Building A Winning Maintenance Strategy


Published on

Guy Delahay, Owner and Managing Partner at Mainnovation Inc., discusses building a winning maintenance strategy through the use of the Value Driven Maintenance methodology, a state of the art framework that calculates economic added value of maintenance using Net Present Value techniques and industry specific maintenance benchmarks. Organizations that have embraced this practice have been able to achieve impressive results including:

30% Uptime Improvement
50% Cost Reduction
40% lower MRO stock value
View the slides to understand the steps invloved in building a winning maintenance strategy, such as understanding your Dominant Value Driver, utilizing KPI's and benchmarking, implementing Maintenance Best Practices, and exploring Value Drive Maintenance.

Published in: Technology, Business
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Building A Winning Maintenance Strategy

  1. 1. Building a Winning Maintenance Strategy with Value Driven Maintenance <ul><li>Webinar September 27th, 1:00 - 2:00 pm EDT </li></ul>Guy Delahay MSc Managing Partner [email_address] +1 917 562 5050 Mainnovation Inc. 445 Park Avenue New York, NY 10022
  2. 2. Personal Introduction <ul><li>Industrial Engineer, graduated in Maintenance Management (M.Sc. degree from Eindhoven University of Technology) </li></ul><ul><li>25 years of experience in maintenance / asset management improvement projects </li></ul><ul><li>co-Founder of ‘ Mainnovation ’ and co-author of the book on ‘ Value Driven Maintenance ’ </li></ul><ul><li>Former Chairman of the Maintenance Association in the Netherlands </li></ul><ul><li>Regular speaker and chairman on international Maintenance Management Conferences </li></ul><ul><li>Heading the USA office in New York since January 2011 </li></ul><ul><li>Married and 4 children </li></ul><ul><li>Hobbies: cars, hockey and music </li></ul>Guy Delahay Managing Partner E: M: +1 917 562 5050 T: +1 212 836 4306
  3. 3. Introduction Mainnovation <ul><li>Consultancy firm specialized in improving Maintenance, Reliability & Asset Management </li></ul><ul><li>Founded in 2000, since then steady growth of 30% per annum despite economic climate </li></ul><ul><li>Developers of Value Driven Maintenance ® (full intellectual property) </li></ul><ul><li>Recognized as thought leaders and pioneers in maintenance business intelligence </li></ul><ul><li>Offices in the Netherlands, Belgium, UK and USA </li></ul>
  4. 4. Our Service Lines Interim & Change Management Process Consultancy CMMS/EAM & BI Reliability Engineering <ul><li>Audits & Benchmarking </li></ul><ul><li>Asset Management Strategy & PAS-55 Certification </li></ul><ul><li>Standardize & Improve Work Processes </li></ul><ul><li>Align Maintenance Organization </li></ul><ul><li>Skill Development & Training </li></ul><ul><li>Maintenance Excellence Programs </li></ul><ul><li>Training & coaching in RE techniques (FMEA, RCM, RBI, RCA, PMO) </li></ul><ul><li>Development and optimization of Preventive Maintenance Strategies </li></ul><ul><li>implementation of RCM++ ® </li></ul><ul><li>MRO spare parts analysis </li></ul><ul><li>Asset Master Data Management </li></ul><ul><li>Securing continuity in changing environments </li></ul><ul><li>Integrate improvement agenda in day to day business </li></ul><ul><li>Change Management on the shop floor </li></ul><ul><li>Recruitment </li></ul><ul><li>CMMS Strategy Development </li></ul><ul><li>CMMS Software Selection </li></ul><ul><li>CMMS Implementation Support </li></ul><ul><li>VDM based KPI dashboards built in Cognos ® and BusinessObjects ® </li></ul>
  5. 5. Customer Experience includes: Infrastructure Manufacturing Other Chemicals Life Sciences (Waste) Water Transportation Energy & Utilities Paper & Board Dredging & Offshore Food & Beverages Oil & Gas
  6. 6. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy
  7. 7. What is your Winning Maintenance Strategy?
