8 illustrates this concept.

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Figure 15.8 Contamination Either Can Thicken or Thin the Oil, Depending on Contaminant Viscosity and Emulsifying Characteristics In oil labs, viscosity is typically measured using kinematic viscometers. ISO viscosity grades shown on lubricant spec sheets are based on kinematic viscosity in centistokes (cSt) at 40 degrees C. Kinematic viscosity can also be represented by Saybolt Universal Seconds (SUS). Figure 15.9 shows a photo of a common U-tube kinematic viscometer. In this device, the oil is allowed to drain by gravity through a capillary at a constant temperature. The drain time (efflux time) is measured and translated into centistokes. Viscosity varies nearly proportionally to drain time. Because gravity is involved, kinematic viscosity characterizes both the oil’s resistance to flow (absolute viscosity) and specific gravity.

Figure 15.9 A Common U-Tube Kinematic Viscometer Onsite oil analysis labs frequently use absolute viscometers to obtain a precise indication of base oil condition. Unlike kinematic viscometers, absolute viscosity measures only an oil’s resistance to shear or flow (not specific gravity). Figure 15.10 shows an absolute viscometer designed for plant-level use. It employs a capillary in its tip, through which the oil flows under constant pressure and temperature. An

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inline plunger moves outward with the flow. The speed of this plunger, measured electronically, varies nearly proportionally to absolute viscosity. Viscosity is typically trended at 40 degrees C, although for high temperature applications such as crankcase lubricants, a 100-degree C trend is sometimes preferred. Both temperatures are needed to determine the oil’s Viscosity Index (VI). However, the VI rarely is trended for routine condition monitoring. Monitoring viscosity at 40-degrees C, for most industrial applications, will provide the most reliable early indication of base oil degradation and oxidation.

Figure 15.10 An Absolute Viscometer Designed for Plant-Level Use Oxidation Stability When an oil oxidizes, the base oil thickens and discharges sludge and acidic materials, all of which are detrimental to good lubrication. Oxidation is uncommon in applications where oils are relatively cool, dry, and clean. This is especially true for low viscosity oils such as hydraulic fluids and turbine oils that have higher oxidation stability. However, when operating conditions are severe, oil oxidation can be a recurring problem. Where a proactive solution cannot be applied (controlling oxidation root causes or the use of resistant synthetics), monitoring the progress of oxidation is the only option. Monitoring the depletion of oxidation inhibitors provides an early, forecastable trend; however, it may not be practical in some applications. The technologies used to monitor the depletion of the oxidation inhibitors are: 1. Infrared spectroscopy (FTIR) can pick up trendable changes in phenolic and ZDDP inhibitors. However, only a few of the laboratories report additive depletion with FTIR because of unreliable reference oils and occasional inferences from contaminants. FTIR is addressed in Figure 15.11. 2. Acid number (AN) is sensitive to both mass-transfer and decomposition depletion of ZDDP inhibitors. Interpretation of the trend requires practice and a good new-oil reference. 3. Elemental spectroscopy can show reliable mass-transfer depletion trends in ZDDP inhibited oils. 4. Rotating Pressure Vessel Oxidation Test (RPVOT) provides a highly forecastable trend on additive depletion. The time needed to run this test makes it expensive; therefore it is usually saved for exception testing or special circumstances. 5. Linear Sweep Voltammetry is a new technology that has shown particular promise in trending the depletion (mass transfer and decomposition) of phenolic and ZDDP inhibitors.

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Figure 15.11 Infrared spectroscopy (FTIR) If trending the depletion of oxidation inhibitors is not practical, then oxidation must be monitored. The problem with this approach relates to the fact that oxidation can progress rapidly in stressful conditions once the antioxidant has depleted. Simply stated, with oxidation, the worst things get, the faster they get worse. If the goal is a condition-based oil change, this translates to the need to monitor sufficiently frequently to catch the problem in the incipient stages; not after the oil throws sludge and destructive lubrication has occurred. The most common and reliable methods for detecting and trending oil oxidation are listed below.  If a reliable new oil reference is available to the laboratory, infrared analysis (FTIR) is dependable for mineral oils and many synthetics, including organic and phosphate esters. The acids, aldehydes, esters, and ketones formed during oxidation are detected by FTIR in mineral oils and PAO synthetics.  Acid number (AN) will quantify the growing acid constituents in oxidizing oils.  Oxidation results in the polymerization of the base oil and the discharge of oxide insolubles, causing the viscosity to increase.  Color-bodies form in oxidized oils, resulting in a marked darkening of the oil’s color.  Oxidized oils emit sour or pungent odors similar to the smell of a rotten egg. Thermal Stability and Varnish Tendency The thermal failure of an oil can be localized or uniform. Localized thermal failure occurs when the bulk oil temperature remains generally suitable for the selected lubricant, but oil is exposed to hot surfaces, such as the discharge valves of recip compressors or hot surfaces in IC engines and turbo machinery. Another common cause of localized thermal failure is associated with entrained air that is permitted to compress, similar to air bubbles passing through a high-pressure hydraulic pump. The air bubble implosion causes heat to concentrate, generating microscopic specs of carbon. These carbon insolubles later condense on machine surfaces, forming what is commonly called varnish. The varnish tendency of an oil is often difficult to detect because the majority of the physical properties of the oil are unaffected. For instance, there is generally no change in viscosity, AN, or FTIR for oxidation. However, sophisticated labs that have experience with hydraulic fluids employ specialized tests such as ultracentrifuge, FTIR for nitration, and submicron membrane tests. Other, less reliable, indicators include oil color and paper chromatography (blotter spot test). The uniform thermal failure of an oil results from excessively high operating temperatures attributable to a number of causes. However, the most common reasons include overloading, inadequate oil supply, failure of a heat exchanger, and use of a high watt-density tank heater. When any of these conditions occur, the oil fails by evaporation (thickening), carbonization (coking, carbon stones, etc.), or cracking (thinning) in extreme cases. Regardless, the uniform thermal failure of the oil is serious and threatens the reliable operation of the lubricated machine.

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An oil’s thermal stability it often measured using the Cincinnati Milacron test (ASTM D 2070-91). This test takes a week to gestate; therefore, it is generally impractical for routine used oil analysis. Other ways to evaluate thermal failure include viscosity analysis, ultracentrifuge, total insolubles, and oil color. Less reliable indicators include oil odor (either a burnt, rancid odor or no odor at all) and paper chromatography. Additive Stability Additive monitoring is one of the most challenging and evasive areas of used oil analysis. The reasons for this are many and complex. A review of how additives deplete during normal use and aging offers a good starting point. There are two forms of additive depletion; both are common and can occur simultaneously. The first form of depletion is known as decomposition. Here the additive mass stays in the oil, but its molecular structure changes, resulting in an assortment of transformation products (other molecules). In some instances, the transformation products may possess properties similar to the original additive, but in most cases performance is degraded or is completely lost. This sacrificial form of depletion is common to what happens over time to oxidation inhibitors, as described previously under Oxidation Stability. The second form of additive depletion is called mass transfer. This type of depletion is often the easiest to detect because the entire mass of the additive transfers out of the bulk oil. And, as such, any measurable property of the additive leaves as well. For example, if the additive is constructed with phosphorous, a downward trend of phosphorous in the used oil is a reliable indication of its mass transfer depletion. Conversely, an unchanging level of phosphorous in used oil in no way confirms that decomposition depletion has not occurred. With decomposition the elements of the additive remain suspended in the oil. Mass transfer of additives occur in normal operation, usually as a result of the additive doing the job it was designed to do. For instance, when a rust inhibitor attaches itself to internal machine surfaces it depletes by mass transfer. It is common for additives to cling to various polar contaminants in the oil such as dirt and water. The removal of these contaminants by filters, separators, and settling action causes a removal of the additive as well. And, over time, aging additives can form floc and precipitate out of the oil due to decomposition and long cold-temperature storage. The insolubles formed will migrate out, often ending up on the bottom of the sump or reservoir. Figure 15.12 describes common methods used to monitor additive depletion. Note that the use of elemental spectroscopy to trend additive depletion is only effective where mass transfer is involved. It is not uncommon, therefore, for oil labs to condemn an oil with only a 25 percent reduction in the concentration of telltale additive elements (e.g., zinc and phosphorous in the case of ZDDP).

Figure 15.12 Common Methods for Monitoring Additive Depletion

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MONITORING OIL CONTAMINATION Contamination can be defined as any unwanted substance or energy that enters or contacts the oil. Contaminants can come in a great many forms; some are highly destructive to the oil, its additives, and machine surfaces. Contamination is often overlooked as a source of failure because its impact is usually slow and imperceptible. Yet, given time, the damage is analogous to eating the machine up from the inside out. Although attempting to totally eradicate contamination from in-service lubricants is impractical, controlling contaminant levels within acceptable limits is possible and vitally important. Particles, moisture, soot, heat, air, glycol, fuel, detergents, and process fluids are all contaminants commonly found in industrial lubricants and hydraulic fluids. However, particle contamination and moisture are widely recognized as the most destructive to the oil and machine. Particle Contamination No single property of lubricating oil challenges the reliability of machinery more than suspended particles. Particles are essentially a microscopic wrecking crew. Small particles can ride in oil almost indefinitely and, because they are not as friable (easily crumbled) as their larger brothers, the destruction they cause can be continuous. Many studies have shown convincing evidence of the greater damage associated with small, rather than large particles. However, most maintenance professionals have misconceptions about the size of particles and the harm they cause. These misconceptions relate to the definition people apply to what is clean oil and what is dirty oil. This definition also becomes the first of the three steps of proactive maintenance; the need to set appropriate target cleanliness levels for lubricating oils and hydraulic fluids. The process is not unlike a black box circuit. If we want a change to the output (longer and more reliable machine life) then there must be a change to the input (e.g., improve cleanliness). For example, monitoring cholesterol does not save us from heart disease; the things we do to lower the cholesterol may. Therefore, the best target cleanliness level is one that is a marked improvement from historic levels. This leads us to the second step in proactive maintenance—the lifestyle change. By effectively excluding the entry of contaminants and promptly removing contaminants when they do enter, we can frequently and easily achieve the new cleanliness targets. Concerns that filtration costs will increase are not often realized because of the greater overall control, particularly from the standpoint of particle ingression. The third step of proactive maintenance is the monitoring step (i.e., particle counting). If this is done on a frequent enough basis, not only is proactive maintenance achieved, but a large assortment of common problems also can be routinely detected. As such, particle counting is another important “catch all” type of test, like viscosity analysis. Because of the obvious value, the particle counter is probably the most widely used onsite oil analysis instrument. It is not uncommon to find organizations testing the cleanliness of their oils as frequently as weekly. The activity of routine particle counting has a surprising impact on step number two. When the cleanliness of oils are checked and verified on a frequent basis, a phenomena known as the “invisible filter” occurs, which is analogous to the saying, “what gets measured gets done.” Because a great deal of dirt and contamination that enters oils come from the careless practices of operators and craftsmen, the combined effect of monitoring with a modicum of training can go along ways toward achieving cleanliness goals. The ISO Solid Contaminant Code (ISO 4406) is probably the most widely used method for representing particle counts in oils. The current standard employs a two-range number system, as shown in Figure 15.15. The first range number corresponds to particles larger than 5 microns and the second range number for particles larger than 15 microns. From the chart, as the range numbers increment up one digit, the represented particle count roughly doubles. At this writing, the ISO Code is undergoing revision that will likely add a third range number plus a change to the particle size corresponding to the three range numbers.

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Figure 15.13 ISO 4406 Two-Range Number System for Representing Particle Counts in Oils Although numerous methods are used to arrive at target cleanliness levels for oils in different applications, most combine the importance of machine reliability with the general contaminant sensitivity of the machine to set the target. This approach is shown in Figure 15.14. The Reliability Penalty Factor and the Contaminant Severity Factor are arrived at by a special scoring system that is included with the Target Cleanliness Grid. Oil analysis laboratories use many different types of automatic particle counters. Likewise, there are a number of different portable particle counters on the market. The performance of these instruments can vary considerably, depending on the design and operating principle. Particle counters employing laser or white light are widely used because of their ability to count particles across a wide range of sizes, as shown in Figure 15.15. Pore blockage-type particle counters have a more narrow size range sensitivity; however, they are also popular because of their ability to discriminate between hard particles of other impurities in the oil, such as water, sludge, and air bubbles. This is shown in Figure 15.16. Figure 15.17 shows how particle count trends vary depending on the machine application and the presence of an onboard filter. Because particle counters monitor particles in the general size range controlled by filters, equilibrium is usually achieved (i.e., particles entering the oil from ingression minus particles exiting from filtration will leave behind a steady state concentration). When filters are properly specified and ingression is under control, this steady state concentration will be well within the cleanliness target. In systems with no continuous filtration (e.g., a splash fed gearbox), the equilibrium is not effectively established (i.e., there is no continuous particle removal). This causes the particle concentration to continuously rise. However, contamination control can be achieved by periodic use of portable filtration systems like a filter cart.

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Figure 15.14 Target Cleanliness Determined Based on Need for Machine Reliability and Machine’s General Contaminant Sensitivity

Figure 15.15 Particle Counters Using Laser or White Light Can Count Particles Across a Wide Range of Sizes

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Figure 15.16 Pore Blockage-Type Particle Counters Can Discriminate Between Hard Particles and Other Impurities

Figure 15.17 Particle Count Trends Vary Depending on the Machine Application and the Presence of an Onboard Filter Moisture Contamination Moisture is generally referred to as a chemical contaminant when suspended in lubricating oils. Its destructive effects in bearings, gearing, and hydraulic components can reach or exceed that of particle

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contamination, depending on conditions. Like particles, control must be exercised to minimize water accumulation and resulting destruction to the oil and machine. Once in the oil, water is in constant search of a stable existence. Unlike oil, the water molecule is polar, which greatly limits its ability to dissolve. Water may cling to hydrophilic metal surfaces or form a thin film around polar solids co-existing in the oil. If a dry air boundary exists, water molecules may simply choose to migrate out of the oil to the far more absorbent air interface. If water molecules are unable to find polar compounds on which to attach, the oil is said to be saturated. Any additional water will create a supersaturated condition, causing the far more harmful free and emulsified water. The temperature of the oil, as shown in Figure 15.18, also influences the saturation point.

Figure 15.18 Oil Temperature Influences the Saturation Point With few exceptions, the chemical and physical stability of lubricants are threatened by small amounts of undissolved suspended water. In combination with oxygen, heat, and metal catalysts, water promotes oxidation and hydrolysis. An overall degradation of the base oil and its additives result. The harmful effects of water on the life of rolling element bearings and other contact zones when boundary lubrication prevails are well documented. According to SKF, “free water in lubricating oil decreases the life of rolling element bearings by ten to more than a hundred times . . .” And water is well-known for promoting corrosive attack on sensitive machine surfaces, discharging harmful abrasives into the oil like rust. The omnipresence of water in the environment precludes completely excluding it from entering and combining with the oil. However, its presence can be greatly minimized and controlled through effective maintenance practices. A proactive maintenance program needs to be established to control water. This should start with setting a target dryness level for each different oil application. By investigating the sources of water ingression, a plan can be implemented to eliminate the water. Occasional removal by water absorbent filters and vacuum dehydrators may also be necessary. A simple and reliable test for water is the crackle test (a.k.a. the sputter test). In the laboratory, two drops of oil are placed on the surface of a hot plate heated to approximately 320 degrees F. The presence of free or emulsified water in the oil will result in the formation of vapor bubbles and even scintillation if the water concentration is high enough. Although this procedure is generally used only as a go/no-go

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procedure, experienced lab technicians have learned to recognize the visual differences associated with progressive concentrations of water contamination. This concept is illustrated in Figure 15.19.

Figure 15.19 Visual Differences Associated with Progressive Concentrations of Water Contamination Detected via the Crackle Test Other widely used methods to detect water include:  Dean & Stark apparatus – occasionally used by laboratories; involves a procedure of co-distilling the water out of the oil and establishing the water content volumetrically (ASTM D 4006).  Karl Fischer titration – commonly used by laboratories as an exception test should initial presence of water be detected by crackle or infrared analysis. Two Karl Fischer procedures exist: volumetric titration (ASTM D 1744) and coulometric titration (ASTM D 6304).  Infrared spectroscopy – can reliably measure water concentrations down to about 0.1 percent. This lower limit may not be adequate for many oil analysis programs.

WEAR PARTICLE DETECTION AND ANALYSIS While the first two categories of oil analysis (fluid properties and contamination) deal primarily with the causes of machine failure (proactive maintenance), this category emphasizes the detection and analysis of current machine anomalies and faults—in other words, the symptoms of failure. The oil serves as the messenger of information on the health of the machine. When a machine is experiencing some level of failure, the affected surfaces will shed particles, releasing them into the oil. The presence of abnormal levels of wear particles serves as problem detection; the particles’ size, shape, color, orientation, and elements define the cause, source, and severity of the condition. Elemental Spectroscopy Figure 15.20 illustrates the three common categories of wear particle detection and analysis. The oldest and most widely used of these methods is elemental analysis, done today primarily with optical emission spectrometers. The procedure involves applying high heat to the oil. Particles in the oil will totally or partially vaporize in the presence of the head, producing incandescent emission of light. The light is diffracted such that spectral intensities at different wavelengths can be measured. Specific wavelengths are associated with certain elements and the special intensities define the concentration of the elements. The typical output from elemental spectroscopy is concentration units (parts per million) across 10 to 25 common elements such as iron, copper, lead, and aluminum. By comparing the major, minor, and trace

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metals to the metallurgical chart of the machine, we can establish a fingerprint of the probable sources of the wear. Many of the laboratories perform wear metal interpretation with the help of sophisticated software programs and extensive metallurgical databases. Figure 15.21 applies to wear metal interpretation. Most oil analysis laboratories offer elemental spectroscopy as standard with all samples analyzed. The spectrometers and technology vary somewhat, creating variations in detection range and sensitivity. The precision of these instruments is also influenced by the size of the wear particles suspended in the oils. During analysis, small particles vaporize more completely, while large particles (>10 microns) are almost unmeasureable. This particle-size bias leads to occasional errors—some serious (false negatives). One popular way to reduce the particle-size error is to use rotrode filter spectroscopy. This capability is available with spark-emission spectrometers at many of the large commercial laboratories. A more complete vaporization of larger particles is achieved (possible sensitivity to 20 microns) by pushing the particles into the interstices of the disc electrode. A special fixture is required to process the sample through the electrode prior to analysis. Because the oil is washed through the electrode during preparation, a separate test is performed on the oil alone to measure dissolved metals and additive elements. Ferrous Density Analysis The most serious wear particles are generated from iron and steel surfaces. In fact, in most oil-lubricated pairs, at least one of the two surfaces is a ferrous surface. Typically the ferrous surface is the most important from the standpoint of machine reliability. As a result, the oil analyst must have a thorough understanding of the ferrous particle concentration at all sizes. This is particularly important, considering the particle-size bias associated with elemental spectrometers. Therefore, to ensure that abnormal wear of iron and steel surfaces does not go undetected, most commercial and onsite laboratories use ferrous density analyzers. These instruments provide a first line of defense by detecting free-metal ferrous debris reliably. Example instruments include:  Direct Reading Ferrograph: reports results in Wear Particle Concentration units  Particle Quantifier: reports an index scale  Wear Particle Analyzer: output in micrograms/ml  Ferrous Particle Counter: assigns a percent ferrous to particle count results Analytical Ferrography Elemental spectroscopy and ferrous density analysis are just two of many methods for detecting problems in machinery. Thermography and vibration monitoring are also effective at detecting specific faults and modes of failure. Once there is an initial indication of a fault by any of these methods, the process must continue to: 1. Isolate the fault to a single component 2. Identify the cause, 3. Assess how severe or threatening the condition is 4. Determine the appropriate corrective action When problems are detected and analyzed early, they can often be arrested without downtime or expensive repair. In fact, root causes to the most common problems are usually correctable on the run. The key is the timing of the detection. An important part of timing is a regiment of frequent sampling (e.g., putting the hook in the water). Successful analysis of a current wear-related problem requires many pieces of information and a skilled diagnostician. To this end, the practice of analytical ferrography has achieved recent prominence. Unlike other common instrumentation technologies, analytical ferrography is qualitative and requires visual examination and identification of wear particles. Numerous properties and features of the wear debris are inventoried and categorized. These include size, shape, texture, edge detail, color, light effects, heat treatment effects, apparent density, magnetism, concentration, and surface oxides. This information is combined with other information obtained via particle counting, ferrous density analysis, and elemental spectroscopy in defining a response to items 1-4 above. Figure 15.22 presents a

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general overview of the combined detection and analysis process. Analytical ferrography is represented by microscopic analysis in the figure. Two methods are commonly used to prepare the particles for viewing by the microscope. If a high level of ferromagnetic debris is detected by ferrous density analysis then a ferrogram is typically prepared. The process involves slowly passing solvent-diluted oil down the surface of an inclined glass slide. The instrument that does this is called a ferrogram maker. Beneath the slide is a strong magnet. Ferromagnetic particles become quickly pinned down onto the slide and oriented to the vector lines of the magnetic field. Non-magnetic debris deposit gravimetrically in random fashion, with the exception of larger and heavier particles, which settle first. Approximately 50 percent of the non-magnetic particles wash down the slide and do not deposit. A ferrogram of cutting wear is shown is Figure 15.23. In cases where low levels of ferromagnetic particles are detected, but high non-ferrous debris is found (by a particle counter or elemental analysis), a filtergram is preferred. Unlike the ferrogram, the filtergram does not use a magnet; therefore, all particles are randomly deposited without size, weight, or magnetic bias. This is accomplished by passing an aliquot of solvent-diluted oil through a membrane of about threemicron pore size. No particles are lost from observation except those too small to be retained by the membrane. The single disadvantage of the filtergram is the difficulty of distinguishing ferrous debris from non-ferrous. The skillful eye of an experienced technician can usually overcome this drawback. An example of red iron oxide particles (rust) can be seen in the filtergram in Figure 15.24.

INTERPRETING TEST RESULTS Most machines are highly complex, consisting of exotic metallurgy and intricate mechanisms. The numerous frictional and sealing surfaces usually employ varying contact dynamics and loads, all sharing a common lubricant. A failure to gain knowledge about these many internal machine details as a reference base for use in interpreting oil analysis data may lead to confusion and indecision in response to oil analysis results. A good approach is to build a three-ring binder with index tabs for each machine type. Include in this binder photocopied pages from the service and operation manuals, plus other accumulated information. The following are examples of data and information to include: 1. Types of bearings in use and their metallurgy 2. Input and output shaft speeds/torques 3. Type of gears in use, speeds, loads, gear metal hardness, surface treatments, alloying metals 4. Type and location of frictional surfaces (e.g., cams, pistons, bushings, swash-plates, etc.) and the metallurgy of surface treatments 5. Type and location of coolers and heat exchangers and type of fluids used 6. Fluid flow circuit diagrams/schematics 7. Identification and location of the types of seals in use, both external and internal 8. Possible contacts with process chemicals and types 9. Lubricant flow rates, lubricant bulk oil temperatures, bearing drain and inlet temperatures, and oil pressures 10. Detailed lubricant specification and compartment capacity 11. Filter performance specification and location In many cases, oil analysis data can be inconclusive when used alone. When combined with sensory inspection information, however, a reliable, more certain, determination can be made. Likewise, the application of companion maintenance technologies (like vibration and thermography) can help support a conclusion prior to expensive machine teardown or repair.

IMPORTANCE OF TRAINING When a well-intentioned oil analysis program fails to produce the expected benefits, indifference among plant personnel is often thought to be a main contributing factor. Although this is occasionally true, in reality the problem is much more fundamental and deep-rooted. Unless maintenance professionals have an understanding of the purpose and goals of oil analysis and are literate in the language of oil analysis, they cannot be expected to carry out its mission.

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This level of understanding can be accomplished through a liberal amount of training and education. This should not simply be concentrated on a single individual—it should include all of those personnel who benefit from and contribute to machine reliability. In fact, training and education should occur at several different levels, including craftsmen, operators, engineering, and management. Below are a few subjects for which seminars and training classes are generally available:  Lubrication fundamentals and their use  Mechanical failure analysis  Proactive maintenance and root cause analysis  Troubleshooting hydraulic systems  Lubrication and maintenance of bearings and gear units  Oil analysis fundamentals  Oil analysis data interpretation  Filtration and contamination control  Wear particle analysis machine fault detection Once these fundamentals are in place, oil analysis can move forward enthusiastically, beginning with the development of oil analysis mission and goals. Rapid-fire corrections can be carried out in response to oil analysis exceptions and measures can be taken to preempt their reoccurrence. In time, unscheduled maintenance will become rare and oil analysis exceptions will be few, as the idealized machine operating environment becomes controlled. Finally, as the many elements of oil analysis and proactive maintenance merge together into a cohesive maintenance activity, the benefits should be promoted. Unlike many applications of new technology, proactive maintenance seeks non-events as its goal and reward. These non-events include oil that continues to be fit-for-service, machines that do not break down, and inspections that do not need to be performed. This quiet existence is the product of a highly disciplined activity; however, at times, it can be misunderstood and its value underestimated by the casual observer. Therefore, the close association of the activities of proactive maintenance with the benefits of proactive maintenance must be measured, monitored, and displayed for all to view.

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ELECTRICAL ANALYSIS: STATIC (OFF-LINE) AND DYNAMIC (ON-LINE)16 By: Jack R. Nicholas, Jr., P.E., CMRP Maintenance Quality Systems, LLC.

Electrical condition monitoring of a limited nature has been possible for decades using a number of qualitative and quantitative analysis methods. However, the process of arriving at a definitive, objective diagnosis and prognosis regarding comprehensive motor electrical health has been difficult and time consuming until recently. The availability of powerful, field portable computers has made it possible to quickly and definitively assess the major parameters that may be used to characterize condition. The computers, combined with an increasing number of software programs and small electronic packages for applying innovative measurement methods, enable technicians to quickly gather, store, recall, analyze, and present the mass of data needed to perform electrical predictive maintenance and diagnosis. Computers also enable technologies long used in all industries to provide more definitive and revealing information on the condition and predicted performance of the electrical materials in motors, generators and connecting circuits.

CONDITION MONITORING TECHNOLOGIES AND METHODS Some of the most common “traditional” condition monitoring techniques are:  Resistance to ground (RTG) testing  Surge comparison (Surge) testing  High potential (HiPot) testing  Motor current balance analysis (MCBA)  Partial discharge monitoring (PDM) Newer methods include:  Motor circuit analysis (MCrA)  Motor current signature analysis (MCSA)  Motor power or electrical signature analysis (MPA)  Motor flux analysis (MFA)  Motor normalized temperature analysis (MNTA)  Time domain reflectometry (TDR) Newest method available commercially  Model based fault detection and diagnosis

MOTOR CONDITION MONITORING TECHNOLOGIES The technologies described below can be applied to all types of motors (and generators) and associated circuits of any size. There is beginning to be considerable overlap between the capabilities of electrical analysis equipment from various vendors. However, none of the commercially available products have the complete range in all parametric or technology categories to meet total market requirements. Resistance to Ground (RTG) Testing For electrical circuits, the most commonly used condition monitoring method is resistance to ground (RTG) testing. This type of measurement is most often performed off-line, but it may also be done when a circuit is energized (on-line). RTG instruments measure DC (direct current) “leakage” current flowing to 16

Material in this chapter is extracted from Predictive Maintenance Management by Jack R. Nicholas, Jr., P.E., CMRP and R. Keith Young, ISBN 0-9719801-2-8 and Motor Electrical Predictive Maintenance and Testing (Ninth Edition) by Jack R. Nicholas, Jr., P.E., CMRP ISBN 0-9719801-4-4. Both books are published by Maintenance Quality Systems LLC, Millersville, MD.

