Maintenance Cost as a % of Replacement of Asset Value - Where are you?

? Maintenance Cost as a % of Replacement of Asset Value - Where are you

 

It is difficult to find any organization who uses the two metrics "Total Maintenance Cost As a Percent of Replacement Asset Value (RAV)" and "Stocked MRO Inventory Value As a Percent of Replacement Value (RAV)". These two metrics have been used for at over 25 years and however very few companies use them. The question is why not?

SMRP (Society for Maintenance and Reliability Professionals) states the objective of these two metrics:  This metric allows comparisons of the expenditures for maintenance with other plants of varying size and value, as well as to benchmarks. The RAV is used in the denominator to normalize the measurement given that plants vary in size and value.  This metric is supported by the European Federation of National Maintenance Societies (EFNMS).

 

I understand industries are different however my question is why do organizations not measure against "sites in the same industry" or the "same company"?  Example: SMRP Maintenance Cost as a Percentage of Replacement of Asset Value (RAV)

 

Source: "Society for Maintenance and Reliability Professionals (SMRP) Best Practice Metrics, 3rd Edition" Maintenance Cost as a % of Replacement of Asset Value (RAV) 

A. DEFINITION

The metric is the amount of money spent annually maintaining assets, divided by the Replacement Asset Value (RAV) of the assets being maintained, expressed as a percentage.

B. OBJECTIVES 

This metric allows comparisons of the expenditures for maintenance with other plants of varying size and value, as well as to benchmarks. The RAV is used in the denominator to normalize the measurement given that plants vary in size and value.

C. FORMULA 

Total Maintenance Cost per RAV (%) = [Total Maintenance Cost ($) × 100] ÷ Replacement Asset Value ($)

D. COMPONENT DEFINITIONS 

Total Maintenance Cost- Total expenditures for maintenance labor (including maintenance performed by operators, e.g., total productive maintenance (TPM), materials, contractors, services, and resources. Include all maintenance expenses for outages, shutdowns or turnarounds, as well as normal operating times. Include capital expenditures directly related to end-of-life machinery replacement This is necessary so that excessive replacement versus proper maintenance is not masked. 

Do not include capital expenditures for plant expansions or improvements. Replacement Asset Value (RAV) Also referred to as Estimated Replacement Value (ERV). This is the dollar value that would be required to replace the production capability of the present assets in the plant. Include production/process equipment, as well as utilities, facilities and related assets. Do not use the insured value or depreciated value of the assets. Include the replacement value of buildings and grounds if these assets are included in maintenance expenditures. Do not include the value of real estate, only improvements.

E. QUALIFICATIONS 

1. Should be measured annually. 2. Typically used by corporate managers to compare plants, by plant managers, maintenance managers, operations managers, reliability managers, and vice presidents.  In began work at Alumax Mt Holly in 1980 and soon after Alumax, Mt Holly, began utilizing these two metrics, "Total Maintenance Cost As a Percent of Replacement Asset Value (RAV)" or "Stocked MRO Inventory Value As a Percent of Replacement Value (RAV). (along with many other metrics)

The last measurement taken by this company (Alumax, Mt Holly) before being bought out by Alcoa are posted in the headline of this article. These metrics were provided by the former Maintenance and Engineering Manager at this plant from 1979-1998, John Day, PE. John and his maintenance team used these metrics to manage maintenance, they were used to measure the effectiveness of maintenance on production "Capacity Assurance". What John determined was maintenance is not alone in area of reliability, maintenance manages asset reliability, production measures process reliability and together they produce capacity at the lowest cost. 

Lowest cost only means they are effective and efficient in the management of their maintenance and production processes and resources.Written by Ricky Smith CMRP, former maintenance employee of Alumax Mt Holly.  The results of John Day's legacy are shown in the heading of this article. John lives today with the same fire he had when he begin this journey in 1978 at Alumax, Mt Holly.

The Author: Ricky Smith CMRP, CMRT, CRL

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