  8. 8. Poll Question 1 <ul><li>What is your most important strategic objective? </li></ul><ul><li>to serve Production the best way we can (without Production there would be no need for doing Maintenance anyway) </li></ul><ul><li>to stay within budget at all times </li></ul><ul><li>to become (or remain) a World Class / Best in Class maintenance organization (high score in a Maintenance Excellence program) </li></ul><ul><li>to make money for my company </li></ul>
  9. 9. The Maintenance Dilemma <ul><li>too often Maintenance is treated as a cost centre (a necessary evil) </li></ul><ul><li>the Maintenance Manager is not able to convince the Board of the real value potential and the need to invest in improvements </li></ul><ul><li>hence, Maintenance suffers from budget cuts year after year. It ’ s hard to keep the team motivated, to hire new talent and the workforce is ageing. Loosing grip by being forced to outsource work to third parties... </li></ul><ul><li>Why can ’ t we convince the Board? </li></ul><ul><ul><li>we don ’ t speak the same language </li></ul></ul><ul><ul><li>our strategies are not S.M.A.R.T. enough </li></ul></ul>
  10. 10. <ul><li>first and only maintenance methodology that really calculates the Economic Added Value of Maintenance, using Net Present Value techniques and industry specific Maintenance Benchmarks </li></ul><ul><li>provides focus on the real performance killers and supports setting the right targets and priorities </li></ul><ul><li>creates a Continuous Improvement mindset with yearly improvement cycles </li></ul><ul><li>is adaptive to changing economic climates </li></ul><ul><li>boosts the speed of improving by using proven best practices and the full capabilities of modern CMMS / EAM systems </li></ul><ul><li>provides an all-inclusive Maintenance Management Framework, filling the gaps not covered by existing methodologies like TPM, RCM, .. </li></ul>Value Driven Maintenance ® (VDM):
  11. 11. Definition of Value The sum of all free future cash flows, discounted to today Value = In case of sustainable cash flows, year after year, the following short cut applies: Net Present Value = CF 0 + (NPV) CF r r = Internal Rate of Return (IRR) or ‘ discount rate ’ or ‘ hurdle rate ’ (representing the opportunity costs of capital) CF 0 = Cash Flow at year 0, CF t = Cash Flow at year t Net Present Value = CF 0 + (NPV) ∑ CF t (1 + r) t
  12. 12. Value Of Maintenance Value Potential of Maintenance = Sum of all free cash flows (discounted to today), derived from improving (either): A sset U tilization (∆CF AU ) C ost C ontrol (∆CF CC ) SHE Compliance (∆CF SHE ) R esource A llocation (∆CF RA ) = ∆ CF AU + ∆CF CC + ∆CF RA + ∆CF SHE r Assumptions: - sustainable improvements, year after year - no SHE limitations for expanding production volumes Important: - calculate the potential for each driver individually - check the interference (positive/negative) - determine the Dominant Value Driver
  13. 13. Value Potential depends on:
  14. 14. Value Calculation Example Asset Replacement Value (ARV) = 200 million USD Current Maintenance Spendings = 10 million USD Maintenance Costs vs ARV = 5% (current score) the value of 1% improvement (incremental): 1% of 10 million USD = 0.1 million USD per year NPV ∞ = (0.1 million)/0,10 = 1 million USD Sustainable Improvements Growing Market r = 10% = 0,10 the Performance Gap (Maintenance Cost vs ARV): Current KPI score = 5% Realistically achievable in 2 years = 4% Relative change = | (current - new) / current | = | (5 - 4) / 5 | = 20 % Value potential on Cost Control: = 1 million USD x 20 = 20 million USD (or 2 million per year) say C 0 = 0.5 million USD, then: NPV CC = -0.5 + 20 = 19.5 million USD EBITDA ( ‘ annual profit ’ ) = 90 million USD Current Technical Availability = 90% (technical uptime, ‘ maintenance OEE ’ ) Assumption: growing market the value of 1% improvement (incremental): 90 million USD / 90 = 1 million USD NPV ∞ = (1 million)/0,10 = 10 million USD the Performance Gap (Technical Availability): Current KPI score = 90% Realistically achievable in 2 years = 92% Relative change = | (current - new) / current | = | (90 - 92) / 90 | = 2,2 % Value potential on Asset Utilization: = 10 million USD x 2,2 = 22 million USD (or 2,2 million per year) say C 0 = 5 million USD, then: NPV AU = -5 + 22 = 17 million USD
  15. 15. Remember <ul><li>In most cases one value drive will be significantly higher than the others. Speed up business results by focusing on this Dominant Value Driver! </li></ul><ul><li>Dominant Value Driver changes over time </li></ul><ul><li>Dominant Value Driver may differ per plant, per line, depending on the Product Life Cycle </li></ul><ul><li>Calculation must be based on reliable, industry specific benchmark data </li></ul>
  16. 16. Examples of Maintenance Value Creation Reduction of maintenance costs with 2 mio EUR EBITDA improved by 20 mio EUR Maintenance cost reduced with 50% MRO stock reduced with 50% EBITDA improved with 15% 27% uptime improvement (equals 15.000 trucks) 5% more uptime plus 7 mio EUR cost reduction 5 mio EUR benefits after first wave of VDM audits 45 mio USD improvement potential revealed for 30 sites Bengt Svensson Maintenance Manager at Volvo Cars “ ..Thanks to the VDM concept, our plant in Torslanda Sweden has been able reduce costs by around SEK 340 per car or SEK 70 million per year. ..VDM is based on constantly measuring and report back on anything that affects how assets are utilized . Without VDM, it is unlikely that we would have succeeded in implementing cost controls as successfully and quickly as we did.. ”
  17. 17. Maintenance can make the difference! BP almost collapsed after fatal Deep Water Horizon incident... DSM outperforms industry peers after implementing new vision and Operational Excellence program..