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and through an insulation system to ground under the pressure of a controlled (known) electromotive force (constant DC voltage). The test result, in ohms, is derived by dividing the known voltage by the measured current. This relationship is known as Ohm’s Law. National electrical codes, industrial and professional standards institutes, and associations provide standards for RTG values on circuits required to carry electric power. The condition being monitored is the integrity of the insulation system isolating the power conductors from ground. Some users of RTG testing use a variation of this test method, which involves calculation and analysis of ratios of RTG values taken seconds or minutes apart on the same electrical circuit. These variations eliminate any need for temperature correction of RTG measurements. They make apparent the combined effects of circuit capacitance and insulation polarization on total current flow caused by applying voltage to the circuit under test. Condition criteria exist for certain commonly used RTG ratios, such as polarization index (ratio of RTG after 10 minutes to RTG after 1 minute of continuously applied, constant voltage) and dielectric absorption ratio (RTG value taken at 1 minute divided by the RTG value taken after 30 seconds of continuously applied, constant voltage). Even more important than the RTG ratios is the Polarization Index Profile or “PIP” of an electrical circuit. In this method, resistance to ground using a 500, 1000 or 5000 volt DC test voltage is plotted every three to five seconds for up to 10 minutes. Weak systems exhibit a profile or resulting plot of RTG versus time that has frequent “dips” or “spikes.” Even though the ratio may indicate a good condition, the stability of the “profile” as indicated by the size and mere presence of dips or spikes will indicate otherwise when moisture is present or the integrity of the system is beginning to yield intermittently under the force of the test voltage. Surge Comparison (Surge) Testing Surge and/or surge comparison testing involves off-line insertion of controlled electrical pulses into a motor from capacitor or capacitor-like circuits. The return pulses, which have been “damped” and may exhibit instability caused by the effects of changing inductive reactance of the motor coils or resistance in the circuit, are evaluated to assess the condition of winding coil turn-to-turn and ground insulation in all motors. Surge testing also reveals phase-to-phase insulation and coil orientation (erroneous connection) problems in polyphase motors. Evaluation of oscilloscope traces of return pulses reveals effects of any variation in impedances of parts of the motor circuit on the inserted (DC) electrical pulses. Comparison is most often performed with simultaneously inserted pulses into polyphase motors. The oscilloscope traces should be closely matched, stable and not “shifted” relative to the input pulse. Modern surge testers include a computer for storing and later recalling oscilloscope traces of return pulses for comparison with those from the same circuits at widely separated times. Comparing traces taken months or years apart on DC, single phase, and polyphase AC motor circuits allows more reliable evaluation of changes in motor electrical condition to be performed. Many motor manufacturers use surge testing as a quality tool. Motor rewind shops use the method for diagnosing incoming motors. Many motor users employ the technique for diagnosis, periodic testing, and more recently, as a predictive condition-monitoring tool for motors and small generators. High Potential (HiPot) Testing HiPot testing involves off-line application of either AC or DC voltage higher in value than that for which an electrical circuit is rated. The test is used to evaluate the integrity or margin of the ground insulation system against its breakdown under electromotive forces. Guideline evaluation criteria are available from various codes, standards, and texts on maximum values to use in conducting the testing. The test unit operator controls voltage. Current (i.e., leakage current) flowing into the circuit from the test instrument and proceeding through multiple paths and over the ground insulation system under test is measured and recorded. If no indication of insulation breakdown occurs at the maximum voltage established by the test criteria, the test is terminated and declared to be successful. Electrical apparatus repair shops and use this method frequently for evaluation of incoming machine insulation systems and

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during winding replacement and insulation system integrity restoration. Some facility maintenance teams use this method, taking care not to overstress insulation in the course of in-service testing. Many surge testers, such as those by the Baker Instrument Company and Electrom Instruments, also contain HiPot, temperature compensated RTG, Polarization Index and dielectric absorption ratio capabilities. The latest Baker instrument, the Advanced Winding Analyzer (AWA), also has the ability to measure, compare, and trend winding resistance (in the conductor path), a feature of Motor Circuit Analysis (MCrA) technology. This topic is covered in greater detail later in this appendix. Motor Current Balance Analysis (MCBA) For polyphase electrical circuits, taking a set of on-line current measurements, comparing them mathematically, and calculating their percentage unbalance provides an excellent indication of conditions affecting motor health. Current readings can be taken with simple, inexpensive instruments; clamp-on or flexible current transformers suffice for non-intrusive sensing on many systems. For best indication the readings should be taken when the motor carries a significant load. Unbalance usually results from impedance mismatch between phases of a circuit. Impedance changes can occur, for example, as a result of motor winding degradation (turn-to-turn or phase-to-phase shorts) and/or because of high resistance connections that can develop anywhere in the motor circuit, from the motor control center to the motor. Current unbalance can also be caused by source voltage unbalance due to faults in power utility generation, transmission, or distribution systems, which is rare in highly industrialized countries. Regardless of cause, motor or generator insulation system degradation and failure will occur as a result of overheating and accelerated aging if significant (e.g., >15%) unbalance is not corrected. Partial Discharge Monitoring (PDM) Partial discharges (PD) are small electrical sparks that occur in void spaces in and around conductor insulation when the electrical (force) field (voltage differential) is strong enough to initiate and sustain them. Once the discharges begin, they further erode and enlarge voids and thermally age and convert insulation materials into conducting contaminants. This is most prevalent inside and at the exits of stator winding slots and between end turns. Early versions of this technology, applied to turbo and hydro generators, used antenna-like sensors mounted inside the machine. The electronics were much like an AM radio, indicating the presence of PD like “static.” In current versions, the presence of partial discharges can be detected using electronic circuits that can decipher PD characteristics, sort or filter out “noise” from sources outside of the machine and indicate magnitude, intensity and internal location of the PD. Capacitive sensors called “couplers” located in slots of the stator core and/or mounted on power supply busses in the motor or generator connection box detect the PD pulses and channel their indications via sensor cabling to an electronic data acquisition unit mounted for easy access on or near the machine. Data may be downloaded locally or routed via network connection to a computer for alert, alarm, analysis and reporting. As conditions become more favorable to electrical discharges, the discharges become more frequent and stronger, accelerating the deterioration. The discharges, like lightning discharges in the atmosphere, create “pulses” in the electronic circuit of the PD detector. The more intense the discharge activity the worse the condition of the insulation systems and the closer it is to complete failure. Partial discharge monitoring has been used for over 40 years on medium and high voltage motors and generators (6kV and above) to give two or more years warning of insulation degradation caused by PD leading to inevitable failure. Two companies with the longest history in this technology field, Adwel, Inc., and Iris Power Engineering, both from the Province of Ontario, Canada, produce partial discharge monitoring systems for high voltage generators and motors. Their efforts were the result of research and pursuit of solutions to the problem of PD by Ontario Hydro, the provincial electric utility. Other companies now produce PD monitoring equipment for power cables and other applications. In lower voltage motors a precursor to imminent winding insulation failure is an increase in partial discharge activity that occurs only a few weeks or months before complete insulation breakdown. Until a new product was introduced by Iris Power Engineering of Etobicoke, Ontario, Canada, in May of 1996, there was no reasonable way to monitor partial discharge in medium (3.3kV to 4kV) voltage motors used in many power generation and industrial facilities. MotorTrac™, a successful continuous, on-line

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monitoring system, consisted of up to three partial discharge sensors that are typically mounted on terminals in the motor connection box and wired to an instrument package which may be mounted on or at a distance from the motor. The successor to MotorTrac™ , called PDTrac™ can be used to monitor motors, switchgear, generators and dry transformers. Like MotorTrac™ the unit front panel provides local indication of alert or alarm conditions. Data are stored for periodic download to a portable computer containing software for presentation analysis and reporting via RS232 output, or the units may be connected by Ethernet or RS485 link to a personal computer containing presentation, alert, alarm analysis and reporting software The instrument electronics use a sophisticated pattern recognition and filter technique to discriminate between external “noise” incoming from the power line and characteristic pulses created by partial discharges from the motor or generator. The instruments and associated couplers can normally be installed on a motor during a one-day outage. In late 1999 and early 2000 two other products were introduced by Iris Power Engineering (now a subsidiary of Koch Industries) for monitoring motors. The first, SurgAlert™, measures magnitude, rise times and number of voltage surges or spikes from variable frequency drive (VFDs) and switchgear. Surges can cause damage directly or, if high enough, induce partial discharges that cause progressive damage to insulation systems. Poorly performing or improperly installed VFDs - including those supposed to develop output voltages of only 460 volts - can create much higher voltage spikes that exceed PD inception voltage. Even motors with “spike resistant” magnet wire may be subject to premature failure. The second product, PDAlert™, measures PD in each phase under fast rise time surges. Combined with certain surge testers it can indicate the inception voltage at which PD first occurs. An output analog signal of PD can be displayed on a high speed digital oscilloscope for more detailed analysis. Motor Circuit Analysis (MCrA) Motor circuit analysis (MCrA), also known by many large manufacturers and electric power generation companies as Motor Circuit Evaluation or MCE17, involves off-line measurement of four “natural” electrical parameters using closely controlled AC and DC input signals from a computer-based test unit. MCrA became economically feasible about 1991, when field portable computers and micro processors with sufficient memory and speed entered the marketplace linked with portable test packages. MCrA testers measure: (1) resistance in the conductor path, (2) inductance, (3) capacitance-to-ground and (4) resistance-to-ground. Analysis involves development of trends, pattern recognition, correlation of combinations of parameters, statistical comparison where possible, calculations of unbalance, and graphs for diagnosis and identification of suspected defects. Results may be compared to well-accepted standards (e.g., for RTG) or empirically derived guidelines. The guidelines are based on analysis of tens of thousands of motors and reflect experience of MCrA equipment vendors as well as many utilities, government organizations, and manufacturers. Using MCrA data, motor predictive maintenance personnel can quantitatively characterize present and predict future motor circuit (and small generator and transformer) electrical conditions. This method is growing in popularity and is now used in many parts of the world. The most advanced application of this test method indicates the following:  Resistive unbalance in AC three-phase motor circuits (causing overheating and premature and uneven stator winding failure) 

Excessive resistance in DC motor circuits (which may interfere with control)



Inductive unbalance in AC three-phase motor stators and wound rotors (indicating quantitatively the extent of shorted turns)



Loss of inductance and/or resistance in synchronous rotors (indicating quantitatively the extent of shorts in poles of the rotor)



Loss of inductance and/or resistance of armature winding circuits (indicating quantitatively the extent of shorted turns) Presence of broken or cracked rotor bars or end rings and rotor eccentricity



17

MCE is a registered trade mark of PdMA Corporation, Tampa, Florida. Another company, BJM, Inc, of Old Saybrook, Connecticut produces lower cost versions of Motor Circuit Analysis equipments and associated software suites.

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DC armature shorts, opens, or grounds (through quantitative and graphically presented bar-to-bar readings and profiles) Temperature-corrected and time-consistent resistance to ground (RTG) conditions Build up or presence of dirt or moisture on the outside of winding insulation systems (through correlation with capacitance to ground measurements over time) Polarization Index, Dielectric Absorption or other ratios from RTG readings and Polarization Index Profiles (PIPs).

In approximately 50 percent of cases of electrical failure of polyphase AC motors, the root causes were found somewhere outside of the motor casing—from the motor control center and associated supply busses to the motor connection box. According to Jim Berry, vibration expert at Technical Associates of Charlotte, Inc., the root causes of failures in DC motors are found outside the motor in even higher proportion, perhaps up to 65 percent, based on research completed in April 1998 18. The significance of this has only recently become apparent to many people including electrical apparatus repair shop personnel and electrical condition monitoring equipment vendors and users. As a result of this revelation, some newer Surge and Hipot testers have added a capability to monitor resistance and (for polyphase AC motors) resistive unbalance in the conductor path. The values of resistance are typically quite small, in the range of a few ohms for small AC and DC motors, milli-ohms for larger AC motors, and micro-ohms for larger DC motor (armature and field) circuits. However, just a 5 percent resistive unbalance can cause significant circulating and/or unbalanced currents in AC motors, generating heat in excess of that needed to rapidly age and ultimately cause failure in electrical insulation. Inductive unbalance can cause the same types of degradation, although most machines can tolerate higher levels (20-25% inductive unbalance) before suffering adverse results. Unbalanced resistance in DC circuits can interfere with machine control. Motor Current Signature Analysis (MCSA) This on-line test method is known by several different commercial and generic names, many of which abbreviate to the same set of initials, MCSA. The technology was developed in Scotland and used initially on off shore oil platforms in the North Sea in the early 1980’s by Professor Bill Thompson of the Robert Gordon University.19 Many vibration data loggers can be used to collect current spectra using a signal processor or conditioning accessory and a rigid or flexible clamp-on current transformer mounted on any phase lead. Test results are more definitive when data are collected while a motor is loaded significantly. The most common applications involve analysis of two AC motor line current spectra. The first spectra analyzed after Fast Fourier Transformation is in the frequency domain around the power supply line frequency (60 Hz in North America, 50 Hz in most other parts of the world). The second is in the frequency domain around the center frequency calculated by multiplying the number of rotor bars or stator slots by the motor rotational speed in revolutions per second. Frequency spikes (sidebands) in the spectrum around the line frequency spike indicate the presence and influence on current amplitude of various faults in motors, as well as dominant mechanical characteristics of both the motor and driven device(s). Comparing the results to a set of empirically derived numerical relationships between current amplitudes of spikes at the line frequency and sideband frequencies indicates the severity of the problem. Sidebands around the slot multiplied by rotational frequency and their relative amplitudes indicate the presence and relative severity of eccentricity problems. The most common faults detected by MCSA (but not fully distinguishable from each other) are:  Broken or cracked rotor bars  High resistance joints in rotor bars or wound rotor conductors  Broken or cracked end rings in squirrel cage rotors  Casting porosity affecting current flow in die cast rotors  Static and dynamic eccentricity conditions between rotor and stator 18

Presentation by Jim Berry at 1998 Machinery Reliability Conference April 28, 1998, Charlotte, NC Bill Thompson’s website, www.mcsainterpreter.com, provides much information and an MCSA consulting/subscription service (for fee). He is also visiting professor in Electrical Engineering at University of Abertay in Scotland and has written over 80 papers on this subject. 19

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Mechanical defects associated with the rotating element (e.g., bearing or gear degradation)

A large number of companies produce equipment, accessories and software for MCSA. Motor Power (or Electric Signature) Analysis (MPA) This method involves measuring, conditioning, instantaneously recording and further processing for analysis in time and frequency domains of all phase currents and voltages associated with a motor, while on-line and carrying some significant amount of load. Power or electric signature analysis provides a potentially huge amount of data and opportunities to detect degraded conditions at early stages of development. From calculations, power factor and real, reactive, and apparent power can be derived, tabulated, and graphically presented. Instantaneous variations of these and the basic, measured values in each phase, one phase compared to the others and power in the overall circuit can be used to assess conditions of the motor, the power system supplying and controlling it, and the devices it drives. For example, the waveform of a variable frequency drive unit can be analyzed for the presence of output voltage spikes caused by faulty filters, degraded supply circuit electronics, or reflected voltages. The method has been used to monitor for motor circuit electrical defects and efficiency degradation over time, as well as analyzing the mechanical performance of valves, pumps, couplings, and other devices being driven by or through them. Current and voltage signatures directly from the motor or from its meter circuits may be used. In addition to characterizing losses from internal factors such as core eddy currents, copper heating, windage and friction, one version of this technology also presents motor losses attributable to harmonics detected in the current waveforms. Harmonics are a growing threat to electric machine health as more and more electronic circuits are added to plants. Everything from fax machines to desktop computers and programmable logic controllers add to the harmonic levels in modern plants. Harmonics create unwanted heat in proportion to the square of the harmonic frequency relative to that of the power supply line, harming electrical insulation. Motor Flux or Leakage Flux Analysis (MFA) 20 Magnetic flux created by currents in motors is concentrated largely inside its casing, enclosure or shell. The rotating magnetic flux field creates “motor action” causing the rotor to turn and react to the load demands. However, some magnetic field flux lines may be detected in the space near the outside of most motors while they are operating (on-line). This “leakage flux” varies with conditions found inside the motor and the condition of power supplied to it. Over the years, various investigations including one by a U.S. Navy laboratory have resulted in some correlation between trended variations in the leakage flux field and defects such as broken rotor bars and stator turn-to-turn or phase-to-phase shorts. No commercial version of this technology was available until 1995, when Computational Systems Incorporated (CSi), now a division of Emerson Electric Company, introduced a patented method for consistently positioning a flux detection coil in the same place on motors, the key to repeatability of observations and conclusions derived from their analysis. Once the coil is positioned it is connected to a vibration data logger for collection. Data from the data logger are uploaded and analyzed in CSi’s Motor View software programs. Analysis involves comparing conditioned output signals from the flux coil. The signals are presented on a Fast Fourier Transformed frequency spectrum that typically runs from 0 Hertz to 10 or 20 Hertz above two times the line frequency. Specific frequency lines in the spectrum of flux amplitudes can be related to particular types of defects. As the amplitude of a particular line increases, it indicates that the identified condition is growing worse. Sideband analysis similar to that described in motor current signature analysis is also used, although there is no direct correlation established (or revealed) yet between the numbers used in each method. Iris Power Engineering recently introduced an on-line monitor, FlexTrac™, for remotely acquiring measurements of magnetic flux from air-gap mounted flux probes in synchronous motors and generators. The output of this instrument is used to assess integrity of inter-turn insulation.

20

See application paper entitled “Proactive Motor Monitoring” by S.V. Bowers, W.A. Davis and K.R. Piety of Computational Systems, Inc., at www.compsys.com/expertise/productsupport/applicationpapers

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Motor Normalized Temperature Analysis (MNTA)21 Most motor defects are accompanied at some point in their development by increased temperature. In applying MNTA, temperatures are taken at specific points, such as on the outside of an end bell closest to where a bearing is located, an outlet air vent, or the outer skin of the casing while the motor is operating. The measured temperatures must be “normalized” to account for load and ambient conditions and are trended over time. The normalization algorithm is:

Tn  Where:

T pt  Tamb % Load

100

Tn = Normalized thermal parameter Tpt=Measured motor temperature point Tamb=Measured ambient air temperature % Load = percent of full load of motor at measurement time Emerson CSi has developed a software program module (part of the Motor View product line) to aid in normalizing and analyzing temperature data. Increasing trends, for example, usually indicate the onset of degradation or an unsatisfactory condition that can be corrected. Effects of location relative to direct sunlight, of design (e.g., outer skin thickness and material used, internal airflow patterns, and frame design), and of surface paint color must all be accounted for or mitigated. Many critical motors are equipped by the manufacturer with temperature sensors at key locations, making the application of this method of motor condition monitoring somewhat redundant. However, there are many critical motors without this capability that are candidates for monitoring with relatively low cost, hand-held temperature measurement devices. Typical conditions manifested by increased temperatures in motors include:  Degrading bearings  Rotor faults (broken or cracked bars and end rings)  Clogged ventilation filters or screens  Stator winding faults (turn-to-turn and phase-to-phase)  Couplings that are misaligned or need lubrication  Unbalanced currents that are caused by high resistance in the motor circuit Time Domain Reflectometry (TDR) Some electrical condition monitoring systems include time domain reflectometry (TDR) capabilities. The principles of TDR are somewhat like those of active pulse-echo sonar or radar. A voltage pulse is inserted into an electrical circuit. The voltage pulse will travel to the end of the circuit unless it encounters a defect, such as a high resistance connection. The defect will reflect a portion of the energy of the inserted pulse back to the origin. The time it takes for the reflected voltage signal to make the round trip and return to the insertion point is measured. One half the measured time is converted into distance, using the known velocity of the voltage pulse in the material of the current carrying conductor. The result tells the condition monitoring equipment operator, to within a few feet, where in the circuit a defect is located. Many systems capable of TDR are also capable of measuring resistance in the conductor path, capacitance-to-ground, resistance-to-ground, and inductance - all parameters associated with Motor Circuit Analysis, described earlier in the appendix. All of these measurements are performed off-line, with the circuit de-energized. An Internet search engine inquiry “Time Domain Reflectometry” will generate many “hits” on this subject.

21

Ibid

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Model-based Fault Detection and Diagnosis In the 1990’s, a Turkish firm, Artesis 22, under the direction of a professor of Electrical Engineering at University of Miami (Florida, USA)23 developed and introduced Motor Condition Monitor (MCM) and Predictive Fault Sensor (MCMSoC) technology and associated products to European and North American markets. The technique uses motor input voltage and current (vectors) and waveform data analysis to detect fault indications. These were first used successfully in the 1980’s by the U.S. National Aeronautics and Space Administration (NASA) and Department of Defense (DOD) to assess condition of motor circuits. However, the technique developed and marketed by Artesis goes well beyond the early applications, Motor Current Signature and Motor Power Analysis, described earlier in this section. Voltages applied to and currents demanded by a motor in response to even very small variations of the load on it affect and are very sensitive to the relationship between the magnetic field created by current flow “induced” in the rotor and its interaction with the rotating magnetic field of the stator. The stator’s magnetic field is a result power source current flowing (and changing at line frequency) in its winding conductors. As motor inductance varies in response to load changes and defects, so does the current waveform. MCM “learns” what the characteristics of a “good” motor are and then uses what it has learned as a baseline against which to compare future performance. The “model” it creates uses data acquired and/or calculated using a set of differential equations, resulting in 22 different parameters, classified as follows:  Eight (8) electrical parameters which generally are sensitive to changes in supply voltages (including harmonics), loading conditions and electrical faults  Two (2) current “fit” parameters which are sensitive to load changes, line changes and electrical faults developing within the motor  Twelve (12) mechanical parameters generally sensitive to conditions such as load unbalance, coupling, bearing and driven end problems. In the simplest version of the associated equipment, comparison is made point-by-point between the baseline that has been learned and real time data. If differences exceed a set of thresholds beyond what is “normal” the system provides a warning by means of a liquid crystal display and a set of light emitting diodes on the front panel of the MCM device. The device is mounted on the outside face of the control center cabinet for the motor being monitored. The thresholds for the warnings are typically based on relative magnitude of differences - one or two standard deviations from a Gaussian distribution “norm” and the multiplicity of differences – that is, the number of the 22 parameters that are at or beyond the threshold differences from the corresponding parameters in the reference model. MCM devices and associated product outputs can be integrated into a SCADA system using Modbus communications protocol. An RS 485 serial output can be connected to a laptop or personal computer equipped with monitoring software for presentation and analysis of graphs for each of the 22 parameters over time.

ADVANTAGES AND DISADVANTAGES OF OFF-LINE AND ON-LINE ELECTRICAL TESTING There are advantages and disadvantages to off-line and on-line testing. The major considerations are summarized in Figure 14.1.

22

Artesis A.S. is a subsidiary of Arçelik, a major European manufacturer of domestic appliances. The first version of this fault detection and early prediction technique was introduced in 1998 as an end-of-production line motor testing device for small appliance motors. The DEI Group of Millersville Maryland is the North American distributor of Artesis products and software. 23 The professor is Dr. Ahmet Duyar, Ph.D. e-mail: [email protected]

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Figure 14.1: Major Advantages and Disadvantages of Static (Off-line) and Dynamic (On-line) Motor Electrical Condition Monitoring Methods Off-line Monitoring Advantages

Disadvantages

1.

Active, known, and controlled test signals used

2.

Fewer extraneous signals on deenergized motor circuits to mask test results

On-line Monitoring 1.

Passive – no test signals needed

2.

Monitoring can be done without interfering with production when equipment is permanently installed

3.

Hookup and/or data collection may be achieved for some methods and installations without special electrical safety considerations (MFA, MNTA)

1.

Motor must be shut down to perform testing, which may interfere with production

1.

Many normal conditions provide test indications which mask fault indications (MCSA, MPA, MFA)

2.

Circuit must be proven safely de-energized before hookup of ALL off-line methods

2.

3.

Test signals used are not always the same for different vendors, making correlation of results more difficult

Test hookup for periodic monitoring may be difficult to achieve safely without motor shutdown at some installations for some on-line methods (MCBA, MCSA, MPA)

3.

Local conditions may influence test results (MNTA)

4.

Residual magnetism may influence some results (MCrA)

RECENT ADVANCES IN ELECTRICAL ANALYSIS INFORMATION AVAILABILITY Those involved with Electrical Analysis predictive and diagnostic tools have formed the Institute for Electric Motor Diagnostics. The institute was activated officially on 1 January 2006. The mission of the IEMD is to share information, set standards and best practices, develop certification programs and promote Electrical Motor Diagnostic (EMD) technologies and motor-system health information as it relates to the reliable and efficient generation, transmission, distribution, control, conversion, coupling, load and process of energy. Technologies that fall within the scope include, but are not limited to: Current Signature Analysis, Electric/Power Signature Analysis; Motor Circuit Analysis; Vibration; Infrared; Ultrasonics; Partial Discharge; Insulation testing; Software; and, all other technologies and methodologies used for condition based monitoring and testing of motor systems. Institute membership is open to end-users, vendors, manufacturers, consultants and other system stakeholders with an interest in application of EMD in an effective manner. Additional information on the institute is available at its web site, www.iemd.org.

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XVII. MANAGING THE IMPROVEMENT PROCESS “Old organizations were built on control — but the world has changed. The world is moving at such a pace that control has become a limitation. It slows you down. You’ve got to balance freedom with some control, but you’ve got to have more freedom than you ever dreamt of. Results and what you contribute are the measures of value — not what you control.” Jack Welsh

The asset optimization program is directed to gaining organizational and operational excellence, effective processes and optimized reliability. Within asset optimization the improvement process is focused on establishing the values, institutional culture and behavior that are essential for success, gaining mutual trust, ownership for excellence and positive, constructive working relationships. Gaining these objectives is a difficult task that must be driven, led and closely managed.

CREATING THE ENVIRONMENT FOR TRANSFORMATIONAL IMPROVEMENT Transformational improvement, like any change will be viewed by most as a threat — and by many a large threat that is to be resisted. The real question and challenge is how to accomplish the necessary changes quickly and in the least threatening way so that as many as possible support the process and contribute positively with minimal disruption. Transformation used in this chapter describes a rapid and dramatic process of total change in values, culture, organization and procedure to attain significantly higher levels of performance and effectiveness. In a transformational improvement process all opportunities for improvement are considered, changes are accomplished simultaneously in multiple areas within an overall strategy to gain results as quickly as possible. Transformation is an essential element of asset optimization. It begins with establishing initiative, ownership, responsibility, and accountability. This is combined with knowledge and empowerment that maximizes individual contribution, rewards initiative and results, and accelerates the decision making process. Organization, coordination, communication, and supervisory functions are all streamlined. Waste and non value-added elements such as bureaucracy, compartmentalization, hierarchical decision-making, excessive handoffs from one individual or function to another, and redundant approvals are eliminated. People must be educated about the business and why, as individuals, their positive participation and contribution are imperative. They must understand the business process and relationships as well as the importance of and connection between business success and their personal happiness, success, and security. Understanding a compelling business necessity for transformation can energize the entire organization. (129) Some corporations are increasing the time a person holds a managerial position to ensure that he / she gains a solid understanding of the business, a more long-term perspective, and real accountability for decisions and results.(129) The transformation process must have everyone on board or at least neutral, not impeding progress. It has been reported that shifts in values, attitude, mindset and discipline (institutional culture) are more important to success than the application of technology and capital investment. Achieving this shift in institutional culture is a prime objective of the Communications Program described later. Within a physical asset optimization program itself, gaining a productive partnership between Production, Maintenance, support functions and plant management is essential. As an organization applies a transformation initiative it is common to find intellectual support for the objectives and program that doesn’t translate into emotional buy-in. As an example, instead of using an unexpected failure as a lesson of how to avoid a problem in the future there may be a natural tendency to look first for someone to blame. This action will quickly restrict the open dialog that is necessary within an asset optimization program. Others may cite an unacceptable loss of capability because the transformed, lean organization may not have the people immediately available as they would / might be in an undisciplined reactive maintenance scheme where response to failures and rapid failure correction are the expected norm rather than the exception.

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A new plant manager touring for the first time asked the Unit Production Manager why all these people were sitting in the lunchroom during working hours. His reply “they are maintenance people making us thousands of dollars since by sitting here there is nothing needing immediate attention in the unit!” Necessity for Transformational Improvement The necessity for transformational improvement must be detailed, communicated and heavily promoted. Two necessities for change that can be communicated effectively are:  A major improvement in results is essential to remain in business in the face of competitive threats: A facility that had been manufacturing a product since its invention and enjoyed patent protection suddenly found that a Chinese manufacturer could deliver identical quality at 70 percent of the price they needed to remain in business. While financial analysts concluded that they could sell successfully at a premium due to supply chain considerations, they would have to reduce manufactured cost by 20 to 25 percent in order to remain in business. Raw materials were commodities, governed by global pricing. Thus, the bulk of the savings had to be gained from conversion costs, primarily O&M.  Adaptability to meet a changing market environment is essential for success in a competitive world. In many areas of the US abandoned factories are mute testimony to leaders who didn’t recognize competitive threats and / or do anything to assure survival in a changing business environment: Until the mid 1990’s US power generators lived in a heavily regulated environment with a fair amount of reserve capacity and guaranteed profits. Power stations were typically well staffed with highly experienced local and centralized technical support. As the electric power market became more competitive, reserve capacity, technical support and many optimizing programs were reduced as economy measures — some would say false economy. Diminished generating margin and fewer experienced people stretched thinner, combined with reduced surveillance requires a significant change in thinking. A multi-plant power generator quickly evolved a networked, highly automated surveillance center manned 24-7 by experienced specialists. With capabilities for monitoring all plant variables in real time, specialists at the center often noted deviations before the plant, particularly during intensive periods such as start up where the local operators were fully occupied with the procedure. By communicating the existence of a potential problem and recommending corrective action well before a major event occurred, the surveillance center leveraged experience and demonstrated value many times over. Organizational Culture There are two opposite extremes of institutional culture and a multitude of companies in the middle. At one end of the spectrum is the “Do exactly as instructed, no deviations” philosophy. The opposite culture is “It’s been good enough this way for 30 years and I’m certainly not going to change for some fad, ‘program-of-the-month,’ that will likely blow over.” The military is close to the “do exactly as instructed.” Industry varies, but is typically closer to the “not until you convince me” culture. There are lessons to be learned from both. The “do exactly as told” culture requires complete, detailed instructions and extensive training for every task. In the asset area tasks include installation, operation, and repair practices. Instructions include safety precautions, tag-out procedures, tools, step-by-step restoration and work practices, replacement parts, and acceptable tolerances as applicable. The “not until you convince me” culture requires time and compelling evidence that the new way is the better way, making tasks safer, more rewarding and increasing security and value for the person performing the task. No matter which end of the scale an organization finds itself, the objective of a transforming improvement process is to increase ownership, initiative and responsibility. For the person who says: “It’s been good enough this way for 30 years and I’m certainly not going to change for some fad, ‘program-of-the-month,’ that will likely blow over” the operative question is whether the current way meets business requirements and if not how can it be improved. Every person must accept individual responsibility for improvement.

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The same holds true for “do exactly as told.” Is this the best, most effective way, how can a process or procedure be improved — and all can. Successful Transformation Any change initiative requires a set of processes that ensure the improvements are identified, prioritized and implemented in a visible, orderly and controlled fashion. The process, roles and responsibilities must be fully defined, see Chapter X. A successful improvement process has three overall characteristics: 1. Pulled by necessity — reasons recognized, understood and accepted. 2. Organizations and individuals are required to think, behave, act and perform differently. Many would like to believe that major improvements can be gained by continuing to do the same things — better. This conclusion implies that current processes are satisfactory, people are inefficient, incompetent or both. A close examination almost always concludes it is the culture and processes that need to be improved along with values, and behavior to utilize the improved methods most effectively. Appointment of a senior, respected leader for the transformation program is one of the first things that must be done if others are to be convinced that the program is for real, Chapter X. A Fortune 250 company that has employed this collaborative philosophy very successfully calls the process “shared leadership,” inspired by Noel Tichy. 3. Everyone is involved and must change — leaders set the vision and drive the process, mid level managers lead, supervisors and workers develop and implement details — the process unfolds “middle out”. Characteristics of the Transformed Organization The transformed organization will have a number of recognizable characteristics including: 

A flatter organization, with fewer levels in the hierarchy. Individuals are expected to assume greater ownership, initiative and responsibility People in the transformed organization are expected to perform at higher levels of proficiency. Hourly crafts will be expected to perform technical and analytical tasks such as failure analysis, many of which are currently being performed by salaried professionals.



Great reliance on cross-functional, multi-skill teams formed to identify and exploit opportunities. Increased energy, initiative, motivation, ownership, and better relationships The lean transformed organization relies on cross-functional teams empowered to identify and solve problems and inefficiencies. Bureaucratic, command and control silo organizations characterized by barriers between functions and layers of approval required for minute improvements stifle initiative and motivation and are eliminated during the transformation process.



Greater flexibility in the work process Many transformed organizations cross train technicians to assume multiple roles. For example, a technician with primary mechanical skills assigned to a job requiring multiple skills might act as an instrument or electrical helper to avoid the necessity for a third person with these skills. In some cases mechanics are permitted to tag out and disconnect electric motors that are being removed for repair. (Some US states require a certified electrician.)





People stretched thinner — with the ratio of supervised to supervisors continually increasing. Self directed work teams with less assistance and supervision are a necessity Core craft and operator-level personnel must be empowered with the practical knowledge, skills and authority to perform precision practices on a routine, day-to-day basis.(87) Effectiveness increases in all tasks — tasks are prioritized by risk and value, only the most important are done, wasted time and effort are minimized

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Change is Threatening While there are large variations in any population, on average, people have reservations about change. People can talk and talk about the necessity for change. However, most are comfortable with current conditions and the status quo, no matter how inefficient. People feel threatened by change. Perceived threats from change must be relieved early in the process, communicated again and again and finally demonstrated by action in the improvement process itself. Every major transformation process will be viewed very skeptically as a stealth way to eliminate jobs. If left unaddressed this skepticism can be the downfall of an essential improvement process — “why should I cooperate if success will reduce my pay or perhaps even cost my job?” Recognizing the issue will be uppermost in many minds, facilities must identify how many jobs will be lost and how they will be lost at the very outset of the transformation program. If a facility is fortunate, expected retirements plus normal attrition and an early retirement program might avoid involuntary layoffs. Responses Faced with an essential transformation process many will react in well-known, predictable stages: 

Fear and concern of the unknown — I don’t know how, I can’t do it, it’s asking too much, I don’t have the training or resources A natural reaction that can be headed off by effective communications. The leadership, training and continuing support necessary to show how, provide confidence and assure you that success will be achieved.



Denial — the requirement is overstated, I’ve been doing the job this way for 20 years, don’t see senior managers concerned An employee of a privately held company with approximately 2,500 employees that was in serious financial difficulty informed a division manager with detailed knowledge of the overall precarious financial situation that he didn’t see any urgency or necessity for change. He had been working there over 25 years, knew the owners well and they didn’t look worried. Until he saw them visibly worried he wasn’t going to change. The company went bankrupt, was sold in receivership and today is less than 20 percent of its pre bankruptcy size!



Anger — Why us? Why me? What did we do to deserve this? It’s really a failure at a lot higher level, I just work here. Anger and blame don’t get anyone anywhere. In this situation, communications need to redirect anger toward ownership, initiative and motivation to accomplish the improvements required to gain necessary results.



Despair, Depression — this transformation process is too complicated, it’s too hard and simply a way to eliminate my job — work hard, do well, executives receive bonus’s and I’ll be out on the street Again, the issue is communications. This stage can be anticipated and must be mitigated by training, support and facts expressed within the transformation strategy and implementing plan



Bargaining — just another program of the month, if I do nothing it will blow over like so many before High level management must demonstrate with full commitment and constant action that the transformation initiative is not just another program of the month, especially if there have been programs in the past commenced with great fanfare only to wither away with little or no visible results



Acceptance — maybe we really have to do things differently, I’ll do my best Almost home!

