Applied Research Laboratory

HANDBOOK

OPERATING EQUIPMENT ASSET MANAGEMENT

YOUR 21ST CENTURY COMPETITIVE NECESSITY
First Edition

Compiled by:
John S. Mitchell
Edited by:
Mr. Thomas H. Bond
Ms. Natalie Nodianos
Contributors:
Dr. Thomas Brotherton
Mr. James C. Fitch
Dr. Howard Gaberson
Mr. Timothy Murnane
Mr. Jack R. Nicholas
Mr. Christian B. Staller

Pennsylvania State University

Applied Research Laboratory
P.O. Box 30
State College, PA 16804
(814) 865-9036

HANDBOOK
OPERATING EQUIPMENT ASSET MANAGEMENT
YOUR 21ST CENTURY COMPETITIVE NECESSITY

Acknowledgements
I.
Executive Summary
Operating Equipment Asset Management Your Path to Success
The Challenge
The Opportunity
Considerations
The Solution Operating Equipment Asset Management
Key Elements of Operating Equipment Asset Management
II.

Introduction
Illustrations
A.
Scope, Purpose, Vision, and Organization of the Handbook
Scope
Purpose of Handbook
Vision
Organization
B.
Operating Equipment Asset Management
Operating Equipment Asset Management
C.
Conditions, Necessity, and Benefits of Operating Equipment Asset Management
Conditions
Cost of Sub-Optimal Equipment Effectiveness
Value of Improvements
D.
Industry, Mission, and Equipment Applicability
Nine Layer Asset Hierarchy
E.
Evolution to Operating Equipment Asset Management
F.
Reliability Considerations
G.
Managements Challenge
Lead Culture Change
Provide Consistent, Continuing Support
Establish Ambitious Objectives
Create Financial Awareness
Invest for the Future
Appoint the Right Leaders
Deploy a Mission-Centered Strategy
Shift to a Profit Center Mentality
Manage the Change Process
Overcome Resistance

III.

Overview and Benefits of Operating Equipment Asset Management

Illustrations

A.

B.
C.

D.

E.

F.
IV.

Summary
The Requirement
Interactions Among Asset Classes
Identifying Asset Productivity Opportunities
Building Line Management Commitment
Operating Equipment Asset Management
The Process
Successful Operating Equipment Asset Management
Operating Equipment Asset Management is a Business Issue
Maximum Value, Not Least Cost
Profit Centered Management
Lifetime Ownership
Financial Measures
Capital Reduction
The Necessity for Information
Open Systems
A Proposed Equipment Information Model
Maintenance
Optimizing Maintenance
Reduce the Need for Maintenance
Maintenance Optimizing Processes
Maintenance as a Core Management Responsibility
Maintenance Life Cycle
Equipment Management Requirements for Facilities and Structures

Current Practices Combine in Operating Equipment Asset Management

Illustrations
Summary
A.
Background
B.
Evolution of Equipment Management Practice
Reactive Maintenance
Preventive Maintenance
Predictive or Condition Based Maintenance
Application
Value of Predictive Information
Proactive Maintenance
C.
An Optimized Equipment Management Program
D.
Reliability Centered Maintenance
RCM Principles Applied to the Selection of Condition Measurement
Technology and CBM
Dominant Failure Mode
Applicability
Effectiveness
Streamlined RCM
Other Derivatives of RCM
RCM Standards

E.

F.
G.

H.
I.

Failure Analysis
Failure Modes, Effects, and Criticality Analysis
Root Cause Failure Analysis
Weibull Analysis
Total Productive Maintenance
Six Sigma, 2Cp
Six Sigma
2Cp
The Balanced Scorecard
Utilization of Equipment Information within Control and Enterprise Resource
Planning Systems

V.

Metrics/Measures of Performance
Illustrations
Summary
A.
Introduction
B.
Benchmarking
Efficiency
Effectiveness
C.
Use of Metrics in the Improvement Process
D.
Commonly Used Metrics, Advantages and Limitations
1.
Corporate Asset and Capital Based Metrics
2.
Overall Effectiveness Metrics
Asset Utilization
3.
Industry Performance Metrics
4.
Equipment Management Metrics
5.
Key Performance Indicators
6.
Work Process Productivity Measures
7.
Leading Indicators
8.
Technical Metrics
9.
Indirect Metrics
E.
Avoided Cost
F.
Applications of Metrics
G.
A Measurement Process
H.
Identifying Benefits

VI.

Major Elements of Operating Equipment Asset Management

Illustrations
Summary
A.
Introduction
B.
Summarized Requirements
C.
Steps Necessary to Optimize Equipment Lifetime Performance
Equipment Lifetime
Design
Procurement
Installation

D.
E.
F.
G.

H.
I.

J.
K.

L.
M.
N.
O.
P.
VII.

Operation
Maintenance and Repair
Financial Measures of Performance
Understanding the Present
Gap Analysis, Current Compared to Objective
Mission Statement, Strategy and Prioritization of Efforts
Mission Statement
Strategy
Prioritizing Efforts
Business Plan
Requirements for Success
Commitment and Support
Cultural Change
Establish Ownership, Align Objectives
Improve Productivity
Accurate Lifetime Cost Tracking (Activity-Based
Accounting/Management)
Information and Communications: Demonstrate Progress to Objectives
Information
Organization
Planners and Schedulers
Organizational Hierarchy
Sub-Functional Hierarchy
Task-Level Structure
Reengineering
Training
Compensation
Outsourcing
Spare Parts Inventory Management

The Operating Equipment Asset Management Process

Illustrations
Summary
A.
Introduction
B.
Set Corporate Objectives
C.
Appoint a Steering Team
D.
Understand the Business
E.
Create a Business Model
F.
Focus Efforts
G.
Perform Gap Analysis
H.
Begin the Implementation
I.
Assemble Implementation Teams
Champions
J.
Identify Highest Priority Systems, Equipment, and Components
Systems
Equipment

K.

L.
M.
N.
O.
P.
Q.
R.

Components
Identify and Prioritize Opportunities
Existing Equipment
New Equipment
Establish Strategy
Select Technology and Practice
Build the Organization
Construct and Implement the Plan
Measure and Manage Results
Identify and Strengthen Weak Links Implement Continuous Improvement
Maintain Ownership and Support Institutionalize Success

VIII.

Industry Best Practices, Results, Issues, Challenges, and Lessons Learned

A.
Introduction
B.
Best Practices
Condition Assessment
Precision Balancing
Precision Shaft Alignment
Lubrication
Repair Procedures
C.
Results
D.
Issues
E.
Challenges
F.
Lessons

IX.

Condition Assessment Technology and Systems

Summary
A.
Technology Enables Maximum Gains
B.
Condition Monitoring Measurements
Vibration
Fluid Characteristics
Electrical Characteristics
Operating Performance and Efficiency
Thermogrpahy and Thermal Imaging
Ultrasonic Measurements
C.
Condition Measuring Systems
D.
Computerized Maintenance Management Systems
CMMS
E.
Condition Assessment Displays

X.

Signal Processing Algorithms for Equipment Defect Recognition and Identification

Illustrations
Summary
A.
Introduction
B.
Frequency Patterns
C.
Peak, rms, Overall, Crest Factor, Kurtosis

D.
E.
F.
G.
H.
I.
J.
K.
L.
M.

N.

O.

P.
XI.

Digitizing and Aliasing

Spectra
FFT Algebra
Harmonics and Orders
Sidebands, Amplitude, and Frequency Demodulation
Rolling Element Bearings
Cepstrum
Envelope Detection and Demodulation
Order Normalization and Time Synchronous Averaging
Bump Testing for Natural Frequencies
Time Frequency Analysis
Short Time Fourier Transform
The Wigner Distribution
RID Calculations
Wavelet Analysis
Continuous Wavelets
Analytic Signals and the Hilbert Transform
The Convolution Theorem
Orthogonal Wavelets
Comparison of Methods: Machinery Vibration Diagnostic Signal Analysis
Example
STFT
Pseudo Wigner Ville
Choi-Williams Distribution
Morlet Wavelet Analysis
Newland's Method
Summary

Fundamentals of Fluid Analysis for Industrial Machinery

Illustrations
A.
Introduction
Detecting Machine Faults and Abnormal Wear Conditions
Condition-Based Oil Changes
Monitoring and Proactively Responding to Oil Contamination
B.
Oil Sampling Methods
1.
Selecting the Ideal Sampling Point
2.
Procedure for Extracting the Sample
3.
Dont Contaminate the Contaminant
C.
Oil Sampling Frequency
D.
Selection of Oil Analysis Tests
Fluid Properties Analysis
Fluid Contamination Analysis
Fluid Wear Debris Analysis
E.
Monitoring Changing Oil Properties
Viscosity Stability
Oxidation Stability

F.

G.

H.
I.

Thermal Stability and Varnish Tendency

Additive Stability
Monitoring Oil Contamination
Particle Contamination
Moisture Contamination
Wear Particle Detection and Analysis
Elemental Spectroscopy
Ferrous Density Analysis
Analytical Ferrography
Interpreting Test Results
Importance of Training

XII.

Electrical Analysis: Static (Off-line) and Dynamic (On-line)

Illustrations
A.
Introduction
B.
Motor Condition Monitoring Technologies
Resistance to Ground
Surge Comparison (Surge) Testing
High Potential Testing
Motor Current Balance Analysis
Partial Discharge Monitoring
Motor Circuit Analysis
Motor Current Signature Analysis
Motor Power (or Electrical Signature) Analysis
Motor Flux or Leakage Flux Analysis
Motor Normalized Temperature Analysis
Time Domain Reflectometry
C.
Advantages and Disadvantages of Off-line and On-line Electrical Testing

XIII.

Decision Support
Illustrations
A.
Introduction
B.
Artificial Intelligence, Rule-Based Expert Systems, and Interference Engines
C.
Fuzzy Logic
D.
Model-Based Approaches
E.
Neural Networks
F.
Data Mining/Automated Rule Extraction

XIV. The Future

A.
Introduction
B.
Smart Sensors
IEEE 1451
C.
Open Systems
Open Systems
D.
Open Standards Organizations
MIMOSA

E.
F.
G.

OPC
Impact of Open Systems
Standards
Summary

Appendix A

Glossary

Appendix B

Understanding Producer Value

Asset Management
Equipment Lifetime Management
The Opportunity
Profit Center Mentality
Performance Gap
Economic Value Added
The Producer Value Model
Value of Operations and Maintenance
Equipment Effectiveness
Timed Production Effectiveness
Leveraging Conversion Effectiveness

Appendix C

Handbook References
International Joint Power Generation Conference Proceedings
Maintech 98 South Conference Proceedings
MARCON 99 Maintenance And Reliability CONference Proceedings
MARCON 98 Maintenance And Reliability CONference Proceedings
MARCON 97 Maintenance And Reliability CONference Proceedings
National Manufacturing Week 99 Conference Proceedings
National Manufacturing Week 98 Conference Proceedings
Other Papers

Appendix D

General References
1.
Books
2.
Periodicals
3.
Organizations
General Maintenance and Reliability
Engineering And Technical Societies
4.
Equipment Management Oriented Specifications
American Petroleum Institute Equipment Standards
ISO Standards on Measurement and Evaluation of
Mechanical Vibration

Appendix E Case Studies

A. The Twenty Nine Palms Projects - A Proven Success Story
"Nominal" Life Cycle
Abbreviated Life Cycle

ACKNOWLEDGEMENTS
In any project of this size, there are many groups and individuals to thank for their contributions.
An expression of appreciation must begin with The Best Manufacturing Practices Center of Excellence
for the vision to begin the process and the perseverance to finish. Thanks to the entire team who formed at
the Oak Ridge Centers for Manufacturing Technology in July 1997 for their concepts, ideas, and written
contributions. Thanks to Skip Gootel and Don Jarrell for their efforts to ensure the project was completed
and special thanks to Bill Nickerson for championing the project and finding the way to completion, as
well as contributing time, expertise, and encouragement.
Special thanks to CSi for their leadership and vision in sponsoring the interviews that contributed greatly
to the material contained in the handbook. To the individuals interviewed (listed alphabetically below),
thanks for sharing your experience, expertise, insight, and successes. I was gratified to learn of the
enthusiasm and consistency of purpose that you, as industry leaders, possess. I hope that this text does
justice to the contribution you are making to your respective companies.
Charles Bailey
John Burns
Jon Carlson
John Cray
Rick Elliott
Ron Evans
Lynn Fulton
Max Gorden
Stan Grabill
Jeff Grant

Peter Havelka
David Hilliard
John Horne
Cesar Ilagan
Art Jones
Mike Jones
Randy Jones
Bart Lee
Maril MacDonald
Bob Marston

Ian McKinnon
Tim Murnane
Roy Schuyler
Jerry Shockey
Joe Spencer
Tim Stovall
Wally Walejeski
Keith Wells
John Wood

Many thanks to the following contributors who wrote entire sections of the handbook. Your insight,
technical knowledge, writing ability, and time expended will provide great value to readers.
Tom Brotherton
Jim Fitch

Howard Gaberson
Tim Murnane

Jack Nicholas
Chris Staller

Thanks to Maintenance Technology and Reliability magazines, to the Vibration Institute, and to the staffs
for valuable resource material and permission to publish in this handbook.
Thanks to Tom Bond for the initial editorial comments. A friendship is never tested more than by asking
for editorial assistance. Thanks to Natalie Nodianos for editorial assistance and organizing the final
manuscript. To Rick Woomer, thanks for keeping a recalcitrant computer operating over three weeks of
intense activity. Thanks to Sue Snook and April Brumbaugh for maintaining a happy, highly productive
environment and helping an old fellow master new technology (fax and copy machines).
Finally, but by no means least, thanks to Sarah Mitchell for allowing me to move in and disrupt her
family for a month. She understands the anxiety of deadlines and the elation upon completion.
John Mitchell
October 1999

I.

EXECUTIVE SUMMARY

Operating Equipment Asset ManagementYour Path to Success

Youve probably heard the term Asset Management used to describe a better way of attaining corporate
and/or organizational objectives. Perhaps a product or system with Asset Management in its name has
been proposed or demonstrated as the solution to your challenges. But what exactly is Asset
Management? Is it another buzz word solution or something entirely new? Can Asset Management help
you in a world that seems constantly to demand cost reductions?
If you are interested in learning how to optimize the performance of your organizations physical assets,
you should read this handbook. It is packed with concepts and ideas for successfully managing physical
assets to gain greatest lifetime value that have been selected from the best of the best. Youll gain
knowledge in areas such as developing the process; optimizing current practices and technology;
financially justifying improvements; structuring multi-discipline, high-impact work teams for greatest
effectiveness; and demonstrating results. This handbook will convince you that Asset Management must
be a part of your future.
The handbook contains principles, information and results derived largely from leaders in industry. The
concepts, principles and processes apply equally to vessels, Navy and commercial, buildings with
mechanical equipment, aircraft and off-road vehicles.

The Challenge
In todays operating and production environments, systems and equipment must perform at levels that
were not thought possible a decade ago. Requirements for increased mission availability (military
readiness), throughput, product quality, agility, and operating effectiveness within a rapidly changing
demand environment continue to elevate the tempo and intensity of operations. As organizations are
pressured to reduce costs, they must produce the same or improved results with fewer people and, often,
with diminished resources. Increasingly restrictive social and regulatory constraints are contributing to
reduced experience levels, flexibility, and operating margins. The need to reduce capital employed is
leading to lower levels of stocked spare parts, diminishing redundancy and operating flexibility.
The necessity to maintainand often increaseoperational effectiveness, revenue, and customer
satisfaction, while simultaneously reducing capital, operating, and support costs is the largest challenge
facing operating and production enterprises. Success demands radical change from earlier culture,
process, management, and organizational concepts. Furthermore, organizations must attain unprecedented
levels of equipment availability, reliability, and maintainability. They must also manage extensive
information systems capable of predicting future operational readiness in ample time to effectively
mitigate mission-threatening anomalies.
Asset Management has become the Holy Grail to manufacturing in the 90s, ARC Automation
News, August 27,1999.
Leading production and operating organizations recognize the essential nature of increasing the
effectiveness of physical assets.
business is on the verge of a major next wave of asset productivity improvementone that will
go further and be more difficult to achieve than past initiatives. The Boston Consulting Group (115)

With business, manufacturing, administrative, supply chain, and logistics activities improving, asset
optimization is the final frontier for achieving major gains in operating effectiveness, corporate
profitability, and shareholder value. Organizations that pursue this path will be winners in the years
ahead.

The Opportunity
Opportunities for asset management are substantial. Reports indicate that North American industry could
recover $200 billion to $500 billion annually through improved physical asset management. For example,
General Motors reported that its worldwide maintenance spending on production machinery and
equipment totaled $4.7 billion in 1994, approximately 13 percent of the capital invested in these physical
assets. The same report stated that a benchmarking survey disclosed that Japanese automobile
manufacturers were spending approximately 3 percent of capital investment to sustain physical assets.
Eliminating the gap will improve GMs annual profit by $3.6 billiona move that unquestionably would
be welcomed by their shareholders.
As another example of a comprehensive, enterprise-wide approach to asset productivity, a large chemical
company had experienced an alarming seven-year decline in return on investmentdue primarily to
decreasing asset productivity. Its consistently poor asset performance (nearly 4% below the cost of
capital), led the company to conduct an extensive analysis of opportunities for asset productivity
improvements across most of its divisions.
One part of the review was a top-down exercise in which senior managers, with their project teams,
benchmarked each business unit against the performance of relevant industry peers. On the basis of this
analysis, the teams estimated that, given competitors typical levels of asset productivity, the company
would be able to improve its performance by about 25 percent, freeing up some $5.5 billion in assets.
Assuming cash-flow margins held constant, this improvement in asset productivity could potentially
produce a one-time increase in returns of roughly 50 percent and increase shareholder value by 20
percent, creating almost $6 billion in new value. (115)
The Department of Defense (DoD) reportedly spends approximately $40 billion annually to maintain
physical assets. Of this total, the U.S. Navy should be able to save $750 million to $1 billion per year
through more effective physical asset management. 1
Improved production effectiveness gained by comprehensive equipment asset management offers even
greater potential benefits. Most enterprises, ranging from automobile manufacturing to power generation
and military operations, are being forced into a minimum lead-time, demand-pull process where
predictable equipment reliability is essential to meet customer expectations. Simultaneously, they must
strive for maximum effectiveness, profitability, and return on capital, as well as minimum reserve
capacity and redundancy. Compared to world class industrial effectiveness of 80 to 85 percent, the
estimated overall effectiveness of the following industries are:

Petroleum and petrochemical facilities: 90 percent or greater

U.S. manufacturing facilities: approximately 50 percent or less
U.S. Navy: less than 30 percent

These estimated savings are based on the following assumptions: 1) the U.S. Navy spends 25 percent of the DoD
total, 2) 50 percent of the Navy total is expended on shipboard assets, and 3) the Navy can achieve half the gains
demanded by commercial industry.

Reports indicate that industrial production could be increased by approximately 20 percent by eliminating
losses, including the cost of lost opportunity, downtime, and slow time; poor quality; waste; and scrap
caused by equipment malfunctions. The asset effectiveness of Naval ships is more likely related to
personnel, rather than performance and endurance of the assets themselves.
For a profit-oriented industrial corporation, the savings gained by improved asset management represents
a significant improvement in gross profit and the commonly utilized financial measures of Return On Net
Assets (RONA) and Return On Capital Employed (ROCE). For most companies, the profit potential is in
the tens to hundreds of millions of dollarsthe equivalent to 20 to 35 percent of non-raw-material
Operating and Maintenance (O&M) costs. For operating entities like the U.S. Navy and non-profit state
and municipal organizations, the savings realized from improved asset management increases operating
effectiveness and budgetary flexibility.
In both government and industry, the gap between current and potential performance represents hidden
capacity and return that must be utilized. Opportunities abound. Industry leaders are developing
comprehensive processes of asset optimization designed to increase their lead over competitors who may
not yet recognize the need for any changes beyond cost reductions. The concept and implementation for
improved asset management is mandatory for gaining full operating effectiveness, return, and shareholder
value.

Considerations
Successfully improving asset effectiveness requires addressing all contributors. Within industry these are
availability, yield, quality, and costthe four horsemen of asset effectiveness. Availability, yield, and
first-run quality are more profit factors than cost issues. Balance among the four is all-important; by
focusing solely on cost, organizations risk falling on the sword of availability, yield, or quality.
One company, directing attention and efforts to quality improvements, found that a concurrent
decline in availability had nullified quality improvements.
The balance often will vary with demand.
Another company anticipates that a 75 percent increase in value will be gained from increased
first-run quality and yield. The remaining 25% will result from cost reductions.. They emphasize
that companies cannot starve themselves to prosperity by relying solely on cost reductions.
The last statement highlights the danger of gaining short-term results at the expense of long-term
prosperity. Concentrating solely on reducing costs by outsourcing to low cost providers and eliminating
people and programs will produce short-term results. However, results gained typically consume assets
and are not sustainable without comprehensive cultural, organizational, and process changes. More
important, they address only about half of the actual expense. There will be an added price in the future,
when fewer options and operating alternatives are availablethe well known pay now or pay more
later.
Reducing defects is the key to reducing spending. Reducing defects is the only way to address both the
labor and material consequence of failures. Focusing on labor cost alone immediately limits
improvements by 50 percent (the approximate labor component of a typical repair)! As defects are
eliminated, corresponding reductions can be safely and permanently implemented throughout the
organization, including cutbacks in idle capital used for redundancy, work-in-process, and spare parts.
Negative cash flow caused by failures will be minimized and operating availability and production
effectiveness will increase.

Long-term effects must be carefully considered when initiating change. Many companies have reduced
their workforce as a means of cutting costs, only to discover that they have lost the knowledge and
experience necessary to safely and effectively perform vital tasks.
Organizations who see and understand what is happening recognize that physical asset management holds
the key to reaching the next level of corporate effectiveness. Assessing the operations of a variety of
organizations has indicated that a set of first principles is being refined to optimize asset utilization.

The SolutionOperating Equipment Asset Management

A variety of terms are used to describe physical asset optimization. Magazine articles and conference
presentations often refer to the concept simply as Asset Managementa term that is also applied to
managing hospital beds, real estate, and financial resources. For the purposes of this handbook, a more
specific term, Operating Equipment Asset Management (OEAM), is used to denote:
A strategic, fully integrated, comprehensive process and culture directed at gaining greatest
lifetime utilization and effectiveness from production and operating equipment assets.
Operating Equipment Asset Management provides the strategic and implementing framework for
processes, systems, practice and technology. It addresses an enterprises:

Specific mission and objectives

Market, business, and operating conditions
Opportunities
Site-specific requirements and conditions
Safety and environmental compliance
Reliability
Operating efficiency
Operating and maintenance costs
Logistics (spare parts) management

Operating Equipment Asset Management is an integral, inseparable part of operations and manufacturing
processes. OEAM includes design, procurement, installation, operation, and maintainability to ensure that
in-service reliability matches mission requirements. It begins with a comprehensive strategy linking
equipment reliability and capacity management with market conditions and facility and mission
objectives. The strategy includes risk assessment and management, connected through layered measures
of performance that promote optimized process, system, and component effectiveness. OEAM is profit
oriented. Its goal is to strive for best-in-class operational effectiveness. OEAM begins with a radical
change in philosophy, culture, and practice, followed by continuous improvement to refine the process
and steadily elevate effectiveness.
Paul ONeil, Chairman of Alcoa, in a speech signaling change in his company noted that:
Continuous improvement is exactly the right idea if you are already the world leader in
everything you do. It is a terrible idea if you are lagging. It is probably a disastrous idea if you
are far behind the world standard. He added I believe we have made a major mistake in our
advocacy of continuous improvementwe need rapid, quantum-leap improvement.
Many industry leaders are following a similar process toward optimizing equipment management.
Although implementation details and specific measures of performance may vary between industry
groups, strong similarities are firm evidence that an optimizing process for equipment asset management

is coalescing. The emerging process is likely to become a substantial competitive advantage for
enterprises that recognize the opportunity and are capable of capturing the benefits.

Key Elements of Operating Equipment Asset Management

The Operating Equipment Asset Management process is represented in Figure 1.1. The figure illustrates
the progression of identifying and prioritizing opportunities; constructing a strategy and tactical action
plans to address opportunities; injecting processes, systems, technology and resources; measuring results;
and closing the loop with continuous improvement.
OEAM is, first and foremost, a process. It represents a hybrid approach that combines technology and
systems such as Total Productive Maintenance (TPM), Reliability Centered Maintenance (RCM), and
Preventive and Condition Based Maintenance (PM and CBM). OEAM applies to management of physical
assets, primarily equipment used in heavy manufacturing and capital-intensive petrochemical, power
generating, and rolling (paper, steel, aluminum) industries. Its principles are equally applicable to
industries such as food processing, pharmaceutical, cement, printing, ships and buildings, and other
facilities dependent on equipment assets.
Following are the crucial elements of OEAM:

Top-down Vision, Drive, Participation, and Support Success requires a visible commitment
at the CEO level to permanent, sustainable improvement. The CEO must lead the OEAM effort,
originating objectives, providing leadership, and focusing on long-term results. Management
must provide coaching, active guidance, and the advocacy necessary to maintain support.

Clear, Ambitious Objectives Success requires detailed objectives that are ambitious,
optimistic, challenging, and crystal clear to all. Ambitious objectives ensure that all potential
improvement opportunities are identified and considered. Maximum results cannot be obtained by
timid objectives and the incrementalism they encourage.

Comprehensive, Mission-Centered Strategy The strategy provides the means to optimally

balance immediate results and long-term prosperity and serves as a direct connection between the
organizations mission and its daily operations. The strategy builds from performance
benchmarks and prioritized contributors to profit and mission compliance. Objectives ensure that
funds and resources are invested to gain the greatest results and profit/return. The strategy must
be opportunity driven and profit and results oriented. It should focus on equipment reliability and
address capital effectiveness and risk.

Financial Model A financial model is constructed to assess total return on investment for
improvement initiatives. The financial model must be able to illustrate risk and show changes in
return in response to variations in market, business, and internal conditions. Results must be
presented in financial terms that are meaningful to management to ensure continued high-level
support.

Detailed Business Plan A formal, detailed business plan fully defines and prioritizes
objectives, requirements, initiatives, schedules, and measures of performance. The plan links
corporate business objectives to the operating goals and serves as a living document that is
reviewed and revised at regular intervals.

Strong Leadership OEAM requires experienced, well-qualified leaders who are committed,
respected, persuasive, flexible, and willing to learn. Leaders must have the authority and
accountability to lead the improvement process.

Effectiveness-Oriented Reorganization The OEAM process will likely lead to a matrix

organization composed of multi-skill/disciplinary work teams that are supported by skilled
specialists.

Tactical Action Plan Multi-skill/disciplinary implementation teams are formed to construct

detailed tactical action plans that identify and prioritize specific improvement initiatives. Tactical
action plans describe specific deliverables, recoverable value, schedule of fulfillment, and
accountability for each initiative. The action plan must also address the transition required to
bridge the gap from current conditions to required results.

Technology and Practice Selected for Optimum Results Within OEAM, technology and
practice are means to an end, rather than ends in themselves. The OEAM selection process must
result in a value-oriented, complementary mix of proven methods and practices that make a
tangible contribution to enterprise objectives. Condition-based maintenance is used where most
effective. Low-value preventive maintenance is minimized. Operate-to-failure may be used as the
result of a decision process, but never as a default. The application of each depends on the
specific circumstances and the probability and cost of failure.

Comprehensive, Open Information System The information system required for OEAM must
be fully open and able to extract and fuse data from a broad variety of sources. It must be able to
determine and display current condition and status, an accurate assessment of lifetime remaining,
the operational and financial consequences of any departures from normal and recommendations
for mitigating action. The system must be able to communicate and exchange information with
enterprise, production management, control, and logistic systems.

Implementation Beginning with Radical Change One giant step is required to jump-start
increases in effectiveness and begin to achieve ambitious objectives. Culture, process, and
organization must undergo varying degrees of change, depending on objectives and the gap
between current and required performance.

Support from All Levels of the Organization Implementing OEAM requires a major change
in culture. People must understand and accept the need for improvement and the importance of
success, aligning their personal objectives and performance accordingly. All must be willing to
assume new relationships, roles, and responsibilities. Ownership and commitment to the process
is established and reinforced through training, continuing communications, publicized results, and
incentive-based compensation. OEAM must include flexibility to accommodate positive
contributions outside the plan from both processes and people.

Training for Success For best results, OEAM training should focus on specific objectives
needed to successfully implement the process. Training may be in technical, craft, interpersonal,
and other areas. Training should be immediately reinforced with the opportunity to apply and
solidify skills in a work situation. Best-of-class companies provide 80 hours or more of training
per year to each employee.

Measure and Manage Results Benchmarks, metrics, and Key Performance Indicators (KPIs)
are used collectively to identify opportunities for improvement, measure progress, and manage
the improvement process. Metrics convey corporate value and return (in terms of availability,
production output, quality and cost savings) achieved via improved equipment reliability and
overall effectiveness. They justify the sustained investment in personnel and resources required
for OEAM. Metrics are also used to monitor the performance of specific processes, systems,
equipment, and components. Metrics must be directed to specific results and cascade from high to
low levels, connecting equipment-optimizing activities to overall business, mission, and
performance objectives. Metrics include:

Corporate metrics typically asset- or capital-based metrics that measure shareholder value,
such as Return On Net Assets (RONA) and Return On Capital Employed (ROCE)

Production metrics Overall Equipment Effectiveness (OEE) measures production

effectiveness; it is the product of normalized availability (uptime), production throughput
(yield), and first-run-quality

Metrics to assess equipment reliability and work process effectiveness Mean Time
Between Failure (MTBF) measures equipment reliability; cost per unit production measures
overall asset effectiveness; the ratio of planned to unplanned work is a measure of work
effectiveness; inventory turn rates measure capital effectiveness.

Other metrics metrics, such as the amount of training per employee, indicate
organizational commitment to and progress toward achieving objectives

Reward Results Industry is finding that performance-based compensation effectively increases

personal awareness and involvement in an improvement process, and encourages responsibility
for results. Performance-based compensation typically includes: (1) a base salary, (2) an added
percentage for performance to objectives, and (3) merit compensation for results that exceed
objectives and for demonstrated and applied proficiency.

Commitment to Continuous Improvement As success is gained from the initial improvement

efforts, organizations must institute a process of continuous improvement to guide the OEAM
process. Continuous improvement is driven by prioritized failure analysis that includes proactive
identification, prioritization by risk, and action to eliminate the defect. The strategy and
implementation is adjusted and refined, as necessary, to ensure progress.

Institutionalize Success From the beginning, the improvement process must be implemented
on the basis that the new way is the only way. Improved organization, work, and administrative
processes must be continually reinforced through communications, training, persuasion,
ownership, peer pressure, and rewards for compliance to objectives.

Operating Equipment Asset Management offers substantial competitive and profit rewards for those
organizations that correctly implement its principles and practices and vigorously pursue established
objectives. The preceding has provided an overview of key elements of OEAM; Chapters II through VIII
cover each of these elements in detail.

II.

INTRODUCTION

Illustrations:
2.1
2.2
2.3
2.4
2.5
2.6

A.

Sustainable Equipment Asset Management

Manufacturing Process
Simplified Operating Equipment Asset Management Process
Asset Hierarchy
Evolution to Operating Equipment Asset Management
Optimum Reliability

Scope, Purpose, Vision, and Organization of the Handbook

Scope
The purpose of Operating Equipment Asset Management (OEAM) is to ensure that the means of
production/operation are available to meet mission, availability, yield, schedule, quality, and cost
commitments at optimum effectiveness and return.
Operating Equipment Asset Management supplies effective, predictable capacity to meet
mission, business, and production objectives.
OEAM consists of a mix of processes, systems, practices, and technologies strategically implemented to
achieve a specific mission and/or objectives, taking into consideration market, business, and operating
conditions; related opportunities; and site-specific requirements and conditions. The OEAM strategy
addresses issues as diverse as environmental compliance, reliability, operating efficiency, maintenance
costs, and spare parts management.
OEAM provides the basis for collectively optimizing investment, resource allocation, and spending
decisions to gain greatest lifetime return. Its emphasis is on achieving maximum sustainable lifetime
effectiveness from design, procurement, and installation through operation, maintenance, and eventual
replacement or de-commissioning, as shown in Figure 2.1.
As illustrated in Figure 2.1, the type and tempo of operations may raise or lower minimum sustainable
costs. Knowledge of the current position and the rate of consumption of a given asset are critical to
maintaining maximum lifetime effectiveness. In the hydrocarbon processing industry, for example,
temporary operating requirements may accelerate corrosion rates or catalyst de-activation. All operating
decisions must consider the resulting economics. A decision not to paint a structure for corrosion
protection may require replacement of the structure long before its designed end of life.
Reports indicate that some well-publicized cost reductions have been gained by deferring sustaining
maintenance on capital assets. Probably fewif anyof these decision makers attempted to assess the
risk of deferred maintenance(7) or calculated Net Present Value (NPV) of their decisions; instead they
focused on expediency, rather than economic value. The penalties for deferring activities such as painting,
correcting steam and air leaks, and repairing damaged insulation are gradual and spread over time. In
addition, the negative impact on operating budgets and the real costs and consequences of such decisions
do not become apparent until production is affected or a major failure occurs.

The following cases demonstrate that profitable operation requires reliability improvement and a program
for identifying defects and predicting lifetime while operating alternatives are available.
One company lost 40,000 pounds of steam per hour during cold, wet weather as a result of
defective insulation. When the loss began to affect production output, the obvious action of
launching an effort to locate and restore defective insulation was ignored in favor of a capital
project to purchase an additional boiler.(120)
Another company eliminated lubrication rounds as a cost savings measure. After approximately
six month, valves, dampers, and moving equipment began to stick, requiring expensive
maintenance and, in some cases, replacement.(120)
OEAM includes safety, availability, reliability, operating efficiency, operability and maintainability, and
logistics (support and spare parts) management. Organizational issues include such variables as a
functional vs. a multi-skilled team workforce; the availability of in-house or outsourced workers;
personnel qualifications; and the availability of training resources.
Purpose of the Handbook
This handbook is intended as an overview for executives, managers, and team members charged with
gaining maximum productivity and effectiveness from systems and equipment in response to stated
mission/business/operating imperatives. It provides a top-to-bottom overview of the processes, practices,
technology, implementation, and results attainable with Operating Equipment Asset Management. The
Handbook addresses financial requirements, including conservation of capital. It illustrates how generic
processes and technology can be assembled to provide maximum results for a given mission, business,
and set of operating conditions. Soft issuessuch as culture, organization, communication, ownership,
compensation, and trainingare addressed as integral elements that are vital to the success of OEAM.
Vision
The handbook describes Operating Equipment Asset Management from an overall perspective, essentially
providing a what-to, rather than a how-to. The latter is covered extensively by numerous, specialized
books, technical papers, and articles, many of which are listed in Appendices C and D.
Organization
The remainder of this handbook is divided into three sections:
1. The Operating Equipment Asset Management Process Chapters III through VIII
2. Current Technology Chapters IX through XIII
3. Future Developments Chapter XIV
Chapters III through VII begin with an introductory summary that provides the reader with a brief
overview of the contents and conclusions of the chapter. Chapter V is devoted to benchmarking and
commonly used performance metrics. These range from corporate asset and profitability metrics to work
effectiveness, component, and part reliability metrics. The chapter describes how metrics must cascade to
ensure consistency of purpose and contribution to overall business, mission, and performance objectives.
World class values are cited where available.

The handbook includes many direct quotes and technical paper references from industry experts who are
pioneering the journey to optimized equipment effectiveness. References are cited in Appendix C. We
present ample ideas for consideration and potential implementation, and we demonstrate results within the
appropriate sections.
By necessity, the handbook contains numerous acronyms and terms. Acronyms and terms are defined
when they first appear and are compiled in Appendix A. In some cases, definitions may vary between
references and across industries.
Observations detailed in this handbook are derived from technical papers and discussions with industry
leaders. Industries represented include steel and automobile manufacturing, oil refining and
petrochemical, paper, and power generating. References noted in superscript parentheses are listed
numerically in Appendix C. References without parentheses are located at the conclusion of the
respective chapter.

B.

Operating Equipment Asset Management

Industry leaders are following similar, generic paths toward optimizing equipment management.
Although implementation details and measures of performance vary across industry groups, there are
striking similarities, indicating the emergence of an optimizing process for equipment management. The
process is quickly translating into substantial competitive advantages for enterprises that recognize and
exploit its benefits.
Asset Management has become the Holy Grail to manufacturing in the 90s, ARC Automation
News, August 27,1999
Current literature often refers to the OEAM concept as Asset Management. Those actually engaged use
different terms to characterize their initiatives. Many consider the term Asset Management to be too
vague. Operating Equipment Asset Management offers a more specific description of the concept,
process, and objectives. The name may be new, but the concepts are proven. OEAM processes, practice,
and technology are availableand the concept has become an economic and operating imperative for
global competitiveness.
Operating Equipment Asset Management:
Optimizes the operating effectiveness of process and production equipment assets to gain greatest
lifetime value and return.
Provides systematic prioritization and implementation of processes, practice, and technical
improvements to ensure full compliance with safety, availability, performance, and quality
requirements at least sustainable cost for operating, market, and business conditions.
An operating/manufacturing/production process has three primary elements, as shown in Figure 2.2.
1. Production Management including Enterprise Resource Planning (ERP) and Manufacturing
Execution System (MES), manage the supply chain, production schedules, and flow into and within
the process.
2. Control Automation manages the content and performance of internal production processes and
controls operating variables to meet rate and quality requirements.

3. Operating Equipment Asset Management supplies the predictable capacity. Predictable capacity
implies that operating and production equipment is performing with optimal effectiveness and
reliability and that capacity will be available when required to meet schedule, cost, and quality
commitments. Predictable capacity provides the foresight necessary to evaluate the cost/risk/profit
balance of future commitments and opportunities.
The advantages of predictable capacity include:

Increased quality throughput

Reduced cycle time on customer orders; minimized missed shipment commitments
Minimized production losses
Anticipation of equipment aging effects

OEAM is constructed on the premise that application of the processes, practices, and technology to gain
optimum effectiveness are market, business, and site specific. OEAM is profit oriented. It includes
continuous improvement to steadily elevate effectiveness.
Paul ONeil, Chairman of Alcoa, in a speech signaling change in his company noted:
Continuous improvement is exactly the right idea if you are already the world leader in
everything you do. It is a terrible idea if you are lagging. It is probably a disastrous idea if you
are far behind the world standardI believe we have made a major mistake in our advocacy of
continuous improvementwe need rapid, quantum-leap improvement.
OEAM provides the tools for both situations.
Figure 2.3 is a simplified illustration of the OEAM process. It illustrates the progression of identifying
and prioritizing opportunities; constructing a strategy and tactical action plans; injecting processes,
systems, technology, and resources; measuring results; and then closing the loop with continuous
improvement. All are assembled in a site-specific implementation optimized for mission, business, and
market conditions, as well as site and facility conditions and culture.

C. Conditions, Necessity, and Benefits of Operating Equipment Asset

Management
Innovative practices combined with true empowerment produce phenomenal results. (96)
Commander D. Michael Abrashoff, Commanding Officer, USS Benfold (DDG 65)
Conditions
In todays process and manufacturing environment, systems, and equipment are required to perform at
levels not thought possible just a decade ago. Mission, production operations, product quality, and agility
to meet delivery requirements demand unprecedented levels of equipment availability, reliability, and
maintainability. Budgetary structures are under pressure from cost reduction initiatives.
All industrial production enterprises are faced with the sizeable challenge of reducing operational and
support costs. Demands to improve operating effectiveness and revenue and minimize or eliminate capital
investment are increasing. Redundancy and operating margin are being reduced as a result of
organizations need to increase capital efficiency. Manufacturers are striving to invoke new measures to

ensure planned performance, achieve best of class, and extend the life and effectiveness of new and/or
aging equipment, at least cost.(41)
A study disclosed that the difference in refining industry profitability between the highest and
lowest performing quartiles had increased from about 5 percent in 1986 to 12 percent in 1992.
The divergence was not merely an industry average, but rather a difference in performance
unrelated to industry average performance.(109)
Most enterprises, ranging from automobile manufacturing to power generation and the military, are being
forced to shift to a minimum lead, demand-pull process, where predictable equipment reliability is
essential to meet customer expectations. This must be accomplished with maximum effectiveness,
profitability, and return on capital, as well as minimum reserve capacity and redundancy. In addition, risk
and environmental considerations continually reduce the envelope in which most enterprises can operate
acceptably. Several companies report that the number of loss generating incidents is declining; however,
the same sources state that the cost per incident is increasing rapidly. Remediation has become a major
cost. In extreme cases, community concerns have delayed or restricted the restart of established facilities,
resulting in huge revenue losses.
Traditionally, operating equipment maintenance and reliability have been viewed as business costs,
largely below the horizon of senior corporate and financial executives. Todays climate of heavy
profitability pressures have caused operating, process, and manufacturing enterprises to reduce costs
through measures such as workforce reductions, deferment of non-essential work, and outsourcing. All
gain results, but are the results sustainable when applied to production equipment?
Process and manufacturing enterprises are vigorously pursuing cost reductions. However, industry leaders
have an additional, differentiating characteristic. Leaders recognize that increasing effectiveness by
improving reliability is a profit producer. All view equipment management as an integral, inseparable part
of the manufacturing process, where cost is only one measure of performance. In terms of effectiveness
and value, considerations such as opportunity exploitation, availability, yield, and first-run quality are
often more important than cost. Leaders have a comprehensive strategy that links equipment reliability
and capacity management with market conditions and facility and mission objectives. The strategy
includes risk assessment and management; involves layered measures of performance; promotes
optimized process, system, and component effectiveness; and includes continuous improvement.
Both elements of riskprobability and consequencemust be managed as part of OEAM. In many
cases, reducing probability through the use of better materials, extended boundaries, increased lifetime,
and improved monitoring may be the best method of control. In other situations, consequences may be
controllable. And, in some cases, both may be addressable.
Opportunities abound. Industry leaders are forming comprehensive processes designed to increase their
lead over competitors who may not yet recognize the need, or requirements, for change beyond cost
reduction. Many of these pioneers cite the OEAM concept and implementation as the final frontier to full
production effectiveness.
Cost of Sub-Optimal Equipment Effectiveness
Authoritative sources report that North American industry collectively spends $300-500 billion annually
on production equipment maintenance.
The U.S. Department of Commerce reports that 40 percent of manufacturing revenues are spent
on maintenance.

For the average process and manufacturing firm, maintenance costs may be larger than gross profit.
Reports indicate that approximately 20 percent of industrial production losses, including the cost of lost
opportunity, poor product quality, waste and scrap, and downtime and slow time (diminished production)
are caused by equipment malfunctions.
In the manufacturing industries, unreliability necessitates costly inventory buffers.(120)
Reliability is necessary to minimize the impact of buffer inventory on capital utilization.
As much as 50 percent of environmental incidents are reportedly caused by equipment failures.
Collectively, the cost of production losses and environmental and safety incidents caused by equipment
malfunctions is likely to be several times greater than maintenance and repair costs.(120)
Value of Improvements
Improving operating effectiveness allows an enterprise to meet commitments at less cost or deliver more
at the same cost. Many manufacturing enterprises have an overall operating effectiveness of
approximately 50 percent, leaving ample room for improvement. (This subject is discussed in more detail
in Chapter V.)
At a time of intense competition, sustainable cost effectiveness is a major competitive advantage
that companies simply cannot afford to underestimate.(24)
The value of increased output depends on many variables. These include market capacity (i.e., the ability
to sell out production at a higher rate), quality assurance, and potential reductions in price as more
production becomes possible. A financial model, included in Appendix B, is necessary to evaluate
opportunities and value gained from increased production.
One process company anticipates that 25 percent of increased value will be gained by cost
reductions and 75 percent will be gained from increased first-run quality and yield. Furthermore,
companies cannot starve themselves to prosperity.(120)
The benefits of cost reductions are easier to determine as value recovered is directly reflected in bottom
line profit. For example, a major automobile manufacturing facility operates two shifts, six days a week
(equivalent to 13 regular time shifts), at about 50 percent effectiveness. One of the facilitys objectives is
to produce an equal output in two shifts, five days a week. Meeting the objective will reduce
manufacturing costs by nearly 25 percent. (120)
In terms of equipment expenditures, analyses of cause and distribution indicate that as much as 60 percent
of maintenance costs are unnecessary and preventable. Industry leaders are convinced that reductions of
20 to 30 percent are achievable. For most enterprises, the potential recovery is in the tens, even hundreds,
of millions of dollarsequivalent to 15 to 25 percent of non-raw-material Operating and Maintenance
(O&M) costs.
Industry leaders recognize that achieving a sustainable reduction in equipment O&M costs must be part of
a larger process. The process begins with the understanding that gaining full value and benefits can only
be achieved by reducing failures. Failures can only be reduced by eliminating the underlying defects
which cause failures. As defects are eliminated, large segments of the organization, along with idle capital
tied up in redundancy, work-in-process, and spare parts, can be safely and permanently reduced. Negative
cash flow resulting from failures is minimized. In addition to permanently reducing costs, eliminating
defects increases the operating availability necessary to gain the benefits of increased production

effectiveness. Many leading firms have plans in place to achieve these objectives; some are well on their
way to fulfilling them.

D.

Industry, Mission, and Equipment Applicability

The principles, practices, systems, and technology described in this handbook apply primarily to capitalintensive process, production, and heavy manufacturing industries. These industries use fixed, rotating,
and reciprocating equipment as a primary means of production (e.g., oil and petrochemical, power
generation, automobile, steel, aluminum, and paper manufacturing). Operating Equipment Asset
Management applies equally to Naval and commercial vessels. It is well-suited for defining lifetime care
strategies for industries with smaller, distributed production equipment (e.g., pharmaceuticals, food
processing, and semiconductor production), as well as less capital-intensive applications (e.g., building
Heating, Ventilating, and Air Conditioning (HVAC) systems). OEAM can also be adapted to light
manufacturing, aircraft, and off-road vehicle applications.
The principles of Operating Equipment Asset Management are extensible and applicable to both static
equipment (e.g., bridge, building, hull, structure, piping, heat exchange, electrical distribution, and control
systems) and dynamic equipment (rotating and reciprocating) machinery, as well as components across
multiple applications.
The acceptance and use of equipment management principles vary greatly among applicable segments of
industry and government. The status of the four major sectors is summarized as follows:

Heavy industry (e.g., process, petrochemical, fossil power generating, paper, and steel)
Generally the leading sector in the use of equipment management practice and technology with
effective, mature optimizing processes and technology in use. Relatively easy to inject new
technology. Difficult to change culture, operating, and work practices.

Commercial nuclear power High utilization of equipment management practice and

technology. Some maintenance requirements governed by statutory regulations.

General industry Medium to low utilization of practice and technology for improved
equipment effectiveness.

Military (Navy) Held to compliance with PM program. Reports indicate that Planned
Maintenance can be reduced by 30 to 40 percent by simply optimizing tasks and schedule.

Nine Layer Asset Hierarchy

OEAM uses the nine-layer enterprise asset hierarchy illustrated in Figure 2.4. The OEAM hierarchy
contains three to four more levels than some current asset hierarchies, such as the Operational Reliability
Analysis Program (ORAP).(62) The OEAM hierarchy adds an enterprise level at the top to permit results
from multiple geographic plants or facilities to be rolled into a single measure of effectiveness. The
OEAM hierarchy adds several levels at the bottom to facilitate more specific measures of effectiveness
and identification of the cause of departures. The hierarchy is presented below; specific enterprises may
omit one or more levels in the hierarchy that are not applicable.
1. Enterprise: top level
2. Plant/facility: geographic entity
3. Unit/platform: identifiable producer section within a facility, individual aircraft or ship
4. System: a set of physical assets designed to perform an identifiable mission/function (e.g.,
generator, propulsion, air conditioning)

5. Sub-system: a system within a system (e.g., lubricating oil system on a turbine generator)
6. Equipment group: a complete functional assembly (e.g., a coupled motor/pump)
7. Equipment component: (e.g., pump, motor, turbine, compressor, speed changing gear)
8. Assembly: consisting of one or more parts (e.g., valve, rotor, governor)
9. Part: lowest layer with individual part numbers (e.g., shaft, impeller, wear ring, bearing, seat,
stem)
There is another vital element in the asset hierarchy. Assets are generally nested within assets like the
familiar Russian doll. In Figure 2.4, most levels of the hierarchy are assets with tangible value. More
important, the equipment assets and components within a facility or unit have varying lifetimes.
Beginning at the second tier of the hierarchy, the plant/facility or prime asset level, there are at least
four identifiable layers of assets. Each has its own life expectancy and replacement strategy:
1. In a facility or ship, the buildings, structure (hull), large heat exchangers and pressure vessels,
piping, major mechanical equipment, and electrical distribution cabling are typically expected to
last for the lifetime of the prime assetwith proper care.
2. At the second level, there will be form, fit, and function equivalent replacements for equipment
components, such as electrical switchgear, motors, pumps, and valves, throughout the lifetime of
the prime asset.
3. At the third level, control and similar systems have an expected supportable lifetime that varies
from about 25 to 50 percent of the prime asset lifetime. Throughout the lifetime of the prime
asset, these components and systems will be changed two to four or more times with upgraded,
more effective replacements that may or may not be compatible with the previous components
and system.
4. Information systems and other components at the bottom level age to obsolescence quickly and,
therefore, have an even shorter supportable asset life. Assets at this level may require replacement
eight to ten times during the lifetime of the prime asset.
The varying lifetime, asset-within-an-asset concept has substantial implications throughout the assets
lifetime. The timing for inserting technology during an extended design process, developing optimum
operating equipment lifetime management strategies, defining monitoring and overhaul intervals, and
managing spare parts are just a few of the areas affected.
An initial investment for lifetime optimizing improvements, such as a more conservative design, better
metallurgy, and improved coatings, requires a solid estimate of lifetime value. This must be accomplished
via a financial analysis capable of capturing all effects.
The optimum design investment should facilitate replacing systems and components that have a known
lifetime less than the primary asset. Design must also be flexible and capable of accommodating changes
and improvements brought about by components that become obsolete earlier than the prime asset. This
usually requires using standard control and similar components that will have a certain and inexpensive
upgrade path. Spare parts management during initial, mid- and end-of-life stages will vary as the
availability and price of parts changes over the lifetime of the asset.
The optimum time to freeze the design of new technology, simultaneously starting the clock to
obsolescence, also depends on the relative lifetimes of primary and secondary assets. Applied too early in
the design process, some third and fourth tier assets could become obsolete and/or difficult to support
prior to commissioning.

Accurate benchmarking and reliability assessment, discussed in more detail in Chapter V, depends on
detailed identification of the geographic location and a host of other factors. These include environment,
type of operations, operating intensity, and others. All affect performance and reliability and,
consequently, the optimum OEAM strategy to achieve greatest value. For example, a helicopter that
spends its operating lifetime in Alaska is likely to have totally different availability, reliability and cost
profiles, and optimum OEAM strategy than an identical model operated shore-to-platform in the Arabian
Gulf. Another example, a multi-location production enterprise, found that maintenance costs as a
percentage of Replacement Asset Value (RAV) varied 6 percent as a result of process intensity.(120)

E.

Evolution to Operating Equipment Asset Management

The evolution toward Operating Equipment Asset Management has been in progress for at least 30 years.
Until the mid-1970s, equipment management was mainly reactive cost containment in a cost center
environment, as shown in Figure 2.5. Most industries had operating and profit margins that were ample
enough to accommodate many small failures and an occasional large failure. Maintenance workers were
largely disconnected from the budget process and viewed their primary responsibility as repairing failures
as quickly as possible. Budgets for equipment maintenance were largely based on prior years
performance. There was little awareness of requirements for improvement or motivation to pursue
changes.
A supervisor in an automobile manufacturing facility neatly summed up these conditions:
Until the early 1970s automobile manufacturers didnt worry much about equipment failures.
Our competition all had the same labor contracts, used the same manufacturing processes and
equipment, had about the same operating effectiveness, and experienced similar failure rates. On
this level playing field, costs were passed on to the customer. Then the Japanese arrived with a
better product, manufactured at substantially lower cost. To be competitive, U.S. automobile
manufacturers were forced to simultaneously increase quality and reduce manufacturing costs
and model cycle time. Everything had to change.
Throughout industry the initial focus was on quality improvement and cost reduction. Reengineering and
rightsizing were just a few of the euphemisms for cutting cost and workforce. Corporations began
benchmarking to determine relative performance in an increasingly competitive manufacturing
environment. In the maintenance area, many were astonished to find a 30 percent or greater difference
between their current practice and industry best practice. For most this was a wake-up call.
In some cases, people recognized that many of the cost reduction changes being made were very shortterm and could not be sustained. Numerous anecdotes emerged about corporate and plant managers who
quickly cut expenses by reducing the workforce, eliminating programs, and deferring maintenance well
below sustainable levels. For a time, the facility survived on the momentum of previous practicesand
substantially increased profit. The manager responsible was promoted just about the time consequences
began emerging. The replacement inherited major problems directly attributable to neglect under previous
management. These problems were blamed on the new manager, making the previous manager look even
more worthy of promotion.
The best CEOs recognize that commercial operating and producer facilities must generate a profit greater
than the cost of capital, plus a premium commensurate with the risk involved. With a 4 to 6 percent return
on capital currently available with little or no risk, there is no incentive to invest funds in a process or
manufacturing concern for less than several percent above the no-risk floor.

If awareness is the first stage of change, most industrial producers were shocked to learn their industries
and facilities were not returning the cost of capital. This is one of the factors driving the imperative to
continually improve effectiveness and reduce capital and lifetime ownership costs.
The conditions described are very apparent in the rapidly deregulating power generating industry.
Merchant power producers, targeted to the spot market without guaranteed delivery or fuel contracts,
must be able to demonstrate a return of 25 percent or greater to attract risk capital.(120) Spot market
operation mandates the reliability and agility necessary to take maximum advantage of opportunity
demands when prices are highest.
Operating Equipment Asset Management and similar equipment management programs must address a
common set of business, market, and operating requirements:
1. Mission Compliance, Availability, Production Rate, and Quality

These factors determine profitability and customer satisfaction and are all-important in todays intensely
competitive environment. Many industries measure fulfillment in terms of Overall Equipment
Effectiveness (OEE) plus conversion cost (refer to chapter V and Appendix B).
2. Pressures on Availability Increased by Tempo and Intensity of Operations and Decreased
Operating Margin

An article in the August 6, 1999 edition of The Wall Street Journal described how a large powergenerating corporation was forced to declare force majeure and default on contractual delivery
obligations during a heat wave. Within the power generating industry there are many incidents of this
type where power, sold at $25 to $30 per megawatt, must be purchased at $3,000 per megawatt or greater
to meet delivery commitments.
One power company reported that in June 1998, 50mW traded for 16 hours at $5,000 megawatt
per hour (MW/hr.). A power marketer obligated to deliver power at $33.25 MW/hr. had to
purchase energy at $1,300 MW/hr..(7)
With penalty provisions in most contracts, defaults caused by the inability to deliver have enormous
short- and long-term financial impact. Several facilities describe operating conditions where there is
virtually no margin between the normal operating value of a process variable and quality degradation.
Under these constraints, systems and equipment must be maintained at peak performance to gain full
profit.
3. Shift to Minimum Lead, Demand Pull Operation

This requires innovative, agile, flexible, and reliable processes to meet customer expectations. Dell can
deliver a custom configured computer in three to five days from order. Toyota recently announced a
production process capable of delivering cars to order in five days. The supply chain management system
Toyota devised to fulfill this ambitious commitment stunned the industry. No one mentioned the
imperative for production equipment reliability.
4. Increasing Customer Expectations for Quality and Reliability

There probably would not be sufficient mechanics or repair space available if todays population of
automobiles adhered to the reliability and service requirements that existed 30 years ago. Who remembers
the spark plug cleaning equipment that used to be a fixture in every service station? Today, 100,000-mile
automobile power train and 50,000-mile tire warranties are the standard.

5. Increased Consequences and Cost of Operating Variation and Failures, Production

Interruption, Safety (Personnel Hazard and Property Damage), and Environmental Incidents

One company reports that more than 50 percent of capital expenditures are required to meet regulatory
and environmental requirements. Burning gas by flaring and operating the remainder of a hydrocarbon
processing facility on inventory used to be a temporary work-around while a failed compressor was
repaired. Todays reduced inventory and environmental regulations that prohibit flaring would quickly
force a plant shutdown. This combination significantly increased the cost for a given failure.
6. Stability and Reliability of the Manufacturing Process

Producer facilities that seriously measure production effectiveness and map steps to close the gap between
average and best performance recognize the necessity, value, and benefits of process stability and quality
gained by reducing variables and variation. Early identification of anomalies that could impact
availability and quality has substantial value and benefits, including greater operating flexibility and time
to arrange alternative sources of supply and manage work and spare parts effectively. Leaders recognize
that equipment reliability is an essential contributor to stability and minimum variation. A stable, reliable
manufacturing process requires stable, reliable equipment.
7. Cost Management

Everyone in an operating organization is being required to do more with less.

8. Return On Capital

Profit is the numerator and capital is the denominator of capital- and asset-based measures of
effectiveness, such as Return on Capital Employed (ROCE) and Return on Net Assets (RONA). Thus,
reducing capital employed (the denominator) has the same positive effect on measured performance as
increasing profit (the numerator). This leads to less redundancy and design margin in new facilities and
requires older facilities to operate closer to design limits. Pressures to reduce capital also lead to pressures
to reduce levels of stocked spare parts.
Although two 100-percent redundant boiler feed pumps have been the standard in the power generation
industry, required return on capital is leading to the construction of large, new facilities with a single
pump. Enlightened companies recognize that the pump now has the same impact on production as the
boiler and generator. They also recognize the need to invest resources and funds to ensure that single-unit
reliability does not compromise overall reliability.(120) This is where predictable capacity is essential to
ensure objective profitability.
Two corporations stated that investment in new construction, on a unit output basis, had been forced to 50
percent of prior levels by requirements for return on capital. The same companies are investing both time
and capital to increase output from older facilities and to ensure that the reliability and effectiveness of
new investments meet requirements for return on capital.(120)
9. Opportunity Driven, Profit-Centered Organizations

Industry leaders are quickly beginning to recognize that production equipment effectiveness is more of a
profit issue than a cost issue. In terms of effectiveness and value, areas such as opportunity exploitation,
availability, yield, and first-run quality are often more important than cost. Leaders have a comprehensive
strategy that links equipment reliability (i.e., availability and capacity) management with market
conditions and facility and mission objectives. The strategy intertwines layered measures of performance
and promotes profit-oriented process, system, and component effectiveness.

A profit-oriented process balances immediate results with long-term prosperity (i.e., evaluating a process
requires careful consideration to determine whether deferring or reducing costs in the short-term may
have a negative net present value in the mid to long term). Postponing painting for corrosion protection is
a commonly encountered example of short-term savings that can lead to severe, long-term problems.
Examples can be observed throughout the country. Many highway bridges, particularly in large cities that
experience bad weather, are in declining condition from the effects of weather, corrosion, and lack of
preservation. Pipe supports and steel structure within manufacturing and process industries are often in
similar condition. Roof repairs are another. One individual commented that his company never repairs
roofswe wait until they are about to collapse, then initiate a capital replacement project. In these
examples, what are the real costs of deferred preservation?
Deferred preservation, such as painting, has a cost that can be expressed in Net Present Value (NPV).
Several companies have procedures for estimating the cost of deferred structural painting at several stages
of corrosion. Calculating net present value involves prioritizing requirements to obtain a clear
understanding of the order of accomplishment and costs involved. This avoids, or at least identifies, the
real cost of savings gained by consuming assetsthe well known pay a little now or a lot later.
10. Increasing Acceptance of OEE Plus Cost as a Prime Measure of Operating Effectiveness

For many manufacturers, the gap between current and best practice industry Overall Equipment
Effectiveness may be 35 percent or higher. The discovery of a hidden plant, nearly as large as the
operating plant, surprises most corporations who can no longer afford this effectiveness deficit.
Recognizing the capacity of the hidden plant drives initiatives to increase production from the existing
asset base, while simultaneously reducing cost. Initiatives must address increased availability and/or
production rate at equivalent or higher quality.
11. More Complex and Expensive Manufacturing Equipment and Systems

Physically challenging, semi-skilled manufacturing tasks are being replaced by automation that requires
fewer people. Those employees who remain are no longer operating the production process, but are
managing equipment and systems that operate the process. Automation demands higher skill levels for
both operation and maintenance.
Systems to manage a manufacturing process are co-evolving and becoming ever more co-dependent.
Real-time control systems and strategic supply chain management (ERP) systems must be linked with
equipment management systems for accurate current and predicted status of equipment assetsthe
predictable capacity mentioned earlier.
Maintenance is becoming more expensive with greater variations.(120) Many enterprises are finding that
the gap between themselves and world-class performers may be as high as 25 to 30 percent of the total
maintenance budget.(109)
12. Better Equipment Management

Organizations under pressure to improve the effectiveness and return on enterprise capital assets are
quickly recognizing the necessity, value, and benefits of improved equipment managementas
demonstrated by the deregulating power generating industry. In this industry, managing a portfolio of
mixed cost and efficiency generators to gain greatest return requires accurate lifetime prediction and
optimized reliability management. Both ensure availability (predictable capacity) capable of meeting
commitments for power delivery.

One power generating company developed 44 initiatives to improve performance. Condition

Based Maintenance ranked in the top ten. Boilers and boiler tube defects were high on the list of
reliability problems.(7)
A manufacturing company implemented 25 quality improvement projects to eliminate
manufacturing process limitations and constraints.(120)
Many operating organizations have reduced owned maintenance, repair, and overhaul (MRO) spares by
as much as 50 percent. Achieving this reduction, without affecting availability and production output,
demands improved reliability and logistics management that can best be obtained with comprehensive,
predictive lifetime management.
13. Necessity for Root Cause Analysis

There is a growing recognition that many mission-jeopardizing defects responsible for reduced
effectiveness and resource consumption may be separated in time and space from the point where
symptoms are initially recognized. This requires a more holistic process of analysis and improvement.
An engine manufacturer, searching for the cause of coolant leaks, determined that the process of
attaching a subassembly altered the engines integrity.(120)
In another case, correctly torquing a fitting led to leaks much later in the process when the fitting
did not have the correct angular position. Ultimately, this problem necessitated a re-design to
remove two potentially mutually exclusive requirements.(120)
In a third case, defects often appeared late in the process of machining a complex casting. As a
result, a great deal of value-added machine time was lost, as well as the casting itself. Based on
costs involved, the manufacturer was able to justify an expensive 100-percent radiography
inspection of all of the raw castings.(120)
14. Organizational Changes

North American industry is moving toward multi-function team organizations. Giving people more
responsibility and accountability and broadening participation in the decision process builds the
commitment and ownership necessary for success. The team approach requires a continuous effort to
achieve greater understanding and communication. This is similar to the collaborative approach
advocated by Total Productive Maintenance (TPM), which is being used effectively by many industrial
leaders.
In a typical producer facility, skill levels and institutional knowledge are declining with early retirements,
outsourcing, and less emphasis on mechanical and problem solving skills in secondary education.
Industry is responding with more training in everything from basic skills to team building,
communication, and specialized technology.

F.

Reliability Considerations

Reliability has a maximum intrinsic value that is established at design.(22) Fragile, outdated, or unproven
technologies typically result in unreliable processes.(22) Manufacturing and installation quality and
operation are other factors that affect reliability. High intrinsic reliability is relatively easy to achieve
with static equipment such as pressure vessels, piping, and power distribution systems. It is much more
difficult to achieve with complex equipment such as machinery.(68)

Maintenance and other support strategies are important, but they can only preserve the reliability that is
built-into the process.(22) A maintenance-only focus can produce substantial misallocation of resources
when activities attempt to compensate for systemic weaknesses that would be more effectively and
efficiently addressed or eliminated in other ways.(22) Thus, Equipment Management must address design,
procurement, installation, and operating deficiencies to ensure that in-service production reliability meets
mission requirements.
Every organization should strive for the lowest cost reliability that meets mission requirements.(19) A level
of reliability that guarantees availability when required (timed availability) is a key issue. Few travelers
would feel comfortable flying with engines that have greater reliability during ground taxi than in the air.
Required availability may range from 100 percent to less than 50 percent in a defined increment of time.
Failure to operate within a defined production window often causes major loss. A food processing plant
that fails during harvest season, resulting in spoilage losses, is one example. Failure of a power generator
during a heatwave that forces the purchase of expensive replacement power on the spot market, or results
in the default mentioned earlier, is a second example.
Design for efficient operation and maintenance (maintainability) is important.(22) Many companies have
experienced equipment-operating difficulties that have resulted in failures. Likewise, routine maintenance
tasks can be complicated by factors, such as interference, which require design changes. The cost balance
of reliability is illustrated in Figure 2.6.(1, 22) For every process, system, and equipment there is a point of
optimum effectiveness that balances the cost of improved reliability with the cost of unreliable
manufacturing.
A reliability evaluation involves statistically estimating lifetime reliability.(29) When design and other
intrinsic defects are present, gaining sufficient reliability to meet production goals through maintenance
alone may be prohibitive in terms of costs.(22) Intervention required for effective equipment management
will range from relatively simple inspections on equipment with high intrinsic reliability to
comprehensive planned and predictive maintenance on complex machinery.(68)
Reliability is sustained by adherence to designated standards and specifications. Reliability is enhanced
by modification and improvement projects.(120) There is a general feeling in industry that reliability is a
valuable commodity.(7)
OEAM includes a reliability management system that notes conditions found when equipment is being
monitored, inspected or repaired, and tracks the cause for each equipment failure. Reliability management
also includes reliability analysis and continuous improvement. Reliability analysis, including lifetime
prediction (prognosis), provides the information necessary to extend life and avoid unplanned outages.
Continuous improvement eliminates cause, extends life, and ensures full effectiveness and return from
equipment management. Determining reliability through failures is not a sound practice.(68, 76, 120)
Ownership of reliability is a major key to success. Ideally, the individual(s) who are accountable for plant
capacity should own reliability.
Remember, reliability is a means to an endnot an end in itself.

