Lessons We Can Learn from Australian Companies in Their Journey Toward Reliability and Operational Excellence
IMC-2012 Conference Speaker
My first trip to Australia was in May 1995. It was exciting and rewarding. I found Australians to be friendly, fun loving, open to new ideas and very interested in reliability. And still do. We have much in common with Australians. I’ve been going there now three to four times per year ever since then, making four trips per year most years and have now been there more than 60 times. It’s a long trip, but every single trip has been very gratifying and rewarding. If ever I were kicked out of the United States for some bizarre reason, I would go to Australia first and ask if they would let me in. More importantly, while all the companies there continue to have considerable opportunity for improvement, their industrial operations have made remarkable progress in their journey toward reliability and operational excellence.
Then - 1995
My first encounter with Australians was in making a presentation to a group called the IMRt of SIRF Rt, that is, the Industry Maintenance Roundtable of the Strategic Industry Research Foundation Roundtables. You can see why it’s abbreviated. If you have a keen sense for the obvious, you can guess that it is a group of maintenance managers and engineers, all of whom are very interested in reliability. There are very few, if any, operations managers, no executives, no capital projects managers, no purchasing managers…just maintenance managers. Giving my presentation was a wonderful experience. Everyone (that I know of) was quite enthused to see that the process being presented and discussed required the inclusion of several other functions, among them design, operations and procurement, in order to assure reliability and operational excellence.
In my early trips to Australia, as with most places I’ve traveled, workshops were attended mostly by maintenance personnel. When the word reliability was mentioned, it was viewed as a maintenance thing, so the nearly automatic response to “reliability workshop” was to send a group of maintenance people. At the time, it was typical for maintenance managers, engineers and others in attendance to report the following:
- Reactive maintenance made up ~50% of the total maintenance work, the balance being heavily focused on PM/planned maintenance, with a small amount of predictive/condition-based and even smaller being proactive or root-cause based.
- Operations had little or no role in assuring reliability.
- Capital projects and purchasing had little or no role in reliability; stores were an afterthought most of the time.
- Overall equipment effectiveness (OEE) or asset utilization (AU) was very often not measured, but when it was, it was reported as ~ 50%-60% for discrete/ batch plants and ~ 70%-80% for process plants; it was often not even used to determine asset performance. If the production schedule was met, all was good with the world.
- Most plants were mediocre relative to unit cost of production.
As the Aussies say, it was all pretty ordinary. (Beware of an Aussie saying, “Oh, that’s pretty ordinary” - they don’t mean average, rather far from it). Maintenance and reliability were, in essence, big M and little r, very little r. My experience, however, has found that if you don’t have strong operations leadership and ownership for reliability, along with a strong philosophy for lifecycle costs in the design and total cost of ownership in purchasing, plus excellence in leadership, teamwork and alignment to these principles, you will not have reliability and operational excellence.
Now - 2012
Over the past many years, however, Australian companies have made a great deal of progress in most industries. Progress has been slow and gradual, but continuing. There is far greater realization of the leadership role that operations must play to assure reliability; of the fact that most production losses and equipment failures are typically not controlled by maintenance, but rather by operations and design, and to a lesser extent procurement; and of some simple ratios - there are typically two to 10 times more operators than maintainers in a given operation, so operators plays a critical role in reliability. A simple way of thinking about this is that maintenance can’t fix things faster than operations can break them. Alternatively, expecting maintenance to own reliability of a plant is like expecting the mechanic at the garage to own the reliability of your car. Most of us need a good mechanic, but if we don’t operate the car properly and take good care of it, the mechanic cannot make up for that.
Today in Australia, there is still a heavy emphasis on maintenance as a key contributor, but there is far more emphasis on operations’ leadership role for assuring reliability and a far greater appreciation of the need for reliability to be led from the top, i.e., site manager, VP of operations and COO or CEO.
- Reactive maintenance is now typically in the range ~35% and often less, with the rest being more “balanced,” that is having a larger dose of PM/planned maintenance, of predictive/condition-based maintenance and a reasonable dose of proactive or root-cause maintenance.
- Operations has an increasing, and often leadership role, in assuring reliability, except in many mining operations.
- Capital projects, purchasing and stores still need considerable work, but improvements have been made.
- Overall equipment effectiveness (OEE) or asset utilization (AU) is commonly measured and used to develop improvements. It’s uncommon for an operation not to be measuring this in some form. While I don’t have as much data on this, anecdotally, OEE is routinely measured and seems to be somewhere in the range of ~ 55%-65% for discrete/ batch plants and ~ 75%-85% for process plants. A few even report significantly better performance. OEE still needs more attention in terms of how it is used to manage the losses from ideal.