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Satisfaction — this really did work, I’m happier and in a more personally rewarding environment Demonstrate with well-publicized metrics, surveys, action on deficiencies and continuing improvements, all widely communicated. Reinforce with results based compensation, greater responsibility and accountability

THE TRANSFORMATIONAL IMPROVEMENT PROCESS The process begins with the appointment of a Change / improvement Manager / Champion. The best facilities will have dedicated people assigned to the task and focused solely on the improvement process. The position is a field job for the individual must have a solid sense of the facility, the institutional culture and relationships. The Change / Improvement Manager may be the leader of the Communications Team described in a later section. Implementing a Transformation Initiative There are fundamentally four ways to implement a successful transformation initiative: 1. Utilize the very best people on-site; train as necessary 2. Increase staffing; one organization augmented staff with retirees to perform vital verification tasks 3. Augment staff temporarily with additional people from corporate; if available 4. Utilize an outside, third party contractor Using site personnel is the best and most effective way to capture institutional knowledge and gain the ownership that is essential for success. It is often difficult to increase staffing when most transformational initiatives are directed at reducing staffing. Temporary assistance is one solution, retirees on a short-term contract is even better because of their specific plant, process and organizational knowledge. Corporate personnel are often viewed as outsiders with an agenda that may not be totally aligned with the local plant. There are two primary ways to implement a transformation process with a third party: 1. The third party team develops the entire transformation process with supervision by site personnel. Transformation includes reorganization, selection and documentation of revised practices, e.g., Work Management, PM, CMMS, CBM, materials optimization. 2. Joint effort — the third party team advises, facilitates and trains site personnel. All actual work performed by site personnel Several potential pitfalls must be recognized when a third party develops the entire transformation initiative. They include:  The plan typically follows the outside team’s standard process and is not necessarily optimized for site-specific culture, conditions and opportunities — implementing the plan may be quite difficult.  The objectives / priorities of site and third party may be difficult to align. The site wants a practical, solid reorganization; the third party wants a rapid solution and payment.  Site personnel may not feel much, if any, ownership in the process and may not agree with and / or support the results with the enthusiasm and commitment necessary for success.  A plan formulated by a third party may exacerbate existing organizational tensions; “they are forcing something ill advised on us — again.”  It is more difficult to assign responsibility / accountability for results from a plan developed by a third party — are the lack of results due to an inadequate plan or its implementation? A transformation plan developed solely by a third party typically ends when a voluminous, and expensive report is turned over — and typically put on a shelf never to be opened again.

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Use of a Third Party Change Agent / Facilitator A joint, implementation using third party facilitation offers a solution to the preceding pitfalls plus several major benefits:  Site personnel are integral to the improvement process. Opportunities and action plans are primarily developed by site personnel who therefore have intimate knowledge of the changes required, ownership of the process and commitment to success.  Site personnel rapidly and effectively gain proficiency with core best practices through personalized, totally applicable training and on-the-job practical experience.  Development by site personnel minimizes us-them tension; whatever may develop is addressed and resolved immediately.  Joint development offers the potential to establish a long-term win-win relationship with a third party who can periodically audit performance and bring latest improvements. An experienced third party change agent / facilitator should be considered early in the process to work closely with the site Change Manager. A third party facilitator brings knowledge of what has worked well elsewhere and can help to minimize the apprehension that is inevitably experienced at the beginning of a transformation process. An experienced facilitator will have the ability to quickly identify and prioritize opportunities for improvement brought forth by participants, as well as the sensitivity for building team relationships and effectiveness. The site Change Manager learns quickly with minimized potential for misunderstandings. For maximum contribution, a third-party change agent / facilitator should have broad, state-of-the-art knowledge and experience with the organizational transformation process and supporting practices. Having this knowledge will enable able them to focus their time and efforts on the site-specific strengths, relationships and opportunities, and quickly and effectively convert the opportunities into an actionable reorganization plan. Another advantage of utilizing skilled facilitators is the sensitivity to conflict, combined with the skill and experience to identify and resolve individual difficulties as soon as they arise and before they become intractable. A third party also serves as “new eyes” in the pursuit of “world class” performance. All too often waste and ineffective conditions are not recognized by participants. People are accustomed to and comfortable with the “old way.” An experienced facilitator will help in the buy-in process, motivate the team and keep them on track to objectives. Rapid formulation, deployment and implementation of “best practice” total solutions will move change faster and farther. A third party can drive the improvement process and develop the relationships necessary to make the process go with minimum time wasted on struggling with the process itself. Some companies might want to consider a long-term shared risk-reward contract with a third party. The contract operates on a business basis with objectives and interests fully aligned. Success requires openness, full cooperation and everyone looking out for each other — a partnership for success. In this type of relationship one question always comes up. With both parties working together to achieve an agreed objective how is each parties contribution to success apportioned and the third party compensated? The only answer is that a percentage division is agreed on ahead of time and followed throughout the duration of the contract. If either party feels they are doing more, and the other less than anticipated there should be a means in the contract for renegotiations. “An experienced facilitator can make the difference between success and failure.” Anthony M. (Mac) Smith

TRANSFORMING THE INSTITUTIONAL CULTURE Within asset optimization the transforming the institutional culture is focused on establishing the values and behavior that are essential for success, gaining mutual trust, a commitment to organizational and operational excellence, and positive, constructive working relationships. A reliability oriented, profit center mentality, and mutually reinforcing teamwork are essential characteristics. The CEO of a large company commented that an optimum organizational ethos, defined as values, culture and guiding beliefs, is essential to ensure optimum results. (129)

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Cultural transformation is directed to creating a fertile environment with embedded values and processes in-place that encourage employees to assume new behaviors, roles, relationships, and approaches to work. Industry leading companies are beginning to create a new work culture that retains willingness and expertise and provides the collective intelligence needed to meet the challenges of an increasingly competitive industry.(33) Industry is progressing from supervised workers with little or no say in the work process and who largely follow instructions, to energized, empowered technicians identifying, analyzing and correcting defects. Cultural improvement typically must address six areas:(112, 129) 1. Gain broad and deep acceptance for the need for improvement 2. Create and embed an excitement and energy for achieving shared objectives, the future state 3. Promote initiative, commitment and ownership for improvements and the transformation process 4. Develop and implement an effective plan to achieve the objectives 5. Align processes and functional components to the plan, gain full understanding and support 6. Establish and reinforce change through communication, training, and coordination Many of the successes gained by the Japanese can be attributed to culture and the high value placed on trust and relationships. Trust between Japanese workers and management is unquestioning and strong. Partnerships with suppliers and contractors are at levels yet to be achieved in the U.S. Trust between plant workers and contractors is equally strong. Reallocation of tasks is accomplished rather easily compared to the effort required in the U.S. (92) One company remarked that culture changes were easiest when big problems and / or threats were present and recognized. (129) The preceding was illustrated by union agreement to work in mixed crews with non-union site personnel and under site supervisors during a unit maintenance outage. During prior outages the union had always demanded union only work crews and union supervisors. Perhaps the steady reduction of opportunities for union members promoted the flexibility. Within North American industry the generally prevailing asset culture has been to repair defects and control cost to budget. If a process such as planning and scheduling was awkward and not particularly effective, it was up to participants to figure out how to make it function without any changes in the process itself. Process improvements were not encouraged and had little possibility of being implemented. Improved practices such as PM, CBM, and even RCM, generally focused on taking action on expectation of failure or earlier discovery to avoid failure. This is more or less the firefighting example referred to in a previous chapter. The only improvement made with predictive technologies is that the firefighter may be dispatched in expectation of a fire to put it out while it is still smoldering. There was little emphasis on increased reliability — the equivalent to a fire marshal acting to eliminate problems. The culture necessary for successful asset optimization must include a safety-conscious and environmentally aware, profit-oriented mindset. This is combined with a commitment to improving reliability by eliminating defects; and increased effectiveness through more efficient, accurate task performance.(129) Within industry, the best not only perform work more effectively they have greater reliability and thus less work to do! Most major producer corporations have a high awareness of safety and environmental issues and perform well in these areas. Many recognize gaps to best practice and therefore have room for improvement in other areas. Improvement requires directing the same level of attention to mission compliance, production, and equipment effectiveness that has proven highly successful in maximizing safety and environmental performance. Asset optimization calls for initiative, energy and ownership. All participants are encouraged to identify opportunities for improvement. Opportunities are identified, prioritized and implemented as low in the organization as possible. When Production and Maintenance Superintendents must get involved to arbitrate, the process has failed.

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THE TRANSFORMATION PROCESS There are basically two types of improvement processes. One is step change transformation, which can be described as an exponential change that rises very quickly, the other is continuous, which can be described as a saw-tooth, gaining an objective in small incremental steps. An elephant being eaten one bite at a time. A Step change transformation process is advisable when a required process or function is nonexistent, dysfunctional or so far away from benchmark performance that a major improvement is required to gain objective performance. A continuous process is appropriate when a process or function exists, includes all necessary elements and needs only fine-tuning and refinement to gain objective performance. Step Change (Transformation) As stated in the quote by Paul O’Neil in Chapter IV: “I believe we have made a major mistake in our advocacy of continuous improvement…we need rapid, quantum-leap improvement; step change.” Step change has the following attributes:  Objective — breakthrough improvement in performance and effectiveness, leap into an ideal future state  Entire organization subject to review and major change — everything; organizational structure, roles, methods, values, culture, policies, processes and procedures  Transition plan is all important — to avoid costly interruptions as major changes are implemented  Perform many changes simultaneously — despite the difficulty of coordination and management  High risk / high potential gain — create greatest value most rapidly, very rewarding organizationally and personally A large organization that had been mandated to improve performance and effectiveness settled on an objective of 12 percent improvement in five years. A third party pointed out that such an unambitious objective immediately moved all participants into a task protective role on the conclusion that the objective could be satisfied by tinkering without addressing any of the major processes and gaps that really demanded improvement. Continuous Improvement Continuous improvement is advisable when analysis demonstrates that some or all of the current structure, methods, cultural values, policies and procedures are close to best practice and require only fine-tuning. Continuous improvement:  Builds from current structure, policies and procedures  Changes are incremental, designed to optimize existing practices  Ensures little disruption, an orderly transition  Is low risk / medium gain What Form of Change is Required? As detailed in Chapter IX, benchmark values identifying industry best performance are readily available in virtually every area of management and operations. When a comparison of industry best to current performance yields a gap the gap determines the necessary action. Where there are voids and / or deficiencies a step change transformation is necessary, whereas only reinforcing improvements are necessary in the case of a small gap, Institutional culture and organizational deficiencies are subjective and somewhat more difficult to determine. Employee interviews and facilitated workshops are two methods used successfully to identify value, cultural and organizational deficiencies. Deficiencies are typically marked by lack of trust, discouraging initiative (you can’t do that), inconsistent / inadequate processes (people making dysfunctional processes work by brute force), ill-defined roles and responsibilities, poor relationships (it’s not my job) and excessive layers of management approval that discourage initiative. A supervisor at a large production facility stated that procedures required signatures from two levels above his own in order to requisition stocked repair parts in excess of a specified value. He expressed frustration in the lack of trust, stating that the process was time consuming (managers were often absent), managers seldom knew, or cared, what the parts were or their use, and in any case his name was on the requisition.

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The difficult part is separating complaints from structural deficiencies and placing a time, cost and value on improvements. Step Change and Continuous Improvement are Typically both Required: Step (transformational) change — to implement non-existent processes, correct non functional processes Continuous improvement — applied to processes in-place and working at some level of effectiveness An Overall Plan for Transformation The following lists the essential steps in a transformation program. Most will be expanded in subsequent sections.  Senior management decision that transformation is imperative, full commitment to the implementing program – Communicate a vision and mission that are inspiring and clearly worth achieving Vision and initial steps must be sufficient to overcome inertia of the status quo – Establish and communicate a sense of urgent need that is clear to everyone – Create a clear set of organizational objectives that stretch abilities, each with a tangible measure of success – Develop the transformation initiative organizational structure. Align participants around the necessity for improvement, business imperatives, current and required values. – Select transformational change agents; champions – Create a spirit of teamwork — we’re all in this together  Construct overall transformational improvement strategies to meet business objectives  Commence educational and communications campaign to establish the necessity for improvement  Discuss, test and refine improvement strategies in larger groups within the organization; develops ownership for the process and resulting strategy as well as invaluable background for producing implementing action plans – Set forth rules for dialog and contribution  Launch transformational implementation teams, trained for high performance; fully align implementation teams with organizational business objectives, metrics and constraints, develop leadership skills  Identify strengths, weaknesses, barriers, values, behaviors and culture – Strengths, positive values, behaviors and culture that must be retained and strengthened – Weaknesses, non constructive values, behaviors and culture that must be improved – Barriers and challenges to improvement – What changes have been successful — why? – What changes did not succeed — why? What could have been done differently to improve probability of success?  Formulate a cohesive and compelling strategic plan for transformational improvement; Build a platform from which to spread knowledge  Develop implementing action plans that address each element in the strategy, assign results oriented objectives for each initiative – Specific activities – Results expected and time line – Value generated – Estimated resources – Roles responsibility, RASCI – KPI’s

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Develop specific action plans within small groups – Define the issue – Measure present performance – Establish specific objectives, results time – Brainstorm ideas – Decide on a plan – Implement the plan – Measure and monitor results Create an environment where team members are confident they can meet objectives Establish reporting and refinement processes – Monitor progress, reevaluate priorities, refine improvement plans, continue improvement Create a sustainable system capable of driving real transformation; sustain and institutionalize results

Elements of a Successful Transformation Process Sixteen principal elements of a successful transformation process are outlined below in a categorized, numbered list with amplifying comments. The list form is intended as a check list to guide organizations and people engaged in a transformation process. 1. Establish requirements — clear, concise, objectives that can be understood by everyone “It’s one thing to establish objectives. It’s quite another to get people to passionately believe they absolutely must reach them to succeed!” GE Executive 2. Detail improvements that must be accomplished — increase availability and reduce costs along with the organizational and process changes necessary to attain the objective(s) Address all anticipated concerns; e.g., personnel reductions and reduced compensation as a result of reduced overtime 3. Communicate shared values — to establish the basis for the transformation process  Safe, responsible operation  Honesty and integrity in all aspects of business  Honest, open, fair dealings with employees, mutual trust, transparency, promises kept  Respect for the individual  Good attitude and relationships throughout  Focus on objectives and value Values drive behavior, behavior drives results  Curiosity, initiative, ownership and accountability encouraged at all levels  Empowerment, teamwork, coaching for mutual success  Effective involvement in activities and the decision making process  Continuous, open communications 4. Assure all employees understand the necessity for improvement — and visualize how they must contribute to and will benefit from success  Focus on changing attitudes and beliefs by stressing necessity, results and benefits, thoroughly explain reasons, create a vivid picture of the necessity (why we must improve) destination and journey (how we get there)  Establish ownership of the process, accountability for results  Conduct training; in-depth for those directly involved, awareness for all others

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Stress primary benefits  Safer, cleaner, more stable work environment, greater quality of work life  Increased pride, ownership, personal satisfaction in job  Greater job stability and security  Greater professionalism  Greater voice in plant operation, more control, fewer surprises  Better relationships  More and better training, continuous learning, gain full potential  Opportunities to gain additional knowledge, learn and apply new capabilities and skills  Skill, contribution and results based compensation

5. Create direction, energy, commitment and motivation  Communicate continuously, create communications “look” for the improvement process, provide as much information as possible, repeat the message  Listen carefully to concerns, address and answer every question (although some may not like the answers)  Strengthen commitment by simple repetitive communications of the necessity for improvement stated in terms everyone can understand.  Build trust Trust is built from action, not communications. Actions must be visibly consistent with program objectives, honest and fair to all thereby building trust in the process and in the management of the process. 6. Build the organizational structure  Appoint an executive level transformation program champion. Attributes include: energy, enthusiasm, the position, authority, time and willingness to build success, facilitate cooperation and remove barriers  Identify and appoint champions with real credibility, position and authority for each key process and sub process, e.g., Planning and Scheduling, Materials MRO, Reliability, Condition Based Maintenance (vibration and lubrication), Electrical, Instrumentation and Control  Define roles / responsibilities of all principal participants required to implement the improvement strategy. Responsible Accountable Consulted Informed (RASCI) diagrams are commonly used to ensure all participants have a full understanding of the roles and responsibilities of others as well their own, Chapter X. The positions with defined responsibilities must as a minimum include Executive Champion and Program Leader, Steering Team, Operations and Maintenance Superintendents and process champions  Consider experienced facilitation — to assist in establishing the implementing vision (future state), organization and boundaries; identifying opportunities for improvement, strengths and barriers; translating objectives to actionable tasks and keeping the improvement initiative on track Facilitation by experienced leaders produced an excellent improvement process. Monday morning the entire change team and facilitators met to review progress and establish goals for the week. Following the Monday morning meeting, teams, including individual facilitators, met separately to work on issues and develop improvement action plans. Facilitators held a meeting mid-week to review progress and assure efforts were aligned. A short “all-hands” meeting Friday afternoon was established to review progress and set a preliminary action agenda for the following week. 7. Align supporting functions and processes  Support organizations such as Engineering, Human Resources (HR), Information Systems (IS), Finance and Safety must all be aligned and kept up to date by means of periodic communication and reports to ensure they are fully supportive of the transformation effort and prepared to participate and contribute when needed.

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While discussing potential improvement initiatives that involved advanced skills, it became apparent that task certification and union rules would have to be considered in order to arrive at an acceptable solution. HR involvement was imperative. 8. Identify potential improvements, formulate initiatives  Maximize use of institutional knowledge — create ownership and motivation Every organization has a vast pool of institutional knowledge of what works well, what doesn’t and ideas for improvement. Harnessing this knowledge creates the ownership and enthusiasm necessary for program success. Facilitation, or at least an impartial participant, is generally advisable to keep solutions on track, practical and in concert with good practice as well as focused on clear, defined objectives of both results and time.  In addition to identifying and prioritizing improvement opportunities based on potential value, improvement teams must examine cost, time and risk to attain objectives. In a typical transformation program an array of improvement initiatives (approximately five) should be constructed for each objective, amounting to approximately 120 percent of the objective. This ensures the objective will be achieved even if one or more initiatives encounter unexpected delays or problems during implementation. 9. Establish a reward system to boost performance and enthusiasm  Construct tangible rewards for meeting objectives — to show real appreciation. Performance based compensation based on successfully meeting objectives is a direct method. Awards such as family dinners, gift certificates, jackets with a transformation team logo and other similar tangible gifts can be a substitute. In order to comply with essential objectives, a technical group had to significantly increase productivity for approximately three months. Incentive pay was not allowed. Instead, the company agreed to compensate overtime with purchased goods provided objectives were met. Several obtained major appliances, washers and dryers, others sound systems, one traded his considerable overtime for a two week vacation in Fiji!  Address compensation issues — such as reduction in overtime. In many cases, employees eligible for overtime base their living style on compensation that includes overtime. An improvement process with an objective of reducing overtime won’t be received very well by people dependent on overtime to pay for toys; motorcycle, boat, airplane, summer cabin, jet ski, and so on. To gain the level of motivation and ownership necessary for success, the transformation initiative must address what’s in it for me (WIIFM) and demonstrate tangible personal benefits for improved performance across the entire organization. Many organizations reward senior executives and managers for successfully meeting objectives — the working level people who do the actual work, often at personal sacrifice, go unrecognized and unrewarded. Faced with this dilemma, one company proposed adding 50 percent of the savings in monthly overtime to employee compensation. 10. Overcome barriers  Resolve organizational and personal conflicts. Rules to avoid conflict must be established and enforced from the outset of an improvement program. The basic rule is that people and their ideas must be treated with respect. Facilitators and everyone in charge of meetings and dialog must be sensitive to this issue and stop infringement immediately.  In some cases the barrier may be organizational, procedural or operational; and can’t be eliminated without a major change that requires additional involvement or a production outage. Anticipating barriers, personnel implementing an improvement initiative developed parallel paths so that if one was blocked for any reason activities could be shifted to a second initiative without any loss of momentum while the barrier was being addressed and resolved.  Make resources, time and training available A company launching a major improvement program reorganized and reassigned tasks so that improvement team members could devote a minimum of 50 percent of their time to the initiative process. The realignment had a number of significant advantages: The improvement initiative benefited and was significantly strengthened by the participation of the most

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experienced employees with greatest insight into the company organization, strengths and weaknesses. Less experienced employees had the opportunity to step up into greater responsibility with assurance of readily available support in the event of uncertainty or questions. Provide team and individual counseling and training. In most cases in-depth team training is essential at the beginning of a transformation process so that everyone understands the principles and etiquette of working productively together in a team, understands the mission and can quickly focus on the tasks.

11. Install metrics  Metrics, discussed in detail in Chapter IX, are essential to set objectives and measure progress. Metrics must demonstrate compliance to program objectives and measure performance of key initiatives. In addition to overall objectives it is wise to establish monthly or quarterly progress objectives. These assure incremental progress sufficient to meet the overall objective and provide the visibility necessary to implement adjustments when necessary. Metrics of interest to and controlled by working level personnel should be published periodically (monthly) on internet / intranet and printed media, and widely available. A successful transformation demands that everyone, from top to bottom, has a vital role in gaining success. Everyone wants to know how they are doing; that their job is important and that they are not just a cog in a giant machine. Published metrics are a powerful reinforcement. 12. Implement initiatives  Implement for quick success — harvest “low hanging fruit”. Identify and solve known problems that can be corrected quickly. Nothing builds motivation, enthusiasm and confidence better and faster than successfully solving real world problems! An improvement process began with several months classroom training followed by several more months of detailed effort to apply the training in areas where success might not be observed for years. The process failed in less than six months. When asked (some volunteered) participants stated they couldn’t maintain interest or the motivation necessary to continue with a process that didn’t appear to contribute anything significant to solving problems they had to deal with on a daily basis. 13. Drive the improvement process  The Plant Manager, Executive Champion, Program Leader, Steering Team and all process champions must continually press for action and results. Their regular, continuing presence reinforces the importance of participating in, and the relevance of the program. In too many cases people directly involved with implementing improvement initiatives will have so many demands on their time that today’s crises always push everything else aside. Senior corporate executives and management cannot expect people to make a commitment to a difficult initiative if all they do is say some good words at a kick-off and then disappear. Everyone must understand that time invested in the transformation initiative is essential and well spent. Without investment in improvement — tomorrow, and the next day will be just like today! 14. Measure results — to feed back team performance and progress to objectives One team had a beginning of year objective to improve availability by 10 percent. Nothing had been accomplished by November. There was no energy, no sense of urgency and no commitment. Improvement projects were postponed with statements like “no time to work on the task this month”. For ten months no one had been held accountable for results. Needless to say the crucial objective was missed. Today, more and more organizations are moving toward score carding as an optimal way to measure results, Chapter IX, Appendix E. Simple color coding, red, yellow, green, can be used very effectively to denote performance.

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15. Recognize team and individual accomplishments. The communications program outlined earlier is a good means to publicize team and individual accomplishments. A monthly change report that attempted to praise team and individual accomplishments was read minutely by all involved. After a few months teams were complaining, not always good naturedly, that more words or better language were used to praise other people and other teams. Eventually the writer gave up in frustration and stopped mentioning any individual or any team by name! 16. Improve and institutionalize the process  Feedback to improve the process and results. Feedback gained by comparing expected results to objectives provides indication that improvements are or are not proceeding as planned. Feedback indicates the necessity for modifications and / or additions to the improvement process and / or plans. Critical Factors for a Successful Transformation Process Shared vision — the compelling need for change understood and accepted Constant communications are essential to assure full and widespread understanding of the necessity to improve, what the key objectives are, the progress towards meeting these objectives, and the urgency of moving the improvement process forward as quickly as possible. People working in a typical facility find it difficult to understand the necessity of change. Many have been there for years and can’t understand why improvements are suddenly required when current practice has been acceptable for so long. As stated earlier, there are many regions in North America where the fallacy of that reasoning is graphically illustrated by once thriving factories that are now lying abandoned. To establish the necessity and urgency for improvement, familiar metaphors from everyday life should be considered when creating advocacy communications. Housing, food, automobiles and gasoline are living expenses incurred and understood by all. By connecting the necessity to search for affordable goods in order to keep within a housekeeping budget, to the budget with which their company must comply, the necessity for change can sometimes be driven home. People will not change by command — they must see the necessity for it and want to change. They must accept change as being necessary and attractive. Establishing the necessity for, and the benefits of change, of which job security may be the highest, is essential. This again confirms the need for effective communications. Clear, Specific Objectives, Understood by all Throughout the transformation initiative, objectives, program and improvement initiative goals are crucial. Objectives must be highly ambitious, but seen by most as attainable. Objectives set too low are not energizing. Believing that the goals can be met without major change, people work around the margins rather than making a real effort. Objectives set higher than anyone can imagine simply discourage people from trying. Suppose a 50 year old out of shape former collegiate basketball player was offered a $1 million reward if he could play in the National Basketball Association? Suppose the same person was offered $50,000 if he could average 20 points per game in a recreational basketball league for the over 40’s? Which objective would create the greatest commitment, effort and potential reward? When establishing objectives it is better to err on the high side rather than low. Experience indicates that establishing an objective of a 25 percent improvement that everyone agrees is possible under best circumstances, may result in a 21% improvement. If the objective had been set at 10%, which everyone agreed could be easily accomplished, that result might be a 12% improvement. Which would be better? Which would energize people to higher levels of performance? There is another issue to be considered while establishing objectives — the implementation of a control plan, discussed in detail later, to assure gains are sustained. Without a control plan the stretch to achieve objectives can be thought of as a rubber band just waiting to snap back when pressure is removed. A control plan snips the rubber band, preventing the snap back to the old ineffective ways. The establishment of objectives begins in the executive suite. Objectives must be very specific and augmented with as much information as possible to initiate the actions that will be necessary. The

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following, paraphrased from the web site of a major corporation that had announced the necessity for major improvement, caused real concern and a great deal of uncertainty: “We must make changes to more tightly align our manufacturing with market and customer requirements and reform our cost structure for greater consistency with business and market realities.” The message says nothing that is clear or specific to plant people. It implies a workforce reduction that can hardly be comforting. Making matters worse, several months elapsed before specific plans were developed and announced. If a general announcement is published, specific implementing plans must follow immediately. Otherwise there is a significant risk that the best and most qualified employees, who are also most mobile, will quickly depart for other less unsettled opportunities — the dreaded migration of the best! Strong Leadership — Universal, Committed Participation Throughout Committed participation begins at the top of an organization. The Plant Manager sets the tone. He or she must be a highly visible advocate — an invisible shrinking violet won’t create the excitement and energy necessary to succeed. Similarly, visible energy and commitment across all levels of leadership are essential to create the working level ownership and participation required for success. By setting an example, by persuasion and individual counseling (kick in the stern) when necessary, plant management must assure that everyone is on board and contributing. A critical mass is necessary. It is established when all management has the improvement process at or near the top of their interest and implementing personnel are assigned with real objectives and authority. In one facility with a major transformation initiative in progress the leader was a highly regarded, top executive. The transformation initiative was one of many collateral duties. What message did that send to all involved in the initiative? There must be a dedicated leader for whom the transformation initiative is a primary, rather than an additional responsibility. Unless the organization sees transformation as the leader’s primary responsibility they will quickly conclude that the entire initiative is of secondary importance, and are unlikely to invest the emotional energy necessary for success or feel much ownership. It is human nature to do as others seem to be doing, rather than what they say should be done. When the “others” are your boss or boss’s boss, who ask you to do one thing while doing something different themselves, what would you do? Everyone Committed to Making a Personal Contribution to Success This means that everyone in the organization must understand the objectives of transformation and do everything within their control to make the initiative successful. At one facility, a post workshop survey asked what is your commitment to assure success? Responses varied from “Walk the talk” to “Assure subordinates are fully trained, motivated, encouraged and made an integral part of the process”. The responses were universally excellent and demonstrated the personal commitment necessary for success. As part of the commitment process all must understand and commit to the decision process illustrated in Figure 17.1.

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• All key stakeholders involved • All required information and resources made available • All participants agree to a nonadversarial role • All agree to work in collaboration for resolution • Thorough discussion of alternatives -- all views expressed • Group recommendation(s)

70% agreement Decision 100% support

Figure 17.1 Program Decision Process Value Performance Metrics in Place — Regularly Reviewed and Published Participants respond to the score. How many athletic teams play beyond their ability when behind? How many slack off when ahead? Metrics inject the competitive spirit, increase the energy necessary to gain commitment and peak performance and identify areas where adjustments need to be made. Continuous Communications This is a recurring necessity for success. A communications team, detailed later, is an essential part of the transformation initiative. Communications must be regular, reinforce the necessity of transformation, publicize activities and successes and answer questions of concern. Control and Sustaining Plan A comprehensive Control and Sustaining Plan must be constructed into the transformation process from inception. The Control and Sustaining Plan assures that improvements are stabilized and institutionalized, momentum and gains achieved by the Asset Optimization program are continued and improved. Key elements of an asset optimization program control and sustaining plan include:  Identify specific, continuing overall objectives; e.g., improve safety and environmental performance, production uptime and reduce maintenance costs. Specific short and long-term objectives for results and time must be stated.  State the values, behaviors, actions necessary for meeting objectives, sustainable transformation.  Identify specific issues that warranted special attention during the program implementation, e.g., improve core competencies, craft skills, minimize off-books “squirrel” stores.  Establish metrics; results required for specific, continuing objectives: what is to be achieved, when  Define the scope of the control plan: – Program elements: Details of all elements within the Asset Optimization program and expectations for future progress – Organization, detailed, defined roles and responsibilities; RASCI: From site manager to reliability improvement team members, including succession plans for key participants – Processes and systems included in the program: CMMS, Planning and Scheduling, Stores Management, critical spares, risk ranking, RCM, condition monitoring, PM, RCA, etc. – Foundation documentation and procedures: All the general documentation and procedures necessary for the program including revision / configuration control. Note site procedures

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should be cited as references and not duplicated to eliminate the necessity of plan revisions whenever a site procedure is updated Identify program procedures and instructions: Procedures and instructions that are included in the program – Include standard procedures Specify program elements, including: – Maintainability, including safety and environmental issues – Assuring accuracy within CMMS – PM / Predictive processes; application, use and procedure for changes – Operational check off lists, startup, post repair turnover plans – Punch list development, sign offs and follow up Specify critical documentation: MEL, asset hierarchy, risk rank, critical spares Establish roles and responsibilities, RASCI – Responsibility for the process and plan, schedule for plan review and revision if necessary – Responsibility for review and updates – Communications, interaction, linkage, integration between program elements (including IT requirements) – Skills management; coaching, training, retraining and certification requirements Perform periodic audits to confirm performance

Leaderships Role The following is intended as guidance for leading the transformation initiative: Establish the Requirements and Necessity for Improvement; Overall Objectives Where the organization can / must improve — the ultimate destination of the improvement process — and the necessity of improvement in simple, clear terms must:  Establish overall objectives and results that must be achieved; preferably expressed in terms of specific safety, environmental, production output and cost metrics  Direct attention to factors that contribute directly to organizational objectives Communicate Vision Energize the organization by creating and communicating a clear vision, a sense of the possible. How together we can arrive at the destination, a vivid picture of the journey and benefits of success.  Express organizational imagination and expectations for participation, ownership and initiative  Describe the future state (To Be)  Develop and publish a Vision Statement Sponsor, Energize, Motivate and Drive the Improvement Process There must be highly visible, open commitment, unqualified support, drive and consistency from the highest levels of management that energizes, motivates and creates enthusiasm in all personnel who are involved in the transformation process. Specifics include:  Continually reinforce the necessity for improvement People immediately sense when leadership is truly committed to an objective, they also know when exhortations are only words with no real drive or commitment. They tend do as the boss does, not necessarily what the boss says!  Maintain awareness of performance, drive results  Identify areas that require additional improvement  Maintain unity, consistency of purpose A large manufacturing facility has embarked on a major transformation initiative directed to increasing asset utilization and effectiveness, organizational and work quality. The first thing to be seen when approaching the facility is highly visible waste, reportedly close to $1 million per month. Under these circumstances how can a craft mechanic be motivated to worry

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about repetitive $5,000 equipment failures when management tolerates waste that is 200 times greater? Energize Enthusiasm, Commitment and Ownership Senior management must demonstrate personal commitment by periodically participating in improvement program, steering team and area action meetings. This encourages questions and ensures personnel raise any concerns they may have. Senior management should also personally congratulate contributors, which will demonstrate their knowledge of and interest in the program. Select Transformation Program Leader The position of transformation program leader is crucial. He / she will be responsible for energizing and driving the program, and personally accountable for results. The transformation program leader must be able, comfortable and effective at working both up and down in the organization. The personal characteristics of the leader are crucial. They must:  Be at least at the level of Manufacturing / Production or Maintenance Superintendent and report directly to the site / facility manager. The transformation initiative must be a primary responsibility, not just an additional responsibility.  Have organizational stature, credibility, energy, authority, time and ability to make things happen within the organization — a proven motivator and leader Establish a Program Steering Team The transformation program steering team has program oversight and is responsible for establishing the organizational environment that will assure success. The steering team must be strategic oriented and have enough status to resolve any functional and departmental differences that may inhibit full exploitation of the team-based transformation. The program steering team is:  Composed of senior managers: Plant Manager (ex officio) Operations / Production, Maintenance, Engineering, Stores and Finance plus improvement program leader  Chartered to establish program objectives, review and approve improvement plans, provide guidance for implementation, monitor results, facilitate interdepartmental coordination, remove institutional and procedural barriers, reward success. The Steering Team must be fully engaged in the asset optimization process. Meetings should be used to drive toward performance objectives, identify weaknesses and barriers to resolve not used for detailed reviews of implementing tactics. Performance, gaps to required performance, barriers holding back results should all be identified before the meeting Strategic direction and program facilitation are the primary roles of the steering team. They must concentrate on objectives and results while avoiding involvement in tactical, implementation issues. Membership in the steering team should be limited to senior management. Refocus From Tactics to Strategy In any operating environment the natural movement is from strategy to tactics. Without conscious discipline, tactics — those actions necessary to continue operations — will always take precedence. While not losing sight on the tactical necessities of maintaining operations, leadership must assure the continuing discipline necessary to work within the long-term improvement strategy. It is essential to think and work on two levels simultaneously:  Tactical - maintain production and existing processes  Strategic - improve process and asset reliability, effectiveness and return, identify and eliminate defects, reduce necessity for work — make tomorrow better than today Motivate all participants to work effectively short-term while thinking long-term Identify, Select, Support and Encourage Motivated Working Level Leaders — Champions Within any organization there are people with the motivation, capability and enthusiasm to lead the transformation process. These people must be identified, encouraged, trained and coached to become champions. The benefits are many. Most important, there is greater use of “brainpower,” initiative and institutional knowledge. A key individual became seriously ill immediately before an important engagement. A potential replacement had excellent technical knowledge but was very quiet and had never been

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considered an advocate or leader. The replacement performed superbly — so well that a position in leadership was created to develop this previously hidden talent. In two other facilities individuals decided that they wanted to become lubrication champions and could contribute a great deal. Both personally organized comprehensive lubrication programs that within a year had generated substantial savings. Specific attributes of a successful champion include:  Credible within the organization — respected equally by peers, subordinates and supervisors  Positioned in the organization to assure priority for the program  Competent, skilled, strong leadership capabilities  Committed, believes in the program  Positive, persuasive  Open to new ideas and methods  Enthusiastic, energetic  Team builder, good coach, gains the best from people  Good problem solver, creative problem solving skills  Well organized, follows up  Strong communication skills, up and down the organization  Good technical knowledge  Trains successors Every organization has hidden talent. By its nature, a transformation initiative is an ideal vehicle for identifying and encouraging people who may never have had the opportunity to utilize their full talents and capabilities. With opportunity and encouragement many people suddenly blossom in terms of leadership and contribution. Move the Organization from Management Control to Team Partnership The command and control organizational structure under which workers, having clocked in, stop thinking, and perform exactly as they are told — no more, and no less — is a relic of the past. Competitive pressures have made it essential to use everyone’s brain, not just their brawn. An employee at a major automobile manufacturer commented that relations between union workers and management were highly adversarial. Workers were expected to adhere strictly to the contract in terms of both work scope and performance. Suggestions for improvement were not encouraged and certainly not considered. The organizational transformation process typically unfolds as follows:  Replace hierarchical command and control organization with a multi discipline team organization empowered to identify and correct deficiencies. People directly performing work are well aware of any deficiencies and problems. Given the chance and properly supported they will come up with innovative improvements to help overcome these issues. The transformed organization will probably be a matrix with people having both functional and team responsibilities. It is up to functional and team leadership to work out details of time allocation to optimize results in both areas.  Teams have responsibility for defining improvements, ownership and responsibility for implementation and accountability for results.  Team capabilities must be created and strengthened, an awareness of objectives and expectations established and training conducted to assure teams function effectively. The scope of improvements must be controlled. For example, teams should be empowered to implement improvements such as improved communication and coordination as well as low cost material and process improvements. Larger scope improvements that may require design or process modifications should have formal approval with the proviso that the approval process itself may have to be streamlined and improved to fit within the guidelines of the transformation program.