G.

Managements Challenge

Success requires a visible commitment at the CEO level to permanent, sustainable improvement and a
three- to five-year time horizon to meet objectives. In addition to a visible commitment, effective
communication, involvement, and patience are imperative. All of these qualities must originate at the top

with regard to the major changes in culture, organization, and practice necessary for the organization to
fully benefit from OEAM.
Management must recognize that successful change is often a slow process in which profits and value are
gained through steady progress rather than quick fixes that sacrifice the future. Corporations and facilities
moving ahead with successful change processes typically have three- to five-year plans with interim
objectives to demonstrate progress.
Lead Culture Change
The culture change required for success will not occur without the commitment, drive, inspiration, and
thorough involvement of senior management. The importance of CEO interest, involvement, and
communication cannot be overstated.
Provide Consistent, Continuing Support
Mature OEAM is characterized by few problems. This is a sign of success; it does not indicate an
opportunity to further reduce costs by withdrawing support from the programs producing the results. With
a shift in perspective, top-down commitment, effective implementation, continuing support, and processes
and practices oriented to maximum value, best practice profitability achieved by a few today can be the
norm for all tomorrow.
Establish Ambitious Objectives
Gaining maximum results from a change process requires establishing optimistic objectives. The
individuals chartered with implementing the change should determine what can be gained if everything
works as anticipated. The highest optimistic objectives ensure that all potential opportunities for change
are identified and placed on the table for consideration. Setting objectives significantly above what
optimistic implementers believe they can accomplish runs the risk of losing commitment, ownership, and
maximum effort. Objectives that fall below the optimistic expectations can result in a change process that
suffers from incrementalism, where many potential areas for positive change are protected by being
placed off-limits. Requiring radical change through ambitious objectives demands irreversibility and,
thereby, helps institutionalize the results of the change process.
Create Financial Awareness
Virtually everyone in a corporation understands financial issues. With a little help and an enlightening
presentation, most can relate corporate financial performance to the process they go through deciding to
purchase a house, an automobile or a jet ski. Corporations who have taken the time to translate financial
imperatives and considerations into understandable terms find initiative, commitment, and ownership for
an improvement process much easier to gain and maintain.
Senior management must convey the complementary importance of increased availability, production
rates, and quality compared to cost reductions. Appendix B may help in beginning this process. Changes
in relative importance and priority, in response to market and other conditions, must be communicated. In
many cases, calculating the cost of waste in terms of production rate is an enlightening exercise. For
example, air leaks at an amusement park were the profit equivalent of about 15,000 paid admissions. In
another facility, the additional production throughput necessary to gain the profit equivalent of increasing
pump average Mean Time Between Failure (MTBF) by one year was 104 percent availability.

Invest for the Future

Corporate executives and management must recognize that investment is required to permanently reduce
costs. Reducing costs by deferring sustenance of capital assets is a temptation that must be avoided.
Potential problems with the U.S. highway infrastructure (cited earlier and often discussed in the media)
result from such cost cutting. Furthermore, many industrial facilities have achieved impressive, but
temporary, cost reductions by mortgaging the future.
Appoint the Right Leaders
Management must appoint and support persuasive, committed individuals with the authority, respect, and
accountability to facilitate and lead the change process. Within the leadership structure, champions must
be identified, encouraged, and facilitated.
Deploy a Mission-Centered Strategy
The development of a solid, mission-centered strategy, with supporting measures of performance, must be
guided and nurtured to ensure that everyone is pulling in the same direction. Within the strategy,
management must ascertain that prioritization is on target and resources and funds are invested to gain the
greatest results.
Shift to a Profit Center Mentality
Management must encourage, facilitate, and support the evolution of equipment management from a cost
center to a profit center mentality. A profit center is results oriented. Improvements are encouraged and
will occurso long as they are supported with incentives for results. A cost center mentality is task
protective and resistant to change, providing institutional disincentives for improvementeveryone is
familiar with the rewards for doing well and finishing under budget!
Manage the Change Process
Business is constantly changing; however, corporate culture rarely embraces radical change. Reluctance
to change virtually guarantees sub-optimized results. The successful are those who thoroughly understand
the need for change, are willing to change, and are capable of managing the process of change while
patiently awaiting results. Directing the change process, maintaining consistency of purpose once the
process has begun, and injecting changes carefully and incrementally are vitally important challenges for
results-oriented management.
Overcome Resistance
In any change process, some individuals will resist. In fact, organizational conflicts are typically more
difficult to solve than technical issues. Several companies stated that middle management was most
resistant to change and found change most threatening.
Companies that have successfully implemented major process and organizational changes flexibly
accommodate resistance. Some people who are otherwise valuable, productive employees simply cannot
adapt to change. The skilled craftsman accustomed to working independently may not be able to maintain
the same level of effectiveness in a team environment. There may be interpersonal friction and/or
competition. Progressive companies will adjust the organization and create special assignments to retain
the full use of loyal, talented individuals. However, individuals who openly oppose the change process
and attempt to convince others to resist the change must be replaced; the dissonance they create can derail
the entire change process.

III.

OVERVIEW AND BENEFITS OF OPERATING EQUIPMENT ASSET

MANAGEMENT

Illustrations:
3.1
3.2
3.3
3.4
3.5

Operating Equipment Asset Management Focuses on Results

Intervention Improves Asset Effectiveness(120)
A Generalized Information Model
The Maintenance Process(120)
Cost Advantages of Maintenance Types

Summary
Operating Equipment Asset Management (OEAM) is business oriented, profit centered and directed to
lifetime effectiveness. Gaining maximum effectiveness, productivity, and value is the primary objective.
The process begins with design and continues through procurement, installation, operation, and
maintenance. Metrics that link to business and financial objectives are employed throughout to identify
opportunities and measure progress to objectives. Information and information systems that convey
current status, predicted asset lifetime and capacity, and operating and logistics recommendations have an
integral role in OEAM. Within OEAM, maintenance is viewed as a vital part of operations/production,
elevated to asset effectiveness and managed as a profit opportunity and core business issue.

A. The Requirement
An excellent exposition describing the requirement for Asset Management was published in 1998 by the
Boston Consulting Group. The remainder of this section consists of extracts from the document, Asset
Productivity: The Next Wave. (115) Notes in brackets [ ] refer to chapters in this Handbook where
specific concepts are described relative to Operating Equipment Asset Management.
Business is on the verge of a major next wave of asset productivity improvementone that will go
farther and be more difficult to achieve than past initiatives. This next wave is being driven by three
powerful trends:

The exhaustion of traditional cost cutting: Intense price competition has ratcheted margins
downward in many businesses. This no-win game has sharply limited the ability of margin
improvement to boost a companys returns, forcing more and more companies to turn to
increasing asset efficiency as an alternative.

The downside of rapid growth: Too often the pursuit of growth has come at the price of a
neglected balance sheet. Ultimately companies must focus on improving asset productivityto
get more profit out of fewer assets.

Fundamental changes in industry structure: Companies can no longer subsidize poor asset
performance in any single business activity by making that activity part of an integrated value
chain. Vertical integration and asset ownership are no longer competitive requirements in many
industries; new entrants are building successful business models based on minimal asset
ownership and extremely high levels of asset productivity. [Chapters II and III, Appendix B]

The next wave of asset productivity initiatives will share three basic characteristics:

Holistic rather than piecemeal: Efforts will be directed by a sophisticated understanding of

asset productivitys role in shareholder value creation as well as systemic interactions among
asset classes along the entire value chain. This allows a company to capture the dynamic
interactions among assets and the second and third order effects that can result. [Appendix B]

Factored into portfolio and capital allocation decisions: Next wave companies will incorporate
a sophisticated view of asset efficiency into strategic decisions about a corporations product and
business portfolio and into the entire capital allocation process.

Over time, increases in share price are a function of returns (relative to the cost of capital),
and growth in the asset base of the business. There are two ways a company can boost returns.
Either it can increase cash-flow margins or it can improve the productivity of existing assetsin
effect doing more with less.

While asset productivity is an important driver of shareholder value, it should never be considered in
isolation. Rather, its impact on other drivers of shareholder value, particularly growth and operating
margins, must be factored into a companys strategy and plans. Addressing these variables holistically
and managing tradeoffs between them is essential to delivering superior shareholder return. [Chapter III,
Appendix B]
Interactions Among Asset Classes
In some industrieschemical processing and papermaking, for exampleimproving fixed-asset
productivity can come at the price of working capital productivity. Achieving full utilization of fixed
assets often requires relatively rigid production scheduling. Unless safety stocks are increased
(diminishing working capital productivity), responsiveness to short-term demand is compromised.
Tradeoffs can be modeled, allowing managers to explore implications of a range of alternatives.
In many businesses, it is a common practice to use consignment stocksinventory located at the
customer site but remaining on the books of the supplying company. The customer takes possession of the
inventory only at the moment of use. In effect, the practice of consignment improves the customers asset
productivity at the expense of the suppliers. [Chapter VI] Some suppliers offset this disadvantage by
writing contracts that include provisions for immediate payment on use. This practice greatly improves
account receivables performance, offsetting the negative effects of consignment stock on inventory
valuation.
Focus on asset productivity makes strategic sense in at least four situations:

When a company is being outperformed by its peer group: In any particular industry, if a
company slips substantially below the average asset productivity of its peer group, it risks a
financial crisis.

When a company has exhausted other avenues for boosting shareholder value: In this case
the focus on asset productivity is more a response to the diminishing returns available from other
pathways to shareholder value.

When improved asset productivity is necessary to execute a new strategy: Many companies
realize that in order to be more responsive to customers they must combine highly flexible
manufacturing with low inventories and increased service. In others, a focus on asset productivity
comes as part of an effort to free up cash to fund growth.

When the industry value chain is deconstructing: Under the influence of deregulation,
proliferating market mechanisms, and the new economics of information, more and more
industries are deconstructing. In some cases, high asset productivity turns out to be a far more
important strategic lever than the traditional value chain.

Identifying Asset Productivity Opportunities

There are four basic steps to improving asset productivity:
1. Understand your asset structure. Many managers still focus almost entirely on their Profit and Loss
(P&L). They carefully track volume, sales, and margin but give little consideration to the assets
necessary to achieve the results. Therefore, the first step is to get to know your balance sheet.
It is also necessary to dig deeper than the numbers provided by the typical balance sheet. Many of the
conventions of generally accepted accounting principles, originally devised for tax purposes and for
reporting information to shareholders, mask what is really going on in the operations of a business.
For example, a typical balance sheet factors in depreciation when reporting the value of assets. But
depreciated assets do not necessarily reflect the true operational value of the assets in question or their
actual replacement cost. That fact makes it impossible to compare one companys asset performance
with its competitors and can distort managerial decisions about investment or growth by
understanding or overstating actual long-term operating performance. A better approach is to use
replacement-value accounting, which adds back depreciation and adjusts asset costs to current dollars
by factoring in inflation. [Chapter V]
2. Disaggregate your business to identify key areas of need: It is important to identify the products or
businesses where asset productivity is especially important and where improvement opportunities are
most promising. So look behind the averages to capture differentials in performance across products,
plants and entire business units. [Appendix B]
3. Customize your benchmarking: Any comprehensive approach to asset productivity improvement
must involve extensive benchmarking. However, companies need to make sure their benchmarking is
relevant to the competitive situation of their business. Many companies find the process far less
useful than anticipated, usually because of flaws in their approach; they dont select the right peer set,
dont develop different peer sets for fundamentally different businesses, or dont get to the causes that
explain the performance of the selected benchmarks. [Chapter V, VII]
To avoid this outcome, pay considerable up-front attention to ensuring that your benchmarking
targets are truly comparable. Sometimes the relevant comparison will be, not with another company,
but with a single unit (or even subunit), of that company. In many situations, it also pays to look
beyond the industry peer group for benchmarking candidates. This can be an effective way to
investigate operational models from other industries that you can adapt and apply.
It is also extremely useful to benchmark internally as well as externally. Internal benchmarking
(which highlights variations in business unit performance) is especially effective for persuading line
managers that improvement is actually feasible. The best response to the it cant happen here
reaction is to present data demonstrating that it already has.
4. Estimate the impact of operational improvement on shareholder value: Once a company
identifies potential operational improvement opportunities, it should strive to estimate the impact
these improvements will have on shareholder value. While hard-and-fast predictions are impossible,
there are methodologies for calculating the approximate impact of increases in asset productivity on

total shareholder return. Linking operational efficiencies to value creation is an important way to
build internal support for a companys asset productivity initiatives. [Chapter VI, Appendix B]
As an example of a comprehensive, enterprise-wide approach to asset productivity, a large chemical
company had experienced an alarming seven-year decline in return on investment, due primarily to
decreasing asset productivity. Its consistently poor asset performance (nearly four percent below the cost
of capital), led the company to conduct an extensive analysis of opportunities for asset productivity
improvements across most of its divisions.
One part of the review was a top-down exercise in which senior managers, together with their project
teams, benchmarked each business unit against the performance of relevant industry peers. On the basis
of this analysis, the teams estimated that, given competitors typical levels of asset productivity, the
company would be able to improve its performance by about 25 percent, freeing up some $5.5 billion in
assets. Assuming cash-flow margins held constant, this improvement in asset productivity could
potentially produce a one-time increase in returns of roughly 50 percent and increase shareholder value by
20 percent, creating almost $6 billion in new value.
Meanwhile, a bottom-up effort led by the operating managers in each unit attempted to establish
specific business-unit improvement targets that line managers could live with. Feasibility studies and
root-cause analyses identified more than 30 business-specific initiatives that, if successful, would realize
some two-thirds of the original estimated savings. Some of the initiatives involved the redesign of
specific business processes. Others recommended shedding nonproductive plants. Still others focused on
building new systems for logistics management. Finally, some initiatives aimed at identifying the specific
drivers of shareholder value in each business unit and incorporating that understanding into the metrics by
which unit managers and their subordinates were measured. [Chapter V]
In some business units, the new focus on asset productivity led to a major reorganization of operations.
One unit, for instance, had for years measured the asset productivity of each of its production facilities but
not of its entire production chain. This approach was not really suited to the needs of the business, which
consisted of products with long, drawn-out production chains crossing many different facilities, and with
no single plant dedicated to a single product.
When the team finally did the work of analyzing asset productivity by product, it discovered that different
types of products had very different patterns of asset performance. Some products, for instance, had
relatively stable demand, which meant that they lent themselves to high fixed-asset utilization. Other
products, by contrast, had highly irregular demand, which meant that it was important either to maintain
some excess capacity or to build high inventories in order to meet peak demand.
This insight led the unit to rethink the way it allocated production to its plants. Some plants were
dedicated to stable-demand products with high fixed-asset productivity. Other plants specialized in
fluctuating-demand products with low fixed-asset productivity but with fast and flexible logistics. The
unit also reorganized its production and marketing organizations around this new product segmentation.
The companys asset productivity efforts continue. So far about 25 percent of the agreed-upon savings
have been realized, totaling nearly $1 billion. In the two years following the commencement of the asset
productivity improvement effort in 1995, the companys stock performance substantially outpaced that of
its industry peer group.

Building Line Management Commitment

Unless asset productivity improvement is driven by the line, even the most elaborate program is likely to
take hold. Thats why for many companies, especially those that have already had extensive experience in
operational improvement, the main focus of asset productivity efforts will be organizational: creating the
right mix of managerial roles, accountabilities, and support systems to ensure that asset efficiency
receives the ongoing attention of line managers. [Chapter VI, VII] In building line management
commitment to asset productivity, three things in particular are critical:
1. Make the financial case and set the right level of aspiration: Asset productivity is a critical
business lever that should be an important part of what line executives manage. At far too many
companies, however, it is still perceived as yet another corporate mandate imposed on the line. Its
not that line executives dont understand on some level that asset productivity is importantit is just
one of a variety of goals, sometimes conflicting, that they have to manage. In the absence of a
persuasive financial case and clear accountability and ownership, they are unlikely to make it a
primary focus of attention.
Senior managers should avoid starting the asset productivity effort by dictating what kind of
improvements they expect from the line. Rather, they should open a dialogue that allows them to
make the case for why asset productivity is important to the companys financial and strategic goals.
Part of this dialogue with the line is an iterative process of setting the right level of aspiration for the
companys asset productivity improvements efforts. This aspiration will partly be the result of
extensive benchmarking, as described above. But it will also be based on a close examination of the
fastest achievable rate of improvement given each units strategic goals. In addition to asking How
much can we improve? ask, How long will it take to get there?
2. Hold accountable, but dont micromanage: The result of this dialogue should be a shared
understanding of the order-of-magnitude improvements that are possible. The next step is to build an
effective system for holding line executives accountable for achieving these goals.
Clarity and simplicity are the key characteristics of an effective accountability system. Thats why it
is usually a mistake to have managers commit to detailed operational metrics so much improvement
in days receivable, inventory turns, accounts payable, and so on. As desirable as such improvements
may be, creating a whole new set of metrics adds complexity and limits executives freedom to
manage the business. And it can result in counterproductive behavior: executives either manage
exclusively to the new metricsbut at the cost of neglecting other important prioritiesor they never
really focus on the new targets at all. [Chapter VI, VII]
A better approach is to drive line commitments through a single, high-level, asset-related financial
measure, then let each manager decide precisely how to get there given the specifics of the particular
business. This is easiest to do when balance sheets are fully allocated among business units. But even
when they are not, there are a variety of techniques that companies can use to simulate allocation or
otherwise define those assets that particular line executives control. Finally, many of the bestpractice asset performers link this top-level asset-related measure directly to compensation. [Chapter
V, VI, Appendix B]
3. Support through information and infrastructure: Once commitments to high-level financial
targets are set, the final step is to provide the information and support that line managers will need in
order to meet their goals. This is where detailed operational metrics are keynot as targets but as
information to help line managers make smart and informed decisions. Armed with information about
operational best practice, both outside and inside the company, each line manager can prioritize

among improvement opportunities and make the tradeoffs between asset productivity and other
business imperatives. [Chapter VI]
Another important resource that senior management can provide is a support infrastructure that makes
it easy for line managers to learn from their colleagues, to take advantage of specialized expertise,
and to incorporate best practice quickly. Indeed, once line executives are committed to the asset
productivity improvement program and its goals, are held accountable for high-level financial targets,
and are compensated for meeting them, they begin to look at staff support not as an imposition but as
a crucial resource. They pull in staff support rather than perceiving it as something pushed on
them.
A company designed a support infrastructure to help line managers meet their goals. One component
was a set of new line and staff roles; these included a vice president for asset productivity, who
reports to both the COO and the CFO, and business-unit champions, each responsible for a single
units activities in a specific asset class. Another element was a set of mechanisms for sharing best
practicefor example, the establishment of three cross-unit asset improvement teams. Finally, the
company developed models for enlisting the entire organization in the improvement effort and for
translating high-level financial metrics into concrete operational goals.

B. Operating Equipment Asset Management

Operating Equipment Asset Management:
A comprehensive, fully integrated, strategy, process, and culture directed at gaining greatest
lifetime effectiveness, value, profitability, and return from production and manufacturing
equipment assets.
OEAM helps attain the capacity necessary to gain greatest effectiveness and profitability from a
production process. It is the essential partner of enterprise and manufacturing planning, ensuring that
production capacity is, and will be, available to meet delivery commitments on schedule, cost, and
quality. OEAM is essential for process, production, and manufacturing enterprises where optimum
equipment availability, reliability, and lifetime cost effectiveness are necessary for profitability in todays
opportunity driven, minimum-lead, demand-pull production environment. This concept is presented in
Figure 3.1. Note that revenue, asset utilization and cost are the three prime contributors to mission
effectiveness, expressed as Return On Net Assets (RONA) and Return On Capital Employed (ROCE).
Figure 3.2 illustrates the lifetime profile of typical operating and production assets ranging from process
and manufacturing facilities to Navy ships and individual equipment. Shaded areas above the breakeven
line represent the ability to meet mission requirements and profit. Interruptions, losses, and restrictions
that prevent full compliance with mission requirements are shown as shaded areas below the breakeven
line. Note that both the horizontal and vertical scales in this figure have been greatly exaggerated for the
purposes of illustrating the concepts.
A gradual loss of profit/operating readiness can be caused by deteriorating efficiency (greater cost),
corrosion, heat exchange limits, mechanical constraintsfor example, speed restrictions resulting from
excessive vibration, valve leakage, declining catalyst activity (applicable to the hydrocarbon industry) and
a host of other problems acting alone or in combination. Improved design, care in installation, proper
operation, and maintenance all contribute to extended life and asset effectiveness. However, every asset
eventually must be removed from service for restoration. The only questions are how often and for how
long.

Three methods that can be used to increase profitable operation are illustrated in Figures 3.2b, 3.2c, and
3.2d.
Increasing reliability by eliminating life-shortening defects extends the length between restorative
outages, as shown by Figure 3.2b. Profitable operating life, illustrated by the area above breakeven,
increases. Shortening the duration of restorative outages reduces the non-service components that subtract
from asset operating life, effectiveness, and profit, as shown in Figure 3.2c. Within industry, objectives to
double the interval between restorative outages and halve the duration of an outage are not uncommon.
Figure 3.2c also illustrates operation with reduced capability below breakeven for some period of time.
This type of operation at reduced capability is occasionally necessary to ensure successful mission
completion, meet operating and delivery commitments, and preserve valuable customer relationships.
Figure 3.2d shows how increasing rate and capacity by removing bottlenecks will increase profitable
operation, as indicated by the shaded area above breakeven. In this case, de-bottlenecking is defined as
removing process, operating, quality, and mechanical impediments to full operationessentially realizing
the hidden plant described in Chapter V.
Optimizing lifetime Operations and Maintenance (O&M) costs is an important aspect of Operating
Equipment Asset Management. With electricity consumed during operation often comprising 50 to 80
percent of total lifetime cost, maintaining the highest possible operating efficiency is essential.
OEAM begins at design and includes procurement, installation, operation, and maintenance. It links
safety, mission compliance, availability, capacity (production output), reliability, quality (yield),
operating and maintenance costs, and environmental compliance to business objectives. OEAM
constructs the vital ability to predict future availability, conditions, and cost that enables managers to
make production commitments with confidence in their ability to deliver.
OEAM is results oriented, rather than task protective. Prioritization and measures of performance are
financially based. The entire process is directed by profit center, rather than cost center, principles. It
incorporates and builds on the best attributes of Reliability Centered Maintenance (RCM), Total
Productive Maintenance (TPM), Preventive Maintenance (PM), Condition-Based Maintenance (CBM),
and even Reactive Maintenance, with one crucial additionprofit-centered prioritization is applied to
arrive at an optimum mix and balance.
By definition, Operating Equipment Asset Management imposes broad requirements and demands results
that may be well beyond the capacity of any single functional area. Perhaps OEAM is best viewed as a
unifying link between production planning and process control that ensures that mission requirements can
be met safely at optimum output, quality (yield), efficiency, and profitability. Figure 2.2 in Chapter II
depicts this idea.
The OEAM process must be driven top down and accomplished bottom up. Business conditions,
specifically the origin of profit, are the basis. The process requires a clear understanding of the principal
factors that determine and drive profit.
Are mission effectiveness and profit determined by production availability (capacity), market conditions
(demand), operating (conversion) and maintenance costs, or some combination of these? The answer is
vitally important, because it establishes the basis for deployment and allocation of resources. Safety is a
paramount consideration. Regulatory (environmental) factors have a strong effect, as does quality. Does
operating closer to quality standards produce greater profit at a given output?

OEAM promotes maximum effectiveness and profitability gained through:

Minimized threat to safety and the environment, elimination of industrial injuries.

Optimum production rate

Optimum quality

Maximum conversion effectiveness.

Minimum failures and unscheduled outages.

Optimized O&M costs

Optimized use of capital including spare parts

The benefits of OEAM include:

Safety compliance and greatest value and effectiveness for mission, business conditions, and
objectives

Highest value and return from equipment assets

Attention directed to highest value and priority opportunities

Progressively increased effectiveness through continuous improvement

Awareness, participatory ownership, and peer pressure promoted to meet objectives

Corporations leading development of the principles of Operating Equipment Asset Management state
that work groups are the biggest motivator and contribution to successwhen the need is
understood, buy-in, commitment, and ownership follow.(120)

C. The Process
On new equipment, Operating Equipment Asset Management begins at design with criticality prioritized
Reliability Centered Maintenance and Failure Modes, Effects, and Criticality Analyses (FMECA). When
equipment has been in operation and has a history, OEAM begins with prioritized RCM and RCFA and
maintenance effectiveness assessments. These are applied first to critical systems and equipment that have
experienced problems. Maximum value is the objective.
The OEAM process:

Extends from design, procurement, and installation through operation and maintenance

Requires a profit center rather than cost center mentality

Demands defect elimination as the only way to achieve sustainable, optimized operation

Assembles the different maintenance processes with mission-based financial prioritization for
greatest effectiveness

Provides processes, techniques, and measures of performance that gain ownership, compel
broader responsibility for the value and return generated by capital assets

Requires continuous improvement

Bridges operations, maintenance, technical, and financial functions

Successful Operating Equipment Asset Management

Successful OEAM requires a culture change, a commitment to reducing the need for and the cost of
maintenance, action directed at streamlining the organization, and an optimized mix of practices.
Important actions necessary to derive maximum value and profit include designing for reliability and
maintainability, correcting root cause problems, upgrading materials, improving the quality and integrity
of lubrication, and providing better tools and training. Few would argue with a statement that fire
prevention is far more cost effective than fire fighting. Systematic elimination of minor deficiencies
before they lead to major damage and interrupt production is the key to optimum Operating Equipment
Asset Management.
OEAM requires an objective, value-oriented, complementary mix of condition-based, time-based, and
even run-to-failure maintenance. All are directed to maximum profitability. Condition-based maintenance
is often the most profitable. However, preventive maintenance is called for in situations where experience
or safety considerations require time-based actions, or when the measurements required for condition
assessment either are inaccurate, unreliable, or too expensive. Run-to-failure must be based on facts,
which demonstrate that this method is most effective when all factors are considered; it cannot simply be
a default condition.
Operating Equipment Asset Management is a Business Issue
Although most of the processes and practices necessary to assemble an effective OEAM program are
available today, organizations are not yet realizing OEAMs full value. The primary reason appears to be
inadequate communications between equipment management professionals and senior management.
Equipment management personnel may be narrowly focused on physical achievements and technology.
Many personnel express frustration, believing that their past and future contributions to corporate success
and profitability are endangered by management decisions that focus solely on short-term cost reductions.
Most equipment management professionals have difficulty conveying results in financial terms that are
credible and appealing to senior management.
Financial managers argue that customers, shareholders, and boards of directors all push for cost
reductions. Further, in many cases, equipment maintenance enthusiasts have been allowed to pursue
narrow goals without sufficient discipline or requirements to demonstrate real value. As a result, future
investment for productivity-improving technology and practices must be supported with compelling
financial justificationin terms that are familiar and credible to senior executives.
Operating Equipment Asset Management is a business issue. There are permanent cost reductions, value,
and profits to be gained through visionary, enlightened change. Maintenance can be controlled, planned,
and optimized for maximum value. Maintenance cannot be deferred too long or ignored; deferred costs
will reappear in the future greatly multiplied in both financial terms and impact.
The choice is clear. Lead with maintenance optimization or wait until it is imposed by the same
competitive pressures that forced adoption of modern manufacturing practices such as Just in Time (JIT)
and Statistical Quality Control (SQC).
Maximum Value, Not Least Cost
Insisting on maximum value over least cost is a long-term commitment that requires a top to bottom
change in culture. The concept is difficult to establish as the normal way of conducting business.

Return On Investment (ROI) and Net Present Value (NPV) are two conventional ways to calculate the
relative value of projects and decisions in order to objectively determine maximum value. Framing
operational issues and schedule-impacting equipment decisions in value terms is a greater challenge. For
the typical organization trained to think of minimizing costs, the concept of maximum value may seem
foreign. The value concept of reducing costs as a percentage of operating hours or production output in
units, MW, pounds, tons, etc., is quite different and leads to greater value than cost reduction. The value
concept takes advantage of opportunities for added sales, increased production, yield, quality, and
efficiency. The financial model and process presented in Appendix B may be of assistance.
Within the financial model technology benefits must be translated into financial terms so that decision
makers will readily support the initial and sustaining investments to gain maximum value.(34)
Benefits of equipment management that translate into real financial value include:(34)

Reduced safety incidents, improved environmental compliance

Increased availability and production rate
Improved quality
Reduced energy usage
Eliminated maintenance actions, reduced maintenance costs
Reduced spare parts inventory (capital)

Profit Centered Management

The need for an approach to equipment management that differs from past practice is apparent to many
professionals.(70) Cost-centered management must comply with an operating budget. It is task protective,
risk adverse and contains structural disincentives against optimization. In contrast, profit-centered
management is value- and results-oriented, encourages investment, and accepts added operating costs in
order to improve efficiency and take advantage of opportunities. A profit center encourages agility and
initiative and demands responsibility and accountability.
There is a clear distinction between cost and profit centered mentalities. A cost center has no systemic
incentives to optimizeadversely, it provides disincentives to optimize. The reward for coming in under
budget in a cost center is often tighter constraints in the future. A profit center is the opposite. A premium
is placed on optimization. Investments and added costs are evaluated from the standpoint of results and
return. The latter is certainly healthier and better suited to OEAM in a complex process or manufacturing
environment.
OEAM focuses on profitability and value gained over a lifetime of operation. This profit-oriented concept
is quite different from economic value as defined by accounting textbooks. For example, traditional
accounting may yield a depreciated book value so low that vital equipment is no longer considered a
valuable asset that warrants continued, sustaining investment.(25)
The principles of FMECA, prioritized by opportunity, provide essential guidance. For example, an oil
refinery increased profit tenfold by focusing on opportunity.(120) Opportunities include improved safety,
reliability, production, and quality. Reducing cost by replacing or modifying equipment that is operating
inefficiently is an often-neglected opportunity to create value. In addition to reducing operating costs,
changes to improve efficiency often also improve reliability. Examples that can have very attractive
returns include:

Extending life by upgrading to corrosion resistant materials

Eliminating pipestrain induced casing distortion and shaft misalignment

Installing sealed bearings to ensure contamination-free lifetime lubrication

Drilling pump cases to self-vent seal housings(86)

There are dozens of such opportunities in every industryall must be prioritized by financial return.
Within the concept of Operating Equipment Asset Management, maintenance shifts from keeping
individual equipment operating to ensuring process and system integrity and effectiveness.
Lifetime Ownership
Operating Equipment Asset Management focuses on the lifetime cost of ownership, which includes
design, procurement, and installation. Over a full lifecycle for typical rotating equipment, acquisition may
be 10 to 15 percent of the total cost; maintenance is usually less than 5 percent. Operating cost comprises
as much as 85 percent.(25)
An estimated 20 percent of maintenance costs result from design defects.(108) Procurement based on low
initial cost is false economy if diminished quality, inefficiency, and excessive maintenance quickly
consume the initial price advantage.(25) Some companies take this concept a step further and select
equipment based on highest efficiency and lowest lifetime cost.(25) A few apply offsets to quoted prices
that compensate for the lifetime cost of ownership.(120)
A systems approach to total ownership costs provides a means for managing every cost element at the
margin to gain the highest returns on both new and existing assets. The objective is to maximize the
revenue and related profit-generating potential of the equipment.
Visionary manufacturers have shifted awareness from the here and now to an extended horizon of
time. Asset management strategies based on total lifetime ownership have become a fundamental
extension of competitive awareness.(25)
In most facilities, rigorous design specifications are applied to critical equipment that affects production
availabilitytypically large, unspared machines. Equipment in this category are designed, installed, and
operated with great care. They are subjected to detailed surveillance and, based on grouped lifecycle
costs, are usually the most reliable and possibly least expensive to maintain. Many have discovered that
maintenance of small general-purpose machines consumes more lifetime costs than critical machines.
Although the cost of any given maintenance event is typically much less for general-purpose
equipment, the population is far larger and more chronic. Chronic, repetitive problems are typically
allowed to exist. Equipment in the critical category routinely operates for lengthy periods without
attention or problems.
Efficiency improvements are a large potential source of added profit. In a facility operating 50,000 HP
(37.5 MW) of electrical power consumers, an overall improvement of just 5 percent saves more than
$400,000 per year in utility costs (at $.025/kWh). At the bottom line, this is equivalent to $4,100,000 in
added production (at 10 percent net profit).
Financial Measures
Industry leaders recognize that investments for improved practice, process, and technology will be
approved only when justified by undeniable, compelling financial return. Show me the money is much
more than a catchy line from a popular movie.

Metrics such as costs as a percentage of plant replacement value (i.e., Replacement Asset Value [RAV])
are used for assessing the performance and effectiveness of equipment assets, primarily in the
petrochemical industry. Maintenance costs of 2 to 2.5 percent of RAV are considered to be world class.
This measure focuses entirely on controlling cost. Progressive leaders question this strategy, reporting
that when all factors are consideredsafety, quality, and production output to name threeoptimum
sustainable cost is typically greater than least cost.
DuPont was one of the first companies to measure maintenance effectiveness in terms of costs as a
percentage of plant replacement value. They have reportedly reduced their index from 3.3 to 2.3 percent
and are gaining $400 million per year in reduced costs. This results from a focus on excellence that
emphasizes planning and scheduling, a mixture of condition-based and preventive maintenance, and
reliability improvement.
Another major company in the same industry is about midway in a reduction effort, reducing the index
from approximately 4 percent to their objective of 2 percent to realize savings of about $100 million
at the bottom line.(120) Another company reported expectations for both increasing asset utilization and
reducing maintenance costs expressed in the following table:(100)
ROE

RONA

Earnings/
Share

Increase asset utilization by 5 percent

3.5%

1.5%

$1.30

Reduce maintenance cost/RAV by 30 percent

1.5%

.8%

.60

Another company estimates that maintenance costs can be reduced by nearly $500 million by
implementing best practice.(35)
General Motors reported that maintenance spending in 1994 totaled $4.7 billion worldwide,
approximately 13 percent of the capital investment in production machinery and equipment. The same
report stated that a benchmarking study disclosed that Japanese automobile manufacturers were spending
approximately 3 percent. The 10 percent gap represents $3.6 billion at the bottom line.
Cost as a percentage of RAV should be applied with caution, as it does not consider several influential
factors. Plant age, operating hours, and intensity of operations all affect costs and the optimum
expenditures for a given regime.
A progressive petrochemical company uses costs as a percentage of RAV as overall guidance and
justification for virtually all aspects of equipment management optimization. The need to eliminate
defects and the need to establish the number of personnel enrolled in apprenticeship training are both
based on cost/RAV. The two, seemingly unrelated areas are linked by the proportional costs of labor and
material (approximately 50-50), plus a realization that reducing maintenance costs requires reductions in
both labor and material. From the average cost of repair, an estimate of the reduction in repairs necessary
to meet the cost/RAV objective can be calculated. A similar calculation, beginning with the average cost
of labor, leads to a head count objective. Upon making this calculation, management of the petrochemical
company were surprised to learn that attrition and retirements would soon result in a shortage of trained
personnel. That conclusion necessitated re-activation of an apprenticeship program to meet the
unexpected needs.(120)
Two lessons can be learned from this example:

1. An objective to reduce costs as a percentage of some fixed quantity requires addressing all
contributors. Concentrating solely on reducing labor costs by eliminating people and/or outsourcing
considers only about 50 percent of the cost of maintenance and will not produce the required results.
A focus on defect reductionthrough more effective maintenanceis far more productive and
effective. This action has the greatest effect by reducing the costs of both material and labor.
2. Change must be accompanied by a means to determine long-term effects. Many companies have
reduced their workforce to cut costs, only to discover that the knowledge and experience necessary to
safely and effectively perform vital tasks had been irretrievably lost.
Life cycle extension, improved incremental profit from increased availability, and delaying the necessity
for capital investment to meet market demands for added capacity are major additional benefits gained
through improved equipment management. Extended life and avoided obsolescence affect depreciation
and increase earnings per share.
Capital Reduction
In most measures of financial performance, reducing capital has the same positive effect as increasing
profit. Within Operating Equipment Asset Management, pressure to reduce capital appears as pressure to
purchase least cost capital equipment and reduce spare parts inventory.
In addition to the cost of non-performing capital assets, companies estimate that spare parts inventory
consumes a minimum of 15 percent per year of inventory valuation for warehouse storage, damage, loss,
and obsolescence. Companies who have calculated actual costs estimate that the annual cost of
maintaining spares inventory is somewhere between 30 and 40 percent of the value. Thus, a facility with
$100 million in spares inventory is paying at least $30 million per year above usage costs for handling
and warehousing. For companies seeking to maximize effectiveness, this cost must be reduced.
The first step toward minimizing spare parts inventory is to reduce failures and the corresponding
necessity for maintenance and spare parts. Next, many facilities are implementing efforts to increase
shared parts and reduce unique parts. In some cases, slight design alterations may eliminate a unique
spare and allow a machine to share a component, such as a bearing, that is already used on multiple
machines.

D. The Necessity for Information

Information is the lifeblood of successful OEAM. Information includes current condition, operating
efficiency, projected lifetime, and lifetime cost for use in enterprise planning and production control. In
addition, equipment-specific information such as operating and maintenance history, the presence and
diagnosis of problems, components affected, status of work, and spare parts are required for effective
equipment and logistics management.
Open Systems
All available evidence supports the superiority of open systems for exchanging information. Only a few
years ago the telephone system was closed. All wiring and equipment had to be purchased, installed, and
serviced by telephone company personnel. A strong case can be made that the decentralized, open
environment that followed deregulation has been largely responsible for the explosive growth in
telecommunications. Perhaps the growth would not have occurred at all in a closed environment. The

June 14, 1998 Outlook Section of the Washington Post stated: The greatest invention in the computer
industry is not the Personal Computer but a standard open platform on which third parties can innovate.
Within industry, process control is rapidly moving from closed, proprietary systems to open access and
exchange. Why? A growing customer awareness that no single supplier can maintain best for
application in every area required for modern automated control systems.
The Open Systems Joint Task Force promotes an integrated business and technical strategy that defines
interfaces through which components can inter-operate. Interfaces should be widely used, nonproprietary, and based on either de-facto standards or those accredited by standards organizations.
Business and industrial purchasers are likewise demanding open connectivity, interoperability, and the
ability to migrate information from generation to generation of hardware, operating systems, and
applications software. This protects companies large investments in information management
technology.
An open system is:
Capable of automatic communication (connectivity) and information exchange (interoperability)
through widely accepted, published conventions without any proprietary or system-specific
software links.
Open system conventions offer a number of benefits, including:

The most effective, least expensive means to measure and communicate equipment condition and
control information for the purposes of managing availability, reliability, and lifetime cost of
ownership

Simplified data fusion and concurrent analysis for decision support by assembling information
from:
-

Dissimilar condition measurement and advisory systems (e.g., vibration, lubricating and
hydraulic oil condition, operating performance, electrical condition, and thermography)

Condition assessment, control, maintenance management, and enterprise information

(production and financial) systems

Freedom to assemble comprehensive, self-integrating equipment control, and management

systems from multi-source best-for-application components without expensive, inflexible, and
specialized system integration

Enterprise-wide awareness of results, benefits, credibility, and business value of optimized

equipment management processes and practices through full participation in the information
structure

Continuing, least cost upward growth and expansion to gain maximum advantages from
improved technology and increased experience

Ability to concentrate resources and investment on highest value, core competency, application
optimization, and advancement rather than low value platform and custom interface requirements

Reduced purchase prices via high-volume commercial components

Stimulation of new life, acceptance, expansion, and success into the equipment asset management
and condition assessment fields by full participation in 21st century information processes

A Proposed Equipment Information Model

The information model illustrated in Figure 3.3 offers a means of initiating an open systems approach. It
defines boundaries to allow specialized systems to perform designated tasks in an optimal fashion. In
addition, the model defines information content at boundaries for each logical function. This model
represents a giant step forward and reflects a consensus among a broad variety of users and suppliers.
The model illustrates six functions that supply and receive equipment management information. In the
open model, all are accessible through open gateways employing standard exchange protocols. This
eliminates the costly requirements for custom mapping between every combination of functional systems
from multiple suppliers.
The center, double-headed arrow in the information model represents the open link to and from functions.
It can also provide links to functions and access for display elsewhere in the facility and enterprise.
Condition Measurements include on- and off-line vibration; operating, and process measurements such as
temperature, pressure and flow, fluid (lubrication and hydraulic oil) condition, motor operating current
and static impedance characteristics; and ultrasonic and thermographic temperature images. The open
model provides a published means to exchange information between compliant systems.
Maintenance Management is the repository for a great deal of information that is useful for users in both
the Condition Measurement and Decision Support functions.
Recording periodic predictive measurements is likely to become a scheduled activity of the Maintenance
Management System. Completion and time required will be reported back for the purpose of cost
accounting, similar to work order completion.
Control Systems also require equipment information. Many control system suppliers view condition
information as another measured value that can be accommodated like all the other scalar control values.
There appears to be little awareness of the necessity and benefits of the rich detail resident within
complex, dynamic signalssuch as measuring vibration for early detection of problems and accurate
lifetime prediction.
Decision Support is the heart and core of Equipment Management. It converts equipment operating and
condition measurements into actionable, predictive information. This model provides the basis for
information available and needed for decision support. The decision support process must support
collective evaluation of operating and complex static and dynamic data from a variety of sourcesthis
results in a comprehensive picture of current condition and predicted lifetime, enabling effective product,
operations, and maintenance planning.
Today, decision support is largely accomplished manually by experts. With open links providing greater
access to more data at less cost, increased resources can be applied to extending and improving the vital
decision support process. This will allow scarce human expertise to be concentrated on tasks with high
economic valueanalyzing root cause and developing corrective action for complex deficiencies.

E. Maintenance
Maintenance is a key component within the organization that ensures the capacity necessary to meet
production commitments and makes a strong contribution to the bottom line. Maintenance must be
viewed as an investment in future profits, capacity assurance, improved throughput, and quality. In short,
optimized maintenance and equipment management are essential to lifetime profit.

Many corporate and financial executives and boards of directors view the maintenance function as a cost
and the expenditures required to maintain buildings, structure, equipment, tools, and training as business
expenses. In too many cases, when expenses must be curtailed, the maintenance budget is the first to feel
the pinch. Incentives to increase effectiveness, replace inefficient equipment, and invest in new
technology (which often incurs installation and training costs) are often rejected strictly on the basis of
cost. (Minimum sustaining maintenance costs are discussed in chapter II and are depicted in Figure 2.1).
A power generating company reports that maintenance expenditures are approximately 65
percent of non-fuel O&M costs.(7)
Among leading corporations, maintenance is considered an integral part of production. Its importance to
the timely, efficient, and effective creation and delivery of an end product is fully recognized. The process
is well defined, as demonstrated in Figure 3.4.(120) Just as a car needs tires, an effective and profitable
manufacturing process requires an effective and well-run, proactive maintenance program. The principles
expressed in this section apply regardless of whether maintenance is an identifiable function within
manufacturing or outsourced.
By following the recommendations, maintenance managers will be able to demonstrate that their activities
add to the financial success and profitability of the organization. Good maintenance ensures that your
organization is able to provide high quality products and services that are delivered on time. Dynamic
maintenance practices programs support the products and services delivered by the organization and will
be a positive influence on financial health and the organizations future. This is especially true for
organizations that aspire to the standards defined by Malcolm Baldridge, the International Standards
Organization (ISO), and other national and international organizations that recognize excellence in all
aspects of business.
Production manufacturing equipment is typically expensive and usually represents a large percentage of a
producer corporations capital assets. Engineers, managers, and purchasing agents devote substantial time
and effort to specifying and procuring equipment that is expected to serve the organization far into the
future. The time, effort, and money that went into the acquisition of manufacturing capabilities should be
extended throughout the equipment lifetime in the form of quality care to ensure that the equipment
continues to operate reliably and within expected tolerances. This represents a sound business decision.
The company and its shareholders will receive a full return on their investment in capital equipment,
while ensuring that the equipments capabilities and features are fully exploited to manufacture a high
quality product at a competitive price.
Extending the service life of capital equipment is another important issue. Again, prudent equipment
management practices ensure that the equipment has a full and effective service life. Well-maintained
equipment often lasts far beyond the normal expected service life, thereby reducing the capital
requirements for acquiring new (and expensive) equipment.
Optimizing Maintenance
Optimized maintenance is an essential part of Operating Equipment Asset Management. Physical
maintenance, the work done on and for machinery and equipment, has a broad range of technical and
conditional requirements. Maintenance must be flexible and adaptable to change, often under
circumstances that demand the application of a wide range of competency, skill, and techniques.
Firefighting is a vivid example of a physical process. Firefighters can never be certain what to expect;
therefore, they must have broad training, flexible equipment, and the ability to adapt quickly to a wide
variety of conditions.

Maintenance fits the fire fighting analogy. A minor defect is usually controllable and easy to correct. Left
unattended, a minor defect can lead to an unexpected major plant equipment failure with costly side
effects that impact safety, quality, and production. Early recognition and correction, avoiding failures that
impact safety, production, quality, and the environment, is integral to Equipment Asset Management.
Reduce the Need for Maintenance
Fundamental to the value principle is the fact that the only way to permanently reduce maintenance costs
is to reduce the need for maintenance, as shown in Figure 3.2. Any other approach is temporary at best
and gains only a minor portion of the potential value of defect elimination. Improved design, materials,
operations, lubrication, and maintainability are examples of changes that increase reliability and reduce
the need for maintenance.
Maintenance Optimizing Processes
Condition-based maintenance, or predictive maintenance, is a proven, successful practice that can
optimally identify minor problems while they can be easily controlled or corrected at minimal cost. CBM
relies on an ongoing assessment of measurements that accurately represent condition, to determine the
need for and the scope of maintenance. Flaws are identified and corrected in sufficient time to avoid
outright failure or an unscheduled interruption in production.
Over the years, industry, in general, has recognized that migrating from reactive or breakdown
maintenance to condition-based maintenance has the dual advantages of increased effectiveness and
decreased cost, as shown in Figure 3.5. A 1986 Electric Power Research Institute (EPRI) study showing
plant maintenance cost per total horsepower per year has become so well known that it has evolved as a
standard. (See chapter IV, Figure 4.2.) It is used in many industries to demonstrate the relative
improvement as maintenance evolves from breakdown, through planned to predictive. Figure 4.2 extends
the illustration to project the anticipated savings accruing from implementation of additional optimization
available from a profit-centered lifetime management program.
The clear trend toward placing value on optimized maintenance is as close as the television. Ford,
Cadillac, and BMW are advertising automobiles that are essentially maintenance free. Why has the
interval between tune-ups increased to 100,000 miles, well over an order of magnitude improvement, in
less than ten years? The simple answer is the investment in design to eliminate the need for maintenance
and the use of more robust parts returns value to the purchaser and profits to the manufacturer. The lesson
is clear. With vision, commitment, willingness to change, and modern technology, maintenance is being
controlled and converted to a profit contributor.
A Ford Motor Company plant announced, Zero Accidents, Zero Defects, Zero Breakdowns. This is
another illustration of the importance of equipment management within a key industry. It may be the first
time a trend setting, world class operating organization elevated equipment management to the level of
safety and quality.
The electric power generation industry is also finding value through improved maintenance. An EPRI
report states that predictive or condition-based maintenance can potentially reduce overall, non-fuel O&M
costs for a power generating utility by 5 to 10 percent and reduce fuel consumption by 1 to 2 percent. A
power generating utility recently reported a documented average savings of over $2 million per year
during the last three years from maintenance, availability, and heat rate improvements gained with
predictive maintenance.

Ron James, publisher of P/PM Technology, a trade journal devoted to practical applications of predictive
maintenance technology, states that the savings currently gained from predictive maintenance represent
only 10 percent of the savings potential in long-term programs where the need for and the cost of
maintenance is reduced.
In companies where maintenance costs may exceed annual net profit, optimization must be mandatory.
Maintenance as a Core Management Responsibility
Maintenance must be a full participant in business decision-making and productivity reviews. People with
maintenance experience must be involved in key business process decisionssuch as constructing or
modifying facilities, acquiring new equipment, and changing manufacturing tolerancesand not simply
notified as the new decision is being implemented. Maintenance involvement at the beginning helps
ensure that lifetime optimization issues are addressed to avoid operating problems, production
bottlenecks, and sub-optimal maintenance costs.
Industry leaders integrate the maintenance function into all levels of their organizations management
review and decision-making process. This ensures that cost-effective business decisions are made with
full input from all organizational elements. Today, and for the foreseeable future, business emphasis will
be on availability, throughput, quality, production cost, speed of delivery, and effective service support.
The only way to successfully achieve that end result is to include all organizational elements, including
maintenance, in the decision process. When maintenance is not consulted, operating costs may be greater
than expected, equipment reliability and/or performance may be less than expected, and maintenance and
repairs may take longer and cost more than expected. Maintenance is typically blamed!
Some examples:
1. The production manager orders a new piece of machinery for installation on the production line.
When it arrives, management determines that there is only marginal space available to install the
equipment. The installation team squeezes the equipment in. The constrained space prevents easy
access to the maintenance service areas of the equipment; as a result, production must be stopped to
conduct maintenance or repairs. The conclusion was that preventive and condition-based maintenance
could not be accomplished without interrupting production. The equipment is now operated-tofailure. Capacity is comprised and quality may be jeopardized. Performing maintenance on overtime
is the only option. In the first case, availability suffers. In both cases, costs are higher than they
should be with CBM. Had maintenance been involved in the process from the beginning, such
problems might have been avoided.
In the above example, what happens when a maintenance worker is called in to perform repairs on the
equipment? We already know that space was inadequate. Chances are that access to the inner workings of
the machine is also restricted. Lighting and ventilation may be poor. More important, there may be poor
visibility. Space constraints increase the risk of a piece of clothing getting caught in moving machinery,
creating a potential safety hazard. Lost time injuries, disrupted family lives, investigations and lawsuits
are the costly end result, as are declining profits and damaged corporate reputation. All too often
maintenance is unfairly made an easy scapegoat. However, if maintenance had been part of the equipment
selection, siting, and installation processes, the problems would likely have been identified for correction
before the equipment was installed. Repeatedly, maintenance input proves highly valuable in ensuring a
cost-effective installation and operating life.
2. Unexpected new business brought in by the sales department requires the production department to
go to two-shift operations in order to ship the product on time. A key component of the item is made

on a seldom-used piece of equipment that is either out of alignment, has a major component that
needs replacement or is unable to make the key component within tolerances. The sales department
pushes hard to have the plant meet the customer commitment. The equipment either breaks or
produces an unreliable end product that does not meet specifications. The sales department and the
customer are upset. Had the facility implemented OEAM, a capacity forecast would have identified
the potential problem in time to resolve the issues to everyones mutual satisfaction.
By integrating equipment management into the organizational decision process, potential problems are
anticipated; availability and reliability concerns can be discussed and understood by all. When this
routinely happens, the organization is well on its way to maximum effectiveness. Equipment managers
provide a critical assessment of problems and future needs associated with system upgrades and/or
equipment replacement.
Equipment management takes a holistic overview of the process. It examines how the entire process is
operated. This leads to a prioritized view of equipment cost versus durability, compatible operating
requirements, best practices for lifetime care, and similar issues. Those responsible for equipment
management have a vested interest in the success and continued viability of the organization. Soliciting
input from equipment management may lengthen the decision process to a degree; however, a mutually
agreeable consensus increased the likelihood that all potential problems have been identified, an
appropriate risk assessment has been made, and the final decision has minimized organizational risk and
costs.
Maintenance Life Cycle
Obtaining the desired product at minimum cost is the goal of all manufacturing and production processes.
As illustrated in the financial model contained in Appendix B, a production process requires numerous
contributing elements. These include plant, fuel, water, people, logistics, administrative and technical
support, safety and environmental and training, and services such as waste removal. The total cost of
operating and maintaining a plant to provide efficient and reliable performance over the expected lifetime
is known as lifetime cost. Dealing with and controlling lifetime cost requires an understanding what the
actual life really is and how the operating environment, operations, and maintenance of the plant affect
the bottom line.

F. Equipment Management Requirements for Facilities and Structures

Equipment management is normally associated with production equipment. All too often buildings,
structure, piping supports, hull, and other capital assets that are a vital part of the mission/production
process are neglected. There is always the temptation to save by deferring maintenance. This only
shortens the facilitys lifetime and, when the end is reached, repair or replacement is likely to cost several
times that of effective lifetime care.
Buildings and equipment do not last forever and their continued use can often be too costly and adverse to
the price of the product and customer loyalty. For example, in the late 1970s and early 1980s American
automobile manufacturers finally had to come to grips with production costs. During the introspective
analysis, American automotive executives finally realized that they were still manufacturing cars and
components in production facilities that were built to suit practices used in the early twentieth century.
The executives saw that the Japanese (and later, Korean) competition had constructed modern, very
efficient facilities designed to gain the utmost from the latest manufacturing processes. These facilities,
combined with advanced practices, provided the ability to produce high quality products at low cost.

The response was to close many of the old facilities, completely modernize others, and, in some cases,
build modern state-of-the-art replacement plants. The design and building of new vehicle assembly plants
also accommodated the inclusion of new technology, the most notable examples of which were the
installation of robotic welders and movable carts that enabled teams to assemble large portions of the
vehicle in a given location. There are several lessons to be learned from this example:

An integrated approach in the design of new facilities can accommodate new technology and
equipment management practices focused on providing a high quality, low cost end product

There are numerous hidden costs in adding building modification upon modification in hopes of
avoiding the cost of extensive repairs, modifications or development of new facilities.

EVERYTHING affects the quality, cost, and availability of the end product.

Senior executives must understand the importance of the role of equipment management in their
operation/business and how a proactive program will positively affect the bottom line. Here are a few
examples:
1. Electrical: Electrical demand has grown dramatically over the years. New production equipment
(often computer controlled), computer networks, and other high technology information equipment is
multiplying exponentially. Electrical systems can remain in place for decades. With the advent of
computers, computer-controlled equipment, and systems, gross electrical demand and the need for
conditioned power may exceed the electrical systems current capacity. Without upgrading the
system, equipment may not work at peak efficiency and/or service life may be diminished.
2. Roofing: Roofing systems have evolved over the years, including numerous, accurate diagnostic
technologies that quickly assess the condition of the roofing material. Roofing failures are expensive
to replace and often incur additional expense in the form of damage to roofing support systems or
equipment in the building. Periodically inspecting the roof, cleaning roof drainage components, and
patching damaged areas increases service life of the structure, ensures an uninterrupted flow of work
within the structure, and reduces maintenance costs. In most cases, significant roof failure begins to
occur at approximately in 20 years.
3. Purpose-Based Care: Some work processes require more support than others. For example, more
support is required for office operations than most warehouses. By the same token, support
requirements for an industrial clean room manufacturing or assembly operation far exceed the
requirements for an ordinary office. The demanding clean room environmental standards require
diligence and excellence to ensure quality.

IV.

CURRENT PRACTICES COMBINE IN

OPERATING EQUIPMENT ASSET MANAGEMENT
Illustrations:
4.1 Evolution of Equipment Management
4.2 Comparative Maintenance Costs (EPRI 1986)
4.3 Failure Distribution
4.4 Benefit/Cost of Preventive Maintenance Tasks (110)
4.5 Current and Objective Division of Maintenance by Type
4.6 Condition Monitoring System Applications
4.7 Maintenance Costs as a Function of Vibration Level (87)
4.8 Improved Effectiveness Gained by Implementing Precision, Proactive Practices (87, 120)
4.9 The Classical RCM Process
4.10 The Streamlined RCM Process (31)
4.11 Pareto Risk Ranking
4.12 The TPM Process (112)
4.13 Balanced Scorecard Translating Vision and Strategy (95)
4.14 Balanced Scorecard Links Strategy to Four Processes (94)

Summary
The best concepts and practices are assembled within Operating Equipment Asset Management to gain
greatest effectiveness for specific mission, business, and site requirements. OEAM considers Six Sigma,
The Balanced Scorecard, Reliability Centered Maintenance, Total Productive Maintenance, and Reactive,
Preventive and Condition-Based Maintenance. OEAM recognizes that none of these methods is exclusive,
but that all contribute and have the potential to increase the effectiveness of operating and production
assets. OEAM adds financial prioritization to the decision-making process, ensuring that resources are
applied most effectively toward fulfilling operating and business objectives.

A. Background
In the last 40 years, equipment management has evolved from a largely reactive, fix it when it breaks
approach through Preventive Maintenance to Condition-Based and Proactive Maintenance, as shown in
Figure 4.1. Each stage in the process has been proclaimed as the solution that makes previous approaches
obsolete. Preventive was said to eliminate, or at least minimize reactive. Condition Based Maintenance
(CBM) was introduced to replace Preventive. In the early 1990s, Reliability Centered Maintenance
(RCM) and Total Productive Maintenance (TPM) were both promoted as the conclusive process,
further clouding the issue.
In the late 1990s, we learned that all of these processes have a place. Operating Equipment Asset
Management uses concepts and ideas from all, assembled in a mix to best address mission, business, site,
and cultural requirements.
In the past, many equipment optimization programs have been promoted on a technology basis, with little
emphasis on their contribution to economic value. Condition monitoring is a good example. Should two
pumps, one in light service with a good history of reliability and a second in mission-critical service
handling an aggressive fluid, be monitored with the same type and number of measurements recorded at

the same interval? Intuition says no; however, in many cases, no distinctions are made based on service
and history. A one-size-fits-all approach has a cost, because it must be based on worst case.
This principle was illustrated during implementation of a condition-monitoring program on a commercial
tanker:
When asked what effect the failure of a specific pump had on operation, a crewmember stated
they simply disconnected the pump, dumped the water in the bilge and then pumped the bilge with
another pump before the ship sank! When cost of surveillance was compared to the probability,
cost and consequences of failure the solution was obviousallow the pump to fail then replace it.
One large issue looms over processes and programs implemented to attain optimized equipment
effectiveness. All require visible investment and sustaining cost compared to the hidden, but much
larger costs of reactive, repair on failure. With the growing emphasis on cost reduction, many managers
find investment and ongoing funding increasingly difficult to justify. This occurs for one principal
reasononly a few have successfully translated operating and technical results gained by optimized
equipment management practices into credible value and benefits in the financial terms necessary to
ensure continued high level support. Moreover, a successful equipment management program has likely
eliminated most mission-interrupting problems. The institutional memory of real costs associated with
unexpected failures has faded. Without crucial justification linking equipment performance and reliability
to financial return, many successful equipment management programs such as Condition-Based
Maintenance are being curtailed, even terminated, as cost reduction measures. The solutiondevelop
compelling financial proof of the programs effectiveness from the very beginning.
Emphasis on cost reduction has several added liabilities. One is the loss of experience as skilled
maintenance craftsmen and supervisors take advantage of incentives for early retirement. Only a few
companies recognize how safe, reliable operation and the absence of problems are directly connected to
the efforts, contribution, commitment, skill, and experience of individuals responsible for the results. As
champions depart, their experience is lost and their programs are dismantled. All that has been gained
the progress and momentum in developing effective maintenance programscould be quickly lost unless
training and resources are allocated in anticipation of future needs.
This chapter identifies current practices for equipment management and summarizes strengths and
limitations that determine optimal use in an integrated program of Operating Equipment Asset
Management.

B. Evolution of Equipment Management Practice

Reactive Maintenance: Corrective action taken on failure or obvious threat of failure
The old line: If it ain't broke, don't fix it is the perennial run-to-failure argument. Run-to-failure is
simplistic, requires no forethought, and, at least up to the point of equipment failure, appears to require
the least support. The total cost of failures, including safety and environmental, impact on production,
repairs, and logistics, are typically spread among cost centers. As a result, the real cost of failures may be
invisible to those who view failure avoidance as an added expense.
Reactive maintenance pays little, if any, attention to ensuring that operating conditions are within the
design envelope. Consequently, actual equipment service performance and life span may be substantially
below specifications. Equipment is simply run until it either can no longer perform its intended function
or catastrophically fails. At that time (usually around 2:00 A.M. on a Sunday morning), the equipment

must be repaired or replaced. Several years ago a large U.S. railroad allegedly operated its diesel
locomotives until they could no longer pull their own weight. This is an example of true run-to-failure
maintenance.
Operating to failure has many side effects. It costs two to four times more than failure avoidance through
PM.(24) It is particularly expensive when an unexpected failure endangers personnel; releases toxic,
flammable or polluting material; interrupts production; and/or causes collateral damage. The threat to
safety and the environment from an unexpected failure is real, particularly when aggressive material is
involved. Unexpected failures generally cause production outages and may inflict damage well beyond
the affected component. A bearing failure that damages shaft, bearing housing, and rotor is a common
example. There have been a number of cases where an unexpected failure of a relatively inexpensive part
caused a major fire, loss of life, and interrupted production for months. In at least two cases during 1999,
industrial facilities had their operating permits suspended following a failure and fire until they could
demonstrate that they had taken action to avoid similar problems in the future.
In some cases, reactive maintenance does make economic senseas in the case of replacing easily
accessible light bulbs. However, the decision must be based on probability, cost, and consequences; it
cannot simply be a default in the event that funding for failure avoidance is not available. In the vast
majority of industrial producer applications, reactive maintenance is, by far, the most expensive type of
maintenance. Since the 1950s, industry has generally agreed that reactive maintenance is costly,
inefficient, and often unsafe.
Preventive Maintenance (PM):
Maintenance tasks including inspection, service and/or replacement conducted at regular,
scheduled intervals established to avoid failure based on average statistical/anticipated lifetime.
Preventive Maintenance consists of tests, inspections, servicing, and/or parts replacement at regular
intervals. In many cases, Preventive Maintenance is invasive, requiring an outage and disassembly for
visual inspection and/or overhaul/replacement regardless of condition. The intervals between specific
Preventive Maintenance tasks are based on average life. This is intended to provide a high probability that
performance and material condition are maintained within required limits and that problems are identified
and corrected before outright failure. PM tasks can be accomplished on calendar time (e.g., weekly,
monthly, or quarterly, regardless of operation) or on a service life basis (e.g., hours of operation).
The acronym PM is often used to mean Planned Maintenance. Many who use PM in this manner
include scheduled and preventive maintenance in the definition of Planned Maintenance. Some
include only preventive maintenance. PM is one of many terms commonly used in equipment
management that must be strictly defined to ensure the acronym has the same meaning to all who
are trying to communicate. For the purposes of this handbook the term PM refers only to timebased Preventive Maintenance.
A PM program can be cost effective when equipment operation is consistent, average life is predictable
within a reasonable span (i.e., it demands reducing outside effects such as shaft misalignment and
contaminated lubricating oil to a minimum level), failures are well understood, and useful failure statistics
are available. Aircraft engines are an example. Some experts have advocated risk-based inspection
intervals, the timing of which is determined by equipment condition and history.
A study conducted by the power generating industry in 1986 reported lifecycle cost savings for PM in the
range of 12 to 18 percent compared to reactive maintenance, as shown in Figure 4.2. PM significantly
reduces Operations and Maintenance (O&M) costs compared to operate-to-failure; however, costly

unexpected failures may still occur when the span between average and minimum lifetime is large or
external, localized conditions affect lifetime.
Advocates recommend a living PM program consisting of the following key elements:(24, 120)
1. Mandated tasks identified and executed to ensure regulatory compliance
2. Processes, procedures, and tasks continually reviewed for applicability, effectiveness and interval
and optimized as required
3. Consistency maintained and enhanced on a site, system, and component basis
4. New technologies (including predictive) applied and integrated where effective
5. Complete task instructions including safety precautions, tag-out procedures, tools and parts
required to maximize work efficiency
6. Skills training to ensure accurate interpretation, quality work , and recommendations
There are cautions regarding the application of Preventive Maintenance:
1. Intrusive inspections are often conducted and components replaced unnecessarily with equipment in
good condition.
Generalized failure statistics do not account for localized conditions such as the environment,
operating regime, quality of installation, and service. At the component level of mechanical
equipment, external conditions such as excessive shaft misalignment, unbalance, and contaminated
lubricating oil significantly reduce the lifetime of affected parts.(111)
The widely varying environment and operating conditions found in most industrial facilities can result
in broad component failure distribution, as shown in Figure 4.3. Basing decisions on average lifetime
is dangerousan average does not reveal the distribution. To minimize the risk of failures when
setting intervals for PM and for self-protection in the event of failure, personnel responsible for
recommending PM tasks typically select intervals on the low side. As a result, PM often results in
costly replacement of components that were in excellent condition with substantial life remaining,
based solely on the statistical average lifetime.
2. Preventive Maintenance tasks must be reviewed frequently to determine if the same results can be
achieved more effectively by altering requirements and/or extending intervals
Compared to work performed as needed, Preventive Maintenance, conducted at arbitrary intervals, is
often unnecessary, overly expensive and labor intensive. It has been reported that as much as onethird of Preventive Maintenance expenditures are wasted. A recent paper asserted that 50 percent of
PM tasks have essentially no value, as shown in Figure 4.4.(110)
As a solution, the PM tasks are frequently altered to gain the same results with less expenditure of
time and resources. In one instance, a shipboard PM program required sight glass disassembly and
cleaning at regular intervals. Not only was the work unnecessary in most cases, but sight glasses
frequently leaked when restored to service. A simple change to inspect and clean as necessary,
ensured regular inspection, produced the same end results, dramatically reduced the work required,
did not hazard equipment in good condition, and ensured that dirty sight glasses were located and
cleaned.