- Reliability, much like safety, is a business imperative for many more Australian companies. This is because plant operating data strongly indicate that a reliable plant is a safe plant, a cost effective plant and an environmentally sound plant. To have all these simultaneously, you must be applying reliability principles across the company.
- There is simply a greater overall awareness in Australia of the need for a more holistic approach to reliability.
- Finally, and perhaps most importantly, far more executives, GMs and operations managers are focused on leading the reliability improvement effort, and far more executives attend reliability and operational excellence workshops than any in other countries. Klaus Blache, who heads the Reliability and Maintainability Center (RMC) at the University of Tennessee, points out, “Executives won’t come to a course on reliability in the U.S.” That has been my experience in the U.S., but not so in Australia. It is not extraordinary to have a CEO or COO in a session and quite common to have a site GM or VP in a session. In turn, they lead and drive reliability improvement using a more holistic approach.
While there are many good companies in the U.S., I don’t think the overall progress has been as good as it has been in Australia. Why has Australia made more progress, at least from my, perhaps isolated,
perspective? The reasons are numerous and discussed below. I should note that my opinions are not based on any exhaustive research or compelling analysis, but rather impressions from working there for many years. Perhaps we could learn something from them, and indeed, I’m writing this article to share some of what I observed as a frequent traveler to Australia with the hope that the United States and others can benefit from these observations and lessons.
First, and as noted above, more Australian executives have come to realize that reliability is a business imperative, much like safety, and is closely linked to safety. The data from operating plants demonstrate that a reliable plant is a safe and cost effective plant. Though there are many exceptions, Australian companies are more active in reliability and operational excellence than their American counterparts. I believe the reason for this is three-fold: 1) American executives associate reliability with maintenance, and in many cases consider the two synonymous; 2) maintenance is not considered a strategic issue, and therefore of lesser importance (though they complain loudly about the costs); and 3) American executives typically do not understand reliability principles, or maintenance for that matter.
Another reason could be that while Australia is large in land mass (nearly the size of the U.S.), it is a relatively small country in population, with some 20 million people. Furthermore, a larger proportion of industries there, in most states except Victoria, are focused on natural resources - like mining, ore processing and related industries. Because of more common problems, systems and issues, this appears to make networking easier among the different companies in the same industries. A good process for networking is available in Australia and we’ll discuss more on that later. This networking process encourages greater sharing of reliability/ best practices for operating and maintaining the plant, and more often includes integrating design, procurement and employee development practices. Bill Holmes, Managing Director of SIRF Rt, has suggested that this may not be the case since most mining operations are remote, making networking more difficult, not easier. While it is true that these sites are often quite remote, and having spent several nights in tin huts at these sites, I can certainly relate. The big issue seems to be having the opportunity to network among similar operations. This is where SIRF Rt has played a critical role, which is also discussed below.
Holmes also suggested that this perception may make it easier for others, and particularly Americans, to say, “We’re different, so this doesn’t apply.” While they may actually do that, my opinion is that taking that view is utter nonsense, hogwash. American companies are not all that different. It’s just that their leadership is not as involved in reliability and operational excellence as a business imperative. Peter Drucker, famed management consultant, said 90% of all organizational problems are common. Indeed, that has been my experience. W. Edwards Deming said that 85% of all organizational problems are because of poor management and just before he died, he said he was wrong, it was 95 percent. One could argue the percentages, but even if they are anywhere close, the issue is management and leadership. Australia is truly a resource-rich country, and they have the managerial systems, rule of law, infrastructure and technology to take advantage of this.
In a bit of a paradox, however, the same factors that make it essential for Australian resource industries to have reliable operations also make it possible for most of them to make money without having reliable operations. If you’re sitting on a high concentration ore body, reliability is not necessary to be successful - you can be reactive and still make plenty of money. As one person observed, “Excellent ore bodies make bad miners.”
Granted, the poorer operators soon find themselves in difficulty, particularly if they have no structural advantage, such as a high concentration ore body. The more enlightened companies however, and not just resource-based companies, want to achieve the maximum business performance, and are thus giving a lot of energy to a holistic approach to reliability to assure optimal performance.
One of the major reasons why Australia has made really good progress, in my opinion, is the networking company, SIRF Rt. There are other companies in Australia doing similar things, but I’m most familiar with SIRF Rt. It began with support from the Victorian state government in conjunction with the Commonwealth Scientific and Industrial Research Organization (CSIRO) and the Australian Academy of Technological Sciences and Engineering (ATSE). Its original focus was to bring technology and best practices from around the world into practice in Australian industries, that is, to learn, use and build upon what others have developed, rather than reinventing things that already exist. Its foundation as an organization in the sciences encouraged working from a basis of fact and learning.