  18. 18. Poll Question 2 <ul><li>In your organization and market situation, which value driver will have the biggest value potential? </li></ul><ul><li>Asset Utilization: more uptime, sell more products </li></ul><ul><li>Cost Control: reduce Maintenance & Reliability spendings </li></ul><ul><li>SHE: compliance with Safety, Health & Environment legislation </li></ul><ul><li>Resource Allocation: reduce Spare Parts stock level </li></ul>
  19. 19. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy
  20. 20. The VDM Roadmap to Continuous Improvement Value Driven Maintenance ® (VDM) Project & Change Management Vision Creation Operation 1. Start up 2. Current State Analysis 3. Future State Visioning 4. Improvement Agenda <ul><li>Improve </li></ul><ul><li>Asset </li></ul><ul><li>Reliability </li></ul>6. Design Work Process 7. Optimize IT 8. Align Organisation 9. Implement Future State 10. Stabilize Transition 11. Celebrate Success 12. Close-Out
  21. 21. VDM Vision Phase <ul><li>collect basic data </li></ul><ul><li>connect right people </li></ul><ul><li>communicate the why </li></ul><ul><li>Measure Current Performance: </li></ul><ul><li>KPI scores compared to industry peers </li></ul><ul><li>current practices </li></ul><ul><li>understand why you are there </li></ul><ul><li>Define Desired Future State: </li></ul><ul><li>identify your core competences </li></ul><ul><li>review running initiatives </li></ul><ul><li>learn from internal & external best practices </li></ul><ul><li>set realistic targets </li></ul><ul><li>Shape your Improvement Action Plan: </li></ul><ul><li>challenge scope, priorities & targets </li></ul><ul><li>choose best approach & team(s) </li></ul><ul><li>review business case </li></ul>1. Start up 2. Current State Analysis 3. Future State Visioning 4. Improvement Agenda
  22. 22. from Maintenance Value Drivers...
  23. 23. to Core Competences
  24. 24. Measure Performance with VDM KPIs
  25. 25. Benchmark with <ul><li>companies joining the VDM Benchmarking Program get secured login access to our online benchmarking database </li></ul><ul><li>after on-site validation by our consultants, the data will be activated </li></ul><ul><li>based on (sub) industry and other parameters, the tool will select the best set of benchmarking peers </li></ul><ul><li>the tool will not only show your current performance at a glance, but directly calculate the improvement potential </li></ul><ul><li>the tool will guide you through the process of defining your winning strategy </li></ul>
  26. 26. Example your scores industry peers
  27. 27. Levels of Professionalism Understand where you are today and which step you can realistically achieve
  28. 28. Clever use of Best Practices <ul><li>Once you know on which competences you need to focus, select the relevant (internal & external) best practices to compile your improvement action plan </li></ul>See the VDM Book for an overview of best practices RCM, FMEA, PMO, PdM,.. Gatekeeping, Peakshaving OAC, 5S, RCA, OEE Asset Based Budgeting Condition Monitoring Risk Based Inspections SGA, RCA, FI Cost Driver Analyis MRO Segmentation
  29. 29. Example of a Focused Improvement Plan
  30. 30. Case Study GlaxoSmithKline <ul><li>GlaxoSmithKline (GSK) is a leading global player in the Life Sciences industry </li></ul><ul><li>GSK adopted VDM in 2006 as the framework for Maintenance Excellence Assessment throughout the Primary and Secondary Product divisions </li></ul><ul><li>the VDM Audit Assessment approach is embedded in GSK ’ s Operational Excellence Roadmap </li></ul><ul><li>Up to 2010, Mainnovation has conducted most of the audits. For repeating audits and small sites, Mainnovation has trained GSK certified auditors using the VDM Benchmarking Database </li></ul><ul><li>To date, the benefits discovered by the program are at least 5 mio EUR per year. </li></ul>Pharma
