Partner & Director
Related Expertise: Manufacturing, Operations, Automotive Industry
When seeking to improve productivity, many manufacturers have historically taken a hands-off approach to maintenance labor. Maintenance workers have been regarded as skilled craftsmen—and management has feared alienating them by introducing new standards, metrics, and practices to improve productivity. Manufacturers have also sought to keep maintenance staffing levels high to ensure that equipment breakdowns are addressed immediately. The savings from minimizing production downtime are thought to outweigh the costs of keeping excess capacity in the maintenance labor pool.
But this traditional mindset has come with a price. Manufacturers are missing out on opportunities to improve overall operating performance as well as reduce maintenance costs. Enabling the maintenance function to provide better service to production promotes better equipment performance. The resulting increase in uptime can lead to significant operating improvements. At a global steel manufacturer, the introduction of world-class maintenance practices at a single plant reduced equipment downtime due to maintenance delays by 13 percent, resulting in almost $5 million in annual savings.
The direct reduction in costs can also be significant. According to our analysis, the portion of a plant’s cost structure that is usually addressable—labor, repair and maintenance (R&M) parts and tools, and utilities—accounts for approximately 15 percent of total costs for the typical organization. Experience shows that improvements in maintenance productivity can enable 10 to 20 percent savings on these addressable costs, reducing conversion costs by 2 to 4 percent. (See Exhibit 1.) Manufacturers with a portfolio of plants can potentially capture more value by using a central program-management office to support best-practice sharing and performance measurement.
Although it will be challenging to change the traditional mindset, the current environment presents an excellent opportunity for manufacturers to pursue productivity improvements in maintenance. Recent across-the-board reductions in labor capacity have resulted in many experienced workers leaving the maintenance function. While older workers still dominate the maintenance labor pool, the proportion of younger employees is increasing, and they are often more open to accepting new ways of working. In addition, contrary to what some old hands may believe, maintenance work can be performed according to a predictable schedule using standardized methods and a common set of tools. Standardization helps to reduce variability in performance and thereby improve productivity. Moreover, at companies that reduced capital investments during the economic downturn, the need for improved maintenance productivity is greater than ever. Because these companies’ aging equipment requires more attention from maintenance, manufacturing productivity and costs will suffer if the maintenance function does not raise its game to handle the workload.