According to Bill Holmes, a member of SIRF Rt from its early days and now its managing director, from the beginning, focus was given to learning with an open mind and with no particular agenda except to facilitate the gathering of knowledge for its members. This was crucial to its long-term success. It provided a compass so that emphasis was given to the strategies and tactics that led to success for its members. SIRF Rt was not driven to rollout a particular tool or ideology, but instead its first few years were really a journey of inquiry with a growing number of members benefiting from learning along the way. Knowledge and understanding was sought from around the world. From this, early benchmarking studies showed SIRF Rt that two themes in particular were critical:
- The principle that maintenance is not about “putting it back together to be as good as new,” but rather about understanding why things fail and changing “the system” so they don’t fail again. Hence, a more holistic approach to reliability and problem-solving was taken, particularly a focus on other issues, such as operating and design practices. Other issues that came to the forefront were leadership, alignment, teamwork and human resource management. And, of course, attention was given to improvement in traditional maintenance practices, such as planning and scheduling, preventive and predictive maintenance, stores management and contracts management. All these are critical to understand, but are meaningless without a clear direction from the leadership of the organization. Thus, a greater emphasis was placed on the executive role in reliability and operational excellence.
- The principle that eliminating waste, in all its forms, is critical, as is recognizing the importance of operator ownership and responsibility for outcomes, something which is fundamental, for example, to the Toyota Production System.
In fact both points are really the same, but use words and concepts that are meaningful to different people. Fundamentally, both are about truly understanding what is causing the many forms of waste (another name for defects in the reliability model) and then providing systems that eliminate the waste and defects.
According to Holmes, the early influencing factors were:
- The Fraunhofer Institute for Terotechnology concepts from Manchester University by Dr. Tony Kelly, which gave insights into the European perspective.
- Vince Flynn of DuPont and a paper he delivered at the 1991 TPM World Congress in Tokyo, which, among other things, reported a $200 million a year savings through a focus on reliability. This was an astonishing claim. A $200 million savings to a company might be equivalent to an extra billion dollars in sales, but without all of the capital and logistical costs in achieving the business improvement without growth. This also led to meeting Ed Jones and Winston Ledet, who offered exceptional insight into manufacturing excellence and how to influence a large audience, e.g., 150 or so sites across DuPont, and provided a roadmap to success. Of special note was Winston Ledet’s insight on how to change the culture of an organization and address the systemic issues that can be corrosive to success. His workshop, called The Manufacturing Game, is an outstanding example of how to engage people at all levels in understanding the key issues within an organization and in aligning the functional groups within the organization to solve problems and eliminate defects.
- Insights from the Toyota Production System (TPS) were profound. TPS, which applied total productive maintenance, gave insight into the importance of the operator in a reliable plant and prompted the creation of networks focused on manufacturing excellence.
- Various benchmarking studies across some 130 sites were particularly beneficial. However, an important side benefit was that SIRF Rt developed a strong insight into what is important in delivering the best results within an organization. This fed back into the design of its networking activities. SIRF Rt did not randomly present opportunities for learning, but instead focused on the more important messages and the strongest approaches.
Over time, SIRF Rt has “morphed” into a pure networking company, with over 250 members from various companies and industries. This networking approach facilitated the sharing of best practices - operating, maintenance, stores and other practices - among members so as to lift each industry to a highly competitive level on a global scale. Vendors and consultants participate by invitation only, and generally are not permitted in networking meetings. At the request of members, vendors and consultants can present information or do workshops for their benefit. However, the key driver is members sharing among each other how they have addressed particular problems and issues successfully. This gives the practice or approach far more credibility in the eyes of companies considering the practice since there is no bias toward pushing any commercial product or outcome by members as there might be with a consultant. To facilitate this, a regional facilitator takes on several tasks:
- Organizes monthly and quarterly meetings for members to share with each other certain practices that have been successful.
- Arranges specific so-called common interest workgroups (CIWGs), wherein a specific issue or practice is reviewed and developed by a subcommittee of members who may have a special interest or expertise in this area, for example, performance measurement, electrical or rotating equipment reliability, operator care, contractor management, developing supplier alliances, and so on.
- Organizes annual conferences for the sharing of specific information around reliability and operational excellence. Different topics arecovered at each conference, e.g., applying lean manufacturing principles, equipment condition monitoring, planning and scheduling, and so on.
- Coordinates external thought leaders to provide specific seminars and workshops targeted at a particular purpose, e.g., lean manufacturing, fleet maintenance, operating practices, reliability and operational excellence, and so on.