There have been many reports that shipboard PM conducted by the U.S. Navy can and has been
reduced by 30 to 40 percent without any loss in effectiveness by eliminating unnecessary tasks,
altering some requirements, and extending intervals. In one test case, the ship was reportedly required
to revert to the old, less effective system. Similar reports come from unionized facilities where PM
may be viewed as job security. It is difficult to convince individuals, who may derive as much as 50
percent of their compensation from performing PM tasks, that PM reduction and improved
effectiveness is in their personal best interest.
In the mid 1990s, a U.S. commercial nuclear power generating station, which was about to close
down as a result of excessive operating costs and other problems, initiated a thorough review of their
PM program. They anticipated a 30 to 40 percent cost reduction without compromising effectiveness
by eliminating unnecessary tasks, altering some requirements, and extending intervals. Another
nuclear power plant embarked on a similar project to reduce the overwhelming number of
manufacturer-recommended PM tasks that did not contribute value.
In an industrial facility, persons performing PM tasks often reported normal conditions with no
anomalies present. A review of past records disclosed that normal conditions, no work required, had
been reported for years. Although the manufacturers objected, a decision was made to extend PM
intervals by 25 percent. When nothing was found at the extended intervals they were extended again
by another 25 percent. Ultimately, the facility extended intervals by as much as 400 percent, with no
loss of confidence in the safety and operability of their systems. The U.S. Navy has reportedly
extended overhaul intervals on submarine high-pressure air compressors from 1,000 hours to 5,000
hours with no adverse effects.
In a related area, facilities are beginning to wonder what will happen as the overhaul interval for large
turbomachines, such as electric power generators, is extended well beyond current practice. Several
reliability engineers have commented that lifetime statistics have all been based on a four- to six-year
overhaul cycle. As the cycle extends to eight years and beyond, will lifetime availability statistics
remain valid? Will problems that were not life threatening at a 6-year overhaul cycle cause an outage
at the longer overhaul interval? These are questions yet to be answered.
3. Equipment is hazarded and frequently degraded by an invasive PM task
Stories abound where performance and condition were degraded and major problems appeared
following PM. Many facilities have learned that performing an inspection and/or arbitrarily replacing
components can introduce failures and often hazards equipment as a result of infant mortality,
personnel or reassembly errors, and/or improper procedures.(12)
In one case, a boiler feed pumpoperating well and thought to be in good conditionhad to be
disassembled for an insurance inspection. The inspection confirmed that the pump was in good
condition. Following reassembly the pump leaked badly, performance had degraded, vibration had
increased and the control system was unstable. The disassembly, inspection, and reassembly
consumed nearly a week; restoring the pump to a satisfactory operating condition required an
additional wasted week.
Predictive or Condition Based Maintenance (PdM, CBM):
Maintenance action based on actual condition (objective evidence of need) obtained from insitu, non-invasive tests, operating and condition measurements
Condition Based Maintenance has proven capable of identifying anomalies early enough to minimize the
impact of operational interruptions; avoid expensive failures, including collateral damage; and

significantly reduce the cost of maintenance. Many leading companies in the manufacturing, process,
paper, and power generating industries have shifted the majority of their maintenance tasks from timebased preventive to condition based. Commonly mentioned objectives are condition based maintenance
greater than 50 percent of total maintenance, 25 percent or less time-based preventive maintenance, and
less than 15 percent reactive maintenance on failure. These objectives are depicted in Figure 4.5. Real
returnsin terms of increased operating effectiveness and reduced costsof five to seven times the
annual cost of equipment and labor are typically reported across a broad range of industries.
The U.S. Navy uses a more expansive definition of CBM than that used by industry. Navy CBM includes
scheduled maintenance based on condition monitoring, as well as scheduled maintenance consisting of
replacement or restoration tasks triggered by equipment agewhere the task interval is based on valid
engineering analysis.(114)
Condition Based Maintenance is composed of at least three identifiable activities:
1. Condition measurement consists of non-invasive measurements that define mechanical and
operating condition (e.g., vibration, fluid condition [lubricating and hydraulic oil], performance,
thermography, and electrical characteristics). Measurements may be recorded continuously (on-line)
from installed transducers or periodically with portable equipment. They are applied individually and
collectively depending on the specific equipment and expected failure modes (e.g., vibration,
lubricating oil condition, thermography to detect bearing defects or degraded insulation [thermal and
electrical], and loose electrical connections).
Complex vibration measurements are often required for accurate condition assessment, earliest flaw
detection (recognition) and identification (diagnosis), and lifetime prediction (prognosis). These
measurements are typically high bandwidtha factor that influences the system design necessary to
gain full use. This topic is discussed in Chapter XIV.
2. Condition monitoring and (health) assessment is the individual and collective comparison of
condition measurements, value versus time trends, and measurement arrays (e.g., FFTs) to arrive at an
appraisal of current condition, identify and analyze defects, and estimate remaining life (prognosis).
Condition assessment is also directed at detecting and identifying degradation mechanisms. The agent
of degradation can then be understood and either eliminated or controlled prior to significant physical
deterioration of the equipment. This element of CBM enables problem detection and correction at a
much earlier stage when alternatives remain available to mitigate the total cost and effect on
production.
3. Repair and Maintenance actions based on condition monitoring and health assessmentthe
objective evidence of need.
Measuring and condition assessment are the first steps of Condition Based Maintenance. The process
is not complete until operating and maintenance recommendations based on condition assessment
information are implemented.
Condition measurement and assessment technology, methods, and practice are proven beyond question.
Applied correctly, all work well in a variety of situations for a variety of people. Some successful
programs include engineers. Many more are operated entirely by hourly craftspeople.
Many experts suggest that there is a fourth step, Root Cause Failure Analysis (RCFA), to ensure that
problems are fully understood. With corrective action based on RCFA, repeated failures become history.

For the purposes of this Handbook, RCFA is treated as an essential part of Operating Equipment Asset
Management and separate from CBM.
Michael Neale and Associates, a U.K. consulting firm, developed a method for quantifying the value of
CBM in 1975.(21) As illustrated earlier in Figure 4.2, EPRI determined that CBM adds an additional 8 to
12 percent to the savings gained from a good PM program. Many companies report significantly better
results; some state that a mature CBM program can save up to 50 percent compared to reactive, operateto-failure maintenance. The importance of maintaining accurate records of contribution cannot be over
emphasized. Without accurate records of the returns from CBM, the initial and ongoing investment in
diagnostic equipment, labor intensity, and ongoing involvement and training to maintain proficiency may
strain management support and funding.
Often a difficult concept for management to accept, avoided cost is used by some facilities to estimate the
true value of CBM. (See Chapter V.) Many of the organizations that report a high value of avoided cost
are operating with sold out production in areas where interruptions are extremely expensive as a result of
lost production and/or penalties for non-delivery. These organizations typically base avoided cost on
statistical consequences including safety, environmental and repair costs, impact on production revenue,
and penalties. Some disallow all or a portion of avoided cost if the condition would have been discovered
in time to avoid failure and production outage by other means. At these facilities, spared equipment is
typically excluded from avoided cost credits. Positioning avoided cost for credibility and acceptance at
the executive level requires close cooperation and agreement between Operations, Maintenance, and
Finance. Because of its controversial nature, avoided cost is simply disallowed by many companies.
Application
Most equipment is, and remains, in good condition for extended periods. Therefore, most of the
measurements required to assess condition do not change significantly over time. This leads to
considerations regarding the type and interval of predictive condition monitoring measurements.
Condition monitoring measurements and systems can be divided into a matrix of categoriesprotective
and predictive, continuous, on-line, and periodic off-line, as illustrated in Figure 4.6. Protective systems
(typically governed by American Petroleum Institute [API] Standard 670) must be continuous on-line for
reasons discussed later in the section on RCM. Predictive systems may be continuous on-line or periodic
off-line.
Permanently installed, continuous on-line condition monitoring systems are required and universally
accepted for protection of large critical equipment (e.g., process turbocompressors, power generators, and
propulsion turbines). Failures on this type of equipment can occur rapidly, are always costly, typically
interrupt production, may hazard safety, and/or may result in collateral damage. Permanent, on-line
protective systems may be installed on some smaller, non-critical equipment where condition can change
rapidly with safety, environmental and/or mission consequences.
Periodic predictive condition measurements utilizing portable, microcomputer-based equipment are
widely used where safety is not an issue, operating alternatives exist, and/or failures typically develop
slowly. In view of the small portion of condition monitoring measurements that change, the ongoing
expense necessary for periodic data collection with portable equipment may be considered excessive. The
dilemma is how to detect the few measurement variations without continuous recording.
Permanently installed on-line predictive systems significantly reduce the labor costs of periodic data
collection and are advantageous in a number of circumstances. These include applications where safety,
environmental or access restrictions prevent manual collection with the equipment in operation or where

comparing predictive and process data offers insight into cause and effect.(120) Disadvantages are
primarily cost. Permanent predictive monitoring systems may have an installed cost as high as ten times
the annual cost of manual measurement with portable instruments, depending on the configuration.
To date, the large difference in cost between installed on-line and portable off-line condition monitoring
systems has discouraged wholesale replacement of manual measurements. A compromise solution uses
permanently installed sensors that are connected to a field-mounted termination box, allowing manual,
periodic data collection from inaccessible locations. Many facilities are shifting some measurements to
this configuration to reduce recurring cost and improve effectiveness.
Some facilities have been forced to reduce periodic condition monitoring without any replacement as a
result of personnel reductions. When this occurs, prioritization is essential to ensure highest value and
return for the remaining resources available.
Value of Predictive Information
In addition to its value in Condition Based Maintenance, the predictive information developed in the
condition monitoring and assessment processes has substantial value on its own. Predictive information
gained from operating equipment:

Uniquely predicts the ability to meet future production within time, quality, and cost
commitments

Provides warning that minimizes the risk of failures, safety, and environmental hazards, and
reduces the costs of primary and collateral damage. CBM can eliminate at least 75 percent of
unscheduled shutdowns in a typical industrial application.(21)

Anticipates operating interruptions in time to minimize impact on mission/profit. Several

individuals have described incidents where ample warning of an impending production outage
provided time and negotiating leverage to arrange replacement sources of supply at attractive
prices.

Reduces and, in some cases, eliminates time-based preventive maintenance

Provides information from which to manage logistics most effectively. With spare parts,
personnel, and shop availability reduced by constraints on capital and operating expense, the
logistics system requires a minimum of two weeks to respond efficiently.(120)

Provides information for process and system reliability analysis, RCM, FMECA, and RCFA

Supplies knowledge of equipment operating problems and operator training requirements

Condition Based Maintenance can:

Warn of most mechanical problems in time to minimize unexpected failure, the risk and
consequences of collateral damage, and adverse impact on safety, operations, and the
environment

Increase equipment utilization and life; minimize disruption to mission and schedule

Reduce maintenance costs both parts and labor

Allow safe elimination of a significant amount of preventive maintenance

Minimize cost and hazard to equipment as a result of unnecessary overhauls and disassemble and
inspect PM. Disassemble and inspect/overhaul PM routines hazard equipment in good condition

and often introduce infancy failures. Unnecessary equipment overhauls often cause more
problems than they prevent.

Increase the likelihood that components operate to optimum lifetime. In some cases, replacement
prior to end-of-life is more efficient to meet operational requirements and optimum cost. A
manufacturing facility with a large number of roof mounted, belt-driven ventilating fans
concluded that simultaneous replacement during periods of low demand was more efficient than
either condition-based replacement or replacement on failure.(120)

Reduce requirements for spare parts

Increase awareness of equipment condition

Form the core of effective lifetime management

Provide vital information for continuous improvement, work, and logistic planning

Condition Based Maintenance cannot:

Eliminate defects and problems, or stop machines from deteriorating (114)

Eliminate all preventive maintenance (e.g., lubrication, leak inspections, gas turbine combustion
path inspections, and thermographic inspection of electrical connections)

Reliably and effectively warn of fatigue failures (with current technology)

Address electronic failures within computer, control, communications and information systems

Reduce personnel or produce a major decrease in lifetime maintenance costs without a

commitment to eliminating defects and chronic problems

Condition Based Maintenance is not a silver bullet. Some potential failures, such as fatigue, are not
easily detected with condition measurements. In other cases, sensors may not be able to survive in the
environment and measurements to assess condition may be overly difficult (e.g., require major equipment
modifications for sensor installation), costly, inaccurate, or unreliable.
Proactive Maintenance:
Activities and actions applied to equipment prior to and during operation to prevent problems,
gain greatest reliability, and minimize failure.
Proactive Maintenance begins with the identification of the root causes of equipment failures. Changes to
processes, programs, and technology (e.g., design or metallurgy), prioritized by cost and return, are
implemented to eliminate defects and extend equipment lifetime.(87) Proactive activities applicable to
equipment management include ensuring lubrication quality and integrity, piping alignment, precision
shaft alignment, and precision balancing.
Several organizations have reported results similar to Figure 4.7, where maintenance costs decline in
direct proportion to vibration. Figure 4.8 illustrates one tangible benefit of a proactive improvement
program consisting of precision balancing and alignment. Other benefits that must be considered include
lower risk of production interruptions, greater operating efficiency and labor productivity, and reduced
demand for spare parts.
At the beginning of an initiative to implement Condition Based Maintenance, one facility found a large
percentage of their rotating equipment had symptoms of shaft misalignment. Based on that information, a
proactive program was implemented to eliminate the problem at its source. The program consisted of

providing alignment training, purchasing laser alignment equipment, and realigning equipment to
precision standards in a priority sequence. Within approximately two years failures caused by
misalignment had all but disappeared.(87,120)

C. An Optimized Equipment Management Program

Many organizations have promoted the benefits in progressing from reactive through proactive equipment
management in illustrations similar to Figures 3.5 and 4.2. Leading practitioners recognize that a
comprehensive equipment management strategy will include a blend of reactive, preventive, and
proactive elements based on the specific circumstances, probability, and consequences (risk) of failure.
As stated earlier, the decision regarding optimum methods must be made considering all relevant issues.
Default operate-to-failure is typically the most expensive and least effective form of equipment
management. However, operate-to-failure, reactive maintenance may be the most effective method of
lifetime management for certain circumstances. Electronic systems are one example. There are numerous
examples of small pumps and other equipment where the cost of failure, including probability and
consequences, is less than the cost of condition monitoring and assessment over a nominal lifetime.
An effective equipment management program requires gaining support from the top by demonstrating a
credible improvement toward corporate objectives such as Overall Equipment Effectiveness (OEE) and
conversion cost (120):
1. A commitment to continuous improvement directed to identifying, prioritizing, and eliminating
defects
2. A cultural and organizational understanding of use and benefits. Effective CBM must be a
collaborative effort that includes constant communication and attention to gain cultural
understanding of its use and benefits and avoid we-they divisiveness.(120)
3. Ensuring that people remain connected to equipment and not disconnected by measurements(120)
This leads to the next concept, how to best design an equipment management strategy for a given set of
conditions.

D. Reliability Centered Maintenance (RCM) (Contributed by Jack R. Nicholas)

A systematic, disciplined process to ensure safety, mission compliance, and system function. The
process defines system boundaries and identifies system functions, functional failures, and likely
failure modes for equipment and structures in a specific operating context. RCM develops a
logical identification of the causes and effects (consequences) of system (and) functional failures
to arrive at an efficient and effective asset management strategy to reduce the probability of
failure.
Reliability Centered Maintenance utilizes a highly structured process to extract the experience and
knowledge of operating and maintenance experts who understand how the equipment works and are
familiar with its operating and maintenance deficiencies. RCM establishes a rigorous framework for
anticipating, identifying, and developing proactive work processes directed at maintaining full system
function. RCM requires task implementation and continuous improvement to account for process and
regulatory changes, experience, and new technology.(68,108)

RCM recognizes that equipment follows differing failure patterns. One reference asserts that when
properly cared for 90 percent of equipment has an unlimited lifetime and does not follow the classical
bathtub curve of failure rate versus operating age.(12)
The classical RCM process has four essential elements:(13)
1.

Define systems and required functions

2.

Define functional failures and specific component failure modes that can defeat required
functions

3.

Prioritize the importance of the failure modes

4.

Select the applicable and effective PM countermeasures for the high priority failure modes.
Applicable tasks include those that will prevent, mitigate, detect the onset of, or discover
equipment failure modes. Effective tasks are the lowest cost tasks among competing options.

The classical RCM process is illustrated schematically in Figure 4.9. The process blends history, risk
analysis, and economic considerations with actual condition to statistically estimate the risk and
consequences of failure and identify optimal decisions. One company recommends using PHM,
Proportional Hazards Modeling, a sophisticated multi-variate regression analysis procedure.(20)
Reliability-Centered Maintenance has been seriously attempted for all types of facilities, vehicles,
and manufacturing plants. These include railways, electric and water utilities, commercial and
military aircraft, nuclear submarines, mines, oil refineries, and steel and aluminum plants. RCM
has also been attempted at plants that produce automobiles, beer, cosmetics, textiles, fibers,
paper, food products, cigarettes, office equipment, photographic equipment, and paint. 2
A NASA version of RCM seeks to develop the optimum synthesis of reactive, preventive, predictive, and
proactive maintenance strategies to provide required reliability at least cost. An RCM strategy being
pursued by the US Navy asks three questions:

Has a failure occurred? If not, could it occur?

Is the avoidance task applicable?

Is the task worth doingdoes it increase safety, reduce the risk of mission failure, and pay for
itself?

RCM requires the knowledge and experience of a cross-functional implementation team.(31) Knowledge of
current process performance and state of compliance, equipment history, and variability over time are
absolutely essential to the RCM process. RCM also requires a Computerized Maintenance Management
System (CMMS) and its resident information, including PM routines and findings, field notes, and
observations for every piece of equipment.(18)
Some of the elements that must be in place for successful RCM include:(120)

Knowledge of RCM methodology and documentation

Trained and disciplined RCM facilitators

Cross-functional detailed equipment analyses

Moubray, John, Reliability-Centered Maintenance RCM II, Industrial Press, N.Y., N.Y., 1997 and Smith, Anthony M. Mac,
Reliability-Centered Maintenance, McGraw Hill, Inc., N.Y., N.Y., 1993.

Interaction with manufacturing Failure Modes, Effects and Criticality Analyses (FMECAs)

Defined plans to implement recommendations

Organizational reaction to recommendations

Support for implementation

Operator involvement with equipment reliability

Periodic review of effectiveness

RCM Principles Applied to the Selection of Condition Measurement Technology and CBM
A recent paper presented to the American Society of Naval Engineers (ASNE) described how the U.S.
Navy applies RCM to the selection of appropriate CBM tasks and enabling technology.(114) Some of the
major points from this excellent paper are summarized below.
RCMs rules are based on a realistic analysis of the failure process. The process of equipment
deterioration is one element that is crucial to the appropriate selection of condition monitoring methods.
The effects of a failure are not always important enough to justify preventive action. For example, some
systems are designed with redundant units, so that system functions will not fail when a single unit fails.
If the failed unit can be repaired promptly and cheaply, devoting resources to prevent every failure may
not be worthwhile.
When the effects of the failure are important enough to justify preventive efforts, the challenge is to
predict failures with sufficient accuracy and precision to support scheduling appropriate repairs before the
failure occurs. There are several ways to make such a prediction. One way is to base the decision on the
items age. Before the days of RCM and CBM, this was often the only method used. However, age-based
repair work has rightly lost favor as RCM and CBM have gained popularity, primarily because it tends to
be appropriate (in RCM terms, applicable) for less than 25 percent of the failure modes that are
encountered. While it should not be dismissed entirely, it cannot be the only tool in the toolkit of the
scheduled maintenance program designer.
Based on an appreciation of the failure process, RCM presents decision criteria for evaluating
maintenance strategies: the presence of a dominant failure mode, applicability, and effectiveness.
Dominant Failure Mode

Maintenance must focus on a dominant failure modea failure mode that is specific and is reasonably
likely to occur. The amount of likelihood required will vary to some extent with the severity of the failure
modes effectsfor example, if the failure mode is potentially lethal, it may be as dominant as a less
severe failure mode, even if it is less likely to occur.
For equipment that is already in service, the best way to find out whether a failure mode is reasonably
likely to occur is to ask the people who operate and maintain the equipment. The people who work with
the equipment are the people most likely to be aware of these potential problems, of the failures that go
unreported, and of the failures that have been reported but cannot be found in databases.
Failure histories only look backwards. They do not reveal failures waiting to happensevere failures
that have been prevented by happenstance so far, but that will eventually take place when the right
combination of circumstances falls into place.

In order for CBM-enabling technology to meet RCMs rules, it must provide affirmative answers to the
following questions:

Does the technology monitor a specific failure mode? If so, what is it?

Is it reasonable to expect that this failure mode will occur during the lifetime of the equipment?

If the technology is monitoring a parameter that cannot be correlated to a specific failure mode on that
equipment, no one will know what failure the technology is intended to prevent. If the failure mode is not
likely to occur, there is no need to install technology to prevent it.
Applicability

RCM has rules for applicability for each type of scheduled maintenance task: time directed, condition
directed, and failure finding. CBM-enabling technology must show that it is applicable.
Quantifiable condition measurement parameters may offer an advantage if they can be measured with
sufficient consistency (including both the inherent errors of the measurement technique and also the errors
that may be introduced by the person performing the technique). In practice, a parameter is not always
quantifiable.
Condition measurement technology must meet the following applicability requirements:

The measured parameter must correlate to deterioration and the failure mode previously
identified.

The parameter must be measurable. The measurements must be sufficiently accurate to serve as a
reliable trigger for corrective action and sufficiently consistent that the user can be confident that
every unit in the population that reaches the given alarm threshold will fail at about the same time
afterward.

There must be sufficient time between the discovery of a potential failure and the onset of
functional failure to take appropriate corrective action.

The condition-monitoring interval must be less than the time between warning and functional
failure.

The technology must be relied upon to monitor the parameter and warn of changes with ample
time to allow corrective action prior to functional failure.

These questions are related if the measurements are not accurate, consistent, or available at the correct
intervals, the technology will not reliably predict failures.
Effectiveness

RCMs rules for effectiveness are based on the consequences of the failure that the task is intended to
address:

For critical failures the CBM task must reduce the risk of failure to a tolerable level.

For all other failures the CBM task must be cost-effective.

If mission or economics are involved the investment required by the CBM technology
must be less than the resources required to support the mission and/or repair the failures.

When failure consequences affect the mission, the alternative to the technology may be a larger inventory
of the affected unit (to cover the mission requirements of the unit that suffers unplanned failures). Here,
the tradeoff is one investment (technology) vs. another (inventory). The cost of the inventory investment
will depend on the nature of the unit. Can the technology be relied upon to monitor the parameter at
these shorter intervals?
Streamlined RCM
Virtually everyone with RCM experience validates its effectiveness. However, after eight years of extensive
experience in attempting to apply RCM in electric utility plants, Electric Power Research Institute (EPRI)
members reached a consensus that classical RCM is too expensive and time consuming. It also was perceived
to lack prioritization needed for general application within a complex manufacturing facility. EPRI sponsored
development of Streamlined RCM (SRCM), illustrated schematically in Figure 4.10.(31)
The same conclusion had been reached a decade earlier by the U.S. Navy after extensive
application of RCM to nuclear submarines. As a result of this experience, the concept of EightyTwenty RCM was conceived. 3
The Eighty-Twenty concept traces its origins to the application of RCM in the 1970s and early 1980s on
nuclear submarines. In 1971, after consulting with the originators of the approach to RCM at United Airlines
and Boeing Aircraft Corporation, U.S. Navy engineers, with contractor support, began conducting thorough
RCM analyses of 65 systems on Fleet Ballistic Missile (FBM) submarines. 4 The approach of this program
was to increase the time between shipyard overhauls of these ships. The ultimate goals were to reduce
lifecycle maintenance costs and increase availability for operations over the 25-year lifetimes of the FBM
submarines. The program was placed on a fast track and given highest priority in both budget and support.
As each system analysis was completed, revised maintenance programs were developed and implemented in
the fleet. To support conversion to condition-directed tasking, many monitoring technologies were developed
and applied by dedicated teams of personnel stationed at ports from which the submarines deployed. Program
engineers developed many different methods of predictive condition monitoring analysis. By the late 1970s, a
number of lessons had been learned, including:

Concentration on mitigating only a few failure modes in systems brought significant increases in
projected and actual overall reliability and availability of subsystems. Maintenance costs were
brought under control and reduced.

It was not cost effective to try to identify, or even possible to try to mitigate, all potential failure
modes even in systems vital to mission.

There was extensive overlap in applicable functions, failures, and failure modes for similar pieces of
equipment, even in different applications. Analysis time could be greatly reduced by concentrating
on differences after a quick review of those modes already identified and documented for all
applications previously studied.

Even the most thorough RCM analysis often did not identify all potential failure modes, but the
few that were missed could be readily managed by effective feedback and a follow-up program,
referred to as an RCM Living Program.

The material concerning Eighty-Twenty RCM has been excerpted from Advancing Maintenance (Second Edition) by Jack R.
Nicholas, Jr., P.E. and R Keith Young, pub: Maintenance Quality Systems LLC, Millersville, MD
4
Note that this was six years before publication of the U.S. Department of Defense-sponsored landmark text, ReliabilityCentered Maintenance, by Nowlan and Heap of United Airlines. The text is out of print and only available in micro-fiche
reproductions from the National Technical Information Center and in edited form published by Maintenance Quality Systems,
LLC, Millersville, MD.

The analysis phase of conversion to RCM is only a small part of the total effort required,
particularly in a culture that is resistant to change. The overwhelming majority of effort is
expended in implementing the results of RCM analyses.

Applying the principles of risk management as early as possible in the conversion to an RCMbased program significantly reduced the time until real benefits could be realized.

After applying the Eighty-Twenty RCM concept to the last of the first group of 31 ships, the Navy began
using it extensively and, beginning in the 1980s, employed RCM on all newer classes of nuclear attack
submarines.
By 1988, RCM was implemented on 122 nuclear submarines, which included seven different
classes of ships with many different builders and original equipment suppliers. On the first 31 of
these ships, life cycle cost reduction (or avoidance) calculated at that time was 15 percent ($1.7
billion). Average ship availability was increased by 17 percent in the nominal life cycle. In
addition, some ships of this group had life cycles increased up to 8 years beyond their predicted
25-year lifespan.
A typical implementation of SRCM or Eighty-Twenty RCM includes templates (or component
maintenance standards) to ensure that analysis teams recognize earlier efforts of other groups using RCM
and consider them during their analysis. Advocates of this approach state that templates or maintenance
standards allow the analysis process to begin at a higher state of awareness of functions, failures, and
failure modes encountered in many different applications of common equipment. Time is devoted to
selecting applicable items from existing lists in the templates or standards and adding those that apply to
the system being analyzed. SRCM and Eighty-Twenty RCM reportedly lead to essentially the same
appreciation for potential losses and the optimum processes to reduce risk. Leaders who have compared
this approach to classic RCM report arriving at the same results with about one-third to one-fourth the
cost and time of analysis.(8)
Streamlined and Eighty-Twenty RCM have the following attributes: (7, 8, 31, 78) 5

Provide a clear statement of purpose, intent and overall scope

Identify process, system, and equipment

Strategy is constructed on complete system functionality

Develop an equipment analysis list (equipment type, tag number, manufacturer, and model)

Risk rank equipment to focus on highest risk equipment. Process/system and equipment selection
based on failure rate or significant problems determined by reviewing production and incident
reports, maintenance records and interviews.

Prioritize prior to application (which systems to analyze) and during implementation (which
failure modes to mitigate) based on risk. A Pareto risk analysis, shown in Figure 4.11, is often
used.

Focus on dominant failure mechanisms; do not pursue low-risk, low-probability items

Use generalized component templates (maintenance standards) to ensure that a broad range of
potential failures and solutions are identified for consideration. From these, updated standards or
templates specific to the system being analyzed are derived and used in follow-on analysis at a
given site or additional site(s) in the same company on similar systems. A template is a starting

Nicholas and Young, Advancing Maintenance

point that exposes best strategy alternatives at a component level. Even experts may miss
something. Templates are modified to accurately account for local conditions(8).

Consider criticality, environment, duty cycle and other factors

Evaluate performance and document current equipment management tactics, including PM and
CBM; operating procedures; requirements for additional activities (e.g., condition monitoring,
statutory/regulatory [OSHA 1910] activities, and insurance); and anticipated results

Evaluates all routine PM, CBM, and testing, as well as the intervals between PM and CBM tasks

Select maintenance strategies that are traceable to maintenance standards and specific RCM
analysis results

Include all alternatives for reliability improvement, including design enhancement and equipment
replacement

Establish an audit trail for follow-on reference

Assess the value of reliability engineering via results appraisals. Add, delete, modify or
consolidate PM and CBM activities as appropriate.

Develop plans to implement results from a given analysis early, so that benefits can be realized
quickly and applied to other critical systems on the priority list

Implement a living process of continuous improvement

Can be modified to add more detail

Issues include:(8)

Clear, understandable goals, objectives, and expectations

Dedicated staff

Ownership

Processes and systems selected to gain best results

Strategic implementation

Accurately measure results

Other Derivatives of RCM

There is also a risk-based approach to RCM that is similar to SRCM.(105) Risk-based RCM builds from a
structured, experienced-based review that establishes a business focus. Reliability Planning is the name
given to another process similar to Streamlined RCM that:(17)

Identifies the most critical short-term tasks required for the largest initial improvement in overall
machinery reliability

Builds a long-term reliability plan of all necessary maintenance tasks for all critical machinery

Provides a method for continuous review and improvement of reliability plans as a greater
volume of accurate data regarding equipment condition and failures is documented

Reliability Planning is designed to accommodate:

Increasing equipment age

Decreasing personnel

Decreasing budget

The need to reduce equipment cost relative to finished product cost

RCM and all reliability improvement initiatives require strong management support and a work process
that supports the proactive strategy.(8) Implementation must be planned from the beginning of the
improvement initiative.(31) The cost of failures and countermeasures must be tracked at the right level and
detail.(8)
RCM Standards
In early 1999, a technical committee sponsored by the International Society for Automotive Engineers
(SAE) produced a draft standard for Reliability-Centered Maintenance. The technical committee was
made up of members representing the U.S. military and commercial industry. The draft standard provides
criteria defining the Essential Elements of RCM. The standard may be used to specify requirements for
and assess proposals relating to full effort RCM. This phrasing distinguishes full fledged RCM from
Streamlined, Eighty-Twenty or any other method (e.g., Total Productive Maintenance TPM) for
developing a program leading to machinery reliability through a logical, disciplined approach to
maintenance.
Completion of the SAE balloting process is expected before the end of 1999. When adopted, it will
partially fulfill a mandate by the Secretary of Defense for the U.S. military to have non-government
standards replace military standards to support assets of the Department of Defense. At the same time it
will provide a basis for commercial firms to submit bids for government, utility, manufacturing,
transportation, and other sectors that are interested in conducting RCM in compliance with an
internationally recognized standard.

E. Failure Analysis(86)
All successful and cost-effective failure analysis methods are characterized by a structured approach that
gives focus to an otherwise scattered search for cause. The best failure analysis processes attempt to
uncover the root of a problem by guiding the analyst/user through a sequence of steps.
An integrated, comprehensive failure analysis process begins by defining the deviation, or stating the
problem. Next the process encourages, or mandates, careful observation and definition of failure modes. It
employs pre-existing or developed-as-you-go checklists and troubleshooting tables. Finally, an integrated
process leads to the selection or determination of one of four failure agent(s):
1. Force
2. Reactive environment
3. Time
4. Temperature
Components will fail as a result of one or more of these failure agents. All machinery failures, without
exception, fall into one or more of the following seven cause categories:
1. Faulty design
2. Material defects

3. Fabrication and/or processing errors

4. Assembly or installation defects
5. Off-design or unintended service conditions
6. Maintenance deficiencies, including neglect
7. Improper operation
Failure Modes, Effects, and Criticality Analysis (FMECA)
Failure: Inability to meet the normal and/or specified operating characteristics of the component or
system.(23)
Failure Modes, Effects, and Criticality Analysis is a pre-failure systems analysis to identify, prioritize,
and implement corrective action to prevent reliability problems that potentially threaten operation.
Root Cause Failure Analysis (RCFA)
Root Cause Failure Analysis is a logical and systemic post-failure analysis to determine root cause and
minimize or eliminate reoccurrence of the specific and similar problems. RCFA is used to identify
opportunities for improvement and must involve the entire organization.(23)
RCFA acknowledges design limitations. Its objectives are to maintain the inherent reliability of the
design, recognizing that changes in inherent reliability are the province of design rather than
maintenance.(23) See Chapters II and VI for more information.
One company applies RCFA to identify the root cause of similar problems/failures experienced on
multiple equipment. It applies RCM when multiple, apparently disconnected, failures occur on a single
piece of equipment.(78) Another company maintains a continuous RCFA process to eliminate complex and
chronic equipment problems, requiring action on corrective recommendations.(120)
Weibull Analysis
A Weibull distribution is often used to estimate lifetime. It can fit more failure patterns than an
exponential distribution and flexibly describes increasing and decreasing failure rates. The Weibull
distribution may be used to analyze weakest link subsystems where the system fails with the first
subsystem failure.(23, 111)

F. Total Productive Maintenance (TPM)

Total Productive Maintenance: Optimization of production processes through motivation and a localized
knowledge-based stratagem.(110)
TPM is a team-based approach to equipment management that emphasizes operations/maintenance
cooperation (autonomous maintenance), small group activities, zero defects/zero loss operations and
cleanliness.
The original (Japanese) implementation is constructed around the following principles:

Improving equipment effectiveness

Autonomous maintenance by operators

Planned maintenance by maintenance department

Training to improve operation and maintenance skills

An early equipment management program to prevent problems occurring during new plant or
equipment startup

One company expanded these principles to seven steps for improved productivity:(112)
1. Cleaning
2. Failure source location
3. Service, adjustment, and repairs
4. Standard machinery inspection list
5. Personal checklists and responsibility
6. Target management and quality measures
7. Cleanliness and order in the workplace
A study of four award-winning Japanese facilities that had implemented TPM revealed the following:(92)

All four sites had substandard performance five years earlier

Pride was evident in all cases; charts and banners were prominently displayed

Each site took up to two years to study the concepts before making the commitment

Pursuing TPM was the sites primary maintenance focus; TPM was not just one of several
improvement programs

The plants viewed TPM implementation in stages; putting the plant in as new condition was the
first priority and took nearly three years to achieve. Continuous improvement followed. The
combination required a commitment to fund rehabilitation of equipment, followed by continuous
improvement.

TPM was used as a tool to analyze task allocation between operators and mechanics. Improving
overall effectiveness was the goal. In general, operators assumed responsibility for normal operation
and daily maintenance, while Maintenance took the lead for periodic and preventive maintenance.
Maintenance was assigned primary responsibility for repairing breakdowns and improving
maintainability.

Implementations in North America to fit corporate objectives and culture typically follow the process
shown in Figure 4.12 and emphasize the following: (30, 39, 48, 93, 112, 120)

Corporate process to maximize the effectiveness of production systems

Organization, constructed from the shop floor, that prevents every type of loss over the life of
the production system by ensuring zero accidents, zero defects and zero failures

All departments involved in the implementation, including development, sales and

administration

Full involvement from all personnelfrom top management to shop-floor workers

Focus on capacity, quality, delivery, revenue and expense optimization, and capital and work
productivity

Focus on team-oriented equipment improvement

Set reliability metrics that maximize equipment effectiveness

Monitor condition, predict failures, and identify root-cause

Motivate by results

Optimized initial and operating equipment management routines based on calendar or operating
hour (PM), usage (unit throughput), or condition (PdM/CBM) that cover entire lifecycle.
Individual plants/units within a corporation may be granted authority to alter the program and
increase or reduce the frequency of equipment management tasks to attain greatest effectiveness
for local conditions.(120)

Asset ownership through autonomous maintenance by operators/productionsmall multi-skilled

work groups responsible for cleanliness, minor maintenance, and adjustments (Operator/
Maintainer CLAIR: Clean, Lube, Adjust, Inspect, Repair). Major adjustments in organization,
culture, labor agreements and attitudes are required to gain full benefits from autonomous
maintenance.

Maintenance effectiveness through prevention design and management

Proactive activities to increase equipment reliability and maintainability

Early equipment management

Work order prioritization and improved planning and scheduling

A continuous improvement process driven by a team consisting of skilled trades, production,

and engineering, to improve equipment effectiveness

Zero-loss conducted through overlapping small-group activities

Process benefits workshops and skills improvement training for operations and maintenance

Factors for success include:(39)

Top management support

Effective communications

Employee involvement

Rewards and recognition for results

One organization established an Inspector Program consisting of a single mechanical and electrical
inspector for each critical area. The inspector, a skilled tradesperson, identifies and repairs/reports
deficiencies. Such a program increases team ownership and accountability.(30)
Another company that implemented TPM reported a 30 percent reduction in maintenance costs in two
years.(93)

G. Six Sigma, 2Cp Contributed by Tim Murnane

Six Sigma (6S): The use of statistical tools applied in a disciplined manner to a problem with an unknown
solution. There is no magic in the tools. They are the standard statistical tools used in industry since Dr.
Deming made them popular. Rather the success comes from the work process. The project is carefully
chosen, defined, and quantified. Management and champions support the team and remove barriers. The
team is led by a trained black belt who is accountable for results. The final control phase of the 6S project
is focused on institutionalizing the solution.

The Six Sigma work process was developed by Motorola and further refined by Allied Signal and GE.
Their annual reports continue to sing the praises of the results that they are achieving. GE has two percent
of its work force trained as black belt leaders. Several large manufacturers employ Six Sigma to identify
and correct production process deficiencies.(120)
Although 6S is advertised as a Total Quality Management type of initiative, in many companies it is
focused more on producing bottom line business results than in actually achieving 6S capability. Many
industries have reached a mature stage where there is a need to integrate all the tools and techniques that
have been learned in the past two decades. Six Sigma can effectively integrate tools and techniques in the
companies that have top-level executive support. It is process focused, rather than task oriented. Because
it does not attempt task-oriented heroics, 6S can be synonymous with the culture change that so many
companies desire.
Technically 6S means that only 3.4 defects occur in one million tries. Most industrial activities are at a
Two Sigma (2S) level, which produces 308,537 defects per million. The airline industry performs at a 6S
level for safety, but both drug prescription writing and tax advice from the IRS are said to perform at the
2S level. As stated above, actually achieving 6S is often not the goal of individual projects. Instead,
management intends to reach a defined goal that adds significant cost savings to the bottom line.
The three overall metrics used by 6S are: Rolled Throughput Yield (RTY), Cost of Poor Quality (COPQ),
and Capacity. Capacity is measured in a similar way to OEE or Asset Utilization. RTY is the total number
of defects divided by the total number of units produced. COPQ is the cost of failing to produce and
deliver 100 percent quality to the customer the first time. This includes waste, returns, rework,
unscheduled downtime, yield loss, downgrades, defective inventory, blending and special handling,
claims, credits, and special shipping. For many companies, COPQ is 25 percent of sales. These
companies commonly expect to cut this in half.
The basic assumption behind 6S is that process variability is the enemy of quality. The more variation in a
product, the fewer the number of items that will work as designed. The mission of Six Sigma is to
relentlessly reduce variability that causes defects in products and processes by eliminating the root causes.
Six Sigma project team leaders are given four weeks of training and are often termed Black Belts after
successfully applying the techniques to a project. A project worth more than $100,000 (often more than
$250,000) to the bottom line has to be identified before training is given. Training takes place as one
week per month increments and the other three weeks are spent working on the projects.
Executive sponsors, project Champions and Master Black Belt mentors are other features of the program.
Most companies and consultants do not recommend a six sigma initiative without high-level executive
support. A number of companies adopting Six Sigma as a culture change have given it high visibility by
appointing Vice Presidents of Six Sigma.
There are five phases 6 to a Six Sigma project:
1. Project Definition a project must be quantified and have realistic boundaries
2. Process Measurement the data gathering phase
3. Process Analysis analysis and testing of the data
4. Process Improvement key variables identified above are tested using Design of Experiments
and other techniques
6

Adopted from Sigma Breakthrough Technologies, Inc. training materials.

5. Process Control the improvements must be institutionalized so that backsliding does not occur
The major tools 7 of Six Sigma are:

Maps and Metrics document key inputs and outputs

Cause and Effect Matrix prioritizes key inputs

Gage Repeatability and Reproducibility (R&R) Studies determines the measurement

capabilities (accuracy and precision) for key outputs and inputs

Capability Analyses establishes initial process performance to specifications

Multi-vari Analysis provides quantitative clues for identifying inputs to leverage

Failure Mode and Effects Analysis identifies high risk inputs and improvement actions

Design of Experiments systematic study of process inputs to identify optimal process windows

SPC Control plans documents all actions necessary to maintain world class performance

Explanations of these tools can be found in any textbook on Statistical Process Control (SPC) and Total
Quality Management (TQM).
2Cp:(113)
Six Sigma performance is based on the assumption that the process mean is centered on the
target value. Any deviation of the process mean from the target increases the number of defects
that will be within the specified standard deviation. The effects of both variance and off-target
process means are combined into a parameter called Process Performance. Cp, Performance
Potential, relates process capability to the specification. Cp is used to summarize how a process
is running relative to its specification limits; it measures how well the process mean is centered
within the specification and what percentage of product will be within specification. Motorola
assumed, based on analysis, that the process mean would deviate from the target by 1.5 Sigmas.
Shifting the mean this amount in either direction degrades the defect rate to 3.4 parts per million.

H. The Balanced Scorecard

The Balanced Scorecard is a management philosophy, management system, and method of measuring
compliance to objectives. It is:(95)
A top-down method to translate an organization's mission and strategy into tangible linkages,
interrelationships, specific activities and measures necessary for successful implementation.
Reliability and maintenance issues can be integrated into an overall business scorecard or
identified in a stand-alone scorecard.(61)
The Balanced Scorecard addresses four essentials for strategic implementation:(95)
1. Vision must be totally understood by those responsible for implementation and translated into
meaningful objectives
2. Management Systems must be connected to strategy and not solely directed to operating control
and budget conformance
7

Ibid.

3. People personal goals, knowledge building and competencies should link to strategy
implementation
4. Processes link to and leverage the drivers of business strategy
The Balanced Scorecard is intended to supplement financial measures with criteria that measure
performance from three additional perspectives: customers, internal business processes, and learning and
growth, as shown in Figure 4.13. The Balanced Scorecard enables companies to track financial results
while simultaneously monitoring progress in building capabilities and acquiring intangible assets that are
collectively essential for continued success and growth.(94) The Balanced Scorecard can be the cornerstone
of a new strategic management system that links lofty statements such as best in class and the numberone supplier into terms that provide useful guidance for action at the operating level.(94)
The Balanced Scorecard links a companys long-term strategy to short-term actions. Managers using the
Balanced Scorecard do not have to rely on short-term financial measures as the sole indicators of
company performance. The Scorecard goes beyond downsizing and cost cutting to introduce four new
management processes that, separately and in combination, help to link long-term strategic objectives to
short-term actions, as shown in Figure 4.14.(94)
1. Translating the Vision: builds a consensus around the organizations vision and strategy. The
Balanced Scorecard sets vision and strategy statements as an agreed upon, integrated set of
objectives and measures that describe the long-term drivers of success.
2. Communicating and Linking: ensures that all levels of the organization understand the long-term
strategy and that departmental and individual goals are in alignment.
3. Business Planning: the basis for allocating resources and setting priorities so that only those
initiatives that move toward strategic objectives are implemented.
4. Feedback and Learning: for monitoring short-term results from three additional perspectives and
using the information to modify strategies.
One facility uses a Balanced Scorecard type approach to link financial and strategic goals and to
effectively communicate objectives to team members responsible for implementation. Plant teams that
have greater influence/involvement/decision making have greater productivity than less empowered
teams. Winning results from generating employee enthusiasm and aligning plant and employee
goals.(77)
There are eight keys related to Balanced Scorecard success:(95)
1. Balanced Scorecard is an integral part of the change process
2. Strong, visible executive sponsorship
3. Greater focus on long-term objectives
4. Build teamwork, align objectives
5. Measure results
6. Direct attention to factors that drive measures and results
7. Recognize that learning is an evolutionary process
8. Connect compensation to scorecard results

I. Utilization of Equipment Information within Control and Enterprise Resource

Planning Systems
Many enterprises are recognizing the requirements and benefits of merging Condition Assessment,
CMMS, and ERP in an asset management structure, as described in chapter VI. One fundamental issue
that must be resolved involves the level detail that is useful and can be accepted by a receiving system. In
general, a receiving system needs results and much less detail than the originating system.
For example, the information a control system requires from a condition assessment system is usually
limited to current condition and, possibly, predicted equipment lifetime. Diagnosis and the details on
which the diagnosis is based are probably not useful. In addition, a control system may have a much
shorter time horizon than a predictive system, which provides information to manage both production
capacity and logistics.
One company is linking equipment, monitoring and control systems to gain knowledge of the cause of
variations. The objective is to utilize knowledge gained to achieve the predictability and stability
necessary to deliver maximum value at an optimum cost and quality for the product mix.(120)

V.

METRICS/MEASURES OF PERFORMANCE

Illustrations:
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10

Metrics Overall
General Benchmarking Process(10)
Detailed Benchmarking and Improvement Process(35)
Decomposition of a Benchmark
Best Practice Benchmarks(35)
The Hidden Plant(120)
Relationship between MTBF, MTTR, and MTBR
Spider Chart
Control Band
Pareto Chart

Summary
Metrics are essential within the Operating Equipment Asset Management process. Beginning with
benchmarking, they help management and plant personnel understand the business and mission
requirements, identify opportunities to increase effectiveness, and measure performance to objectives.
OEAM links metrics so that improvements in equipment and work effectiveness are connected to the
resulting contribution to business and operating objectives. OEAM metrics begin with business measures
such as RONA and ROCE. They include industry benchmarks such as cost per Replacement Asset Value.
Effectiveness metrics cascade through overall, availability, yield, quality and cost measures of
performance. Equipment effectiveness and work productivity measures are included in this spectrum.

A. Introduction
Metrics are an objective means of measuring performance and effectiveness. There is a saying, You can't
manage if you cant measure. That leads to, Unless you are measuring you are only practicing(10) and
You will achieve what you measure. Metrics are a two-edged sword. On one hand, metrics are
necessary to establish objectives and measure performance. On the other, incorrect or disconnected
metrics can mislead and result in unexpected, sub-optimal results.
People don't always use measures to get better, they manipulate measures to look better.
Wrong measures lead to bad decisions.(120)
Everyone engaged in equipment improvement processes must understand how the business operates and
the financial metrics that the business uses to measure results and track improvement. There must be a
direct connection from improved equipment performance to overall operational performance (i.e., asset
productivity), throughput, quality, and costall of which are essential mission/manufacturing objectives.
Metrics must demonstrate the value of asset productivity improvements in terms of financial performance.
This is the only means of securing the resources needed to implement improvements.(62, 108)
A hierarchy of distinct metrics, all linked to corporate goals, is vital to the success of a corporate program
of overall equipment asset management. Metrics are necessary to identify competitive opportunities,
prioritize resources, and measure the progress and effectiveness of improvement initiatives. Metrics help

to better understand the contributors to availability, production output, quality, and cost, as well as what
drives plant profitability.(62)
A managing system with safety, finance, production, cost, and quality metrics at both management
and working levels, and real-time directed feedback, is imperative.(120)
Metrics and their associated financial results are key links between business and financial executives and
personnel engaged in equipment management. They are essential in conveying the corporate value and
return gained by improved equipment reliability and overall effectiveness. Metrics also provide the basis
for justifying the sustaining investment of personnel and resources required for OEAM.
A valid comparison of performance measurements requires consistent definitions and rules. For example,
is availability reduced when equipment that is spared or otherwise not required removed from service for
maintenance? The causes of downtimemarket effects (lack of sales/demand), operational considerations
(shift to an alternate source for economic reasons), process difficulties, and equipment malfunctions
(unreliability)must be delineated. Failure to properly identify cause will skew availability and
reliability values and may lead to incorrect conclusions and prioritization of effort.(47, 62)
Metrics must cascade from high to low levels so that objectives are consistent and activities are
connected. Equipment Management metrics must connect directly to corporate/mission objectives
and demonstrate the contribution to manufacturing effectiveness. If the corporate goal is to gain
greater uptime and/or quality, the metrics must directly relate to the goal. Metrics that arent
related to the goal (e.g., percentage of Preventive Maintenance accomplished as a percentage of
overall maintenance) may be counter-productive and lead improvement efforts in the wrong
direction.(42, 108)
Figure 5.1 illustrates the family of linked benchmarks and metrics discussed in the following sections.
The differentiation is somewhat arbitrary and the metrics tend to overlap. Flow, linkage and consistency
of purpose are of prime importance.
At the top tier, return on equity/assets demonstrates the corporations ability to create shareholder value.
This level must cascade to linked production and asset effectiveness metrics and the elements that
compose each. The latter demonstrates the effectiveness of equipment management, measures the
contribution to profit and value (production or mission capability), identifies costs (to support the budget
process) and verifies the effectiveness of improvement initiatives. Linkage must include the ability to
drill down from a top tier metric all the way to the lower level metrics for the purpose of identifying the
cause of deviations.
Ownership demands answers the question: How are we doing? Apart from preschoolers T-ball, would
any competitive endeavor be meaningful without some sort of scoring system? How could effectiveness
be measured? What would motivate improvement? Corporations that are immersed in the process of
optimized equipment management all report that demand for scoring metrics is essential. Metrics increase
interest, ownership, and enthusiasm for the process.
Metrics must be concise. Focusing on too many areas at once may result in information overload and
increase the difficulty in directing limited resources to highest value activities.
Metrics are crucial in the strategic planning process for optimizing the application of resources to achieve
corporate objectives. Participation by all involved in the equipment management process, especially when
setting objectives, is essential to developing the commitment and optimism necessary to achieve the goal.

Leaders report that they are often surprised by the ambitious objectives and level of commitment that
result from a clear needs statement conveyed to working-level teams chartered to develop action plans.
Overall management is accountable for implementing an equipment management strategy to meet the
corporate/mission objectives. This level includes overall and performance metrics that connect upward to
corporate objectives, as well as downward to specific equipment performance, work processes and
technical metrics. The lowest tier metrics must identify requirements in areas such as staffing and training
requirements.
At the technical level, metrics are used to monitor the performance of specific processes, systems,
equipment and components. Used largely by team leaders, engineers, and technicians, these metrics
identify opportunities and measure the performance of the ongoing optimization and continuous
improvement process.
A valid comparison of metrics within and between corporations requires precise, strictly defined terms.
For example, several metrics that are widely used to compare effectiveness within the hydrocarbon
processing industry are based on Replacement Asset Value (RAV). When corporations using RAV are
asked for their method of determining this value, major variations are apparent. Mean Time Between
Failure (MTBF) is another example. There are many definitions of failure that significantly affect the
value of MTBF calculated by different companies.
Wherever possible, definitions should conform to industry conventions. Definitions must include the
metric itself, all of its components, and the method of calculation. Those who will use the metric and be
accountable for results must understand and agree on the definition. Definitions should be printed and
readily available to ensure consistency of application.
Comparing metrics also requires consistency of mission, overall intensity, location/environment and even
age.(62) Consider a race car and a passenger car. Even though both may have an internal combustion
engine, four wheels and operate on a road, major differences in mission and overall intensity significantly
limit the number of metrics that might offer a valid comparison between the two.
Metrics must be understandable, directed to the requirements of users and controllable through work
activities by those charged with compliance. At the upper levels of a corporation, asset and capital based
metrics, such as Return On Net Assets (RONA), are of greatest importance. At the working levels, RONA
holds little meaning and is only marginally controllable. However, improving MTBF (and thereby
RONA) by eliminating equipment defects is both meaningful and controllable at the working level. Thus,
effective metrics measure results which managers and workers can control and change. And this sense of
control, contribution and ownership is vital to the overall optimization and improvement process.
Employees at all levels in the organization must understand the metrics for which they are responsible and
why those metrics are important.
In addition to sharing a common definition of metrics, companies must ensure the accuracy of measured
metrics. Metrics should be measured under consistent conditions within the process. For example, a
determination of the average drive time from home to work may or may not include the time required one
day a week to fill-up with gasoline. If it did, you might find yourself five minutes early on the days you
didnt purchase gasoline and ten minutes late on the day you did. This simple example highlights an
important issue that is all too often overlooked. Metrics must represent the process. If the process
changes, the performance metrics must change also. In the simplified example, the metric should be made
more descriptive of the process; average driving time to work without stops. From this basis, one could
calculate the average time required to fill up with gasoline to arrive at an accurate metric for both the
normal process and the one-day a week exception.

There also must be consensus on the exact starting and stopping point in the process. Most frequent
airline travelers have experienced this issue. Airline on-time departures are measured by comparing
pushback from the gate to scheduled departure. Planes are often pushed back ten feet where they remain
for an hour or more due to traffic, weather or other delays. However, by the airlines rules, the flight made
an on-schedule departure!
In the industrial world, metrics must be seen as a positive force driving improvements that are beneficial
to all. This is an essential step in tracking progress toward the necessary improvements. Otherwise
metrics will be manipulated like aircraft pushbacks to ensure that performance, representative or not, is as
high as possible.

B. Benchmarking
Almost every aspect of business can be improved. Even recognized, world-class competitors understand
that companies have limited pockets of excellence. No facility is excellent in every area.(22) Leaders also
recognize that tools, techniques, and results from other companies are a vital part of the process. Critical
self-examination must occur on an ongoing basis to recognize opportunities for improvement and take full
advantage of changing state-of-the-art techniques.
Benchmarks establish an organizations reference objectives. Benchmarking is:
A systematic process for measuring best practice and comparing the results to corporate
performance in order to identify opportunities for improvement and superior performance.(35)
A realistic benchmarking effort is the first step toward understanding real conditions and recognizing
opportunities for improving the effectiveness of an equipment management program.
Benchmarking is a means to gain insight into competitive realities and define the objectives and
measures of performance needed to initiate positive change and to manage for greatest
effectiveness(6).
In a growing number of cases, enlightened managers understand that equipment management is a key
component of business operations and a contributor torather than a detractor fromthe bottom line. In
the long run, top-down, peer and working-level support are all essential for success. Benchmarking
provides the insight required to attain organizational buy-in.
The benchmarking process, illustrated in Figure 5.2, has four essential steps:(9, 92)
1.
2.
3.
4.

Select a comprehensive set of parameters for comparison

Select reliable internal and external sites for comparison, based on performance
Compare own parameters with best-of-best measures
Identify areas of greatest opportunity

One company elected to benchmark in seven areas:(93)

Leadership
Planning and scheduling
Preventive and predictive maintenance
Reliability improvement
Spare parts management

Contract maintenance management

Power generating companies have traditionally benchmarked in more objective areas, such as:(6)

RAM, reliability, availability, non-fuel operating and maintenance

Fuel costs and heat rates
Capital effectiveness

Successful benchmarking begins with consistent definitions. Activity Based Accounting and a consistent
chart of accounts for equipment costs are essential. Data collected should be matched to the data available
for comparison. There is often a tendency to want too much data.(6)
Benchmarking methodology must: (6)

Be plant, process and/or equipment specific

Consider the reliability of existing data sources
Be easily understood
Be repeatable
Demonstrate cause and effect for the resulting strategy
Be useful for follow-on monitoring

The comparison to best practice, often called a Gap analysis (see Chapter VI), leads to a prioritized
array of optimizing changes directed to achieving best practice levels of effectiveness.(55) A more
detailed diagram of the benchmarking process and how benchmarking fits into an overall process of
improvement process is illustrated in Figure 5.3.(35)
In a multi-business enterprise there may be a broad variation in performance resulting from factors such
as type and intensity of processing. Leaders recognize that all efforts should not necessarily be directed to
the largest apparent Gap; profits can be increased in all areas and resources should be allocated
accordingly.(120)
Benchmarks are typically in four categories: industry, process, functional and internal. (35) Benchmarks
may be obtained from surveys, exchanges with similar organizations or they may represent organizational
goals and objectives. In any case, care must be taken to ensure that objective values derived from
benchmarks are realistic and attainable. Objectives that are unrealistic will not gain the commitment
necessary for success. Leaders report that allowing working-level implementation teams to establish
performance objectives typically leads to both ambitious goals and a commitment to their attainment.
External industry-wide and internal benchmarks are both valuable to assess performance. Each industry
has several, generally accepted, overall world class benchmarks that are useful for determining
comparative performance (e.g., tons of steel production per availability hour and assembly hours per
automobile).(108) From there, internal corporate or facility metrics can be established for each component
within the overall benchmark to prioritize and drive the improvement process. Figure 5.4 illustrates the
decomposition of an industry benchmark into individual system, equipment and component metrics.
There are several rules of etiquette that must be incorporated into an external benchmarking process.
Primarily, refrain from requesting anything that your company would be not able or willing to provide.
Chances are others will be under the same restrictions. Benchmarking with a non-competitive business
avoids many of the problems associated with giving or receiving proprietary information that may be
considered trade secrets.

Benchmarks should be used as performance indicators and drivers for continuous improvement and
objectives for cost reductions. Some companies risk-adjust opportunities for improvement and then
evaluate initiatives to determine which have the highest returns.(120) Benchmarks should not be used as
performance goals; this can lead to temporary, short-term fixes that have an adverse long-term impact.(84)
Gaps to benchmark performance must be followed by a comprehensive improvement plan. The plan must
include interim metrics and performance indicators.(52) Interim metrics monitor the continuous
improvement process, verify progress to a longer-term objective, and indicate changing conditions and/or
the need for additional action. Thus, benchmarking should be a continuous process.(35)
Benchmarking to improve performance may include non-competing partnerships. A large U.S. Navy
maintenance group recognized the need to improve its maintenance response times. It developed a
working partnership with a national research laboratory, a major university, a regional utility company
and a county department. Over the course of the next year, the effort led to the identification of 21 distinct
improvement ideas. Some of those challenged bedrock organizational values, long held work
management policies and practices and even existing Federal regulations. All of the participants benefited
from the experience. The effort led to the establishment of an informal assistance network that
encouraged members to contact one another to resolve other issues. Over the course of time, each member
organization excelled at some work practices that it could share with the others. Other such groups will
likely have a similar experience.
Learning operating and business requirements and priorities for equipment management may be the most
important initial benefit of benchmarking. Once the gaps to best practice have been identified, everyone
involved in the equipment management process should begin to explore opportunities and detailed
initiatives for improving efficiency and effectiveness.
Efficiency:
Performing a given task (not necessarily the correct task) well (e.g., budget to actual, PM
completion)
Effectiveness:
Performing the correct task efficiently (e.g., safety, availability, quality, output)
Efficiency and effectiveness metrics at each level in the performance measurement hierarchy must focus
on mission and business results.(120)
Figure 5.5 contains some best practice benchmarks.(35, 120)

Figure 5.5: Best Practice Benchmarks

Category
Yearly Maintenance Costs:
Total Maintenance Cost / Total Manufacturing Cost
Maintenance Cost / Replacement Asset Value of the Plant and Equipment
Hourly Maintenance Workers as a % of Total
Planned Maintenance:
Planned Maintenance / Total Maintenance
Planned and Scheduled Maintenance as a % of Hours Worked
Unplanned Down Time
Reactive Maintenance
Run-to-Fail (Emergency + Non-Emergency)
Maintenance Overtime:
Maintenance Overtime / Total Company Overtime
Monthly Maintenance Rework:
Work Orders Reworked / Total Work Orders
Inventory Turns:
Turns Ration of Spare Parts
Training:
For at least 90% of workers, hrs. / Year
Spending on Worker Training (% of Payroll)
Safety Performance:
OSHA Injuries per 200,000 labor hours
Housekeeping
Monthly Maintenance Strategies:
PM:
Total Hours PM/Total Maintenance Hours Available
PDM/CBM:
Total Hours PDM/Total Maintenance Hours Available
PRM (planned reactive):
Total Hours PRM/Total Maintenance Hours Available
REM (reactive, emergency): Total Hours REM/Total Maintenance Hours Available
RNEM (non-emergency):
Total Hours RNEM/Total Maintenance Hours Available
Plant Availability:
Available Time / Maximum Available Time
Contractors:
Contractors Cost / Total Maintenance Cost

Benchmark
< 10-15%
< 3%
15%
> 90%
~ 85-95%
~ 0%
< 10%
< 10%
<5%
~ 0%
> 2-3
> 40 hrs/yr
~ 4%
<2
~ 96%
~ 20%
~ 50%
~ 20%
~ 2%
~ 8%
> 97%
35-64%

Benchmarks based on the authors experience and available literature. Each category benchmark will vary from industry to industry,
and with time.

C. Use of Metrics in the Improvement Process

Benchmarking leads to objectives. Metrics are the score. There must be accountability for metrics and the
status that the metrics represent. Some organizations assign people by name to each metric.(120)
To take full advantage of the benefits of metrics, the metrics should be clearly displayed. Displaying
metrics often has an immediate positive effect that encourages everyone to achieve objectives in the
functional area being measured.

D. Commonly Used Metrics, Advantages and Limitations

Figure 5.1 (presented earlier) illustrates a family of corporate metricsfrom asset and capital-based
metrics to technical and indirect metrics. Metrics must link to each other and to financial performance of
the enterprise at several levels. A recent article containing a proposed financial model is reprinted in
Appendix B.
1.

Corporate Asset and Capital Based Metrics

Corporate-level metrics are typically asset or capital based and measure creation of shareholder value. As
the top tier, corporate metrics are used to develop and support strategic decisions affecting overall
objectives, mission, production, cost, and staffing strategies. Examples include Return On Net Assets
(RONA), Return On Capital Employed (ROCE), and Economic Value Added (EVA). EVA is a
measure of profitability above the cost of capital based on the precept that increasing capital is a measure
of increasing shareholder value.
Some companies use a normalized EVA-type measure called Activity Value or Contribution Margin.
One company using Activity Value requires results in excess of 20 percent of sales in good years and no
less than zero in bad years. Adherence to this objective means that the companys profitability should
never fall below the cost of capital. The company measuring Contribution Margin will close plants with
negative results that are considered a drain on shareholder value.
Other companies use Return On Equity (ROE) or Return On Assets (ROA) as a governing corporate
metric.(120) At least one company using ROE recognized that it must demonstrate a better return on capital
than others in equivalent industries in order to attract investment and build shareholder value. This
exemplifies the need for EVA.(120)
2.