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It should be noted that it may take as long as 1 to 2 years to get team members fully aligned and working effectively together. As the transformation program progresses, leadership moves from command and control into a role of facilitation, removing barriers, coaching and monitoring results.

The building of individual and team capabilities is a prime role of leadership. With time, teams gain greater self-reliance and direction, control over tasks, prioritization and accountability for results. Leadership assures that teams progress by:  Establishing performance measures — effectiveness KPI’s  Providing training and coaching  Respecting and considering team recommendations  Explaining deviations when recommendations can’t be implemented for any reason Quantify and Prioritize Opportunities — in Business Terms Teams are typically very good at identifying opportunities for improvement, but they often need help determining the potential value of improvements. With a broader knowledge of the value creation process, financial elements of the business and the balance between increased production and reduced spending, team leaders may have to help establish the value that will be employed to prioritize opportunities.  Utilize financial model similar to that outlined in Chapter VII, “Financial Results” to establish a valid comparison of cost and value gained by initiatives to increase availability and effectiveness, and reduce spending  Prioritize initiatives based on the cost to implement, the risk, and value returned As stated earlier, there should be approximately five to seven working improvement initiatives totaling approximately 120 percent of the results required for any given objective. Emphasize Increasing Process and System Reliability, Effectiveness and Quality Permanent improvements must be directed to improving the underlying structure and cause of inefficiency / ineffectiveness. Under normal operating pressures, and multiple simultaneous problems, it is often difficult to resist the temptation to accept the expedient “quick fix” rather than permanent corrective action that takes more time to develop and implement. Leadership must hold fast. Stating the necessity for a commitment to quality, that tasks must be done right the first time followed by continually demanding instant action, temporary solutions and rewarding people who comply is a highly visible demonstration of what the boss really wants despite words to the contrary. Immediately following a meeting between Maintenance and Production, where the necessity of quality and long–term permanent solutions were stressed, a Production Superintendent walked out into the maintenance shop where a small turbine was being repaired. Although the turbine was not required for several days, the first question asked by the Production Superintendent was when repairs were going to be completed. That was immediately followed by several strong suggestions for quick, less than optimal repairs to accelerate completion and reinstallation. What lesson did the craft workers present take away? Is quality paramount in the bosses mind or is speed, and for which will I be rewarded? Leadership must work toward establishing a reliability and work quality culture within the asset optimization program that is equivalent to safety. Everyone knows that expedient shortcuts are never acceptable when safety is an issue. To accomplish this goal within the asset area, leadership must:  Assure that all necessary changes to organizational, process and program practices that are necessary to ensure the ongoing strategic, reliability and quality oriented culture required to achieve maximum lifetime utilization, effectiveness and return from physical assets are planned and implemented.  Clearly define the roles of top and mid-level management, supervisors and employees.  Continually emphasize quality in all aspects of work, the need to minimize variation; and to perform all tasks effectively and correctly the first time.  Carefully explain the reason for any deviations from quality and reliability principles that may be required due to operational necessities with emphasis on why they are necessary. Any expedient activity that becomes necessary must be followed by the permanent solution that is consistent with the quality culture demanded by the transformation initiative.

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Maintain Motivation and Enthusiasm, Focus on Long-Term Objectives In parallel with increasing emphasis on reliability and quality, leadership must maintain their focus, enthusiasm and motivation on long-term objectives. As stated earlier, it is always easy to slip into a shortterm tactical focus where all efforts are concentrated on solving immediate problems. While maintaining the pressure necessary to solve operating problems, leadership must maintain the discipline necessary to ensure that tactics are within a long-term strategy. As stated in the previous section, short-term fixes that are mandated by operational necessity must be followed by long-term solutions while knowledge is fresh. Point solutions must be leveraged with broader application wherever possible. In a typical production facility, real discipline is required to direct any level of attention toward long-term improvement. There are generally so many problems requiring immediate attention that any lull in intensity is welcomed and taken as a well-deserved break. Under these conditions it takes solid leadership, continuously applied, to achieve long-term gains that may not be considered by those involved as contributing much to their short-term needs. Clear Acknowledgement that Sustainable Progress Requires Time Leadership must recognize that improvement is not a command, but the result of a comprehensive, well thought out and implemented process. Time and continuous effort are required to assure the transformation takes hold and is institutionalized. In numerous mid level asset optimization workshops, participants state that management’s belief that improvements in asset availability and spending can be ordered is one of the most significant obstacles they have to face. Optimize Company and Contractor Work Force As a final comment under leadership, there is always a question about employees compared to contractors in terms of cost, proficiency and value. Outsourcing, covered in detail in Chapter XIII, “Excellence at the Basics”, is never too far from mind. For the purposes of this discussion, it is imperative that leaders lead and oversee the requirements and rules developed for outsourcing. In particular, leadership must be involved in the identification of core and non-core competencies as it may involve safety, proprietary operating and business details that are better protected by employees. Establish Effective Communications “Real communications is an attitude, an environment, a constant interactive process aimed at creating consensus. Effective communications are simple, consistent and repetitive. Getting the message across requires countless hours of back and forth.” Jack Welsh Communications are one of the most important aspects of a transformation initiative and also frequently one of the most ignored. Effective communications are essential to establish and maintain the energy, enthusiasm, ownership, commitment and constructive internal environment necessary for successful change / improvement. Constant communication is essential to maintain the necessity for transformation and the objectives of transformation uppermost in everyone’s mind. Some assert that it is better to keep people largely in the dark when faced with the necessity for major organizational and process changes that many would find highly threatening. Others argue that communicating frankly and addressing concerns as they arise is far better than attempting ad hoc answers to rumors that fly whenever any uncertainty or unexplained activities are in the air. The following attempts to list some of the aspects of a communication program that should be considered as an integral part of the transformation process: Select and Assemble a Communications Team The primary objectives of the communication team are to identify the issues and concerns that must be addressed and answered to maintain positive, participatory environment, energy, enthusiasm and ownership for the improvement initiative. The team doesn’t necessarily have to answer questions, their primary task is to identify and frame real questions. The communications team makes certain the question and its importance is understood, answered completely by the appropriate people within management and / or steering team and communicated back within a reasonable length of time.

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The communications team should represent a cross section of facility personnel. Members should include management, the professional staff, production and maintenance personnel — salary and hourly. The members should be selected for their sense and knowledge of the plant, people and culture, their credibility and confidence within their peer group, their willingness to contribute and eagerness to improve conditions. In effect the communications team can be considered as equivalent to a plant ombudsman. It is advisable to form the communications team early in the transformation process. The team should be made up of people with a good feel for the mood and spirit of the facility and in whom others confide. The steering team typically meets every two weeks at the beginning of the transformation program. They should endeavor to produce a site wide communication that is issued at regular intervals, no greater than monthly, to reinforce the initiative and address issues and concerns. Reinforce the Transformation Initiative, Address Uncertainty and Concerns The communications program is a key element for building the trust necessary for success. It must be directed to conveying straight answers in simple terms. The use of metaphors that connect to everyday experience has been mentioned as a good method to convey complex ideas. The means of communication can be varied depending on circumstances and the facility practice. Although internet communications provide broad, rapid communications, a printed newsletter that can be posted throughout the workspaces should be strongly considered with or without internet communications. Communications must be concise and brief — to ensure that people will take time to read it. To gain attention, transformation communications should have a distinctive look that differentiates it from other facility communications. One organization established a special format, logo and colors for transformation program communications. The logo was a butterfly implying metamorphosis to a new form. The same organization used symbolic musical notes in the left margins of communications to indicate an action that was “playing” from the strategy. All communications from the transformation team should be checked before release to ensure they can be easily understood by all personnel who will read or listen to them. Organization The principal organizational elements and considerations are detailed in Chapter X, “Leadership and Organization”. The following is intended as specific guidance for organizational improvement within a transformation initiative: Establish Guiding Principles In general terms, the objective of reorganization is to:  Streamline the organization and make it more responsive and effective  Increase the energy, ownership, responsibility, accountability, teamwork and effectiveness of all personnel  Delegate greater responsibility and control to the lower levels of the organization and shift behaviors to ensure greater individual initiative, ownership and accountability  Energize positive contribution, and improve relationships, communications, teamwork and response to problems  Reduce non-value added activities, bureaucracy and layers of management required for approval. Guiding principles must address the improvements required of the new organization. What strengths should be retained and built upon, what weaknesses need correction? What improvements are necessary? All organizations have different institutional culture, values, relationships, individual personalities, behavior and controls so there is no single, one size fits all, solution.

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Identify Potential Structural and Organizational Improvements In most, if not all companies the reorganization plan must be developed from inside by people who are intimately familiar with the current culture, conditions, values, organization, individual personalities, strengths, weaknesses and opportunities for improvement. These areas are best explored, discussed and refined in a series of workshops. Workshops must include a broad cross section of people within the organization (professional, managerial and supervisory; salaried and hourly) so that all current structural defects and opportunities for improvement will be identified and examined from every perspective. The resulting improvements will make the maximum contribution to process effectiveness. Within the new organization the roles and responsibilities of essential functions, and their location and reporting hierarchy must be defined. The location of some functions, for example reliability, is sometimes questionable. Will reliability be most effective as part of Engineering, Maintenance or Operations, given that they may all have different methods and priorities? The same question must be answered for specialty functions such as lubrication and predictive monitoring. . Move from Command and Control to Individual Commitment, Initiative, Ownership, Responsibility and Accountability The principal objective of a transforming reorganization is to move away from the old command and control organization that places the burden for thinking and direction on management and supervision to a new energized organization that emphasizes initiative, self direction and accountability for results by those performing the work. The “new way” utilizes all employees to their full potential and demands much more in terms of individual commitment, initiative, ownership, accountability and collaborative relationships. As soon as the new organizational structure has been conceived, a parallel effort must be initiated to assure best practices are identified, and communications, procedures, resources, support and training are all in place to support the organizational change. These include communications and training for all personnel in the new values (initiative, ownership, responsibility, accountability) and the added knowledge necessary to successfully fulfill greater responsibility. The objectives, requirements, reasons and benefits of the new structure must be thoroughly understood. Reorganize for Maximum Effectiveness As mentioned in previous sections, the transformed organization is typically a flatter, team based, multi skill organization that is organized by objectives rather than function / crafts. In this type of organization it would not be unusual to find a technician or team of technicians identifying and correcting a potential problem, performing an analysis and communicating results to prevent repetition. As stated earlier, the reorganization must include a detailed transition plan to map the process for getting from the current to the new organization effectively and without any confusion or loss. Develop Personnel Personnel development is a key element toward a successful reorganization. Everyone must know what is happening, why it’s happening, and their individual roles and responsibilities. Training was covered in detail in Chapter X. Reorganization typically demands changes in values, thinking, relationships and the individual’s concept of responsibility and accountability. Although many may like the new organization and the idea of greater individual initiative and responsibility in theory, training is required to assure everyone has a full understanding of the new concepts and organizational and individual requirements, in a consistent way. Training will be necessary for effective participation in the transformed organization. Form Improvement Teams Identifying opportunities for improvement through a series of workshops was discussed earlier. With opportunities identified, action teams should be formed to fully define the opportunity, the results / end state to be achieved, and to develop detailed plans to transform from the current to the improved. The team members selected to address specific opportunities are typically those from the initial teams having special interest and knowledge, augmented by others who wish to participate and can contribute.

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The team based improvement process typically consists of the following:  Appoint the top-level coordinator — a post required when multiple teams are chartered, each addressing a slice of the total. This individual must participate in all teams and be authorized to adjust team charters and objectives if and when necessary to ensure consistency in the reorganization process and that all improvement initiatives combine to produce the optimum result. 

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Establish team rules, conduct training — communications, trust, cohesiveness, common ground, courtesy; establish methods to resolve any potential friction and conflicts within the team. Conflict during a brainstorming session is typically one of the first disruptions experienced by a new team. When this occurs everyone must be reminded that brainstorming is directed solely to identifying ideas. Discussions of the pros and cons of individual ideas occurs later in the process after as many ideas as can be identified are listed and each is opened for detailed examination and discussion. Define the issue and direction — opportunities to be addressed, conclusions from the initial teams, strengths to be preserved and boundaries are all established at the outset of the process. These objectives must include results (reorganization plan, roles, responsibilities in the new organization, benefits, any expected difficulties and a transition from current to new) and the time allowed to accomplish the results. Ensure the issues are completely identified and discussed openly; and that there is good participation from all members. Every team seems to have one or more people who want to take charge and dominate every discussion (often not the person with the most to contribute) and one or more who are content to say nothing (often the individual with the most to contribute). A facilitator will recognize this dynamic and take steps to assure effective participation and contribution from all. Each team meeting must be preceded by a detailed written agenda listing subjects to be discussed, objectives, responsibility and participants. Meetings must be followed with a written report including highlights of the discussions, actions taken and any future requirements. Because of the complexity of discussions and the difficulty of simultaneously taking notes and participating, especially for the facilitator, it has been found helpful to tape record entire meetings. The recording can be reviewed later to assure all nuances of complex, often heated, discussions are accurately reflected in the written minutes. Experience has demonstrated that recording meeting discussions has no adverse impact on the openness of discussion by participants. Measure current performance in the applicable areas, define current state, objectives for improvement; qualitative and quantitative; brainstorm ideas for improvement, prioritize opportunities. Define specific actions required to achieve the new objectives. These may include redefining processes, roles and responsibilities, additional resources, technology and training Formulate practical action plans to meet objectives including resources required, risk evaluated, value calculated and measures of performance Build ownership, commitment, motivation, enthusiasm, involvement, mutual respect (members respect and support one another) and cooperation. By its nature the team process builds the initiative, ownership and teamwork values that are required in the new organization. In addition to utilizing institutional knowledge most effectively to develop the transformation plan, team development builds positive relationships with others involved in the activity and plants the seeds necessary for ultimate success. Recognize that it will take time, in some cases years when a major shift in institutional culture is required, to get people aligned and working together effectively in teams.

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Decisions made by consensus No matter how hard everyone may try, it is often impossible to go beyond 70% or so consensus. When that occurs, all must agree to fully support the majority with the proviso that if results later demonstrate the 30% way was best, the plan will be adjusted. Implement solutions — apply resources, technology Measure and evaluate performance — monitor and feedback results, team effectiveness Many initiatives have failed because the process is considered complete as soon as the action plan is implemented. The team, or at least a core group of the team, must remain together, active and meeting periodically (typically at lengthening intervals as the actions mature) to evaluate performance, conduct ongoing assessments of progress to objectives and develop any refinements or alterations that may be necessary. The team’s work is not complete until the improvement is institutionalized — a process that typically requires years. Adjust action initiatives to improve performance and results.

Finally, it must be noted that gaining participation of the best people on site for the transformation initiative will likely require some schedule flexibility. Since the people who can contribute most are also likely the busiest with heavy responsibilities, it is generally best to stagger schedules so that people work the transformation initiative a week or so a month, staggered two or three days at a time. Recognize also that the plant may have its own ideas of when people can be made available and that interruptions and rescheduling cannot always be avoided. Flexibility is key. Resolve Conflicting Priorities Along with periodic evaluation of performance and results, the team must continue to examine the original objectives, and even the overall reorganization, to assure their solution was optimal and contributing the greatest amount possible to overall organizational effectiveness. This evaluation must focus on effectiveness and quality metrics to judge success and identify areas where adjustments / further training might be necessary (see Chapter IX). Successful teams, who presumably believe in the process, must be celebrated in communications to increase the enthusiasm, ownership and belief in the necessity and value of improvement. Maintaining Enthusiasm, Good Relations Maintaining enthusiasm, motivation and good relations throughout the transformation process is essential for success. The transforming organization must work toward establishing and maintaining positive, constructive values, culture and relationships just as hard as in the process and procedural areas. This final section will reveal some ideas as to how that can be done. First and foremost, there must be mutual acknowledgement that optimizing the productivity of physical assets is a vital business necessity and an essential contributor to production, profitability, job security and personal satisfaction. Production and Maintenance are partners with joint responsibilities for success, not a customer and supplier. This has been mentioned earlier as a crucial ingredient and will be mentioned again. Ownership and commitment to value must be continually reinforced. This includes, but is not limited to the following:  Knowledge of and contribution to safety, mission and business requirements.  Continually meeting all formal requirements as well as informal expectations Tensions within an organization often occur not because people aren’t performing to procedure but rather they are disappointing someone’s expectations. Complying with informal expectations may be more important to good relations than meeting formal requirements.  Mutual agreement on procedures for identifying, discussing, prioritizing and resolving cultural and relationship issues. Frequent discussions are necessary to review activities, assure objectives remain aligned and problems resolved. Motivation Along with initiative and ownership, enthusiasm and motivation are essentials for success. To a large degree success builds motivation and motivation creates success. A chicken and egg situation!

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Surveys have shown that people believe individual success depends on the following — in order of importance:  Coaching to achieve success  Enthusiasm, commitment  Implementation of best practices  Sound organizational procedures  Process effectiveness The key message is that contrary to the teachings of W. Edwards Deming, some people believe that coaching is significantly more important than process effectiveness. That may mean that a good coach can obtain good results from a flawed process. It also may be that responders are considering individual success, a feeling of worth and contribution that will be conveyed by an exceptional coach rather than success of the process itself. Perhaps the most important lesson is that real success requires all ingredients. The same people indicated that satisfaction was based on — again in order of importance:  Recognition for success / results  Honest, open, fair treatment  Ownership  Compensation  Encouraged to take initiative  Reasonable control over conditions  Kept informed  Consideration for the individual The only surprise here is that consideration for the individual is at the bottom of a list that has honest, open, fair treatment second highest — the two would seem to go hand in hand. People reviewing the results explain compensation in the middle by noting that participants were all relatively senior people, and probably satisfied with their compensation. Empowerment While empowerment is an important attribute of the transformation process it is a fact that everyone wants to be considered, but not all want the responsibility and accountability that go along with empowerment. And that’s acceptable — the same as not everyone can or should be a chief! The key elements are that team members must complement each other and teams must work well together. Within a team there is plenty of opportunity for individuals to contribute, even though they may not want to be a leader or empowered. “Our urge to liberate and empower the work force is not enlightenment — it’s a competitive necessity!” Jack Welch Gaining Individual and Organizational Success Identifying and encouraging competent, motivated and fast-learning individuals, giving them as much responsibility as they can accept effectively and moving them into influential positions as rapidly as possible is another key element toward gaining a successful empowered, self-directing organization. Some individuals will shine and these must be given advanced training and increased responsibility as quickly as possible. Building on success in this fashion self perpetuates the new organization. When individual success is combined with team-based rewards, peer pressure becomes a powerful incentive to elevate ownership and performance. Recalcitrant members must be urged to participate fully and raise their performance to team average as a minimum. That said, they may be potentially strong contributors who simply do not fit the new team model. In this case some effort must be made to find ways to preserve and reward their contribution. Measuring and Maintaining Satisfaction Conduct Formal and Informal Satisfaction Surveys Periodic employee surveys are a must. They provide a means to evaluate attitudes and ensure that all sources of friction, frustration and ineffectiveness are identified, understood and corrected. Surveys

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provide a means to legitimize complaints and a positive vehicle for suggestions. Employee surveys are typically developed and implemented as part of the communications program. They should be performed regularly within the framework of an overall strategy designed to develop specific information. Surveys can be developed and conducted in-house or by an experienced third party. Anonymous inputs are advisable to encourage candid evaluations and comments. It is generally agreed that participants are more open when surveys are conducted by a third party and as a result the survey may reveal more. Having completed the survey it is essential the results are publicized and communicated, along with an evaluation and conclusions identifying the positive as well as any identified need for additional improvement. The survey must result in a formal action plan defining tasks and any changes required to address and correct the major issues. A survey increases awareness among participants and elevates expectations that real changes will be made. If the survey is not followed by a detailed summary of results, evaluation and an action plan people become cynical and conclude the survey is simply another exercise where management wants to feel good but doesn’t really want to hear or even care about what is actually going on within the organization For these reasons it is best not to conduct a survey unless management is prepared to listen to and act on the survey’s results. Some of the topics that have been covered in surveys are listed below. A single survey should have no more than five or so basic questions centered on the theme that is being examined. Too many questions and responders will either not answer at all or not in the detail necessary.  Safety culture  Values, guiding principles, understanding the necessity for improvement  Understanding of strategy  Understanding / agreement with organizational values, endeavoring to comply  Effectiveness and satisfaction in the following areas:  Leadership and management  Provides leadership / coaching  Creates positive environment, optimum working conditions  Supportive  Considerate of people and the opinions of others  Decisive  Committed to  Workplace safety  Environmental compliance  Quality work  Creating maximum value  Organization and organizational structure  Well organized, organization understood  Compliance to objectives with optimum effectiveness and efficiency  Good communications  Clear process of decision making, timely decisions  Improvement proposals evaluated quickly and fairly, implemented as soon as conditions permit  Individuals able to influence the organization  Good teamwork and relationships within the organization  Considered effective  Communications and information:  Information readily available  Good communications between units, functions and operations  Well informed, including individual and business performance  Effective follow-up

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Individual employee satisfaction  Overall satisfaction  Honest and fair treatment  Clarity of purpose  Challenge, ownership, participation and control within the work environment  Working conditions  Job security  Adequacy of tools and work procedures  Availability and completeness of information and training necessary for job success  Consideration, respect for opinion  Fair compensation, tangible recognition and rewards for quality performance, value contributed  Opportunities for personal betterment

Sustain Momentum, Institutionalize the Improvements The final step in the transformation process is to sustain the momentum gained and institutionalize the results. This process closure will take years, typically several times greater than the time required for the transformation. As stated earlier, there is a great temptation to demobilize and slack off the effort a soon as results begin to appear. This temptation must be resisted. Sustaining and institutionalizing success requires continuing effort and a process not unlike the transformation itself. Assumptions are continually reviewed and tested. Has the environment changed, have market and / or business conditions changed? If so are changes to the process advisable in order to meet the new conditions? Does the transformed process still meet objectives? Have objectives changed? Results are continually monitored to assure compliance with industry best benchmarks. If benchmarks have / are changing can the process effectiveness be improved or must the process be transformed again? As the excitement resulting from success fades into distant memory there is a need to keep the people involved enthusiastically committed to the transformation goals — continually seeking improved performance and effectiveness. The communications program must be kept alive and evergreen. Publicize results with individual credit to maintain enthusiasm and commitment. Some Lessons Learned Organizations who have instituted major transformations mention some lessons learned:  Make certain leadership is committed, aligned and on the same page  Manufacturing organization must own the process  Gain buy-in across the entire organization, don’t forget supporting functions; Finance, HR, IT  Assign the best people  Formulate and implement a solid process  Assure stability in management during the transformation  Implement for results  Maintain focus on results  Communicate frequently at all levels  Listen to and consider feedback, don’t assume all is well  You will have to make hard choices  Change will take time  One person alone cannot make change  You will need outside help  Publicize and promote results and successes

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XVIII. IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM “It’s one thing to establish objectives. It’s quite another to get people to passionately believe they absolutely must reach them to succeed!” GE Executive

Implementing the Physical Asset Optimization program begins by assembling a Steering Team to establish overall business and operating objectives, organizational values and oversee the process to reach the objectives. Multi discipline Action Teams are formed to identify and prioritize specific opportunities and construct detailed improvement action plans including cost, results expected, probability of success and time required. Having defined the action plans, the Action Teams proceed to implementation in defined steps. The results of each step are measured and the plans adjusted if required to ensure each objective is achieved. Finally, program success is institutionalized

THE ASSET OPTIMIZATION PROCESS The asset optimization process described in this chapter is divided into seven phases. The Plan phase of the process described in Chapter IV has been subdivided into three phases, Analyze, Prioritize and Plan as listed below:  Define — program objectives, conduct asset and process effectiveness audit  Analyze — identify improvement opportunities by comparison to benchmarks  Prioritize — potential improvements based on value opportunity, cost, time to implement and probability of success  Plan — improvement strategy, develop detailed action plans, gain approval  Do — deploy resources, implement improvement initiatives  Check — measure and manage results  Improve — adjust initiatives as required, initiate continuous improvement, institutionalize success Figure 18.1 illustrates a simplified version of the Asset Optimization process: Key Keyareas areasof ofimprovement improvement from frombusiness businessrequirements requirements Identify Identifyspecific specificinitiatives initiatives to togain gainimprovement improvement Name Nameaachampion championfor for each eachspecific specificinitiative initiative Define Defineimprovement improvementstrategy strategy

Adjust Adjuststrategies strategies

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Figure 18.1 The Overall Physical Asset Optimization Process (10) Figure 18.2 is another way of looking at the asset optimization program. Phases of the program can be illustrated as shown:

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Benchmarking Asset AssetEffectiveness Effectiveness Assessment Assessment Business BusinessCritical Critical Operating OperatingObjectives Objectives Corporate CorporateBusiness Business Plan Plan

People People Processes Processes Systems Systems Technology Technology

“Best “BestPractice” Practice” Objectives Objectives

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Continuous Continuous Improvement Improvement

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Measure MeasureResults, Results, Metrics Metrics

Figure 18.2 Business Plan, Improvement Process (11) Essentials for Success The asset optimization program requires the following; all have been discussed in detail in preceding chapters.  Top-level commitment — an absolutely essential ingredient. Motivation for improving production and asset effectiveness and asset optimization Program Leadership must originate at the top levels of an enterprise. Demonstrated commitment, involvement, and continuing drive from the CEO and / or plant manager are essential for gaining success and value. Top management must be visibly and energetically committed, constantly driving for success with both words and actions.  Solid values established, communicated and adopted by all in the organization  Energized, empowered and motivated champions with real responsibility and accountability leading the program  Initiatives formulated for maximum contribution to business objectives / mission compliance: increased profitability, availability, production output, quality, and reduced cost  Ambitious, optimistic, and achievable objectives established by implementation action teams  Detailed improvement plans developed and owned by the action teams, prioritized and implemented in value order  Optimal practices and technology deployed to address specific requirements  Activity-based accounting to accurately assess the real costs and value produced  Effective training initiated at launch, and continued throughout  Array of layered metrics to measure and assure compliance with interim and final objectives  Complete information structure to monitor and display performance, and communicate results  Full commitment to continuous improvement and identification of additional opportunities for improvement  Tangible rewards for results and value created Organizational transformation is discussed in Chapter XVII. The principles are an essential part of asset optimization. Figure 18.3 illustrates the asset optimization process from yet another direction; this one showing process steps in finer detail along with the implementing organizational structure.

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Corporate Steering Team

Appoint Leadership, Steering Team Establish Mission from Corporate Business Objectives Establish Program Overall Objectives

Define

Create Business Model Publicize Need for Improvement, Develop Consensus Select Champions, Assemble Implementation Teams Identify Highest Priority Systems and Components Benchmark, Perform Gap Analyses

Leadership & Implementation Teams

Plan

Identify and Prioritize Opportunities, Assess Risk Establish Strategy Build the Organization Construct Tactical Action Plans Select Technology and Practice

Do

Gain Approval, Implement Improvement Plans Measure and Manage Results Identify and Strengthen Weak Links Maintain Ownership and Support, Institutionalize Success

Check Improve

Figure 18.3 Details of the Physical Asset Optimization Process Implementing Methodologies There are two basic methodologies for implementing a process to improve asset performance and effectiveness. The first, essentially a bottom up strategy, begins with the premise that certain foundation processes; planning and scheduling, materials MRO and work quality to name three must be perfected before an organization can move into more advanced, optimizing processes and practices. The second treats the asset optimization process as a matrix of organizational, practice and technology where each organization identifies site-specific strengths, opportunities and weaknesses and moves to implement improvements in areas that offer greatest value and highest probability of success. If a facility is experiencing many failures and has too much reactive maintenance work it would seem logical to target and correct the causes of unreliability rather than concentrating on improving the work management process to deal more effectively with conditions that shouldn’t exist. Hence the focus of asset optimization is to constantly direct efforts at greatest value. This handbook and chapter advocate and describe opportunistic implementation within a matrix similar to Figure 18.4 rather than sequential implementation. The former is considered the more effective way to gain enthusiasm and ownership for the process, demonstrate results, and achieve maximum value as early in the program as possible. The process is constructed around action teams chartered to identify and implement improvements within the matrix to gain greatest business value in the least amount of time. These teams constantly monitor progress and seek additional opportunities for improvements within the program framework that will add still more value.

