It looks like we may have dodged the GFC bullet but are we out of the woods? Most maintenance organisations were asked (or made) to make large reductions in their expenditure, and the risk is that those cuts could drastically reduce reliability in the long term. Even though we may have weathered the storm, it is unlikely the board rooms will be loosening the purse strings for some time. It is imperative then that we make a good job of managing what funds we do have. As maintenance managers we have a responsibility to ensure we are making sound decisions based on known facts when committing funds to execute maintenance. We have a further responsibility to communicate these decisions to all levels of the organisation to ensure there is a clear understanding of why these decisions were made. This communication is critical if maintenance managers are to be successful in maintaining the current budget levels while ensuring we also maintain and try to improve equipment reliability.
Ask yourself the following questions:
- At the beginning of the month do you know how much your budget/forecast is and what it is for?
- During the month do you regularly track how you spend the budget/forecast?
- At the end of the month do you meet your budget/forecast?
- During the month have you spent the funds on what you had planned to spend it on?
If you answered yes to all four questions you may as well start reading another article!
The majority of us would answer yes to the first question and some yes to the second, however not many would answer in the positive to the last two.
We commit considerable resources into formulating our budgets. Some organisations will seconde a number of key personnel for months to make sure they prepare a budget that will pass through the torrent of obstacles with minimal reduction.
Do we put in a similar amount of effort into ensuring we do what we said we would do? In some cases we can say we did not exceed our budget; can we also say we actually performed the work we had budgeted for, or did we do different work that cost about the same?
Is this an indication that all the planning and budgeting we do is flawed and wasted effort? As with most areas of planning we can never anticipate all eventualities. What we can do is set a budget close to what we expect, then as we get closer to the execution phase, we can make adjustments to accommodate changing circumstances.
This process of budgeting for long periods of say 12 months and then re-forecasting at shorter intervals of 1 month is not a new concept but what we do need to improve is how we perform the re-forecasting. Then how we manage the subsequent spending during that forecast period.
When gathering the information for the new forecast we must include information from the following sources:
- The original Budget
- The planned work in the CMMS
- Rectification/breakdown work and opportunities in the CMMS
- Expected parts deliveries in the purchasing system and any outstanding commitments not received in the previous period
- Information on possible work from production and maintenance supervisors, planners, Engineering and others
The important point here is that everyone who can spend the maintenance dollar must contribute any available information to the person who actually owns and manages the maintenance budget. This person will then present that information to the management group so they can make an informed decision on what work will actually be performed and how much they are willing to allow maintenance to spend on it. This decision should then be communicated back down the line so there is a clear understanding of the work to be done in the next period and how much money has been allocated for its execution. The next objective is making it happen as we have planned and forecast.
At this stage we can cross our fingers and hope, or we can continue to manage the outcome.
This can be achieved by monitoring expenditure and compliance to plan on a regular basis. At Best Practice level this would be on a daily basis but at a minimum should be performed on at least a weekly basis. Key stake holders need to meet early, being in the morning for a daily process or the beginning of the week for weekly reviews.
This allows for proactive actions as opposed to reactive countermeasures. It is easier to prevent the occurrence of a problem than deal with the aftermath (prevention is better than cure). The meetings need to be structured and organised so that they are completed quickly and have minimal impact on other business.
Best practice would see a meeting being no longer than fifteen minutes for a moderately large area. During these reviews the following key information needs to be presented with the focus on deviations from the plan or confirmation of compliance:
- Actual costs as they currently are in the General Ledger (GL)
- Outstanding commitments in the Purchase System expected to be received in the current unforecast work or breakdown costs expected to be incurred in the current period
- Un-forecast work or breakdown costs expected to be incurred in the current period
- Invoices received for accruals from the previous month
In my experience, the most effective way to manage all of this information is in a spreadsheet. Gathering reports from the various systems and then getting some boffin to work out a way of presenting it all in a simple table format and then tracking it on a graph at each meeting.
The output from the review should be a list of actions complete with accountability and a time frame for completion, as well as a condensed set of minutes which highlight non compliance to plan including a short explanation of what occurred. graphical representation of the current situation and any outstanding actions.
The whole process needs to be "Championed" by the owner of the budget who should have the ability and authority to ensure people follow up on actions ASAP.
The outputs need to be communicated to the entire organisation in a format which can be absorbed quickly and effectively.
A half page email usually suffices with a KPI Board in a central communication area containing a large graphical representation of the current situation and any outstanding actions.
At the end of the period and as part of the last review meeting, any work which was not completed needs to be considered for inclusion in the following periods forecast. As a result, the final review meeting also forms the forecast meeting for the next period and makes this a continuous process
Hopefully the forecast was met and the majority of the planned work was performed. If this was not the case the review meeting minutes will provide the information as to why work was not executed as planned or why un-forecast work was performed. This information can be used to assist in communicating non compliance to upper management and provide input to problem solving so similar situations can be avoided in the future.
The road to maintenance cost control lies in education and communication. Personnel in positions where the maintenance dollar can be spent must have a clear understanding of the level of funds currently available and what those funds were approved for.
Deviation from the plan must be accompanied by approval from the appropriate level of the organization and contingency plans agreed to for managing the repercussions of those deviations. There needs to be a good understanding of accounting basics so that simple errors are reduced and communications with the finance department are clear and often.
Information about the current level of spending needs to be regularly communicated both up and down the company structure in a format that is easily understood.
In time it is hoped that by becoming good cost managers, upper management's confidence in our ability to manage funds will lead to the maintenance department being seen as a good investment and we will be able to continue to improve reliability and increase productivity.
Stuart Carlile - Principal Consultant, Assetivity Pty Ltd
Based in Perth, Stuart has had 25 years experience in the maintenance field in a variety of roles and industries which include the Royal Australian Navy, exploration drilling, the mining industry, mineral processing and heavy manufacturing. His varied experiences have given him the chance to work with a wide range of organisations and presented him with the opportunity to gather knowledge from a variety of people. His expertise lays in developing systems for the management of maintenance activities including planning, budgeting and motivating and developing people. His easy-going, people-focused manner engages the workforce, and results in sustainable improvements in systems and processes which are "owned" by client staff at all levels.
Stuart holds the following qualifications: Post Grad Certificate in Reliability Engineering, Diploma of Front Line Management, Certificate IV Workplace Trainer, Fitter/Machinist First Class.