- Provides easy access to basic ingredients for success in the areas of problem-solving and waste elimination.
There are 13 SIRF Rt networks and their regional facilitators run more than 300 one- and two-day activities designed to expose and share some aspect of best practices.
It is critical to note that these topics, while facilitated by SIRF Rt staff, are driven by the members and their needs. The focus is on helping members work together to solve common problems and improve performance. As such, they have a much greater sense of ownership and, therefore, focus on implementation of the practices that are developed and shared among the members.
There are many examples of similar concepts around the world, but there seems to be an intensity and clarity of focus and purpose that is different in Australia. To put all this in perspective, remember that Australia’s land area is similar to the contiguous United States, but the U.S. population is 15 times greater. If the numbers are simply scaled up by a factor of 15, then SIRF-Rt networks would be similar to a U.S. organization:
- Running 180 regional networks around the U.S.;
- Engaging more than 3,500 companies and sites;
- Conducting more than 4,000 one- and two-day activities per year, all designed at sharing and improving practices in operations. That consistency and drive makes a difference.
Yet to Be
The reliability model often being used in Australia is provided below:
Figure 1: Reliability Process Model
While Australian companies have made considerable progress, there is still much to be done. Not withstanding the considerable executive attention being given to reliability as a business imperative, there is still much convincing to be done among executives. There are still too many executives who, when they hear the word reliability, think of it as a maintenance- driven activity. It is not. You will never have good reliability by only doing good maintenance. You will be doing more efficient work that you should not have to do in the first place. Even worse are those executives who hear the word maintenance and immediately think of costs and breakdowns, something to be viewed very negatively. Clearly, maintenance excellence is required to manage the defects and failures, no matter the cause, but the critical effort for ensuring reliability is to eliminate the defects upstream of maintenance that are causing the failures, and particularly in improving operating and design practices. Reliability must be operations led.
Similarly, much progress has been made in involving operations in taking a stronger, even lead role, in assuring reliability, but much remains to be done. For example, the development of strong, disciplined operator care routines, including look, listen, feel and smell, to ensure operators take care of the place where they make their living so it will take care of them; a greater focus on consistency of operation to specific standards across all shifts; better practice in startup and shutdown efforts since the greatest risk of failure and defect creation is during startup and shutdown; and just generally greater process consistency and conformance to specific standards. My experience has been that about two-thirds of production losses have nothing to do with the equipment. It’s because of things like changeovers, rate and quality losses, production planning problems, etc. Of the one-third that is equipment-related, some two-thirds of that is typically because of poor operating practices. This leaves maintenance in control of only about 10% of the total production losses. Reliability is about an operation’s ability to reliably produce quality product. Maintenance controls very little of that.
In my view, only a little progress has been made in design and purchasing, specifically getting these two functions to think longer term than the initial price or the installed cost, that is, to focus on lifecycle cost and total cost of ownership. Some progress has been made in managing the stores operation, but this area typically reports to purchasing and one of its primary drivers is often reducing inventory since this is working capital not working parts. Reducing inventory and parts availability without improving related operating and maintenance practices will only increase the risk of loss and waste to the business.
And of course, there is still considerable work to be done in maintenance, including better condition monitoring to detect problems early so the risk of loss can be minimized through better planning and scheduling, including integrating the maintenance plan with the production plan so there is one plan for the site; optimization of PM routines for more effective and efficient use of labor; better lubricating practices - some 40% of machinery failures are due to poor lubrication; and greater precision in the work done to put reliability into the equipment.
Training and employee development is also lagging in many companies. Most companies spend millions each year operating and maintaining their plant, but very little to improve their employees’ ability to better operate and maintain. As someone once said, “If you think education is expensive, try ignorance.”
With all this said, I’ve observed that Australia has made remarkable progress over the past 17 or so years, for the reasons discussed above, and particularly with executives playing a much stronger role in reliability and operational excellence. Yet, much remains to be done. I’m hoping I’ll have another 17 good years to help in their development. However, the more important question is, “What can the United States and other manufacturers learn from the Australians that will help them be more competitive?” Hint - executives must take the leadership role.
Ron Moore is the Managing Partner of The RM Group, Inc. Ron is the author of Making Common Sense Common Practice: Models for Manufacturing Excellence (now in its 4th edition) and What Tool? When? - A Management Guide for Selecting the Right Improvement Tools (now in its 2nd edition), both from the MRO-Zone.com, and Our Transplant Journey: A Caregiver’s Story from Amazon.com, as well as over 50 journal articles. He holds a BSME, MSME, MBA and CMRP.