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Achieve Market, Business, Value Driven Physical Asset Optimization Institutionalize Results, Success

Control Plan

Communicate

Publicize

Promote

Technology

Organization

Increase Ownership and Support Implement Continuous Improvement

Process

Practice

Improve

Review, Adjust and Improve Business and Action Plans Measure and Manage Results Communicate & Promote Results Activities Supporting Programs Information Management Skills Management - Training Systems Organization & Administration Foundation Processes Basic Documentation Values, Culture, Relationships

Actual Results

Metrics

Gap

Corrective Action

Wins

Lessons

People

Continuing Work

Reliability Prediction

Failure Analysis (RCA)

Risk Analysis

Lifetime Analysis

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Proactive

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Safety

Team

Professional / Craft

General Learning

CMMS

Condition Monitoring

Reliability

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Criticality / Prioritization

Work Management

Materials Management

Lubrication

P&ID Reliability Culture

Asset Register Asset Hierarchy Production / Maintenance Partnership

Objectives: Results, Time

Do

Equipment History Change Management

Deploy / Improve Personnel, Skills, Processes, Practice, Systems and Technology Implement Improvement Plans Gain Approval for the Detailed Action Plan Select Technology and Practice Build Organizational Support Develop Business, Tactical Improvement and Control/Sustainability Plans, Establish KPI's Develop and Publish Preliminary Improvement Objectives: Systems and Equipment Highest Priority Opportunities

Check

Risk

Plan

Responsibility

Prioritize

Prioritize Opportunities for Improvement Based on Value Potential, Probability of Success Identify Gaps to Best Performance / Practice, Opportunities for Improvement Benchmark Establish Current Conditions Risk Rank Systems & Equipment Categorize Areas For Improvement

Results expected

Value Potential

Probability of success

Metrics

Strengths

Weaknesses

Barriers

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History

Probability

Consequences

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Material

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Establish Action Teams; Initiate In-Depth Improvement Workshops Gain Approval for the Initial Improvement Strategy Formulate a Preliminary Improvement Strategy and Process Write Program Mission Statement Develop Organizational Consensus for the Necessity for Improvement Initiate The Change (Improvement) Form Communications Team; Develop Communications Strategy Management Process Establish Program Vision, Objectives and Overall Strategy Conduct Leadership Workshops Appoint Program Action Organization, Change (Improvement) Manager, Initial Implementing Team Create Business Model Establish Overall Business and Mission Objectives — Top Metrics Appoint Steering Team, Program Leader / Champion

Analyze

Define

High Level Agreement on the Need For Improvement, Commitment to Program and Success

Figure 18.4 Physical Asset Optimization Program Improvement Matrix Where and How to Begin? There is no easy answer. In an ideal world, a long-term management commitment will be in place to provide the direction and resources necessary to fully implement the asset optimization initiative. Unfortunately this is not always the case. Management and / or priorities can and often do change. Although asset optimization is a long-term sustaining concept, continuing short-term results, “quick wins” are imperative in order to build and maintain enthusiasm, confidence, credibility and support. As in so many activities, long-term support and funding is often dependant on the achievement of solid, short-term results. A number of fundamental issues should be considered as the implementing strategy is developed. Mission, business and economic conditions, and the resulting managerial priorities have a way of evolving over time. The implementation plan must have sufficient flexibility and adaptability to contribute continuing value and results to the business despite changing conditions. When processes and practices are present and close to objective performance, a continuous improvement optimization process can begin immediately. But when vital functions, processes and practices are absent, or there are major deficiencies compared to world-class performance, transformation is required to make a step change into the new processes. The step change, transformation process is described in Chapter XVII. When the transformational change is complete, the

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process changes to one of continuous improvement. One expert has suggested calling this sequence an Asset Transformational Improvement Process, ATIP. Ultimate success will be determined by how well the strategy and implementation plan addresses the key areas with the greatest impact on profit:  Safety and the environment  Events, conditions or problems that have an effect on business / mission / operating performance  Gaining performance objectives in availability, yield, quality, and conversion cost  Ability to take maximum advantage of opportunities for increased production and / or quality  Improvements in process effectiveness The business model presented in Chapter VII is a starting point. An economic analysis enables improvement initiatives to be developed and prioritized in terms of real value. What is the potential value of available courses of action — including no action? How much does each action cost to implement? What is the probability that improvement initiatives will achieve their objectives? What is the return in financial terms such as RONA or ROCE? In virtually every case, far more opportunities for improvement will be present than there are resources for their implementation. Considerations for Commencing with a Pilot As with any new concept, the introduction and first-use of the asset optimization program should be carefully controlled in a way that maximizes the potential for success and minimizes barriers to gaining success. Corporations with facilities in several geographic areas should consider a pilot program at a single facility. Facilities with multiple units might consider a single unit pilot program. Many of the asset optimization concepts may appear threatening to workers. When beginning with a pilot, fewer people are involved and it is far easier to establish the communications and dialog necessary to gain and maintain ownership, enthusiasm and support for a new, potentially threatening program. Selecting a facility or unit whose personnel are considered to be reasonably receptive to change greatly improves the chances for success. A controlled, pilot introduction thus establishes the most favorable conditions possible from the beginning to assure long-term success and the best interests of the organization. A number of factors should be considered in the selection of facilities and units for the “pilot” installation:  Workforce receptiveness and enthusiasm for change  Improvement opportunity based on mission, business, market and operating conditions; current performance and results  Degree to which a facility or unit pilot program is applicable and can be transferred to other enterprise / plant businesses  Independence of the pilot entity providing freedom to improve processes and practices within the pilot without outside interference or veto by another because the improvements don’t comply with institutional or procedural “standards.”  Reasonably close physical proximity to corporate resources and Steering Team to ensure continuous involvement, communications and support throughout the pilot. A large, multi site corporation decided to pilot a major improvement initiative at the facility considered to be most receptive to change, even though it was not the largest facility or believed to be most in need of change. The pilot proved highly successful and led to spontaneous appeals from other sites wanting to implement the program. To achieve success, a pilot often requires modifications to be made to the corporate infrastructure and interfaces. Areas that may require administration and organizational changes to fully test pilot improvements include reporting, information flow, finance, logistics, HR and the supply chain. Any of these and others that remain in the “old” mode can have an adverse impact on the improvements implemented within the pilot; dilute and diminish results. Workshop participants engaged in transformation initiatives frequently state that “they” (senior management) demand and expect new values and new behaviors, but continue to evaluate individual and group performance based on the “old” values and behaviors. Why is there any surprise that nothing significant changes?

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When it isn’t possible to change the infrastructure, and the transformational pilot must operate in all or part of the old organizational environment, any potential conflicts should be identified at the beginning of the pilot initiative. With inhibiting conflicts identified, their impact on the implementation of the pilot and the results should be assessed and understood by all. The expectations and objectives of the pilot must be adjusted accordingly. As an alternative, a pilot may be authorized to operate with modifications to corporate administrative practices, reporting and approval procedures or even granted permission to operate outside current administrative procedures with controls appropriate to the pilot. Beginning with a “pilot” installation is a good way to learn and prove an asset optimization program. It retains flexibility, can be altered quickly to fit unanticipated conditions, is less risky, and is generally easier to sell to management. Expanding a successful “pilot” is much easier than downsizing an ambitious effort that failed to meet expectations. The latter may also discourage others from considering future improvement projects.

DEFINE THE PROGRAM Overall objectives, what the asset optimization program must accomplish in terms of business / mission results, are established at the top levels of the organization. The senior executive sponsor of the Asset Optimization program must state specific program objectives in clear, objective language that will lead directly to operational objectives and performance metrics. Overall program mission / business objectives are passed to Program Leadership as the program basis. If top management cannot describe exactly where they want to go with clear, specific, quantifiable objectives the very best teams are incapable of getting them where they want to be! Business objectives typically originate from corporate planning and are generally based on improving RONA, ROCE or some other high level metric. At the plant level this must be translated by the Steering Team (discussed in the next section) into increasing production output (availability and yield), quality and reducing cost. One large company stated their overall objective was to be the best in their industry. But what did that mean, especially when there was serious consideration being given to outsourcing all activities? Did best mean the most profitable? In the extreme case of total outsourcing they would become a holding company with little control over quality or customer satisfaction. In several large companies that have successfully implemented an improvement process, the program’s requirements and objectives originated from the CEO or Office of the CEO. (129) Plant managers in one company collectively recognized the need for improvements to advance their competitive position. The plant managers established objectives for improvement, developed an implementing plan, and presented the results as recommendations to a receptive CEO. The CEO is now enthusiastically involved and driving the improvement process. (129) Appoint Program Leadership Steering Team The Steering Team for an asset optimization program is chartered to identify and translate business objectives into program goals, select Program Leadership and champions, energize the implementation and assure the organization is fully aligned and working toward success. The Steering Team oversees the working level planning process, evaluates the potential business value of proposed improvement initiatives, serves as a facilitating resource during implementation and reviews the function, progress and results of the various action teams. The Steering Team must remain concentrated on strategy and results, becoming involved in tactics only when reviewing results and acting to eliminate organizational barriers. As detailed in Chapter XVII, appointees to the Steering Team must be the best, most highly motivated managers in the corporation / on the site that are capable of driving a demanding initiative to successful completion. They must have credibility within the organization and be able to gain consensus and support, and remove barriers; the latter by command if necessary. In addition to the asset optimization Program Leader, a site Steering Team is typically composed of Production / Operations, Maintenance and Engineering Superintendents, Finance, Purchasing, HR and IT Managers and is chaired by the

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Operations or Maintenance Superintendent, preferably the former. The Steering Team reports to the Plant Manager who is an ex officio member of the team. Program Leader / Champion Appointed by the Plant Manager with input from the Steering Team, the asset optimization Program Leader is the key to success of the program. The individual appointed must be respected and credible within the organization, have the initiative, enthusiasm and drive necessary to achieve success and possess excellent leadership, organizational and people skills both up and down the organization. The Program Leader must be dedicated to the task, have real authority and be a member of the site leadership team. Continuity of leadership Many major improvement programs flounder when the program executive or champion is promoted out of the job or retires. When that occurs, the successor often has no ownership for the program and either terminates it in favor of a new program of which he / she will be seen as the initiator, or allows the program to wither away from lack of priority. To address this potential problem, the probable successor(s) should be assigned to the asset optimization program from the beginning if at all possible. Unfortunately, especially in the case of the Executive Sponsor, the succession is rarely known at program commencement. To assure the program survives a change in leadership, the building of corporate and institutional support must begin immediately. Developing internal ownership and commitment, as well as documentation demonstrating progress, is part of the process needed to assure the program continues through any leadership changes. Establish Program Objectives First order of business for the newly appointed Steering Team is to translate the overall business / mission objectives, business basis and contribution into specific objectives for the asset optimization program. Safety is always a paramount consideration. Environmental factors and quality have strong effects. Does operating closer to quality standards produce greater profit at a given output? Business conditions, specifically the origins of profit, are the foundations of asset optimization. The identification and prioritization of opportunities for improvement requires a clear understanding of the principal factors that determine and drive profit. Is profitability driven by market conditions (demand), production capacity (availability, yield, and quality), operating and maintenance (O&M) costs, or some combination of the three? If a facility’s production is sold out, the balance between availability, yield, quality, and conversion costs probably determines profit. Under these conditions, incremental increases in production are highly profitable. If production is not sold out, the prime emphasis shifts to controlling operating and maintenance costs. A paper mill easily justified a control system upgrade that reduced process variability and allowed increasing nominal water content by approximately 2 percent. The added water was sold, by weight, at the price of finished paper! Gasoline delivered at the pump one or two octane numbers above the specification in order to guarantee a minimum quality represents an uncompensated gift by the supplier. The business analysis may be complicated by variations over time. For example, power generation may be availability driven and thus the most profitable during summer heat waves. It will be demand driven during spring and autumn, when heating and air conditioning systems are not operating. Within these seasonal swings there will be day-night and weather-related variations. Create a Business Model With business conditions understood, a business financial model linking improvements to financial results must be constructed in order to provide guidance for establishing profit-driven priorities. The model must take into account market conditions and be capable of reporting results and predicting return for any given set of circumstances. Financial considerations and a model for implementation are presented in Chapter VII. Companies often state that they have saved several million dollars in cost through a reliability improvement program and gained two or three times that amount in terms of increased production. The

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financial model must identify which creates more value, how much and hence what initiatives should have highest priority. Establish Asset Optimization Program Vision and Objectives The Steering Team has to translate all of the preceding into the mission and specific objectives of the facility asset optimization program. If the overall corporate objectives are to increase RONA, and perhaps reduce expenses, these objectives must be translated into definitive top-level objectives, such as increase production availability by a stated percentage or to a specific value, and reduce expenses to some number, either absolute or a percentage of Replacement Asset Value (RAV); for examples see Chapter IX. Because large changes require time to achieve, the Steering Team must assign a time line and define interim objectives to demonstrate progress and thereby promote confidence that the objectives will be met. Appoint the Program Action Organization Program Leadership Team The next task to be addressed is the selection of the Program Leadership Team. The Program Leadership team will have primary tactical responsibility for achieving results, Figure 18.5. With concurrence of the Steering Team, the Program Leader, Maintenance and Production Superintendents will identify and appoint members to the Leadership Team. Leadership Team members should be among the most knowledgeable, experienced, and credible in the facility. Their experience and skills must cover all aspects of the production process — operations and maintenance, hourly and salaried; supervision and skilled crafts (mechanical, electrical and instrument), planning and scheduling and stores, engineering, finance and information systems as required. As a group they must be capable of identifying improvement opportunities, developing the action plans necessary to convert opportunities into measurable results. The whole idea is to place key people in an environment where their knowledge and experience are leveraged to the maximum. Steering SteeringTeam Team Change Manager

Program ProgramLeadership LeadershipTeam Team

Communications Team

Area AreaImprovement ImprovementTeam Team

Area AreaImprovement ImprovementTeam Team

Improvement Improvement Action Action Team Team Steering SteeringTeam Team Program ProgramLeadership LeadershipTeam Team Improvement ImprovementTeams Teams Improvement ImprovementAction ActionTeams Teams

Improvement Improvement Action Action Team Team

Area AreaImprovement ImprovementTeam Team

Improvement Improvement Action Action Team Team

Plant Plantand andBusiness BusinessManagers, Managers,Initiative InitiativeLeader Leader Initiative Leader, key personnel from Initiative Leader, key personnel fromProduction Productionand andMaintenance Maintenance Reliability ReliabilityEngineer, Engineer,Initiative InitiativeLeader, Leader,Area AreaProduction Productionand and Maintenance MaintenanceManagers, Managers,First FirstLine LineSupervisors, Supervisors, Planners, Planners,Trades Tradesas asrequired required Improvement ImprovementTeam TeamLeader, Leader,Reliability ReliabilityEngineer, Engineer,Champion(s), Champion(s), Trades, Specialist and Technical participation Trades, Specialist and Technical participationas asrequired required

Figure 18.5 Physical Asset Optimization Program Organization The Program Leadership Team is the heart of the asset optimization program. The actual improvement strategies and action plans are developed and planned by this team. Led by the asset optimization Program Leader, the Leadership Team will write the mission statement, perform the opportunity assessment, gap analysis, identify and prioritize opportunities and supervise the development of action

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plans by the implementing teams. In large facilities there may be multiple leadership teams, one in each unit.  Team members are senior engineers, supervisors, operators and skilled craft employees selected for their broad knowledge, credibility within the organization, ability and willingness to contribute.  The team must include in-depth experience in operations / production, maintenance and reliability A large facility organized multiple leadership teams. Due to the make-up of individual teams and leadership they had remarkably dissimilar personalities. Members of one team, led by a production superintendent, had no doubt about the importance and priority of improvements. Two others, led by reliability engineers with strong support of the area maintenance and production superintendents, were highly data oriented and also very effective. Change (Improvement) Management An asset optimization program must include management of change and a designated Change Manager, Figure 18.5. In larger programs the task is sufficiently demanding to call for a dedicated person, for smaller programs the Program Leader can probably also serve as Change Manager. In either case, the position of Change Manager is a field position, not an office administrative task. The Change Manager works with the Leadership Team and has primary responsibility for the communications program discussed in the next section. He or she must have an intimate sense of the plant and change process developed by contact within the work environment such that potential problems involving institutional values and relationships, concerns, feelings and motivation can be anticipated, identified addressed and corrected. Establish Communications Team and Communications Program With the necessity for the program, its overall objectives and leadership established, it is time to begin increasing awareness and broadening support for the asset optimization program. The Communications Team described in Chapter XVII should be formed as part of program leadership. Developing consensus for the need to improve, enthusiasm and support for the improvement program is the primary responsibility of the Communications Team. The Communications Team works alongside the Program Leadership Team to develop the communications necessary to sell the process and its benefits to skeptical and concerned employees. The Steering Team must be involved in this process as many of the initial questions regarding “why is this necessary” will require business based answers that must be supplied by the Steering Team.

ANALYZE — IDENTIFY AND ANALYZE OPPORTUNITIES Expand the Leadership Team At some point during the process of identifying opportunities, consideration should be given to expanding the Leadership Team to include individuals who will become leaders, champions and core members of Improvement Teams and accountable for the resulting action plans, see Figure 18.5. Early involvement, participation in the process, creates the enthusiasm and ownership necessary to gain the highest confidence of reaching objectives. Referring again to Figure 18.5 it should be noted that in smaller facilities with only one unit, Leadership and Improvement Teams can be combined. In this case the Steering Team is concerned with the overall business strategy and results, the Leadership Team with the tactical improvements necessary to meet the overall objectives. Conduct Workshops The Program Leadership Team commences their real work with a facilitated workshop to establish a working relationship and cohesion within the team, see Chapter XVII. The workshop begins by reviewing the overall mission and objectives, followed by an explanation of the optimization process and program. If team training is considered necessary to assure a productive environment it begins at this initial workshop. The most important element at this stage is to get all the experts with process, practice and reliability information together to identify the largest specific opportunities for improvement. They have the most accurate information regarding deviations from required performance, corrective actions that have been tried and the outcome.

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It is advisable to have someone familiar with the process facilitating the initial team workshop to keep participants focused, on track and assure the time is used most productively, Chapter XVII. The facilitator should also convert ideas expressed to improve the mission statement into a proposed draft for comment, discussion, modification and approval by participants. Identify Highest Priority Systems and Equipment Prioritization begins with business objectives and the recognition that they can change with time, conditions and seasons. In the power generating industry, a market goes from sold out in winter to excess capacity in summer. One multi-business company reports that prioritizing is easiest to accomplish within the same business unit. Prioritization across business units is much more difficult because the units may have significantly different market and operating conditions. (11) Methods for prioritization / risk ranking are discussed in Chapter XIII. Systems and assets are risk ranked by probability and consequences of an event in approximately five categories from high risk / cost / probability to low. Systems and assets in the first group have the highest risk and historically poorest compliance to objectives, i.e., safety, production availability / quality, costs. This first category is where most of the initial analysis and effort will be directed and should consist of no more than 10 percent of the total assets. A Computerized Maintenance Management System (CMMS) provides invaluable costing information. If this data isn’t readily available it may be possible to utilize standard tools to search whatever data is available to identify primary deviations, see Chapter XII. If accurate data is not available from any source institutional knowledge should exist to make a reasonable classification. Conduct Audit An audit of results, processes and practices must be accomplished to establish the program starting point and identify the gaps to objective performance and best practice from which the action plan will be developed. The audit is the initial step to ensure plant performance targets are identified, improvements will meet business, availability, reliability and cost effectiveness objectives and expectations will be met. The audit consists of appraisals of the integrity and performance of physical assets together with the supporting processes and management systems. The audit also establishes the basis to assure that plant assets are not being abused, life span shortened for short-term gain. The audit consists of a series of inquires to establish the following:  What are current performance and effectiveness objectives? Are objectives established and being achieved? What are gaps from current performance and effectiveness to business requirements?  Are best practice procedures established and utilized? Are they in use for operating equipment, work and stores management and supporting programs? How do they compare to industry best practice?  Are employees enthusiastic, motivated, are they doing things right, following procedures?  Is the organization disciplined, are rules being applied? An audit can be used in two ways:  Define elements that should be considered for inclusion in a new program  Provide a basis of judging the content and effectiveness of an existing program The scorecards detailed in Appendix E can be used to guide the audit process. The following are general objectives of effectiveness audits:  Management direction clearly defined  Improvement program directed to and consistent with business objectives  Goals and objectives established and broadly understood  Comprehensive asset life cycle management in place — long-term plant and equipment health indicators and KPI’s in place and monitored  Operating utilization and effectiveness accurately tracked  Costs defined and traceable  Results conforming to objectives  High level of ownership and effort  Agility in response to change

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Satisfaction of all involved, good employee morale and development

Write Mission Statement The mission statement must be descriptive, concise, follow directly and support the business strategy. A good mission statement clearly defines objectives with specific measures of performance. An overall mission statement might read: Over the next five years, improve production effectiveness measured by availability, production rate and first-run-quality to greater than 87 percent. Reduce cost to X dollars per unit. Reduce safety and environmental incidents to zero. This more detailed example of a mission statement was constructed during an improvement workshop: The Asset Productivity Optimization Program will elevate the utilization, effectiveness and quality delivered by site assets and improve the work environment by:  Safe performance of all tasks without injury or significant incident  Compliance to business requirements for availability and cost  Minimizing controllable unplanned events  Gaining full commitment to quality work, personnel and organization — Improve repair success, minimize rework  Identifying degrading conditions of monitored equipment as early as possible — “no surprises”  Continuing to improve MTBR and maintenance cost performance  Utilizing human resources more effectively  Achieving mutual trust and support, high level of ownership, teamwork, morale and proficiency  Accepting responsibility for results Note that performance to all but the last three points can be measured with very specific, numerical metrics. The following is a mission statement from a power generation company Goal 2000: Achieve market price production, capacity factor greater than 70 percent, equivalent availability of 90 percent, improve heat rate by 5 percent, and reduce O&M costs to 3.5 mills per kWh.(33) The mission statement must be accompanied by definitions for each term — availability, production rate, capacity, first-run quality, etc. — as well as performance objectives. Team members must assure the mission statement concisely describes the program goals and must be in agreement on the general improvements necessary to meet program objectives. Although the formal process for identifying and prioritizing specific opportunities is in the future, numerous workshops have validated the concept of an abbreviated introductory process where participants make a preliminary identification of improvement opportunities, describe the ideal future state, list strengths to build on and barriers to overcome, and formulate preliminary action plans. This exercise can be accomplished in a day or so and is an excellent way to quickly build interest, ownership and motivation. Very basically the Mission Statement must clearly state objectives — the destination — with enough detail to lead to the linked improvement program Experience demonstrates that identifying the necessities for the mission statement in a workshop, designating someone to write a draft “off-line,” circulating the draft for comment, and finally conducting a second workshop to develop a final version is the most effective use of time and resources. Attempting to draft a mission statement and conduct detailed “wordsmithing” within a meeting or workshop are not effective uses of time. Build a Preliminary Improvement Strategy An optimum, comprehensive improvement strategy is required to accomplish the objectives within specific market, mission, business, and operating conditions. Areas that should be addressed in the preliminary strategy and eventually a detailed action plan include: (66)

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     

         

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Safety improvements Reduced environmental incidents Improved production output and quality Increased equipment uptime Reduced costs Improved organizational values and structure  Optimized organization: effective professional leadership, fewer layers, decision making at lowest effective levels in the organization, reliability orientation Reduced delivery time Reduced energy consumption Optimized effectiveness of vital processes such as work planning and scheduling, stores Proactive asset lifetime management Reduced production buffers (Work In Process) and Maintenance, Repair, and Overhaul (MRO) stores inventory Improved skills, development and training for success Greater worker-directed activities such as failure analysis Operations-conducted asset surveillance and maintenance Improving workspace cleanliness (to more readily identify defects) Continuous improvement

The initial asset optimization strategy will be translated into high-level plans that drive planning and resource allocation. The high level plans provide the basis for detailed operating plans and performance scorecards for the major strategic and functional performance areas of the business. Every element of an asset optimization strategy must focus on benefits to the organization. Identified opportunities for potential improvements must be subjected to a rigorous financial analysis. This identifies the most profitable corrective remediation alternatives for the highest priority defects and leads to a prioritized list of actionable faults, corrective initiatives, and results. As a result, the Steering and Leadership Teams gain confidence that the proposed improvement initiatives do represent the greatest opportunities for improvement and their potential value. Strategies employed to address greatest risks and dominant failure modes are typically the most reliable and effective.(18) Prepare a Program Summary and Preliminary Plan The analysis phase closes with the Leadership Team preparing a summary of the optimization program definition and a preliminary plan for its implementation. The summary plan should include:  Mission Statement  Strategic basis for the program  Program objectives, linked to business objectives  Program organization, personnel assigned  Anticipated changes to the organization and processes that may be required  Potential barriers  Next steps  Anticipated date for commencing the actual implementation The summary and preliminary plan is circulated for approval.

PRIORITIZE — BENCHMARK TO PRIORITIZE IMPROVEMENT OPPORTUNITIES At this point in the asset optimization process there should be an understanding of mission requirements, what drives requirements, the systems and components that are critical drivers, how each contributes to objective performance and an accurate risk ranking to delineate the systems and equipment on which efforts should be directed.

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The necessity and process of comparing current performance to benchmarks and other objectives was discussed in Chapter IX. Measures of current performance such as asset utilization, production effectiveness (availability, throughput, first-run quality), cost per unit (MW, pound, ton, EDC, etc.) or cost as a percentage of RAV are the essential first steps in identifying opportunities for improvement. Gap Analysis, Current Compared to Desired A Gap Analysis compares current performance to objectives. It is an essential part of benchmarking. The Gap defines “where we are,” the current situation, compared to “where we must be,” the desired situation, Figure 18.6.(112) The Gap analysis identifies opportunities for improvement that are prioritized by value and lead directly to action plans.

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Value ValuePrioritization Prioritization Detailed Improvement Action Plans Figure 18.6 The Gap Process Identifies Opportunities for Improvement Objectives, the “where we must be,” are established from industry benchmarks, listed in Chapter IX, and internal requirements for improvements in areas such as production effectiveness. In monetary terms, Gaps to “best practice” may total tens or hundreds of millions of dollars, depending on the size of the enterprise.(100, 129) Unless objectives have already been prioritized in the improvement process charter, e.g., reduce costs; separate Gap Analyses should be conducted in the key categories of Availability, Yield, Quality, Cost and Process Effectiveness itemized earlier. Many industries have benchmarks based on RAV, commonly used in the chemical processing industry; Effective Distillation Capacity (EDC), used in the oil refining industry; and Forced Outage Rate (FOR), used in the power generation industry. In each case, the objective is to identify and value the magnitude of differences between current and objective (best practice benchmark) performance. To complete the picture the internal risk assessment, described in Chapter XIII, must be added to the mix. High-level gaps to best performance benchmarks are not particularly informative in terms of devising improvement initiatives. “Reduce conversion cost per unit output” is a typical overall objective that must be cascaded to lower-level implementable initiatives. The detailed benchmarks needed to construct an improvement plan must include high-risk systems and components as well as reliability; work, materials and stores process management effectiveness. Specific areas to benchmark include (refer to Chapter IX for values): Overall Effectiveness  Availability and / or downtime  Production rate and quality

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Maintenance costs (per unit, percentage of RAV)

Reliability  MTBF for major equipment (pumps, motors, turbines, compressors, etc.) – Unscheduled events (failures) Work Management  Work accomplished on Work Orders (non standing / blankets) as a percentage of total hours expended  Emergency, break in work as a percentage of total work  Schedule compliance  Work originated from PM and PdM as a percentage of total work – Work quality (repair success, rework) Materials and Stores Management  Inventory value  Stock outs As stated earlier, Gap determined improvement program objectives must connect directly to enterprise objectives for increasing profitability and shareholder value. And the relationship, up and down, must be thoroughly understood by everyone. In a sold-out business, increasing production by increasing availability, rate, and / or quality may have greater value than reducing costs. Where production is not sold out, reducing costs is usually a primary consideration. Many cases may involve a combination of the two. Regardless, the specific relationships between business and asset optimization objectives must be understood and agreed upon by all concerned. Some general examples: A large specialty chemical facility found that they were already high in both quality and yield with only a small amount of recoverable Gap value in these two areas. In their case, improving availability and reducing cost offered the greatest opportunities. (129) Several power generating facilities had the same experience. Availability and cost offered the greatest opportunities and recoverable value. A pet food manufacturer operating in a highly competitive, sold out market stated that yield was the prime consideration. By increasing yield and holding MRO costs constant, the company was able to decrease the cost per unit output. Organizations have commented that they focused on quality, only to find that availability was the real problem. Others have worked to drive costs down, only to discover that availability and / or quality decreased as a result. Balance is imperative at this early stage in asset optimization. A potential value for each Gap deficiency is determined from a financial analysis. For example, an analysis based on average repair costs might determine that increasing average MTBF / MTBR on centrifugal pumps by 12 months will reduce maintenance spending by approximately $2 million per year. That will be the value used to prioritize potential improvements. This, more detailed information, will be used to develop detailed action plans discussed in the next section. One facility determined that increasing the MTBR of approximately 200 of the worst performing pumps from the current 8.5 months to 30 months (average of the overall population) would save approximately $85,000/month (over $1 million/year) in repair costs. To complete the picture of current conditions four additional areas should be examined during the benchmarking process: Organization Is the optimum organization in place? Are the right people in the right positions? Are they working to their full capabilities? How proficient are they? Do people communicate effectively? Is there waste in the process? Are efforts prioritized by value? When asked to rank workforce proficiency in three categories; totally dependable, highest quality work; undependable in both proficiency and quality; and everyone else, several organizations stated approximately 15 to 20 percent totally dependable, 50 percent undependable and

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approximately 30 percent somewhere in the middle between the two extremes. These companies have major problems! Processes Are all asset optimization processes in place and functioning effectively? (Appendix E contains a detailed list of program essentials in abbreviated scorecard format)  Work management, planning and scheduling  Stores management  Information Procedures Are detailed procedures in place and followed for:  Operating and repairing critical and general equipment  Coded entries utilized at Work Order close out to document vital reliability information, describe abnormal conditions, conditions found, components affected and action taken  Repair / replace decisions  Outsourcing and contractor administration  New equipment design, purchase, installation, operation and maintenance  Practice implementation and efficiency  Are the results and effectiveness of practices such as Lubrication, Condition Monitoring, Motor Testing and Thermographic surveys audited periodically? Have failures occurred that should be identified early with a predictive technology? Asset Performance and Effectiveness In virtually every enterprise, data and / or institutional knowledge exists to identify specific assets that continually cause problems, those that sometimes cause problems, and those that never cause problems. In the detailed analysis this information is tempered by consequences. If a problem has safety or environmental consequences, or interrupts production, the potential value of problem elimination is significantly greater than the direct cost of the failure. The detailed analysis task begins by either determining or reconstructing operating and maintenance history and lifetime cost. Some facilities have an automated system for tracking operating availability. A Computerized Maintenance Management System (CMMS) is another major resource. If operating or CMMS data is not readily available or is of questionable accuracy, operating logs, work orders, spare parts usage, and people directly involved can be queried to reconstruct failure history and create a best estimate of costs, including downtime, by asset. Failures are prioritized by number of occurrences, cost, and consequences. Failures that have caused safety or environmental incidents, slowed or interrupted production should be investigated with a Root Cause Analysis (RCA), described in Chapter V, to determine optimum remedial action. A Pareto representation is a useful way to classify and present information. (26) The Pareto analysis, shown in Figure 18.7, was developed from sources of lost production as an initial indication of where to focus attention in a process cascade. The Pareto shows clearly that four of thirteen units cause 75 percent of the total losses.