Overall Effectiveness Metrics: Asset Utilization, Overall Equipment Effectiveness (OEE),

Cost Of Poor Quality (COPQ), Uptime, Operational Readiness, Availability, Cost of
Unavailability, and Downtime

Overall effectiveness metrics are top-level industry measures used to evaluate operating and quality
performance. Overall Equipment Effectiveness (OEE) is a common metric used in North American
industry to measure production effectiveness. OEE is the product of normalized availability (uptime),
production throughput (yield) and first-run-quality. OEE is a measure of process and equipment
effectiveness when the equipment is scheduled to run. (10, 120) In terms of OEE, world class performance
is said to be 85 percent or greater for continuous processes and 80 percent or greater for batch processes.
When demand exceeds capacity, any reduction in OEE represents lost profit.(112)

One caution with OEEavailability must coincide with operating requirements. This is especially
important when requirements to operate are less than 100 percent, such as a peaking power station. Timed
Availability, discussed in more detail in Appendix B, requires calculating availability relative to windows
of required operation.
Typical North American manufacturing facilities report OEEs near 50 percent. This indicates a hidden
plant recoverable capacity of at least 35 percent, as indicated by Figure 5.6. As illustrated in Figure 5.6,
the hidden plant includes:

Downtime
Process-related rate losses
Quality and yield losses

A lack of demand may also contribute to the hidden plant.(10)

Downtime can be broken down in a number of ways. One reference suggests dividing total downtime into
the following five categories: (112)

Process
Changeover
Set-up and adjustment
Logistics
Sales
Waiting
Equipment failure

Some facilities using OEE add cost as a fourth measure of performance:

Several companies perform detailed analyses of lost uptime, yield, quality and margins caused by
shutdown or slowdown, whether planned or unplanned. The analysis includes frequency of
occurrence and consequences. The specific location of the loss in the business process is
identified (sales, process [rate and quality], equipment unreliability, or indirects [e.g. support
structure, planning, administration, pricing and other variables such as abnormal catalyst
deterioration]) along with root cause. Monetary loss depends on specific conditions, plant and
product.(112, 120)
One industry-leading company manages to detailed internal metrics within OEE and cost. They
do not roll up detailed metrics into an overall measure of OEE. The plant states that
understanding and driving details within availability, yield, quality and cost metrics are highly
important. However, they believe that an overall OEE calculation offers little added value. It also
may be misleading because beneficial changes in one term may mask detrimental changes in
another.(120)
Cost of Poor Quality (COPQ) includes all quality variations. COPQ is calculated by yield affected (i.e.,
tons, pounds, etc.), multiplied by price per unit of prime product. One company has established a COPQ
objective of less than 10 percent of Cost Of Goods Sold (COGS).(112, 120)
Combined asset utilization, yield and COPQ are similar to OEE.
Asset Utilization:
Percentage of time a plant is in operation at Maximum Demonstrated Production Rate, perfect
quality and defined yield.

There also must be some method to measure delivery reliability, especially when the production output is
part of a JIT supply chain.(112)
3.

Industry Performance Metrics

Industry performance metrics provide a basis for determining comparative effectiveness. Industry metrics
include:

Cost as a percentage of Current /Replacement Asset Value (CAV/RAV) commonly used in

the petrochemical industry.
Most companies operate at 4 percent or greater. World class performance is approximately 2
to 3 percent. Some companies claim less than 2 percent. Process intensity also affects what
should be an optimum sustainable value of cost per RAV.
One company computes costs per RAV for every production unit, rather than calculating costs
per unit output.(120) Another company, reporting about 1 percent above the world class value
states that the gap represents $32 million annually in lost profits.(10)
A downward trend in cost per RAV without corresponding increases in equipment effectiveness
metrics probably indicates assets are being consumed.(92) Reducing defects is the only way to gain
a sustainable reduction in cost per RAV.(120)

Cost and other measures as a percentage of Equivalent Distillation Capacity (EDC)

Solomon Associates maintains EDC benchmarks that are universally used in the oil refining
industry.

EFOR (Effective Forced Outage Rate) determined from an EPRI calculation and used in the
power generating industry
EFOR: the probability of experiencing either a forced outage or forced de-rating when called
upon to deliver load.

Output (tons) per availability hour is used in the steel industry

Production cost and/or labor hours per unit production (ton, pound, Mw, barrel,
automobile, etc.) is widely used across industry.

Inconsistent definitions and methods of calculation often add uncertainty to metric comparisons between
companies. Values such as RAV may be defined and calculated differently by different companies. Their
use is much more effective for tracking performance within a single company where the calculation is
consistent.(120)
A financial indicator such as Costs as a percent of Replacement Asset Value might be a
meaningful corporate management metric; however, it is unlikely to inspire individual employees.
Specific objectives combined with micro metrics such as maintenance costs for generic
equipment, e.g., motors, pumps, compressors and parts are understandable to employees and
within their ability to impact.(41, 108)
Life cycle profit (return on an asset) is a better way to evaluate asset performance than life cycle cost.
Establishing metrics based on life cycle profit will reinforce the necessary cultural change from a costcentered mentality to the more constructive profit-centered mentality.(120)

4.

Equipment Management Metrics: Mean Time Between Failure (MTBF), Mean Time To
Failure (MTTF), Mean Time To Repair (MTTR)

Equipment management metrics are used to assess reliability and maintainability and identify problems.
But are reliability and maintainability the best standards for measuring equipment effectiveness? If so,
reliability must be related to performance and profitability. How is this accomplished if required
availability is significantly less than 100 percent and/or there are system redundancies?
Many companies are realizing that a large investment in improving component reliability does not
necessarily translate into a measurable increase in overall function or system reliability. For example,
reliability improvements to two parallel pumps may have little overall effect. However, reliability
improvements to their automatic start switches may have major effects. Reliability investments must be
focused on prioritized improvements that have a direct impact on system availability.
Figure 5.7 illustrates the relationship between Mean Time Between Failure (MTBF), Mean Time Between
Repair (MTBR) and Mean Time To Repair (MTTR). Some observations:

MTBR is MTBF minus MTTR and is, thus, a better measure of reliability (poor maintainability
results in a longer MTBR and therefore extends MTBF for a given MTBR)

MTTR is a measure of maintainability (i.e., how fast repairs can be completed)

When MTTR is relatively small in proportion to MTBF, MTBF and MTBR are essentially equal.

Accurate MTBF/MTBR by equipment and component (model number) is necessary to be able to

identify common failures spread across a population of equipment. If MTBF/MTBR is low, the
cause, whether a few bad actors or an institutional problem such as poor alignment or balancing,
must be detectable from the data.

MTBF and MTBR are plotted for similar equipment to locate process, environmental and
installation variations that may change failure characteristics.(120)

Equipment MTBF/MTBR may lose some usefulness as a result of the staggered life of
components and the effect of external influencescorrosive or abrasive environment, harsh
loading conditions, contaminated fluids (lubricant and hydraulic oil), misalignment, and
unbalanceon component lifetime.(120)

Organizations must take care in selecting maintenance effectiveness measures. Too often objective or
subjective maintenance effectiveness is judged on time to repair, rather the more effective
MTBR/MTBF.(112)
Loss Margin is a better measure of effectiveness than either EFOR or MTBF. Neither EFOR nor
MTBF identify the ability to operate when required. Loss Margin focuses on the correct objectives.(8)
In the process and petrochemical industries, world class MTBF/MTBR for pumping equipment is
reported to be approximately seven years. As stated earlier, numbers for world class performance must
be used with some caution because of the varying service, environment and definitions of failure and
repair. Some organizations reserve the term failure and repair for events that affect production.
Events that have no effect on production are not classified as failures and, hence, are not considered as
repairs. In other cases, problems that require intrusive disassembly are failures. Under these
definitions, a bearing, seal or coupling that requires replacement is classified as a failure and the
corrective action a repair. Likewise, degraded performance that necessitates overhaul would be
classified as a failure. Lubrication and adjusting packing and belt tension would not be classified as
failures.

One company that uses this system does not classify a worn, frayed or broken drive belt as a failure, or
its replacement as a repair. There are numerous other examples in a gray area that could be classified
either way. Perhaps the best solution is to decide what information is required from the standpoint of
reliability analysis (a case can be made that drive belt failures fit this criteria), define those as failures
and designate the corrective action as repairs.
Determining how hidden or impending failures, identified and corrected during maintenance conducted
for another purpose, are counted is often difficult. As maintenance and overhaul intervals are extended,
these issues assume greater importance.
Some companies measure and track Mean Time Between Events (MTBE), where an event is any
departure from normal operation that costs more than a specified amount of money. Two companies
require a full RCFA on individual equipment when the cumulative cost of repairs over a 12-month period
exceeds $10,000.(120)
5.

Key Performance Indicators (KPIs)

Key Performance Indicators are widely used within industry to measure specific parameters across all the
classes of metrics. KPIs are often used to measure short-term progress to objectives. One company selects
KPIs to measure progress to objectives.(120) Examples of KPIs include:(10, 21, 108)

Safety and environmental indices

Percent plant utilization

Availability/uptime

Units/availability hour

Manufacturing cost/unit (ton, pound, bbl., Mw, automobile, etc.)

Yield loss

Percent unplanned production losses

Cost Of Poor Quality (COPQ)

Customer complaints

Maintenance management indices (i.e., bearings and seals used or number of unexpected failures)

Condition monitoring/CBM program effectiveness (i.e., percentage fault detection or average

vibration level)

A leading oil company has 21 categories of equipment each with KPIs linked to MTBR.(120) Another
leading company in the petrochemical industry measures detailed KPIs for each processing unit, including
electrical power, thermal energy, and air consumption per unit output. About 80 percent of the
performance indicators are based on metered values; the remainder are largely allocated between
production units on a fixed formula.(120)
One paper listed the following KPIs for a world class organizations: (17)

Percentage planned work: 90 percent

Schedule compliance: 70 percent

Work order discipline: > 90 percent

Process availability: 90 to 95 percent

6.

OEE: > 80 percent

Maintenance cost as a percentage of total sales: < 3 percent

Work Process Productivity Measures

Work process productivity measures are used to assess effectiveness in terms of task accuracy, adherence
to schedule, completion, and other factors. They measure how resources, primarily labor, are deployed to
meet production goals. The measures identify opportunities for improvement and define staffing, budget,
and training requirements.
Measures in use, such as maintenance costs divided by net asset value, have significant weaknesses. In
this case, the measure fails to consider the age of the facility and operating intensity, both of which have a
strong influence on maintenance costs. Second, with the numerator being the only variable in the
equations, only cost reduction can have a positive impact. Earlier chapters have warned of the dangers of
short-term cost reductions at the cost of long-term quality and operational effectiveness. Such practices
contradict the value or profit center mentality that is the core principle of Equipment Asset Management.
Some practitioners suggest a measure of the proportion of scheduled to total maintenance. However, a
high percentage of scheduled to total maintenance has no meaning if the scheduled tasks are unnecessary
or improperly performed.
The productivity measures explained herein are based on planned maintenance, defined for this purpose
as maintenance that is scheduled in advance of commencement by some specified lead-time. Some
facilities require a two-week lead-time to qualify as planned maintenance; others specify one week. The
goal in measuring productivity based on planned maintenance is to optimize planning accuracy.
Typical productivity measures include:(10, 43, 84)

Cost per unit production

Total hours worked

Work scheduled as a percentage of work accomplishedpercentage of labor hours expended on

scheduled work. Daily schedule compliance is the most important measure in work
management.(19)

Preventive and Condition-Based Maintenance as a percentage of total maintenance. Preventive

Maintenance completion percentage means very little if the work is unnecessary or lacks value.
Effectiveness is more important than adherence to a program. A facility cautions about the use of
this metricit may result in flooding the system with worthless Preventive Maintenance tasks.(120)

Unexpected failures

Emergency work required. One facility has established an objective of reducing unplanned or
break-in work (defined as work scheduled during the same week as accomplished) to less than 10
percent of the total. Another combines emergency (accomplish immediately) and class 1
(accomplish within 24 hours) work. (120)

Percentage of candidate equipment covered by an optimized maintenance plan

Planned completion rate (tasks completed within a specified time from schedule). One facility
reports 65 percent of Preventive Maintenance Tasks are completed on-time (within one week of
schedule) and cites a 95 percent total completion rate. Preventive Maintenance completion is
tracked by trades. A large corporation in the hydrocarbon industry that has a four-week rolling

maintenance plan is achieving 70 percent compliance with the four-week plan and 90 percent
compliance with the one-week plan. Another facility performs a monthly Pareto analysis of the
cause of unresponsive (unplanned) work.(120)

Overtime work as a percentage total hours worked

Planning accuracy actual time expended as a percentage of planned time. Only a few facilities
measure planning accuracy, although studies show that those who do are 40 to 60 percent more
productive.(82)

Work backlog

Labor utilization (i.e., wrench time). Fifty to sixty percent is considered world class.(120)

Percentage of labor and material cost. One facility uses the ratio of maintenance labor to material
to measure labor effectiveness. They state that as maintenance becomes more proactive, the labor
percentage should increase. (120)

Percentage improvement in MTBF/MTBR

Life cycle extension

Storehouse stock effectiveness (i.e., service level) percentage of time parts are available when
required

Inventory value as a percentage of RAV. The Society of Maintenance and Reliability

Professionals (SMRP) reports that 1 percent is a best practice benchmark.

Inventory Quality Ratio (IQR): ratio of active MRO parts inventory to total inventory.(81) In
Japan, stores disbursements as a percentage of total maintenance material appears in two
distinct regions. Plants with a percentage above 50 percent are managing stores through
Western-style storerooms. A cluster of Japanese sites with ratios of less than 20 percent are using
dependable local suppliers in a just-in-time (JIT) environment.(92)

MRO parts inventory turns. A facility expressed reservations that when inventory turns are used
as a critical metric, all stock is lumped together. Slow movers may be hidden.(81)

Material turnover rates in Japan are reportedly stratified into two distinct regions. Companies who
manage their own inventories have turnover rates exceeding 4. Companies who have established close
relationships with local JIT suppliers maintain slow-turning critical spares at a turnover of less than
0.6.(92).
A large manufacturer reports combined production and MRO inventory is approaching 21 turns with an
objective of 85 turns. (Eighty-five turns represents approximately three days of material and WIP on
hand.) To meet 85 turns, MRO inventory must be addressed.(120)
Work Productivity Metrics must be consistent with and reinforce overall optimizing actions. For example,
enlightened practitioners of Equipment Management encourage RCFA, view repairs as opportunities to
eliminate defects, and consider the process as essential to improving equipment effectiveness. As stated,
the conventional definition of Labor Utilization as wrench time excludes RCFA and is contrary to
encouraging proactive failure avoidance measures. The better solution is to count time expended
performing RCFA in Labor Utilization.
Increasing inventory turns via a reduction in slow moving spares, combined with a general reduction in
the number and quantity of stocked parts, should be approached with caution. Attempting to comply with
both metrics may result in scrapping vital, long-lead insurance spares.

Spider charts, illustrated in Figure 5.8, are frequently used to compare the performance of multiple Work
Process Metrics with benchmark objectives. A spider chart can provide a useful display of Balanced
Scorecard results, as described in Chapter IV.
One large manufacturer evaluates performance on a spider chart in the following nine areas, as well as
providing an overall assessment:(120)

Planned maintenance
Continuous improvement
People, organization and culture
Supplies and tools
Planning
Training
Communication
Costs and benchmarking
Standards and documentation

The evaluation process begins when questions are submitted to work teams. The teams prepare written
answers that are evaluated by other teams, who then conduct a four-hour verbal review. The score in each
area and the overall are plotted along with benchmark objectives on the spider chart, shown in Figure 5.8,
to identify gaps and gain potential. Comments and the spider chart are combined into a feedback
document that includes a written evaluation and suggestions for improvement. The latter are focused on
successnot criticism. The team evaluated has the option to apply improvement initiatives in areas other
than metrics with the greatest gap on the spider chart and the team is accountable for results. Gaining the
optimum mix of effort requires effort.(47,108).
A petrochemical company uses a spider chart to evaluate performance in more general terms: Focused
Empowerment, Compliance to Balanced Scorecard, Asset Management, and Maintenance Prevention.(120)
Another company tracks linked metrics on a combination plot (e.g., Preventive and Condition-Based
Maintenance completion and downtime). As Preventive and Condition-Based Maintenance are applied
more effectively, an increase in completion should result in a corresponding decrease in downtime. If the
cause/effect does not trend as anticipated, an effort is initiated to learn why.(120)
7.

Leading Indicators

Leading indicators are task specific metrics that respond more quickly than results metrics. Leading
indicators are selected to anticipate progress toward long-term objectives that may not change quickly in
response to effort. As one example, employee training should result in improvement. Thus employee
training is considered a leading indicator. Initiating a program of precision shaft alignment may require
years to affect overall reliability measures such as, MTBF, MTBR. In this case a leading indicator might
be individual MTBFs or MTBRs for specific equipment. Leading measures are also an early indication
where added improvements might be necessary.
Examples of leading indicators that are in use for equipment management include: (120)

Schedule compliance
MTBF/MTBR on specific equipment with improvements implemented
Percentage Preventive and Condition-based Maintenance, percentage overdue
Overtime hours worked
Emergency work required
Warehouse stock turn, planning accuracy
Percent failures subjected to RCFA (measure of proactive to reactive failures)
Hours of training per employee

The overlap with other categories is also apparent with this list.
To demonstrate contribution and progress, leading indicators must connect through overall effectiveness
measures to functional and enterprise financial objectives.(120)
8.

Technical Metrics

Technical metrics are used to measure the effectiveness of equipment management programs and systems
at the facility, unit, or equipment level. These metrics demonstrate the technical results of programs such
as vibration monitoring, fluid (lube oil) analysis, and thermography as the first step in linking their
contribution to corporate and facility results. Technical metrics capture, in objective terms, results that
can be trended over time to track progress toward program objectives and demonstrate improvement (e.g.,
percentage of predictive monitoring performed within one week of schedule).
Technical objectives allow program owners and managers to determine contribution and identify areas
where improvements are required to increase effectiveness. Examples of technical-level metrics applied
to typical facility programs include:

9.

Percentage of facility/unit equipment monitored with predictive technology

Facility average overall vibration levels several organizations report a direct link between
reduced vibration levels and reduced maintenance costs

Number of early warning alerts or alarms by unit or condition survey

Number of second warning danger alarms by unit or condition survey

Number of faults detected for each technology in use (e.g., fluid analysis, electric current
analysis, thermography, and steam trap surveys)

Number of undetected failures for each technology in use

Percentage false alarms

Indirect Metrics

Indirect metrics are used to measure the impact of an equipment management program on organizational
imperatives such as safety and environmental incidents. (One company reports that 50 percent of all
environmental incidents are caused by equipment failure.(120)) Indirect metrics demonstrate the value of
equipment management to those managers who are accountable for vital areas such as safety and
environmental compliance. These indirect metrics provide another means for demonstrating the value of
an equipment management program to influential decision makers who have little to no awareness of such
programs. Some examples of indirect maintenance metrics are:

Safety and environment incidents

Environmental savings achieved through waste reductions
Energy savings attributed to equipment management

E. Avoided Cost
An assessment of the contribution of a predictive or proactive equipment management program should
include the issue of avoided cost. Avoided cost is defined as the differential between the actual repair cost
and the cost of repair had the equipment and/or system proceeded to failure, plus the estimated cost of
downtime related to an unscheduled failure. In other words, it compares what actually happened to what
most likely would have happened if the problem went undetected.(21)

Policies regarding credits for avoided cost vary by company. One company disallows avoided cost credits
if the impending failure likely would have been recognized during operator rounds and would not have
adversely affected operation/production. Some companies use an average cost of failure, taking into
consideration the cost and probability of a failure causing added damage (e.g., a bearing failure that
results in housing, shaft and/or rotor damages). Others avoid the challenge by not allowing avoided cost
estimates in the calculation of program value.
A detailed procedure for calculating Avoided Cost is found in reference 91, Appendix C.

F. Application of Metrics
Significant thought must go into the process of selecting metrics to support the equipment management
program. The value of meaningful metrics cannot be overstatedthe impact of metrics that are inaccurate
or inapplicable cannot be understated. One must first identify the goals and objectives of the organization.
Metrics must connect to organizational objectives; therefore, the selection criteria must establish the path
from corporate financial results down through overall, equipment and program effectiveness. The
contribution at each stage must be understood and linked. Fundamental issues such as safety and
environmental protection must also be identified so that the appropriate metrics will be selected.
All key processes within the overall effort should have one or more metrics to indicate goal compliance
and progress. In each case, the process owners and implementers must be involved in selecting metrics, as
well as objectives and time to gain compliance. This first vital step toward ownership is the basis for data
collection and the means to embed a continuous improvement culture.
Organizational capabilities to collect and report metrics must be considered. The cost of obtaining data for
metrics and the relative value the metrics add to the overall program must be calculated. Some companies
have one or more people dedicated to the task of accumulating and reporting metric information. As
information systems improve, automatic, real-time processes will supersede manual batch methods. The
Equipment Management process is directed toward adding value. Metric selection and reporting must be
consistent with that principle.
In summary:

Good metrics focus activities on maximum benefits and value added

Poor metrics lead away from optimum activities, often to unintended results

Whenever possible, metrics should be positive, rather than negative (e.g., measure first-run
quality, not rework)

Prevent conflicting metrics, as exemplified by the stock reduction conundrum mentioned earlier

Always examine complementary metrics together (i.e., there isnt much benefit in directing
efforts to increase yield if quality is significantly below objective)

Non-compliance with a metric should be followed by efforts to identify cause, full cost, and other
effects of non-compliance. Many organizations use Pareto analyses for this purpose.

Metrics must be used and kept current. Metrics that are not regularly used should be eliminated.

G. A Measurement Process
The following paragraphs outline a metric selection and measurement process that objectively identifies
real conditions within the equipment management process. The establishment and collection of metrics
must be clearly related to the organizations business conditions, mission, and objectives and must
identify opportunities for improvement. Objectivity and honesty are fundamental, but often neglected,
aspects of this process. Everyone is familiar with some type of large-scale effort that was undertaken to
prove or disprove what was already known.
Like many important business decisions, the keys to a realistic equipment management measurement
program are clearly stated objectives, understanding, consultation with all affected parties, and effective
planning and training for all personnel, from shop floor employees to the Board Chairman/Fleet/Type
Commander. The needs and concerns of each group should be recognized and accommodated in the
design of the measurement process. This will help ensure that nothing important is overlooked and will
gain more cooperation and support when the equipment management measurement process is installed.
The top metric should be whatever the corporation/facility uses to measure financial performance. For
many this will be RONA. At the next lower level, many organizations use some variation on OEE
(availability, production throughput and first-run quality) plus cost. Improvements required at this level to
meet the top tier objective should be determined. A financial model of the type contained in Appendix B
is useful in performing the analysis. The analysis should lead directly to the selection of key equipment
management metric, work process metrics, and technical metrics for each of the second tier categories
illustrated in Figure 5.1.
When possible, benchmarks should be identified for each of the metrics selected. If possible, the
benchmark values should be based on industry standards or organizational past experience. If such data
are not available, they can often be developed by contacting professional societies such as the Society of
Maintenance and Reliability Professionals (SMRP), visiting reliability-oriented web sites, or consulting
the numerous texts available on the subject. Consult fellow equipment managers to determine what
benchmark values they use for variables such as MTBF. Considering all of these resources, the equipment
manager can also generate estimated values. Any value chosen must fulfill the top-tier objective.
When all parties agree on what needs to be measured and how the metrics are defined, the next step is to
set up training and get started. Whether establishing an equipment management process for the first time
or modifying an existing process with new definitions or a more precise focus, you must allocate time to
gather information and identify and prioritize improvement initiatives. Gather sufficient information to
determine historical values for all metrics. Compare historical values to benchmarks in a Gap calculation
(as described in Chapter VI). The Gap calculation identifies opportunities for improvement and provides
direction for prioritization and implementation. This process is detailed in Chapters VI and VII.
An improvement process of the type detailed in Chapters VI and VII must be paralleled by a
measurement process that tracks results metrics against objectives to ensure progress. When the results
measurement process is initiated, management must decide how often data should be collected and by
whom and how frequently the data should be reviewed. Technicians involved on a daily basis and
managers directly responsible for the process should monitor results at least weekly and no less frequently
than monthly.
In a typical measurement process, most information should be considered suspect for the first two or three
reporting cycles. This is typically the amount of time required for everyone to understand what is being
measured, to gain measurement accuracy, and to reasonably ascertain that the data are being reported
correctly. Definition fine-tuning to gain consistency, minor process refinements and additional training

may be required. Thereafter, the real data collection begins. For the next year, performance data should be
collected and analyzed without further corrections, improvements, or fine-tuning of the measurement
process. A stable system is necessary to obtain value from the data. If problems or shortcomings are noted
in the measurement process, they should be held for incorporation after the first annual review.
A word of caution: This process requires significant effort. There is always a natural tendency to identify
a large number of key factors for measurement and tracking. Experience indicates that the number of
factors analyzed in each area should be limited to less than six.
Equipment managers may want to track more equipment metrics. This should add to an understanding of
processes and problems, identify more areas of potential improvement, and provide background
information to clarify the metrics being reviewed by operating and financial managers.
The greater the number of factors that are being tracked, the more difficult the results analysis. Confusion
may arise if several related metrics appear inconsistent. Selecting indicators at several stages in a key
process for identifying indicators from several different equipment management processes helps avoid
potential confusion.
The equipment manager must establish interim objective performance levels for metrics such as MTBF,
to ensure progress toward the long-term goal. (This process was depicted in Figure 5.4 and described
earlier in this section.)
Reasonable upper and/or lower control limits should be established using accepted industry or company
practice or personal experience, as shown in Figure 5.9. Most companies use either plus or minus two
standard deviations (which covers 67 percent of all possible occurrences) or plus or minus three standard
deviations (which includes 95 percent of all possible occurrences). Establishing control limits will direct
attention to occurrences that are significantly better and worse than normal (e.g., equipment with MTBFs
significantly greater or less than the average). The equipment manager should analyze each to determine
the reason for the deviation.
Most equipment managers set boundaries at the 95 percent confidence level to reduce the number of
examples that fall outside the boundaries. Looking at a smaller number of outlyers gives an equipment
manager sufficient time to perform in-depth RCFA or other analyses to determine why the specific case
deviated. For the initial year, equipment managers may focus all of their efforts on improving only a few
of the most egregious cases while they develop a better understanding of distribution within the control
limits and develop initiatives to improve the median. A clustered distribution around a low median may
indicate the presence of a common problem, such as improper bearing installation, poor lubrication,
misalignment, or unbalance. A large scattering in the data typically indicates numerous localized
problems.
Some organizations that are well along in this process consolidate the type and number of failures on
similar equipment in a Pareto analysis, as shown in Figure 5.10. A Pareto graph is an excellent method for
identifying primary detractors from objective performance by number and cost.
At some point a year or more after the formal measurement period began, changes may need to be
implemented. The necessity for changes may result from revised objectives and a corresponding change
in prioritization. Changes may also originate from recognition of improvements needed in the
measurement process to identify conditions more specifically. Most often, equipment managers will
examine defect distribution along the median to identify cluster defects as previously mentioned. Control
boundaries also may be reduced slowly to identify more departures for prioritized study. With the cause

and distribution of defects better understood, the improvement process can begin to address broader
problems.
The equipment manager must continue tracking all equipment effectiveness indicators. As his/her
familiarity with the processes increases, corrective action will become easier and the contribution of
equipment management to the effectiveness and profitability of the overall organization will become
clearer. This is an essential step toward maintaining executive endorsement and funding.

H. Identifying Benefits
Benefits that should be associated with metrics to identify the real worth of an Overall Equipment Asset
Management program include:

Increased availability and decreased downtime monitor availability and convert the increase to
product value

Increased product quality calculate quality value in terms of quality premium compared to
COPQ losses (e.g., rejects, returns, discounted sales, and quality penalties)

Increased throughput product value gained from reduced slow time and other equipment delays

Reduction in maintenance costs labor hours, parts, and consumable savings realized by
minimizing failures and unnecessary PMs

Reduction in breakdown costs identify saves and calculate the difference in repair cost for a
typical failure compared to repair costs if operated to failure

Increase in energy efficiency calculate energy costs for production before and during the
improvement process

Reduction in spares parts inventory current value of freed capital resulting from reduced usage
and better planning

VI.

MAJOR ELEMENTS OF OPERATING EQUIPMENT ASSET MANAGEMENT

Illustrations:
6.1
6.2
6.3
6.4
6.5
6.6
6.7

Detailed Operating Equipment Asset Management Process

Business Plan, Improvement Process (11)
Maintenance Expenditures by Origin (108)
OMETA Pentagram
Task Description
Layers of Outsourcing
Risk and Cost Determine Optimum Spare Parts Stocking Levels

Summary
The Operating Equipment Asset Management process has a number of key requirements. These include
interest and drive from the CEO, clear vision, ambitious objectives, financial prioritization, and
ownership and support throughout the organization. OEAM is directed to achieving lifetime effectiveness
beginning at design and continuing through procurement, installation, operation, and maintenance.
OEAM begins with a mission statement, followed by an analysis to determine and prioritize opportunities
for improvement. It requires a strategy and formal, living, business plan that addresses practice,
organization, and technology. OEAM extends to areas such as logistics management, outsourcing, and
results-based employee compensation.

A. Introduction
The Operating Equipment Asset Management program and process are presented in this and the following
chapter. This chapter addresses broad issues, such as constructing objectives, identifying and prioritizing
initiatives, organization and training, outsourcing and spare parts management. An overall improvement
process is illustrated in Figure 6.1.(11)

B. Summarized Requirements
The following ingredients are essential to the success and contribution of Operating Equipment Asset
Management:

A clear vision and objectives established and led by an engaged CEO with visible commitment to
permanent, sustainable improvement

An overall strategy connecting business/market objectives to production, equipment, and

component effectiveness

Total understanding of how Operating Equipment Asset Management contributes to mission

compliance, increased profitability, availability, production output and quality, and reduced cost

Ambitious, optimistic, and achievable objectives established at working levels

Improvement initiatives directed to opportunities and process improvements

Financial prioritization of improvement initiatives for greatest value and contribution

Organization, practice, and technology changes to address specific requirements

Defined roles and responsibilities

A timed transition plan three- to five-year duration with interim objectives to ensure progress

Activity-based accounting to accurately assess real costs and value

Layered metrics to measure and ensure compliance with interim and final objectives

Information structure to monitor and display performance

Rewards for results and value created

Commitment to continuous improvement and identification of additional opportunities for

improvement

Recognition that change takes time to root. One company, well into the improvement process,
states that five years minimum is required for implementing major change; however, results will
be apparent in 18 months. (120)

Cultural change to focus on operational excellence, defect elimination, and optimized equipment
reliability. Defect elimination is essential to gain optimum reliability and a permanent reduction
in costs. Prosperity cannot be achieved by reducing expenses. (120)

C. Steps Necessary to Optimize Equipment Lifetime Performance

Figure 6.2 is a more detailed illustration of the Operating Equipment Asset Management process
illustrated in Figure 6.1 from a slightly different perspective.
Equipment Lifetime:
Span of time over which the equipment is expected to fulfill its intended purpose.
Systems, subsystems, and equipment within a facility are interrelated. Expected lifetimes vary by
circumstances and equipment type. In a typical manufacturing facility or ship, the buildings, structure
(hull), large heat exchange and pressure vessels, piping, major mechanical equipment and electrical
distribution system components have an expected lifetime of 40 to 50 years or more. Components such as
small mechanical equipment and control and information systems within a facility typically have a shorter
expected lifetime than the facility itself. This is the nested asset concept described in Chapter II.
A 1997 article in Maintenance Technology(108) stated that over 60 percent of equipment lifetime
maintenance costs were caused by preventable errors during design, procurement, installation, operation,
and maintenance, as demonstrated in Figure 6.3.
Design
Operating Equipment Asset Management requires eliminating defects introduced directly during the
design process as well as defects introduced through fabrication, construction, installation, operation, and
maintenance due to design weaknesses. Fundamental reliability-enhancing strategies must be
incorporated in the design process.(22)
The 1997 Maintenance Technology(108) article also stated that preventable design errors were responsible
for approximately 17 percent of equipment lifetime maintenance costs. Optimizing equipment lifetime
reliability at design depends on several issues.

System Reliability, Availability, and Maintainability (RAM), including component life and ease of
repair, are inherent characteristics that originate at design and strongly influence the lifetime
cost of ownership. Lifetime costs must be assessed more fundamentally during the design process.
Good design eliminates or minimizes problems, including opportunity for operating mistakes. The
process must ensure that improvements and problems solved on existing equipment are
incorporated in the design of new equipment. Compromises to reduce cost often result in facilities
and equipment that are difficult and costly to operate and maintain. Once a system has been
fielded, no improvement of RAM performance can be achieved without significant expense. (45, 59,
62, 120)

A reliability risk analysis is useful to ensure that in-service performance will meet lifetime expectations
and requirements(22).
Return on capital necessitates that new manufacturing facilities are designed with reduced operating
margin and redundancy. In some cases, return on capital necessitates a 50 percent reduction in investment
for a given capacity.(120)
This philosophy requires a different design approach and investment to ensure the resulting
reliability meets mission requirements. Equipment purchased may be slightly more expensive
than a single unit in a redundant pair, but less expensive than the pair.(120)
An incident that occurred in a new plant illustrates where design can go astray.
Two deep-well pumps were installed in a hydrocarbon processing facility to maintain level in a
water storage tank open to atmosphere. The length and flexibility of the deep-well column caused
the pumps to be horribly unreliable and failures occurred nearly every month. Specifications
disclosed that the design required pumping a tank filled with ammonia-saturated water to grade
level. While this could occur, it was never necessary, extremely unlikely, and clearly abnormal.
The company concluded that the pump should be designed for normal conditions rather than
unlikely, extreme conditions. The deep-well pumps were replaced with conventional in-line
pumps. These pumps performed satisfactorily for years without any failures.
Procurement
The same considerations apply to procurement. Measures to reduce cost of parts and labor often result in
reduced production availability and output and increased long-term costs. Relaxing material
specifications, purchasing equipment sized to barely meet specifications, and challenged designs are
examples of how savings at procurement can cause enormous losses during operation.
A number of years ago several chemical companies decided to purchase one- or two-section
turbo compressors, despite the fact that prior designs had all included an additional section.
Procurement savings were in the millions of dollars. In every case, design problems delayed
startup for months. With production losses of $250,000 or more per day, the company quickly
consumed its procurement savings and lost considerably more.
The time lag between decision and results may mask procurement problems. For example, visualize the
sequence of events following a decision to purchase lower cost components that turn out to have a
significantly shorter service life compared to the components they are replacing. At least two years will
elapse from the time the replacement components arrive, are installed, and begin to fail before a pattern
emerges. (Whether the pattern will be recognized at all may be questionable.) Assuming the failure
pattern is recognized, there must be some record of the change, why it was made, conditions prior to the

change, and expected return. Otherwise, the failure pattern may continue without anyone recognizing the
deterioration from prior performance.
Installation
Equipment installation is equally important to optimized lifetime cost. Only a few leaders rigorously
apply equipment installation specifications that include foundation preparation, base-plate leveling and
grouting, pipe flange and shaft alignment, oil system flushing, and pipe and separator cleaning.
A 1996 paper described conditions in a chemical plant about five years after commissioning.
Pumps were experiencing a high failure rate attributed to coupling misalignment. Root Cause
Failure Analysis disclosed that the problem was really inadequate grouting that caused pumps to
quickly go out of alignment during operation. The difference between the low-cost grouting used
in the installation and best-practice was calculated to be approximately $1,500 per pump. The
added cost to perform the installation correctly during construction would have paid for itself in
about eight months. The cost to correct the problem during operation had multiplied about
sevenfold.
Operation
The 1997 Maintenance Technology article(108) stated that 32 percent of maintenance expenditures were
caused by avoidable operating errors.
A leading manufacturer determined that 28 percent of their maintenance costs were caused by
abuse and poor operating practices.(120)
Avoidable operating errors include those caused by difficult, unusual, or easily forgotten operating
procedures. Many potential operating problems can be prevented by simple modifications. Drilling an
internal vent into pump seal cavities to ensure that vapor cannot collect, warp seal faces, and produce dry
face contact at start is an example of a modification that will prevent failures and reduced reliability
during operation.(86) Maintaining a positive pressure on bearing cavities located in areas of high moisture
to prevent lubricant contamination is another.
Maintenance and Repair
A NASA instruction for facilities is titled Design for Construction and Maintainability. Operating
Equipment Asset Management takes a further step by first requiring that maintenance requirements are
designed out and those that cannot be eliminated altogether are made as easy and inexpensive as possible.
The order is very important. First, design maintenance out, then address maintainability, and finally
implement a program of defect elimination.
In 20 years automobiles have gone from 2,000 miles between tune-ups to 100,000 miles by a
constantly improving low maintenance design.
A Canadian Coast Guard Officer inspecting a cruise ship observed a timer-initiated, automated
cleaning system for galley range grease filters to eliminate labor-intensive requirements for
manual cleaning. (120)
The Maintenance Technology article cited earlier states that 8 percent of maintenance expenditures are
caused by errors in performing maintenance.

Better maintenance practices could reduce maintenance costs by 20 to 40 percent and increase
OEE by 5 to 20 percent. (56)
As mentioned in Chapter III, the electricity consumed over the lifetime of a motor-driven pump comprises
50 to 80 percent of the total lifetime cost. With a reasonable mean time between repair (MTBR), the
operating cost of a typical mid-size pump will be about four times the maintenance cost. Stated another
way, a 5 percent improvement in operating efficiency will offset 20 percent of the average maintenance
costs.
In addition to power savings, facilities with a large number of pumps have reported substantial savings in
maintenance costs by correcting off-design performance. (In addition to consuming more electrical
power, a pump operating off-design probably has reduced reliability due to factors such as internal
turbulence/cavitation, recirculation, and off-design pressures.)
Off-design performance is identified from equipment design conditions: temperature, head, speed and
power. Match design conditions to the actual conditions observed on operating instrumentation (flow is
usually unavailable). Many will be close to design parameters; some will be off; and a few will be way
off. Start with those that are off design performance. How does power delivered based on motor current
and speed compare to power required from pump curves? Conduct an economic analysis on corrective
actions including replacement. Several organizations have gained substantial added profits from this
simple process.
As mentioned in Chapter IV, power-generating companies are planning to extend the interval between
major turbine generator overhauls from four or six years to eight or more years. Turbo compressor
overhauls in the oil and chemical industry have been extended from approximately four years to eight or
more years. Extending the interval between, and reducing the length of, major equipment overhauls gains
as much as 2 percent in operating availability and 30 percent reduction in maintenance costs. Safe
accomplishment, with equal or better between-overhaul availability, requires improved reliability and
maintainability combined with regular condition assessment.

D. Financial Measures of Performance

Financial results are essential to demonstrate the full value of Operating Equipment Asset Management
toward mission compliance, production effectiveness, and profitability. Demonstrating the value of
equipment effectiveness should:

Account for business, mission, and market conditions; opportunities for increased production
and/or quality; product margins and manufacturing performance.

Accurately represent the contribution of increased equipment utilization and effectiveness to

production effectiveness, enterprise value and profitability.

Demonstrate the necessity for, priority of, and profit impact of investment to eliminate defects.

Promote commitment, ownership, and a profit-centered mentality.

Be credible to business and financial executives who control investment for Operating Equipment
Asset Management.

Ideally, the financial measure or measures apply top to bottom within an enterprise. The measure used by
a senior executive focused on shareholder value should be consistent with and linked to measures used by
line management, engineers, process operators, and craft and support personnel. All must understand the

strategy, priorities and their individual contribution. Financial measures must provide clear direction and
demonstrate the necessity to meet quality standards and perform assigned tasks effectively.
Team athletics provide a good analogy. Everyone on the team must be focused on the final score.
Individual statistics, no matter how overwhelming, are of no use if the team does not win. In fact, the
lucrative individual incentives offered to many highly paid professional athletes, if not directed toward
team victory, often have a negative impact. In the production and manufacturing world business rules and
profit is the score!
The financial matrix must depict a real relationship between reasonable expectations for equipment and
the impact on overall financial performance. The model that emerges from this concept must provide the
ability to predict, and therefore, tune a process to achieve greatest effectiveness and mitigate deficiencies
identified from the model. (18)
Appendix B contains a financial model designed to account for all of the value and benefits generated by
OEAM. One organization testing the model stated that the model agreed with actual results and added a
great deal of insight into exact cause for non-compliance with objectives. They liked the concept of TPE
and commented that results were greatly dependent on how aggressively objectives were set.(120) Another
company testing the model determined that completed and planned reliability improvement projects
improved EVA by nearly 8 percent.(120)

E. Understanding the Present

Chapter V discussed the necessity and process of measuring current performance in areas that coincide
with benchmarks and other objectives. Measures of current performance such as asset utilization,
production effectiveness (availability, throughput, first-run quality), cost per unit (Mw, pound, ton, etc.),
cost as a percentage of Replacement Asset Value, and others are the essential first steps in identifying
opportunities for improvement.

F. Gap Analysis, Current Compared to Objective

Current performance is compared to objectives in a Gap analysis. A Gap analysis is essentially the current
situation compared to the desired situation.(112) It identifies opportunities for improvement. Objectives are
established from industry benchmarks and/or internal requirements for improvement in parameters such
as production effectiveness and cost per unit.
In monetary terms, Gaps to best practice may total tens or hundreds of millions of dollars, depending on
the size of the enterprise.(100, 120)

G. Mission Statement, Strategy and Prioritization of Efforts

Mission Statement
The mission statement must be descriptive, be concise, and lead directly to the strategy. An overall
mission statement might read:

Over the next five years, improve production effectiveness measured by availability, production
rate and first-run-quality to greater than 80 percent. Reduce cost to $X per unit. Reduce safety
and environmental incidents to zero.
An actual mission statement is:
Goal 2000: Achieve market price production, greater than 70 percent capacity factor, 90 percent
equivalent availability, 5 percent improved heat rate, and O&M costs of 3.5 mills per kWh.(33)
The mission statement must be accompanied by definitions for each termavailability, production rate,
capacity, first-run quality, etc.as well as objective performance.
Strategy
An optimum, comprehensive strategy is required to accomplish the mission within specific market,
mission, business, and operating conditions. Areas that should be addressed in the strategy and
accompanying action plan include: (66)

Safety improvements

Reduced environmental incidents

Improved production output and quality

Increased equipment uptime

Reduced delivery time

Reduced costs

Reduced energy consumption

Reduced production buffers (Work In Process) and Maintenance, Repair, and Overhaul (MRO)
inventory

Streamlined planning and scheduling

Proactive equipment lifetime management

Optimized organization: effective professional leadership, fewer layers, decision making at

lowest effective levels in the organization, engineering orientation

Improved skills, training, and development

Worker-directed activity

Operations-conducted maintenance

Continuous improvement

Strategies employed to address greatest risks and dominant failure modes are typically the most reliable
and effective.(18)
Prioritizing Efforts
Prioritization begins with business objectives that can change. One multi-business company reports that
prioritizing is easier to accomplish within the same business unit; prioritization is much more difficult
across business units, because the units may have significantly different market and operating
conditions.(11)

Prioritization is critically important to ensure that the cost and resources needed to deliver improvements
have the greatest advantages and do not exceed availability.(18) As improvement initiatives emerge to
achieve the mission and strategy objectives, a criticality analysis is performed on the equipment, systems
and individual initiatives to determine priority. A criticality analysis defines which initiatives have
greatest impact on mission/objectives and opportunitiesexpressed as safety, environmental, business
opportunity (availability, production rate, and first-run quality), and cost.
As mentioned in Chapter V, many companies who have been through the process of developing
improvement initiatives recommend initial prioritization as part of Streamlined RCM. Early prioritization
ensures that RCM is applied to highest priority systems and initiatives with greatest potential return.
Pareto analyses by cause and number of occurrences of the events in the Gap between actual and
objective performance are useful for identifying areas and items requiring greatest attention.
One companys system for ranking business opportunities is based on return in terms of
Availability, Production Output, Quality, and Profitability. Ranking is first conducted by
processing unit. Processing unit rank is then multiplied by factors representing unit contribution
to plant performance to arrive at a normalized plant-wide priority ranking. The system is
designed to ensure discipline and that limited resources are applied to highest priority tasks
across the plant. (120)
The company uses essentially the same system to prioritize corrective action (work requests). Work
requests are ranked by probability multiplied by consequences of failure (risk) if the work is not
performed. The prioritization considers Safety, Environmental, Availability, Production Output, Quality,
and Profitability. Ranking across the plant is also accomplished in about the same way.
One company that went through a prioritization effort to focus on highest return opportunities selected six
initiatives for action out of 300 identified opportunities.(33)
All involved must recognize that constraints and criticality rankings shift with work completion,
market/mission requirements, and plant and operating conditions. This requires periodic reviews
and adjustment.(120)

H. Business Plan
Facilities that have been through the improvement process cite the advantages of a formal business plan
and the business planning process. Together, they help ensure that objectives, requirements, initiatives,
and measures of performance are fully defined, understood, prioritized, and communicated throughout the
organization. A comprehensive business plan is the link between corporate business objectives and the
operating goals, tactics, and improvement initiatives necessary to attain the required results.(120) The
business plan must be reviewed and revised at regular intervals to account for changing conditions.
Business Plans are typically constructed in two layers. An overall plan for the corporation or Business
Unit establishes broad mission, operating, and production objectives. Improvement teams composed of
technical and working-level personnel convert the broad objectives to specific initiatives and goals for the
individual units.
In one company, strategic planning groups develop business plans. Plans include a forecast of
product throughput, production balance and requirements to meet both. A plan contains
initiatives for process changes and new equipment, as well as requirements for investment,

personnel training, and information systems. The plan is layered to provide guidance throughout
the organization. (120)
Another company states that the
Business Plan must be a live document in daily use and
revised as necessary. They conduct a formal review and revise their business plan every six
months.(120)
Determining the probability of meeting operating objectives is the first step in the business planning
process. If history indicates a high probability of not meeting operating objectives, the plan must address
mandated improvements and identify initiatives and investment required for compliance.(101) All
improvement initiatives must be supported with a root cause analysis demonstrating that resources are
applied most effectively. Likewise, improvements that involve process and/or work practice changes must
be accompanied by sustaining changes in managing and work practices.(11)
Specific areas that are addressed within a typical business plan: (120)

Corporate objectives

Business unit objectives (carried through to individual Business Unit plans)

Team goals to meet business unit objectives

Safety and environment

Throughput
Quality
Reliability
Yield
Cost
Ongoing improvement projects
Specific tasks

Deliverables

Assignment/Responsibility

Measurables

Recommended strategic business plan format:(10)

Objective

Executive Summary

Business strategy
Expected results
Resources required
Risk
Plan details (for each initiative)

Objective
Action steps
Resources required
Time line

Performance measures
Risk
Continuous improvement

A company with multiple business units strongly advises that all business unit plans adhere to a
single standard format. Objectives, tasks, and measurables must be quantified as much as
possible. Plans must provide the basis to judge whether objectives were achieved and, if not, why
not. Their experience indicates that equipment KPIs are relatively easy to formulate for
production delay and output objectives. However, formulating equipment KPIs that demonstrate
performance in terms of contribution to production quality and yield objectives is often
difficult.(120)
The plan developed by one company was constructed on three pillars:(33)
1. Labor relations shared goals and teamwork
2. Incentive plan communication and reward (10 percent of base pay)
3. Improvement process (involvement and accountability) any condition, situation, or event
(existing or potential) that does not support the vision or mission and/or conflicts with our
values

I. Requirements for Success

The soft issues such as commitment and support from the top, cultural change, ownership, profitcentered mentality, and productivity improvement are crucial toward the success of Operating Equipment
Asset Management.
Commitment and Support
Success requires visible commitment and support from the top to the bottom of an organization. A
committed, involved CEO is critical. Management must provide the active guidance and advocacy
necessary to maintain executive support, as well as publicize success and value gained at high levels of
the organization.
Cultural Change
Cultural change typically must address four areas:(112, 120)

Foster a sense of shared objectives

Promote ownership

Establish and reinforce change through communication, training, and coordination

Gain broader and deeper acceptance for the need for change

Many of the successes gained by the Japanese can be attributed to culture and the high value
placed on relationships. Partnerships with suppliers and contractors are at levels yet to be
achieved in the U.S. Trust between Japanese workers and management is unquestioning and
strong. Trust between plant workers and contractors is equally strong. Reallocation of tasks is
accomplished rather easily compared to the effort required in the U.S.(92)

One company remarked that culture changes were easiest when big problems and/or threats were
present.(120)
There are two opposite extremes of culture and a multitude of companies in the middle. At one end of the
spectrum is the Do exactly as instructed, no deviations philosophy. The opposite culture is Its been
good enough this way for 30 years and Im certainly not going to change for some fad, program-of-themonth, that will likely blow over. The military is close to the do exactly as instructed end. Industry
varies, but is typically closer to the not until you convince me culture. There are lessons to be learned
from both.
The do exactly as told culture requires complete, detailed instructions for every task. Tasks include
installation, operation, and repair practices. Instructions include safety precautions, tag-out procedures,
tools, step-by-step restoration and work practices, replacement parts, and acceptable tolerances as
applicable. The not until you convince me culture requires time and compelling evidence that the new
way is the better way, making tasks safer and more rewarding and increasing security and value for the
person performing the task.
The benefits of detailed task instructions in a not until you convince me culture were highlighted in a
story related by a paper mill.
Following replacement of a dryer roll bearing, three additional failures occurred at the same
location in less than two weeks. After the second failure, mechanics were offered help but refused
stating, Bugger offweve done this many times before and dont need help. After the third
failure someone decided that perhaps they had better look at the instruction manual. They
discovered that the initial replacement had been installed backward where it had no ability to
carry a thrust load. Instead of checking after successive failures, a new bearing was simply
installed the way the old one came out because the mechanics knew what they were doing.
This expensive lesson initiated an 18-month project to computerize all task instructions in a priority order
based on task difficulty and the probability, cost, and consequences of errors. As the project moved ahead,
detailed task instructions were attached to every work order. Mechanics were required to follow the steps
and list whatever changes were necessary to the instruction as part of the closeout requirements. The mill
found numerous benefits with the new procedure. Productivity increased significantly. Awareness of all
safety requirements, tools and spare parts before arrival at the job site minimized time wasted waiting for
operations clearance or seeking forgotten tools or parts. Quality of work increased. Since mechanics were
required to recommend changes on completion of work, the task instructions became a living document
that benefited from a wide range of experience.
Another example:
Several years ago, a consultant brought in to oversee a complex shaft re-alignment introduced a
new way of calculating changes. The foreman, accustomed to another method, was not willing to
make the radical changes identified by the unfamiliar procedure. Realizing that trial and error
would take days to achieve the necessary results, the consultant convinced the work crew to
implement the changes while the foreman was away on lunch break. Upon return the foreman
was furious, until he observed the results. Within a year the convince me foreman had written
a detailed procedure for the new method, trained all the craftsmen in its use and supervised
implementation throughout the facility.
The CEO of a large company commented that organizational ethos, defined as culture and guiding beliefs,
is essential to ensure optimum results.(120) The culture necessary for successful Operating Equipment

Asset Management must include a safety-conscious and environmentally aware, profit-oriented mindset; a
commitment to improving reliability by eliminating defects; and increased effectiveness through more
efficient, accurate task performance.(120)
Most industrial producer corporations perform well within safety and environmental constraints. Many
have room for improvement in other areas. Improvement requires directing the same level of attention on
mission compliance, production, and equipment effectivenessan approach that has proven successful in
minimizing safety and environmental incidents.
The cultural task is to create a workplace environment with processes in-place to encourage employees to
assume new roles and establish new relationships, new value, new behaviors, and new approaches to
work. Companies are beginning to create a new work culture that retains willingness and expertise and
provides the collective intelligence needed to meet the challenges of an increasingly competitive
industry.(33)
Establish Ownership, Align Objectives
People with different functional responsibilities must see themselves as partners in a team charged with
achieving a common goal. A customer/supplier relationship typically does not gain optimum results.
Pride will only take you so far.(120) Involvement is key to establishing ownership and buy-in to an
improvement process. Industry leaders in both union and non-union environments strongly advise
including working-level personnel on improvement initiative teams.
Working-level participation in an improvement process results in fresh input, is the source of
many opportunities and sometimes startling revelations, and provides access to a great deal of
wisdom. Continued involvement with opportunity identification, prioritization, process
development, and implementation is vital for support and success.(11, 44, 120)
One company reported that:
Increased worker knowledge of the business environment, its ramifications for company success
and job preservation through participation in the improvement process has promoted ownership
and a desire to maximize opportunities. (69)
Another stated:
Ownership and commitment to the success of a change process is not easy to gain. Workers
resist change. They will typically ride out management directed changes because experience
indicates the change will be forgotten in six months or the change itself will be changed. Worker
involvement and ownership creation must be part of the overall strategy. Workers must know and
believe why they must change and improve. A clear strategy paves the way to reality and the
necessity for changes. (120)
A third company outlined the necessity for specialist technicians to remain in work teams:
Specialist technicians must be members of work group teams to keep all members aware of the
capabilities and benefits of the specialty, as well as maintain up-to-date knowledge of problems
and concerns. Participation helps greatly with gaining buy-in and ownership for team
objectives. (120)

Improve Productivity
For the purposes of this discussion, improved productivity is defined as doing the right task efficiently.
Used this way, productivity is really work effectiveness.
Improving productivity requires total involvement of the people actually doing the work. They know
where real problems are and are in the best position to formulate ideas for corrective action.
One company involved 50 percent of all maintenance people directly in the process to identify
problems and opportunities for improvement and formulate action plans. (120)
Productivity gained by optimizing Preventive Maintenance (PM) has been discussed in detail in Chapter
IV. Organizations who have optimized PM routines report savings of 30 to 40 percent. PM optimization
includes eliminating unnecessary and low value tasks, replacing time-based tasks with on-condition tasks,
modifying tasks to achieve the same results with less expenditure of time and resources, and extending
the intervals between tasks.
The productivity benefits of detailed task instructions, including safety precautions, tools, and spare parts
requirements were outlined earlier in this chapter. Task instructions recognize that even the best, most
experienced and conscientious people will occasionally forget some details. For this reason, and the
potential consequences of an error, pilots are required to use checklists. Detailed task instructions become
more valuable and necessary as institutional knowledge declines. They are essential when tasks are being
accomplished by contractors who may not always recognize the vital nature of simple tasks such as
replacing gaskets in a system that cannot be isolated during operation.
Accurate Lifetime Cost Tracking (Activity-Based Accounting/Management)
Activity-based accounting is necessary to accurately identify the cost and consequences of defects and to
track the effectiveness of corrective action. The system must be able to associate and track total costs
consumed by type (pump, motor, etc.), individual equipment, manufacturer, specific model, and part
number. The ability to sort cost data in a variety of ways is essential to identify deviations from required
performance and provides vital input into cost times occurrence Pareto analyses needed to prioritize
improvement initiatives.
Activity-based accounting provides the vital information necessary to optimize design and gain maximum
effectiveness by identifying unproductive, inefficient, or redundant activities for modification or
elimination. Activity-based accounting will evolve into the Activity-Based Management that is essential
for Operating Equipment Asset Management.
As has been mentioned, some companies use lifetime cost to favor suppliers with high initial cost and low
lifetime cost and penalize those with low initial cost and high lifetime cost.

J. Information and Communications: Demonstrate Progress to Objectives

Operating Equipment Asset Management does not operate in a vacuum and, therefore, must be part of the
overall improvement process. Decisions made by sales, marketing, and operations all affect value and
priority within OEAM and must be communicated. One cannot overlook the importance of information. If
the product is not delivered within time, cost, and quality constraints, this vital information must flow
back into the OEAM process as an opportunity for improvement. All involved in the process, whether
directly or indirectly, must share ideas about weaknesses and potential improvements. Likewise, all must
participate in formulating reasonable, cost effective, and durable solutions.(112) The information process

must be positive and directed to solutionsnot used to assign blame. The dashboard described in more
detail in Chapter IX is an excellent means to convey information in a familiar, understandable format.
Chapter V discussed metrics and the concept that metrics score performance within a business
environment. To effectively use and gain ownership for the improvement process, graphs of performance
metrics should be widely distributed, displayed, and discussed in meetings with employees. The
organization should be sufficiently confident and proud of the results to share performance indicators with
customers. Customers gain confidence knowing that the organization is focused on improving all aspects
of its business. Communicate successes, good ideas, best practices and lessons learned.
One company encourages plants and people to describe experience on the company's intranet
site. Other plants feed back yes/not applicable and comments. When an idea is accepted as a best
practice, it is placed in a special section of the intranet site and other plants in the corporation
are asked to commit to a timetable for implementation. So long as the idea is useful and
applicable, it will remain in the best practice site.(120)
Another company maintains a binder that contains corporate best practice in each of nine key
areas. Each best practice includes a contact person for additional information.(120)
Employees ARE interested in performance information! Performance represents success, job security, and
what employees can do to improve the latter by delighting management and customers. Involved
employees should be able to see the impact of their personal and group efforts. Experience indicates that
displaying results encourages employees to offer even more improvement suggestions, regardless of
whether or not they will be rewarded.
Information
Information is vital for direction, prioritization, and measurement of results. Information includes current
and projected performance and condition, projected lifetime (prognosis), equipment specifications,
operating and repair history, operating and maintenance recommendations, task instructions, safety
precautions, and continually updated lifetime costs. All are necessary and must be readily accessible.
What was a given piece of equipment designed to do? What is it supposed to do? What is it doing now?
Has it had past problems? How were they resolved? Combine all of this with detailed operating and
maintenance instructions and instant communications. Experienced people are more productive and can
accomplish more with greater efficiency.
Changes are occurring within equipment information. There is a growing awareness of the necessity to
present refined, actionable information instead of data requiring interpretation. For a number of years,
predictive condition assessment systems (vibration, fluid analysis, etc.) were developed independently.
Proprietary products that cannot readily communicate with each othermaintenance management or
enterprise information systemshave confounded the individual user. There is a solution in the making.
The Machinery Information Management Open Systems Alliance (MIMOSA) is developing and
advocating conventions that will permit purchasers to choose the best equipment management products
with the confidence of full, open interoperability. There is more on this subject in Chapter IX.
An information system must provide information, not disconnected data, to equipment management and
support personnel where and when they need it. This requires not only integrated computer systems, but
also a reworking of the manner in which computers process equipment data and present it as information.
There is a growing awareness that corporate Information Systems (IS) departments are becoming a
powerful force in the selection of equipment management technology. The real question is who owns and

defines technology requirements? Is it those who know the process, will use the technology, and are
responsible for results or those developing the corporate information structure? Both must meet
somewhere in the middle. And this can only occur if suppliers adhere to rapidly coalescing standards for
communicating and displaying information.

K. Organization
Throughout industry and the military, organizations are being reduced in size. Staff reductions of 50 to 66
percent are not unusual. Achieving such a radical change requires examining every aspect of work
requirements and processes(120).
There are three additional issues:
1. Organizations are being flattened to three or four levels (99, 120)
2. Demographics are clustered between young and old; many operating plants have very few people
between 40 and 50 years old. As experienced professionals retire, technical resources are
becoming stretched and scarce.(74, 120)
3. The days of single skilled mechanics and technicians have come to an end. One company
determined that approximately 65 percent of lost productivity was caused by delays in matching
specialized skills to required tasks and getting the individuals in place to do the work.(120)
One company adheres to the following organizational principles:(99)

Management is obligated to manage in such a way that employees will have the opportunity to
earn according to their productivity

Employees should feel confident that if they do their jobs properly, they will have a job tomorrow

Employees have the right to be treated fairly and must believe that they will be

Employees must have an avenue of appeal when they believe they are being treated unfairly. One
company has a process that allows an appeal to move up to the general manager level. If the
employee is still not satisfied, the appeal can be submitted to headquarters for final
judgement.(120)

The company that has implemented the preceding principles states that employees are producing at the
highest rates in the industry and earning wages as high as any comparable industrial business.(99)
Many operating facilities are promoting relatively inexperienced people to fill management positions
vacated by retirements. This often results in less qualified individuals who believe management requires
them to be assertive and demonstrate control. Not considering advice, not making inquiries, and making
ill-advised decisions and statements typically de-motivate experienced people who have been passed over
for promotion. As a result, many experienced peoplewho should be mentoringtake early retirement,
causing further erosion of institutional knowledge.
In some facilities that have not adopted the team structure, the combination of flattening the
organization and declining experience has led to inexperienced managers responsible for too
many people to provide effective guidance or conduct on-the-job training. In some cases, the
manager-to-managed ratio, which was formerly 8 or 10 to 1, has increased to 30:1 with a less
experienced manager. Leveraging shared expertise and knowledge must be the rule, not an
exception.(120)

Rapid promotion, combined with incentive compensation that rewards short-term results, may encourage
ill-advised actions that have severe consequences. Eliminating planned and predictive maintenance,
combined with staff reductions, will significantly boost effectivenessfor a short time. The manager will
get a large bonus and promotion for the short-term results and the replacement manager will have to battle
all of the problems caused by deferred and neglected maintenance. This makes the first person look even
better to those unaware of how the results were obtained.
At the working level, shifting requirements place a premium on skill levels:
Many companies are seeking multi-skilled, reliability technicians capable of identifying root
cause and recommending and/or implementing corrective action. Often the employment interview
process focuses not only on proficiency in hard technical skills, but also "soft" abilities such as
troubleshooting, communicating, persuasion, and team skills.(120)
In any discussion of organization and skills, the question of centralized or decentralized organizations
arises. Typically, centralized organizations are characterized by greater specialization. Decentralized
organizationsconsisting of multi-function teamshave less specialization.
One company includes planners and schedulers in the cross-functional operating teams. Their
task is to know everything about specific equipment in its manufacturing context to ensure
stability of the manufacturing process, the most effective equipment management strategy, and
highest value improvement initiatives.(120)
Planners and Schedulers. In best practice facilities, Planners and Schedulers are typically the best
tradespeople, who apply their experience to help others.
Total Productive Maintenance (TPM) provides an excellent guide for the multi-function manufacturing
team. However, in practical implementation there are other factors to consider. A central maintenance
function is required for specialized tasks that either cannot justify a full-time individual within the
manufacturing teams or where safety, quality, or other considerations demand specialization. High
voltage electrical maintenance and centralized pump repairs were examples discussed in Chapter VI.
Within manufacturing teams, equipment management may have different priorities. When production is
sold out, availability is a prime objective. If there is spare production capacity, cost is likely the prime
consideration. This is totally consistent with Equipment Management.
Many consultants will advocate shifting a centralized equipment management organization to a
decentralized organization and vice versa. When questioned, they indicate that change is good for an
organization, because it shakes-up traditional practices. Perhaps there is a larger truth hidden in the
either/or between centralized and decentralized organizations. A hybrid containing the best characteristics
of each may be optimal.
The advantages and disadvantages of both centralized and decentralized organizations include:
Centralized

Decentralized

Advantages

Disadvantages

Advantages

Better focus on
enterprise objectives
and requirements

Less responsive to
individual facility
requirements

Better control of
personnel and quality

Less ownership

More efficient use of

warehouse and tools

Responsive to
individual facility
requirements

Disadvantages

Difficult to prioritize
on an enterprise basis

Difficult to maintain
proficiency in
specialized areas

Sub-optimum use of
warehouse and tools

Strong ownership

In a hybrid organization, routine maintenance is accomplished at the team level. This autonomous
process, mentioned in Chapter V, promotes ownership and gains fast response to problems. Trained
specialists working from a central facility perform specialized tasks requiring specific skills. As stated,
high voltage electrical work and pump bearing and seal replacement are examples.
A major pump repair serves to illustrate how the hybrid organization works. When the unit team
determines major work is required, they assume responsibility for removal, including tag-out and all
safety precautions. The pump is delivered to the central repair organization with a work order indicating
priority (required completion date), description of the problem(s), and estimate of the work required.
The actual work is performed in the central facility. Some organizations use employees and some use
contractors; most employ a mix of the two, depending on the specific task. When the work is complete,
the pump is delivered back to the unit team for reinstallation. Requirements for specialists to perform
specific tasks on reinstallation must be considered and agreed upon. For example, one facility allows a
unit team to tag-out and remove most motors for repair, but requires a qualified electrician to reconnect
the motor following repairs. Another facility authorizes the unit team to reinstall a pump, but requires
specialists to be present for coupling alignment.
Specialists have another rolequality assurance across manufacturing teams. Specialist responsibility for
training and oversight in equipment management tasks such as operation, lubrication, post repair
installation, and alignment ensures performance of consistently high quality. Organizations with hybrid,
team organizations caution that reliance on inter-team training often results in a slow degradation of skills
and quality.
In a matrix organization, the optimum location of responsibility for tasks such as seal replacement,
coupling alignment, and collection of predictive measurements always arises. Each must be decided based
on the circumstances at hand. What is best for one organization is not necessarily best for all.
The key to a successful hybrid organization is a task division that best utilizes the advantages of each
structure, supported by ongoing training.
A facility that has implemented this method reports simultaneously reducing repair costs by 30
percent while extending MTBR by more than 50 percent.(120)
Organizational Hierarchy
To understand how equipment management fits into the overall organizational context, picture the
structure of an entire plant. There are literally thousands of specific organizational structures used in
industrial processes. To simplify the discussion, a generic functional decomposition methodology,
borrowed from the commercial nuclear industry, will be used to establish a framework for discussion.

