Asset Life Cycle Costs and Your Automobile
The USA Today just ran an article on the annual cost of operating an average automobile for 2012 driving 15,000 miles. (Larry Copeland, April 16, 2013). The article had a couple of very interesting quotes:
“The biggest percentage increase this year was in maintenance costs, which grew by 11.26% to 4.97 cents per mile, on average, for sedan owners.”
“The maintenance cost estimates are based on the cost to maintain a vehicle and perform needed repairs for five years and 75,000 miles, including labor expenses, replacement part prices and the purchase of an extended warranty.”
“Since last year’s study, there were substantial increases in labor and parts costs for some models, and a significant rise in the price of extended warranties.
So how would we apply this to maintenance in our plants and facilities? What if a maintenance manager went to his executive team and said “maintenance costs will be increasing by 11.26% next year, so we will need at least that much of a budget increase.
The executive team would probably answer “What!!”.
The maintenance manager would continue, “Since most of our equipment is beyond the five year life expectancy and has run time beyond the vendor’s projection, we can expect the labor and replacement part cost to grow exponentially. Also, we have had increases in the maintenance labor and spare parts cost from some of our foreign suppliers, so the overall maintenance cost increase will likely be in the 17% range. I know we had a budget of $15M last year, so I expect the forecasted budget to come in at $17.55M this year.”
I wonder how long it would take the executives to come back with a “Your budget will be the same as last year” or “Your budget will take the same 10% cut as the rest of the departments.” It is humorous to consider how companies cut their maintenance expense budget without giving documented and factual consideration to the consequences. Countless studies have shown that reducing the maintenance budget by eliminating preventive maintenance, spare parts, and maintenance headcount increase equipment failures and reduce the capacity of a process or manufacturing plant. You can go back and review my last two blogs if you need reminders of what a reduction will do to facilities.
Most of us understand why we maintain our automobiles and are willing (maybe begrudgingly) to perform proper maintenance and repair on them. Why is this not the case in our plant? The real answer is found in the lack of understanding (at the executive level) of asset management. Perhaps with the growing interest in PAS-55 and the developing ISO-55000 standard, the executive team will become more educated in the value of good asset management policies and processes. If not, our company assets will never be as reliable as our automobiles.