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Figure 18.7 Pareto Analysis Identifies Sources of High Production Loss Locating faults and defects and developing remedial action requires discipline — discipline to search for the real root cause and develop optimum improvement plans. Plans must be incorporated into the proactive defect elimination process.(112) It is often advisable to perform a second Pareto of the highest ranking data within a Pareto; “a Pareto of a Pareto.” Figure 18.8 was developed from the data represented by one of the largest bars in Figure 18.6 to determine more specifically what was causing the losses. It should be noted that the two highest causes in Figure 18.8 are “Unknown” and “Other.” This is not an unusual outcome with real data. The next step to establish cause is to go back to the basic data, resort the data in the “Unknown” and “Other” categories and then attempt to determine real cause for the highest contributors from logs and other documentation. Here again the 80 – 20 Pareto rule applies. If exact cause can be determined for 80 percent or so classified as “unknown” and “other” the analysis is valid. In this particular case a relatively small percentage of the events accounted for most of the production losses.

Figure 18.8 Pareto Analysis to Determine Cause

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The Pareto analysis and display illustrated in Figure 18.9 (26) is useful to identify specific problem areas or equipment on which to focus improvement efforts.

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Cause of Pump Failures Figure 18.9 Pareto Analysis Identifies Primary Sources of Pump Failures A Pareto distribution such as that shown in Figure 18.9 and process 2 in Figure 18.10, indicates clustered (localized) problems, the “bad actors” mentioned earlier, that can be resolved with specific corrective actions. A tight, non Pareto distribution, Process 1 in Figure 18.10, can indicate one of two conditions depending on the average value. If the average is close to a best practice benchmark, the entire population is in good shape and doesn’t require immediate attention, subject to a risk analysis. A Process 1 average off the best practice benchmark indicates facility wide systemic deficiencies such as equipment coupling misalignment that call for procedural changes and training. A broad random distribution such as shown in Process 3 is difficult to analyze and requires additional localization.

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The same line of thinking holds for operating parameters, which should be compared with design specifications to identify significant departures from design specifications and / or best efficiency. During the localization process it is a good idea to physically inspect systems and equipment for adequacy and quality of installation, condition, and cleanliness. System quality includes factors such as compressed air systems equipped with moisture separators, system drains, filters, and dryers if necessary. Installation quality includes type of equipment mounting, level base plates, pipe supports, shaft and piping alignment, component location, orientation and piping unions for maintainability. Vibration and oil surveys are useful to determine mechanical condition. Discrepancies noted should be added to the list of potential improvements. As a final comment, this stage of developing the asset optimization program must be data driven wherever possible. In some cases “guesstimates” of poor performers may not be supported by actual data. Whenever there is a difference between perceptions of bad performance and a data driven risk analysis the differences must be resolved. New Equipment If any new equipment is included in the asset optimization program an operating history has not been established and much of the preceding won’t be applicable. In this case, a design audit substitutes for lifetime assessment. The design audit must include installation specifications and assurance that safety precautions, operating and maintenance procedures, test, calibration lubrication and other instructions and spare parts requirements are all established and complete. Procedural, Productivity, Effectiveness Productivity improvements must address two issues: First, is the system itself optimal and are tasks required within the system being performed at optimal effectiveness? Using Preventive Maintenance as an example, the first issue is whether the correct tasks are being scheduled and performed at optimal intervals. The second issue is whether each task in the procedure is fully documented by a detailed, upto-date task instruction, if sufficient people have been trained to perform the task and skill documentation is available and up-to-date. Safety precautions, Master Equipment List, P&ID’s, operating and repair procedures, task instructions, and spare parts requirements should also be checked for completeness and accuracy. Deficiencies are added to the improvement list. The work management, planning and scheduling process is another example. Is a work management process in place and being fully utilized? If so there are many follow-up questions: Is the CMMS being utilized to accurately track hours expended and costs by asset and component? Are work effectiveness KPI’s, Chapter IX, being measured and reviewed? Do planners have Bills of Materials (BOM’s) and ready access to spares inventory records for most equipment? Are they accurate? Can they reserve spares and easily check the status of parts ordered? Are planners and schedulers spending most of their time with planning and scheduling duties such as walking jobs, assembling work packages and communicating with operations to establish optimum times to perform the work or do they spend inordinate time on reactive work and expediting parts? Check off lists, similar to the scorecards in Appendix E, have been published and are available for use in auditing the effectiveness of asset optimization processes. Identifying productivity improvement opportunities requires total involvement of the people actually performing the work. They know where real problems are, where time is wasted and are in the best position to formulate ideas for optimum corrective action. One company involved 50 percent of all maintenance people directly in the process to identify problems and opportunities for improvement and formulate action plans. (129) Risk Analysis — Addressing the Future With current departures from best practice identified and localized, the process concludes by identifying the risk of deficiencies that haven’t yet caused problems. This is where RCM, examining the top 10 percent or so of equipment and systems based on probability and consequences of failure is utilized very effectively to assess risk.

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Identify Value Potential, Probability of Success Prioritization by risk ranking is critically important to ensure that improvements are delivered without exceeding the available cost and resources. (18) Risk ranking defines the initiatives that have greatest impact on mission / objectives and opportunities — expressed as safety, environmental, business opportunity (availability, production rate, and first-run quality), and cost. As improvement initiatives to achieve the mission and strategy objectives emerge, each initiative must be assessed in terms of the priority of the equipment, systems and individual components, and ranked accordingly. As mentioned in Chapter V, many companies who have been through the process of developing improvement initiatives recommend Streamlined RCM with initial prioritization to assure attention and resources are focused on highest potential value / risk. In addition to optimizing the improvement effort, early prioritization assures that expensive processes like RCM gain greatest potential return. Pareto analyses by cause and number of occurrences of the events in the Gap between actual and objective performance are useful for identifying areas and items requiring greatest attention. One company’s system for ranking business opportunities is based on return in terms of Availability, Production Output, Quality, and Profitability. Ranking is first conducted by processing unit. Processing unit rank is then multiplied by factors representing unit contribution to plant performance to arrive at a normalized plant-wide priority ranking. The system is designed to ensure discipline and that limited resources are applied to highest priority tasks across the plant. (129)

The company uses essentially the same system to prioritize corrective action (Work Orders). Work Orders are ranked by probability multiplied by consequences of failure to determine the risk if the work is not performed. The prioritization considers Safety, Environmental, Availability, Production Output, Quality, and Profitability. Ranking across the plant is also accomplished in about the same way. Another company went through a detailed prioritization effort to focus on highest return opportunities. Six initiatives were selected for action out of 300 opportunities identified. (33) All involved must recognize that constraints and risk rankings change with work completion, market / mission requirements, and plant and operating conditions, so periodic reviews and consequent adjustment is essential.(129) Construct Priority List for Improvement With the information developed thus far the Leadership and Improvement Teams can identify the specific areas in which improvements offer greatest value and contribution toward mission and business results.

PLAN — DEVELOP DETAILED IMPROVEMENT STRATEGY AND ACTION PLANS With overall objectives set forth in a Mission Statement and agreed upon, current performance and effectiveness identified and benchmarked, and a Gap Analysis completed to identify opportunities for improvement, the augmented Leadership Team constructs a preliminary improvement strategy for the highest value opportunities including:  Objectives, required end state, improved performance, KPI’s and time to achieve  Current conditions, strengths to build on, barriers to overcome  Potential value gain  Preliminary improvement action initiatives including:  Deliverables; interim and final measures of performance; results and time line  Investment required, people, technology and funds  Forecast return  Probability of successfully achieving objectives, barriers and potential risks, mitigating action  Recommendations for further investigation and / or changes to design, procurement and installation practices, safety and operating procedures, repair task instructions, and spare parts levels  Supporting improvements recommended in other areas, i.e., organization, procedural and compensation, with advantages and benefits

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At this point, the Steering and Leadership Teams must be absolutely convinced that the enterprise-level and mid-level objectives can be met and be totally committed to making that happen. Although the gap analysis, prioritization and planning stages of the asset optimization process are discussed separately; they are most effectively accomplished together. The first phase, discussed in the previous section, identifies and prioritizes overall opportunities by potential value. Value in areas such as availability, spending, average deviations e.g., low average MTBF / MTBR and process effectiveness e.g., percentage emergency, break-in work. The next stage, described below, builds on overall value opportunities to develop an improvement strategy that includes detailed action plans. The processes are continuous and iterative. Information developed in the initial Gap analysis is refined, directed to specific improvements, tested for practicality, potential value and probability of achieving expected results. Appoint Champions Champions are essential to the success of the asset optimization program; they drive the improvement process and are its source of inspiration and leadership. Champions are selected for personal attributes; enthusiasm, commitment to success (i.e., passion for success), knowledge, and experience in one or more areas of asset optimization. They become champions through ownership and results. The selection of champions and their required attributes are discussed in detail in Chapter XVII. Repeating some information from Chapter XVII, the champion must be credible within the entire organization and possess the leadership skills and persuasiveness to sell concepts and requirements to people at all levels of the organization. Perseverance, and the ability to convince others who may be skeptical, recalcitrant and even resistant to change, is essential. The latter requires the champion to have an acute sense of final objectives and an understanding of how and where change can be introduced to ensure progress and continuing support. Experience with mechanical equipment or process control systems, preferably in a maintenance or operations organization, is desirable. Individuals who have performed well in these positions will have acquired the process and technical overview necessary for successful asset optimization and possess the required familiarity with the people and processes as well as a direct knowledge of opportunities for improvement. In addition, these individuals are likely to be familiar with the practices and tools necessary to identify defects and devise corrective solutions — requirements of asset optimization. (e.g., Root Cause Analysis [RCA]) Specific training is utilized to gain or reinforce the required knowledge. People with the required enthusiasm, commitment, and credibility to become a successful champion are generally known and visible within an organization. Form Improvement Teams As stated earlier, as general objectives are mapped out at some point in the analysis and prioritization process, additional members will be added to the Leadership Team. The new members will become champions for specific initiatives as well as the core of the Improvement Teams, Figure 18.5. They are brought up to speed during the gap analysis and prioritization process. The Improvement Teams break off to develop detailed action plans for high priority opportunities that have been identified in the overall process. The idea is to maintain continuity as program focus shifts from identifying, analyzing and prioritizing opportunities to planning and executing specific improvement initiatives. As the groups responsible for defining and implementing improvement action plans, the Improvement Teams are key to the success of an asset optimization program. Conduct Workshops Workshops, detailed in this section and in Chapter XVII, are used to define and refine specific opportunities, build the implementation strategy and develop detailed improvement action plans. A typical example is the one cited earlier where a facility quickly identified about 10 percent of their pump population as “bad actors” requiring special attention. Within this population there were some units that could be identified as “worst of the worst”. By quickly concentrating attention and action on a small segment it is often possible to make huge gains by solving just a few particularly egregious problems. Outside facilitation should be considered when any major changes to asset care processes are likely. Facilitation can go a long way towards establishing a positive environment, providing an impartial perspective, and gaining best compromises between functional groups and people who may feel very threatened.

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During the workshops, improvement opportunities are examined from the perspective of value potential by correcting known problems — including risk — and process improvements. Formulate Detailed Improvement Action Plans When the strategy is approved, the Leadership and Improvement Teams, principally the latter, construct more detailed action plans. These plans define tasks very specifically, assign responsibility, state time to complete, list specific measures of performance / KPI’s, and identify any anticipated risks or restrictions. Individual initiatives necessary to meet objectives are prioritized and assembled into a business plan for the asset optimization program. There are several strategic characteristics that are common among the organizations leading the migration to asset optimization:  Individual initiatives to close Gaps — Industry leaders have learned that when developing improvement initiatives and action plans to address Gaps, the safest course is to implement a group of smaller initiatives to fill the gap, rather than attempting to accomplish everything with a single initiative. With multiple initiatives directed to achieve about 120 percent of a given objective, there is greater confidence that the objective will be met. From the opposite perspective, a shortfall in any single initiative will not jeopardize overall success. Small misses in a few areas do not materially affect the whole and may well be matched by better than expected results in other areas. There is also the question of executive credibility. A series of small improvements that add up to the objective is far more credible than placing all eggs in a basket of one or a few large improvements.  Improvement initiatives formulated for maximum contribution — Improvement initiatives must be valued in terms of a monetary contribution to mission compliance, increased profitability, availability, production output, quality and reduced cost. A company calculated that a 1 percent improvement gain in availability was worth $2.5 million at the bottom line.  Active participation of people at the working level — is essential to gain ownership and commitment. With knowledge of where the opportunities are located people at the working level often propose more ambitious results than management might believe possible. With inspiration, ownership, understanding, and access to the proper tools, the effort quickly gains critical mass.  Agreement on ambitious, optimistic, and achievable objectives — established by Improvement Teams. An array of layered metrics are developed and published to measure and assure compliance with interim and final objectives.  Ambitious objectives require time for implementation — Most improvement programs include time to reach objectives — 1,000 days in one case, three years for a second facility, four years for another.(129) Intermediate goals are established to ensure progress to final objectives. Formulate Business Plan Facilities that have been through the improvement process cite the advantages of a formal business plan and the business planning process that compile all the individual improvement action plans into an integrated overall strategy. This helps ensure that requirements, objectives, initiatives, and measures of performance are fully defined, understood, prioritized, and communicated throughout the organization. A comprehensive business plan is the link between corporate business objectives and the operating goals, tactics, and improvement initiatives necessary to achieve the required results. (129) The business plan must be reviewed and revised at regular intervals to account for changing conditions and circumstances. Business Plans are typically constructed in two layers. An overall plan states broad corporation and / or Business Unit mission, operating, and production objectives. Specific initiatives, detailed plans and goals for individual units developed by Leadership and working level Improvement Teams specify how the broad objectives will be met. In one company, strategic planning groups develop business plans, which include a forecast of product throughput, production balance and requirements to meet both. The plan contains initiatives for process changes and new equipment as well as requirements for investment, personnel training, and information systems. It is also layered to provide guidance throughout the organization. (129)

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Another company states that the Business Plan must be a live document in daily use and revised as necessary. They conduct a formal review and revise their business plan every six months. (129) Identifying broad areas in which improvements will meet overall and operating objectives is the first step in the business planning process. This process was discussed in detail earlier in this Chapter. The plan must address mandated improvements, identify initiatives and investment required for compliance. (101) All detailed improvement initiatives must be supported by logic demonstrating that action is directed to real defects, will produce the required results (probability of success) and resources are applied most effectively. Likewise, improvement initiatives that involve changes to process and / or work practice must be accompanied by actions to sustain the changes. (11) Specific areas that are addressed within a typical business plan: (129)  Corporate objectives  Business unit / facility objectives (carried through to individual unit plans) and mission statement  Improvement Team goals to meet business unit objectives  Safety and environment  Throughput  Reliability  Cost  Quality  Yield  Improvement project detailed action plan (for each initiative)  Specific tasks  Deliverables  Objectives, results and time — Metrics, KPI’s  Resources, technology, people, processes, systems  Probability of success, barriers, risk; actions to maximize probability, minimize barriers and risk  Assignment / Responsibility  Control and sustaining plan; refer to Chapter XVII for details. A strategic business plan outline used successfully by a leading company utilizes the following format: (10)  Objective / Mission  Executive Summary – Business strategy – Planned results – Resources required – Risk  Needs analysis considering opportunity and Gap to optimum performance  Plan details (for each initiative) – Objective – Action steps – Resources required – Time line – Performance measures – Risk  Continuous improvement A company with multiple business units strongly advises that all business unit plans adhere to a single standard format. Objectives, tasks, and measurables (KPI’s) must be quantified as much as possible. Plans must provide the basis to judge whether objectives were achieved and, if not, why not. Their experience indicates that equipment Key Performance Indicators (KPI’s) are

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relatively easy to formulate for production delay and output objectives. However, formulating equipment KPI’s that demonstrate performance in terms of contribution to production quality and yield objectives is often difficult. (129) The plan developed by another company was constructed on three pillars: (33) 1. Improvement process (involvement and accountability) — to any condition, situation, or event (existing or potential) that does not support the vision or mission and / or conflicts with our values 2. Labor relations — shared goals and teamwork 3. Incentive plan — communication and reward (10 percent of base pay) Build Support To gain maximum results, the workforce must support the improvement process and the specific initiatives of the effort. This requires recognizing and accepting the reason and necessity for adopting the process along with an overview of improvements being planned. The Communications team mentioned earlier is central to this effort. The following are essential to building and maintaining support:  Communication, education and training — Beginning with the CEO / Plant Manager’s explanation of why change is necessary, messages must be simple, focused, consistent, and continuous. Objectives must be clear and measurable. Broad training in subjects ranging from technical proficiency, to team and consensus skills and conflict resolution, are necessary to establish and maintain enthusiasm, ownership and commitment.  Consistency of both purpose and implementation — Consistency is necessary to minimize the fears of change. All involved with leading the improvement process must recognize that to many, change is unsettling and threatening.  Ownership, responsibility and accountability — Multi-function Improvement Teams responsible for results formulate detailed implementation plans with participation from the Leadership Team.  Reward performance — People who are responsible for results must be rewarded for success. Results based compensation is discussed in Chapter X. Other rewards that have been used effectively for achieving success include personal gifts selected from a catalog, team dinners, and travel.  A learning organization — dedicated to defect elimination and continuous improvement can move the organization from a problem-solving organization to a problem-preventing organization. (22)

Select Technology and Practice With the strategy and action plan constructed and approved, the next step is to select specific practices and technologies to implement the initiatives, e.g., TPM, PM, CBM and Proactive, RCM / FMECA and RCFA, which are outlined in Chapter V. A comprehensive lubrication program must be considered as an essential for immediate deployment when failure analyses disclose an abnormal number of bearing failures. Similarly electric motor analysis (Chapter XVI) thermography and ultrasonic monitoring must be considered when appropriate. The application of technology and practice must be directed to specific opportunities in which its application will generate demonstrable results. Proactive approaches to eliminating defects must be implemented when warranted. Prioritization should equally consider the activity’s contribution to the improvement initiatives; the probability and consequences of equipment failure (risk); and the ability to recognize defects in time to avoid failure and production outages. Figure 18.11 illustrates one company’s process for selecting key initiatives.(10)

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Figure 18.11 Process for Selecting Initiatives

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Optimizing maintenance, particularly time-based, Preventive Maintenance (PM), is essential for gaining greatest maintenance effectiveness. Reports of maintenance costs reduced by a third or more as a result of eliminating unnecessary PM, extending the intervals of necessary PM where possible, and shifting from time-based Preventive to Condition-Based Maintenance (CBM) are plentiful. One company reported they were able to extend many supplier-specified maintenance intervals by a factor of four without any adverse effect. Many mechanics may resist both lengthening PM schedules and replacing PM with CBM. The real issue is not fear of failure, but rather the potential impact on employment and compensation. As stated earlier, to get everyone behind changes in this and other comparable areas, management must devise a compensation plan based on results and compliance to objectives, rather than time and task. While analyzing methods to increase maintenance effectiveness one company found that its culture was to work as slowly as possible to maximize both employment and overtime. In a modern industrial climate, this mindset cannot be tolerated. On-line protection and periodic condition monitoring strategies should be prioritized by probability, cost, and consequences of machinery failure. Condition Measurements, e.g., vibration or lubricating oil analysis, should be selected for their contribution to objectives and timed to achieve optimal periodic measurements. Criteria are explained in more detail in Chapter XIV. Each technology and practice deployed must be accompanied by training to ensure that the skill level will enable the organization to realize the full benefits of asset optimization and collect metrics to confirm its effectiveness. Gain Approval The planning phase is completed when approval is gained to proceed into implementing the improvement initiatives. In many cases the Steering Team has authority for final approval. In others, particularly when resources are required, a more formal approval process may be required.

DO — IMPLEMENT IMPROVEMENT PLANS If the planning stage has been accomplished completely and thoroughly, the implementation process is simply carrying out the plans. Thus, a successful implementation is totally dependent on planning. Successful implementation depends on three additional factors — ongoing financial justification, immediate access to information demonstrating results, and continuing high-level support. Improvement project milestones and meeting objectives should be part of every salaried persons list of objectives for annual salary review.

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Implement Plans Improvement plans are typically executed, managed and monitored by the teams that developed the details — augmented as necessary with specialized skills. Teams should begin with weekly meetings to assign action, assess progress, identify any adjustments that might be required and / or unexpected barriers. Communications are exceptionally important to assure a fast start, increasing momentum, enthusiasm and ownership. The team leader needs to push early and hard. As initiatives mature, action progresses and problems are solved, meetings can be reduced to bi weekly or even monthly. However, all involved must be alert for any slackening of effort or results. Early recognition and immediate correction is essential. Deploy Supporting Processes Ensure a Complete Information Structure A well-configured information and reporting system is essential to convey the results gained by the asset optimization program in terms that will attract and maintain interest and support at the highest levels of a production enterprise. Information must be readily available to automatically calculate each optimization program metric and KPI, and to create periodic reports communicating progress, performance and results, see Chapter IX, Figure 9.14. As discussed in Chapter XII the information system must be capable of collecting and consolidating data from disparate sources and displaying results in easily understood dashboard presentations Figure 9.4. If the information structure is not present at the initiation of the asset optimization program it must be created and implemented as soon as possible so that the improvements create a history of progress as they are implemented. Implement Activity-Based Accounting Similar to the information system, a structure to accurately assess real costs and value produced must either be present at program initiation or implemented soon thereafter to enable reporting real results. Deploy Optimal Practices and Technology Practices and technology: TPM, PM, CBM/PdM and Proactive, RCM / FMECA and RCA are deployed in accordance with the improvement plan. Some, that may be present prior to the asset optimization initiative, will be upgraded and improved, again in accordance with the plan. It is particularly important to review the lubrication program to assure all aspects including lubricant selection, receipt, storage, issue and disbursement are all up to standards, Chapter XV will be instructive. Electric motor analysis, Chapter XVI, Thermography and ultrasonic monitoring are deployed / improved to address specific requirements. Build the Organization Many of the companies implementing asset optimization initiatives are simultaneously shifting to multifunction, work team organizations. The team organization has the advantage of broader awareness, better focus, and prioritization on specific objectives. This approach makes sense when the crafts / trade “baggage” of the past can be discarded. Many operators are skilled mechanics. Likewise, many skilled crafts do not hesitate to perform cross-craft tasks on their homes or automobiles. The fact is that artificial boundaries, applicable only at work, limit efficiency, which cannot be tolerated in today’s climate. The challenge is how to make this type of organization perform most effectively. A pay structure that encourages qualification in different cross-functional skills can be used as an incentive.

CHECK — MEASURE AND MANAGE RESULTS As discussed in Chapter IX, metrics demonstrate compliance to objectives and real value in terms of improved production effectiveness and profitability. Each improvement initiative must have one or more key metrics (results and time) with which to measure performance. In addition to measuring performance and results gained by the individual improvement initiative, metrics must fit in the cascade from corporate profitability through operating and equipment effectiveness, to program and technical performance. Although they may be at a fairly low level, essential improvement initiative metrics demonstrate contribution to senior business and financial management in terms that compel support. Improvement

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initiatives with value demonstrated by discernible changes in profit are essential for credibility at senior levels of an enterprise. For action plans that may extend over a relatively long period of time and involve preparatory steps such as reorganization, training, improvement / insertion / deployment of practices or technology, leading indicators, Chapter IX should be employed to assure prerequisites are being completed on schedule. Performance to plan should be measured frequently, at least monthly. Most team leaders will make every effort to get ahead of plan

IMPROVE — IMPLEMENT CONTINUOUS IMPROVEMENT, IDENTIFY AND STRENGTHEN WEAKNESSES Continuous improvement requires defined and agreed upon goals and objectives, performance measures, and tracking. Continuous communication and training are essential. (30) The continuous improvement aspect of the asset optimization program is not unlike the planning stage. But in this case program results are reviewed and plans adjusted as necessary to maintain momentum and progress toward objectives. Using Pareto analyses to identify the root causes for deviations from objectives is equally essential during an improvement process. It helps to locate deficiencies in the plan, identify further opportunities for improvement, and serves as the basis for corrective action. (129) As defects are eliminated, others move in the priority sequence and are subjected to financial analysis. The appropriate corrective action is formulated and applied. The process improves awareness and ensures that problems are addressed in a financially sound fashion. Progress is continuous; measured results and profitability should and must improve. This is the process of continuous improvement. Establish and Maintain Full Commitment to Continuous Improvement Nothing succeeds like success. Demonstrating real improvements and progress toward an important objective creates enthusiasm, ownership and identification of additional opportunities for improvement. In many cases people observing the enthusiasm and success developing in a pilot improvement project will ask: “When can I / we participate?” When that happens the facility is on the road to real, sustainable success! Institutionalize Success — Sustain Results, Maintain Ownership and Support Almost anything can be accomplished on a temporary, one-time basis. The key to sustaining success with an asset optimization program is to institutionalize the concept and process. The program is institutionalized when there is no memory remaining of the “old” ineffective processes. Management, champions, and team members can be promoted for outstanding results without diminishing program results. Results-based compensation that rewards compliance and results within the new scheme can be a key factor in institutionalization. Although full institutionalization may take as long as seven to ten years, the facility will be gaining solid rewards from the program inception throughout! A time line for a complete implementation through sustainability is illustrated in Figure 18.12.

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Opportunity Assessment 2 Months As Is

Mobilization 4 Months

Implementation 20 Months

Institutionalization 34 Months

(Current Conditions Related to Business Objectives)

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Data Mine to Identify Specific Opportunities   

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3/09/04

Figure 18.12 Time Line for Asset Optimization Program Implementation

Verify Business Case Validate Benchmarks and Metrics Review Program and Results Confirm Performance to Objectives Recommend Program Revisions Conduct Coaching for Success Introduce and Implement New Practice and Technology

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XIX.

ESTABLISHING A SUCCESSFUL ASSET MANAGEMENT PROGRAM AT A GLOBAL PHARMACEUTICAL COMPANY

The following is based on a paper presented at the Maintenance and Reliability Technology Summit (MARTS) 2004.(128) Any variations from the original are the sole responsibility of John Mitchell who transcribed the material from the conference proceedings. “Your system is perfectly designed to give you the results that you get.” W. Edwards Deming

OBJECTIVE Implement an Asset Management process across all sites that will maximize the availability of facilities and equipment utilizing optimal resources. For the purposes of the program, Asset Management is defined as follows: A systematic prioritization and implementation of processes, practices and technical improvements to ensure full compliance with safety, availability, performance, and quality requirements at the least sustainable cost for operating, market and business conditions The Necessity for Asset Management From our perspective there are four primary elements driving the necessity for Asset Management: 1. Maximize customer satisfaction: optimize system reliability and equipment availability 2. Assure quality products 3. Optimize lifecycle costs: – Equipment life – Performance / efficiency 4. Reduce maintenance costs by optimizing: – Equipment reliability to reduce the need for and cost of maintenance – Preventive and Condition Based Maintenance to assure the correct tasks are accomplished at optimum intervals – Employment of personnel and material resources through accurate forecasting of maintenance requirements The Asset Management Program: The Center of Excellence (COE) team was created in 1998. The team created a strategic map to identify all components that must be addressed to develop a successful Asset Management program, Figure 19.1, next page. A Maintenance Model Team (MMT) was created during 1990 – 2000. The mission of the MMT was stated as follows: Develop a maintenance model that provides our customers with cost effective, high quality, value added customer service that supports their business drivers. The MMT identified eight focus areas: 1. Customer service (meeting all business drivers) 2. Work process 3. Performance tracking – metrics 4. Maintenance standards including RCM 5. Organization 6. Systems (CMMS) 7. Training 8. Supplier management

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Customer Service Metrics & Benchmarks

Security

Administrative Services

Materials & Supplies

Facility Systems Support

Energy / Utilities

Building Maintenance

General Services

Production Maintenance

Food Services Contract Management

Figure 19.1 Asset Management Program Elements Outside expertise was employed early in the program to educate both maintenance management and maintenance staffs in areas to be addressed by the program. The following individuals contributed to the effort:  Mark Galley  Bill Keeter  John Mitchell  Doc Palmer The maintenance model constructed to meet program objectives has six key elements — all centered on the customer, Figure 19.2: Asset Care MR O

k or on W cuti e Ex

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Care Organization of Resources

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Customer

Figure 19.2 Elements of Maintenance Customer Care: entails looking at absolutely everything we do from the viewpoint of the customers to assure their objectives are fully met. Requirements include: Procedural/Process

Cultural

Centralized call center Customer choice for submission of service requests Managing resources

Customer feedback and communication Building or process managers as customer advocates Aggressive maintenance / operations / business partnership

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Asset Care: An aggressive program of caring for company assets was defined to prevent failures, which disrupt our customer’s productivity. The program includes: Procedural/Process

Cultural

Asset indexing Preventive & Predictive Maintenance RCM program Systematic processing of assets

Asset care as a priority Failure Analysis (RCA) Life-cycle planning

A detailed process flow map for Asset Care was developed. One region organized an Asset Care Department in 2001 to formulate an optimum strategy for all their physical assets. The region consists of eight sites. Each site includes:  Research buildings  Office buildings  Pilot plants  Utility plants  Data centers Global Facilities and Engineering Management Organization A Global Facilities and Engineering Management organization was established in 2004 covering North America, Puerto Rico and Europe. The vision and mission statements for Global Facilities and Engineering Management are: Vision: To create a high performing, integrated Facilities and Engineering network that delivers optimal value to stockholders, competitive advantage, customer satisfaction and models the One Company culture. Mission: In support of the One Company culture, the Global Facilities and Engineering effort will achieve sustainable process, performance and productivity improvement by focusing on specifications and standards, aligning facilities efforts, rationalizing service levels and leveraging economies of scale. Key goals of the Global Facilities and Engineering Management organization are:  Reduce facilities costs through the elimination of unnecessary redundancies, continuous process improvement and global leveraging of improvement opportunities  Develop a One Facilities operating model and culture in support of the One Company strategy and culture  Develop a consistent approach to our investment in, and management of, facilities across our businesses and globe  Increase the productivity of our customers by increasing the reliability of the services provided thereby maintaining and enhancing customer’s satisfaction. Planning & Scheduling: is a systematic method of optimizing the use of company and contact resources, integrating requests for work from numerous sources (PM, PdM, Work Orders, etc.) and focusing these resources to furnish the optimal “value-add” for our customer’s productivity. Essential areas of the process include: Procedural/Process

Cultural

Dedicated planners Master planning schedule

Adhering to planned work Customer focused teamwork between Planning & Scheduling and work execution Expecting excellence in Planning and Scheduling.

Identification, kitting, skidding and scheduling of all materials Managing resources

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Work Execution: is the key customer interface within the maintenance model. A key objective of the process is to enable those who do the work to “shine” before the customer with performance and results leaving a highly positive impression. This process includes: Procedural/Process

Cultural

Thoroughly planned jobs, leading to most effective accomplishment Jobs completed in a safe, high quality, expeditious fashion; job site left cleaner than before the work with equipment / system performing better Radio dispatch

Customer focus and response Excellent communications and cooperation between maintenance and production “Do-it-now” teams

MRO Stores: is an outsourced activity for most operations in our industry. Because of its criticality in the delivery of “best-in-class” service to the customer, the interface of MRO to each of the processes must be firmly established and performance expectations clearly understood. This includes:  Establishing clearly defined performance metrics  Imbedding performance requirements into outsource contracts  Electronic interfaces between requirements and supplier  Maximum use of consignment inventory  Focus on maximizing maintenance productivity  Open stockrooms Organization of Resources: requires designing the optimal organization structure to support the Asset Management processes, enhance customer results, productivity and satisfaction. This process impacts: Procedural/Process

Cultural

Levels and spans of control Centralized, decentralized or regional organization Functional vs. Process vs. Asset based organization

Customer as the driver of the organization Empowered crafts people Transitions of supervisor and manager roles from command to coach.

Performance Tracking: uses cascading metrics (level 1, 2, 3), that are aligned to maximize efficiency, assure attainment of a satisfying customer experience, improve customer productivity, and maintain acceptable risk. Key Performance Indicators (KPI’s) are structured to build ownership at the operator / mechanic level with linkage at every level upward to demonstrate business results. Automatic generation within the CMMS is highly desirable — essential for greatest effectiveness.

ASSET MANAGEMENT STRATEGY The asset management strategy was constructed on three principles: 1. Maximize reliability of critical systems while minimizing life cycle costs 2. Improve reliability and reduce preventable maintenance activities 3. Methodical problem analysis and ongoing optimization of maintenance requirements, including time based PM and PdM activities and frequencies The big question to ask is “Do we manage the process or does the process manage us?” Our conclusion was that Asset Management provides the tools to enable us to manage the process. Maintenance Maintenance was divided into three categories for the purposes of increasing effectiveness within the Asset Management program. Characteristics of each are: Reactive Maintenance:  Unplanned work  Emergencies and perceived emergencies  Breakdowns, run-to-failure (RTF).

