A Cost-Benefit Case for Condition Monitoring
Jane Alexander | March 13, 2017
Gain management support for PdM efforts, whether your organization is an owner/operator of equipment assets or services those belonging to others.
What’s the best way to justify a condition-monitoring investment? The question is a common one whenever plant personnel are seeking—or trying to maintain—management support for an equipment-reliability program. While reliability and maintenance professionals are quick to recognize the value of condition monitoring and the predictive-maintenance (PdM) efforts that support it, they often have difficulty translating this value into terms executives will appreciate.
Chicago Bridge & Iron (CB&I), Woodlands, TX, (cbi.com), found itself facing that type of situation in early 2014. The global engineering, procurement, and construction (EPC) services company needed a way to assure a petrochemical client’s management team that its condition-monitoring services, i.e., PdM program efforts, were delivering hard value.
According to Scott Yenchik, reliability director of CB&I Plant Services, his organization had been performing vibration analysis, oil analysis, ultrasound, motor management, infrared thermography, and visual inspections at the client’s plant for almost a year. The benefits were clear to the site’s Operations and Maintenance (O&M) personnel—they wanted to expand the program. The management team, however, remained unaware of the bottom-line benefits. That presented a problem.
“Without strong executive support,” Yenchik said, “the expansion would never happen. Even worse, a decrease or elimination in funding would return the plant to reactive mode.”
The solution to the dilemma was found in existing tools and a simple methodology that CB&I had already been using. Working with the client’s O&M personnel, CB&I helped create a reliability-review team that initiated a cost-benefit analysis of the PdM efforts to:
• quantify the program’s results in a language C-level managers could understand and appreciate
• validate the value and necessity of the plant’s existing condition-monitoring investment
• justify increasing the PdM program’s scope
• ensure that the figures were credible and convincing.
Not only did the plant’s managers accept the cost-justification numbers and attribute the value to the reliability-review team’s efforts, they also elected to increase the company’s investment in equipment reliability. The PdM program has since grown in scope and impact.
Yenchik explained that the reliability-review team built its successful cost-benefit case on three easy steps “that anyone who owns or services critical assets can follow.”
Step 1. Start small and leverage available tools. A handful of lucrative “saves” is usually all it takes to convince management of how valuable a condition-monitoring program can be. For critical equipment in particular, the financial benefits of failure cost avoidance are substantial enough to deliver a rapid return on investment.
Cost benefits are based on the difference between what could have occurred upon failure versus what action was actually taken as a result of monitoring. For this cost comparison, CB&I set a goal to assess just 5 to 10 condition cases each week, which is not very intrusive. Only fully closed cases would be included.
CB&I worked independently to develop the cost-benefit analysis process, and then involved the plant’s reliability engineer, CMMS (computerized maintenance management system) coordinator, and operations representative in the assessments. The cross-functional reliability-review team asked questions about each selected condition scenario and negotiated their probability and likely costs of failure. In addition, they calculated the actual costs of recommended PdM actions. Costs such as parts, labor, transportation, and production impact were included.
Since these figures were not available from the client’s CMMS, CB&I retrieved them through its own Tango reliability-information-management system from 24/7 Systems Inc. (Louisville, TN, tf7.com). Integrating all CB&I condition-monitoring activity, the web service captures data on actual and projected costs and provides a basis for measuring avoided costs.
The client’s cost-benefit details were subsequently exported from the Tango system to Excel for customized presentation to the plant’s executive team. Highlights of the findings included actual vs. projected costs, which equipment types had the highest total cost avoidance, and which “bad-actor” assets represented the highest costs.
Step 2. Ensure trust with credible cost-benefit analysis results. Making the data visible is only half the battle. Any business case must be credible with numbers perceived as “real” in order for management to really pay attention. Though individual numbers may be debatable, having sufficient analysis, cleanly presented in charts by asset type and by technology, makes the savings tangible and actionable.
Building trust began with the plant’s reliability-review team members. CB&I faced resistance early on, but gradually the participants recognized the value of their efforts and the reviews were no longer considered a nuisance.
Within the first few months, 15 to 20 cases were assessed and documented, including an impressive $100,000 potential cost avoidance from a visual inspection on a critical asset. That marked the moment of management buy-in during the first management-review meeting.
In these quarterly meetings, PdM cost-benefits are presented to the plant manager as a consensus opinion of the reliability-review team. The rapport with management soon became so positive that the plant manager began to contact the condition-based inspection technicians directly with equipment questions. (The review team has since been invited to share its findings with other sites.)
Operations’ confidence in the PdM program also grew. Over time, typical consultation among reliability-review team members and the Operations representative was reduced to merely seeking final agreement on matters. After 18 months, the review team no longer had to involve Operations in each case.
Step 3. Quantify PdM-program successes and act on conclusions. For CB&I, nearly $2 million in cost-avoidance savings over the first-year analysis period were revealed. The reliability-review team provided this benefit to the plant by using enough technology to thoroughly complete the job, increasing the value of the technology they had already acquired, and honoring a commitment to provide enough processes and resources to deliver the full benefit of the technology.
Cost-benefit analysis results allow the petrochemical plant to visualize hard-dollar savings, validate the condition-monitoring program, and justify PdM expansion costs. It also reveals trends in equipment and asset types. For example, plant personnel had previously been unaware that their motors had the highest rate of faults in their equipment fleet, not to mention how expensive those motor failures really were. Easily fixable problems such as loose components, balance issues, and bearing degradation were among the most common issues identified—issues that led to motor-repair expenditures of $430,000 in a single quarter.
To reverse this trend, the equipment-type and fault-count data were used to guide the plant’s motor-management strategy, and someone was hired to work full time on motor management. In addition:
• Motor procedures were created for shaft rotation, motor repair and replacement, and motor handling for on-site and off-site requirements.
• Stored motor offline meg-ohm readings and resistance-to-ground readings were tested to identify motors with low RTG (resistance-to-ground) readings.
• Climate-control storage improvements were made, and a station was set up to apply/energize the motor heaters of larger motors.
• An opportunity to focus on better alignment practices, including laser alignment, was identified.
• Vendor surveillance was instituted to track motors going to shops, check the work quality, and hold people accountable.
Similarly, the data showed that, among all equipment assets, the plant’s gearboxes alone accounted for $661,000 in costs, and that almost a million dollars in savings were possible through condition-monitoring efforts. Consequently, gearboxes became a focus of the site’s lubrication-analysis program, which, in turn, spurred investment in more oilers, improved cleanliness, and a filter cart.
CB&I’s reliability-information-management system can also indicate where savings are lacking for a certain asset with regard to condition-monitoring tools. It can also allow personnel to determine:
• if they’re not using a PdM technology correctly
• if a PdM technology isn’t generating sufficient value
• if a PdM technology is working, but there aren’t sufficient processes or resources to support its use and derive full benefits.
Yenchik said that the CB&I team has plans to extrapolate the petrochemical plant’s data further for continuous improvements. Their next step is to address the root causes of deteriorating conditions. They also intend to leverage the information across other sites within the company. Yenchik puts the value proposition into the form of a question: “If a $200,000 save is made for one motor, and the company owns three similar motors,” he asked, “why wouldn’t all four units need the same PdM?”
A Certified Maintenance and Reliability Professional (CMRP), CB&I’s Scott Yenchik has worked in various capacities in the fields of maintenance, reliability, and electric-motor repair for 20 years. Yenchik is also certified in multiple PdM technologies, including Vibration Analysis Level III, IR Thermography Level II, and Airborne Ultrasonics Level I. Contact him at email@example.com.