  31. 31. Case Study DSM <ul><li>Leading company in life sciences and high performance materials with over 100 plants worldwide </li></ul><ul><li>DSM adopted VDM in 2002 as it provided a framework for the meetings of DSM Maintenance User Group </li></ul><ul><li>DSM started an internal maintenance benchmarking & auditing program using the VDM Benchmarking Tool </li></ul><ul><li>VDM helped to structure and enhance the maintenance work processes in their MANUFEX program </li></ul><ul><li>2007: 25% cost reduction (= $52M per annum) without jeopardizing SHE and Asset Utilization </li></ul><ul><li>And they are still improving! </li></ul>Chemicals
  32. 32. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy
  33. 33. VDM Creation Phase 5. Improve Asset Reliability 6. Design Work Process 7. Optimize IT 8. Align Organisation
  34. 34. Create Improved Competence 5. Improve Asset Reliability 6. Design Work Process 7. Optimize IT 8. Align Organisation
  35. 35. Focus on your performance killers <ul><li>instead of full blown RCM programs or huge Master Data Management exercises, go directly after your trouble equipment and prove the value potential </li></ul>
  36. 36. Improve & Standardize your Way of Working
  37. 37. Best Practice Process Description
  38. 38. Linked to detailed reference materials
  39. 39. Linked to Organizational Roles & Skill Profiles
  40. 40. Case Study Volvo Cars <ul><li>Volvo Cars Manufacturing operates 4 production plants in Sweden and 1 in Belgium </li></ul><ul><li>Volvo Cars is a recognized TPM champion but adopted VDM to respond to changed market conditions </li></ul><ul><li>In 2006 the VCMS program was launched to standardize the work processes and IT systems. VDM was used to: </li></ul><ul><ul><li>validate the Maintenance Strategy of each plant and benchmark the performance </li></ul></ul><ul><ul><li>develop a best practice maintenance process map </li></ul></ul><ul><ul><li>develop a Global Maximo Template </li></ul></ul><ul><ul><li>develop a dedicated maintenance game to improve change readiness on the shop floor to really embed the new way of working </li></ul></ul><ul><ul><li>Volvo achieved 50% reduction in maintenance costs </li></ul></ul>Automotive
  41. 41. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy
  42. 42. Our view on Maintenance Business Intelligence Yearly Set targets Evaluate results and trend Daily / Weekly CMMS KPI Dashboard Plan Act Do Check or or download to Excel use KPI Report Generator in your CMMS use a preconfigured KPI Dashboard solution
  43. 43. Case Study Conagra Foods <ul><li>Leading manufacturer of consumer food products with 30 (main) operating plants </li></ul><ul><li>ConAgra Performance System (CPS) to standardize work processes, IT and organization (ONE company) </li></ul><ul><li>The Planned Maintenance Pillar started off with TPM, later adopted VDM </li></ul><ul><li>VDM tools have been customized to ConAgra ’ s CPS setting. This includes: </li></ul><ul><ul><li>VDM benchmarking database </li></ul></ul><ul><ul><li>VDM Process Map </li></ul></ul><ul><ul><li>VDM RE Roadmap </li></ul></ul><ul><ul><li>VDM KPI Dashboard </li></ul></ul><ul><li>Estimated project benefits: USD 45 million per year </li></ul>Food & Drink
  44. 44. What is it (4)? Full drill-down analysis capability KPI score YTD is in red and the trend is negative... Cost go up rapidly starting in August/September... Biggest spend is on Production assets, mainly spares for corrective work orders interactive report shows the cost split up per work order
  45. 45. Summary
  46. 46. Winning Maintenance Strategy Value of Maintenance KPIs & Benchmarking Maintenance Best Practices VDM Inside Understand your Dominant Value Driver Understand how good you are & where to improve Use proven best practices to innovate your organization Measure your performance & improve continuously
  47. 47. Building a Winning Maintenance Strategy with Value Driven Maintenance <ul><li>Thank you for your attention! </li></ul>Guy Delahay MSc Managing Partner [email_address] +1 917 562 5050 Mainnovation Inc. 445 Park Avenue New York, NY 10022