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Preventive Maintenance:  Planned inspections and replacement on a time basis  More effective, greater percentage of planned work  Reduce surprises, failures, emergencies  Time based intrusive inspections and replacements are costly and can hazard equipment in otherwise good condition Predictive / Condition Based Maintenance Since maintenance is accomplished on need, Predictive / Condition Based Maintenance is proven the most effective. It provides earliest warning of an impending problem thereby minimizing failures and emergencies. The steps required to establish an effective Predictive Maintenance program include:  Identify critical (highest risk) equipment  Review equipment specific surveillance procedures  Develop standardized PdM tasks and frequencies (intervals) utilizing templates, FMEA  Establish optimal equipment trending and predictive condition monitoring programs utilizing the following:  Vibration Analysis - Infrared Analysis  Ultrasonic Analysis - Oil Analysis  Statistical Analysis - Laser Alignment  Machine Balance - Motor Circuit/Current  Review current work process, insert PdM tasks  Document equipment history The PdM process requires the following core competencies:  High Technology – Vibration analysis – Infrared analysis – Motor Circuit / Current Analysis – Laser Alignment  Lower Technology – Oil Analysis (sampling) – Ultrasonic Analysis (passive, leak detection) – Steam Trap Testing Within maintenance the Asset Management strategy breaks down into six areas: 1. Planning and Scheduling – Planning – Scheduling 2. Work management and execution – Work Management System, CMMS 3. MRO Stores 4. Metrics / KPI’s 5. Cause Mapping (RCA) 6. Failure Mode and Effects Analysis (FMEA, from RCM) Planning and Scheduling A results oriented objective for Planning and Scheduling was adopted for the Asset Management program: Increase our Effectiveness Through Optimal Resource Allocation The definition of Planning and Scheduling cited in the Allied Reliability Work Execution document was utilized to develop the Asset Management program improvements, Figure 19.3.

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Predictive and Preventive work 80% of total PM 15%, PdM 45%

Job Plan Improvement

Planning Requested Work 10% of total work

Equipment Reliability Improvement

Scheduling Weekly Schedule

Daily Coordination Job kits

Work Performed

Craftsmen Feedback Work Quality Checks

Figure 19.3 Planning and Scheduling Process Duties of the Planner that were optimized to maximize effectiveness include:  Reviews work requests and develops manpower requirements  Determines parts requirements and places orders  Obtains required approvals  Develops accurate bill of materials to ensure quick and accurate parts lists Duties of the Scheduler that were optimized to maximize effectiveness include:  Develops accurate schedules  Communicates weekly and daily schedules  Communicates with customers and work execution  Confirms availability of required parts Based on published reports, improving the Planning and Scheduling process can produce productivity improvements of up to 60%. That improvement in productivity would allow shifting 10 percent of our workforce to Capital Projects for a profit gain of $1.5 million. Some elements to achieve the objective include:  Appropriate Manpower to Planner ratio, 20 to 1 (rule of thumb)  Planners able to focus on planning and scheduling as sole function  Planners focus on future work and separated from day to day operation  Operations managers intimately involved with the prioritization of work orders  Planners have the time necessary for communication between the customer, craftsmen and customer care  Focus on achieving scheduled work Work Order Prioritization The following prioritization is utilized for Work Orders: Emergency:< 30 minute response Urgent: < 2 working days response Priority: < 5 working days response Normal: >1 week from request date, for Planning and Scheduling purposes Shutdown: Accomplish during shutdown A key objective of the Asset Management program is to increase reliability and predictability so that most work shifts to priority 4 and thereby allows full Planning and Scheduling.

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Work Management and Execution Work execution is the key customer interface within the maintenance teams. It creates the optimum balance between efficiency and effectiveness defined as follows: Efficiency: Performing a given task well (task oriented) Effectiveness: Performing the correct task efficiently (results oriented) Some work management areas requiring emphasis to maximize effectiveness within the Asset Management program include:  Customer focus  Jobs thoroughly planned  Trained mechanics  Empowerment of mechanics  Call centers and radio dispatch  “Do-it-now” teams Job Plan Templates Complete, written job plans are essential to gain maximum work effectiveness. Formalized templates containing a detailed listing of work, including full job steps for repairs and PM are an effective and easily expandable method to gain standardized, consistent quality. In addition, templates provide an ideal basis for training and quality audits. To date, a standard library has been created with a total of 245 templates. The templates are easily searched and copied for application and modification to specific equipment. Each Job Plan Template contains all requirements and detailed instructions for:  Lock out, tag out  PPE  Work permits  System isolation and line-up  Any evacuation, draining, cleaning required  Detailed job plans, including parts and tools  Restoration to service  Historical information to be recorded upon completion of work including conditions as found, as left Work Management System, CMMS: Areas within the CMMS that had to be optimized to fulfill the objectives of the Asset Management program included:  Work order management  Planning and Scheduling tool  Data Management – cost and repair history  Purchasing and Stores Management  Document control (status)  Proper allocation of personnel and resources Over the past two years the CMMS has accommodated the following:  Equipment 35,453  Work Orders 135,459  PM’s 20,409  Job Plans 4,109  GMP Items 13,945  Inventory Items 7,964  Labor ID’s 3,394

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Materials MRO / Stores: Functions within MRO Stores include:  Manage parts and supplies inventory  Maintain critical spare parts inventory  Frequently used parts  High value, long lead critical spares  Consumable supplies  Document costs and usage At the beginning of the Asset Management initiative maintenance stockrooms were found to have the following general characteristics:  The stockrooms were inadequate  Stockrooms did not have sufficient inventory  Inventory mix was inappropriate  Item descriptions were incomplete  Inventory locations were inaccurate  Inventory management was very poor The following improvements were made during the Asset Management program:  All stockrooms in one region were placed under one management  Integrated supplier managing the stockroom was replaced  Stockrooms were improved  All 26,000 items were checked  The inventory was cleaned up  Descriptions improved  Items were matched to a location  High value and specialty items were placed in a restricted area  Instituted weekly cycle counts  Stocking and issuing procedures were implemented  Critical spares were identified and linked to critical equipment  Max and min levels established for every item in stock  Performance tracking metrics put in place  Stockrooms reorganized for better flow  All 26,000 stock items will be transferred to and issued from the CMMS Stockrooms and improved stockroom effectiveness make the following contribution to the Asset Management program:  Planners immediately able to identify parts on hand to meet job requirements  Reduction in ordering parts that are in stock, reduction in expediting costs  Reduction in stocked inventory achieved by:  Increased reliability, fewer emergencies, reduced necessity to maintain a high level of emergency stock  Max and min levels set in a logical way based on risk analysis  Stock room optimization To date there have been four additional accomplishments toward improved stockroom effectiveness:  Reorganized four sites  Conducted Bar Code pilot  Spares consolidation – 2,800 items valued at over $1 million  Inventory catalogs at all sites, prepackaged parts kits at two sites (trial)

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Savings gained includes:  Reduction in overhead charge at sales: $75k  Teaming with Planner Scheduler to reduce expedited orders: $200k  Standardization of light bulbs: $60k  Elimination of P-Card: $120k Metrics/KPI’s: Factors to consider selecting metrics and KPI’s include:  Individual and department goals matched to corporate objectives  Indicators to measure performance at all levels of the organization within span of control  Metrics linked bottom to top and contribute to performance at next level up What gets measured – gets done Cause mapping, Root Cause Analysis (RCA): Root Cause Analysis is a formalized post failure analysis designed to identify specific defect(s) that caused failure so that it / they can be eliminated. Root Cause Analysis directs attention to improving reliability, failure prevention and reducing requirements for maintenance — the key elements of gaining greatest asset and cost effectiveness. Thus, RCA is an essential component of Asset Management that contributes greatly to success. Failure Mode and Effects Analysis (FMEA): Failure Mode and Effects Analysis is a systematic pre failure process to identify, prioritize and develop failure avoiding reliability strategies. The process defines a system, its function, failure modes and the failure avoidance strategy in the following nine steps (actual illustration): 1. System description – (lab air compressor) 2. System function – (provides compressed air to lab) 3. Functional failure – (failure to meet demand) 4. Failure mode – (leaking piping) 5. Failure cause – (loose connection) 6. Failure effects – (lost research) 7. Probability of failure – (once every 2 years) 8. Criticality of failure – (ranking system – A1 very serious) 9. Preventive / corrective measures – (Preventive / Predictive Maintenance, including periodic walkaround inspections / job plan)

ADDITIONAL ELEMENTS AND TECHNOLOGIES A successful Asset Management program requires consideration of many elements plus deployment of technologies that will contribute to the overall objective. Additional elements and Technologies that haven’t been discussed include:  Proactive Maintenance  Total Productive Maintenance  Craft skills enhancement  Life Cycle Costing  Total Asset Care Proactive Maintenance Proactive Maintenance is defined as improvements accomplished to increase lifetime and reduce requirements for maintenance. It is a key element of Asset Management. Some elements that must be considered when applying Proactive Maintenance include:  Emphasis on reliability improvement  Identify preventable maintenance approach  Align engineering and maintenance goals

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Perform CMMS data analysis to identify equipment and systems with problems Conduct Root Cause Analysis; assure lessons / improvements are applied on the specific and similar equipment Accomplish reliability improvements at commissioning / re-commissioning Focus on maximizing planned maintenance by improving reliability, minimizing variation

Total Productive Maintenance The concepts of Total Productive Maintenance address institutional culture, organization, teamwork, ownership and values. These concepts are exceptionally valuable within an Asset Management program with the following benefits:  Prevention at source culture  Partnership between maintenance and operations  Clean, orderly workplace  Commitment to quality  Sense of ownership by the plant and equipment operators, maintainers and support staff Craft Skills Enhancement A successful Asset Management program depends on awareness, initiative, ownership and commitment to quality at the craft levels. In order to gain the skills necessary to realize full effectiveness from empowered mechanics, craft skills had to be extended and improved. The following areas were incorporated into the training program:  Root Cause Analysis (RCA) – cause mapping; overall awareness and benefits to promote craft participation (facilitation for process leaders)  Failure Mode and Effects Analysis  Lubrication  Bearing, belts, sheaves; installation / repairs  Laser shaft / sheave alignment  Pump reliability  Introduction to vibration analysis  Vibration certification level I  IR/Thermography certification level I  Motor circuit/current analysis  Steam trap testing (Trapman)  Ultrasonic testing certification level I  Job plan writing (primarily planners)  CMMS system Life Cycle Costing Life cycle costing is designed to maximize the useful life of our assets and optimize maintenance costs. Asset lifetime strategies are designed for optimum performance, including safety and environmental throughout lifetime including:  Design  Procurement  Installation / Commissioning  Safety, Environmental  Operation  Organization  Reliability (availability)  Efficiency  Maintenance (including work practices)

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Total Asset Care The concept of Total Asset Care is an important requirement that must be institutionalized to gain a successful Asset Management program. All levels in the organization from senior executives to crafts must be engaged, involved and reach the level of excellence necessary to achieve program objectives. Within the Asset Management program an Asset Care Department was formed with a 5 year implementation plan, Figure 19.4. Ass e Plant Inventory 2001

t Re

gist ry

Improve Web Access 2002 CMMS Integration 2003

CMMS Pilot CMMS 2001

Implement Initial CMMS CMMS Validation 2002 2003

Conversion to Documentation 2004

Links to Supporting Systems 2005

Reliability

port Asset Sup

Centralize MRO Stockrooms Scrub MRO Inventory 2004 2003 Computer Based Inventory Upgrade Stockrooms 2002 Fine Tune RCM Strategy 2001 2005 Implement Motor Circuit Testing, Transformer Fluid Analysis, Reliability Engineering 2004 RCM Site Studies, Asset Health Reports, Cause Mapping and Commissioning 2003 Train RCM Technicians, Implement Vibration and Oil Analysis 2002

RCM

Figure 19.4 Asset Care Five Year Implementation Plan The essential nature of Asset Care was illustrated by a decision to defer some PM’s on twelve pieces of equipment. One year of deferred PM’s generated $3,100 savings — and cost $34,000 in repair labor, a cost penalty of over ten fold! This concept is illustrated in Figure 19.5 showing an actual example of the impact of deferred action.

Misalignment detected by vibration analysis Realignment should have been planned & scheduled

Bearings damaged due to misalignment Bearings should have been scheduled and replaced Other components identified as failed

Proactive Cost to align

$650.00

Predictive Cost to replace bearing and align

$2920.00

Catastrophic failure

Reactive Costs: • Replace bearing • Repair collateral damage • Realign • Downtime • Emergency OT • Expediting parts

$13,345.00

Figure 19.5 Cost Impact of Deferred Action

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RELIABILITY CENTERED MAINTENANCE RCM determines the optimum mix of reactive, preventive, predictive and proactive maintenance practices for equipment under its operating conditions. The maintenance strategies are integrated to take advantage of their respective strengths in order to maximize the efficiency of facility equipment while minimizing life cycle costs. Some of the key benefits of RCM are:  Safety enhanced  Uptime increased  Production throughout increased  Asset life extended  Maintenance needs accurately forecasted; predictable performance, reduced variation  Unplanned work reduced  Maintenance costs optimized  Spare parts inventory reduced  Energy costs reduced  Customers satisfied An RCM program was implemented at one site. The goal was to find a systematic and structured approach (FMEA) to identify an optimum maintenance and reliability strategy. The RCM program incorporated procedures based on:  Classical RCM – Nowlan and Heap  Abbreviated RCM – Anthony Smith and Jack Nicholas  SAE JP 1011 and SAE JP 1012 The RCM process consisted of the following steps:  Perform a systems criticality assessment  Identify all critical and non-critical equipment  Analyze failure modes, mitigating activities, FMEA in a criticality prioritized order  Develop detailed PM job plans and intervals  Develop specific PdM procedures  Establish equipment monitoring routes  Implement the new PM / PdM procedures  Baseline all critical equipment  Train crafts on the new PM / PdM procedures  Implement a monthly Asset Health Report A standard application was developed to discipline the process with the following fields:  System Description  System Function  System inputs / outputs  Functional Failures  Failure Modes  Failure Causes  Failure Effects (FMEA Risk Matrix)  Criticality Rating  PM Measures Preventive / Predictive Maintenance Implementation A standard form was developed to specify PM / PdM requirements to assure consistency and maximum effectiveness, Figure 19.6.

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Figure 19.6 PM / PdM Standards Following are some statistics describing the FMEA process for critical systems:  Systems analyzed: 580  Safety / Environmental Critical Systems – 115  Economically Critical Systems – 360  Maintenance critical systems – 105 The resulting RCM Equipment Database required 36 weeks to complete and produced over 25,000 new data points. The equipment list went from 3,442 in the old CMMS to 6,469 in a new CMMS. Six hundred new detailed job plans were added. Predictive Maintenance is now performed on 1,119 pieces of critical equipment.

Maintenance Costs $$’s

With a more systematic approach to maintenance the existing upward trend in costs should be controllable as illustrated in Figure 19.7.

Existing Trend of Maintenance Spending

RCM Implementation Costs Where Maintenance Costs Should Be

Figure 19.7 Financial Benefits of RCM Benefits of the FMEA process include:  Clean up of existing CMMS Equipment Database  Develop an extensive parent / child equipment database  Focus resources and attention on the highest rated equipment  Capture maintenance and engineering institutional knowledge  Provide training to less knowledgeable personnel  Identify and eliminate unnecessary maintenance  Increase customer satisfaction

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PERFORMANCE METRICS AND REPORTS Metrics Metrics are an essential tool for improvement and greatly assist in directing attention and priorities within the Asset Management program. Metrics must be developed by level and category to demonstrate benefits and value of the program, including progress during implementation. For greatest effectiveness, metric collection and reporting must be fully automated. In order for metrics to be accurate and remain consistent within automated reports, certain fields in the CMMS must be filled out correctly. Metrics by Categories Metrics are classified in eight categories: 1. Safety / EHS / Energy 2. Customer satisfaction 3. Maintenance 4. Planning and Scheduling 5. MRO 6. RCM 7. Training 8. Financial Considerations  Metrics must connect to and demonstrate value contribution organizational objectives  The path must work down from financial to EHS, equipment and program effectiveness and customer satisfaction  All key processes should have at least one or more key metrics (KPI’s) with identified goals  Each key process should have a process owner to shape the direction of the metric  Good metrics focus activity on maximum benefits and value added (Reward for results)  Processing of metrics must be automated as much as possible utilizing CMMS data collection and reporting capabilities  Metrics should be limited in quantity to what can be processed with the current workforce and will provide benefits. Maintenance and Operations potential metrics are tabulated in Figure 19.8.

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MRO

Planning & Scheduling

Maintenance

(Man hours)

Work Orders/PM's (Man Hours)

Level 2

Level 2

Level 2 Inventory turnover (rolling 12 months) One time buys ($ per month)

Schedule compliance (scheduled vs. Work Order priorities completed) PM compliance

RCM

Level 2 Ratio of reactive/corrective manhours vs. PM/PdM Corrective manhours

Benchtop buys ($'s per month)

Level 3

Level 3

Level 3

Level 3

Stock availability

Actual hours vs. planned hours

Overtime by craft

Number of critical equipment failures

Inventory accuracy

Schedule breakers

Equipment in alarm

Order returns

Schedule compliance

Shipping costs (rush orders)

WO backlog

Available hours vs. actual hours posted in CMMS Customer request vs. Facility generated (by priority level) Manpower vs. backlog tracking Total number of hot/cold calls

Number of WO's generated from PdM Number of WO's generated from PM

One time buys (stock recommendations) Source of materials request (Planner)

Equipment in caution Total equipment failures

Number of material requests linked to WO's Need by date compliance Rush orders vs. regular orders

Safety

Customer Satisfaction

Training

EHS

Work Order Survey Customer Assessments Expo Surveys

Technical Leadership Development Customer Service/Cultural

OSHA reported

Customer call back WO's

Hours training per employee Quality customer service

Safety and Environmental incidents

Financial

M&O cost Energy/Utilities per unit Materials cost per unit

Hours tracked per category with established goals Include representative from EHS

Include representative from Customer Care

Include representative from Human Resources

Figure 19.8 Proposed Metrics Metrics Review by Level Tier

Review By:

Description / Examples

Level 1

Senior Management

Level 2

Program leadership

Level 3

WE, Frontline, Site Specific

EHS, Customer satisfaction and financials Schedule compliance, PM Compliance, Reactive Corrective vs. PM/PD Corrective Available hours, Customer Generated, Overtime by craft, Inventory accuracy, Training schedules, etc.

Reports Reports are prepared and submitted at regular intervals to identify asset condition, measure performance, demonstrate and publicize program benefits in a summary form. Specific benefits of the reports include:  Keeps track of problem equipment  Builds equipment history  Tracks Preventive and Predictive work  Promotes program results Reports are designed to demonstrate:  Improved safety record  Increased availability and decreased downtime

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    

As Asset Management takes root in the culture of the facility, equipment availability increases along with reliability Reduction in maintenance costs – labor hours, parts, eliminating unnecessary PM’s and minimizing failures Reduction in breakdown costs – Proactive instead of Reactive Improved customer service Reduction in spare parts inventory Decrease in environmental resources

Certain fields in the CMMS must be filled out for the metrics to calculate correctly and remain consistent. A note is provided at the end of each report explaining exactly what is measured. Asset Health Report A typical Monthly Asset Health Report is shown in Figure 19.9: PLANT MONTHLY ASSET HEALTH REPORT

Date TECHNOLOGY

RECOMMENDATION

EQ STATUS

VIB

BLD 17 EF7 EXHAUST FAN

ALARM

X

SHEAVE MISALIGNMENT

PM INSPECT BELTS / ALIGN

EF6 EXHAUST FAN

CAUTION

X

DRIVE BELTS

TRENDING

EF5 EXHAUST FAN

CAUTION

X

DRIVE BELTS

INSPECT BELTS / ALIGN SHEAVES

80265

2

EF3A EXHAUST FAN

ALARM

X

DRIVE BELTS

CHECK FOR SLIPPAGE

80262

1

ACS 5 AIR HANDLER

CAUTION

X

DRIVE BELTS

TRENDING

COMPRESSED AIR

CORRECT AIR LEAK AT RELIEF VALVE

EQUIPMENT

Bldg 17 MR

ALARM

UE AIR

X

PDM RECORDED

RECOMMENDED ACTION

Figure 19.9 Monthly Asset Health Report Vibration Predictive Program Report A similar report for the vibration predictive program is submitted monthly, Figure 19.10:

Figure 19.10 Monthly Vibration Predictive Report

WO #

TIME IN MONTHS

80266

2 2

2 86911

2

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Manager’s Report The Manager’s Report includes five different reports in one concise format: 1. Backlog Summary – Ten oldest Work Orders – Average Days to Completion 2. Work Order Compliance (based on priority windows) – Estimated vs. Actual Hours – Cancelled Work 3. PM Compliance; goal is 95% completion – PM’s Completed – PM’s Incomplete 4. Reactive vs. Proactive Work Orders – Corrective Work Orders – PM/PD, CM Generated Work Orders 5. Two RCM Reports – Corrective maintenance from a PM/PdM origin vs. all Corrective Maintenance – Corrective maintenance from a PM/PdM origin vs. all Preventive and Predictive Maintenance The Work Order Compliance section of the Managers report is shown in Figure 19.11:

Figure 19.11 Managers Metric Report — Work Order Compliance Two reports show compliance to principal reliability and work optimizing metrics, Figures 19.12 and 19.13.

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Figure 19.12 Corrective Compared to PM/PdM Generated Work Orders

Figure 19.13 PM’s Completed goal is 95% completion Backlog Report The backlog report displays all Work Orders that do not have a status of CANCELLED, CLOSED or COMPLETE. All Work Order types are included (Preventive Maintenance, Customer requests, Corrective Maintenance) There is no need for data prompts on the report as the backlog should always contain all open Work Orders in the system. A Complete summary is provided at the end of the backlog report including:  Backlog Man Hours (time required to complete all Work Orders on the backlog)  Count of PM vs. non PM work  Number of future PM’s included in the backlog (due to lead times).  Breakdown of how long the work orders have been in the system. (number of work orders in the system less than 30 days, less than 60 days, etc.) MRO Metrics and Reports The following eight metrics are used to track and evaluate the activity and effectiveness of the stockroom and assess the ability of meeting needs of the customer: 1. One time buys 2. Re stocked items 3. Inventory turns

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Stockouts On time delivery Inactive items Orders placed by Planner Number of transactions with Work Order numbers

Stock purchases and inactive inventory are reported graphically, Figure 19.14 and 19.15:

Figure 19.14 Stock Purchases by Location

Figure 19.15 Inactive Inventory

REQUIREMENTS TO REACH NEXT LEVEL OF PERFORMANCE Five areas have been defined that require additional effort to gain full effectiveness from the Asset Management program: 1. Develop: – Training program – Distribution plan 2. Expand the metric program 3. Track life cycle costs 4. Conduct external benchmarking 5. Review emergency work, identify and recommend ways to eliminate or minimize emergencies

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The use of handheld PDT’s is being considered to minimize the necessity for paper records. Handheld’s offer the following advantages:  Ease of use  Paperless work orders  Capture all work  Accurate reporting of work  Accurate reporting of failure cause and components affected  Less training required  Improved productivity  Feeling of ownership by technicians  Conducting rounds  Accurate collection of readings from multiple equipment  Readings are entered directly into the device  Previous readings can be viewed from the history tab  Details about the points can be viewed  Visual observations can be entered

RESULTS TO DATE (2004) Cost Avoidance / Cost Savings Specific examples of cost savings  Damper actuator, cause mapping, $10,392/year  Motor misalignment, Laser alignment, $3,400/year  PM Optimization, One site, $305,000/year  Helium leak, Ultrasonics, $24,725/year  Generator oil analysis, Oil Analysis, $3,200/year  Vacuum pump leak, Ultrasonics, $2,260/year  Circuit breaker, IR Electrical, $25,000  Reduction in failed steam traps, Steam trap survey, 2001: 19.14%, 2003: 8.2%, 2004: 4.38%, reduction of $127,000 Skill Enhancement – Craft Training The following have been completed to date (2004):  Cause mapping (240 trained and 20 facilitators certified)  Laser Shaft / Sheave Alignment (40 trained, 12 certified)  Steam trap testing (6 trained, 2 certified)  Ultrasonic testing I (50 trained, 19 certified, train the trainer)  IR / Thermography (12 certified)  Motor current / circuit (10 certified)  Introduction to Vibration Analysis ( 12 trained)  Vibration I (8 trained, 3 certified)  Job Plan Writing (10 trained and 10 future)  Failure Mode and Effects Analysis / FMEA (9 trained)  Pump Reliability (40 certified) Future plans are for additional technical training including: bearings, belts, sheaves and lubrication.

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Failure Analysis – Cause Mapping Thus far 37 RCA Cause Maps have been completed at one site detailing:  Safety issues  Mission Issues  Equipment failures  Miscellaneous Items Standards, Specifications and Contracts A team is developing company standards in the following areas:  Vibration  Oil Analysis  Alignment  Balancing  Motor repair  Cause mapping — Maintenance Standard Operating Procedure (SOP)  Switchgear Testing — Maintenance SOP  Commissioning — Engineering specification Similarly, engineering specifications for commissioning, testing and balancing are being developed in the following areas:  Alignment tolerances  Soft foot tolerances  Balance  Bearing temperatures  Pipe strain tolerances  Future: grouting, belt tensioning, etc. Regional standardization will maximize effectiveness, assure consistency, facilitate the interchangeability of people and maximize the applicability of internal best practices. Regional standards and regional / national / global contracts are being developed for PdM in the following areas:  Hardware  Software  Services  Training The Reliability Team is / will be involved in the following:  Engineering — commissioning / acceptance testing  CMMS — new equipment, job plan edits, maintenance strategy failure analysis  Work Flow — Planning and Scheduling  MRO — BOM, spare parts optimization  Cause Mapping — Internal and External  Communication / Documentation — Web Site A desktop knowledge portal provides access into the company’s reliability system. The portal includes the following:  Facility folders containing all information pertaining to the specific facility  Charters  What’s new  Links  Content manager In closing, the ultimate goal is to perform the right tasks, on the right components, at the right time by having the right mix of preventive and predictive maintenance tasks.

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XX. PHYSICAL ASSET OPTIMIZATION FOR CAPITAL PROJECTS Contributed and copyrighted by: Robert J. Motylenski, P.E. Used with permission Since the objective of Physical Asset Optimization is to obtain the greatest lifetime value from a company's assets, it follows that a similar approach needs to be applied to capital projects to ensure they will startup unimpeded, operate efficiently, and meet business objectives. By implementing an asset optimization program during the planning, design, and engineering phases of a project, the new facilities will achieve the levels of availability, reliability, and maintainability needed to achieve economic success. Thus, an asset optimization program for capital projects that will potentially avoid major corrective activity in the future is just as important, if not more so, as managing the assets of existing facilities. With an eye towards increasing overall profitability, most major process companies have concentrated on reducing operating costs during the past years, while either sustaining or improving process availability. The operating cost most likely to be reduced was maintenance. In some plants, this was done using asset optimization, while in others management took the quick-fix route by eliminating people and indiscriminately reducing maintenance work. The more successful and sustaining efforts involve developing systematic approaches for defining what maintenance work needs to be done and how to perform it effectively. To ensure that these efforts are not jeopardized and future profitability does not suffer with the addition of new facilities or equipment plants need to implement a program for Projects that parallels asset optimization. Today, there is more pressure for new facilities to startup unimpeded and operate with lower maintenance cost and limited manpower. By applying the principles of asset optimization to expansion projects, a negative impact on existing plant availability and maintenance cost can be averted. Similarly, when grassroots facilities are built, the design process must ensure that the expected plant availability will be achieved and maintenance cost will be within expectations. This chapter describes a work process that includes elements of an asset optimization program and ensures reliability and maintenance is considered during all phases of project development. The process can be applied to grassroots facilities and plant upgrades. The process consists of five major activities, starting at the screening stage and ending with plant commissioning. Most of the activities are similar to those for asset optimization, and make common sense. However, a commitment of skilled resources is necessary for the process to be effective and efficiently performed. In today's tight resource pool this can be a problem, so management commitment is required to staff the activities. Also, checklists should be used to ensure a consistent work process and assist less experienced participants.

BUILDING RELIABILITY AND MAINTENANCE EXPECTATIONS INTO PROJECTS The main reason reliability and maintenance (R&M) must be considered during project development is to ensure that the new facilities do not jeopardize the profitability gains already achieved from the application of asset optimization principles and systematic improvements to plant maintenance and reliability. Also, to stay competitive, companies need to ensure that new facilities will operate reliably and with low maintenance costs. A number of activities are underway by different organizations to ensure reliability and maintenance is being considered during capital project development. Industry leaders use Independent Project Analysis (IPA) to assess project performance and one of their indicators is plant reliability post start-up. Reliability and maintenance programs, including maintainability checklists, are now used by most engineering contractors. Professional organizations have also developed programs for assessing the implementation of R&M principles to projects. However, these are generalized activities and usually do not cover specific requirements or the needs of individual owners. Owners need to have their programs and check lists to ensure their specific requirements and situations are adequately covered. To avoid a non-optimum approach to applying R&M technology to projects, each company needs to develop and implement their own program based on asset optimization principles.

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One objective of the work process is to ensure that the inherent reliability imparted to the design is compatible with that needed to achieve the business objectives. This needs to be accomplished at minimum investment cost and without jeopardizing future plant availability. A second objective is to ensure the plant’s future maintenance cost and resourcing will remain competitive by including equipment maintainability in the work process. Another driving force for implementing the R&M work process is that many companies are using front-end loading for projects, which necessitates that R&M be emphasized early in project development. A generally expressed concern is that by focusing on R&M during project development, project cost will escalate, engineering time will lengthen, valuable resources will be diverted from other activities, and equipment will be gold-plated. That is not true if the process is implemented in a timely fashion with the right resources, and the project business objectives are the basis for decision-making. The balancing of capital investment, business objectives, and operating costs is an important consideration. The process will result in the facility having an overall life cycle cost less than a similar facility designed and constructed without R&M principles being applied. Earlier involvement of R&M specialists will be required, as well as, possibly, additional engineering effort, but the improved profitability will more than offset the additional front-end cost. The following are three examples where the up-front additional engineering emphasis on reliability and maintenance resulted in considerable savings.  An aerospace company implemented a program focused on high reliability costing about 10% more than their nominal reliability program. The program resulted in a 68% reduction in maintenance cost and a 58% savings overall.  A grassroots refinery consciously made an additional capital investment of 5 to 10% for improved reliability and better maintainability. The results over a 15-year period were an average reduction of 36% in maintenance cost and a 29% reduction in unplanned downtime.  A third company reported that early reliability and maintenance involvement in design, procurement and installation resulted in the following:  One time savings of approximately 5% in project cost  Continuing savings of approximately 1.5% maintenance costs / RAV throughout lifetime  Runtime improvement of 3% to 5% above industry standard throughout lifetime These examples show that additional up-front engineering effort and investment result in higher availability and lower maintenance cost. Benefits of early reliability input and a solid asset optimization program beginning at design are many:  Minimize number and cost of changes  Reduce duplication of effort  More effective commissioning and startup; improved safety, reduced duration and number of problems at checkout  Opportunity to include optimum maintenance technologies and maintainability at least cost  Build condition based, PM and spares around strategy  Effective maintenance system in place at startup  Greater reliability and effectiveness during operation  Reduce lifecycle cost In addition to improved availability and lower maintenance cost, implementing an R&M program early in a project's development provides direction and focus for subsequent activities and benefits to other areas, such as safety and environmental. It is ten times more costly to make a change during construction compared to early design.

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WORK PROCESS OVERVIEW The work process follows the same major elements as asset optimization. The overall process is shown in Figure 20.1. The key elements are:  Secure Management Support  Define Project Business Goals  Formulate a Plan  Implement Plan Activities  Measure Success

MANAGEMENT SUPPORT

PROJECT BUSINESS GOALS

MEASURE SUCCESS

WORLD CLASS PLANT IMPLEMENT PLAN

FORMULATE PLAN

Figure 20.1 Implementation Process Overview To maximize the benefits from the work process, involvement needs to begin as soon as screening and early planning are underway. This reduces the potential for cost and schedule impacts from changes made later in project development, since the cost of design changes geometrically increases as a project moves from one phase to the next. Another reason for implementing the work process during screening is that about 95% of the life cycle cost of a project is established upon completion of detailed engineering, and any changes that are required after the design is finalized will affect both the schedule and the cost.

