The value of cost avoidance in the world of predictive maintenance

Cost avoidance is really nothing more than taking an action now to avoid a future cost. In the world of predictive/ preventative maintenance where we have several technologies that allow us to see or hear “problems” in our equipment, we have the option to repair or replace the anomaly prior to failure.

A quick look at the common predictive technologies includes:

• Infrared thermography
• Ultrasound acoustic monitoring
• Vibration analysis
• Oil analysis
• Partial discharge
• Motor testing
• Emissions testing

This short article is focuses on cost avoidance using thermal technology.

Since loose connections in electrical systems or bearing that lack proper lubrication do not fix or repair themselves, the ultimate end game for these systems is failure without action, based on the criticality of the pending problem.

The traditional bathtub curve is a graph that represents the failure rate of a piece of equipment over time. It includes possible failures during the startup phase or “infant mortality”. The curve continues through the normal life of the piece of equipment which can be years of even decades and ultimately to the end-of-life part of the curve. It is a basic way to help understand possible equipment failures and where to focus your predictive or proactive maintenance program. The basic goal with an active maintenance program is twofold, one to monitor the equipment and repair anomalies as the start to develop and second to prolong or extend the normal life of a piece of equipment which offers saving back to the company’s bottom line. Utilizing the power of the thermal imager, managing all stages of equipment life will yield less loss of production and longer equipment life.

Mean Time to Failure (MTTF) – the bathtub curve:

Cost Avoidance

A good maintenance program offers savings back to the company. The Federal Energy Management Program (FEMP), estimate that a properly functioning predictive maintenance program can provide a savings of 30 % to 40 % over reactive maintenance.

Other independent surveys indicate that, on average, starting an industrial predictive the following savings:

• Return on investment:                                    10x.
• Reduction in maintenance costs:                25 – 30 %
• Elimination of breakdowns:                          70 – 75 %
• Reduction in downtime:                                35 – 45 %
• Increase in production:                                  20 – 25 %

To maintain a good functioning PdM program, calculating savings associated with each anomaly helps to justify the costs of the personnel, tools and training associated with the program. Management needs to understand program savings to justify the costs of the inspection program. Without financial information, attention to the program diminish to a point where personnel and or funding can be redirected to other departments.

It’s not an easy task to cost out every loose connection or component that needs replacing but finding a simple way to show the “fixed” cost helps to justify all program costs. Below is a sample “Cost Avoidance” form.

Here we can document an anomaly on a disconnect. If we can fix it now the part cost is $380. and the labor for the repair is $200. Total cost prior to failure is $580. If by chance it goes to failure, we still have the initial labor and part cost, but based on the timing of the failure, we add in the 20 employees that are idle for 4 hours at $30 per hour. That total is $2,400. The total cost avoidance for this failure is $2,400. By keeping track of the avoided costs for the year you may find that your yearly savings are in the thousands or even tens of thousands or more. I have been involved with inspections where the savings from one failure reached over $2,000,000 dollars.

Another simple way would be to use the “Statistics Based Method”. This method applies a fixed cost to an anomaly based on the size of the facility in dollars and the criticality of the problem. There are three categories for the facility size and two ratings for the temp rise. In this article I’m showing only two categories.

• Small site: < $25 million
• Large site: > $25 million

Temp Rating                       Small Site                        Large Site
Critical or Serious                $3,000                               $8,000
Intermediate or Minor       $500                                  $1,000

We can assume that all anomalies with not fail. It is recommended to assume that 50% of problems found will fail.

In this example, if you are performing a thermal survey of a large site and find 4 critical and 12 intermediate issues and assume only 50% are likely go to failure the calculation and savings would look like this:

4 critical findings at $8,000/finding/2                         $16,000
12 intermediate findings a $1,000/finding/2                 $6,000  
                        Total savings                                                $22,000

Profit and costs drive business. Many business decisions are based on the return on each investment made of ROI. The importance of promoting a viable and sustainable predictive maintenance can help

• drive down costs.
• improve up-time.
• improve the profitability of the company.

In conclusion, documenting the cost avoidance validates the savings that predictive maintenance offers back to the company and can help boost an organization’s bottom line!