Any industrial process can categorized as one of five major functions that interoperate and communicate
to achieve enterprise goals. The following example is based on a process of generating and transporting
thermal energy from a central heating plant to an end user. The major functions that must be
accomplished are:

Operations safely control the process within specified parameters of throughput and quality

Maintenance ensure the level of availability necessary to meet capacity and quality
requirements

Engineering optimize the process, develop and supervise installation of improvement

modifications

Training provide safety, operating, skill, and other training required for optimum performance

Administration and Finance support services, reports of operating and financial performance

The five areas (OMETA) can be visualized as a pentagram structure, as shown in Figure 6.4. Each of the
five functions are essential to any industrial process.
The OMETA pentagram illustrates how information must flow between each of the functions for the
process to proceed effectively. Consider the following example: If the engineering support function were
to be inactive, ineffective, or isolated from the other functions for some reason, the following can
happenand has happened:

Equipment problems identified by operators go unresolved. As a result, chronic problems

continue unchecked.

Machinery material deficiencies noted by maintenance technicians go uninvestigated. The

machinery continues to fail from the same cause.

Administration does not know the resources necessary to maximize plant efficiency. As a result,
cost control is made more difficult and the probability of underestimating requirements increased.

As new technology is added to the plant, training needs are not recognized and operating
procedures are not changed. Without operator training, the benefits of installing improved
technology may never be realized.

Similar scenarios can be generated if any of the other functional entities are missing or not operating
effectively.
Sub-Functional Hierarchy
As anyone who must work within a producer organization can explain, the pentagram graphic provides a
useful, but oversimplified view of a very dynamic three-dimensional hierarchical network. A much more
complex and realistic depiction is provided in Figure 6.5.
In Figure 6.5, each of the five major functions is broken down into specific areas of responsibility. Each
of these areas within the function must be accomplished in order to make the system perform at the higher
functional level. Continuing with the engineering function, for example, five different areas fall into the
responsibility of the plant engineer. These areas or sub-functions include:

Plant Modifications develop solutions to problems and initiatives that increase the
efficiency/effectiveness of the plant process

Performance Monitoring provide measures and the analytical basis for reporting, understanding,
and improving plant efficiency and reliability

Organization Support ensure effective implementation and control of plant engineering support
requirements

Document Control ensure documents provide accurate, as-built and/or as-modified information
sufficient to support plant Operating and Maintenance requirements

Procedures ensure procedures are available and provide all necessary direction for plant safety,
efficiency, and reliability

The plant engineer is not required to personally perform each of these functions. However, even in small
organizations, the responsibility for each area of performance must be assigned and effectively
accomplished by qualified personnel. Again, as in the case of high-level functions that were previously
discussed, if any of these areas are even partially impeded, that impediment is transferred to some degree
to the efficiency, reliability, and safety of the entire plant.
Task-Level Structure
Finally, individual tasks can be examined. The task level should provide a working description of the
requirements for each individual to successfully accomplish his/her work process objectives. An example
best describes this finest level of functional decomposition.
In the engineering function, one area of responsibility was:
Plant Performance Monitoring provide measures and the analytical basis for reporting,
understanding, and improving plant efficiency and reliability
At the working level, this is further resolved as:

Frequency of instrument calibration

Process, system, and component testing
Process performance baseline analysis
Process performance analysis, trending (relative to the baseline), and reporting
Machinery reliability analysis and reporting

These are the basic tasks the plant engineer must perform to accurately determine the adequacy of process
performance. In large plants, several Results Engineers, as they are sometimes called, devote their
entire efforts to providing these basic functional building blocks. In a smaller process, these tasks and
other functions fall into the province of the plant engineer. For still smaller plants, the level of detail of
these tasks is usually less, but the task elements themselves must still be produced. The result of deleting
any of these task elements reduces or eliminates economic and safety products of the engineering function
and, hence, may degrade the entire process.
Many optimizing processes, Condition Based Maintenance (CBM) to name one, cross OMETA
functional boundaries. In these cases, several, or all, of the OMETA functions may have a role.

L. Reengineering
Reengineering is defined as a one-time fundamental rethinking and business process redesign to achieve
dramatic improvements in performance. The maintenance administration process is composed of a small

number of well-defined inputs and clear boundaries. Reengineering the administrative process must
include establishing ownership, responsibility, and accountability, combined with empowerment that
rewards initiative and maximizes individual contribution. Non-value-added elements such as
compartmentalization, excessive handoffs, and redundant approvals must be eliminated. Coordination,
communications, and supervisory functions are all streamlined during reengineering.
People must be educated about the business and why, as individuals, their activities are
important. They must understand the business process and relationships and the importance of
their contribution to their individual happiness, success, and security.(120)
Core craft and operator-level personnel must be empowered with the practical knowledge and
skills to perform precision practices on a routine, day-to-day basis.(87)
Some corporations are increasing the time a person holds a managerial position to ensure that
he/she gains a solid understanding of the business, a more long-term perspective, and a real
feeling of accountability for decisions and results.(120)
Several corporate leaders perform a spreadsheet analysis of the number and type of equipment
management personnel at the final objective (e.g., cost/RAV). This is obtained by dividing labor cost
(assume parts and labor are split 50/50 or 55/45 percent in either direction) of the objective by average
labor rate. Personnel composition can be detailed by an assumed ratio of planners to skilled trades
(approximately 1:15, varying widely depending on process, type, and complexity of work), schedulers to
planners (approximately 1:3), and even within skilled trades (i.e., the number of electricians, welders,
instrument technicians, etc.). The spreadsheet allows what if variations in the ratios (e.g., the previously
mentioned increase in the percentage labor as reactive repairs are replaced by proactive RCFA and failure
avoidance). The analysis examines how the organization will function at the anticipated levels and
identifies the need for training and improvement initiatives.(120)
Corporations that have gone through this process attest that it demonstrates the necessity and advantages
of eliminating defects to reduce both the costs of parts AND labor.
In at least one case, the analysis disclosed that scheduled retirements and historical attrition
would result in a shortage of workers rather than a surplus at the conclusion of the optimizing
process. This totally unexpected conclusion led to establishing an apprenticeship program that
will not only fill future personnel needs but will preserve a great deal of institutional
knowledge.(120)

M. Training
The day of the single skilled mechanic or operator is at an end. One company determined that 65 percent
of lost productivity was caused by delays in matching limited skills to a required task and getting a
qualified individual in place to perform the work.(120)
Successfully making the transition to a hybrid, multi-skill organization that requires self-directed, multidisciplinary work teams requires communication and initial and continuing training to maximize
operational effectiveness. Organizational downsizing, diminished experience, and institutional knowledge
likewise increase requirements for training.
Training is very important to the success of Equipment Asset Management. Leading companies recognize
that training contributes value.

World Class companies conduct a minimum of 40 hours per year of skill proficiency training for
each employee. One company requires every new employee to receive 38 hours of training before
starting on the job and states that if people need training it will be made available.(120) Another
leading company mandates a minimum of 92 hours per employee per year and between 130 and
140 hours per employee per year for skilled workers.(120)
One company that doubled training over a five-year period gained an annual reduction in
maintenance costs of $2 million, including the cost of training.(87)
Training must be focused on specific competency objectives that are reinforced by opportunities to
practice and gain and maintain real proficiency in the work environment.
A corporation has a skills training and testing process that determines who is most qualified and
likely to achieve success in a given skill. Predictive technicians are generally selected from
skilled trades. A joint Union/Management team governs the testing, selection, and training
process.(120)
Another company stated that an effective training and development program must have the following
attributes: (120)

A dedicated system to ensure the continuing development of employee skills and knowledge

A focus on providing the means and tools to achieve manufacturing and corporate goals

A means of achieving employee satisfaction and fulfillment

Opportunities for multi-skilled tradesmen to contribute to effective operation and be rewarded

appropriately (However, one company warns against allowing this aspect of training to become a
dash for the cash.)

Regular reinforcing training in safe work practices, hazard recognition, and prevention

Training consists of education (why), skills (how), safety, quality, and task procedures:
Training must address soft skills: personal skills (e.g., initiative organizing and decision
making); team skills (e.g., communication, consideration, and compromise); and value skills
(e.g., commitment, ownership, and work ethic). (112)
Training can be made more effective by identifying chronic operating problems and bottlenecks.
Lessons learned during training then apply directly to implementation. (77)
Some companies evolving into team organizations recognize the need for Craft Advisorsskilled
trades whose primary task is to train and work with others to ensure quality. Others shift skilled
mechanics to operating roles where their skills are available to the team.(120)
A major corporation has some plants where all operators are also skilled trades. This structure
minimizes the wait time for a trades person to solve small problems. To make this type of
organization work safely, a comprehensive training program must be in place that includes both
operations and trades skills. (120)
There is a difference between multi-skilled and cross-trained personnel. Multi-skilled implies
craftsman-level skills in multiple areas. The term cross-trained is applied to people qualified to perform
routine tasks in multiple areas but not necessarily at craftsman skill levels.

Training in equipment management skills such as shaft alignment, CMMS operation, and root cause
failure analysis must be followed immediately by the opportunity to use and improve the new skills on the
job.
Training directed at reducing defects (requirements for work) and instilling people skills (to gain
consensus), is essential for moving successfully into an operating team organization.
One company has reduced shift maintenance workers by more than 60 percent through a crosstraining program that enables operators to safely perform minor maintenance. This permits the
transfer of many maintenance workers from shift work to day hours, increasing their productivity
and satisfaction. (This enables companies to realize four to one leverage, because one position
transferred from shift to day work adds four people on days.) The sharing of work and ideas
required for cross training has made both operations and maintenance far more aware of each
other's requirements. (120)
Safety, quality, and awareness training are mandatory for contract workers. Contract workers must also be
trained in local procedures and task instructions and , if applicable, spare parts ordering and storage.

N. Compensation
Most industry leaders recognize the need for merit compensation that shares the gains made in enterprise
effectiveness with employees. In addition, a portion of individual compensation must be connected to
results and, therefore, placed at risk if results do not meet expectations. As outlined in Chapter V, results
that affect compensation must be controllable by the people affected. The example cited, RONA, is not a
good objective basis for compensating equipment management performance and results. Factors that
affect profitabilitycost of raw materials and utilities and the price of finished goodsare not
controllable or even visible to the people responsible for equipment management. However, improving
MTBR/MTBF (and, thereby, RONA) by eliminating equipment defects is both meaningful and
controllable at the working level.
Leaders recognize that working-level employees immediately understand that achieving objectives for
increased equipment effectiveness will reduce employment and likely the size of survivors paychecks.
Fewer people and less overtime for those who remain are very predictable results of reducing failures and
unnecessary work. Many employees view optimizing practices, such as CBM and TPM, as a direct threat
to earnings and job security. Full plans that address employment and compensation must be formulated
and communicated in advance. Leaders must anticipate concerns by determining projected manning
levels and workforce composition over the planned time to reach objectives.
Many employees depend on shift differential and overtime earnings to maintain their lifestyle. Efforts to
increase effectiveness by reducing overtime are resisted as a reduction in pay. The necessity to reduce
overtime and gain greater effectiveness from unavoidable overtime must be approached with candor and
understanding. Gaining support and success requires sensitivity to the real issues from an employee
perspective and compensation for reduced earnings that may result from the improvement program. To
get everyone on-board and supportive, management must devise a method of sharing benefits. This
typically involves awarding a significant portion of the savings gained to the employees responsible.
Everyone wins. Without this vital dimension, a good plan for improving effectiveness is not likely to gain
support from those directly involved.
One leading company planned compensation so that decreased overtime was matched by merit
increases based on compliance to objectives. Most employees are making more money than ever

before and getting more accomplished in less time (increased effectiveness). Workers are
spending more time at home and are happieras are their familiesall adding to the
enthusiasm, morale, and commitment.(120)
Another company states that:
Incentive based compensation is key to success. Employees must know that the results of what
they do and don't do will impact their compensation. (120)
In several companies, shared gain/risk/reward compensation helps drive the optimizing process:
Typical incentive programs place 5 to 10 percent or more of base compensation at risk as
incentive for meeting objectives. Others set base compensation below norms with the gap paid for
meeting objectives. An additional percentage, as much as 30 percent of base compensation, may
be awarded as a performance bonus for exceeding objectives. Variable compensation is typically
based on compliance to facility RONA/ROCE, gross margin, safety, first-run quality, cost,
returns/warranty goals, and compliance to delivery schedules. One company stated that basing
rewards on facility results is a deliberate attempt to eliminate competition between teams.(48, 120)
All of these plans share a common attributepay for performance and demonstrated and applied
knowledge. They are focused on corporate, customer and quality requirements. (120)
This concept was neatly summarized:(120)
Pay for quality production and take the cap off the ability to earn. Link each level into basic
business success measures and require each individual to plan for their own future.(99)
Management compensation trends show a similar focus on value:
One company connects bonuses and stock options to performance within the Strategic Business
Unit and the business as a whole. Bonuses may fluctuate by as much as 50 to 150 percent per
year. (73, 120)
Another company sets base management compensation at 75 percent of competitors levels.
Bonuses, based on ROE/ROA, are paid in cash and company stock and can reach as high as 300
percent of base compensation. (120)
Without a risk/reward incentive compensation scheme, workers are often rewarded for the wrong things.
For example, in maintenance, the expert firefighter often gains acclaim and overtime compensation for
restoring an unexpected failure. The fire marshal who prevents the problem is ignored and
uncompensated.
Craftspeople are key; they quickly understand how the real reward system works and what's in it
for them and respond accordingly. (120)

O. Outsourcing
Virtually all industrial organizations use some form of outsourcing. Many are more than 50 percent
outsourced. Outsourcing can be implemented at five identifiable levels, as shown in Figure 6.6. These

range from supplying labor only through total responsibility for labor, work planning and scheduling,
spare parts ordering and custody to asset ownership:
1) Specific specialized tasks:
Motor, pump and/or valve repairs
Radiography, thickness, and condition measurements (e.g., vibration, thermography, and oil
analysis)
Contract labor
2) Labor plus work process management, planning, and scheduling (e.g., contract maintenance)
3) Parts management ordering, ownership, and custody
4) Process redevelopment and implementation
5) Asset ownership with guaranteed availability (i.e., power by the hour)
The Japanese have integrated the functions of maintenance contracting, just-in-time (JIT)
material supply, and process management by establishing true partnerships with one or more
outsource contractors. These partnerships provide 50 to 100 percent of the labor requirements
and up to 80 percent of material requirements. A site support team provides job prioritization,
planning, scheduling, parts procurement, continuous improvement engineering, and operations
liaison. Partnerships are strong and accomplishments are shared by plant and contractor
personnel alike. The team approach is powerful and impressive and has a major impact on
effectiveness. (92)
Pressures to reduce cost are resulting in more outsourcing. Many companies are already 50 percent
outsourced and the proportion is increasing. An outsourcing contractor can offer savings by spreading
costs of specialized technology and skills over a wider base.
Outsource providers must have the knowledge, tools, personnel, and control procedures to ensure delivery
to expectations and standards contained within customer specifications.(18)
Several manufacturing companies outsource maintenance on all non-production equipment
including HVAC systems and vehicles and equipment lubricant testing. Production equipment is
all managed and serviced by employees. (120)
Even the largest organizations that have historically relied on in-house personnel to perform equipment
management tasks are likely to have some outsourced activities. Most facilities send motors to an outside
shop for repairs. Work is accomplished by specialists who are equipped to perform the tasks most
effectively. Outside contractors are commonly used for tasks requiring specialized equipment, such as
radiography, thermography, and oil analysis. The number of facilities outsourcing predictive vibration
measurements appears to be increasing.
Many process, production, and manufacturing facilities are moving toward outsourced repairs and
overhauls for transportable equipment such as valves, pumps, and seals.
A few companies are contracting pump seal availability to outside sources. In this type of contract, the
service provider typically guarantees availability and repair within a stated time for a fixed annual price
per seal. All decisions, seal type, materials, and external services (e.g., flushing and parts stocking) are the
responsibility of the contractor. At least one company is applying this method for pumps.

Some operating companies are establishing on-site, specialized equipment repair facilities. A few are
staffed and operated by contractors. Other operating companies send equipment to a contractors off-site
facility. In both cases, the repair facility may bear responsibility for spare parts ordering and custody.
Facilities who have implemented this type of repair process typically state that it is more effective,
produces better results and is less expensive than traditional repair methods.
One leading company outsources pump repairs to an on-site repair shop staffed by the
contractor. (This follows the same principle used for motors and valves, with the exception that
the shops are off-site.) The shop repairs all pumps and owns and maintains repair parts
inventory. The contract is open book and runs for five years. It is renegotiated annually based on
standardized repair charges and an end-of-year guaranteed profit margin. This process has
reduced pump repair costs by 30 percent, or $5 million annually. (120)
From this point, we can easily visualize an industrial maintenance process which is similar to that used for
automobile transmissions. A mechanical component is removed and replaced by a remanufactured unit.
The unit removed is remanufactured and eventually reissued to another facility. Many believe that
industry practices will evolve to a model similar to the automotive after-market, where a specialized
outside entity repairs and reissues replacement equipment and stocks most of the spare parts.
There are certainly exceptions to this generalized model. Some repairs and overhauls will have to be
conducted in place. Large specialized machines, such as turbo compressor trains, turbine generators, feed
pumps, and paper machines, cannot be removed. The question in these cases is whether specialized
repairs and overhauls that must be done on-site can be more effectively performed by employees or
contractors?
Industry is using more contract labor; experience seems to be mixed. The hourly rate of contract labor is
typically less than that of employees. However, many facilities utilizing contract labor cite hidden costs,
such as added supervision, safety and other types of training, diminished skills, lack of awareness of local
conditions, and mistakes that later impact production.
Educating outsource suppliers about the new requirements and intolerance for not meeting
standards has taken a couple of years.(120)
The step from contracting labor to outsourcing maintenance planning and scheduling is a small one.
When an operating organization implements contract planning and scheduling, the work order system
must include a detailed procedure that ensures optimum prioritization. As discussed earlier, the priority
system must be based on safety and impact on production effectiveness to ensure optimum application of
resources.
Business systems and work processes must be fully in-place, well defined, and organized for
successful outsourcing. (120)
Some facilities outsource work order initiation and measurements required for Preventive and Condition
Based Maintenance. The actual work can be performed by employees or contractors. Many who have
shifted to contractors find that a number of unexpected issuessuch as parts and assembly quality
controlmust be addressed and resolved.
Outsourcing expertise follows the same concept. Operating organizations can no longer justify the time
and ongoing training necessary to maintain the proficiency of an expert who might be underutilized at a
single facility.

The costs and training to maintain proficiency in a specialty can be justified when shared over a
larger base. (120)
Many organizations are moving toward outsourcing parts ordering, ownership, and custody. In some
cases this takes the form of either on- or off-site consignment spares. Guaranteed delivery, with parts
owned and maintained by a supplier or group of suppliers until use, is another alternative. Gaskets,
bearings, and mechanical seals are examples.
One facility reduced in-house requirements for specialized sparessuch as pump shaftsby
contracting for material and fabrication shop time with guaranteed delivery. Now the facilitys
only requirement is to maintain the drawings. Another facility that is outsourcing spare parts
expressed a need to improve and expand specifications for parts quality, warehouse facilities,
and storage procedures to ensure performance and reliability when parts were installed. (120)
A few operating organizations are combining total contract maintenance with parts purchase, custody, and
ownership, typically under large, multi-year contracts. Some are fixed price with both incentive and
penalty additions. Others are open book, guaranteed profit with incentive. A paper delivered in Europe in
the spring of 1999 argued strongly for the former and against open book contracts.
The new version of outsourcing replaces the former adversarial relationship between operator
and service provider with aligned objectives and linked, common goals. Fixed price contracts are
being replaced by structured risk and reward, guaranteed availability. (120)
Full asset ownership, with an entity (typically the Original Equipment Manufacturer [OEM])retaining
ownership with guaranteed availability, is the most extreme form of outsourcing. Several forces are
converging to make this alternative more attractive. Gaining an advantageous return on capital for the
operating company is most important. Leasing with guaranteed availability reduces capital requirements
and, hence, increases return on capital for a given level of profitability. The increasing focus on core
business is another consideration. Food processors have stated that their business is formulating and
selling tasty foods, not maintaining equipment. Some electric power producers express similar thoughts.
In each case, leasing the means of production with availability guaranteed, rather than owning, is being
given serious consideration.
OEMs are recognizing that after-market support (repair, overhaul, training, service parts, and operation) is
much more profitable than equipment sales. In fact, one recent estimate states that after-market support is
three to four times more profitable than equipment sales. If these observations are correct, contracts that
guarantee support services will benefit the OEM.
In the final analysis, outsourcing, regardless of the extent, does not affect the principles of Operating
Equipment Asset Management. It appears highly likely that future OEAM will be accomplished with an
optimal combination of employees, contractors, and outsourcing. Employees maintain invaluable
knowledge about the institution, what happened, when, and what corrective action was taken. Some
combination of employee staffing and contractors will be used to handle routine, day-to-day operating
activities. Tasks such as major repairs and overhaul of transportable components, such as valves, motors,
pumps, and seals, will probably all be accomplished at specialized, central facilities. Outsourced labor
will be used during intensive activities such as plant turnarounds and overhauls.

P. Spare Parts Inventory Management

The necessity to reduce capital creates pressure to reduce the quantity of stocked MRO spare parts, in
some cases by as much as 50 percent, with a corresponding reduction in administrative costs. Leading
enterprises are employing multiple strategies to reduce stocked spare parts, while simultaneously ensuring
availability in the event of need. In many enterprises, a simple delay in restoring production caused by
the unavailability of a spare part will cancel all of the capital advantages of reduced stocking.
Between 20 and 30 percent of the purchase cost of warehoused MRO spare parts are consumed annually
by the cost of capital, warehousing, damage during storage, loss, insurance, and reserves for
obsolescence. A company carrying $10 million in spare parts pays $2 to 3 million per year for the
privilege.
The solution is to increase reliability and, thereby, reduce requirements for spare parts, transfer
as many spares as possible to suppliers as consignment spares, and implement information
systems that improve planning and allow required parts to be ordered for standard delivery
through normal channels. (81, 120)
The petrochemical industry average for MRO spare parts is reportedly 1 percent of RAV; 0.5 percent to
0.7 percent is world class.
One leading company claims that its owned MRO spare parts are 0.25 percent of RAV. (120)
Alternatives, such as centralized versus satellite, OEM, and supplier stock are opportunities for major cost
savings.
Many facilities are shifting stocking to OEMs and suppliers with either on-site or supplier site
consignment. Some companies do not stock high cost, standard spares such as motors, bearings,
seals, or couplings. They rely on one or more distributors. Many companies rely totally on
distributors for consumables. (76, 120)
Establishing categories/criticality is the first step in the process to reduce spare parts. This leads to a
determination of optimal spare parts stocking levels and locations/custody. In typical process and
manufacturing facilities, spare parts typically can be divided into four or more categories:
1) Unique, high cost, long lead delivery capital spares required for insurance against failures that
would cause a lengthy production interruption. Spare rotors for large turbomachines are an
example.
2) Spare parts that cannot be confidently procured through normal channels within a reasonable
timeframe of identifying the need and necessity for the part.
3) Standard spare parts that are readily available through normal procurement channels in time to
meet the great majority of requirements.
4) Low cost, high use parts and consumables.
Chances are that spare parts in categories 1 and 4 will be maintained in stock for opposite reasons.
Category 1 spare parts are stocked as necessary insurance, category 4 to gain the best prices for bulk
purchases. Sharing category 1 spares between multiple sites, and even multiple corporations, is often used
to gain substantial savings.

Real savings are available in categories 2 and 3. Modifying equipment to reduce the quantity of unique
spares is a factor. Some facilities incentivize suppliers to maintain supplier-owned, on-site, or guaranteed
delivery inventory. Others eliminate spares altogether by outsourcing guaranteed availability, with the
supplier/contractor totally responsible for spares support.
Stocking levels are also important. In general, stocking levels are determined by criticality (impact of
unavailability on production), probability and consequences of failure (risk), population of equipment
served by a specific spare, and delivery via normal procedures and channels. Stocking levels are most
effectively based on these factors plus predicted usage rates, as shown in Figure 6.7. When stocking level
decisions are made, care must be taken to assume production outages do not occur or extend as a result of
a spare parts shortage.
There is a corollary: When the need for a spare becomes evident, the condition of all other equipment that
uses the part must be reviewed. The review determines whether there are other latent defects that could
have a higher priority use for the part within the lead-time for a replacement (assuming insufficient spares
levels to cover all potential requirements).
When rapidly moving spares and some specialized parts, such as bearings and seals, are shifted to
supplier-owned consignment stock, many of the spares remaining in the operating/producer
organizations warehouse may be slow moving, long-lead items, such as rotating elements and parts for
large critical valves. When this occurs, the nature of the remaining parts may cause the inventory turn
metric discussed in Chapter V to trend in the wrong direction, toward fewer turns. Strong awareness of
what is happening is required to resist ill-advised pressures to scrap very slow moving, specialized spare
parts. Scrap slow moving spare parts with extreme caution. Finding that a recently scrapped spare part has
a 24-week lead time can cause major headaches following a failure!
When spares stocking is outsourced, limiting the number of suppliers makes the process easier to
administer, facilitates communication, and provides greater assurance of meeting corporate
standards. It is essential that suppliers know potential requirements with as much lead-time as
possible (e.g., identify spare parts requirements when a defect is first discovered). (73, 120)
One company allows work teams to manage their own spare parts. Teams are responsible for
stocked quantity and can alter and adjust replenishment levels. Parts may be housed in main or
area satellite cribs. (120)
An optimized MRO spare parts management process used by several companies includes:

Hourly personnel authorized to order for direct delivery on a consumer charge card

Direct supply and automatic re-supply

Periodic review to recommend changes to stocking and replenishment levels and identify slow
movers and obsolete parts

Optimum warehouse management procedures must be in place to ensure parts integrity and
quality. This should include PM routines performed on warehouse spares (e.g., periodically
turning motor shafts) to maintain the condition of equipment in storage. (52, 120)
A thorough spares inventory disclosed a large number of off-books spares stored outside the
warehouse in informal shop and unit stores. (120)
Companies are attempting to link spare parts worldwide by stock numbers. They will not stock
anything locally unless it is the highest criticality.(120)

VII. THE OPERATING EQUIPMENT ASSET MANAGEMENT PROCESS

Illustrations:
7.1
7.2
7.3
7.4

The Operating Equipment Asset Management Process

An Overall Improvement Process(10)
Risk Ranked Pareto Analysis by Asset ID Identifies High Cost Equipment(26)
A Process for Selecting Initiatives(10)

Summary
From establishing objectives to institutionalizing success, the Operating Equipment Asset Management
process proceeds in definable steps. Understanding the business, formulating a strategy and business
model, identifying and prioritizing opportunities, assembling an implementing team, performing the
implementation, measuring results, and supporting continuous change are stages of the OEAM process
that are reviewed in sequence.

A. Introduction
This chapter describes the implementation process for Operating Equipment Asset Management. The
process, detailed in Figures 7.1 and 7.2, can be divided into four major phases:
1.
2.
3.
4.

Scope
Plan
Do
Refine and institutionalize

The process begins with establishing corporate objectives, extends through implementation, and
completes with the initiation of continuous change and improvement.
Organizations that have been through major changes to their equipment management process recommend
outside facilitation to establish a positive environment, provide an impartial perspective, and gain best
compromises between functional groups who may feel very threatened.

B. Set Corporate Objectives

Overall objectives and motivation for improving production and equipment effectiveness must originate
at the top levels of an enterprise. Demonstrated commitment, involvement, and continuing drive from the
CEO are essential for gaining success and value. In several large companies that have successfully
implemented an improvement process, requirements and objectives originated from the CEO or Office of
the CEO.(120) In another company, plant managers collectively recognized the need for improvements to
advance their competitive position. The plant managers established objectives for improvement,
developed an implementing plan, and presented the results as recommendations to a receptive CEO. The
CEO is now enthusiastically involved and driving the improvement process.(120)

C. Appoint a Steering Team

A senior level corporate steering team is typical among enterprises that are successfully improving
production effectiveness. Steering teams may be called by a variety of names, however, they are
remarkably similar in charter and function. The typical steering team is chartered to identify and develop
opportunities for improvement, facilitate the working level planning process, serve as a resource during
implementation, measure results, and fine tune the program. A steering team includes representatives
from finance, engineering, operations, and maintenance. Steering teams:

Report to a senior corporate executive who may report directly to the CEO

Are composed of senior engineers and operating and craftspeople with broad knowledge of the
corporate mission, plant operations, and equipment

Include experience in both operations/production and equipment management

Are responsible for direction, education (why), and training (how) to establish and maintain an
optimized equipment management process that includes committed ownership at the working
levels and embraces continuous change.

D. Understand the Business

Business conditions, specifically the origins of profit, are the foundations of Operating Equipment Asset
Management. Identifying and prioritizing opportunities for improvement require a clear understanding of
the principal factors that determine and drive profit. Is profitability driven by market conditions (demand),
production capacity (availability, yield, quality), operating and maintenance (O&M) costs, or some
combination? If a facility is sold out, the balance between availability, yield, quality, and conversion costs
likely determines profit. Under these conditions, incremental increases in production are highly profitable.
If production is not sold out, operating and maintenance costs likely hold prime importance.
Safety is always a paramount consideration. Environmental factors and quality have strong effects. Does
operating closer to quality standards produce greater profit at a given output?
A paper mill easily justified a control system upgrade that reduced process variability and
allowed increasing nominal water content by approximately 2 percent. The added water was
sold, by weight, at the price of finished paper.
Gasoline delivered at the pump one or two octane numbers above the specification represents an
uncompensated gift by the supplier.
The business analysis may be complicated by variations over time. For example, power generation may
be availability driven and, thus, the most profitable during summer heat waves. It will be demand driven
during spring and autumn, when air conditioners are not operating. Within these seasonal swings there
will be day-night and weather-related variations.

E. Create a Business Model

With business conditions understood and opportunities identified, a business financial model that links
improvements to financial results is necessary to establish profit-driven priorities. The model must
account for market conditions and be capable of reporting results and predicting return for any given set
of conditions. An sample financial model and considerations for implementation are presented in
Appendix B.

F. Focus Efforts
In any new concept, the initial implementation should be controlled so that refinements and changes are
easily made with minimum disruption. Corporations with facilities in several geographic areas should
begin the equipment management implementation at a single facility or perhaps a single unit within a
facility.
A number of factors should be considered in the selection of facilities and units for the pilot
installation:

Need for improvement based on mission, business, market and operating conditions, and results

Workforce competence, receptiveness, and enthusiasm for change

The degree to which the pilot program represents the enterprise businesses

Need for close physical proximity of the corporate steering team to ensure continuous
involvement and communications throughout the pilot.

Beginning with a pilot installation retains flexibility, is less risky, and is generally easier to sell to
management. Expand a successful pilot is much easier than downsizing an ambitious effort that failed
to meet expectations. The latter may discourage others from considering future improvement projects.
Some equipment management concepts may appear threatening to workers directly involved. Success and
the long-term best interests of the organization require establishing the most favorable conditions possible
from the beginning.

G. Perform Gap Analyses

Unless objectives have already been prioritized in the improvement process charter (e.g., reduce costs),
separate Gap Analyses (described in Chapter VI) should be conducted in the key categories of
Availability, Yield, Quality, and Cost. In each case, the objective is to identify the magnitude of
differences between current and objective (best practice benchmark) performance. The internal reliability
assessment, mentioned earlier, is another tool to locate Gaps from required performance.
Gap deficiencies are plugged into the financial model one at a time to prioritize improvement
opportunities.
Some examples:
A large specialty chemical facility found that they were already high in both quality and yield
with only a small amount of recoverable Gap value in these two areas. In their case, improving
availability and reducing cost offered the greatest opportunities.(120)
Several power generating facilities had the same experience. Availability and cost offered the
greatest opportunities and recoverable value.
A pet food manufacturer operating in a highly competitive, sold out market stated that yield was
the prime consideration. By increasing yield and holding costs constant, the company was able to
decrease the cost per unit output with careful monitoring.

Companies often state that they have saved several million dollars in cost through an equipment reliability
program and gained two or three times that amount in terms of increased production. The financial model
must identify which creates more value and, hence, what initiatives should have highest priority.
When developing improvement initiatives from Gap analyses, leaders have learned that the safest course
is to identify smaller initiatives to fill the gap, rather than attempting to accomplish all with a single
initiative. With 10 to 20 initiatives directed at a given gap, there is greater confidence that the Gap will be
closed. From the opposite perspective, the failure of any one initiative to meet expectations would not
likely result in missing an overall objective.

H. Begin the Implementation

Where and how to begin is a common question. There is no easy answer. In an ideal world, a long-term
management commitment will be in place to provide the direction and resources necessary to fully
implement the equipment management initiative. That may not happen. The steering team must consider
both short and long-term improvement initiatives. Long-term support and funding can only be ensured by
demonstrating solid short-term results within a long-term plan.
A number of fundamental issues should be considered as the strategy is developed. Mission, business and
economic conditions, and the resulting managerial priorities have a way of shifting over time. The
implementation plan must have sufficient flexibility and adaptability to support the organization with
value and results despite changing conditions.
Ultimate success will be determined by how well the implementation plan addresses the key areas with
the greatest impact on profit:

Threats to safety and the environment

Events, problems, or conditions that have impacted business/mission/operating performance in

the past

Departures from objective performance in the Gap areas of availability, yield, quality, and
conversion cost

Ability to take maximum advantage of opportunities for increased production and/or quality

Efficiency, reliability, and maintainability improvements

The business model presented in Appendix B is a beginning point. Improvement initiatives in the
preceding categories are developed and prioritized with an economic analysis. What are the available
courses of action (including no action)? How much does each cost to implement? What is the return in
financial terms such as RONA or ROCE? Improved efficiency is another source of value; it is described
in Chapter III. In virtually every case, far more opportunities for improvement will be present than there
are resources for implementation.
The GAP analysis leads to objectives. Reduce conversion cost per unit output is a typical overall
objective. Many industries have benchmarks based on Replacement Asset Value (RAV), commonly used
in the chemical processing industry; Effective Distillation Capacity (EDC), used in the oil refining
industry; and Effective Forced Outage Rate (EFTO), used in the Power Generating Industry.
As stated earlier, these mid-level objectives must tie directly to enterprise objectives for increasing
profitability and shareholder value. And the relationship must be thoroughly understood by personnel. In
a sold-out business, increasing production by increasing availability, rate, and/or quality may have greater

value than reducing costs. Where production is not sold out, reducing costs is usually a primary
consideration. Many cases may involve a combination of the two. Regardless, the specific relationships
between business and Operating Equipment Asset Management objectives must be understood and agreed
upon by all concerned.
Organizations have commented that they focused on quality, only to find that availability was the real
problem. Others have worked to drive costs down, only to discover that availability and/or quality
decreased as a result. Balance is imperative at this early stage in Operating Equipment Asset
Management.

I. Assemble Implementation Teams

As general objectives are mapped out, the OEAM steering process must involve more people.
Implementation teams become the core of the improvement process and key to its success. Members
should be among the most knowledgeable, experienced, and credible in the facility. Skills must cover all
aspects of the production process: finance, engineering, information systems, operations, skilled trades
(mechanical, electrical and instrument), planning, and scheduling.
Champions
Implementation teams must include champions who will be a source of inspiration and leadership.
Champions are selected for their enthusiasm, commitment to success (i.e., passion for success),
knowledge, and experience in one or more areas of OEAM. He or she must be credible within the entire
organization and possess the leadership skills and persuasiveness to sell concepts and requirements to
skeptical, recalcitrant people at all levels within an organization. People with the required enthusiasm,
commitment, and credibility usually are very visible within an organization.
Experience with mechanical equipment or process control systems, preferably in a maintenance
organization, is essential. Individuals who have performed well in these positions will have gained the
overview necessary for OEAM and will possess the required familiarity with the people and processes
and the direct knowledge of opportunities for improvement. In addition, these individuals will likely be
familiar with the processes and tools necessary to identify defects and devise corrective solutions (e.g.,
Root Cause Failure Analysis [RCFA])requirements of OEAM. Specific training can reinforce the
knowledge.
Finally, perseverance and the ability to convince others who may be skeptical and even resistant to
change is imperative. In this vital area, the champion must have an acute sense of final objectives and
understand how and where change can be introduced to ensure progress and continuing support. Rapidly
introducing change of the magnitude of Operating Equipment Asset Management could lose support for
the effort.

J. Identify Highest Priority Systems, Equipment, and Components

Systems, equipment, and components are prioritized by their impact on safety, environment, mission,
availability, production output (yield), quality, and cost. The RCM and SRCM processes discussed in
Chapter V and the criticality analysis described in Chapter VI provide excellent guidance for classifying
systems, equipment, and components.

Systems
An operating facility is composed of multiple systems. Some are critical to operation, meaning that any
interruption immediately limits or terminates operation. The condensate and feed systems in power plant,
cooling, and lubrication systems (sub-systems, as defined in Chapter II) are all examples.
Redundancy within a system affects its ability to meet mission requirements. Condensate and feed
systems typically have two redundant (spare) pumps. Piping is generally not redundant and there may also
be system controls (components) with no back up.
Considerations such as safety affect criticality. A fire protection system is classified in the critical
category. Environmental systems should also be classified as critical when a failure forces production
shutdown or could result in fines. The Safety, Quality, Effect, Action, Maintainability, and Support
matrix developed from TPM and derivatives are very helpful in establishing prioritization.
System prioritization based on product quality effects follows the same process. Some systems with little
or no influence on availability or throughput may affect quality. These systems must be identified and
their impact on all categories of Gap performance assessed.
Equipment
Paper machinery, power generating boilers, and unspared turbomachines are all examples of critical
equipment. Everything else can be classified as either essential (meaning that redundancies limit the
impact of a single failure) or having low impact.
Operating conditions and mission requirements may shift the criticality. An individual propulsion turbine
on a warship is probably not critical until the mission requires a speed that cannot be attained without all
propulsion turbines. A cooling tower cell or circulating water pump that are not required in the winter
may be essential for full production rates during high ambient temperatures of summer.
Many deficiencies and problems originate from inadequate design, fabrication, and/or installation and
operation, as discussed in Chapter VI. If equipment, components, or materials are inadequate for the
service, or subjected to operating conditions outside their design envelope, failures are inevitable.
Corrective action is justified by increased profits gained from added production availability and reduced
maintenance costs.
Components
Critical components within critical systems are oftenbut not alwaysobvious. An automatic start
switch on a redundant pump is an example of the latter. The switch is probably an inexpensive standard
item that is given no more than cursory thoughtuntil it does not work and the process suffers a major
upset or stops altogether. Switches that provide warning before an automatic shutdown are another
example. Fail to operate and vital warning time is lost. How much functional consideration goes into
purchase and installation? How often are these components tested?
If the proposed Equipment Management process has worked so far, there should be an understanding of
how profits are generated, what drives profits, the systems and components that are critical drivers, and
how each contributes to objective performance.

K. Identify and Prioritize Opportunities

Existing Equipment
The task begins with either determining or reconstructing operating and maintenance history data and
lifetime cost. A Computerized Maintenance Management System (CMMS) is a major resource. If a
CMMS is not available, work orders, spare parts usage, and people directly involved can be queried to
reconstruct failure history and create a best estimate of costs.
In virtually every enterprise, the institutional knowledge exists to identify assets that continually cause
problems, those that sometimes cause problems, and those that never cause problems. This analysis must
be modified a bit by the identification and classification of assets in the second and third categories with
potential problems so severe (e.g., safety and environmental) that they must be considered with the first
group.
Methods for prioritization have been discussed in Chapter VI. With the grouping completed, we must
identify the assets in the first group that have the greatest impact on objectives (i.e., those that reduce
production availability/quality or those that consume most costs). Again, the institutional knowledge
should exist to make a reasonable classification. As stated, a Computerized Maintenance Management
System (CMMS) can provide invaluable costing information. Leaders perform Pareto analyses to locate
and identify the cause and costs of lost production and quality (COPQ).
Failures that have caused safety or environmental incidents or slowed or interrupted production should be
investigated with a Root Cause Failure Analysis (RCFA), as described in Chapter IV. Failures are
prioritized by number of occurrences, cost, and consequences. A Pareto analysis is a useful way to
classify and present information, as shown in Figure 7.3.(26) Locating and developing remedial action for
faults and defects requires disciplinediscipline to search for the real root cause and follow established
procedures. If procedures are incorrect, they must be corrected as part of the proactive defect elimination
process.(112)
RCM or SRCM analyses should be conducted on the critical systems and equipment identified in the
previous section. The analyses are prioritized by probability and consequences of failure. A risk-ranked
Pareto analysis and display, illustrated in Figure 7.3,(26) are useful and will show whether problems are
clustered by equipment (indicating local problems) or spread out (indicating systemic problems, such as
misalignment). Operating parameters should be compared with design specifications to identify egregious
cases of operation away from best efficiency. Vibration and oil surveys may be used to determine
mechanical condition.
Systems and equipment should be physically inspected for adequacy and quality of installation, condition,
and cleanliness. System quality includes factors such as compressed air systems equipped with moisture
separators, system drains, filters, and dryers if necessary. Installation quality includes component
location, orientation and piping unions for maintainability, level baseplates, type of equipment mounting,
pipe supports, and shaft and piping alignment.
Operating procedures, safety precautions, task instructions, and spare parts requirements should be
checked for completeness and accuracy.

New Equipment
On new equipment, a design audit substitutes for lifetime assessment. The design audit must include
installation specifications and assurance that safety precautions, operating procedures, task instructions
and spare parts requirements are established and complete.

L. Establish Strategy
Every element of an Equipment Management strategy must focus on benefits to the organization.
Equipment faults are identified and prioritized by profit opportunity. Highest priority opportunities are
subjected to detailed root cause analysis. This will provide the Steering and Implementing Teams with a
firm idea of the greatest opportunities for improvement, as well as the initiatives necessary to gain
objective performance.
A rigorous financial analysis will determine the most profitable corrective remediation alternatives for the
highest priority flaws. This leads to a prioritized list of actionable faults, corrective initiatives, and results.
From this point, the Steering and Implementing Teams can devise a detailed strategy and action plan.
The overall objectives should be summarized in a Mission Statement, as discussed in Chapter VI. From
the Mission Statement the Steering and Implementation Teams construct a detailed strategy that includes:

Current conditions, Gap analyses, areas of improvement

Objectives

Opportunities for improvements in the Gap categories of availability, yield, quality, and cost

Specific initiatives for improvement

Deliverables

Forecast return in each of the Gap categories

Investment required, people, and funds

Interim and final measures of performance

Recommendations for further investigation and/or changes to design, procurement and

installation practices, safety and operating procedures, repair task instructions, and spare parts
levels

Other recommended changes, advantages, and benefits (i.e., organization and compensation)

At this point, the steering and implementation teams must be absolutely convinced that the enterpriselevel and mid-level objectives can be met and totally committed to making that happen.
When the strategy is approved, the Steering and Implementation Teams construct more detailed
implementation (business) plans. These plans define tasks more specifically, assign responsibility,
indicate time to complete, list measures of performance, and identify any anticipated restrictions.
Initiatives necessary to meet objectives must be prioritized and assembled into the action plan. Root
Cause Failure Analysis is a very useful and disciplined process for identifying action requirements.
There are several strategic characteristics that are common among the organizations leading the migration
to equipment management:

Individual initiatives to close Gaps. In general, the recovered value of individual initiatives
should be no greater than about 20 percent of a total objective. Developing from five to ten
initiatives to eliminate a specific Gap provides confidence that a shortfall in any single initiative
will not jeopardize overall success. Small misses in a few areas do not materially affect the whole
and may well be matched by better than expected results in other areas. There is also the question
of executive credibility. A series of small improvements that add up to the objective is far more
credible than one or a few large improvements.

Active participation of people at the working level is essential to gain ownership and
commitment. They know where the opportunities are located and often propose more ambitious
results than management might believe possible. With inspiration, understanding, and access to
the proper tools, the effort quickly gains critical mass.

Ambitious objectives require time for implementation. Most improvement programs include time
to reach objectives1,000 days in one case, four years in another.(120) Intermediate goals are
established to ensure progress to final objectives.

M. Select Technology and Practice

With the strategy and action plan constructed and approved, the next step is to select specific practices
(e.g., RCM, RCFA/FMECA, TPM, PM, and CBM [Chapter V]) and technologies to implement the
initiatives. The application of technology and practice must be directed to specific opportunities in which
the application can be effective. Proactive approaches to eliminating defects must be implemented when
warranted. Prioritization should equally consider the activitys contribution to the improvement
initiatives; the probability and consequences of equipment failure (risk); and the ability to recognize
defects in time to avoid failure and production outages. Figure 7.4 illustrates one companys process for
selecting key initiatives.(10)
Reducing unnecessary maintenance, particularly planned, calendar-based, or Preventive Maintenance
(PM), is essential for maintenance optimization. Reports abound of maintenance costs reduced by a third
or more as a result of eliminating unnecessary PM, extending the intervals of necessary PM where
possible, and shifting from Predictive (PdM) to Condition-Based Maintenance (CBM). One company
reported they were able to extend many supplier-specified maintenance intervals by a factor of four
without any adverse effect.
Many mechanics may resist both lengthening PM schedules and replacing PdM with CBM. The real
issue is not fear of failure, but rather the potential impact on employment and compensation. As stated
earlier, to get everyone behind changes in this and other comparable areas, management must devise a
compensation plan based on results and compliance to objectives, rather than time and task. Faced with
the challenge to increase maintenance effectiveness, one company found that its work culture was to work
as slowly as possible to maximize both employment and overtime. In a modern industrial climate, this
mindset cannot be tolerated.
On-line protection and periodic condition monitoring strategies should be prioritized by probability, cost,
and consequences of machinery failure. Condition Measurements (e.g., vibration or lubricating oil
analysis) should be selected for their contribution to objectives and timed to achieve optimal periodic
measurements.
Each technology and practice implemented must be accompanied by training to ensure that the skill level
will enable the organization to realize the full benefits of OEAM and collect metrics to confirm its
effectiveness.

N. Build the Organization

The multi-function, multi-skill (matrix) organizations advocated by Total Productive Maintenance (TPM)
are relatively new in industry, but well established in the U.S. Navy. Chapter VI describes this topic.
Many of the companies implementing equipment improvement initiatives are simultaneously shifting to
multi-function, work team organizations. The team organization has the advantage of broader awareness,
better focus, and prioritization on specific objectives. This approach makes sense when the crafts/trade
baggage of the past can be discarded. Many operators are skilled mechanics. Likewise, many skilled
tradesmen do not hesitate to perform cross-trade tasks on their homes or automobiles. The fact is that
artificial boundaries, applicable only at work, limit efficiency and that cannot be tolerated in todays
climate. The challenge is how to make this type of organization perform most effectively.

O. Construct and Implement the Plan

To gain maximum results, the workforce must support the process, the reason and necessity for adopting
the process, and the specific initiatives of the effort. The following are essential to building and
maintaining support:

Communication, education and training Beginning with the CEOs explanation of why
change is necessary, messages must be focused, consistent, and continuous. Objectives must be
clear and measurable. Broad training in subjects ranging from technical proficiency to team and
consensus skills and conflict resolution are necessary to establish and maintain enthusiasm and
commitment.

Responsibility and accountability Multi-function teams responsible for results should

formulate detailed implementation plans with participation from the Steering Team.

Consistency of both purpose and implementation Consistency is necessary to minimize the

fears of change. All involved with steering the improvement process must recognize that change
is unsettling and threatening to many.

Reward performance People who are responsible for results must be rewarded for success.
Compensation is discussed in Chapter VI. Other rewards that have been used effectively for
attaining success include personal gifts selected from a catalog, team dinners, and travel.

A learning organization A learning organization that is dedicated to defect elimination and

continuous improvement can move the organization from a problem-solving organization to a
problem-preventing organization.(22)

Successful implementation depends on two additional factorsongoing financial justification and

immediate access to information demonstrating results.

P. Measure and Manage Results

Metrics, discussed in Chapter V, must demonstrate compliance to objectives and real value in terms of
improved production effectiveness and profitability. This requires a family of metrics, from corporate
profitability through operating and equipment effectiveness, to program and technical performance.
Metrics must identify changes to senior business and financial management in terms that compel support.
Improvement initiatives with value demonstrated by discernible changes in profit are essential for
credibility at senior levels of an enterprise.

An information system to support the metrics is essential. As discussed in an Chapter IX, the information
system must be capable of collecting and consolidating data from disparate sources and displaying results
in easily understood dashboard presentations.
A well-configured information and reporting system will provide much greater insight into manufacturing
processes, identify opportunities for improvement, motivate the workforce, and improve decision making
at all levels.

Q. Identify and Strengthen Weak Links Implement Continuous Improvement

Accomplishing a Pareto analysis to identify the root causes for deviations from objectives is
essential to locate problems, identify further opportunities for improvement, and serve as the
basis for corrective action.(120)
Continuous improvement requires defined and agreed upon goals and objectives, performance measures,
and tracking. Continuous communication and training are essential.(30)
As defects are eliminated, others move in the priority sequence and are subjected to financial analysis.
The appropriate corrective action is formulated and applied. The process improves awareness and ensures
that problems are addressed in a financially sound fashion. Progress is continuous; measured results and
profitability should and must improve. This is the process of continuous improvement.

R. Maintain Ownership and Support Institutionalize Success

Almost anything can be accomplished on a temporary, one-time basis. The key to success with
Equipment Management is to institutionalize the concept and process. Management, champions, and team
members can be promoted for outstanding results without diminishing program results. Results-based
compensation that rewards compliance to the new scheme is a key factor in institutionalization.

VIII. INDUSTRY BEST PRACTICES, RESULTS, ISSUES,

CHALLENGES AND LESSONS LEARNED
A. Introduction
The following summarizes the best practices, results, major issues, and challenges that must be addressed
in a program of Operating Equipment Asset Management.

B.

Best Practices

Condition Assessment
Applied where cost effective to critical and general purpose equipment; monitors variables
(vibration, lubricating oil, thermography, etc.), type (continuous [installed] or periodic), and
interval, based on equipment type; defect symptoms; and probability, cost. and consequences of
failure.
Precision Balancing
Applied to all rotating equipment
Precision Shaft Alignment
Applied to all rotating and driven reciprocating equipment
Lubrication
Tested periodically at manufacturers replacement intervals, replaced on condition
Repair Procedures
Equipment that can be removed repaired in a specialized shop

C.

Results

This section illustrates one difficulty of establishing credible support for Operating Equipment Asset
Managementoften managers who have had OEAM success are negligent in publicizing that success to
industry and government. These
Some recent published results include:

One company has reduced defect losses by 50 percent; its ultimate objective is to reduce defect
losses by another 30 percent.(120)

In seven years, one company achieved more than a 60 percent increase in production output with
only a 10 percent increase in O&M costs.(120) Some specifics include:
Tons throughput/year
Maintenance shutdowns
Maintenance manpower

1990

1997

2.4 million
8 hours per week
208

3.9 million
8 hours per 3 weeks
146

These benefits resulted from the following changes:

Implementation of ISO 9002/QS 9000 quality systems

Formation of integrated operations, maintenance, and technology reliability management

groups within manufacturing

Focus on team approach

Creation of dedicated job planners for each trade area

Implementation of a highly structured planning and scheduling process

Assurance of resources for all tasks

53,000 man hours invested in RCM

Introduction and implementation of system-based predictive technologies

Development, implementation, and refinement of CBM

Another companys objective is to reduce maintenance expenses from 3.7 percent of RAV to 2.5
percent of RAV over five years, which should reduce equipment expenses by $100 million. The
organization has achieved 60 percent of its goal with two years remaining.(120)

Best in class performance produces the following results, which contribute directly to the bottom
line:(50)

Increased capacity: 5 percent/year

Increased yields: 1 percent/year
Reduced production losses: 30 percent
Reduced maintenance costs: 50 percent
Reduced engineering costs: 40 percent
Reduced unit conversion costs: 50 percent
Reduced equipment costs: 35 percent
Reduced energy usage: 2 percent/year

A 5 percent improvement in Overall Equipment Effectiveness resulted in $100 million increase in

profit.(120)

Improving Asset Utilization by 5 percent and reducing Maintenance Costs as a percentage of

RAV by 1 percent produced the following results:(120)

Asset Utilization
Maintenance Cost/RAV

Return
On Equity
+3.5 percent
+1.5 percent

Return On
Net Assets
+1.5 percent
+.8 percent

Earnings
per Share
+$1.30
+$ .60

A plant has doubled throughput and improved effectiveness while meeting customer demands for
increased delivery and quality.(120)

An analysis disclosed that accomplished and planned plant, process, and equipment reliability
improvements will increase EVA equivalent between 6 and 8 percent. These improvement
represent a gain of more than $100 million at the bottom line.(120)

Over the past three years, one company gained the following improvements in effectiveness(120):

1995
1997

Total Plant
Uptime
85.4 percent
90.6 percent

Maintenance
COPQ
$80,000
$45,000

Maintenance Cost/ Unit

Production
$0.038
$0.036

Improvements, including energy conservation, totaled more than $130 million through 1998.
Further objectives include reducing maintenance COPQ by an additional 30 percent and
improving maintenance cost productivity by an additional 6 percent.

D.

Issues
1. Safety and environmental excellence
2. Financial justification for the investment necessary to implement and sustain equipment
management
3. Identification of principal detractors from objective performance by number of occurrences and
cost
4. Resources prioritized to gain greatest value and return
5. Effective organizational structure
6. Measures of effectiveness metrics that focus attention and priorities on the highest value
opportunities
7. Technology with validation of results
8. Spare parts management

E.

Challenges
1. Management indifference; lack of involvement, communications, and drive; inconsistency of
purpose
2. More intensive operation, increasing cost of interrupted production and quality deficiencies
3. Focus on the wrong issues (i.e., short-term cost reduction, rather than process changes to gain
long-term sustainable value)
4. Resisting the temptation to defer maintenance (i.e., pay some now or pay much more later)
5. Cultural issues/differences within maintenance and other functional areas
6. Combination of increasing technical requirements, declining institutional knowledge and skills,
and outsourcing
7. Lack of ownership and commitment
8. Resistance to change

F.

Lessons(33)
1. Individuals cannot accomplish the improvement process; the effort requires teamwork and
outside facilitation.
2. Must have champions to drive the process
3. Focus first on employee needs
4. Involve always, empower when possible; crafts want to be involved, respected
5. Allow for and expect failures
6. Must work to overcome resistance to accountability

IX.

CONDITION ASSESSMENT TECHNOLOGY AND SYSTEMS

Summary
This chapter provides a brief overview of condition assessment measurements, technology, and systems.
Chapters X through XIII detail dynamic signal processing, fluid and electrical analysis, and decision
support, respectively.

A. Technology Enables Maximum Gains

Modern technologies for measurement, information management, communications, and user-friendly
display enable full implementation of equipment management and are essential for Operational
Equipment Asset Management success. To achieve maximum efficiency, working level personnel must
have immediate access to vital operational and historical information, including current condition,
operating and maintenance history, repair procedures, and parts availability. Full and effective use of
information technology results from empowered workers whose skills and abilities match the complexity
and demands of the work. Achieving this level of skill and ability often requires additional education and
training. Another important aspect of an effective OEAM program are committed and involved
production operators. Without their support, an equipment management plan is doomed to fail.

B. Condition Monitoring Measurements

Dynamic vibration and lubricating oil analyses are well known, widely used, and thoroughly understood
measurements of equipment condition.
Vibration
Vibration measurements can identify commonly encountered defects such as rotor unbalance, coupling
misalignment, mechanical looseness, and rolling element bearing defects. In general, the frequency of
vibration and/or frequency patterns will identify the presence and type of defect. Vibration amplitude is
generally a measure of severity. In some cases, the presence of a specific frequency (e.g., inner race
defect), or a frequency pattern (e.g., sidebands), may also indicate severity. Several texts detail the
application and interpretation of vibration measurements; these publications are listed in Appendix D.
Fluid Characteristics
Methods of measuring equipment condition from fluid characteristics are detailed in Chapter XI. Fluid
measurements are a very sensitive and accurate method for identifying wear and flaws on surfaces that are
in contact with the fluid (e.g., hydraulic and lubricating oil).
Electrical Characteristics
Electrical characteristics provide insight into the electro-mechanical condition of motors and generators,
such as loose or cracked connectors and asymmetric air gaps. Methods of using electrical characteristics
to measure equipment condition are detailed in Chapter XII.

Operating Performance and Efficiency

Operating performance and efficiency measurements provide insight into internal condition, such as
increasing clearances and distributed erosion and build-upconditions that may not be reflected in a
vibration signal. Aerothermal and hydraulic performance and efficiency are calculated from combinations
of process pressures, temperatures, flows, and specific gravity/molecular weight. The equations for pumps
and compressors are well known and contained in many texts on mechanical equipment. Calculating
performance on gas turbines is more difficult; however, there are several computer systems available that
perform gas turbine performance calculations. In many cases, knowledge of load and efficiency is vital to
predicting equipment operating cost and lifetime.
Pumps operating at part load conditions may consume as much as 40 percent more power than
required. In addition to wasted energy, part load operation increases turbulence and stresses,
which can result in a variety of premature failures, including mechanical seal, bearing, impeller,
and shaft failures.(57)
Thermography and Thermal Imaging
Thermography uses a camera which produces images that represent temperature variations with with
variations in color and intensity. Interpretation is intuitive and relatively easy. Cool areas are blue and
purple; hot areas are yellow and red.
Thermography is useful for identifying loose electrical connections in which increased resistance
produces abnormal heating. It is safer, faster, more accurate, and less expensive than mechanically
checking the tightness of electrical connections. One company checks critical line power supply
transformers monthly with a thermographic survey. The survey is performed by opening locked doors to
gain safe access with the transformers powered. This test is accomplished in a fraction of the time and
cost that previously was required for mechanical checks.(120)
Thermography is also useful for identifying hot spots in electrical and thermal insulation. Electrical
components, such as power line insulators, may overheat as a result of leakage caused by dirt or salt
build-up. These insulators readily show up in a thermal image and indicate the need for cleaning.
Breakdowns in thermal insulation (e.g., in buildings and furnaces) are readily apparent in a thermal
image.
Ultrasonic Measurements
Ultrasonic measurements are employed to detect internal and external leaks through valves, traps, gaskets,
and flanges. Ultrasonic measurements may also contribute to the condition assessment of mechanical
components, such as rolling element bearings and reciprocating compressor valves. The overall level of
the ultrasonic signal is read on a meter and heterodyned into the audible range so that it can be heard on
headphones.

C. Condition Measuring Systems

Differences are basically categorized between protective and predictive measurements and monitoring
systems. Permanently installed condition monitoring systems are required and universally accepted for
protection of large critical equipment (i.e., process turbocompressors, power generators, and propulsion
turbines). On this type of equipment, failures can occur rapidly, are always costly, typically interrupt
production, may hazard safety, and can result in secondary damage. Installed condition measuring
systems The system consists of permanently mounted sensors connected to a continuous monitoring

system. It processes the sensor signals to extract specific characteristics. Either the overall level or
specific characteristics are compared to thresholds. An alarm is initiated when a threshold is violated.
Permanent systems are often installed on smaller equipment where condition may change rapidly and/or
there are safety, environmental, or access restrictions preventing manual condition measurement with the
equipment in operation. A compromise solution uses permanently installed sensors connected to a fieldmounted termination box. This allows manual, periodic data collection from inaccessible locations where
continuous protection is not an issue.
Predictive condition measurements recorded manually with microcomputer-based portable equipment are
widely used where safety is not an issue, operating alternatives exist, and/or failures typically develop
slowly. In view of the small portion of condition monitoring measurements that change, the ongoing
expense necessary for periodic data collection with portable equipment may be considered excessive. The
dilemma is how to detect the few measurement variations without recording all measurements.
Permanently installed predictive systems significantly reduce the labor costs of periodic data collection.
However, permanent systems may have an installed cost as high as ten times the annual cost of manual
measurement with portable instruments, depending on the configuration. To date, the large difference
between permanent and periodic condition monitoring systems has excluded wholesale replacement of
manual measurements. Many facilities are shifting some measurements to the installed sensor, manual
collection system mentioned earlier to reduce recurring cost and improve effectiveness. Some facilities
are forced to reduce periodic condition monitoring without any replacement as a result of personnel
reductions. When this occurs, prioritization is essential to ensure highest value and return for the
remaining resources.

D. Computerized Maintenance Management Systems (CMMS)

CMMS: A support tool to ease the flow of information and improve the decision making process.(110)
A computerized Maintenance Management System measures, analyzes, and manages the entire
maintenance cycle.(102) A typical CMMS consists of:

Basic maintenance management processes: MRO task planning and scheduling, inventory (spare
parts) control and management, and labor and material cost accounting

Added functionality: RCM, RCFA, condition-based task scheduling, and reliability tracking

Typical CMMS are offered in a tiered functionality by facility requirements and size. A survey conducted
by Plant Services in 1998 disclosed the following CMMS use:(102)
Track critical equipment
Budgeting
Track integrated procurement
Benchmark maintenance
Use with PdM
Regulatory and/or quality documentation
Financial/ROI calculation

62%
39%
39%
34%
33%
31%
22%

In the same survey, 65 percent of respondents stated that preventing downtime of critical equipment was
the most important benefit desired from a CMMS. More equipment uptime was cited by 55 percent of the

respondents, while 42 percent stated that controlling maintenance costs is the most important benefit of a
CMMS(102).
Interestingly, 52 percent of those responding to the Plant Services survey want integration with PdM, and
50 percent desire financial/ROI capabilities. Companies clearly favor a broader scope, integrated solution
for their traditional PdM and CMMS systems.(102)
In response to these requirements, Computerized Maintenance Management Systems are changing from
programs constructed to control work, to Integrated Maintenance Information Systems that support selfmanaging maintenance teams. The acceptance of this change by senior managers and maintenance
personnel will require improved communications. Both parties must learn to communicate in terms the
other understands. The maintenance practitioner must learn to communicate results in relevant business
terms. Executives and senior management must learn enough of the technical vocabulary to ask relevant
questions, understand the risk, and recognize the real value of results.

E. Condition Assessment Displays

Intuitive, easily operated displays of condition are necessary. Video games are a familiar example.
Displays on successful games clearly convey status, condition, opportunity, threat, and even suggested
action. Well-designed displays allow personnel to focus their expertise on solving complex problems and
alterations that reduce the need for maintenance is a more productive use of resources. Software programs
capable of automatic analysis and displaying refined, easily understood information must be woven into
the fabric of Operating Equipment Asset Management. Corporate metrics, primary management and
operating metrics, and Key Performance Indicators should be displayed on a management dashboard with
capability to drill down for the exact cause of deviations.

IX.
SIGNAL PROCESSING ALGORITHMS
FOR EQUIPMENT DEFECT RECOGNITION AND IDENTIFICATION
By Howard A. Gaberson, Ph.D.
Naval Facilities Engineering Service Center

Illustrations:
10.1

Five Time Segments from a Vibration Signal, Shown as 50% Overlapped and Following
Term-by-Term Multiplication by a Hanning Window
10.2
Figure 10.1 Signal After Each Segment is FFTed. The sequence of the FFTs form the STFT
of the signal.
10.3a-10.3d First Four Steps in Calculating a Continuous Wavelet Transform Coefficient. The sum of
the values in 10.3d is the wavelet coefficient for this frequency or scale and position.
10.4
3-D Plots of the Complex Morlet Wavelet for a Scale = 1.0
10.5
Acceleration from an Intake Valve Cap on a Large Reciprocating Compressor
10.6
Contour Plot of STFT of Compressor Data
10.7
Pseudo Wigner Ville Analysis of Compressor Data
10.8
Choi-Williams Analysis of Compressor Data
10.9
Morlet Continuous Wavelet Analysis of Compressor Data
10.10
Daub-4 Wavelet Map of Compressor Data (The square root of wavelet coefficients were
used to display small values.)
10.11
Square Roots of Daub-4 Wavelet Coefficients Plotted for All 12 Levels. (The higher levels
show discontinuities.)
10.12
Daub-4 Wavelet Reconstruction of Original Signal. (The levels were separately inverse
transformed to display the contribution of each level to the composition of the original
system.)

Summary
Vibration monitoring is the most widely used of the machinery diagnostics technologies. This chapter
reviews the signal processing approaches for vibration-based machinery condition monitoring. Machinery
problems usually occur in the rotating members, causing dynamic forces from the rotating members to
communicate to the machine foundation through the bearings. As a result, bearing housing vibrations
are the best source of diagnostic vibrations.

A. Introduction
Vibration-based machinery condition monitoring typically involves generating a frequency or spectrum
analysis of bearing housing vibration to evaluate changes in the performance of the machinery.
Machinery vibration spectra are Fast Fourier Transforms (FFTs) which show that the vibrations are
composed of frequencies that are primarily multiples of the shaft rotational speed (rpm). During analysis,
when a trend of abnormal growth of constituent frequencies occurs, a machinery problem likely exists.
The pattern of frequency growth usually indicates the type of problem; the level of the signals more or
less indicates the time remaining before failure.