WORK PROCESS ELEMENTS First and foremost, Management Support is required to implement the process. Management needs to endorse the work process for imparting R&M to a project and provide resources and funding needed for early involvement of the right people during the front-end screening and planning phases, as well as engineering. Defining the Project Business Goals translates into establishing the project R&M Goals in the early screening/planning phase. The overall R&M Goals are confirmed in a document that guides project development and supports the business and investment goals. The planners, designers, and engineering contractors use the R&M Goals as the basis for making decisions on R&M questions. The goals are a strategic item in the overall work process. The R&M Program is the Plan for ensuring R&M is considered during project development. It defines the activities that occur during the screening, planning, and engineering phases of a project to ensure the R&M Goals are achieved. A different R&M Program is required for each project. The scope of the R&M Program will depend on the process technology employed, newness of equipment design, business objectives, and front-end engineering budget. The activities in the R&M Program need to be carried out in a timely manner to minimize the impact on cost and the schedule of the overall project. The R&M Program consists of three specific areas with different activities under each. 1. Defining R&M objectives for critical equipment and systems 2. Designing for Reliability 3. Designing for Maintainability

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Implementing the Plan is the next step in the work process, and this requires manpower and possibly outside experts, who are familiar with the equipment and work process. Each of the areas of the R&M Program is presented in more detail, including the purpose of the activity, applicability, timing, and potential implementation tools or techniques. The last part of the process is Measure Success, to ensure the project has achieved the overall R&M goals. This is not an easy task and is a function of the technology used for the activities of the R&M Program.

MANAGEMENT SUPPORT As with any program, management support is necessary. It is essential that management:  Endorses and actively supports the Actively Support Work Process MANAGEMENT Endorse Project Goals work process to impart R&M SUPPORT Provide Needed Resources technology to projects. Align Thinking  Participate in establishing the project goals or, as a minimum, endorse the goals.  Provide the resources, both manpower and funding, so that R&M focused people can participate at the start of screening and initial planning, and continue into engineering. Typically, these individuals are called into the project after the design is finalized and detailed engineering is started, making it too late to have any significant influence on the design without substantial economic and schedule impact.  Alter their thinking with regard to projects and understand that the key objective of the project is not cost and schedule, but constructing a facility that meets the business objectives. This translates into a plant that produces quality products, operates efficiently with excellent availability, and at the lowest possible cost. Project timing is important with regard to the marketplace, but needs to be considered in the context of availability and plant operability. That is why it is so important that the right people are used on the project early in its development.

PROJECT R&M GOALS Typically, a planning or design basis document that outlines the business and investment objectives is used to launch a project. The Mechanical Availabilities PROJECT document may also include the process Planned Run-length R&M technology to be used or alternatives that need Maintenance Cost Targets GOALS to be evaluated. The project staff and Other R&M Issues contractors use this document for guidance in making engineering decisions during project development. In order for the document to be completely effective it must include the project’s R&M objectives, so that decisions about equipment, process configuration, and process alternatives can be properly evaluated. Typically most companies do not include specific R&M goals in their planning or project philosophy document, but base their economics on their own or licensor operating experience, and assume the new facility will duplicate past performance. Project Investment Objectives The project investment objectives need to be known before the R&M Goals can be defined. The business objectives will determine what availability is required for the facility to meet market demand at startup and in the future, and how much money can be spent annually on maintenance and still remain competitive.  Is the project to have a short life?  Is the project to be built with minimum investment?  Are the new facilities expected to achieve benchmark reliability at reasonable investment?

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What is the planned life of the facility and will it be subject to major process changes in the future? Are the manning levels, process operations, maintenance and technical support, to be minimized? Are future operations going to be considerably different from the design and initial conditions?

When investment cost and short plant life are a priority, reliability and maintenance costs are not primary concerns. When benchmark performance is the goal, both reliability and maintenance costs become major considerations. The answers to these types of business questions influence the reliability and maintenance goals for the project. In the end, the R&M goals need to be realistic, achievable, and complement the business objectives. Also, the goals need to consider the project budget, schedule, and process technology. Establishing goals does not mean that high reliability and low maintenance cost are automatically key objectives. Project R&M Objectives The R&M goals must be defined for each project and included in either the project planning basis document or a separate R&M document. This document provides the project team and engineering contractor guidance for reviewing alternative designs, selecting equipment, and making other engineering decisions. The goals need to be congruent with the business and investment objectives. The key issues that need to be addressed in the document include the mechanical availability for the project and individual units, anticipated run-length, maintenance cost target, and other key R&M issues.  Define the mechanical availability goal for the project, and establish minimum availability targets for each process unit in the project and existing units that support the project. The individual process unit mechanical availabilities complement the overall availability goal for the plant, which in most cases is to be a world-class performer. Typically, the availability requirements for the project are not included in the project document because the economic analysis for the project is usually based on the availability achieved with similar or identical process units. This results in the general feeling that it is not necessary to define the availability requirements, because they will be easily achieved. However, the availability does needs to be defined so that everyone involved with the project understands the basis for the ROI and can use that information to make decisions that support the project goals. In addition to defining the overall project mechanical availability, the availability of individual process units included in the project must also be defined. This requires an understanding of how the units interact and their relative importance to the business. Existing process units that will interact and support the project need to be included in this evaluation, to establish whether or not they have the availabilities to support the operation of the new facilities. This is a form of reliability allocation. The individual unit availabilities do not necessarily have to be benchmark, but must support the investment objectives. 

The technology that can be used to assist in defining the overall project availability goal and the availabilities of the supporting units is Reliability Modeling. This technology has improved over the last few years and is now regularly used in defining business objectives, assessing plant reliability, and evaluating maintenance practices. In the project area, Reliability Modeling can help in assessing the trade-offs between investment, operating cost, and reliability and, if a reliability model is used in defining the project goals and during project development the model can be used in measuring success at project completion.



Define the planned unit run-length with the anticipated drivers for the turnarounds. This is needed to guide equipment design and selection and evaluate alternative designs. By knowing the expected run-lengths and drivers for periodic shutdowns, changes to the design may be possible that can either reduce turnaround frequency or decrease the length of downtime. Also, identifying the drivers defines whether the turnarounds are process driven or mechanical in nature.



A long-term maintenance plan for the plant is a document that should be available when establishing run-lengths and turnaround drivers. The plan is used to determine how the new facilities fit into the overall plant maintenance plan and if they will be influenced by turnarounds of existing process units. It is important to know the turnaround schedules and plans for nearby

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plants when developing the site maintenance plan in order to avoid potential conflict in acquiring skilled manpower during the turnarounds. 

Define the maintenance cost target. This can be in the form of estimated annualized maintenance dollars, percent of investment cost, or in terms of industry benchmarks. Establishing the targets can be relatively easy, but ensuring they are achieved is more difficult. In today's environment, everyone wants to have the lowest possible maintenance cost without jeopardizing plant availability and have generally established a plant maintenance cost objective, e.g. Solomon Q1. Thus, in order to ensure that the project does not jeopardize the site cost objective, project maintenance cost targets need to be defined and be in line with the plant goal.



The cost objectives and the availability objectives can be the basis for performing life cycle cost analysis and evaluating trade-offs between different equipment types and manufacturers. One of the most difficult parts of the task is acquiring past maintenance and operating histories for the equipment to carry out a proper evaluation, especially for new equipment with little or no experience. Life cycle cost analysis is an important tool that should be readily applied on projects.



Include other key R&M issues. Other R&M concerns, such as the return required for additional investment for R&M items, manpower restrictions, equipment or component standardization, spare parts, etc., should be defined in the basis memorandum. This information is needed so that the appropriate decisions can be made during planning and engineering.

A comment about equipment standardization: Purchasing equipment and components that duplicate equipment and components already in the facility have several advantages. Demonstrated reliability and performance, workforce familiarity that eliminates the necessity for specialized operator and maintenance training and reducing the need to stock additional spare parts are three tangible advantages that reduce the cost of ownership. Unless R&M goals are defined for every project, regardless of size, project decisions will be made haphazardly and without any consistent guidance or direction. The overall R&M goals, however, need to be reviewed as the project progresses to ensure they comply with the current business climate and thinking. If the goals are changed during project development, prior decisions need to be reevaluated to ensure they are in line with current thinking. Examples of R&M Goals The following are some goals from project philosophy documents:  "The mechanical availability target will be a minimum of 94% and will provide a minimum twoyear-run length".  "Provide minimum return of 20% for R&M and other hard credit operating expense reduction investments during the process design phase."  "Projected annual maintenance cost during the first through the fifth year of operation is estimated to be $X.XX/BOE, with a total operating cost of $Y.YY/BOE".  ".... a refinery maintenance cost index within Solomon 1st quartile".  "The maintenance cost target is 1% of direct cost".  "Spare parts inventories will be based on reliability and life cycle cost considerations."

R&M PROGRAM

R&M PROGRAM

Equipment/System R&M Objectives Designing For Reliability Designing For Maintainability

The purpose of the R&M Program is to ensure that attributes of design and engineering that have an impact on reliability and maintenance are considered during the

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planning and engineering phases of the project. The Program outlines a number of different R&M oriented activities that occur during the screening, planning, and engineering phases of the project. The R&M Program, which is unique to each project and specifically designed to cover those areas that are most critical to the project, is the plan that defines those tasks that are considered necessary to meet the project reliability and maintenance goals, including those of the implementation plan. Issues to consider when developing the Program are:  Project investment and size  Similarity to existing facilities  Criticality  Use of new technology  Anticipated operating life  Project R&M Goals Because it provides direction and focus in subsequent phases the R&M Program must be defined early in the planning phase and should be prepared by the plant R&M stakeholders, in conjunction with the project team. But a Program prepared using a cookbook approach can lead to an expensive plan that adds little value to the project and may require excessive manpower to implement. The R&M Program is an action plan that defines what tasks need to be performed, who will perform them, and their timing. In addition, the Program can include any other R&M related issue or activity that the plant management, R&M stakeholders, and project team consider important and that need focus and emphasis. Such items may include the roles and responsibilities of each party involved in the Program, minimum predicted equipment life, guidance in applying life cycle cost analysis, spare parts considerations, and any other concerns. Key R&M Program Areas The R&M Program is divided into three areas. A number of tasks are included in each of the areas. 1. Defining R&M Objectives for Critical Equipment and Systems. This task not only includes defining specific R&M objectives for individual pieces of equipment or systems, but defining the equipment and systems. This entails some form of criticality analysis. 2. Designing for Reliability involves conducting periodic assessments and reviews of the project. It also includes assessing if supplementary testing of critical equipment is required to ensure the equipment will perform in accordance with design requirements. 3. Designing for Maintainability involves conducting periodic reviews of the project from a maintainability perspective, preparing equipment management programs that are available prior to startup, and developing a long-term maintenance plan.

DEFINE R&M OBJECTIVES FOR CRITICAL EQUIPMENT AND SYSTEMS DEFINE EQUIPMENT R&M OBJECTIVES

Reliability Criticality Analysis Reliability Allocation Equipment Life Requirements Maintenance Cost Objectives

Developing specific reliability and

maintenance objectives for critical equipment and systems, or sub-systems, involves two distinct steps. The first is to define the equipment or systems that are critical to operations and need to have specific objectives. The second is to define specific reliability and maintenance objectives. Several different methods can be used to define the critical equipment and systems. These include:

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 

 

Reliability Centered Maintenance, (RCM) or a similar approach can be used where the equipment or system is assessed as to its relative importance to process operation. Using a ranking system that not only includes operational importance, but also considers design maturity, manufacturing complexity, financial consequences, ease of maintenance, and operating experience. This approach not only identifies equipment that may require specific reliability or maintenance objectives, but also equipment that may need special attention during engineering. Figure 20.2 is an example of a ranking system. Using Reliability Modeling to identify equipment and systems that cause process bottlenecks, or pinch points. Reviewing operating and maintenance experience of identical or similar equipment or systems.

Criterion

Criticality Area

Long unplanned outage Moderate unplanned outage Short unplanned outage Slowdown No disruption Establishes T/A frequency Costly planned maintenance Moderate planned maintenance Limited planned maintenance No maintenance Excessive financial loss Moderate financial loss Small financial loss No financial loss New, innovative design Extrapolation of proven design Modification of proven design Duplicate of proven design Very high failure rate Moderate failure rate Low failure rate Seldom fails Many complex steps Some complex manufacturing Many simple steps Simple to manufacture Significant % of investment Moderate % of investment Small % of investment Insignificant % of investment

Reliability Reliability Consequence Consequenc e Planned Planned Maintenance Maintenanc e Financial Financial Consequences Consequenc e Design Design Maturity Maturity Operating Operating Experience Experienc e Manufacturing Manufacturin Complexit gComplexity y Investment Investmen Cost t Cost

Overall Criticality Ranking

Ranking

Reliability Ranking

Maintenance Ranking

Financial Ranking

Design Ranking

Operating Ranking

Manufacturing Ranking

Investment Ranking

XX

Figure 20.2 Example of a criticality ranking process In addition to identifying what equipment or systems require individual objectives, the criticality analysis can be used to identify equipment or systems that may need additional focus or review in the R&M Program. The document resulting from the analysis is a table listing each piece of equipment and system with its criticality rating and reason for the designation. The table should also include the actions that are needed to reduce the criticality of equipment and systems with a high rating. Reliability Allocation Once the critical equipment and systems are identified, specific reliability and maintenance objectives are assigned. For reliability, this is a form of reliability allocation where individual pieces of equipment are assigned specific reliability values that complement the overall reliability goal. The allocation process ensures that no equipment or system will require a reliability that is unrealistic or unachievable. The reliability allocation process also identifies the equipment and systems that should receive more attention and design improvement efforts during the design and engineering phases. It also helps avoid over-

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designing or requiring higher than needed reliability, which would have little or no impact on overall performance, but could affect the investment cost. If the reliability requirements are unrealistic, a review of the equipment arrangement and sparing needs to be carried out. Allocating reliability or defining specific reliability objectives is not an easy task. Depending on the amount of sparing and redundancy the reliability requirements of individual equipment will, in most cases, be greater than that of the overall system. Several methods are available for assigning individual reliability objectives. Reliability modeling is one method for determining the reliability required of individual pieces of equipment and systems. The model will identify pinch points and critical equipment, assuming certain failure and repair rates. The key to using the results is ensuring that the inputted rate data are realistic and representative of commercial equipment and planned operation. An advantage of using modeling is that it allows one to test different equipment configurations and assess overall performance sensitivity to changes in equipment failure and repair rates. Another approach is using past performance of identical or similar equipment. Providing the performance information is realistic and representative of the anticipated operating and maintenance practices this can result in more viable objectives. A concern is that the data is sometimes optimistically extrapolated to higher values because of new maintenance practices or better equipment design that are not proven to result in improved reliability. The purpose for defining reliability objectives is to ensure the equipment and system performance supports the availability requirements of the overall design and that of the project. Specifying Objectives In addition to reliability, equipment life requirements may also be defined. These would be outside those included in industrial standards and practices. The life should complement the run-length objective in the overall R&M goals and the required turnaround interval. Specifying individual maintenance objectives for equipment and systems is the other area that needs to be considered. These can take the form of specific maintenance cost requirements. However, it is more realistic to specify maintenance cost objectives for systems and individual process units, rather than individual pieces of equipment. Having defined the objectives they must be included in the specifications so that manufacturers know the project requirements and can comment on their ability to meet them. Vendor bid proposals need to include experience that demonstrates the equipment will meet the specified objectives. These are, typically, experience lists with user references. Part of the bid review is an assessment of the vendors' ability to meet the R&M objectives. Establishing specific reliability and maintenance objectives should be done during the initial project planning and design stages. A team of people who are experienced with the equipment and process operation should do the criticality analysis and identify the critical equipment and systems. The reliability stakeholders, in conjunction with experienced equipment and process specialists, should establish the specific reliability and maintenance objectives.

DESIGNING FOR RELIABILITY As a project progresses through planning and engineering, periodic assessments of the Reliability Reviews design are made from a reliability perspective. DESIGNING FOR Reliability Checklists The main purpose of the reviews is to ensure RELIABILITY Special Equipment Testing the design is reliable and will meet the overall project goals within the cost constraints imposed on the project. The process is ongoing, the number of reviews being dependent on project size, complexity, maturity of technology, and operating experience. The reviews are conducted at key milestones in planning and engineering, e.g. plot plan finalization, completion of design specifications, and availability of the CAD computer model. The reviews focus on reliability and understanding what the consequences are on process operations when either a system or a piece of equipment fails, and what can cause that failure. The critical

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equipment identified earlier should be the focus of the reviews. In addition, the reviews evaluate the ease of operator interface and inspection, and challenge the design from various viewpoints, i.e. safety, environment, operation, and human interface. As a minimum the reviews should detect conditions that degrade reliability. Conducting reliability reviews is an important aspect of the project design and engineering process. The prime objective of each review is to determine whether or not the design meets the overall goals within the cost and schedule constraints. To some extent it will also test the validity of the overall goals within those constraints. Those conducting the review must be familiar with process operations and the equipment and should include process designers, mechanical and process operations representatives, and other experts as needed. Experience with the process technology and equipment is a requirement, even if they need to come from outside the local organization. Reliability reviews should be conducted on all projects, their number and extent of will depend on the project size and criticality. Reliability Checklists Checklists of reliability-focused questions are used to expedite the review. They can be divided into areas with different reliability emphasis, for example, plant or unit operating philosophy, equipment reliability and design, equipment manufacturers, and operating conditions and environment. Similarly, checklists can be used for assessing the human interface. Although ergonomics may not be considered a primary reliability issue, the majority of unplanned plant interruptions are caused by human error. Ergonomics therefore needs to be considered during design. The following are reliability checklist questions.  "Will bypasses improve operating flexibility and the ability to perform on-line maintenance - cost vs. payback?"  "How far can the process operating technology be pushed? What is the recent operating experience with these units?"  "Are all operating conditions known and specified, including the variations in the conditions?"  "Are the operators/maintenance people knowledgeable and familiar with this type of equipment/technology, or is training needed?"  "Is the location of utility service stations based on a review of the Operating Procedures, particularly for cleaning, purging and blinding?"  "Can operators read instrument dials or digital displays from the path of the normal walkthrough?"  "Are valves arranged to prevent squatting, stooping, kneeling, bending, twist stretching, or extending the body or arms in order to operate or inspect the valves?" Startup Checklists Startup checklists are essential to assure all safety and operational procedures are observed for new equipment; repaired equipment restored to service and for restarting following a plant shutdown.

Commission auxiliary equipment 1

Ensure pump and piping system has been purged with N2 so



Pump B

Action steps

Pump A

A detailed check list utilized by one company consisted of seven sections: 1. PPE requirements 2. Detailed information describing hazards 3. Requirements for pre operational inspection 4. Detailed operational check off, Figure 20.3 5. Post start up readings to be recorded 6. Observations during and following startup 7. Sign off Deviations / Corrective actions

 Use purging procedure.

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2 3 4 5 6

that the system is air free. Ensure field switch is in stop position. Ensure orifice is installed in arc valve bypass line. FO 10 P01A/B1. Open tempered water supply valves, VA50 & VA51 fully. Ensure LP Nitrogen quench valve VA31 is closed, then open VA30. Set pressure P30 by slowly opening control valve VA31 so that P30 reads 50 kPa. Flow must be visible in sight glass F30.

Pump B

Action steps

Pump A

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Deviations / Corrective actions

Flow must be visible in sight glass. Beware that pressure is not exceeded since damage could occur to the pressure gauge or mechanical seal.

Figure 20.3 Six Steps of a One Hundred Plus Step Detailed Startup Check Off

courtesy Hein Bootes

Special Equipment Testing Another area needing consideration in Designing for Reliability is the identification of equipment requiring special testing outside industry standards. The reasons for the extra testing are: unique or innovative design, limited operating experience, equipment manufactured using many complex and unique steps, or equipment purchased using standards which require insufficient testing. The purpose of these extra tests is to ensure the equipment meets, or exceeds, the needed performance requirements. Very few pieces of equipment should require extra testing, but all designs should be evaluated for this requirement. Specialists should be consulted when establishing if extra testing is needed.

DESIGNING FOR MAINTAINABILITY DESIGNING FOR MAINTAINABILITY

Maintenance Reviews Maintainability Checklists Turnaround Reviews Equipment Management Plans

Three different activities are included in Designing for Maintainability. All are aimed at optimizing maintenance effectiveness and cost. The activities are: 1. Periodic maintainability reviews 2. Assessment of turnaround requirements 3. Preparation of equipment management plans

Periodic Maintainability Reviews Similar to the reliability reviews maintainability reviews ensure that the equipment layout permits ease of maintenance and accessibility. In addition, the reviews are used to identify mandatory and cost-effective facilities that would improve process unit startup, shutdown, and the preparation of equipment for maintenance, i.e. cleaning and clearing. The maintainability review is an emerging technique that moves maintenance from a reactive phase to proactive. Its use in the industry is increasing. Considerable cost savings are achieved by incorporating changes early in a project design, rather than later. Maintainability reviews are conducted by maintenance and operational personnel who are familiar with the process operations and equipment. Three dimensional CAD models, which help to better understand the relation of the piping to the equipment and to assess the space available around equipment for maintenance and operator access should be used during the review. Maintenance and operational people who carry out the reviews need to walk through the model and check for accessibility. A maintainability checklist is another useful tool for conducting the reviews and ensuring there is consistency between reviews. The use of personnel who are experienced with the process unit and respective turnaround work is invaluable. Assessment of Turnaround/Overhaul Requirements The reviews conducted to assess turnaround requirements focus on several different areas, including:  What cost effective changes can be made to the design to either reduce turnaround downtime or ease turnaround work. The focus is on those repetitive maintenance preparation activities that primarily involve the installation of temporary facilities at each turnaround.

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

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What changes to the design would ease repetitive turnaround maintenance activities, such as the orientation of catalyst unloading nozzles. Any proposed change needs to be justified using life cycle cost analysis. Equipment accessibility and orientation. This includes such items as lay down area size and location, manholes size and orientation, heavy equipment accessibility, and traffic patterns for moving mobile equipment.

The above are just extensions of the maintainability review, but focusing strictly on one aspect of maintenance that is infrequent, but costly. The next focus area for turnaround reviews is preparation of a long-range turnaround outlook and schedule. Drivers, both mechanical and process, for establishing the run times between turnarounds are identified and any possible design changes evaluated that would reduce downtime duration and/or increase run time between shutdowns. Again, any design changes are evaluated using life cycle cost analysis and must concur with the goals established for the project. These will tend to be large investment items rather than simple design changes, i.e. reconfiguration of the heat exchanger bank to include more exchangers and/or bypassing, or installation, of another reactor. Equipment Management Plans The last subject for Designing for Maintainability is the preparation of equipment management plans. These are plans that plants prepare for existing equipment, using either an RCM, or a similar process. They focus on the detection, mitigation, and/or elimination of expected failures, and define periodic maintenance and inspection tasks. They include reactive, condition-based elements, and proactive elements that are based on the operating condition and the probability of failure and potential consequences that might occur. On a project, preparation of equipment management plans for critical equipment starts soon after the equipment is purchased and needs to be completed prior to commissioning. People with direct operating and maintenance experience should be used to prepare the plans. Assistance from either the vendor or outsiders should be sought if equipment is unfamiliar to the site. An assessment of spare part requirements is a by product of this activity. As with reliability reviews, maintainability reviews should be conducted on every project. Their scope and extent being depend on the size and criticality of the project. However, as a minimum, the site long-term maintenance plan should be updated to include the new facilities and equipment management plans prepared for the critical equipment and systems. Maintainability Checklists Like the reliability checklist, maintainability checklists are typically developed for each equipment category, in addition to general maintenance and layout considerations. This approach makes it easier for each equipment discipline to use the list.  “Check that access ways and roadways have sufficient head clearance for vehicles, mobile equipment, etc., for construction, operation and maintenance".  "Check that the piping design includes drain and vent valves in accessible and suitable locations".  “Check that platform space is available for refractory installation and repair equipment".  “Check that rodding connections for fluid solids units are accessible and there is sufficient space for insertion of rodding tools".  "Is adequate space provided for extracting tube bundles and the bundle extractor?"  "On fixed bed reactors, is a trolley beam or davit provided to facilitate removal of the catalyst dump flanges and catalyst handling equipment? Can the platform accommodate the equipment?"  "On pressure vessels, is internal bolting made of non-corrosive materials?"

PLAN IMPLEMENTATION TIMETABLE In order for the process to be effective it must start when early planning for the project begins, and end when the plant is commissioned. The work process is continuous with interaction at all phases of the project. A true assessment of how effective the process was, however, does not occur until after the facilities have been operating for several years.

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Figure 20.4 shows the duration and intensity of each element as the project is developed. The darker the arrow, the more activity is underway. Management Support is required over the complete project, with active participation at the beginning when the goals are established. The Project R&M Goals are defined at screening and early planning, but need to be constantly reviewed as the project progresses. The R&M Program activities are intense during design and engineering, but need to be kicked off during planning and when contractors are brought onboard. Advising the contractors of the activities that will take place during development is important so that they can be prepared for and actively participate in reviews Measuring Success can start early if reliability modeling is used for developing R&M goals and objectives. Otherwise, the activity may not start until after startup and continue into operation.

Figure 20.4 Implementation Plan Timing and Intensity

ENSURING RELIABILITY AND MAINTENANCE PERFORMANCE The final phase of the work process is ensuring the R&M goals established at the beginning of the project have been achieved. This is a MEASURE Reliability Compliance compliance check and is an essential part of SUCCESS Maintenance Cost Compliance the overall program. In addition to ensuring the project meets the business objectives, it also confirms, or identifies, areas in the work process that need to be changed or modified, and helps improve the tools used in implementing the R&M Program. Checking for reliability compliance and confirming that the design will achieve the required availability is a difficult task because it will be based on performance estimates obtained either from experience, industry or equipment manufacturers. In some cases these estimates may not be any different from those used in the initial planning stage. However, the constructed project should include cost-effective design changes that were not included in the previously designs. In the end, the proof of the pudding will be several years of operation and, probably, several turnarounds. The best tool for checking for reliability compliance is reliability modeling. It can be a simple block model, or a complex simulation model that includes scheduled refurbishes and turnarounds. The type of techniques used will probably depend on project size, complexity, and criticality. The cost for performing modeling is another factor that needs to be considered. The availability of reliable and representative input data is crucial. Estimating overall maintenance costs (routine and turnaround) and resourcing requirements may be easier, providing completed equipment management plans are available and a long-term maintenance outlook is available. Using the equipment management plans, reliability modeling results, life cycle cost analysis, and experience with similar units, an estimate of maintenance cost and resource requirements can be made. Assessing compliance at project completion is also tool dependent. If a model was used to develop the initial goals and determine applicability of design changes, estimating overall reliability performance should be accomplished relatively easily and inexpensively. However, if a model was not used, some form

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of that technology will need to be applied to estimate overall reliability performance. The other option is to forego the check and let the proof of the pudding be in the operation.

SUMMARY In the recent past, plants have focused on improving profitability by reining in operating cost and moving from reactive maintenance to proactive maintenance, and to equipment management programs. With the potential for new investment to meet the increased demand for petroleum products and environmental regulations, plants need to use a work process to ensure reliability and maintenance are considered during project development. If reliability and maintenance is not considered, the past efforts to better control operating costs will be jeopardized and plants will undertake new initiatives in the future to rein in high operating costs and poor reliability. A work process, which closely follows asset optimization, is available for ensuring reliability and maintenance is considered during project development. The ideas and practices are not out of line with common sense, or good business practices; so acceptance of the process should be relatively straightforward. The biggest drawback seems to be resourcing the front-end review activities and the concern that the activities will increase cost and schedule. Management, as part of their support for the program, should understand that the additional funds for early involvement will be paid back in lower life cycle cost. Similarly, project management needs to recognize that projects are not an entity unto themselves, but part of a bigger business picture. If action is not taken, life cycle cost will not be optimized, firefighting will continue into the future, and the competition will move ahead. References Blueprint for Product Reliability, "Defining Reliability Programs", RBPR-1 May 15, 1996, Reliability Analysis Center Rome, N.Y. Blueprint for Product Reliability, "Developing Reliability Goals/Requirements", RBPR-2, October 1, 1996, Reliability Analysis Center Rome, N.Y. Blueprint for Product Reliability, "Designing for Reliability", RBPR-3, October 1, 1996, Reliability Analysis Center Rome, N.Y. Ferguson, Darrell, "A Best Process Model for Asset Optimization", Maintenance Technology, Volume 13, No.10 (November 2000) Hough, James, "Reliability Program Tutorial Notes", 2001 RAMS Conference

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XXI.

INDUSTRY BEST PRACTICES, RESULTS, ISSUES, CHALLENGES AND LESSONS

“There is a tide in the affairs of men, which taken at its flood leads to fortune.” William Shakespeare; Julius Caesar

This, the final chapter summarizes the best practices, results, major issues, and challenges that must be addressed in a program of Physical Asset Optimization.

BEST PRACTICES Following are some examples of best practices, procedures and instructions that are required for successful Physical Asset Optimization. They are not comprehensive descriptions of all the elements necessary to establish an industry best program but rather highlights. For details, refer to the applicable sections in this Handbook as well as the many books and papers that are available on each of the topics. Equipment Management Lubrication A comprehensive program that is specified by a detailed, written procedure and followed meticulously. The procedure must specify lubricant type for each use / point; approved suppliers; requirements for receiving inspection / testing, storage and issue; detailed instructions for checking, delivering and replenishing lubricants, both grease and oil, and procedures for disposal of used lubricants. All information necessary for quality lubrication from cleanliness, to operation and assurance of lubrication system integrity and quality must be covered in detail. Appendix E contains an abbreviated audit scorecard as a beginning. A comprehensive lubrication program must include instructions for sampling and testing to include a regular schedule, see Chapter XV for details. Where regular oil changes are specified, industry best typically test at regular intervals determined by equipment type, service and environment. Test intervals are typically less than the manufacturers recommended change intervals. Oil is replaced on actual condition rather than time. Condition Assessment Defined by a comprehensive written procedure that includes application, organization and reporting; the latter to include anomalies, responsibility for action and cost / benefit. Condition assessment is applied where cost effective to critical and general-purpose equipment. Monitored variables (vibration, lubricating oil, thermography, etc.), type (continuous [installed] or periodic), and interval are based on equipment type; defect symptoms; and the probability, cost, and consequences of failure, see Chapter XIV. Work Management An effective Work Management program and process is essential. The process must include a fully functional and effective CMMS, detailed instructions for planning and scheduling and the organization and trained personnel necessary to accomplish effective planning and scheduling. Metrics must be in place, regularly measured and publicized to gauge performance and effectiveness. Stores, Materials Management An effective materials ordering, management, storage and control process must be in place and functioning effectively. Access to stores must be controlled. Off hours controls when a warehouse may be unmanned is always a challenge. The process must include outsourcing parts and remanufacturing, Chapter XIII. Controls to restrict orders that result in “off the books” squirrel stores and routine maintenance tasks to assure stored parts retain delivered quality and are ready for issue are essential. Reliability Program A strong reliability program is essential. Appendix E contains the vital elements of a comprehensive reliability program along with consensus weights of each program element to prioritize importance.

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Precision Balancing Applied to rotating equipment, prioritized by size and shaft speed. Requires detailed procedures, quality standards and skilled personnel. Precision Shaft Alignment Applied to all rotating equipment and reciprocating equipment as applicable. Requires detailed procedures, equipment, training, skilled personnel and quality standards. Repair Procedures Detailed task instructions including safety precautions, operating restrictions, if applicable, parts and tools required, tests and measurements required upon completion as well as historical information such as parts replaced, final clearances, etc.

RESULTS This section illustrates one difficulty of establishing credible support for Physical Asset Optimization — managers who have had achieved success are often reluctant to publicize that success fearing the loss of a competitive advantage. Some typical results are illustrated in Figure 21.1.

Reactive World Class

OEE

Maintenance cost % RAV

5%

>80% >80%