Know Your R&M Quartile
EP Editorial Staff | February 16, 2018
By Dr. Klaus M. Blache, Univ. of Tennessee Reliability and Maintainability Center (RMC)
“Why is it important to know your R&M (reliability and maintenance) quartile?” Just like all continuous-improvement efforts, you need to understand your current status to establish a baseline from which to measure progress. Let’s take a look at Reactive Maintenance Percentage and Maintenance Cost/Replacement Asset Value as means of understanding the impact of quartiles. The accompanying table shows percentages, by quartile, for those two measurements, based on my 2016 study of more than 140 companies representing more than 3,000 facilities (all types of industries).
Companies in the 1st quartile are at 9% reactive maintenance and operations in the 2nd quartile are at 19%. Historical data shows that a reactive-maintenance event is five to ten times more expensive than a scheduled-maintenance event. If you are in the 2nd quartile, that means 10% of your total maintenance budget x average cost per maintenance event x 5 = your minimum savings if you are a 1st-quartile operation. If you are in the 3rd or 4th quartile, the savings become even more eye opening.
The Maintenance Cost/Replacement Asset Value numbers tell the rest of the story. I’ve calculated values to less than 1% (discrete manufacturing) and exceeding 20% (mining operations), with most between 2% and 9%. What’s unique about this universal metric is that it’s scalable for all types and sizes of businesses. When I go into a facility, I observe current practices to assess how they are actually spending their resources. This includes such things as in-place lean-process elements, daily maintenance processes, material flow practices, and problem-solving/continuous-improvement robustness. It doesn’t take long to determine whether these processes are in place, understood, and being applied. By doing this, I can determine whether daily practices are driving improvements or costs are being cut simply to improve the metrics.
Replacement Asset Value (RAV) is a good indicator of how effectively you are using financial resources to maintain assets. If you are at 20% of RAV, you spend enough on maintenance each year to pay for a new plant every five years. At 2.1% (1st quartile) of RAV, it would take more than 47 years for your maintenance expenditures to equal the cost of acquiring a new plant.
Take time to collect necessary data so you can have an informed discussion and make fact-based decisions. Otherwise, you are only another person with an opinion. Also, keep in mind that everything is related. When looking at industry overall, note that, for each quartile, there is about a 5:1 ratio of Reactive Maintenance to Maintenance Cost/RAV. This ratio can vary by industry type. However, as you get to best-practice numbers with either of these metrics, the top-quartile values are similar for most types of industries.
Know your current and target quartile for these metrics. If you don’t know where you are going, you may end up where you are headed. EP
Based in Knoxville, Klaus M. Blache is director of the Reliability & Maintainability Center at the Univ. of Tennessee, and a research professor in the College of Engineering. Contact him at email@example.com.