B. Frequency Patterns
Problems with unbalance, alignment, looseness, drive belts, bent shafts, and rubbing have known,
documented patterns of frequencies. Ball bearings have four known characteristic frequencies. Gears have
tooth mesh frequencies and vanes have vane passing frequencies. Sidebands appear at multiples of the
shaft rotational speed on either side of gear mesh and bearing fault frequencies. Harmonic peaks appear at
multiples of shaft speed and bearing frequencies. Resonant problems can arise that are not directly related
to the rotational speed; electrical problems in the motors are reflected in multiples of the AC line
frequency.
Several excellent references to the practical technology are available i; John Mitchells second edition is
the most recent. Three additional references indicate directions for advanced vibration monitoring
techniques not yet available as commercial software. ii

C. Peak, rms, Overall, Crest Factor, Kurtosis

The vibration signal can be evaluated by statistical measures such as its root mean square (rms) level
(i.e., the square root of the mean of the squared values.) This overall measure is the basis of many
vibration-based shutdown switches and alarm lights. The value of rms velocity over the frequency range
of 10 to 1,000 Hz is used as a measure of vibration severity in ISO Standards 2372 and 3945.
Peak value of a pure sine wave is 1.414 times its rms level; this factor is often used to convert between
rms and peak levels.
Crest value, which is the ratio of the absolute peak to rms level, can indicate impacting in the signal.
Kurtosis is given by

1 N
k=
N i = 1

4
( x i - x)

-3

(1)

where the standard deviation or rms value is given by

2=

N
1
( x i - x )2

(N - 1) i = 1

(2)

The -3 in Equation (1) ensures a zero value for a normal distribution. Both crest factor and kurtosis
measure the peakiness of the signal.2(a)

D. Digitizing and Aliasing

Signals must be digitized before they can undergo computerized processing. In addition, prior to
digitizing, the analog transducer signal must be analog filtered to avoid aliasing. Shannons sampling
theorem iii states that a signal is adequately sampled if it is sampled at a rate at least twice the highest
frequency present in the signal. By frequency content, Shannon indicates that the Fourier transform is
zero beyond the maximum frequency present. A signal that is adequately sampled is completely defined
for all pointseven those between the samples; only one function can pass through those points and be

band limited. A signal digitized without analog antialiasing has been essentially destroyed. Any little
spike or spurious high frequency squiggle could be selected by the digitizer as a value, totally corrupting
the digitized signal. Antialiasing is a must.

E. Spectra
A spectrum of a vibration signal is a graph that indicates frequency content as a function of frequency.
Spectra are averaged windowed discrete Fourier transform magnitudes of vibration time histories. Most
are computed in a signal analyzer using a FFT computer algorithm on a digitized segment of the vibration
time signal (given equally spaced samples, sampled at a sampling rate, fs). The result of the FFT, the
transform, is a complex function of frequencycomplex because each frequency component has a
magnitude and phase. Usually the magnitude is retained and plotted as a function of frequency to generate
a spectrum.
The FFT is actually a Fourier series of a segment of a vibration signal, which indicates frequency content
as the actual sine wave components that make up the signal. Adding them all results in the original signal.
However, the FFT considers everything in the segment to be periodic, which causes errors in evaluating
components that do not have an integral number of periods in the segment. Assuming periodic segments
also implies a discontinuity where the segments join, thereby resulting in leakage errors. To diminish
these errors, the time segments are windowed with bell-shaped functions (i.e., the segment values are
term-by-term multiplied by the window function, which goes to zero at its ends). iv This reduces the signal
amplitude and must be compensated for by multiplying the spectra values by a window factor, effectively
wasting part of the data because the ends are attenuated.
Figure 10.1 demonstrates windowing. On the top line is a signal to be analyzed. The five lines below it
show five segments of signal, 50 percent overlapped. To the right, at time = 0.05, are the same five
segments windowed with a Hanning window. The five windowed segments are ready for FFTing and
averaging. The number of values in the digitized time segment to be transformed is equal to a power of
two, providing significant computational efficiency. Typically, 1,024 samples are used to yield 400
frequency values or lines.
The bandwidth is the frequency range over which the data is analyzed. The sampling theorem indicates
value all the way to fs/2; however, because the analog antialiasing filter cannot abruptly stop frequency
content at half the sampling rate, the higher frequency values will be inaccurate. The number of frequency
lines (values, bins) resulting from the FFT is related to the number of time history values multiplied by
2.56 (e.g., the 400-line spectrum requires 1024 points). The sampling rate must also be 2.56 times the
highest frequency for accurate analysis. In general, many spectra are taken and averaged together to yield
the spectrum to be stored or analyzed. The term auto-spectrum is sometimes used to refer to the
magnitude squared of the FFT.
The y-axis or ordinate of the spectrum is the amplitude and the x-axis is the frequency. The ordinate or y
axis can be plotted linearly, logarithmically, or in decibel notation. Decibels are a ratio of the log of the
amplitude to the log of a very small reference amplitude. Logarithmic plotting makes the low amplitude
values visible. Sometimes the frequency is plotted logarithmically, creating what is referred to as a
constant percentage bandwidth presentation.
FFT Algebra
As defined by Matlab v, a common high-level computation software package, the FFT operation is

N 1

X(k + 1) = x (n + 1)e

i 2 kn
N

(3)

n =0

and the inverse FFT of IFFT function is

1 N 1
x (n + 1) = X(k + 1)e
N k =0

i 2 kn
N

(4)

In reference to Equation 3, Matlab states, Sometimes it is useful to normalize the FFT output so that a
unit sinusoid in the time domain corresponds to unit amplitude in the frequency domain. To do this use
Pn = abs(fft(x))*2/N .

(5)

Multiplying the magnitude of the calculated FFT by 2/N calculates the amplitude of a sinusoidal
component of our signal. The (k+1) and (n+1) are used to avoid a zero subscript.
The FFT operation on a sequence of numbers returns a sequence of complex numbers called bin values,
which are sequentially numbered (e.g., the first number of the sequence is the bin 1 value, the second is
bin 2, etc.). For samples sampled at the rate fs, the frequency corresponding to any bin, where (k + 1) is
the bin number (e.g., given k = 0, bin number 1, and 0 or DC frequency), is given by
f = ( bin _ number 1)

f s kf s
=
N
N

(6)

and k goes from 0 to N-1.

Complex exponentials are related to the familiar sines and cosines that are usually presented in
connection with Fourier series. They are complex numbers that have an amplitude and a phase, or a real
part and an imaginary part. The relations between the exponential and sinusoidal functions are
2 cos = e i + e i

and 2i sin = e i e i

now adding e i = cos + i sin

(7)

(Note: e is the base of natural logarithms, equal to approximately 2.71828182845904.)

F. Harmonics and Orders

Harmonics of a frequency are integer multiples of that frequency. Subharmonics are fractional multiples
of a frequency. Because most of the important frequencies are multiples or fractions of the shaft rotation
rate or rotational speed, the frequency variable of a spectrum can be expressed in orders and spectral
peaks can be considered shaft orders. Plotting spectra in terms of orders of the fundamental shaft
rotation rate, rather than frequency, is beneficial for all direct coupled machines where the driven member
turns at the same frequency as the driving member. Complications arise when the driven member is
coupled to the driver by belts or gears; however, but this can be overcome by labeling the frequency or
orders axis as being in terms of orders of the driving machine.

G. Sidebands, Amplitude, and Frequency Demodulation

Sidebands and modulations are common phenomena in bearing and gear diagnostics. For example, a
bearing fault might cause a vibration signal 8.7 times the rotational frequency of the bearing shaft. On the
spectrum of the bearing vibration, in addition to the bearing frequency, sidebands may be visible.
Sidebands are additional frequencies that appear on either side of the bearing frequency and are separated
precisely by the shaft rotational frequency. Sidebands occur in rolling element bearings and gears and are
caused by an amplitude modulation of the high frequency bearing or gear mesh signal by the lower
frequency shaft rotational signal. In the case of a problem with a rolling element, the sidebands can be
separated by the fundamental train frequency. Sidebands can also be caused by frequency modulation in
which the higher frequency gear or bearing tone sinusoidally changes its frequency as a result of a
variation in shaft rotational speed. In this case, many sidebands appearall smaller than the tone being
modulated and all separated by the modulation frequency. Contour plots of the reduced interference
distribution analysis, such as the Choi-Williams distribution, best indicate frequency modulation. vi

H. Rolling Element Bearings

Rolling element bearings are the most common machine failure, yet the most difficult to diagnose. There
are four main frequencies that appear as a bearing begins to fail:
1. A pit develops in the outer race, generating a ball pass frequency outer (BPFO)
2. A pit or defect develops in the inner race and causes a ball pass frequency inner (BPFI)
3. A pit or defect occurs on one of the balls and generates a signal at the ball spin frequency
4. A problem occurs with the cage separating the rolling elements, giving a signal at the fundamental
train frequency (FTF).
These frequencies are given by:
f BPO =

n
DB
cos
12
DP

(8)

where
fBPO = frequency in Hz
= shaft revolutions per second
n = number of balls
DB = ball diameter in inches
DP = pitch diameter in inches
= contact angle
and
f BPI =

where

n
DB
cos
1 +
2
DP

(9)

fBPI = inner race ball pass frequency in Hz

The ball spin frequency for a defect on the ball is given by
f BS =

DP DB
2
1-

cos
2 DB DP

(10)

where
fBS = ball spin frequency
The fundamental train frequency is given by
f FT =

DB
cos
1 2
DP

(11)

where
fFT = fundamental train frequency
These frequencies are calculated for each bearing and are monitored to detect a bearing problem. Some
software packages offer databases that catalog these frequencies for most standard bearings.
The bearing frequencies or tones seldom are exact multiples of the shaft speed and, as such, stand out in
an order normalized spectrum as distinct nonsynchronous peaks. Additionally, axial load changes alter the
contact angle so that the frequencies are not exact. Under many fault conditions, sidebands of the shaft
rotational frequency or the free train frequency appear on either side of the bearing frequencies.
Bearing diagnostics are characterized by nonsynchronous frequencies with harmonic multiples and
sidebands. They exhibit sequenced patterns of peaks that can be detected by cepstral analysis, a method
employed by some software packages.

I. Cepstrum
The cepstrum (pronounced kepstrum) in somewhat like a spectrum of a spectrum. In diagnostics, the
cepstrum is used to detect a periodic structure in a spectrum, such as families of uniformly spaced
harmonics or sidebands. vii The power cepstrum is the inverse Fourier transform of the log of the
amplitudes of the autospectrum. There is also a complex cepstrum, which is used in detecting echoes and
identifying source and transmission path information.2(c)

J. Envelope Detection and Demodulation

Envelope detection is a signal processing technique that high passes or band passes an accelerometer
signal, demodulates the resulting signal, and FFTs the demodulated signal or envelope. Impacts have
many harmonics at multiples of the impact frequency. Measured in acceleration, the higher frequency
impact harmonics will have higher amplitudes. Envelope analysis allows these higher frequency
harmonics to be identified as bearing frequencies.7 After filtering no low frequency information remains,

but high frequency pulses continue to exist in the time history, repeating at a low frequency rate.
Demodulating can be performed by squaring, squaring and taking the positive square root (i.e.,
rectifying), or using the Hilbert transform to form an analytic function, the absolute value of which is the
envelope or the demodulated signal. The mean of the demodulated signal is removed and an FFT is
performed on the result.

K. Order Normalization and Time Synchronous Averaging

Rotational speed (rpm) of machinery varies, causing the peaks associated with machine faults to be spread
over a range of frequencies as the spectra are averaged. Bearing fault frequencies, gear mesh frequencies,
and first and second orders are impossible to distinguish from one another. Order normalization, or order
tracking, automatically adjusts data acquisition to account for changes in the rotational speed (rpm). The
resulting spectra appear as if the machine were operating at a constant speed. The frequency on order
normalized spectra are indicated in orders. Order normalization is usually accomplished with a
tachometer providing a one-per-rev signal to the instrumentation. Machines with speed variations in
excess of 5 percent typically are candidates for order normalization.
Time synchronous averaging is a similar, but more powerful refinement method. The time history sample
signals are triggered at the identical shaft angular position for each shaft revolution. A large number (e.g.,
100) time histories are accumulated and averaged to average out any noise in the signals not repeating
identically in each revolution. The resulting average time history is FFTed. Extensions of this technique
are used in specialized gearbox analyses.

L. Bump Testing for Natural Frequencies

Bump or impact testing is a spectrum of the impact response time history. Several averages are usually
taken and peaks indicate natural frequencies. It is unfortunately common that vertical shaft machines are
mounted such that they are resonant with the first order frequency; bump testing is used to confirm that
the natural frequency is at the rotational speed.

M. Time Frequency Analysis

Many problems in machinery diagnostics are characterized by transient or impulsive events in the
vibration signal that cause the frequency content to vary considerably and regularly with time. Several
methods of time frequency analysis have been used to demonstrate variations in vibration signals. One
method that is not used is FFT analysis, because it averages individual spectra to a single average
spectrum, completely converting the time signal to one of frequency. Short time Fourier transform,
Wigner distribution, Choi and Williams distribution, and wavelet transform are discussed in the following
sections.
The Wigner distribution provides increased resolution in time frequency distributions. Forrester viii has
shown the Wigner distribution to locate the angular position of the impact or discontinuity associated with
individual gear tooth faults. However, the Wigner distribution has severe interference (cross) terms that
confuse interpretation ix and require additional effort to resolve. The reduced interference distributions
mitigate the Wigner cross terms while preserving sharp resolution.
Most time frequency distributions are members of Cohens class of distributions. x Each can be obtained
from his general form with different kernels or selection functions. Gaberson xi has shown that the Choi

and Williams distribution xii yields impressive detail and a significant structure in the time frequency
plane. Impact is recognizable. Finally the wavelet transform is discussed because it is a very new and
different approach.
To apply the time frequency methods to machinery vibration signals, the time frequency algorithms were
programmed in Matlab script. Matlab is considered to be representative of all the high level PC signal
processing software and our use of time frequency will be explained with reference to performing the
calculations in Matlab on a PC.
Short Time Fourier Transform
STFTgenerating a spectrograminvolves selecting short lengths of the vibration signal, performing a
Fourier transform on each, and displaying it as a 3D plot to show how the spectrum changes with time. xiii
This enables the user to evaluate the windowed FFT magnitude of adjacent overlapping segments of the
time signal to see how the frequency content of the segments change. Figure 10.2 shows the signal, its
five overlapping segments, how the segments appear after they have been windowed to reduce leakage,
and the resulting spectra. The frequency axis is not shown.
In math symbols, if x{t} is a sequence of digitized velocity or acceleration values at evenly spaced
increments of time, the STFT time frequency distribution can be expressed as:
X(t, f) = FFT [w() x(t+ )]

(12)

Here, w is a window function (e.g., Hanning, Gaussian, flat top, or other type) that restricts the portion of
the signal, x, being analyzed by the FFT for frequency content. The window function would be zero
everywhere except for half the FFT length symmetrically on either side of zero. We skip a suitable
number of points, move to a new t, and do the process again. Each FFT is the frequency content of the
windowed segment of the function centered about t. Every little blip within that window contributes to the
frequency content at t. Shortening the window provides more accuracy with regard to time, but restricts
the lowest detectable frequency (because a wave length is needed within the window) and reduces the
frequency resolution because there are fewer samples.
The STFT is a popular machinery diagnostics analysis to run during startup or shutdown and is referred to
by the signal analyzer manufacturers as a waterfall function. The amplitude is scaled to return the correct
amplitude of an input sine wave.
The Wigner Distribution
The Wigner9(a) distribution, an autocorrelation-based approach, offers better time and frequency resolution
than the STFT. The following example illustrates the autocorrelation function (ACF) for a stationary
signal. Because the signal is stationary, the ACF does not depend on t, and will only be a function of the
time lag, .
T

1
[x(t) x(t+ )] dt
R x ( ) = Tlim
T
0

(13)

Multiplying the value of the signal at t by the value at (t + ) at every position t in the signal, results in an
average for that value . This is done for each value of .

By the Wiener-Kinchine theorem xiv, the Fourier transform of the ACF is the spectral density, which, for
practical purposes, is the average windowed value of the discrete Fourier transform (DFT) magnitudes
squared, or
| X |2 = XX* = SXX =

1
2

j
d`
R x () e

(14)

Now going back to the ACF as expressed in Equation 13, if we make the change of variable
t = t +

(15)

it will look like a more symmetric autocorrelation function

1


x t x t + d t

T0
2
2
T

R x () = Tlim

(16)

This retains the units of x2 and does not depend on t . It is evaluated over the whole record; the
integration evaluates it at every t for all .
For a nonstationary record, examining an average along the whole signal would be insufficient. Rather, at
time t , we could take the Fourier transform of one calculation of the ACF centered about t . This
instantaneous autocorrelation at t is represented by



R x (t , ) = x t x t +
2
2

(17)

It can be evaluated only at this one t for all . The Fourier transform of this looks like the magnitude of
the square of a Fourier transform and is an instantaneous symmetrical autocorrelation of x, centered about
t . The authors define this to be the Wigner transform and write it as:1(a), 1(b), 1(d), 2(a), 12, 13, xv

W x (t , ) =

e- j x t + x* t - d
2
2

(18)

Ville showed that the complex conjugate has to be introduced to eliminate cross terms between the
positive and negative frequencies. xvi Because Equation 18 contains a complex conjugate notation,
authors9(a), 9(c), 13 recommend converting the real signal to be analyzed to a complex analytic equivalent,
the real part of which is the original real signal. (Matlab has a function called Hilbert that, when applied
to a real signal, returns the complex equivalent analytical signal.) To calculate, Equation 18 has to be
discretized, using Equation 19:

W x (n , k) = 2

j2 m k

x (n + m) x * (n m)

(19)

k=

Note that between Equations 18 and 19 a 2 entered into the exponential (from the /2), which results in
requiring twice as many samples for the same upper frequency limit as for the STFT. This should not be

problematic, because most signal processing programs offer an interpolate function which will double the
sampling rate; however, the computation load does double.
To avoid taking the FFT of a sequence with gross discontinuities at the sequence ends, window the
instantaneous ACF. This results in a pseudo-Wigner distribution (PWD).9(a) Thus, the PWD is the FFT of
a term-by-term product of a window function, w(m), and the discrete ACF or bilinear product. This can
be expressed as:

W(n , k) = FFTm k [w(m) K(n, m)]

(20)

where K(n, m) = x (n + m) x * (n m)

(21)

Adopting Boashashs13 terminology, K(n,m) is the bilinear product and w(m) is the window function. To
evaluate the PWD for a time n, interpret Equation 20 as an FFT with respect to the lag variable m of the
function w(m)K(n,m). The bilinear product has an odd number of terms. Using an FFT, which requires a
signal length equal to a power of two, requires a final zero to be added. The window, w(m), can be a
Hanning, a Kaiser, or, as was used here, a Gaussian-shaped window.
In order to understand what to expect from the PWD, consider the bilinear product of an analytic
sinusoid.

x = A exp(i 2ftn )

(22)

Substituting Equation 22 into Equation 21 yields

K(n, m) = A exp[i 2f t (n+ m)] A exp[i 2 f t (n m)]

(23)

which simplifies to

K(n, m) = A 2 exp(i 4ftm )

(23a)

This is a function of m with the square of the amplitude of Equation 22 at twice its frequency. The FFT of
this will show the amplitude squared and the frequency doubled, indicating that the Wigner transform and
the other Reduced Interference Distributions (RIDs) perform similarly. The primary difficulty with the
PWD is that it generates artificial cross terms.
RID Calculations
A great deal of effort has been invested in mitigating the cross terms of the PWD, which do not indicate
events in the signal. These efforts involve two-dimensional time frequency averaging. Yen9(c) used a time
frequency Gaussian smoothing function. Choi and Williams12 and Cohen10 organized these efforts and
called the resulting time frequency distributions Reduced Interference Distributions (RID). Many RIDs
exist, which all involve a two-dimensional time convolution. One of the first was the Choi-Williams
distribution (CWD)12. Boashash and Reilly13 summarize the computation of the RID as:
(1) Form the bilinear product
(2) Convolve it with the determining or selection function in the time dimension
(3) Calculate the FFT of the resulting convolved row for each time slice of the distribution

The determining or selection function (sometimes called kernel) is what differentiates the various RIDs.
Similar to Equation 20, it is:

RID(n, k) = FFTm k [G(n, m) K(n, m)]

(24)

where G(n,m) is the selection function. This indicates a two dimensional convolution with respect to time
and lag. The expression defining the Choi-Williams (CWD)12 selection function is given by:

G(n, m) =

/
2m

n 2

e 4m

(25)

This equation is more complex than it seems at first glance. It appears to go infinite at m = 0; however,
this is not the case. The sum of the columns have to add to unity; therefore, the problem is ignored and
replaced by unity. This lengthy computation is detailed by Gaberson.11

N. Wavelet Analysis
Wavelet analysis of machinery vibration data is a different form of time frequency analysis. It is likely the
optimal method for locating transient events or discontinuities in data. There are two major categories of
wavelet transforms: continuous and orthogonal.
Wavelet analysis is a topic of current signal processing research; considerable information is available on
the Internet, from sites such as Lucent Technologies www.wavelet.org and Mathsofts
www.mathsoft.com/wavelets.html.
Continuous Wavelets

With continuous wavelets, the wavelet transform, or distribution, is a stretched or compressed short, wavy
function placed at many positions on the signal to be analyzed and term-by-term multiplied with the
signal. The sum of those products is the wavelet coefficient. The amount that the wavelet is stretched or
compressed is called its scale. When it is moved from position to position it is translated.
Figure 10.3a helps to illustrate this concept and relate the calculation to the use of the inner product to
form a continuous wavelet transform. The figure shows an anti-symmetrical wavelet (actually the
imaginary part of the Morlet wavelet) centered at time equal to 0.003 sec. In Figure 10.3b, the wavelet is
flipped left-to-right. Notice that the wavelet is only non-zero for a small region. Figure 10.3c shows a
portion of some air handler acceleration data. Figure 10.3d shows the result of a term-by-term
multiplication of the second and third figures. Adding up the values of Figure 10.3d would give the inner
product of Figures 10.3b and 10.3c, or the wavelet coefficient for the scale and position of the of the
wavelet. The frequency or scale constant would be held constant, the wavelet would be advanced a little,
and a new coefficient could be calculated. After the wavelet had been advanced at this frequency across
our signal, a new frequency or scale would be selected and the process repeated.
Analytic Signals and the Hilbert Transform

Imagine that this complex Morlet wavelet signal that has real and imaginary parts. It is actually a 3D
signal, somewhat like a wire spring, as shown in Figure 10.4. It is called an analytic signal, because it is
complex and has real and imaginary parts, or an amplitude and phase. The imaginary part is plotted
vertically and the real part is plotted horizontally; time is axial. Looking down on the plot from above

would only reveal the real part of the wavelet. Looking at it horizontallyperpendicular to the axial
directionwould reveal the imaginary part of the wavelet. We can make any vibration signal that we
measure and digitize an analytic signal by taking the Hilbert transform of it. In Matlab, the Hilbert
transform of any real vibration signal returns a complex signal, the real part of which is our original
signal. Since we can obtain both the real and imaginary parts of the signal, we can use plot3 to draw it out
in 3D. The mathematical explanation of how one develops or derives a complex or analytic function that
has a real part identical to a measured digitized signal is given in Mechanical Systems and Signal
Processing xviiand presented in the Matlab code hilbert.m from theMatlab signal processing toolbox.
The Convolution Theorem

An example use of the Morlet wavelet is disclosed in Torrance and Compo xviii. To compute the
continuous wavelet they take advantage of the convolution theorem, which states that if w is formed by a
convolution of g and x or
t

w (t ) =

g()x(t )d

(26)

the operation can be performed by term-by-term multiplying their Fourier transforms or

W ( f ) = G (f ) X (f )

(27)

The wavelet computation is a convolution; therefore, the inner product of Equation 28 for every position
n can be determined by term-by-term multiplying the FFT of our signal by the FFT of the wavelet. The
inverse transform (IFFT) of that product is the wavelet transform for that frequency.

(
n
'

n
)
f
f
(
n
'

n
)
f
f

f
f
exp

W (n, f ) = x(n' )exp i 6

fs
fs

(28)

Orthogonal Wavelets

Orthogonal wavelets do not resemble the continuous concept of a wavelet. These are true transforms that
transform a power of two length of time history into the same length transform; the inverse transform
returns the original data set. They are fast and easy to use. Daubechies xix discovered them in the late
1980s and computed the values of the coefficients for nine of them. Her papers xx and Newlands book xxi
give the numerical values. The smallest orthogonal wavelet has four coefficients; the largest has 20. Many
references on orthogonal wavelets describe smoothes and details. The best way to appreciate this is
to consider a miniature version of the actual calculation
Numerical Recipes in Fortran xxii explains the orthogonal wavelet transform calculating/programming in
an understandable manner. The Daubechies Wavelet filter coefficients keep transforming the signal into
half smoothes and half details. For a four coefficient Daubechies wavelet, the cs (c0, c1, c2, c3) are the
coefficients, and Equation 29 illustrates the process. The column of xs is our data, the signal we are
analyzing. Equation 29 shows the matrix description of the calculation for the first level Daubechies-4
wavelet transform of a signal 16 numbers long. (The signal to be analyzed must have a length equal to a
power of 2.)

c 0

c 3

c 2

c1

c1
c2

c2
c1
c0
c3

c3
c0
c1
c2

c2
c1
c0
c3

c3
c0
c1
c2

c2
c1

c3
c0

c0
c3

c1
c2

c2
c1
c0
c3

c3
c0
c1
c2

c2
c1
c0
c3

c3
c0
c1
c2

c2
c1
c0
c3

c3
c0

c3
c0
c1
c2

c2
c1
c0
c3

x 1 s1

x 2 d1
x 3 s 2

x 4 d 2
x s
5 3
x 6 d 3
x s
7 4
x 8 d 4
=
x 9 s5
x 10 d 5

x 11 s 6
x d
12 6
c 3 x 13 s 7
c 0 x 14 d 7

c1 x 15 s 8

c 2 x 16 d 8

(29)

Matrix multiplication can be explained as follows: the number or value s1 (or the first smooth coefficient)
is the inner product of the first row of the coefficient matrix and our data as a column (the xs). Each
blank element in the c matrix is a zero. Smoothes and details are represented by s and d,
respectively. Thus,

s1 = c 0 x1 + c1x 2 + c 2 x 3 + c3 x 4

(29a)

Note that the second row of the c matrix has the same coefficients in reversed order with negative signs
on the second and fourth coefficients. The reversed alternate negative coefficients produce the details.
Thus, d1 is the inner product of the second coefficient row and our data. After the inner products for all 16
c matrix rows and the data are completed, rearrange the output column with the smoothes in the top half,
and the details on the bottom. Apply Equation 29, (this time with only 8 rows) to the top half or the
smoothes, which again breaks those into half smoothes and half details. If N is the power of 2
corresponding to the length of the signal being analyzed, you will end up with N/2 details for the first
level, N/4 details for the second level, N/8 details for the third level, and so on. When you are down to
just two details and two smoothes, the operation is complete.
To invert, or go from the ss and ds back to the xs, use the transpose of the c matrix of Equation 29
which is shown in Equation 30. (To take the transpose of the matrix, flip it around the upper-left lowerright diagonal, as can be seen by comparing the c matrices of Equations 29 and 30.

c 0

c1
c 2

c3

c3
c2
c1
c0

c2
c3
c0
c1
c2
c3

c3
c2
c1
c0

c0
c1

c3
c2

c2
c3

c1
c0

c0
c1
c2
c3

c3
c2
c1
c0

c0
c1
c2
c3

c3
c2
c1
c0

c0
c1
c2
c3

c3
c2
c1
c0

c0
c1
c2
c3

c3
c2
c1
c0

c0
c1

c1 s1 x1

c 0 d1 x 2
s2 x3

d 2 x 4
s x
3 5
d 3 x 6
s x
4 7
d 4 x 8
=
s5 x 9
d 5 x10

s 6 x11
d x
6 12
s 7 x13
d x
7 14
c3 s8 x15

c 2 d 8 x16

(30)

The wavelet is never seen; it can be calculated using the coefficients.

O. Comparison of Methods: Machinery Vibration Diagnostic Signal Analysis

Example
To demonstrate the use of the methods, we will examine some accelerometer data taken from the intake
valve cap on the head of the high-pressure cylinder of a large reciprocating compressor. We will test all of
the analyses with this data. Figure 10.5 provides some time history of this acceleration. The burst of
acceleration at 59 ms is caused by the intake valve channels slamming open. At 72 ms they close. The
other impact events are other valve opening and closing events, both intake and exhaust from the three
cylinders.
STFT

Figure 10.6 shows a contour plot of an STFT of the data. Notice the impact events appear, but are spread
out in time because the STFT responds to the impact anywhere within its window. By shortening the
window, this can be improved at the expense of reducing the frequency resolution.
Pseudo Wigner Ville

Figure 10.7 shows a contour plot of a Pseudo Wigner Ville analysis of the same data. Depending on the
number of contours plotted, it can be quite precise with regard to time. Note also that it indicates a strong
peak at 4100 Hz and 0.059 secs that does not appear in the STFT. This is a cross term.
Choi-Williams Distribution

Figure 10.8 shows a contour plot of the Choi-Williams Distribution of the same data. This method
provides the most precision of the three methods. In all three cases, many impact-like events occur, with
the most prominent and broad banded at about 0.059 sec. However, note that in the CWD contour plot,
the events show a broadband, impact-like wide frequency content. Vertical lines with broad frequency
content on the contour plot are considered to be impacts, while horizontal contours likely are ringing or
continuing vibration at that frequency. The rectangular structure of the contour plot with impacts and
ringings is common to many CWD analyses. Examination of contour plots coupled with trial and error
use of specific contour levels provides the most revealing information. Matlab facilitates this analysis.

Morlet Wavelet Analysis

A continuous Morlet wavelet analysis of the compressor time history of Figure 10.5 was computed with a
modification of the software from Torrance and Compo.18 A contour plot of the results of the calculation
is shown in Figure 10.9. It is effective at locating the impacts. The meaning of the amplitudes is not clear,
however; more work is required in this area.
Newlands Method

To use Newland's programs for the orthogonal wavelet analysis, the signal must be a power of two long.
His mapdn.m was run on the compressor data of Figure 10.5. The plot is shown Figure 10.10. The
impacts do not show up well. The 12 individual wavelets coefficient sets spread over the correct time
interval are shown in Figure 10.11; the impact events can be seen in the upper three levels. Finally,
Figure 10.12 is a plot of the individual reconstructions computed by Newlands displayn.m program.
These clearly show the impact events. The sum of the 12 reconstructions is exactly the same as the
original signal.

P. Summary
To conclude, the Choi-Williams distribution13 seems to display time frequency characteristics with the
most precision. However, the other RIDs13 also have this potential in different situations. The short time
Fourier transform (STFT) could be preferable for slowly varying time frequency characteristics and
could provide more accurate amplitude calculation. The Pseudo Wigner Ville distribution locates time
events and is quick to compute; however, it tends to introduce spurious cross terms. Wavelet methods are
a new and effective means of performing time frequency analyses. Their utility will increase as their use
increases. All of the analyses can be computed on a PC with high-level signal processing software such as
Matlab. They all seem to provide impact or discontinuity detection with precise timing information.
Further, they effectively display amplitude and frequency modulation and identify different components
of the signal.

(a)Eshleman, R.L. and Jackson, C.J. Performance Vibration, Diagnostics, Parameter Identification, and
Condition Monitoring of Rotating Machinery. Handbook of Rotordynamics, Ed. F.F. Ehrich, McGraw-Hill, 1992.
(b)Goldman, Steve. Vibration Spectrum Analysis, A Practical Approach. New York: Industrial Press, 1991.
(c)Mitchell, John S. Introduction to Machinery Analysis and Monitoring. Second Ed. Tulsa, OK: Penwell
Publishing, 1993.
(d)White, Glenn D. Introduction to Machine Vibration. Bainbridge Island, WA: DLI Engineering Corp., 1993.
(e)Wowk, Victor. Machinery Noise and Vibration Measurements and Analysis. McGraw-Hill, 1991.

(a)Braun, S. Mechanical Signature Analysis, Theory and Applications. Orlando, FL: Academic Press, 1986.
(b)Dimentberg, M.F., K.V. Frolov, and A.I. Menyailov. Vibroacoustical Diagnostics for Machines and
Structures. Taunton, Somerset, UK: Research Studies Press (Div. of John Wiley), 1991.
(c)Lyon, R. H. Machinery Noise and Diagnostics. Stoneham, MA: Butterworth Publishers, 1987.

Shannon, C.E. Communication in the Presence of Noise. Proceedings of the IRE, Jan. 1949.

McConnell, K.G. Vibration Testing: Theory and Practice. John Wiley & Sons, 1995.

Matlab for Windows, Version 4.2, 1994, High Performance Numeric Computation and Visualization Software;
MathWorks, Inc., Natick, MA.

Gaberson, H.A. Application of Choi-Williams Reduced Interference Time Frequency Distribution to Machinery
Diagnostics. Shock and Vibration. Vol 2. No. 6. 1995.

Randall, R.B. Spectrum Analyzers and Their Use. Shock and Vibration Handbook. Fourth Ed. Ed. C.M. Harris.
McGraw-Hill, 1995.

Forrester, B.D. Time-Frequency Analysis in Machine Fault Detection. Time-Frequency Signal Analysis Methods
and Applications, Ed. Boualem Boashash. New York: Wiley, 1992. 406-423.
9

(a) Janse, C.P., and J.M. Kaizer. Time-Frequency Distributions of Loudspeakers: The Application of the Wigner
Distribution. J. Audio Eng. Soc. 31. 4. (1983): 198-223.
(b) Meng, Q., and L.Qu. Rotating Machinery Fault Diagnosis Using Wigner Distribution, Mechanical Systems
and Signal Processing. 5. 3. (1991):155-166.
(c)Yen, N. Time and Frequency Representation of Acoustic Signals by Means of the Wigner Distribution
Function: Implementation and Interpretation. J. Acoust. Soc. Am. 81. 6. (1987): 1841-1850.
10

Cohen, L. Time-Frequency Distributions - A Review Proc. of the IEEE. 77. 7. (1989): 941-981.

11

Gaberson, H. A. Application of Choi-Williams Reduced Interference Time Frequency Distribution to Machinery

Diagnostics. Shock and Vibration. 2. 6. (1995): 437-444.

12

Choi, H., and W. J. Williams. Improved Time-Frequency Representation of Multicomponent Signals Using
Exponential Kernels. IEEE Trans. in Acoustics, Speech, and Signal Processing. 37. 6. (1989): 862-871.

13

Boashash, B., and A. Reilly. Algorithms for Time-Frequency Signal Analysis. Time-Frequency Signal Analysis
Methods and Application. Ed. by Boualem Boashash. New York: Wiley, 1992. 163-181.

14

Bendat, J.S., and A.G. Piersol. Random Data Analysis and Measurement Procedures. Second Ed. New York: John
Wiley & Sons, 1986.

15

McFadden, P.D. and W. J. Wang. Analysis of Gear Vibration Signatures by the Weighted Wigner-Ville
Distribution. Inst. Mech. Engineers. C432/134. (1992): 387-393.

16

Boashash, B. Advances in Spectrum Analysis and Array Processing. Vol I. Ed. Simon Haykin. Prentice Hall,
1991.

17

Application of Orthogonal Wavelets to Early Gear Detection Damage. Mechanical Systems and Signal
Processing. 9. 5. (1995): 497-507.

18

Torrance, C. and G.P. Compo. Practical Guide to Wavelet Analysis. Bulletin of the American Meteorological
Society. 79. 1. ( Jan 1998).

19

Hubbard, B.B. The World According to Wavelets. 2nd Ed. Natick, MA: A.K. Peters Ltd., 1988.

20

Daubechies, Ingrid. Orthonormal Bases of Compactly Supported Wavelets. Communications on Pure and
Applied Mathematics. Vol XLI. John Wiley & Sons, Inc., 1988. 909-996.
21

Newland, D.E. An Introduction to Random Vibrations, Spectral and Wavelet Analysis. 3rd Ed. New York:
Longman Scientific & Technical/John Wiley & Sons, 1993. 295-370.

22

Press, W.H. et al. Numerical Recipes in Fortran. 2nd Ed. Cambridge University Press, 1992. 584-599.

XI.

FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY

By: James C. Fitch, Noria Corporation

Illustrations:
11.1
11.2
11.3
11.4a
11.4b
11.4c
11.4d
11.5
11.6a
11.6b
11.7
11.8
11.9
11.10
11.11
11.12
11.13
11.14
11.15
11.16
11.17
11.18
11.19
11.20
11.21
11.22
11.23
11.24

Overview of the Application of Oil Analysis

Monitoring and Responding to Oil Condition
Wear Detection Is Secondary to Failure Avoidance
Optimum Sampling Point in Circulating Oil Systems
Options for Sampling Low Pressure Return Lines
Options for Sampling Pressurized Fluid Lines
Vacuum Pump Assists the Oil Flow of High Viscosity Lubricants
Sampling for Splash, Slinger Ring, and Flood-Lubricated Components
Using Drop-Tube Vacuum Samplers for Static Sampling
Clean Oil Sampling Using Zip-Lock Bags with Sampling Hardware
Routine Tests Combined with Exception Tests Provide Comprehensive Test Bundles by
Machine Application
Contamination Either Can Thicken or Thin the Oil, Depending on Contaminant Viscosity and
Emulsifying Characteristics
A Common U-Tube Kinematic Viscometer
An Absolute Viscometer Designed for Plant-Level Use
Infrared spectroscopy (FTIR)
Common Methods for Monitoring Additive Depletion
ISO 4406 Two-Range Number System for Representing Particle Counts in Oils
Target Cleanliness Determined Based on Need for Machine Reliability and Machines General
Contaminant Sensitivity
Particle Counters Using Laser or White Light Can Count Particles Across a Wide Range of Sizes
Pore Blockage-Type Particle Counters Can Discriminate Between Hard Particles and Other
Impurities
Particle Count Trends Vary Depending on the Machine Application and the Presence of an
Onboard Filter
Oil Temperature Influences the Saturation Point
Visual Differences Associated with Progressive Concentrations of Water Contamination
Detected via the Crackle Test
Three Common Categories of Wear Particle Detection and Analysis
Wear Metal Interpretation
A General Overview of the Combined Detection and Analysis Process
A Ferrogram of Cutting Wear
A Filtergram of Red Iron Oxide Particles (Rust)

A. Introduction
Every industrial organization has experienced the consequences of shoddy maintenance: contract
penalties, junked parts, injuries, catastrophic damage, ballooning costs, missed shipping dates, irate
customers, and sickly quarterly financial reports. Today, machinery and equipment can be maintained to
achieve useful operating lives many times those attainable just a few years ago. For oil lubricated
machinery, the opportunities surround what is commonly referred to as proactive maintenance.
Carefully monitoring and controlling the conditions of the oil (nurturing) can systematically eliminate
many of the root causes of failure. Case studies of highly successful organizations show that oil analysis

plays a central role in this nurturing activity. For oil analysis to succeed, the user organization must first
define the goals of the effort.
Some people view oil analysis as a tool to help them time oil changes. Others view it in terms of its fault
detection ability. Still others apply it to a strategy for contamination control and filter performance
monitoring. In fact, when a program is well designed and implemented, oil analysis can do all of these
things and more. The key is defining what the goals will be and designing a program that will effectively
meet them. One might refer to it as a ready-aim-fire strategy. The ready has to do with education on the
subject of oil analysis and the development of the program goals. The aim uses the knowledge from the
education to design a program that effectively meets the goals. The fire executes the plan and finetunes it
through continuous improvement.
Detecting Machine Faults and Abnormal Wear Conditions

In the past, success in fault detection using oil analysis was limited primarily to reciprocating engines,
power train components, and aviation turbine applications. The small sumps associated with this
machinery concentrated wear metals and the rapid circulation of the lubricating oils kept the debris in
uniform suspension, making trending more dependable.
In recent years, industry reports have revealed widespread success using wear debris analysis to detect
machine anomalies in stationary industrial lubrication oils and hydraulic fluids. The rapidly growing base
of knowledge coming from the burgeoning oil analysis and tribology community has contributed to this
success. Figure 11.1 provides a simplistic overview of the application of oil analysisspecifically wear
debris analysisin machine health monitoring. Specific methods are discussed later in this chapter.
Condition-Based Oil Changes

Each year, huge amounts of oil are disposed of prematurely; all at a great cost to the worlds economy and
ecology. This waste has caused a growing number of companies to discontinue the practice of scheduled
oil changes and implement comprehensive condition-based programs in their place. This, of course, is one
of the principle roles of oil analysis.
By monitoring the symptoms of oil, we are able to respond to the true and changing conditions of the oil.
Figure 11.2 illustrates this point. And, in some cases, reconditioning the oilincluding the reconstructing
depleted additivesmay be practical. Some oil analysis tests even provide a prediction of residual life of
the oil and additives. Some distressed oils can be conveniently fortified or changed without disruption of
production. In addition, those fluids that degrade prematurely can be reviewed for performance robustness
in relation to the machine stressing conditions.
Monitoring and Proactively Responding to Oil Contamination

While the benefits of detecting abnormal machine wear or an aging lubricant condition are important and
frequently achieved, they should be regarded as low on the scale of importance compared to the more
rewarding objective of failure avoidance. Figure 11.3 demonstrates this concept.
When a proactive maintenance strategy is applied, three steps are necessary to ensure that its benefits are
achieved. Proactive maintenance, by definition, involves continuous monitoring and controlling of
machine failure root causes; therefore, the first step is simply to set a target, or standard, associated with
each root cause. In oil analysis, root causes of greatest importance relate to fluid contamination (e.g.,
particles, moisture, heat, or coolant) and additive degradation.

However, defining precise and challenging targets (e.g., high cleanliness) is only the first step. Control of
the fluids conditions within these targets must then be achieved and sustained. This second step often
involves an audit of how fluids become contaminated and then systematic elimination of these entry
points. Often better filtration and the use of separators are required.
The third step is vitalproviding the feedback loop of an oil analysis program. When exceptions occur
(e.g., over target results), this feedback allows remedial actions to be commissioned immediately. Using
the proactive maintenance strategy, contamination control becomes a disciplined activity of monitoring
and controlling high fluid cleanliness, rather than a crude activity of trending dirt levels.
Finally, when the life extension benefits of proactive maintenance are flanked by the early warning
benefits of predictive maintenance, a comprehensive condition-based maintenance program results. While
proactive maintenance stresses root-cause control, predictive maintenance targets the detection of
incipient failure of both the fluids properties and machine components like bearings and gears. This
unique, early detection of machine faults and abnormal wear is often considered the exclusive domain of
oil analysis in the maintenance field.

B. Oil Sampling Methods

The success of an oil analysis program depends heavily on proper oil sampling. Experience has taught
that correct sampling cannot rely solely on human instincts or judgment. In addition, published manuals
on oil analysis often contain inaccurate or outdated methods. The sampling practice must be learned from
those experienced in the trade.
From a practical standpoint, optimum performance in oil sampling depends directly on succeeding in the
following three areas:
1. Selecting the Ideal Sampling Point

In circulating oil systems, such as the one shown in Figure 11.4a, the best (primary) location is a live zone
of the system upstream from filters where particles from ingression and wear debris are the most
concentrated. Usually this means sampling on fluid return or drain lines. Figure 11.4b shows different
options for sampling low pressure return lines. In the case of vented vertical drains from bearing
housings, there is not a solid flow of oil (air and oil share the line), making sampling more difficult. In
such cases, a hardware adapter called a sample trap can be effectively installed to trap the oil for easy
sampling.
In those applications where oil drains back to sumps without being directed through a line (e.g., a diesel
engine and wet-sump bearing and gear casings), the pressure line downstream of the pump (before filter)
must be used. Figure 11.4c shows various options for sampling pressurized fluid lines. Where possible,
always avoid sampling from dead zones such as static tanks and reservoirs. Splash, slinger ring, and
flood-lubricated components are best sampled from the drain or casing side using a short inward-directed
tube attached to a sample valve (see Figure 11.5). A vacuum pump to assist the oil flow may be required
for high viscosity lubricants, as shown in Figure 11.4d.
2. Procedure for Extracting the Sample

Once a sampling point is properly selected and validated, a sample must be extracted without disturbing
the integrity of the data. When a sample is pulled from turbulent zonessuch as at an elbowparticles,
moisture, and other contaminants enter the bottle at representative concentrations. In contrast, sampling

from ports positioned at right angles to the path of the fluid flow in high velocity, low viscosity fluids
results in particle fly-by. In such cases, the higher density particles follow a forward trajectory and fail to
enter the sampling pathway.
Machines should always be sampled in their typical work environment, ideally while they are running
with the lubricant at normal operating temperature. Likewise, during (or just prior to) sampling, machines
should be run at normal loads, speeds, and work cycles. This helps to ensure that the wear debris that is
typically generated in the usual work environment and operating conditions is present in the fluid sample
for analysis.
Sampling valves should be flushed thoroughly prior to sampling. If other portable sampling hardware is
employed, these devices need to be flushed as well. Once the flushing is complete, the sample bottle can
be filled. However, never fill a sample bottle more than three-fourths full. The headspace in the bottle
(ullage) permits adequate agitation by the lab.
With many non-circulating systems, static sampling may be the only option. Often this can be done
effectively from drain ports if a sufficient volume of fluid is flushed through prior to the actual sample, as
shown in Figure 11.5. Alternatively, drop-tube vacuum samplers could be used, as demonstrated in Figure
11.6a. Care should be taken to always sample a fixed distance into the sump. Using a rod with a marked
standoff from the bottom of the tank is a reliable way to do this. Flushing of the suction tube is also
important. To prevent cross contamination and mixing of fluids, never reuse suction tubes.
Static sampling using a vacuum sampler can be improved by installing a quick-connect sampling valve to
which the vacuum tube is attached. Often this will require drilling and tapping, preferably in the wall of
the sump or the casing. The optimal location for valves is near return lines and where turbulence is
highest. Installing a short length of stainless steel tubing inward from the valve is also helpful.
3. Dont Contaminate the Contaminant

One of the main objectives of oil analysis is the routine monitoring of oil contamination. Therefore, in
order to do this effectively, considerable care must be taken to avoid contaminating the contaminant.
Atmospheric contamination that contacts the oil sample cannot be distinguished from the original
contamination.
Avoid sampling methods that involve removing the bottle cap, especially where significant atmospheric
contamination is present. One effective method that ensures that particles will not enter the bottle during
sampling is a procedure called clean oil sampling. It involves the use of common zip-lock sandwich
bags and sampling hardware such as vacuum pumps and probe devices. Below is an outline description of
this procedure, which is illustrated in Figure 11.6b.
1. Step One: Obtaining a good oil sample begins with a bottle of the correct size and cleanliness. The
bottle must be at a known level of cleanliness and this level should be sufficiently high so as not to
interfere with expected particle counts. Some people refer to this as signal-to-noise ratioin other
words, the target cleanliness level of the oil (signal) should be several times the expected particle
contamination of the bottle (noise). For more information on bottle cleanliness refer to ISO 3722.
2. Step Two: Before going out into the plant with the sample bottles, place the capped bottles into very
thin zip-lock sandwich bagsone per bag. Zip each of the bags such that air is sealed into the bag
along with the bottles. This should be done in a clean-air indoor environment to avoid the risk of
particles entering the bags along with the bottles. After all of the bottles have been bagged, put these
small bags (with the bottles) into a large zip-lock bag for transporting them to the plant or field.

Sampling hardware such as vacuum pumps and probe devices should be placed in the large bag as
well.
3. Step Three: After the sampling port or valve has been properly flushed (including the sampling pump
or probe if used), remove one of the bags containing a single sample bottle. Without opening the bag,
twist the bottle cap off and let the cap fall to the side within the bag. Then move the mouth of the
bottle so that it is away from the zip-lock seal. Do not unzip the bag.
4. Step Four: Thread the bottle into the cavity of the sampling device (vacuum pump or probe). The
plastic tube will puncture the bag during this process, however, try to avoid other tears or damage to
the bag (turn the bottle, not the probe or pump, while tightening). If a probe device is used, it is
advisable to break a small hole in the bag below the vent hole with a pocketknife. This permits air to
escape during sampling.
5. Step Five: The sample is then obtained in the usual fashion until the correct quantity of oil has
entered the bottle. Next, by gripping the bottle, unscrew it from the cavity of the pump or probe
device. With the bottle free and still in the bag, fish the cap from the bottom of the bag onto the
mouth of the bottle and tighten.
6. Step Six: With the bottle capped it is safe to unzip the bag and remove the bottle. Confirm that the
bottle is capped tightly. The bottle label should be attached and the bottle placed in the appropriate
container for transport to the lab. Do not reuse the zip-lock bags.
Three levels of bottle cleanliness are identified by bottle suppliers: clean (fewer than 100 particles >10
m\ml), superclean (fewer than 10), and ultraclean (fewer than 1). Selecting the correct bottle cleanliness
to match the type of sampling is important to oil analysis results.

C. Oil Sampling Frequency

The objective of oil analysis, like condition monitoring in general, is to find bad news. The objective of
proactive maintenance is not to have any bad news to find. The machine and oil will generally give off
silent alarms when problems first occur. In time, as the severity increases, these alarms are no longer
silent and even the most rudimentary condition monitoring methods can reveal the problem. Of course, at
this point, a great deal of damage may have already occurred. And arresting the problem on the run
probably is no longer possible; the machine may have to be torn down and repaired.
One of the extraordinary benefits of oil analysis is its incredible sensitivity to these silent alarms and the
detection of incipient failures and faults. The methods for successfully performing oil analysis will be
described later; however, insufficient oil sampling frequency is sure to reduce the effectiveness of the
effort. You cant hear an alarm unless you are listening for an alarm or You cant catch a fish unless
your hooks in the water both demonstrate this notion. Too often we hear about oil samples being taken
every six months or annually, yet vibration readings are taken on the same machinery every month.
Scheduled sampling intervals are common in oil analysis. The frequency may be keyed to drain intervals
or operating hours. The following table lists commonly recommended intervals based on operating hours
for different machine classes.

Recommended Oil Sampling Frequencies

Diesel engines - off highway

Transmission, differentials, final drives
Hydraulics - mobile equipment
Gas turbines - industrial
Steam turbines
Air/gas compressors
Chillers
Gear boxes - high speed/duty
Gear boxes - low speed/duty
Bearings - journal and rolling element
Aviation reciprocating engines
Aviation gas turbines
Aviation gear boxes
Aviation hydraulics

Hours
150
300
200
500
500
500
500
300
1000
500
25-50
100
100-200
100-200

Proper selection of sampling frequencies considers machine- and application-specific criteria such as
those below:

Penalty of Failure: Safety, downtime costs, repair costs, and general business interruption costs
should be considered.

Fluid Environment Severity: Operation and fluid environment conditions influence the
frequency and rate of failure progress. These include pressures, loads, temperature, speed,
contaminant ingression, and system duty cycle.

Machine Age: For most machines, the chances of failure are greatest for machines approaching
break-in and after major repairs and overhauls. Likewise, the risk increases as a machine
approaches the end of its expected life.

Oil Age: Infant oils and old age oils are the highest risk. Infant oils are those that have just been
changed and are less than 10 percent into expected life. Old age oils show trends that suggest
additive depletion, the onset of oxidation, or high levels of contamination.

D. Selection of Oil Analysis Tests

After proper oil sampling has been mastered, the oil must be analyzed. Each test that is conducted by an
oil lab adds cost to the program; therefore, an optimum selection of tests must be defined. There are
generally two types of tests: routine and exception. A routine test is a scheduled test that is repeated with
each scheduled sample, such as tests for viscosity, moisture, and particle count.
An exception test is triggered by a previously non-complying condition or test result. It is conducted to
either confirm a conclusion (diagnosis/prognosis) or to obtain further information that could identify the
cause or source of the problem. Exception tests might, for instance, include specialized tests for
confirming oil oxidation or abnormal machine wear. Figure 11.7 shows how routine tests can be
combined with exception tests to provide comprehensive test bundles by machine application.
To be thoroughly effective, a well-designed oil analysis program must encompass three categories of
routine tests: (1) fluid properties, (2) fluid contamination, and (3) fluid wear debris.

Fluid Properties Analysis

This essential function of oil analysis helps ensure the fundamental quality of the lubricating fluid. The
standard to which a used oils properties should be routinely compared are the new oils properties; a
listing of each of the new oil properties should be a standard fixture on used oil analysis reports.
Examples of common tests include viscosity, total acid number, total base number, infrared for oxidation,
emission spectroscopy for additive elements, flash point, specific gravity, and rotating bomb oxidation
test (RBOT).
Fluid Contamination Analysis

Despite the use of filters and separators, contaminants are the most common destroyers of machine
surfaces, which ultimately leads to failure and downtime. For most machines, solid contamination is the
number one cause of wear-related failure. Likewise, particles, moisture, and other contaminants are the
principal root cause of additive and base stock failure of lubricants. Basic testssuch as particle
counting, moisture analysis, glycol testing, and fuel dilutionare valuable and should be performed as
directed by a well-designed proactive maintenance program.
Fluid Wear Debris Analysis

Unlike fluid properties and contamination analysis, wear debris analysis relates specifically to the health
of the machine. Owing to the tendency of machine surfaces to shed increasing numbers of larger and
larger particles as wear advances, the size, shape, and concentration of these particles tell a revealing
story of the internal-state condition of the machine.
Streamlining oil analysis can be effectively done when on-site oil analysis tools are available. For many
machines, the particle counter serves as the best first line of defense. Only when particle counts exceed
preset limits is exception testing performed. The best exception test is ferrous density analysis, such as a
ferrous particle counter. When ferrous levels are high, a failure condition exists, triggering yet further
testing and analysis. In addition to on-site particle counting, on-site moisture analyzers and viscometers
also assess important root cause conditions.

E. Monitoring Changing Oil Properties

Today there are a growing number of organizations transforming their lube programs from scheduled oil
changes to condition-based changes. In fact, many companies claim that they easily pay for the cost of oil
analysis from savings achieved through reduced lubricant consumption. Such progressive goals as these
place a greater burden of precision on the selection of oil analysis tests and alarm limits to reveal noncomplying lubricants.
Plants commonly interpret oil analysis results independent of the lab. The lab is relied on to provide
accurate and timely data, leaving the interpretation of the data and the corresponding response to plant
personnel who are familiar with the equipment, the application, and the operating conditions. Modern oil
analysis software can greatly assist such programs.
To reduce oil consumption, two plans must be implemented. The first plan is proactive in nature and
relates to the operating conditions in which the oil exists. Improving the oils operating conditions will
increase its expected life many fold. For example, with mineral oils, a reduction in operating temperature
of just 10 degrees C can double the oils oxidation stability and double the oil change interval. An
upcoming section discusses the proactive maintenance benefits of controlling oil contamination.

The second plan to reducing oil consumption is predictive in nature and relates to the timing of the oil
change. Basically, through oil analysis, key physical properties can be trended to help forecast the need
for a future oil change. Restated, by listening to the oil, we can determine when it needs to be changed.
And, if the need for an oil change occurs prematurely, an assessment of the oils operating conditions
(e.g., cleanliness, dryness, coolness, etc.) and oil formulation should be revisited. The nature of the
degradation will provide the basic clue in defining the solution.
There are numerous modes of degradation of lubricating oil. These change the fluids many properties.
Our intent is to recognize the change by monitoring the correct properties; overly extensive monitoring is
wasteful. A discussion of common oil degradation modes and the properties that can best reveal them is
presented below. In all cases, we must obtain a base signature of the normal properties in the new oil to
benchmark the trended change. These reference properties should remain as a permanent fixture on the oil
analysis report and include additive elements, neutralization numbers, infrared units (unless spectral
subtraction is used), RBOT minutes, viscosity, flash temperature, VI, and color.
Viscosity Stability

Viscosity is often referred to as the structural strength of liquid. Viscosity is critical to oil film control and
is a key indicator to a host of ailing conditions related to the oil and the machine. As such, it is often
considered a critical catch-all property in oil analysis. Essentially, when viscosity remains in a
controlled narrow band, we can assume that many things that could go wrong, in fact, are not.
Conversely, when viscosity falls outside of the band, an exception test is usually needed to identify the
nature and cause of abnormality. Therefore, monitoring viscosity serves as a first-line detection defense
for many problems.
The importance of viscosity is reflected in the fact that it is often monitored onsite by the reliability team.
It is used as an acceptance test for new oil deliveries and to verify that the correct lubricant is in use.
When viscosity changes with in-service lubricants, the cause is either oil degradation or oil
contamination. Oil degradation relates to changes to the base oil and additive chemistry (molecular
changes). Contamination of an oil can either thicken or thin the oil depending on the viscosity and
emulsifying characteristics of the contaminant. Figure 11.8 illustrates this concept.
In oil labs, viscosity is typically measured using kinematic viscometers. ISO viscosity grades shown on
lubricant spec sheets are based on kinematic viscosity in centistokes (cSt) at 40 degrees C. Kinematic
viscosity can also be represented by Saybolt Universal Seconds (SUS). Figure 11.9 shows a photo of a
common U-tube kinematic viscometer. In this device, the oil is allowed to drain by gravity through a
capillary at a constant temperature. The drain time (efflux time) is measured and translated into
centistokes. Viscosity varies nearly proportionally to drain time. Because gravity is involved, kinematic
viscosity characterizes both the oils resistance to flow (absolute viscosity) and specific gravity.
Onsite oil analysis labs frequently use absolute viscometers to obtain a precise indication of base oil
condition. Unlike kinematic viscometers, absolute viscosity measures only an oils resistance to shear or
flow (not specific gravity). Figure 11.10 shows an absolute viscometer designed for plant-level use. It
employs a capillary in its tip, through which the oil flows under constant pressure and temperature. An
inline plunger moves outward with the flow. The speed of this plunger, measured electronically, varies
nearly proportionally to absolute viscosity.
Viscosity is typically trended at 40 degrees C, although for high temperature applications such as
crankcase lubricants, a 100-degree C trend is sometimes preferred. Both temperatures are needed to
determine the oils Viscosity Index (VI). However, the VI rarely is trended for routine condition

monitoring. Monitoring viscosity at 40-degrees C, for most industrial applications, will provide the most
reliable early indication of base oil degradation and oxidation.
Oxidation Stability

When an oil oxidizes, the base oil thickens and discharges sludge and acidic materials, all of which are
detrimental to good lubrication. Oxidation is uncommon in applications where oils are relatively cool,
dry, and clean. This is especially true for low viscosity oils such as hydraulic fluids and turbine oils that
have higher oxidation stability. However, when operating conditions are severe, oil oxidation can be a
recurring problem. Where a proactive solution cannot be applied (controlling oxidation root causes or the
use of resistant synthetics), monitoring the progress of oxidation is the only option. Monitoring the
depletion of oxidation inhibitors provides an early, forecastable trend; however, it may not be practical in
some applications.
The technologies used to monitor the depletion of the oxidation inhibitors are:
1. Infrared spectroscopy (FTIR) can pick up trendable changes in phenolic and ZDDP inhibitors.
However, only a few of the laboratories report additive depletion with FTIR because of unreliable
reference oils and occasional inferences from contaminants. FTIR is addressed in Figure 11.11.
2. Total acid number (TAN) is sensitive to both mass-transfer and decomposition depletion of
ZDDP inhibitors. Interpretation of the trend requires practice and a good new-oil reference.
3. Elemental spectroscopy can show reliable mass-transfer depletion trends in ZDDP inhibited oils.
4. Rotating Bomb Oxidation Test (RBOT) provides a highly forecastable trend on additive
depletion. The time needed to run this test makes it expensive; therefore it is usually saved for
exception testing or special circumstances.
5. Voltametry is a new technology that has shown particular promise in trending the depletion (mass
transfer and decomposition) of phenolic and ZDDP inhibitors.
If trending the depletion of oxidation inhibitors is not practical, then oxidation must be monitored. The
problem with this approach relates to the fact that oxidation can progress rapidly in stressful conditions
once the antioxidant has depleted. Simply stated, with oxidation, the worst things get, the faster they get
worse. If the goal is a condition-based oil change, this translates to the need to monitor sufficiently
frequently to catch the problem in the incipient stages; not after the oil throws sludge and destructive
lubrication has occurred.
The most common and reliable methods for detecting and trending oil oxidation are listed below.
1. If a reliable new oil reference is available to the laboratory, infrared analysis (FTIR) is
dependable for mineral oils and many synthetics, including organic and phosphate esters. The
acids, aldehydes, esters, and ketones formed during oxidation are detected by FTIR in mineral
oils and PAO synthetics.
2. Total acid number (TAN) will quantify the growing acid constituents in oxidizing oils.
3. Oxidation results in the polymerization of the base oil and the discharge of oxide insolubles,
causing the viscosity to increase.
4. Color-bodies form in oxidized oils, resulting in a marked darkening of the oils color.
5. Oxidized oils emit sour or pungent odors similar to the smell of a rotten egg.

Thermal Stability and Varnish Tendency

The thermal failure of an oil can be localized or uniform. Localized thermal failure occurs when the bulk
oil temperature remains generally suitable for the selected lubricant, but oil is exposed to hot surfaces,
such as the discharge valves of recip compressors or hot surfaces in IC engines and turbo machinery.
Another common cause of localized thermal failure is associated with entrained air that is permitted to
compress, similar to air bubbles passing through a high-pressure hydraulic pump. The air bubble
implosion causes heat to concentrate, generating microscopic specs of carbon. These carbon insolubles
later condense on machine surfaces, forming what is commonly called varnish.
The varnish tendency of an oil is often difficult to detect because the majority of the physical properties of
the oil are unaffected. For instance, there is generally no change in viscosity, TAN, or FTIR for oxidation.
However, sophisticated labs that have experience with hydraulic fluids employ specialized tests such as
ultracentrafuge, FTIR for nitration, and submicron membrane tests. Other, less reliable, indicators include
oil color and paper chromatography (blotter spot test).
The uniform thermal failure of an oil results from excessively high operating temperatures attributable to
a number of causes. However, the most common reasons include overloading, inadequate oil supply,
failure of a heat exchanger, and use of a high watt-density tank heater. When any of these conditions
occur, the oil fails by evaporation (thickening), carbonization (coking, carbon stones, etc.), or cracking
(thinning) in extreme cases. Regardless, the uniform thermal failure of the oil is serious and threatens the
reliable operation of the lubricated machine.
An oils thermal stability it often measured using the Cincinnati Milacron test (ASTM D 2070-91). This
test takes a week to gestate; therefore, it is generally impractical for routine used oil analysss. Other ways
to evaluate thermal failure include viscosity analysis, ultracentrifuge, total insolubles, and oil color. Less
reliable indicators include oil odor (either a burnt, rancid odor or no odor at all) and paper
chromatography.
Additive Stability

Additive monitoring is one of the most challenging and evasive areas of used oil analysis. The reasons for
this are many and complex. A review of how additives deplete during normal use and aging offers a good
starting point.
There are two forms of additive depletion; both are common and can occur simultaneously. The first form
of depletion is known as decomposition. Here the additive mass stays in the oil, but its molecular structure
changes, resulting in an assortment of transformation products (other molecules). In some instances, the
transformation products may possess properties similar to the original additive, but in most cases
performance is degraded or is completely lost. This sacrificial form of depletion is common to what
happens over time to oxidation inhibitors, as described previously under Oxidation Stability.
The second form of additive depletion is called mass transfer. This type of depletion is often the easiest to
detect because the entire mass of the additive transfers out of the bulk oil. And, as such, any measurable
property of the additive leaves as well. For example, if the additive is constructed with phosphorous, a
downward trend of phosphorous in the used oil is a reliable indication of its mass transfer depletion.
Conversely, an unchanging level of phosphorous in used oil in no way confirms that decomposition
depletion has not occurred. With decomposition the elements of the additive remain suspended in the oil.
Mass transfer of additives occur in normal operation, usually as a result of the additive doing the job it
was designed to do. For instance, when a rust inhibitor attaches itself to internal machine surfaces it
depletes by mass transfer. It is common for additives to cling to various polar contaminants in the oil such

as dirt and water. The removal of these contaminants by filters, separators, and settling action causes a
removal of the additive as well. And, over time, aging additives can form floc and precipitate out of the
oil due to decomposition and long cold-temperature storage. The insolubles formed will migrate out, often
ending up on the bottom of the sump or reservoir.
Figure 11.12 describes common methods used to monitor additive depletion. Note that the use of
elemental spectroscopy to trend additive depletion is only effective where mass transfer is involved. It is
not uncommon, therefore, for oil labs to condemn an oil with only a 25 percent reduction in the
concentration of telltale additive elements (e.g., zinc and phosphorous in the case of ZDDP).

F. Monitoring Oil Contamination

Contamination can be defined as any unwanted substance or energy that enters or contacts the oil.
Contaminants can come in a great many forms; some are highly destructive to the oil, its additives, and
machine surfaces. Contamination is often overlooked as a source of failure because its impact is usually
slow and imperceptible. Yet, given time, the damage is analogous to eating the machine up from the
inside out. Although attempting to totally eradicate contamination from in-service lubricants is
impractical, controlling contaminant levels within acceptable limits is possible and vitally important.
Particles, moisture, soot, heat, air, glycol, fuel, detergents, and process fluids are all contaminants
commonly found in industrial lubricants and hydraulic fluids. However, particle contamination and
moisture are widely recognized as the most destructive to the oil and machine.
Particle Contamination

No single property of lubricating oil challenges the reliability of machinery more than suspended
particles. Particles are essentially a microscopic wrecking crew. Small particles can ride in oil almost
indefinitely and, because they are not as friable (easily crumbled) as their larger brothers, the destruction
they cause can be continuous. Many studies have shown convincing evidence of the greater damage
associated with small, rather than large particles. However, most maintenance professionals have
misconceptions about the size of particles and the harm they cause.
These misconceptions relate to the definition people apply to what is clean oil and what is dirty oil. This
definition also becomes the first of the three steps of proactive maintenance; the need to set appropriate
target cleanliness levels for lubricating oils and hydraulic fluids. The process is not unlike a black box
circuit. If we want a change to the output (longer and more reliable machine life) then there must be a
change to the input (e.g., improve cleanliness). For example, monitoring cholesterol does not save us from
heart disease; the things we do to lower the cholesterol may. Therefore, the best target cleanliness level is
one that is a marked improvement from historic levels.
This leads us to the second step in proactive maintenancethe lifestyle change. By effectively excluding
the entry of contaminants and promptly removing contaminants when they do enter, we can frequently
and easily achieve the new cleanliness targets. Concerns that filtration costs will increase are not often
realized because of the greater overall control, particularly from the standpoint of particle ingression.
The third step of proactive maintenance is the monitoring step (i.e., particle counting). If this is done on a
frequent enough basis, not only is proactive maintenance achieved, but a large assortment of common
problems also can be routinely detected. As such, particle counting is another important catch all type
of test, like viscosity analysis. Because of the obvious value, the particle counter is probably the most

widely used onsite oil analysis instrument. It is not uncommon to find organizations testing the
cleanliness of their oils as frequently as weekly.
The activity of routine particle counting has a surprising impact on step number two. When the
cleanliness of oils are checked and verified on a frequent basis, a phenomena known as the invisible
filter occurs, which is analogous to the saying, what gets measured gets done. Because a great deal of
dirt and contamination that enters oils come from the careless practices of operators and craftsmen, the
combined effect of monitoring with a modicum of training can go along ways toward achieving
cleanliness goals.
The ISO Solid Contaminant Code (ISO 4406) is probably the most widely used method for representing
particle counts in oils. The current standard employs a two-range number system, as shown in Figure
11.13. The first range number corresponds to particles larger than 5 microns and the second range number
for particles larger than 15 microns. From the chart, as the range numbers increment up one digit, the
represented particle count roughly doubles. At this writing, the ISO Code is undergoing revision that will
likely add a third range number plus a change to the particle size corresponding to the three range
numbers.
Although numerous methods are used to arrive at target cleanliness levels for oils in different
applications, most combine the importance of machine reliability with the general contaminant sensitivity
of the machine to set the target. This approach is shown in Figure 11.14. The Reliability Penalty Factor
and the Contaminant Severity Factor are arrived at by a special scoring system that is included with the
Target Cleanliness Grid.
Oil analysis laboratories use many different types of automatic particle counters. Likewise, there are a
number of different portable particle counters on the market. The performance of these instruments can
vary considerably, depending on the design and operating principle. Particle counters employing laser or
white light are widely used because of their ability to count particles across a wide range of sizes, as
shown in Figure 11.15. Pore blockage-type particle counters have a more narrow size range sensitivity;
however, they are also popular because of their ability to discriminate between hard particles of other
impurities in the oil, such as water, sludge, and air bubbles. This is shown in Figure 11.16.
Figure 11.17 shows how particle count trends vary depending on the machine application and the
presence of an onboard filter. Because particle counters monitor particles in the general size range
controlled by filters, equilibrium is usually achieved (i.e., particles entering the oil from ingression minus
particles exiting from filtration will leave behind a steady state concentration). When filters are properly
specified and ingression is under control, this steady state concentration will be well within the
cleanliness target. In systems with no continuous filtration (e.g., a splash fed gearbox), the equilibrium is
not effectively established (i.e., there is no continuous particle removal). This causes the particle
concentration to continuously rise. However, contamination control can be achieved by periodic use of
portable filtration systems like a filter cart.
Moisture Contamination

Moisture is generally referred to as a chemical contaminant when suspended in lubricating oils. Its
destructive effects in bearings, gearing, and hydraulic components can reach or exceed that of particle
contamination, depending on conditions. Like particles, control must be exercised to minimize water
accumulation and resulting destruction to the oil and machine.
Once in the oil, water is in constant search of a stable existence. Unlike oil, the water molecule is polar,
which greatly limits its ability to dissolve. Water may cling to hydrophilic metal surfaces or form a thin

film around polar solids co-existing in the oil. If a dry air boundary exists, water molecules may simply
choose to migrate out of the oil to the far more absorbent air interface. If water molecules are unable to
find polar compounds on which to attach, the oil is said to be saturated. Any additional water will create a
supersaturated condition, causing the far more harmful free and emulsified water. The temperature of the
oil, as shown in Figure 11.18, also influences the saturation point.
With few exceptions, the chemical and physical stability of lubricants are threatened by small amounts of
undissolved suspended water. In combination with oxygen, heat, and metal catalysts, water promotes
oxidation and hydrolysis. An overall degradation of the base oil and its additives result. The harmful
effects of water on the life of rolling element bearings and other contact zones when boundary lubrication
prevails are well documented. According to SKF, free water in lubricating oil decreases the life of
rolling element bearings by ten to more than a hundred times . . . And water is well-known for promoting
corrosive attack on sensitive machine surfaces, discharging harmful abrasives into the oil like rust.
The omnipresence of water in the environment precludes completely excluding it from entering and
combining with the oil. However, its presence can be greatly minimized and controlled through effective
maintenance practices. A proactive maintenance program needs to be established to control water. This
should start with setting a target dryness level for each different oil application. By investigating the
sources of water ingression, a plan can be implemented to eliminate the water. Occasional removal by
water absorbent filters and vacuum dehydrators may also be necessary.
A simple and reliable test for water is the crackle test (a.k.a. the sputter test). In the laboratory, two drops
of oil are placed on the surface of a hot plate heated to approximately 320 degrees F. The presence of free
or emulsified water in the oil will result in the formation of vapor bubbles and even scintillation if the
water concentration is high enough. Although this procedure is generally used only as a go/no-go
procedure, experienced lab technicians have learned to recognize the visual differences associated with
progressive concentrations of water contamination. This concept is illustrated in Figure 11.19.
Other widely used methods to detect water include:
1. Dean & Stark apparatus occasionally used by laboratories; involves a procedure of co-distilling
the water out of the oil and establishing the water content volumetrically (ASTM D 4006).
2. Karl Fischer titration commonly used by laboratories as an exception test should initial presence
of water be detected by crackle or infrared analysis. Two Karl Fischer procedures exist:
volumetric titration (ASTM D 1744) and coulometric titration (ASTM D 4928).
3. Infrared spectroscopy can reliably measure water concentrations down to about 0.1 percent.
This lower limit may not be adequate for many oil analysis programs.

G. Wear Particle Detection and Analysis

While the first two categories of oil analysis (fluid properties and contamination) deal primarily with the
causes of machine failure (proactive maintenance), this category emphasizes the detection and analysis of
current machine anomalies and faultsin other words, the symptoms of failure. The oil serves as the
messenger of information on the health of the machine. When a machine is experiencing some level of
failure, the affected surfaces will shed particles, releasing them into the oil. The presence of abnormal
levels of wear particles serves as problem detection; the particles size, shape, color, orientation, and
elements define the cause, source, and severity of the condition.

Elemental Spectroscopy

Figure 11.20 illustrates the three common categories of wear particle detection and analysis. The oldest
and most widely used of these methods is elemental analysis, done today primarily with optical emission
spectrometers. The procedure involves applying high heat to the oil. Particles in the oil will totally or
partially vaporize in the presence of the head, producing incandescent emission of light. The light is
diffracted such that spectral intensities at different wavelengths can be measured. Specific wavelengths
are associated with certain elements and the special intensities define the concentration of the elements.
The typical output from elemental spectroscopy is concentration units (parts per million) across 10 to 25
common elements such as iron, copper, lead, and aluminum. By comparing the major, minor, and trace
metals to the metallurgical chart of the machine, we can establish a fingerprint of the probable sources of
the wear. Many of the laboratories perform wear metal interpretation with the help of sophisticated
software programs and extensive metallurgical databases. Figure 11.21 applies to wear metal
interpretation.
Most oil analysis laboratories offer elemental spectroscopy as standard with all samples analyzed. The
spectrometers and technology vary somewhat, creating variations in detection range and sensitivity. The
precision of these instruments is also influenced by the size of the wear particles suspended in the oils.
During analysis, small particles vaporize more completely, while large particles (>10 microns) are almost
unmeasureable. This particle-size bias leads to occasional errorssome serious (false negatives).
One popular way to reduce the particle-size error is to use rotrode filter spectroscopy. This capability is
available with spark-emission spectrometers at many of the large commercial laboratories. A more
complete vaporization of larger particles is achieved (possible sensitivity to 20 microns) by pushing the
particles into the interstices of the disc electrode. A special fixture is required to process the sample
through the electrode prior to analysis. Because the oil is washed through the electrode during
preparation, a separate test is performed on the oil alone to measure dissolved metals and additive
elements.
Ferrous Density Analysis

The most serious wear particles are generated from iron and steel surfaces. In fact, in most oil-lubricated
pairs, at least one of the two surfaces is a ferrous surface. Typically the ferrous surface is the most
important from the standpoint of machine reliability. As a result, the oil analyst must have a thorough
understanding of the ferrous particle concentration at all sizes. This is particularly important, considering
the particle-size bias associated with elemental spectrometers. Therefore, to ensure that abnormal wear of
iron and steel surfaces does not go undetected, most commercial and onsite laboratories use ferrous
density analyzers. These instruments provide a first line of defense by detecting free-metal ferrous debris
reliably. Example instruments include:
1. Direct Reading Ferrograph: reports results in Wear Particle Concentration units
2. Particle Quantifyer: reports an index scale
3. Wear Particle Analyzer: output in micrograms/ml
4. Ferrous Particle Counter: assigns a percent ferrous to particle count results
Analytical Ferrography

Elemental spectroscopy and ferrous density analysis are just two of many methods for detecting problems
in machinery. Thermography and vibration monitoring are also effective at detecting specific faults and

modes of failure. Once there is an initial indication of a fault by any of these methods, the process must
continue to:
1.

Isolate the fault to a single component

2.

Identify the cause,

3.

Assess how severe or threatening the condition is

4.

Determine the appropriate corrective action

When problems are detected and analyzed early, they can often be arrested without downtime or
expensive repair. In fact, root causes to the most common problems are usually correctable on the run.
The key is the timing of the detection. An important part of timing is a regiment of frequent sampling
(e.g., putting the hook in the water).
Successful analysis of a current wear-related problem requires many pieces of information and a skilled
diagnostician. To this end, the practice of analytical ferrography has achieved recent prominence. Unlike
other common instrumentation technologies, analytical ferrography is qualitative and requires visual
examination and identification of wear particles. Numerous properties and features of the wear debris are
inventoried and categorized. These include size, shape, texture, edge detail, color, light effects, heat
treatment effects, apparent density, magnetism, concentration, and surface oxides.
This information is combined with other information obtained via particle counting, ferrous density
analysis, and elemental spectroscopy in defining a response to items 1-4 above. Figure 11.22 presents a
general overview of the combined detection and analysis process. Analytical ferrography is represented
by microscopic analysis in the figure.
Two methods are commonly used to prepare the particles for viewing by the microscope.If a high level of
ferromagnetic debris is detected by ferrous density analysis then a ferrogram is typically prepared. The
process involves slowly passing solvent-diluted oil down the surface of an inclined glass slide. The
instrument that does this is called a ferrogram maker. Beneath the slide is a strong magnet. Ferromagnetic
particles become quickly pinned down onto the slide and oriented to the vector lines of the magnetic field.
Non-magnetic debris deposit gravimetrically in random fashion, with the exception of larger and heavier
particles, which settle first. Approximately 50 percent of the non-magnetic particles wash down the slide
and do not deposit. A ferrogram of cutting wear is shown is Figure 11.23.
In cases where low levels of ferromagnetic particles are detected, but high non-ferrous debris is found (by
a particle counter or elemental analysis), a filtergram is preferred. Unlike the ferrogram, the filtergram
does not use a magnet; therefore, all particles are randomly deposited without size, weight, or magnetic
bias. This is accomplished by passing an aliquot of solvent-diluted oil through a membrane of about
three-micron pore size. No particles are lost from observation except those too small to be retained by the
membrane. The single disadvantage of the filtergram is the difficulty of distinguishing ferrous debris from
non-ferrous. The skillful eye of an experienced technician can usually overcome this drawback. An
example of red iron oxide particles (rust) can be seen in the filtergram in Figure 11.24.

H. Interpreting Test Results

Most machines are highly complex, consisting of exotic metallurgy and intricate mechanisms. The
numerous frictional and sealing surfaces usually employ varying contact dynamics and loads, all sharing a
common lubricant. A failure to gain knowledge about these many internal machine details as a reference
base for use in interpreting oil analysis data may lead to confusion and indecision in response to oil

analysis results. A good approach is to build a three-ring binder with index tabs for each machine type.
Include in this binder photocopied pages from the service and operation manuals, plus other accumulated
information. The following are examples of data and information to include:
1. Types of bearings in use and their metallurgy
2. Input and output shaft speeds/torques
3. Type of gears in use, speeds, loads, gear metal hardness, surface treatments, alloying metals
4. Type and location of frictional surfaces (e.g., cams, pistons, bushings, swash-plates, etc.) and the
metallurgy of surface treatments
5. Type and location of coolers and heat exchangers and type of fluids used
6. Fluid flow circuit diagrams/schematics
7. Identification and location of the types of seals in use, both external and internal
8. Possible contacts with process chemicals and types
9. Lubricant flow rates, lubricant bulk oil temperatures, bearing drain and inlet temperatures, and oil
pressures
10. Detailed lubricant specification and compartment capacity
11. Filter performance specification and location
In many cases, oil analysis data can be inconclusive when used alone. When combined with sensory
inspection information, however, a reliable, more certain, determination can be made. Likewise, the
application of companion maintenance technologies (like vibration and thermography) can help support a
conclusion prior to expensive machine teardown or repair.

I. Importance of Training
When a well-intentioned oil analysis program fails to produce the expected benefits, indifference among
plant personnel is often thought to be a main contributing factor. Although this is occasionally true, in
reality the problem is much more fundamental and deep-rooted. Unless maintenance professionals have
an understanding of the purpose and goals of oil analysis and are literate in the language of oil analysis,
they cannot be expected to carry out its mission.
This level of understanding can be accomplished through a liberal amount of training and education. This
should not simply be concentrated on a single individualit should include all of those personnel who
benefit from and contribute to machine reliability. In fact, training and education should occur at several
different levels, including craftsmen, operators, engineering, and management. Below are a few subjects
for which seminars and training classes are generally available:
1. Lubrication fundamentals and their use
2. Mechanical failure analysis
3. Proactive maintenance and root cause analysis
4. Troubleshooting hydraulic systems
5. Lubrication and maintenance of bearings and gear units
6. Oil analysis fundamentals

7. Oil analysis data interpretation

8. Filtration and contamination control
9. Wear particle analysis machine fault detection
Once these fundamentals are in place, oil analysis can move forward enthusiastically, beginning with the
development of oil analysis mission and goals. Rapid-fire corrections can be carried out in response to oil
analysis exceptions and measures can be taken to preempt their reoccurrence. In time, unscheduled
maintenance will become rare and oil analysis exceptions will be few, as the idealized machine operating
environment becomes controlled.
Finally, as the many elements of oil analysis and proactive maintenance merge together into a cohesive
maintenance activity, the benefits should be promoted. Unlike many applications of new technology,
proactive maintenance seeks non-events as its goal and reward. These non-events include oil that
continues to be fit-for-service, machines that do not break down, and inspections that do not need to be
performed. This quiet existence is the product of a highly disciplined activity; however, at times, it can be
misunderstood and its value underestimated by the casual observer. Therefore, the close association of the
activities of proactive maintenance with the benefits of proactive maintenance must be measured,
monitored, and displayed for all to view.

XII. ELECTRICAL ANALYSIS: STATIC (OFF-LINE) AND DYNAMIC (ON-LINE) 8

By: Jack Nicholas, Maintenance Quality Systems, LLC.

Illustrations:
12.1

Major Advantages and Disadvantages of Static (Off-line) and Dynamic (On-line) Motor Electrical
Condition Monitoring Methods

A. Introduction
Electrical condition monitoring of a limited nature has been possible for decades using a number of
qualitative and quantitative analysis methods. However, the process of arriving at a definitive, objective
diagnosis and prognosis regarding comprehensive motor electrical health has been difficult and time
consuming until recently. The availability of powerful, field portable computers has made it possible to
quickly and definitively assess the major parameters that may be used to characterize condition. The
computers, combined with an increasing number of software programs and small electronic packages for
applying innovative measurement methods, enable technicians to quickly gather, store, recall, analyze,
and present the mass of data needed to perform electrical predictive maintenance and diagnosis.
Computers also enable technologies long used in all industries to provide more definitive and revealing
information on the condition and predicted performance of the electrical materials in motors, generators
and connecting circuits.
Some of the most common traditional condition monitoring techniques are:

Resistance to ground (RTG) testing

Surge comparison (Surge) testing
High potential (HiPot) testing
Motor current balance analysis (MCBA)
Partial discharge monitoring (PDM)

Newer methods include:

Motor circuit analysis (MCrA)

Motor current signature analysis (MCSA)
Motor power or electrical signature analysis (MPA)
Motor flux analysis (MFA)
Motor normalized temperature analysis (MNTA)
Time domain reflectometry (TDR)

B. Motor Condition Monitoring Technologies

The technologies described below can be applied to all types of motors (and generators) and associated
circuits of any size. However, not all commercially available products used to apply them have sufficient
range in all parametric categories to meet total market requirements.

Material in this section is extracted from Predictive Maintenance by Jack R. Nicholas, Jr., P.E. and R. Keith
Young, and Motor Electrical Predictive Maintenance and Testing (Seventh Edition) by Jack R. Nicholas, Jr., P.E.
Both books are published by Maintenance Quality Systems LLC, Millersville, MD.

Resistance to Ground (RTG) Testing

For electrical circuits, the most commonly used condition monitoring method is resistance to ground
(RTG) testing. This type of measurement is most often performed off-line, but it may also be done when a
circuit is energized (on-line). RTG instruments measure DC (direct current) leakage current flowing to
and through an insulation system to ground under the pressure of a controlled (known) electromotive
force (constant DC voltage).
The test result, in ohms, is derived by dividing the known voltage by the measured current. This
relationship is known as Ohms Law. National electrical codes, industrial and professional standards
institutes, and associations provide standards for RTG values on circuits required to carry electric power.
The condition being monitored is the integrity of the insulation system isolating the power conductors
from ground.
Some users of RTG testing use a variation of this test method, which involves calculation and analysis of
ratios of RTG values taken seconds or minutes apart on the same electrical circuit. These variations
eliminate any need for temperature correction of RTG measurements. They make apparent the combined
effects of circuit capacitance and insulation polarization on total current flow caused by applying voltage
to the circuit under test.
Condition criteria exist for certain commonly used RTG ratios, such as polarization index (ratio of RTG
after 10 minutes to RTG after 1 minute of continuously applied, constant voltage) and dielectric
absorption ratio (RTG value taken at 1 minute divided by the RTG value taken after 30 seconds of
continuously applied, constant voltage).
Even more important than the RTG relationship is the Polarization Index Profile or PIP of an electrical
circuit. In this method, resistance to ground using a 500 or 1000 volt DC test voltage is plotted every five
seconds for up to 10 minutes. Weak systems exhibit a profile that has frequent dips in the resistance to
ground. Even though the ratio may indicate a good condition, the profile will indicate otherwise when
moisture is present or the integrity of the system is beginning to yield intermittently under the force of the
test voltage.
Surge Comparison (Surge) Testing

Surge or surge comparison testing involves off-line insertion of controlled electrical pulses into a motor
from capacitor or capacitor-like circuits. The return pulses, which have been damped and may exhibit
instability caused by the effects of changing inductive reactance of the motor coils or resistance in the
circuit, are evaluated to assess the condition of winding coil turn-to-turn and ground insulation in all
motors.
Surge testing also reveals phase-to-phase insulation and coil orientation (erroneous connection) problems
in polyphase motors. Evaluation of oscilloscope traces of return pulses reveal effects of any variation in
impedances of parts of the motor circuit on the inserted (DC) electrical pulses. Comparison is most often
performed with simultaneously inserted pulses into polyphase motors.
Modern surge testers include a computer for storing and later recalling oscilloscope traces of return pulses
for comparison with those from the same circuits at widely separated times. This allows more reliable
evaluation of changes in motor electrical condition to be performed by comparing traces taken months or
years apart on DC, single phase, and polyphase AC motor circuits.

Many motor manufacturers use surge testing as a quality tool. Motor rewind shops use the method for
diagnosing incoming motors. Many facilities use the technique for diagnosis, periodic testing, and more
recently, as a predictive condition-monitoring tool for motors and small generators.
High Potential (HiPot) Testing

HiPot testing involves off-line application of either AC or DC voltage higher in value than that for which
an electrical circuit is rated. The test is used to evaluate the integrity or margin of the ground insulation
system against its breakdown under electromotive forces. Guideline evaluation criteria are available from
various codes, standards, and texts on maximum values to use in conducting the testing.
The test unit operator controls voltage. Current (i.e., leakage current) flowing into the circuit from the test
instrument and proceeding through and over the ground insulation system under test is measured and
recorded. If no indication of insulation breakdown occurs at the maximum voltage established by the test
criteria, the test is terminated and declared to be successful. Motor rewind shops and facility maintenance
teams also use this method frequently.
Many surge testers, such as those by the Baker Instrument Company and Electrom Instruments, also
contain HiPot, temperature compensated RTG, and Polarization Index capabilities. The latest Baker
instrument, the Advanced Winding Analyzer (AWA), also has the ability to measure, compare, and trend
winding resistance. This topic is covered in greater detail later in this chapter.
Motor Current Balance Analysis (MCBA)

For polyphase electrical circuits, taking a set of two or three on-line current measurements, comparing
them mathematically, and calculating their percentage unbalance provides an excellent indication of
conditions affecting motor health. Current readings can be taken with simple, inexpensive instruments;
clamp-on or flexible current transformers suffice for non-intrusive sensing on many systems.
Unbalance usually results from impedance mismatch between phases of a circuit. Impedance changes can
occur, for example, as a result of motor winding degradation (turn-to-turn or phase-to-phase shorts)
and/or because of high resistance connections that can develop anywhere in the motor circuit, from the
motor control center to the motor. Current unbalance can also be caused by voltage unbalance from faults
in power generation, transmission, or distribution systems, which is rare in highly industrialized countries.
Regardless of cause, motor or generator insulation system degradation and failure will occur as a result of
overheating and accelerated aging if the unbalance is not corrected.
Partial Discharge Monitoring (PDM)

Partial (or corona) discharges are small electrical sparks that occur in void spaces in and around conductor
insulation when the electrical (force) field (voltage differential) is strong enough to initiate and sustain
them. Once the discharges begin, they further erode and enlarge voids and thermally age and convert
insulation materials into conducting contaminants. This is most prevalent inside and at the exits of stator
winding slots and between end turns.
As conditions become more favorable to electrical discharges, the discharges become more frequent and
stronger, accelerating the deterioration. Even in totally enclosed machines, the presence of partial
discharges can be detected using electronics circuits similar to that of an AM radio. The discharges, like
lightning discharges in the atmosphere, create static in the electronic circuit of the corona detector.

Partial discharge monitoring has been used for over 40 years on medium voltage motors and generators
(6kV and above) to give up to two years warning of insulation degradation leading to inevitable failure. In
lower voltage (3.3kV to 4kV) motors used in many power generation and industrial facilities, a precursor
to imminent winding insulation failure is an increase in partial discharge activity that occurs only a few
weeks or months before complete insulation breakdown.
Until a new product was introduced by Iris Power Engineering of Etobicoke, Ontario, Canada, in May of
1996, there was no reasonable way to monitor partial discharge in medium voltage motors. Motor Trac, a
continuous, on-line monitoring system, consists of up to three partial discharge sensors that are typically
mounted on terminals in the motor connection box and wired to an instrument package which may be
mounted on or at a distance from the motor. The instrument electronics use a sophisticated pattern
recognition and filter technique to discriminate between external noise incoming from the power line
and characteristic pulses created by partial discharges from the motor or generator. The instruments can
normally be installed on a motor with only a one-day outage. Data may be collected by digital readout on
the instrument or by periodic download to a portable computer.
In late 1999 and early 2000, follow-on products will be introduced by Iris Power Engineering for
monitoring variable frequency drive (VFD) motors for conditions that can induce partial discharges and
progressive damage to insulation systems. Poorly performing VFDsincluding those supposed to
develop output voltages of only 460 voltscan create much higher voltage spikes that can exceed corona
inception voltage. Even motors with spike resistant magnet wire, if not protected against corona, may
be subject to premature failure.
Motor Circuit Analysis (MCrA)

Motor circuit analysis (MCrA), also known by many large manufacturers and electric power generation
companies as Motor Circuit Evaluation or MCE 9, involves off-line measurement of four natural
electrical parameters using closely controlled AC and DC input signals from a computer-based test unit.
The measured values are: (1) resistance in the conductor path, (2) inductance, (3) capacitance to ground
and (4) resistance to ground. Analysis involves development of trends, pattern recognition, correlation of
combinations of parameters, statistical comparison where possible, calculations of unbalance, and graphs
for diagnosis of present defects.
Results may be compared to well-accepted standards (e.g., for RTG) or empirically derived guidelines.
The guidelines are based on experience analyzing tens of thousands of motors and reflect experience of
many utilities, government organizations, and manufacturers. Motor predictive maintenance personnel
can then quantitatively characterize present and predict future motor circuit electrical conditions. This
method is growing in popularity and is used in many parts of the world. The most advanced application of
this test method indicates the following:

Resistive unbalance in AC three-phase motor circuits (causing overheating and premature and
uneven stator winding failure)

Excessive resistance in DC motor circuits (which may interfere with control)

Inductive unbalance in AC three-phase motor stators and wound rotors (indicating quantitatively
the extent of shorted turns)

Loss of inductance and/or resistance in synchronous rotors (indicating quantitatively the extent of
shorts in poles of the rotor)

MCE is a registered trade mark of PdMA Corporation

Loss of inductance and/or resistance of armature winding circuits (indicating quantitatively the
extent of shorted turns)

Presence of broken or cracked rotor bars or end rings and rotor eccentricity

DC armature shorts, opens, or grounds (through quantitative and graphically presented bar-to-bar
readings and profiles)

Temperature-corrected and time-consistent resistance to ground (RTG) conditions

Build up or presence of dirt or moisture on the outside of winding insulation systems (through
correlation with capacitance to ground measurements over time)

Polarization Index, Dielectric Absorption or other ratios from RTG readings and Polarization
Index Profiles (PIPs).

In approximately 50 percent of cases of electrical failure of polyphase AC motors, the root causes were
found somewhere outside of the motor casingfrom the motor control center and associated supply
busses to the motor connection box. According to Jim Berry, vibration expert at Technical Associates of
Charlotte, Inc., the root causes of failures in DC motors are found outside the motor in even higher
proportion, perhaps up to 65 percent, based on research completed in April 1998 10. The significance of
this has only recently become apparent to many people in industry, including electrical apparatus repair
personnel and electrical condition monitoring equipment vendors and users.
As a result of this revelation, some newer Surge and Hipot testers have added a capability to monitor
resistance and (for polyphase AC motors) resistive unbalance in the conductor path. The values of
resistance are typically quite small, in the range of a few ohms for small AC and DC motors, milli-ohms
for larger AC motors, and micro-ohms for larger DC motor (armature) circuits. Cable condition
monitoring systems also have this capability.
Motor Current Signature Analysis (MCSA)

This on-line test method is known by several different commercial and generic names, many of which
abbreviate to the same set of initials, MCSA. Many vibration data loggers can be used to collect current
spectra using a signal processor or conditioning accessory and a rigid or flexible clamp-on current
transformer mounted on any phase lead. Test results are more definitive when data are collected while a
motor is loaded significantly.
The most common applications involve analysis of two AC motor line current spectra. The first spectra
analyzed after Fast Fourier Transformation is in the frequency domain around the power supply line
frequency (60 Hz in North America, 50 Hz in most other parts of the world). The second is in the
frequency domain around the center frequency, calculated by multiplying the number of rotor bars or
stator slots by the motor rotational frequency. Frequency spikes (sidebands) in the spectrum around the
line frequency spike indicate the presence and influence on current amplitude of various faults in motors,
as well as dominant mechanical characteristics of both the motor and device(s) driven by it.

10

Presentation by Jim Berry at 1998 Machinery Reliability Conference April 28, 1998, Charlotte, NC

Comparing the results to a set of empirically derived numerical relationships between current amplitudes
of spikes at the line frequency and sideband frequencies indicates the severity of the problem. Sidebands
around the slot multiplied by rotational frequency and their relative amplitudes indicate the presence and
relative severity of eccentricity problems. The most common faults detected by MCSA (but not fully
distinguishable from each other) are:

Broken or cracked rotor bars

High resistance joints in rotor bars or wound rotor conductors

Broken or cracked end rings in squirrel cage rotors

Casting porosity affecting current flow in die cast rotors

Static and dynamic eccentricity conditions between rotor and stator

Mechanical defects associated with the rotating element (e.g., bearing or gear degradation)

Motor Power (or Electrical Signature) Analysis (MPA)

This method involves measuring, conditioning, instantaneously recording and further processing for
analysis in time and frequency domains of all phase currents and voltages associated with a motor, while
on-line and carrying some amount of load. Power or electrical signature analysis provides a potentially
huge amount of data and opportunities to detect degraded conditions at very early stages of their
development. From various calculations, power factor and real, reactive, and apparent power can be
derived, tabulated, and graphically presented. Instantaneous variations of these and the basic, measured
values in each phase, one phase compared to the others and power in the overall circuit, can be used to
assess conditions of the motor, the power system supplying and controlling it, and the devices it drives.
For example, the waveform of a variable frequency drive unit can be analyzed for the presence of output
voltage spikes caused by faulty filters, degraded supply circuit electronics, or reflected voltages. The
method has been used to monitor for motor circuit electrical defects and efficiency degradation over time,
as well as analyzing the mechanical performance of valves, pumps, couplings, and other devices being
driven by or through them. Current and voltage signatures directly from the motor or from its meter
circuits may be used.
In addition to characterizing losses from internal factors such as core eddy currents, copper heating,
windage and friction, one version of this technology also presents motor losses attributable to harmonics
detected in the current waveforms. Harmonics are a growing threat to motor health as more and more
electronic circuits are added to plants. Everything from fax machines to desktop computers and
programmable logic controllers add to the harmonic levels in modern plants.
Motor Flux or Leakage Flux Analysis (MFA)

Magnetic flux created by currents in motors is concentrated largely inside the enclosure or shell.
However, some magnetic field may be detected in the space near the outside of most motors while they
are operating (on-line). This leakage flux varies with conditions found inside the motor and the
condition of power supplied to it.
Over the years, various investigations have resulted in some correlation between trended variations in the
leakage flux field and defects such as broken rotor bars and stator turn-to-turn or phase-to-phase shorts.
No commercial version of this technology was available until 1995, when Computational Systems
Incorporated (CSi) introduced a patented method for consistently positioning a flux detection coil in the
same place on motors.

Analysis involves comparing conditioned output signals from the flux coil. The signals are presented on a
Fast Fourier Transformed frequency spectrum that typically runs from 0 Hertz to 10 or 20 Hertz above
two times the line frequency. Specific frequency lines in the spectrum of flux amplitudes can be related to
particular types of defects. As the amplitude of a particular line increases, it indicates that the identified
condition is growing worse. Sideband analysis similar to that described in motor current signature
analysis is also used, although there is no direct correlation established (or revealed) yet between the
numbers used in each method.
Motor Normalized Temperature Analysis (MNTA)

Most motor defects are accompanied at some point in their development by increased temperature. In
applying MNTA, temperatures are taken at specific points, such as on the outside of an end bell closest to
where a bearing is located, an outlet air vent, or the outer skin of the casing while the motor is operating.
The measured temperatures must be normalized to account for load and ambient conditions and are
trended over time.
CSi has developed a software program (part of the Motor View II product line) to aid in normalizing and
analyzing temperature data. Increasing trends, for example, usually indicate the onset of degradation or an
unsatisfactory condition that can be corrected. Effects of location relative to direct sunlight, of design
(e.g., outer skin thickness and material used, internal airflow patterns, and frame design), and of surface
paint color must all be accounted for or mitigated. Many critical motors are equipped by the manufacturer
with temperature sensors at key locations, making the application of this method of motor condition
monitoring somewhat redundant. However, there are many critical motors without this capability that are
candidates for monitoring with relatively low cost, hand-held temperature measurement devices.
Typical conditions manifested by increased temperatures in motors include:

Degrading bearings
Rotor faults (broken or cracked bars and end rings)
Clogged ventilation filters or screens
Stator winding faults (turn-to-turn and phase-to-phase)
Couplings that are misaligned or need lubrication
Unbalanced currents that are caused by high resistance in the motor circuit

Time Domain Reflectometry (TDR)

Some electrical condition monitoring systems include time domain reflectometry (TDR) capabilities. The
principles of TDR are somewhat like those of active pulse-echo sonar or radar. A voltage pulse is inserted
into an electrical circuit. The voltage pulse will travel to the end of the circuit unless it encounters a
defect, such as a high resistance connection. The defect will reflect a portion of the energy of the inserted
pulse back to the origin. The time it takes for the reflected voltage signal to make the round trip and return
to the insertion point is measured. One half the measured time is converted into distance, using the known
velocity of the voltage pulse in the material of the current carrying conductor.
The result tells the condition monitoring equipment operator, to within a few feet, where in the circuit a
defect is located. Systems such as those produced by the ECAD Division of CM Inc., and by CHAR
Services, Inc., incorporate TDR capabilities and enable measurement of resistance in the conductor path,
capacitance-to-ground, resistance-to-ground, and inductance. All of these measurements are performed
off-line, with the circuit de-energized.

C. Advantages and Disadvantages of Off-line and On-line Electrical Testing

There are advantages and disadvantages to off-line and on-line testing. The major considerations are
summarized in Figure 12.1.
Figure 12.1: Major Advantages and Disadvantages of Static (Off-line)
and Dynamic (On-line) Motor Electrical Condition Monitoring Methods
Off-line Monitoring
Advantages

1. Active, known, and controlled

test signals used
2. Fewer extraneous signals on
de-energized motor circuits to
mask test results

Disadvantages

On-line Monitoring
1. Passive no test signals needed
2. Monitoring can be done without
interfering with production
3. Hookup and/or data collection may
be achieved for some methods and
installations without special electrical
safety considerations (MFA, MNTA)

1. Motor must be shut down to

perform testing, which may
interfere with production

1. Many normal conditions provide test

indications which mask fault
indications (MCSA, MPA, MFA)

2. Circuit must be proven safely

de-energized before hookup of
ALL off-line methods

2. Test hookup may be difficult to

achieve safely without motor
shutdown at some installations for
some on-line methods (MCBA,
MCSA, MPA)

3. Test signals used are not

always the same for different
vendors
4. Residual magnetism may
influence some results (MCrA)

3. Local conditions may influence test

results (MNTA)

XIII. DECISION SUPPORT

By: Tom Brotherton, Orincon Corporation

Illustrations:
13.1
13.2
13.3
13.4
13.5
13.6
13.7

A.

Machine Health versus Time

Fuzzy Set Example
Model-based Fault Detection/Analysis Example
Multi-Layer Perceptron (MLP) Architecture
The Sigmoid Activation Function
Radial Basis Function (RBF) Neural Net Architecture
Binary Tree Rule Example

Introduction

This chapter describes decision support. Decision support takes raw input data and extracts information
that is useful for equipment management. Automation of this function is becoming increasingly important
as new sensors, higher sample rates, and easier collection has lead to an explosion of data to process and
analyze.
The input data can take many forms. For example, it can include outputs from sensors, features developed
for sensor data, historical and trend data, other processing system outputs, and manually completed
reports.
The output from the decision support system can also take many forms pertaining to the health of the
part or system being monitored. Figure 13.1 illustrates an example of several decision support machine
health monitoring and prediction/prognosis problems. The figure shows the trajectory of a machines (or,
a machine parts) health as a function of time. When the machine is new, ideally its health is 100 percent.
As time goes on and the parts begin to wear out, its health, defined here somewhat arbitrarily, drops.
Figure 13.1
Machine Health versus Time. HF(t) is the machine health parameter predicted for the failure point.
Note that seeded fault data, while being different from normal, may not be realistic, as it does
not fall on a normal machine health trajectory.
The following aspects of the problem may be considered:

Current machine health determines where the machine and/or its parts are on the curve shown in
Figure 13.1. Is the part normal or does some fault condition exist?

Novelty detection determines if the machine has moved away from what is considered normal
operations or known fault conditions.

In prediction and prognosis, we attempt to predict how much time we have before a particular
fault will occur and, by extension, how much time we have before we should replace the affected
part.

There are essentially two different approaches for the development of decision support techniques. The
first involves systems that embody rules of thumb, which have been developed and refined by human
experts. Examples of these systems are rule-based expert systems and fuzzy logic systems. The second

approach is to use systems that learn by examining real data that contain nominal and known fault
conditions. Examples of these are neural net and data mining systems.
Rule-based systems are good because they contain information for anticipated fault events that have not
yet occurred on the machine being monitoring. This contrasts with to learning systems. They are only
as good as the data from which they have been trained.
On the other hand, learning systems are good because they can process a wide variety of data types and,
potentially, perform better than rule-based systems because they exploit the nuances in the data that are
not covered by general rules. This is particularly true for new sources of data for which expert analyses
and rules have not been developed.
The fusion of these two systems could achieve the best of all worlds.

B.

Artificial Intelligence, Rule-Based Expert Systems, and Inference Engines

By definition, Artificial Intelligence (AI) programs are intended to give the appearance of human
behavior. The beginning of AI was the development of programming languages (e.g., LISP) to facilitate
programming of symbolic information. AI programming languages supplied tools that enabled programs
to be built that closely resemble human logic and expertise in their implementation. These programs are
called expert systems. 11
Rule-based expert systems are one of the most commonly used approaches for developing expert systems.
In this approach, rules are used to represent heuristics, or rules of thumb, that specify a set of actions to
be performed for a given situation. We usually think of the rule-base expert system as a list if and
then statements. The if portion of a rule is a series of patterns that specify the facts (or data) which
cause the rule to be activated. The expert system tool provides a mechanism, called the inference engine,
which automatically matches facts against patterns and determines which rules are applicable. The if
portion of a rule can actually be thought of as the whenever portion of a rule since pattern matching
always occurs whenever changes are made to facts. The then portion of a rule is the set of actions to be
executed when the rule is applicable. The inference engine selects a rule and then the actions of the
selected rule are executed (which may affect the list of applicable rules by adding or removing facts). The
inference engine then selects another rule and executes its actions. This process continues until no
applicable rules remain.

An example of a popular system is CLIPS. 12 CLIPS stands for C Language Integration Production
System. It was developed in mid-eighties in NASAs Johnson Space Center to enable integration of stateof-the-art artificial intelligence (e.g., rule-based) programs with existing regular programs. CLIPS is used
by NASA and a number of other DoD applications. The CLIPS inference engine supports truth
maintenance, dynamic rule addition, static and dynamic constraint checking and customizable conflict
resolution strategies.
CLIPS rules come in the form of:

11

Simple (string) fact assertion and retraction

J.C. Giarratano and G.D. Reley, Expert Systems: Principles and Programming, Third Edition, PWS Publishing,
1998.

12

Ibid.

Templates for advanced fact representation

If-then rules (productions)

Objects and instances

Expert systems have a major advantage over all of the learning systems, in that real data is not required
in order to develop the system. However, a knowledgeable expert is required. Furthermore, the rules tend
to follow the structure of the rule development environment that is being used. As such, potential nonlinear and correlated relationships maybe lost.

C.

Fuzzy Logic

Fuzzy sets were introduced by Zadeh in 1965. 13 A great collection of papers and insights can be found in
Bezdek and Pals Fuzzy Models for Pattern Recognition: Methods that Search for Structure in Data. 14
Applications to real industrial problems are contained in Indusrial Applicatons of Fuzzy Logic and Intelligent Systems. 15
Fuzzy sets were first invented as a means of generalizing conventional set theory to model the realities of
everyday life. For example, the fuzzy set of operating temperatures of a machine can be {hot, cold} while
the actual measurement is a crisp number (e.g., T=516.7 degrees). Based on T, is the machine hot or
cold? Fuzzy set theory would assign a membership to both hot and cold. Figure 13.2 shows an
example. Here T is a measured value. It is assigned to membership to the class cold of 0.3. The
same temperature is also a member of the class hot with a degree of membership of 0.8.

Figure 13.2 Fuzzy Set Example

Fuzzy set theory has been extended to include fuzzy logic for pattern recognition, control, and decision
support applications. The critical step is the development of methods for aggregating fuzzy measurements
to form fuzzy rules. Standard software packages are available for the development of fuzzy systems. The
fuzzy membership functions, as shown above, can be developed by hand using the developers
intuition/expertise as the shape of the functions. Or the functions can be estimated from training data, with
the developer specifying the function parametric shape (i.e., trapezoid or Gaussian) and estimating the
parameters from the data.
Fuzzy logic has been shown to work very well for a variety of control problems. Those problems typically
involve a small number of inputs and outputs and the rules to be developed are well understood. As the
system becomes more complicated, this is not the case, and training of the system with example data
may be required. The advantage of fuzzy rules over those developed with an expert system is that the
degree of membership is carried throughout the computation and a hard decision is only generated at
the very last step.

13

Zadeh, 1965.
J.C. Bezdek and S.K. Pal, eds, Fuzzy Models for Pattern Recognition: Methods that Search for Structure in Data,
IEEE Press, 1992
14

15 J. Yen, R. Langari, L.A. Zadeh, Indusrial Applicatons of Fuzzy Logic and Intelligent Systems, IEEE Press, 1995

D.

Model-Based Approaches

Model-based approaches use an explicit mathematical model for the machine being monitored. 16 The
models can be physical models or statistical models. 17, 18 Physical models are useful in accounting for all
operating conditions. Statistical models are developed from collected input/output data; therefore, they
may not account for conditions that have not been recorded and, thus, not include them in the model. The
statistical model may be linear or non-linear, stationary or time varying, single or multi-channel, and
simple or complex.
Figure 13.3 shows an example of a simple model-based system for decision support. The model in the
figure has been developed off-line and is either physical or statistical, as described above. Here the model
is used to predict the output of the system being monitored. Computing the difference (the residuals)
compares the model predictions and real system outputs. For nominal operation, the residuals are ideally a
small variance, white-noise data stream. If that is not the case, the residuals are an indication of the fault
condition.

Figure 13.3 Model-Based Fault Detection/Analysis Example

Model-based approaches are as good as the models developed. For very simple systems, for example,
with a single input/output pair that is linearly related, the resulting model is likely a good one. As inputs
and complexity of the real system grows, the chances of the model being exact diminish. For statistical
models, data from all modes of operation and fault conditions must be collected. This is often not
possible. Physical models potentially cover these holes. However, to validate a complicated physical
model, data from all modes of operation and fault conditions must also be collected.

E.

Neural Networks

Artificial neural networks or neural nets (NN) attempt to model the brain with many densely
interconnected simple processing elements. Details of neural net processing and development are well
described in several good books. 19, 20 Two papers provide effective introductions to the two most popular
neural nets, the multi-layer perceptron (MLP) and radial basis function (RBF) neural nets. 21, 22
Neural nets have proven useful in a variety of areas for decision support. They are ideal for developing
non-linear transformations to map input data to outputs. As a result, they can be used for classification as
well as prediction.
Figure 13.4 shows an example of an MLP neural network. It is called a 3-layer MLP. It has an input layer,
2 hidden layers, and an output layer. Each layer in a neural net consists of a collection of processing

16

J.J. Geitler, Fault Detection and Diagnosis in Engineering Systems, Marcel Dekker, Inc., 1998.
G.E.P. Box and G.M. Jenkins, Time Series Analysis: Forecasting and Control, Holden-Day, 1976.
18
S.L. Marple, Jr., Digital Spectrum Analysis with Applications, Prentice-Hall, 1987.
19
Haykin
20
Hecht-Neilson
21
R.P. Lippmann, An Introduction to Computing with Neural Nets, IEEE ASSP Magazine, pp 4-22, April 1987.
22
D.R. Hush and B.G. Horne, Progress in Supervised Neural Networks: Whats New Since Lippmann? IEEE
Signal Processing Magazine, Jan 1993.
17

elements (PEs). Each PE in the net collects the values from all of its input connections and performs a
predefined transformation of the input data. For example the output x at a particular node is given by

x = F ( wi y i )
where yi are the inputs and wi are the connection weights. F is a non-linear functional which applied to the
input to form the output. Figure 13.5 shows an example F (the sigmoid function).
Neural nets are trained by presenting examples of input/output pairs of data. For most applications, the
output data has been labeled as to the correct class. During training the parameters in the neural net are
adjusted until the neural net classification performance reaches an acceptable level.
MLP NNs have been excellent for non-linear function approximation and for solving classification
problems. They have also been shown to be Bayesian classifiers. However, they are not capable of
performing novelty detection. That is, they cannot detect the presence (at the inputs) of data for which it
has not been trained. In addition, as the neural net grows in size, training can become a complicated issue.
For example, how many hidden layers should be included, what is the number of PEs that should be used
for each of the layers, and which features should be retained. Furthermore, the user does not know what
the features on the input data were that lead to the nets performance.
In contrast to the MLP is the RBF neural net. The architecture for the RBF NN is shown in Figure 13.6.
For the standard implementation of the RBF, all of the PEs in the middle layer have a multi-dimensional
Gaussian shape. The output layer is the weighted sum of the basis function outputs.
The RBF can be thought of as a nearest neighbor classifier that can perform novelty detection. This is
important for many applications, because we can benefit from the system alerting us when inputs do not
match anything seen before. The RBF can also tell the user why the neural net performed as it did.

Figure 13.4 Multi-Layer Perceptron (MLP) Architecture

Figure 13.5 The Sigmoid Activation Function

Figure 13.6 Radial Basis Function (RBF) Neural Net Architecture

Both the MLP and RBF NNs require real data that represent known fault classes to be trained. As such,
when first used for a decision support problem, they likely will not operate very well. However, as data
and examples of fault classes of interest are collected, the neural net can be adapted using the new data.
Over time the neural nets performance should become very effective.

F.

Data Mining/Automated Rule Extraction

Data mining and automated rule extraction are synonymous. Data mining/rule extraction has been in
development in the financial community for a number of years. 23, 24 Financial managers are interested in
processing data to target customers for marketing. There are a variety of commercially available software
packages that can perform data mining. Those tools can be applied to decision support processing as well.
In most rule extraction processing, rules are extracted from input data by brute force examination of the
data. Input data must consist of fault class labeled samples.
Rule extraction has several advantages over neural nets:

Comprehensibility it can be understood by humans

Explanation it tells the user why the system did what it did

Validation it allows the user to explore all possible sets of inputs to ensure the system operates
as expected under all conditions

Discovery it may find something new in the features of data that was not previously known

As mentioned, rule extraction is performed by brute force examination of the input data. Typical rules are
found as a binary tree. Figure 13.7 shows an example of a binary tree rule.

Figure 13.7 Binary Tree Rule Example

Data mining is a powerful new method with which to develop classifiers. However, as with the other
trained classifiers, real data representative of all of the conditions under consideration must be
collected.
Recent development has focused on combining rule extractors with models. 25 There the model is
considered an oraclethe truth. The rule extractor then queries the oracle with inputs and analyzes the
oracle outputs to develop rules. The oracle model can be physical, statistical, neural net based, or any
combination. In general, this approach performs better that neural nets. Furthermore, the models can fill
in holes in collected data for unrecorded fault conditions. Care must be taken to relate the new rules back
to reality.

23

L. Breiman, J.H. Friedman, R.A. Olshen, and C.J. Stone, CART: Classification and Regression Trees, Chapman
and Hall/CRC, 1993 (CRC reprint 1998).
24
PC AI Magazine. This magazine always contains a number of practical application articles in print and on its
website: www.pcai.com/pcai.
25
Craven

XIV. THE FUTURE

By: Chris Staller, ICM Technologies, Inc.

A.

Introduction

The future of Condition Monitoring from an Equipment Lifetime Management perspective will be
evolutionary, following a similar path as the evolution of Distributed Control Systems (DCS).
Forty years ago, all control systems were pneumatic, hydraulic, or electro-mechanical. These control
systems usually were housed in local production unit control rooms. They were very large, not always the
most accurate, rarely adaptable, and completely unintegrated. (During an upset, control operators had to
dance between controllers, adjusting this and changing that to bring the process back under control.) Then
in the mid-60s, the transition from electrical to electronic occurred, as lower cost silicon electronics began
to appear. Accuracy improved, size and cost decreased, distance from transmitter to controller was no
longer important, and the centralized control room was born.
The advent of microprocessor-based systems, Programmable Logic Controllers (PLC), Distributed
Control Systems (DCS), and software-based Graphical User Interfaces (PC-based GUIs) produced a
second major change in control system architecture. Information from an entire control board could be
displayed on a video screen. Control loops could be integrated and made interdependent. Today, we have
unmanned pumping and gas compressor stations, on-demand power generation, and truly distributed
control and information systems. Todays control rooms actually are information centers that are remotely
tied to field-based sensors and distributed controllers. Enter the Internet revolution of the mid-90s with
web-based control and remote access to data anywhere in the world, and a new transition occurredthe
DCS Supplier became an Enterprise Asset Manager.
Condition Monitoring (CM) systems often were the first electronic systems in hydrocarbon processing
and power generating facilities. Unlike other technologies, though, Condition Monitoring has not kept up
with control architectural and functionality advances. CM has benefited greatly from lower cost
electronics, microprocessors, and Digital Signal Processing (DSP) chips, as well as software and the
Internet, but the gains have been limited to primarily cost and size. The real advantages of
communications and integration between Condition Monitoring technologies and control, maintenance,
and enterprise systems have been slow in materializing. This slow progress in CM has been a failure of
vision, rather than technology.
Future change will include transitioning from a centralized methodology to a distributed approach. This
change will occur in both the online and offline CM/CBM technology arenas. Currently, online systems
typically are rack-mounted, continuous protection or multiplexed diagnostic systems. They all share two
common characteristicsthey are centralized and their implementation is very complex. There are
distributed input/output (I/O) modules, muxes, and other shared resources; however, they remain
independent, standalone systems. This will change in the future.
In terms of walk-around (off-line) predictive programs, much of the time and money spent on these
programs is in the collection of data. This occurs primarily because most monitored equipment is in good
condition and measurements do not change. As a result of the large effort (labor) required to locate the
few measurements that are changing, many programs are being reduced or cut altogether. In general, offline systems are too costly considering the time and effort required to obtain relatively minimal results. If
the data could be cost-effectively collected and processed via the existing infrastructure, this problem
could be solved and many walk-around programs could be restricted to specific, troublesome machinery

where advanced diagnostics are required. The toolbox market of analyzing machinery and tools will
always exist.
Future CM technologies will take the form of smart or intelligent I/O modules that can be cost effectively
distributed across the existing plant information system/network. They will need to be smart to
accommodate the complexity of CM/PdM data (e.g., vibration, lube oil condition, motor current analysis,
etc.).
Typical process information consists of scalar measurements such as temperature, pressure, and flow.
Some of the recent digital implementations include information such as scaling, linearity, zero and span,
and diagnostic messages of sensor and loop condition. Although the picture has become clouded by the
advent of proprietary DCS and arguments over a unified Fieldbus standard, both pneumatic and electrical
(4-20Ma) process control systems traditionally have been fully open and assembled from a variety of
related and non-related (single or multivendor) components.
Data required for effective CMparticularly vibrationis far more complex than process data. For
example, a technology that has proven successful for early detection of rolling-element bearing flaws
requires detailed examination of a dynamic vibration signal to 10 kHz or 20kHz. Monitoring the start-up
of a critical turbomachine may require simultaneously recording 16 to 20 channels of dynamic vibration
to 500 or 1,000 Hz. The bandwidth requirements of raw CM data preclude its transmission over any
shared, current, or anticipated plant network. As a result of its complexity, CM data is typically
conditioned (i.e., filtered, scaled) and possibly transformed (i.e., FFT) before being presented to a user
(i.e., operator).
Technology exists to condition CM information in remote data concentrators or transmitters. Future CM
systems will provide conditioned information as remote I/O to a control system, enterprise system, or
another CM system (via open systems). Smart conditioners must take advantage of the same
communication technology available to the DCS. Besides a significant reduction in installation costs (the
real inhibitor to any CM system), the ability to access critical and complex data means the information
can be more effectively utilized. This will become more apparent as these modules transition from being
smart (able to coexist as remote I/O) to being intelligent (capable of two-way communications and
programmable remote equipment diagnostics).
Intelligent conditioners (and ultimately the sensors themselves) are devices that will not only condition
data, but will also be able to understand the information. Intelligent sensing systems of tomorrow will be
able provide alarming functions, advanced diagnostics (e.g., FFTs and Cepstrum), and even machinery
analysis (e.g., identification of imbalance conditions, motor faults, and pump inefficiencies). Ultimately,
these same intelligent transducers/conditioners could share (distribute) their computational power and act
together to provide condition indication on a particular piece of machinery or an entire machine train.
Consider the possibilitiescurrently only process data (i.e., amps, temperatures, pressures, and flows) are
used to (empirically) determine the condition of a process. However, what aspects of equipment condition
determine whether the process is available and at what capacity? Ultimately, the future of distributed CM
information will result in an integrated condition indication system in which both operators and
managers, via the decision support system of the DCS or enterprise systems, can make business decisions
about the process and the assets used in the process.
Using todays parallels, tomorrows system will include integrated machinery protection via a remote
network of intelligent sensors and transmitters, an indication of machinery condition that makes sense to
an operator (e.g., good/bad indication or a 0-10 rating), and access to detailed predictive and diagnostic
information over a secure intranet. This same condition indication information can be used by plant

management to determine where to improve quality, enhance their return on net assets or capital
employed, increase production capacity, and maintain safety and environmental conformance. By using
the same network of smart sensors/transmitters, traditional diagnostics and service functions can be
handled across a larger variety of machinery types and by a variety of service suppliers, including the
growing number of OEMs offering O&M contracts. This translates to growth for the CM market.
What must happen to enable the systems of tomorrow?
1. CM must transition from a centralized processing architecture to a distributed architecture.
2. Smart conditioners (and ultimately sensors) must be developed that power, input condition, filter,
and rectify data and share a common interface standard that allows remote access across standard
industrial data highways.
3. Intelligent conditioners must be developed that process conditioned data into alarms and advanced
diagnostic functions and allow for distributed processing capabilities.
4. A network of intelligent sensors/conditioners must be used to provide consolidated condition
indication to the operator and decision support systems for management.
5. The industry must recognize that Condition Indication is as valuable as any other process variable and
is an integral component to the business model by which they operate and make financial decisions.
When will these advancements occur?
Technologically speaking, the capability to implement the functionality described is already available,
with the exception of a common interface standard for remote access to sensors and conditioners. The real
test will be in the vision of the industry to recognize the tremendous growth potential of condition
indication.

B.

Smart Sensors

Where does the transition from smart to intelligent conditioner to transducer occur? Thats of
secondary importance; the real goal is intelligent processing of data with the ability to access the
information via existing communication interfaces. However, the race to develop smart sensors is
already well underway.
IEEE 1451

The IEEE 1451 Standards Committee is a collection of working groups tasked with formulating a smart
transducer (sensor and actuator) interface that is both network capable and network independent. The
standard will provide a mechanism by which transducers can be physically and synchronously connected
to a single bus in a multi-drop configuration, thus limiting the amount of wiring and connections to the
bus. Hot swapping of sensors is a major requirement.
At the heart of the standard is the Transducer Electronic Data Sheet (TEDS). This is a digital record that
stores information such as manufacturer, date codes, calibration data, sensitivity, scale factor,
linearization, and filter coefficients. The TEDS resides in the Smart Transducer Interface Module (STIM)
and can be accessed via a network node. The interface between the transducer and the network node
requesting the information is the Transducer Independent Interface (TII).

The physical connection between the TII and the plant network is made by a Network Capable
Application Processor (NCAP). Sensor information is either requested or actuator information is sent over
the plant network via the NCAP, through the TII where the STIM processes the request. This
configuration is shown in Figure 14.1.

Figure 14.1. Block Diagram Depicting IEEE 1451 Interface

A series of productssmart sensors and the various NCAPs to interface to themare already available.
One product in particular provides a 10-Base T Ethernet connection with a built-in thin Web client engine
running onboard the NCAP. This specific implementation provides off-the-shelf interconnectivity, either
directly or via the variety of Web-based tools currently available. IEEE 1451 has done for hardware what
Java has done to software!
The standard is just a few years old and already hundreds of products are planned. Much of the push will
be in the diagnostic arena, where self-identification and synchronous data and control are a must (e.g.,
modal analysis and multi-variant control applications). Soon OEMs will be designing such technology
into their productsfrom silicon-based sensors (i.e., accelerometers) to smart interfacesand
enterprise operators will need the technology to communicate with the OEM products they employ in
their daily operations. Such technology makes a lot of sense in regards to warranty, service and
maintenance contracts, and insurance and regulatory requirements (e.g., aerospace, nuclear, and
transportation). IEEE 1451 offers a standardized connectivity and communication protocol that will ease
sensor installation, integration, maintenance, and upgrade and provide plug and play simplicity. Smart
sensors are another step toward effective equipment lifetime management.

C.

Open Systems

Open Systems
Systems from multiple suppliers that are capable of automatic communication (connectivity) and
information exchange (interoperability) through published conventions without any proprietary
or system-specific links.

Source independent, self-integrating, standardized, open systems provide maximum power and efficiency.
The same philosophy has driven the success of the personal computer far beyond what anyone could have
imagined ten years ago. This concept provides total access to an incomprehensible array of information
on the Internet.
Where possible, proprietary closed technology and products will be phased out of the architecture over
time and will be replaced with open and standards-based products and technology. Open standards will be
the first selection criterion for all information and automation products and will be critical for the
emergence of a connected economy. Standards will be defined for all architecture elements, including
automation, networks, infrastructure, databases, development environments, and integration middleware.
What will this mean for equipment information? Technology can provide free information exchange of
mechanical condition, performance, operating, and maintenance records between condition assessment,
maintenance management, process control, and enterprise systems. Operators and maintenance mechanics
will be able to see a machines conditionhow it is operating compared to how it should be operating
and any changes that have occurred. They will have full access to history, task instructionsincluding
parts listsand safety precautions. If a problem occurs, an analyst will be able to recover measurements
and the exact sequence of events leading up to and during the problem.
Open systems provide two more significant benefits. They will offer maximum headroom for future
growth based on increased experience and new technology. Second, less system-specific training will be
needed when everyone adheres to a common operating standard. This single factor could reduce
installation and support costs by more than 25 percent. Both benefits have become evident in the PC
market, where commonly accepted Windows standards have shortened users learning curve and focused
ongoing development efforts.
There are active efforts to provide open software solutions. Two organizations, in particular, have
encouraged such efforts: MIMOSA and OPC.

D. Open Standards Organizations

MIMOSA

The Machinery Information Management Open Systems Alliance (MIMOSA), formally introduced in the
fall of 1995, is a non-profit consortium of users of industrial production, process, and manufacturing
equipment, as well as the suppliers, system integrators, and technology and service providers of operating,
control and maintenance information. MIMOSA advocates an open exchange of information between
condition assessment, process control, and maintenance information systems through published,
consensus-based conventions. The objective is to gain the greatest value by combining vital condition
information from multiple sources for collective evaluation, reaching accurate determinations of current
condition and projected lifetime, and communicating the results in a useful, understandable format.
MIMOSA exists to provide a neutral, dynamic, and flexible framework upon which interoperable
applications capable of sharing data may coexist. Also acting as an industry facilitator on the benefits of
integrated machinery information, MIMOSA has established an information flow model, shown in
Figure 14.2.

Figure 14.2 MIMOSA Information Model

Within this model, MIMOSA provides links between location and asset information. A location
may be a geographical plant, unit, or equipment designation in a P&I drawing. In the power industry,
locations are usually referenced as machine trains (e.g., Boiler Feed Pump A or Turbine Generator B).
A location is an area occupied, sometimes temporarily, by a specific asset. For example, a textile
process may have requirements for hundreds of identical winders. The position of each winder is
designated by a specific location in the process (e.g., Winder #321). When the plant is constructed, an
asset, is installed at each physical location. If the winder is removed for an overhaul and replaced
with a spare, Winder #321 is still the location in the plant, yet the physical asset occupying the location
has changed. In some cases, the original asset may be repaired, stored in inventory, and later reissued for
reinstallation at a different location.
The ability to track equipment information by both location and asset is important to evaluating
reliability and accomplishing RCFA, because knowing whether a given failure is connected to the
location or asset is essential. For example, motor failures that appear to be randomly distributed
throughout a facility following a specific repair action would indicate that the failures were somehow
connected to the repairs. Conversely, if the same failure occurred to several motors installed at a specific
location, the failure could be attributable to the service or environment at that location.
In the traditional world of maintenance management, history is stored by asset in CMMS systems.
Examples of such data include manufacturer nameplate information; purchase specifications; operating,
maintenance and work order history; and costs. Condition-monitoring data, such as vibration spectra, lube
oil condition, and motor circuit analysis, are collected and stored by location. In most cases, physical
assets that occupy the location never change. However, if assets change location, valuable condition
and reliability information is lost.
MIMOSA recognized early that effective equipment lifetime management would require a means of
connecting both asset information and data being collected by location (i.e., vibration routes). This is
the essential basis for exchange between location-oriented condition and asset-based CMMS systems. The

MIMOSA gateway, CRIS (Common Relational Information Schema), was developed with this crucial
link included. It ensures a complete asset and location history. A work order does not have to know what
the vibration spectra looks like on a particular location; it only needs to know how the asset is linked
to the location.
By utilizing MIMOSA formatted data, information can be easily exchanged between enterprise systems.
Using the textile example, if Motor #123 is removed from Winder #321, and replaced with Motor #456,
information collected at the location will be linked to the new asset for analysis purposes. When Motor
#123 is installed in another location, its historical CM data is retained. The benefits become even more
evident at the enterprise level, considering the ability to track global histories. For example, by using a
MIMOSA data model, management can review all work orders to find which problems are causing the
most costly and repetitive problems. They can then access process, control, product data, and condition
information across the various locations where the specific types of equipment are used. The result may
disclose that a particular problem is caused by a material defect or the incorrect application of an asset.
Tremendous advantages can be realized if the entire asset history is accessible for evaluation.
Following the information model, one area that will benefit the most from MIMOSA will be the Decision
Support System. The enterprise engines of tomorrow will be responsible for fusing and archiving all
types of data and processing the information to assess condition (including expert analysis via inference
and neural-based systems able to access all types of data across the enterprise), residual life estimation,
and economic decision management. Optimally managing corporate strategy to attain financial,
stockholder, organizational, or operational objectives is only possible if information can be easily
disseminated between systems. MIMOSA provides this ability.
OPC

OLE for Process Control (OPC) also focuses on coordinating the efforts of hardware providers and
software developers. It provides a standardized means for communicating data from one source to any
client application. Data sources can be field devices on the factory floor or databases located elsewhere in
the plant. OPC provides both connection capability and interoperability. Many of todays plants use a
schema similar to the one shown in Figure 14.3.
Display
application

Device
driver

Trend
application

Device
driver

Report
application

Device
driver

Device
driver

Figure 14.3 Proprietary Data Exchange

In this example, four different device drivers need to be developed and linked with each application. If
any one of the devices, its driver, or the application changes, the system becomes a legacy system.

Interoperability becomes limited the moment these systems are installed in the enterprise and the cost to
maintain them quickly erodes their value.
Object Level Embedding (OLE) is a unified environment of object-based services capable of both
customizing those services and extending the architecture through custom services, providing rich
integration between components. OPC is constructed on Microsoft object standards, specifically
Component Object Model (COM), which is an architecture that allows applications to be built from
binary software components. ActiveX, formerly known as OLE 2.0, is one of the services within COM.
Currently OPC provides two COM interfaces, C++ for high performance and complex applications, and
an Automation Interface via Visual Basic, Excel, and CGI scripting.
By using OPC standards, the resulting drivers will provide common mechanisms that enable various
applications to share data among multiple data sources in a plug and play manner not yet seen in the
enterprise, as shown in Figure 14.4.
Display
application

Trend
application

Report
application

OPC

OPC

OPC

OPC

OPC

OPC

OPC

Device
driver

Device
driver

Device
driver

Device
driver

Figure 14.4 OPC Linkage

As standards like MIMOSA and OPC develop further, a convergence will inevitably occur. In essence,
OPC does for the process world what MIMOSA does for the CM industry. It links the process floor with
the systems that serve them and the enterprise solutions that surround them. As MIMOSA develops OPC
interfaces similar to its own XML and OLE developments, the real merger of plant information, condition
indication, and enterprise resources can take place to provide complete equipment lifetime management.

E. Impact of Open Systems

Open Systems is the theme of the future. For systems to be truly open, every user must have complete
access to the information deemed open via a set of industry available tools. If a custom driver is
required, a special application required, or a proprietary data structure used, the system is a legacy system
and lacks the advantages of a truly open system.
Single vendors often produce suites of products that are open among the suite components, but require a
special mechanism only supplied by that vendor to access the product from outside the suite. These
systems are not open outside of their own product range. Open becomes even grayer when people rely
on tools supplied by other very large organizations that supply generic tools. For example, if a
database can be read by another application using an ODBC interface, is the database really open? Or if a
system runs under Oracle, but no other environment, is it really open? These are the types of issues that
must be resolved before any Equipment Lifetime Management system is developed.

F. Standards
In addition to the open standards already discussed, other standardssuch as ISO, API, and ISAare
constantly changing. In many cases, these standards have no effect on the technology utilized; instead
they affect the interpretation of the information they govern. For example, an ISO pump specification
may dictate new ways to measure pump efficiencies and never speak about the collection or
dissemination of that information. However, few standards ever venture far from dictating a method of
acquiring or displaying information, and when that happens, care must be taken that they do not overstep
their original intention and kill what would otherwise be an open solution.
For example, prior to API 670, 4th Edition, the rules for processing and displaying vibration information
for protection purposes severely limited the options available and the choices of technology that could be
used in the implementation of an API protection system. Today, the standard has evolved to the point
where it allows for non-standard implementation of the core protection guidelines, while at the same
time preserving a familiar standard to avoid complications. This is an example of a standard evolving and
reacting to changes in technology, user demands, and progress, without compromising the original
purpose of the standard. As technology and standards continue to evolve, so will the challenge of making
sure each co-exists.

G.

Summary

In summary, the following areas will likely become dominant components in the future of Integrated
Equipment Lifetime Management:
1. Condition Indication as a recognized tool for managing assets from condition, operations, and
financial management perspectives
2. Smart Sensors both IEEE 1451 and, in general, with regard to smart/intelligent conditioners and
transducers
3. Open Standards Groups like MIMOSA and OPC
4. Traditional Standards such as ISA, ISO, API, and IEEE
The common theme from the above is open access to reliable machinery information coupled with
existing enterprise management systems (DCS, ERP and CMMS) to provide an integrated solution to
Operating Equipment Lifetime Management.

APPENDIX A. GLOSSARY
AI:

Artificial Intelligence
Asset Utilization:
Percentage of time a plant is operating at Maximum Demonstrated Production Rate, with perfect quality
and defined yield
Balanced Scorecard:
A top-down method of translating an organizations mission and strategy into tangible linkages,
interrelationships, specific activities, and measures necessary for success. Reliability and maintenance
issues can be integrated into an overall business scorecard or identified in a stand-alone scorecard.(61)
Benchmarking:
A process for measuring best practice performance and comparing the results to corporate performance
in order to identify opportunities for improvement. The comparison to best practice, often called a GAP
analysis, leads to a prioritized array of optimizing changes directed to gaining best practice levels of
effectiveness.(55)
CAV:

Current Asset Value (also RAV): Calculated in a variety of ways; in general, CAV/RAV is the current cost
to reproduce the asset
CBM:

Condition-Based Maintenance - Maintenance based on actual condition (objective evidence of need)

obtained from in-situ, non-invasive tests and operating and condition measurements
COGS:

Cost of Goods Sold: Direct cost of material, labor and utilities to produce a product
Computerized Maintenance Management System (CMMS):
A computer system for measuring, managing, and analyzing the maintenance process. Includes MRO task
planning and scheduling, inventory control and management, and labor and material cost accounting.
Condition Monitoring (CM):
The process of recording measurements that define condition (e.g., vibration, fluid and electrical
characteristics, and thermal gradients) and comparing each to limits.
Condition Based (or Predictive) Maintenance (CBM):
Maintenance based on actual condition (objective evidence of need) obtained from in-situ, non-invasive
tests and operating and condition measurements
COPQ:

Cost Of Poor Quality

Current Asset Value (CAV):
(also RAV) Calculated in a variety of ways; in general, CAV/RAV is the current cost to reproduce the asset
EDC:

Equivalent Distillation Capacity: A value for refinery processing units normalized by processing intensity,
determined from criteria developed by Salomon Associates
Effectiveness:
Performing the correct task efficiently
Efficiency:
Performing a given task (not necessarily the correct task) well
EFOR:

Effective Forced Outage Rate The probability of experiencing either a forced outage or forced de-rating
when called upon to deliver load
EFTO:

Effective Forced Outage Rate: A value that indicates a power generating units ability to deliver full
capacity when required, calculated from an EPRI process.
EPRI:

Electric Power Research Institute

Equipment Lifetime:
Span of time over which the equipment is expected to fulfill its intended purpose
ERP:

Enterprise Resource Planning A software system comprised of a single or integrated suite of applications
to manage enterprise business functions, including finance, human resources, and order fulfillment
EVATM:

Economic Value Added profit in excess of the cost of capital

Failure:

No longer capable of performing the intended function

FMECA:
Failure Modes, Effects, and Criticality Analyses: An integral part of RCM directed to determining type,
probability, cause and consequences of potential failures.
HVAC:

Heating, Ventilating, and Air Conditioning

ISO:

International Standards Organization

JIT:

Just-In-Time used to describe a manufacturing or other process in which materials arrive as close as
possible to the time required
KPI:

Key Performance Indicator metrics that indicate performance to high priority objectives
MES:

Manufacturing Execution System schedules, tracks, and manage production; helps manage manufacturing
labor, quality assurance, and maintenance; collects data generated by factory automation systems and
creates production histories.
Metrics:
Objective means of measuring performance and effectiveness
MIMOSA:
Machinery Information Management Open Systems Alliance: An organization directed to facilitating the
development of open exchange of equipment condition, maintenance and lifetime management
information.
MTBE:

Mean Time Between Events: Defined event used by some organizations to replace failures in reliability
calculations (e.g., Mean Time Between Events)
MTBF:

Mean Time Between Failure

MTBR:

Mean Time Between Repairs

MTTR:

Mean Time To Repair

MRO:

Maintenance, Repair, Overhaul

NPV:

Net Present Value: The current value of future revenue based on the time value of money
O&M:

Operations and Maintenance

OEAM:

Operating Equipment Asset Management: A comprehensive, fully integrated strategy, process and culture
to gain greatest lifetime effectiveness, value, profitability and return from production and manufacturing
equipment assets.
OEE:

Overall Equipment Effectiveness: A term from Total Productive Maintenance that represents actual output
compared to objective calculated from normalized Availability, Yield and Quality.
OEM:

Original Equipment Manufacturer

Open System:
Systems from multiple suppliers that are capable of electronic communication (connectivity) and
information exchange (interoperability) through published conventions without any proprietary or systemspecific links
Operating Equipment Asset Management:
A comprehensive, fully integrated strategy, process, and mindset for gaining the greatest effectiveness,
value, profitability and return from production and manufacturing equipment assets

Systematic prioritization and implementation of process, practice, and technical improvements to ensure
full compliance with safety, availability, performance, and quality requirements at least sustainable cost for
operating, market, and business conditions
ORAP:

Operational Reliability Analysis Program: A system for monitoring and reporting the reliability,
availability, maintainability, and durability of turbomachinery plant equipment (primarily gas turbine
generating units) developed and maintained by Strategic Power Systems, Inc., Charlotte, North Carolina
PdM:

Predictive Maintenance: Also Condition Based Maintenance

PM:

Preventive Maintenance: Unless specifically stated otherwise, PM used in this Handbook refers strictly to
scheduled, time based maintenance.
Proactive Maintenance:
Activities and actions applied to equipment prior to and during operation to prevent problems, gain greatest
reliability, and minimize failure
Preventive Maintenance (PM):
Maintenance tasks to avoid failureincluding inspection, service and/or replacementconducted at
regular, scheduled intervals based on average statistical/anticipated lifetime
Prognostics:
The ability to predict or forecast the future condition of a component, or system of components, in terms of
either failure or degraded condition, so that it can satisfactorily conform to operational requirements
(MFPG Forum, September 1999)
RAV:

Replacement Asset Value

RCFA:

Root Cause Failure Analysis: A formalized process to identify the fundamental defect that caused a failure
RCM:

Reliability Centered Maintenance: A systematic, disciplined process to ensure safety and mission
compliance that defines system boundaries and identifies system functions, functional failures, and likely
failure modes for equipment and structures in a specific operating context.
Develops a logical identification of the causes and effects (consequences) of system and functional failures
to arrive at an efficient and effective asset management strategy to reduce the probability of failure.
Reactive Maintenance:
Corrective action taken upon failure or obvious threat of failure
Reengineering:
A one-time fundamental rethinking and business process redesign to achieve dramatic improvements in
performance
Reliability Centered Maintenance (RCM):
A systematic, disciplined process to ensure safety and mission compliance that defines system boundaries
and identifies system functions, functional failures, and likely failure modes for equipment and structures in
a specific operating context.

Develops a logical identification of the causes and effects (consequences) of system and functional failures
to arrive at an efficient and effective asset management strategy to reduce the probability of failure.
Repair:

An invasive process to correct a defect; interrupts availability

ROA:

Return On Assets: Profit divided by asset value

ROE:

Return On Equity: Profit divided by corporate equity

ROI:

Return On Investment: The profit gained from an investment divided by the monetary value of the
investment
ROCE:

Return On Capital Employed

RONA:

Return On Net Assets: sales minus expenses divided by total assets

RTY:

Rolled Throughput Yield

SAE:

Society for Automotive Engineers

Six Sigma, 2Cp:
The use of statistical tools applied in a disciplined way to identify and solve problems
SMRP:

Society of Maintenance and Reliability Professionals

SPC:

Statistical Process Control

SQC:

Statistical Quality Control

SRCM:

Streamlined Reliability Centered Maintenance: An optimized form of RCM that builds from templates and
predetermined maintenance lists to quickly assure all potential failures and corrective action are considered
Timed Availability:
Available for unrestricted operation during a period of time in which operation is required
Total Productive Maintenance (TPM):
A team-based approach to equipment management that emphasizes zero defects/zero loss operations,
maintenance cooperation (autonomous maintenance), small group activities, and cleanliness
TQM:

Total Quality Management

VFD:

Variable Frequency Drive: A method of controlling the rotating speed of an electric motor

APPENDIX B
The following article appeared in the May 1999 issue of MAINTENANCE TECHNOLOGY, the magazine of plant
equipment reliability, maintenance, and asset management, published by Applied Technology Publications,
Barrington, IL. Used with permission.

Understanding Producer Value

An economic model for justifying equipment asset management and utilization
By: John S. Mitchell, MIMOSA

In todays process and manufacturing environment, intense pressures to reduce expenses, tighter
restrictions, and declining resources necessitate new methods to identify opportunities, prioritize and align
activities, and measure results. With a comprehensive model, maintenanceor more broadly, equipment
lifetime optimizationis a prime candidate to simultaneously increase reliability, effectiveness, and
corporate profitability.
Technology and practice have developed to a level capable of recognizing most equipment defects in time
to prevent failures and minimize unscheduled interruptions in production. However, the measures of
effectiveness have tended to remain subjective and intangible: Does equipment operate when needed, are
production interruptions and catastrophic failures few and far between, are problems corrected promptly,
are operations managers happy?
The concepts of avoided costs and saves, frequently cited as measures to justify advanced equipment
management technology and practices, are largely intangible and disconnected from business and
financial results. What is the profit impact of a failure that does not occur? More sophisticated companies
have gained inter-departmental agreement for an average cost of avoided failures and maintenance
actions. While this adds some objectivity, it does not answer the basic question.
There is another challenge. After years of success, the cost of equipment maintenance will stabilize at a
lower level. At that point, some managers assume that all of the cost reductions have been harvested, and
now the program responsible for these results can itself be harvested by reducing personnel and funding.
Can this be true? Are production gains and cost reductions from enlightened equipment management
practices permanent, or are sustaining efforts required? This is a very difficult question to answer without
measures of performance linked directly to enterprise profitability.
Overall performance measures that combine availability, production output, and lifetime cost are
necessary for prioritizing resources and assessing the effectiveness of optimizing efforts. Measures must
originate from market conditions and business objectives, point to opportunities for increased
profitability, and lead to optimized decisions and greatest value. They must be equally applicable for an
entire producer unit, as well as individual components.
Several overall performance measures are in use. Maintenance cost as a percentage of replacement asset
value (RAV) is often used in benchmarking and as a performance indicator. However, this metric does
not consider operating intensity and age of equipment, both of which affect the need for maintenance and
its cost. Overall equipment effectiveness (OEE), associated with total productive maintenance (TPM), is
another often-used measure of performance. It measures normalized availability, output, and quality, but
it does not consider the cost to attain these results.

Asset Management
Clearly a change in mindset is needed. Asset management is being loosely used to describe a more global,
enterprise view of equipment optimization. It is directed toward increasing the worth, financial return, and
value generated by assetsproduction equipment in a manufacturing, process, or production facility. This
definition leads to a primary objective of asset management: Managing the means of production
(equipment assets) to gain greatest lifetime value.
Does this mean increasing availabilitythe ability to produce more product? Yes. Increasing yield and
quality, producing higher margin products? Yes. How about reduced costs? Again, yes. Some call this
concept asset utilization. Regardless of the name, the end resultincreased availability, yield, and quality
and reduced costsare results rather than actions.
With this perspective, sights must be elevated above maintenance costs to all factors that influence the
creation of lifetime value. Cost reductions are counterproductive if they lead to diminished financial
return through some combination of decreased production availability, output, yield, and quality.
To differentiate efforts for effectively managing producer assets from those of a realtor, transportation
manager, or portfolio manager, more specific terminology is appropriateterminology that defines
applicability, a process, objectives, and measures of performance all aligned to gain maximum value from
the means of production. The name coined for this discussion is Equipment Lifetime Management.

Equipment Lifetime Management

Equipment lifetime management (ELM) begins with the recognition that financial measures are the
fundamental measures of enterprise success and the specific contribution of processes and programs.
ELM extends beyond maintenance to include all factors that determine and influence lifetime cost of
ownership. Proper design, installation, and operation are vital elements of effective ELM and will reduce
costs. A recent article asserts that 60 percent of lifetime maintenance costs are expended on preventable
problems caused by faulty design, installation, operation, and maintenance practices. Several reports have
stated that facilities that work toward highest reliability also enjoy lowest lifetime costs. The two are
inseparable.
A clear and credible connection between lifetime cost and profitability must be established for producer
equipment assets. Economic Value Added (EVA) appears to be a better measure of the value creation
process than return on investment (ROI). In terms of evaluating the performance of specific functions,
EVA offers a far better statement of contribution to organization and business objectives than cost-based
measures such as maintenance cost as a percentage of RAV.
Success begins with a change in mindset from reducing cost to gaining maximum value and profitability
from production and manufacturing equipment. A Producer Value Model (PVM) to measure progress
along this path is proposed and explored in the following discussion.

The Opportunity
Many members of the maintenance and reliability community have viewed reliability improvements and
technology advances, such as precision shaft alignment and predictive condition monitoring, as ends in
themselves. This view, based on technical considerations, may have had merit in the past, but times are
changing. Staff is being reduced. Criteria for success are dominated by bottom line financial results.

Without demonstrable financial justification, investments to improve practice and reliability, as well as
investments for advanced technology to improve condition assessment and life prediction, have
diminishing chances for management approval. In the equipment world, engineering judgment is rapidly
being replaced by the burden of financial proof. Show me the money has become substantially more
than a catchy line from a popular movie.

Profit Center Mentality

This argument leads to another concept: the advantages of shifting from a cost-centered to a profitcentered mindset as an essential ingredient of managing equipment for greatest lifetime value. A cost
center contains no systemic incentives to optimize. If anything, there are institutionalized disincentives to
optimize a cost center. Everyone knows the reward for finishing a year under budget. Pressure to reduce
costs orients people toward protecting their own tasks rather than toward overall results. A profit center
mentality promotes initiative, agility, optimization, and ownership. Investments and added costs are
evaluated from the standpoint of results and return. The profit center mentality is clearly superior in a
complex manufacturing or process environment.
Many have based justification for improved equipment management technology and practice on ROI.
Reported ROI of 7 to 10 for predictive maintenance and other advanced equipment practices is not
unusual. The reported average is somewhere around 4 to 5. However, there is a problem. Many
companies reporting a high ROI from advanced practices have not observed a corresponding
improvement in bottom line financial performance. Some have made this comparison with companies in
the same industry which they know are not spending an equivalent amount for improved equipment
management technology and practice.

Performance Gap
Why is there a difference between expectations, common measures, and bottom line results? There are
several reasons:

Conventional ROI calculations for improved equipment technology and practice typically do not
account for market and business conditions. Changes in either or both can have a significant
impact on the resulting value.

In general, there is no way of linking results to assumptions. Did a given investment produce the
expected results and if not, why? Most enterprises track budgeted versus actual expense for large
projects. Very few have the information, tracking, and accounting structure to accurately
determine the profit/cost impact of incremental changes such as precision shaft alignment.

The best practitioners of equipment management are passionate and often overly optimistic, and
may be totally consumed by technical results with little appreciation of, or even interest in, the
profit impact of their work. In times past, optimistic expectations and subjective benefits were
sufficient. This is no longer true. Show me the money is now the way the game is scored.

There is a major requirement for accurate, traceable information, such as mean time between failure
(MTBF), or an equivalent, for each individual piece of equipment. The exact reason for a failure, all
components involved, and the cost in terms of both operations and restoration are all imperative
information that must be sortable by manufacturer, model, component, cause, and other criteria to detect
patterns. If improvements are made in materials or alignment practice, there must be a way to match
results with expectations. If the two do not agree, information must be available to determine why.

An effective financial model for equipment optimization must include the ability to prioritize the
application of resources by financial return within an environment where opportunities far exceed
resources. The model must be capable of comparing actual results to expectations, especially when
changes and results occur over a considerable period of time. For example, the full results of a systematic
program of root cause failure analysis (RCFA) and defect elimination may not be seen for several years.
The author fully recognizes that many of the concepts presented require a great deal of testing and
refinement. The central theme, that any investment for improvements in equipment reliability, practice,
and technology must be traceable to bottom line financial performance, is indisputable.

Selecting a Financial Measure of Performance

A financial measure of performance that demonstrates the value of equipment effectiveness must have
three attributes:

Credibility It must be credible to business and financial executives who may have little or no
appreciation for the potential contribution of optimizing equipment management technology and
practice toward the creation of enterprise value.

Accuracy It must accurately represent the value of increased equipment effectiveness and
utilization, taking into account market opportunities for increased production and/or quality and
conditions, product margins, and manufacturing performance.

Impartiality It must be an impartial arbiter that indisputably demonstrates the necessity for,
priority of, and enterprise profit impact of investment to eliminate defects.

Ideally, the financial measure or measures must apply top to bottom within an enterprise. The measure
utilized by a senior executive focused on shareholder value must be consistent with and linked to
measures utilized by line management, engineers, process operators, craft, and support personnel.

Economic Value Added

Economic Value Added (EVA) was selected as the representative financial measure to demonstrate the
value of equipment effectiveness for three principal reasons:

EVA is gaining acceptance as a financial measure of value, changes in value, and performance.
EVA promotes ownership and the profit-centered mentality mentioned earlier. EVA has been
cited as being a better indication of value than conventional measures, even cash flow, and it
strips away many of the standard accounting procedures that may distort and disguise real value
and changes in value.

EVA will be credible to the business and financial executives that control investment for
increasing equipment effectiveness.

The information needed to calculate EVA permits calculating other measures, such as return on
net assets (RONA) and return on capital employed (ROCE).

Value models should be constructed for the smallest identifiable producers within an enterprise. Producer
is defined as an entity for which the cost of materials and price of finished goods can be calculated. Each
unit in a multi-unit power station, chemical plant, or oil refinery is an example. Others include one paper
machine in a multi-machine mill and each line in a manufacturing facility. In many cases, the output from

one unit is the input to another. Under these conditions, the calculation of transfer prices is all-important
to ensure an accurate, representative picture of value creation.

The Producer Value Model

Figure B.1 identifies elements of the proposed producer value model (PVM) and their relationships.
Blocks in the lower tier of the chart represent various functional areas. The middle tier illustrates OEE
concepts and illustrates how OEE links to sales revenue. The top tier builds a simplified calculation of
EVA, which essentially is after tax operating profit less the cost of capital.
The top tier illustrates after tax operating profit. After tax operating profit equals revenue from sales of
finished goods minus the cost of raw materials, conversion costs, and taxes. After tax operating profit,
minus the cost of capitalcalculated from net assets multiplied by an interest rateproduces EVA. The
larger the value of EVA, the more value being created. A negative EVA indicates declining value. A
recent presentation stated that a major multinational corporation requires a measure equivalent to an EVA
of greater than 20 percent in good years and no less than 0 in bad years.
Production yield and conversion costs are the links between conventional measures of equipment
effectiveness and financial results. Regardless of production effectiveness, an enterprise will not survive
long if the cost of finished goods exceeds price.
Within the proposed model, conversion costs are defined as inside the fence costs required to produce a
given product. These include utility costs (fuel, electric power, and water) as well as the cost of steam and
compressed air produced centrally or within a process and distributed throughout a plant. Apportioned
administrative costs are another element of conversion costs. The costs of complying with safety and
environmental requirements must be included. Waste disposal is another conversion cost.
Regarding electric power use, we recognize that between 50 and 85 percent of the lifetime ownership cost
of a motor-driven pump is for electricity. Operating efficiency has a double impact: low efficiency will
increase power consumption. The added stress of operating off the best efficiency point will result in
higher maintenance costs and a shorter life.

Value of Operations and Maintenance

Operating and maintenance (O&M) costs include salary and wages, fringe benefits, repair parts, and
consumables. O&M also produces value. Good operating and maintenance practices have a positive
impact on production output through availability, production rate, and quality. By reducing fluid, air, and
heat leaks and directing attention to the benefits of operating equipment at best efficiency, effective O&M
practices reduce utility costs. Likewise, good O&M practices reduce the risk of safety and environmental
violations. (One company reported that 50 percent of environmental violations were caused by equipment
failures.) By extending life and reducing requirements for replacement and spare parts, sound O&M
practices also reduce the need for capital, a growing requirement in todays financial environment.
World class enterprises recognize that conversion effectiveness, measured as a reduction in conversion
costs, can occur only by a reduction in defects. World class organizations further recognize that trained
personnel are imperative to maximizing conversion effectiveness. Personnel must be trained to question
current procedures in order to wring the last drop of efficiency from a given process. They must pay
attention to detail, such as steam and air leaks, heat loss due to faulty insulation, inadequate lubrication,
and pumps allowed to operate at far from best efficiency.

In a real enterprise, the dispersion of producer value to individual pieces of equipmentand even
componentsis complicated by the existence of multiple products and the allocation of shared resources.
Some may be intermediate products of another process; all require establishing internal product transfer
prices. This demands an accurate allocation of costs between producers and usersactivity-based
accounting.
In addition to demonstrating the value impact of practice and technology within a producer enterprise, the
proposed PVM must possess other attributes. The ability to predict EVA for a given investment at any
level within the enterprise and then report on effectiveness (results) as the investment is implemented is
one. Many practitioners believe that a large increase in production is more beneficial to profits than a
reduction in costs. Because factors such as market conditions and product margins are considered within
the PVM, these calculations will demonstrate whether increased production or reduced cost creates
greatest value. ROI is not nearly as effective as either a predictor or a reporter, primarily because the
assumptions leading to ROI may be difficult to evaluate after the fact. Additionally, conditions may
change.

Equipment Effectiveness
The PVM permits tracking any given investment and determining whether the investment had the
anticipated impact and if not, why not, taking into consideration changes in forecast conditions such as
market and price variations. Referring again to the chart, production effectiveness is often measured in
terms of overall equipment effectiveness (OEE) associated with total productive maintenance (TPM).
OEE is a normalized quantity representing net production yield made up of three terms: availability,
production rate, and quality. The values in the numerators lead to production yield. Many companies
utilize OEE as a prime measure of equipment effectiveness. Approximately 85 percent or greater is
considered world class performance.
In the authors opinion, OEE has two significant weaknesses:
1. In terms of OEE, a process can be highly effectiveand very unprofitableif conversion costs
are excessive.
2. OEE alone does not lead to opportunity or priority. By ignoring market and business conditions it
is easy to focus OEE on the wrong activity.

Timed Production Effectiveness

To incorporate the crucial importance of conversion cost toward enterprise profitability, the author has
proposed an expanded OEE-based effectiveness measure: Timed Production Effectiveness (TPE).
TPE =
effectiveness

production output

timed availability

conversion

TPE applies conversion cost to OEE that has been modified to consider the time window of opportunity
driven by market conditions.
Timed availability is defined as the amount of time a facility, system, or component is capable of
producing a required result compared to the time windows in which production is scheduled or required.
Timed availability imposes three conditions to the calculation of availability:

1. For a process or facility in which production is sold out, the availability objective is 8,760 hours
(1 year) to create an incentive for minimizing scheduled outages.
2. For a process or facility in which production is not sold out, and for spared or redundant facilities,
systems, or equipment, the target or objective is the actual time in which operation is required.
3. In the event that a system or component failure slows or interrupts production, the interruption
does not end for the purposes of calculating timed availability until production is fully restored.
Timed availability thus reflects the full impact of a momentary malfunction that stops or upsets
production for an extended period.
Timed availability is the most realistic measure of availability for all facilities and components. It is
especially valid for those that must be capable of operating at 100 percent during a production time
increment less than total calendar time.
Production output is production delivered in specification divided by the production objective. The
concept of a production time increment also is applied so that the term reflects output when required to
meet scheduled demand. Because actual output can be greater than scheduled output, production output
may be greater than 1. If off-specification production is sold at a lesser price, a constant is applied to
account for diminished income. Quality also may be tracked as a separate quantity as in OEE.
Some facilities measure and track the combined timed availability and production output as asset
effectiveness. But asset effectiveness is only part of the story. For the full picture, conversion cost must be
addressed.
Conversion effectiveness, the third term in TPE, is a conversion cost objective divided by actual
conversion cost. Note that the objective is divided by the actual to reflect increasing effectiveness when
actual cost is less than objective. This is the inverse of the terms in OEE. Conversion effectiveness is used
to measure the conversion efficiency of a specific component, unit, or facility. All applicable conversion
costsutilities, O&M, administrative, and waste disposalmust be included.
Some companies prefer real over normalized values. If so, the denominator of conversion effectiveness
divided by the numerator of production output results in conversion cost per unit of output, a valuable
performance measure itself. There are other vital measures that can be derived from TPE, provided the
information structure is properly constructed.
During several discussions of TPE, participants have mentioned the difficulty of obtaining accurate cost
information. Organizations must strive to determine costs, regardless of difficulty. They must determine
exactly how much it costs to deliver a given product. Activity-based accounting is a must. Lacking this
knowledge, they can easily sell a product at less than the manufacturing costa critical mistake in
todays highly competitive climate where fractions of a cent may be the difference between profit and
loss.
Next, the author notes that regardless of whether accurate cost information is available today, competitive
survival will mandate it tomorrow. Those who cross the line between estimated and actual costs will have
an enormous competitive advantage, as well as crucial information with which to ensure resources are
always applied to highest value activities.

Leveraging Conversion Effectiveness

Any discussion of the necessity of linking asset effectiveness to enterprise profitability must not neglect
the leverage comparison between profit increases gained through increasing conversion effectiveness and

production increases. Most process and manufacturing companies operate at a net profit after tax of less
than 10 percent. This produces greater than 10:1 leverage in favor of improving conversion effectiveness.
In other words, $1 million value gained through increased conversion effectiveness has the same impact
on bottom line profit as $10 million of additional production.
When availability is high and production is sold out, improved conversion effectiveness may be the only
way to increase profitability. As an example of converting value to production, a consultant brought in to
survey the control air system at a large amusement park concluded that air leaks consumed the capacity of
one full air compressor. In terms of net profit, air leaks required the equivalent of 10,000 to 15,000 added
paid attendance at the park. In a similar calculation at a sold-out chemical plant, the profit equivalent to
increasing pump average MTBF by 1 year required an availability of 103 percent.
There is also the dual contribution of increasing operating and maintenance effectiveness. In addition to
the obvious advantages of reducing cost, and the not-so-obvious leverage of increasing conversion
effectiveness, there are other major contributions to value illustrated by the upward arrows in the PVM
chart. When production is sold out, increasing output by increased availability or quality (yield)
contributes significantly to profit. Some companies have been able to avoid capital investment for added
production by recovering hidden capacity within existing facilities. In addition, increasing production
output with O&M costs held constant results in a per-unit reductionthus the double-edged contribution.
Whatever the measurement criteria and benchmarks for conversion effectiveness, they must connect
directly to unit objectives and profit and be understood by senior executives. Nothing else will gain
support from those who control the funds. Practitioners of all aspects of equipment management must
incorporate financial awareness, prioritization, and tracking of results into their everyday activities.
Without this vital dimension, potential improvements in technology and practice may never be funded or
applied. Instead of enlightened equipment management leading to greatest value, there will be a race to
the bottomimmediate cost reductions without any long term effects.
The financial model must begin with business and market conditions, demonstrate conclusively the real
value of improved practice and technology, prioritize investment opportunities, and track resultseven
when separated from action by a significant time interval. Furthermore, an ideal financial model must
contain provisions for what if examination of assumptions under variations in business and operating
conditions. The PVM appears best suited to this crucial task. Only with the awareness provided by an
accurate financial model can modern facilities be managed to optimize the only parameter that counts
profitability.
John S. Mitchell is president of the Machinery Information Management Open Systems Alliance
(MIMOSA). The mission and activities of MIMOSA were outlined in a previous article Exchanging
Enterprise Asset Information (MT 1/99, pg 19). MIMOSA information is also available at
www.mimosa.org. Mitchell can be contacted by e-mail at jsmitchell@mimosa.org.

APPENDIX C. HANDBOOK REFERENCES

International Joint Power Generation Conference Proceedings (July 1999)
1. David Smith, David Mauney, Michael Curley, and Thomas McCloskey, Analysis of NERC-GADS Database for Steam
Turbine Generator Reliability Trends

2. Al Unione, K. Fleming, and Doug Rode, Assessing Investment Risk for Existing Power Generation Facilities
3. Kevin Nordt, Can RAM Create Measurable Value in the New Component Market?
4. Scott Hartley, Kenneth R. Balkey, Component Testing An Integral Piece of the Risk Management Puzzle
5. Kenneth L. Ferguson, Impact of Deregulation on Maintenance Practices of Commercial Nuclear Power
Organizations
6. Ron Flugge, Benchmarking in Todays Competitive Environment
7. Randy Lee, Randy Jones, Plant Reliability Optimization at Southern Company Generation
8. Russ Pflasterer, Greg Toomey, SRCM Program Changing the Way Utilities are Doing Business
9. G. Michael Curley, Upgrades for Reliability Targeting Critical Components Through Benchmarking
Maintech 98 South Conference Proceedings

10. Dennis E. McCormick, Maintenance and Reliability Improvement and the Impact on Bottom Line
11.
12.
13.
14.
15.
16.

Performance
David Hilliard, Measuring Contribution to Corporate Profits
Robert D. Harrington, RCM, How to Install a Simple, Effective Program
Robert Ladner, Dennis Westbrook, and Anthony Smith, RCM Comes Home to Boeing
Kevin E. Cary, Management Issues Arising From the Use of Advanced Maintenance Strategies
Robert Matusheski, The Role of Information Technology in Plant Reliability
Charles A. Floyd, Real Time Condition Monitoring Using Expert Systems

MARCON 99 Maintenance And Reliability CONference Proceedings (May 10-12, 1999,

College of Engineering, University of Tennessee)
17. Marc Phillips and Lennis Lammers, The Highly Reactive Manufacturing Organization: Breaking Out of the
Cycle of Reactivity
18. Dick Heath, Reliability Centered Maintenance Relationships and Functions in the Strategic Reliability and
Maintenance Process
19. Michael Stephens, The Wheel: The Story of Work Management
20. Andrew K.S. Jardine, On the Optimization of Condition-Based Maintenance Decisions
21. Ray Bebe, Economic Justification of Condition Monitoring
22. D. Walker, C. Mitchell, and R. Montgomery, Reliability Centered Design: Inherently More Reliable Processes
Through Superior Engineering Design
23. R. J. Anderson and V. Borsattino, Root Cause Failure Analysis (RCFA) is a Process
24. M.L. Harazim and B. J. Ferguson, After Reliability Centered Maintenance: Preventive Maintenance Living
Program Implementation at Ontario Hydro Nuclear
25. Joseph Thorp, Managing Equipment Lifecycle Costs in the Process Industries
26. Richard Matuscheski and D. Williamson, Enhancing ERP Systems with Advanced Plant Reliability
Information
27. Steve Shores, Intra-Industry and Cross Industry Benchmarking of Asset Management Practices
28. L. Vanden Heuvelk and J. Farquarson, Assessing Business Interruption Risk at Manufacturing Facilities
29. Wang Hao, Yu Wenxian, and Zhuang Zhaowen, Information Fusion and Its Application in Reliability
Evaluation
30. J. Haverly and S. Huffman, Autonomous Maintenance That Fits
31. Jeffrey Caplan, Efficient Staffing for Maintenance and Reliability Efforts
32. G. Toomey and R. Pflasterer, SRCM Program Giving Utilities a Competitive Edge
33. F. Southworth and J. Thome, Creating A Workplace Culture for Competition
34. J. A. Bontadelli, Economic Evaluation of Investments in Reliability and Maintenance Improvement Projects

35.
36.
37.
38.

Kyoumars Bahrami, A Maintenance Improvement Program-Benchmarking

John B. Bowles, Constant Failure Rate Models May Be Hazardous to Your Design
J. Thome and M. Stephens, The Challenge of Organizational Change
J. Alfiere, D. Lorenzo, and D. Walker, Reliability Training: Equipping the Plant Staff to Achieve Reliability
Excellence
39. Michael L. McCloud, Organizational Design Factors that Contribute to the Successful Implementation of Total
Productive Maintenance
40. L. H. Mauss and S. Cheabone, Dangers and Issues of Success in Transplanting Management Models The
Case for Total Productive Maintenance

MARCON 98 Maintenance And Reliability CONference Proceedings (May 12-14, 1998)

41. Glenn Allgood, R&D Investment Strategies for Condition-Based Maintenance: An Economic Model to Assist
Process, Plant, and Management in the Decision Making Process
42. Jack Carr, Reliability is the Umbrella for a Good Maintenance Program
43. Richard Heath, Maintenance Performance Measures
44. Scott Huffman, Transitioning the Maintenance Program: Implementing Improvement in Maintenance
Processes
45. Robert G. Batson, What is Maintenance Prevention Design?
46. K. Bahrami-Ghasrchami and JWH Price, The Optimal Preventive Replacement Policy for a Deteriorating
Production System
47. Richard R. Elliott, Measurement of Maintenance Performance
48. Michael McCloud, Maximizing Equipment Effectiveness Through Total Productive Maintenance
49. Ron Moore and Don Rath, Combining TPM and RCM
50. David King, Reducing Costs and Increasing Asset Utilization with The Best in Class Model
51. Chris Piaszczyk and Mark Rennick, Reliability Survey of Acceleration Facilities

Marcon 97 -- Maintenance And Reliability CONference Proceedings (May 20-22, 1997)

52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.

Ron Moore, Reliability as a Corporate Strategy

Paul Smith, Controlling Demand to Increase the Value of Maintenance
George Van DerHorn, Beyond Detection Realizing the Value in a PdM Program
Borden Coulter, Benchmarking A Tool To Achieve World Class Maintenance
Hal Aikens and Sunitha Zacharia, Reinventing Maintenance: How Far Up the Learning Curve Are We?
D.A. Casada and S.L. Bunch, Reducing Operating and Maintenance Expenses Through Periodic Engineering
Blake Van Hoy and Bob Bracher, The Road to Proactive Maintenance
C.M. Pisozczyk, Acceleration Reliability, Availability and Maintainability
Jill Farmer, David Walker, and Chris Yerger, Fundamental Elements of Reliability Management Applied to
the Maintenance Organization
Andrew Ginder, The Reliability and Maintainability Balanced Scorecard
Sal Della Villa, R.F. Steele, Risk and Asset Management -- An Industrial Focus on Reliability
Roy Schuyler III, A Systems Approach to Improving Process Plant Performance
Robert G. Batson, Expanding the Role of Preventive Maintenance to Enhance Product Quality
S. Bradley Peterson, Strategic Asset Management
Richard Elliott and Jerry Shockey, Saturn Corporation Maintenance Strategy and Assessment Process
John Flude, Combining Process Modeling and Reliability Centered Maintenance to Optimize Maintenance
Schedules
Gilles Zwingelstein, Reliability Centered Maintenance - An Efficient Alternative to Implement a Smart
Maintenance Policy
Lawrence B. Durham, Performance-Based Maintenance Training in the U.S. Nuclear Utility Industry

National Manufacturing Week 99 Conference Proceedings (three volumes)

70.
71.
72.
73.

Gino Palarchio, The Physical Asset Management Profession in 2010

Randy Mattison, Selling Equipment Upgrade Projects to Management
Dean Gano, Root Cause Analysis and the Bosses Thinking
Ernst & Young LLP, The Connected Enterprise

74.
75.
76.
77.
78.

Eric Marks, Infocentric Automation: An IT View of Controls

Bill Maggard, Achieving Total Quality
Steve Clouther, CMMS and Enterprise Asset
Klaus Blache, Reliability and Maintenance Operations For Your Competitive Advantage
Jo-Ann Bellucci and Andrew Jardine, Optimizing Reliability Maintenance Decisions

National Manufacturing Week 98 Conference Proceedings (three volumes)

79.
80.
81.
82.
83.
84.

Robert D Harrington, How to Install a Simple, Effective, RCM Program

Scot Bryon and David Gross, Reliability and Maintainability Through Process Improvement
Gary Grossard, Improving Inventory Performance and Bottom-Line Profits
Thomas Westercamp, Management Strategies for Maintenance Process Improvement
David Staat and Al Lawler, Increasing Up-Time A DuPont Success Story
Terry Wireman, Benchmarking Cure or Curse?

Other Papers
85. David Berger, Maintenance Audits Rigorous Introspection is Good for the Soul of your Maintenance
Operation, Plant Services, January 1999.
86. Heinz P. Bloch, Finding the Root Causes of Repeat Failures Requires Looking Beyond the Obvious, Heinz P.
Bloch, Montgomery Texas.
87. C. Rod DeLuca, Maintenance Management Trends for the New Millenium, Paper Industry Management
Association, June 1999.
88. Quality Network Planned Maintenance Awareness Presentation, General Motors Corporation.
89. Measuring Corporate Performance, Harvard Business Review, Reprint Collection 49516.
90. Kenneth Huskisson and Russell Mulcahy, 3-Tier Technology Enhances Plant CMMS, Power Engineering,
February 1999.
91. Bryan Johnson, Howard Maxwell and Daniel Hautala, Predictive Maintenance The Effect on a Companys
Bottom Line, Vibration Institute Annual Meeting, 1999.
92. Edwin K. Jones, The Japanese Approach to Facilities Management, Maintenance Technology, August 1991.
93. Edwin K. Jones and Mark E. Lawrence, Amoco Chemical: A Summary of One Companys Efforts to
Strengthen Maintenance and Reliability Practices.
94. Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management System,
Harvard Business Review, January-February 1996.
95. Robert S. Kaplan and David P. Norton, Virtual Roundtable: The Balanced Scorecard, April 29, 1998.
96. Polly Labarre, The Most Important Thing a Captain Can Do Is to See the Ship from the Eyes of the Crew,
The Future of Business, Fast Company, April 1999.
97. John Mitchell, Equipment Lifecycle ManagementCondition Based Maintenance and More, American
Society of Naval Engineers, July 1, 1998.
98. Ron Nicol and Philippe Amouyal, Asset Productivity: The Next Wave, Boston Consulting Group, December
1998.
99. The Nucor Story, Nucor Corporation.
100. Dick Pettigrew, The Rohm and Haas Approach to Maintenance and Reliability, HSBRT Atlanta Conference,
1996.
101. S. Bradley Peterson, Defining Asset Management, Maintenance Technology, January 1999.
102. Defining the NeedUnderstanding the Evolution of Enterprise Software May Be the Key to an Awareness
of its Potential; Enterprise Resource PlanningReap the Rewards for Integrating Every Facet of Your
Business; Best of Breed or ERP?, The Transformation of Maintenance Management; Weighing the
IssuesObstacles Inherent in a Maintenance Management Enterprise Resource Planning Integration May Also
Present Opportunities; Anticipating the ChallengeAre Predictions of the Maintenance Organizations
Needs of the Future on Target?, Integrating PdM and CMMS with ERPWill the Marriage Work?, and
Points of Integration, Plant Services, October 1998.
103. Jim Powers, Operator-Based Maintenance, Plant Services, October 1998.
104. Karen D. Schwartz, Paradise by the Dashboard Light, Software Strategies, February 1999.
105. David J. Sherwin, A Constructive Critique of Reliability Centered Maintenance, Proceedings, IEEE Annual
Reliability and Maintainability Symposium, 1999.

106. Ben Stevens, Utilizing Maintenance Performance Indicators to Measure Your Maintenance Effectiveness,
IIR Gulf Maintenance Conference, Dubai, May 1999.
107. US Navy, OPNAV Instruction 4790.16, 6 May 1998.
108. Raymond J. Oliverson, Preventable Maintenance Costs More Than Suspected, Maintenance Technology,
September 1997.
109. Richard Ricketts, Survey Points to Practices that Reduce Refinery Maintenance Spending, Oil & Gas
Journal, July 4, 1994.
110. Brian Murray, Application of Risk-Based Asset Management to Enhance Business Performance,
Proceedings of Uptime 99, The Gulfs 7th Annual Maintenance Forum, Dubai, May 15-20, 1999.
111. Paul Barringer, Collection of Lifecycle Papers, published by Paul Berringer.
112. Keep it Running, SCEMM Scandinavian Center for Maintenance Management, 1998, ScforMM Finland
RV and Management Systems OY
113. Anthony Coppla, Measuring Process Variation, or Why Does Six Sigma Equal 3.4 ppm? RAC Journal, Vol.
5, No. 3.
114. Kenneth S. Jacobs, Applying RCM Principles in the Selection of CBM-Enabling Technologies, ASNE,
October 1999.
115. Ron Nicol, Philippe Amouyal, Asset Productivity: The Next Wave, The Boston Consulting Group, Internal
Innovation Series, December 1998.
120. Interviews:
Allied Signal
AMOCO
Champion International
Commonwealth Edison
Dofasco
Duke Energy Systems
DuPont
DuPont, Tyvex
Ford Production Systems
Koch Industries
KoSa
Navistar
NOVA Chemicals
Pacific Gas & Electric
Rhom & Haas
Saturn Corporation
Southern Company Generation
Tennessee Eastman

APPENDIX D. GENERAL REFERENCES

1. Books (courtesy of Reliability, The Magazine for Improved Reliability)

1997 Machinery Reliability Conference Proceedings, Reliability Magazine.
1998 Machinery Reliability Conference Proceedings, Industrial Communications, Inc.
1999 Machinery Reliability Conference Proceedings, Industrial Communications, Inc.
Arredondo, Lani, How to Present Like a Pro: Getting People to See Things Your Way, McGraw Hill, 0-07002505-3.
Avallone & Baumeister, Marks' Handbook, McGraw Hill, 0-07-004997-1.
Bannister, Kenneth E., Energy Reduction Through Improved Maintenance Practices, Industrial Press,
0-8311-3082-2.
Bannister, Kenneth E., Lubrication for Industry, Industrial Press, 0-8311-3061-X.
Bayer, Raymond G., Mechanical Wear Prediction and Prevention, Marcel Dekker, 0-8247-9027-8.
Bent and Humphreys, Effective Project Management Through Applied Cost and Schedule Control, Marcel
Dekker, 0-8247-9715-9.
Bernhard, David L., Machinery Balancing, Rich II Resources, Ltd.
Blake, Gary, Quick Tips for Better Business Writing, McGraw Hill, 0-07-005691-9.
Bleier, Frank P., Fan Handbook: Selection, Application and Design, McGraw Hill, 0-07-005933-0.
Bloch, Heinz P., Practical Machinery Management, Vol. 1, Improving Machinery Reliability, Gulf Publishing,
0-87201-455-X.
Bloch and Geitner, Practical Machinery Management, Vol. 2, Machinery Failure Analysis and
Troubleshooting, Gulf Publishing, 0-87201-232-8
Bloch and Geitner, Practical Machinery Management, Vol. 3, Machinery Component Maintenance and Repair,
Gulf Publishing, ISBN 0-87201-781-8
Bloch and Geitner, Practical Machinery Management, Vol. 4, Major Process Equipment Maintenance &
Repair, Gulf Publishing, 0-88415-663-X
Bloch and Joefner, Reciprocating Compressors, Gulf Publishing, 0-88415-525-0
Bloch Heinz, Improving Machinery Reliability, Gulf Publishing Co., Houston TX, ISBN: 0-87201-455-X
Bloch Heinz, Introduction to Machinery Reliability Assessment, Gulf Publishing Co., ISBN: 0-88415-172-7
Bloch Heinz, Machinery Component Maintenance and Repair, Gulf Publishing Co., ISBN: 0-88415-663-X
Bloch Heinz, Machinery Failure Analysis and Troubleshooting, Gulf Publishing Co., ISBN: 0-87201-232-8
Bloch, Heinz P., MCMR series, 12 parts, Gulf Publishing
Bloch, Heinz P., MCMR, Balancing Machinery Components, Gulf Publishing
Bloch, Heinz P., MCMR, Ball Bearing Maintenance and Replacement, Gulf Publishing
Bloch, Heinz P., MCMR, Casting Salvaging & Compressor Overview, Gulf Publishing
Bloch, Heinz P., MCMR, Compressor Rotor Repair, Gulf Publishing
Bloch, Heinz P., MCMR, Hydraulically Fitted Coupling Hubs, Gulf Publishing
Bloch, Heinz P., MCMR, Machinery Alignment Methods, Gulf Publishing
Bloch, Heinz P., MCMR, Machinery Foundations and Grouting, Gulf Publishing
Bloch, Heinz P., MCMR, Machinery Piping Consideration, Gulf Publishing
Bloch, Heinz P., MCMR, Mechanical Seal Installation, Repair, & Maintenance, Gulf Publishing
Bloch, Heinz P., MCMR, Protecting Machinery Parts Against Loss of Surface, Gulf Publishing
Bloch, Heinz P., MCMR, Welded Shaft Repair Methods, Gulf Publishing
Bloch, Heinz P., A Practical Guide to Compressor Technology, McGraw Hill, 0-07-005937-3

Bloch, Heinz P., Practical Guide to Steam Turbine Technology, McGraw Hill, 0-07-005924-1
Bloch, Heinz P., Shortcuts to Machinery Reliability Improvement, Searchable CD-ROM
Booher, Dianna, Communicate With Confidence: How to Say it Right the First Time, McGraw Hill, 0-07006455-5
Bothe, Davis R., Measuring Process Capability, McGraw Hill, 0-07-006652-3
Brown, Royce N., Compressors - Selection and Sizing, Gulf Publishing, 0-88415-164-6
Burns, Thomas, Serious Incident Prevention, Gulf Publishing, 0-88415-808-X
Burr and Cheatham, Mechanical Analysis and Design, Prentice-Hall, 0-02-317265-7
Calisse, Jr., Richardson, Rotating Electric Machinery and Transformer Technology, Prentice-Hall, 0-13-406401
Calistrat, Michael M., Flexible Couplings, Caroline Publishing, 0-9643099-0-4
Campbell, John D., Uptime Strategies for Excellence in Maintenance Management, 1999, Productivity Press,
Portland, ISBN: 1-56327-053-6
Cato, Bill and Mobley, Keith R., Computer-Managed Maintenance Systems in Process Plants, Gulf Publsihing,
0-88415-137-9
Chattopadhyay, Parthasarthy, Boiler Operations: Questions & Answers, McGraw Hill 0-07-460296-9
Crawford and Crawford, Simplified Handbook of Vibration Analysis, Vol. 1, CSI
Crawford and Crawford, Simplified Handbook of Vibration Analysis, Vol. 2, CSI
CSI, Data Collection Techniques, CSI
CSI, Detailed Phase Analysis, CSI
CSI, Detailed Waveform Analysis, CSI
CSI, Fundamentals of Alignment, CSI
CSI, Gear Defect Analysis, CSI
CSI, Introduction to Infrared Thermography, CSI
CSI, Introduction to Vibration Analysis, CSI
CSI, Oil Analysis, CSI
CSI, Resonance, CSI
CSI, Rolling Element Bearing Analysis Part 1, CSI
CSI, Rolling Element Bearing Analysis Part 2, CSI
Davis, Roy, Productivity Improvements Through TPM, Prentice-Hall, 0-13-133034-9
Dhillon, B.S., Engineering Maintainability, Gulf Publishing, 0-88415-275-X
Dimarogonas, Andrew, Vibration for Engineers, Prentice-Hall, 0-13-456229-1
Dufour, John and Ed Nelson, Centrifugal Pump Sourcebook, McGraw Hill, New York, ISBN: 0-07-018033-4
Eisenmann, Robert, C., Sr. and Jr., Machinery Malfunction Diagnosis and Correction, 1998, Prentice Hall, Inc.,
Upper Saddle River, NJ, ISBN: 0-13-240946-1
Elliot, Chen and Swanekamp, (eds.), Standard Handbook of Powerplant Engineering, McGraw Hill, 0-07019435-1
Eshleman, Ronald L., and Judith Naugle Eshleman, Basic Machinery Vibrations, 1999, VI Press, Inc.,
Clarendon Hills, IL, ISBN: 0-9669500-0-3
Ewert and South, Encyclopedic Dictionary of Gears and Gearing, McGraw Hill, 0-07-059796-0
Folgel, Graham, Wear Debris Atlas, CMS
Forrest, Edward, Activity Based Management, McGraw Hill, 0-07-021588-X
Garay, Paul N., Pump Application Desk Book
Gieck, K. and Gieck, R., Engineering Formulas, 7th Ed., McGraw Hill, 0-07-023455-8
Gill, Paul, Electrical Power Equipment Maintenance and Testing, Marcel Dekker, 0-8247-9907-0
Goldman, Steve, Vibration Spectral Analysis, Industrial Press, 0-8311-3088-1
Gupton, Guy W., HVAC Controls: Operation and Maintenance, Prentice-Hall, 0-13-285058-3

Guyer, Ray A., Bearing Failure Analysis System (Paperback), Rolling Bearing Institute
Guyer, Ray A., Bearing Failure Analysis System (Laminated), Rolling Bearing Institute
Guyer, Ray A., Rolling Bearing Troubleshooters Guide on CD-ROM, TWI Press
Hamrock, Bernard J., Fundamentals of Fluid Film Lubrication, McGraw Hill, 0-07-025956-9
Harris, Cyril M., Shock & Vibration Handbook, McGraw Hill, 0-07-026920-3
Hehn, Anton H., Fluid Power Handbook, Vol. 1, Plant Engineering Maintenance and Design, Gulf Publishing,
0-88415-072-0
Hehn, Anton H., Fluid Power Troubleshooting, Marcel Dekker, 0-8247-9275-0
Hicks, Tyler G., Handbook of Mechanical Engineering Calculations, McGraw Hill, 0-07-028812-7
Higgins, Lindley R. (ed.), Maintenance Engineering Handbook, McGraw Hill, 0-07-028811-9
Hodson, William K. (ed.), Maynards Industrial Engineering Handbook, McGraw Hill, 0-07-041086-0
Howeltt, H.C., II, Industrial Operators Handbook, Gulf Publishing, 0-88415-413-0
Humphreys and Wellman, Basic Cost Engineering, Marcel Dekker, 0-8247-9670-5
Jones, Richard B., Risk Based Management A Reliability-Centered Approach, Gulf Publishing Co., Houston
TX, ISBN: 0-88415-785-7
Juran, J.M., Jurans Quality Control Handbook, 4th Ed., McGraw Hill, 0-07-033176-6
Kececioglu, Dimitri, Maintainability, Availability and Operational Readiness Engineering, Prentice-Hall, 0-13573627-7
Kelly, Anthony, Maintenance Organization and Systems, Butterworth Heinemann, 0-7506-3603-3
Kelly, Anthony, Maintenance Strategy Business Centered Maintenance, Butterworth Heinemann, 0-7506-24175
Kletz, Trevor, What Went Wrong?, Gulf Publishing, 0-88415-027-5
Knezevic, J., Reliability, Maintainability and Supportability: A Probabilistic Approach, McGraw Hill, 0-07707691-5
Lamb, Richard G., Availability Engineering & Management for Manufacturing Plant Performance, 1995,
Prentice Hall PTR, Englewood Cliffs, NJ, ISBN: 0-13-324112-2
Latino, Charles, Root Cause Analysis, ISBN: B-8493-0773-2
Lenahan, Tom, Turnaround Management, Butterworth Heinemann, 0-75064-283-1
Leugner, L. Tex, The Practical Handbook of Lubrication, Maintenance Technology Intl., Inc.
Levitt, Joel, Handbook of Maintenance Management, Industrial Press, 0-8311-3075-X
Levitt, Joel, Internet Guide for Maintenance Management, Industrial Press, Inc., 0-8311-3081-4
Levitt, Joel, Managing Factory Maintenance - Self Study Course
Levitt, Joel, Managing Factory Maintenance, Industrial Press, 0-8311-3063-6
Logan, Earl Jr., Handbook of Turbomachinery, Marcel Dekker, 0-8247-9263-7
Luftig and Jordan, Design of Experiments in Quality Engineering, McGraw Hill, 0-07-038807-5
McCauley, James F., The Steam Trap Handbook, Prentice-Hall, 0-13-450990-0
McKenna, Ted and Ray Oliverson, Glossary of Reliability and Maintenance Terms, 1997, Gulf Publishing Co.,
Houston, TX, ISBN: 0-88415-360-6
Milton and Arnold, Introduction to Probability and Statistics, McGraw Hill, 0-07-042623-6
Mitchell, John, Introduction to Machinery Analysis and Monitoring, 1993, PennWell Books, Tulsa, OK, ISBN:
0-87814-401-3
Mobley, R. Keith, Maintenance Fundamentals, Butterworth Heinemann, 0-7506-7151-3
Mobley, R. Keith, Root Cause Failure Analysis, Butterworth Heinemann, 0-7506-7158-0
Mobley, R. Keith, Total Plant Performance Management, Gulf Publishing, 0-88415-877-2
Mobley, R. Keith, Vibration Fundamentals, Butterworth Heinemann, 0-7506-7150-5
Moore, Ron, Making Common Sense Common Practice, Gulf Publishing, ISBN: 0-88415-899-3

Moubray, John, Reliability Centered Maintenance, 1997, Industrial Press, Inc., New York, ISBN: 0-8311-30784
Muller, Fluid Sealing Technology, Marcel Dekker, 0-8247-9969-0
Murray and Hay-Roe, Engineered Writing, 2nd Edition, PennWell Publishing Co., 0-87814-292-2
Nayyar, Mohinder L., (ed.), Piping Handbook, McGraw Hill 0-07-046881-8
Neale, Michael J., The Tribology Handbook, 2nd Edition, Butterworth, Heinemann, 0-7506-1198-7
Nelms, C. Robert, Dynamics of Inculcating RCFA Mentality, Failsafe Network
Nelms, C. Robert, The Go-Book, Failsafe Network
Nelms, C. Robert, What You Can Learn from Things That Go Wrong, Failsafe Network, 0-00886118-10-8
Nicholas, Jack R., Motor Electrical Predictive Maintenance & Testing, Maintenance Quality Systems
Nicholas, Jack R., Jr., R. Keith Young, Advancing Maintenance (Second Edition), Maintenance Quality
Systems LLC, Millersville, MD
Nicholas, Jack, R. and Young, Understanding Reliability Centered Maintenance, Maintenance Quality Systems
Niebel, Benjamin W., Engineering Maintenance Management, Marcel Dekker, 0-8247-9247-5
Nowlan and Heap, Young, Keith (ed.), Reliability Centered Maintenance, Maintenance Quality Systems
OConnor, P.D.T., Practical Reliability Engineering, Gulf Publishing, 0-471-96025-X
Olsen and Huckin, Technical Writing and Professional Communication, McGraw Hill, 0-07-047823-6
Palmer, Doc, Maintenance Planning and Scheduling Manual, McGraw Hill, 0-07-048264-0
Pasini, Anthony J., Basics of Electric Motors, PennWell Publishing Co., 0-87814-673-3
Patrick and Fairdo, Rotating Electrical Machines and Power Systems, Prentice-Hall, 0-13-268665-1
Pdgeon, Nick F., Man-Made Disasters, Butterworth Heinemann, 0-7506-2087-0
Petrocelly, Kenneth L., Commercial and Institutional Maintenance Management, Prentice-Hall, 0-13-206251-8
Petrocelly, Kenneth L., Maintenance Computerization Handbook, Prentice-Hall, 0-13-562935-7
Pieotrowski, John, Shaft Alignment Handbook, Marcel Dekker, ISBN: 0-8247-966-7
Pope, J. Edward Editor, Rules of Thumb for Mechanical Engineers, Gulf Publishing, 0-88415-790-3
Reeves, Charles M., The Vibration Monitoring Handbook, Coxmoor Publishing Company, 1-90189-200-X
Robeiro, Robert, Engineering Contracts--A Management Guide, Butterworth Heinemann, 0-7506-2498-1
Rosaler, Robert C. (ed.), HVAC Maintenance and Operations Handbook, McGraw Hill, 0-07-052169-7
Rosaler, Robert C. (ed.), Standard Handbook of Plant Engineering, McGraw Hill, 0-07-052164-6
Ross, and Loganoff, Centrifugal Pumps, 2nd Ed., Gulf Publishing, 0-88415-1200-X
Rothbart, Harold A., Mechanical Design Handbook, McGraw Hill, 0-07-054038-1
Roylance and Hunt, Wear Debris Analysis, Coxmoor Publishing Company, 1-90189-202-6
SCEMM Scandinavian Center for Maintenance Management, Keep it Running, 1998, ScforMM Finland RV
and Management Systems OY
Shigley and .Mischke, Standard Handbook of Machine Design, McGraw Hill, 0-07-056958-4
Shim and Henteleff, What Every Engineer Should Know about Accounting and Finance, Marcel Dekker, 08247-9271-8
Simon and Korom, Hydraulics, Prentice-Hall, 0-13-213513-2
Smith, Elizabeth A, The Productivity Manual, Gulf Publishing, 0-88415-652-4
Smith, Anthony M. "Mac," Reliability Centered Maintenance, McGraw Hill, ISBN 0-07-059046-X
Smith, David J., Reliability, Maintainability and Risk, 5th Ed., Butterworth Heinemann, 0-7506-3752-8
Soares, and Bloch, Process Plant Machinery, 2nd Ed., Butterworth, Heinemann, 0-7506-7081-9
Soloman, Sabrie, Sensors and Control Systems in Manufacturing, McGraw Hill, 0-07-059626-3
Stein, and Nilsson,Gonzalez, Baldwin, Monitoring and Diagnostics of Turbine Driven Generators, PrenticeHall, 0-13-606096-X
Stein, Robert E., Re-Engineering The Manufacturing System, Marcel Dekker, 0-8247-9747-7
Stein, Robert E., Theory of Constraints, Marcel Dekker, 0-8247-0064-3

Suzuki, Tokutaro, TPM In Process Industries, 1994, Productivity Press, Portland OR, ISBN 1-56327-036-6
Thomas, Roderick A., Thermography, Coxmoor Publishing, 1-90189-201-8
Thumann, Albert, Plant Engineer and Managers Guide to Energy Conservation, Prentice-Hall, 0-13-244161-6
Tomlingson, Paul, Equipment Management, Kendall/Hunt Publishing, 0-7872-5513-0
Toms, Larry, Machinery Oil Analysis, Coastal Skills Training
Traister, John E., Handbook of Electric Motors: Use and Repair, PennWell Publishing Co., 0-87814-645-1
White, Glenn D., Introduction to Machine Vibration, 1995, DLI Engineering Corporation, Bainbridge Island,
WA
White, Glenn D., Vibration Analysis for Machine Troubleshooting, Predict/DLI
Willmott, Peter, TPM The Western Way, Butterworth Heinemann, 0-7506-1925-2
Wireman, Terry, Computerized Maintenance Management, Industrial Press, 0-8311-3054-7
Wireman, Terry, Developing Performance Indicators for Managing Maintenance, Industrial Press, 0-838113080-6
Wireman, Terry, Total Productive Maintenance, Industrial Press, 0-8311-3036-9
Wireman, Terry, World Class Maintenance Management, Industrial Press, 0-8311-3025-3
Woodruff, Lammers and Lammers, Steam-Plant Operation, McGraw Hill, 0-07-036109-6
Wowk, Victor, Machinery Vibration: Measurement and Analysis, McGraw Hill, 0-07-071936-5
Wowk, Victor, Machinery Vibration: Balancing, McGraw Hill, 0-07-071938-1
Young, R. Keith, Root Cause Failure Analysis, Maintenance Quality Systems

2. Periodicals
Condition Monitor: Coxmoor Publications
Maintenance Technology ( www.mt-online.com)
Reliability ( www.reliability-magazine.com)
Plant Services ( www.plantservices.com)
P/PM Technology

3. Organizations (courtesy of Maintenance Technology, The Magazine of Plant Equipment

Reliability, Maintenance and Asset Management)
General Maintenance and Reliability:
Association for Facilities Engineering: (www.mma.mass.edu.academic/ENG/AFE)
AFE is a professional organization representing Facilities and Plant Engineers and Managers. AFE sponsors the
CPE Certification Program, annual conventions and a monthly magazine.
Maintenance and Reliability Center: (www.engr.utk.edu/mrc)
The MRC, located at and sponsored by the University of Tennessee Knoxville: An industry-sponsored Center
committed to improved Maintenance and Reliability practice by providing new technology, qualified personnel
and lines of communication
Machinery Information Management Open Systems Alliance (MIMOSA): (www.mimosa.org)
The alliance consists of end-users and vendors who are interested in promoting open, network-able
computerized machinery information systems. A major focus is to provide recommendations and conventions to
unify machinery data taken from digital control systems, condition monitoring systems, computerized
maintenance management systems, and operational logs in order to provide companies with the ability to create
comprehensive machine information.

National Board of Boiler and Pressure Vessel Inspectors: (http://www.nationalboard.org)

Information on the boiler and pressure vessel industry including safety, statistics, National Board jurisdictional
laws, and general facts about the organization.
National Information Center for Reliability Engineering, University of Maryland
(www.enre.umd.edu/reinfo.htm)
Supported in part by the Center for Reliability Engineering, University of Maryland at College Park, and IEEE
Reliability Society. Links are provided to frequently asked questions, tools, standards and handbooks, news
items, employment opportunities, educational resources, professional societies, hot topics, and reliability
research.
Occupational Safety and Health Administration (OSHA), Salt Lake Technical Center (www.osha-slc.org)
OSHA computerized information center provides details on OSHA standards and related documents, technical
information, new initiatives and special emphasis programs, OSHA publications, training and registration, and
links to other OSHA and government sites.
Society for Maintenance and Reliability Professionals (SMRP) (www.smrp.org)
The Society is dedicated to excellence in maintenance and reliability in all types of manufacturing and service
organizations, and to promote maintenance excellence worldwide.
Vibration Institute (www.vibinst.org)
A not-for-profit organization dedicated to the exchange of practical vibration information on machines and structures
and non-intrusive condition monitoring technologies.

Engineering And Technical Societies

American National Standards Institute (www.ansi.org)
ANSI promotes and facilitates voluntary consensus standards and conformity assessment systems.
The American Petroleum Institute (www.api.org)
API provides technical services and related public policy development and advocacy research to government
and industry organizations.
American Society of Mechanical Engineers (www.asme.org)
ASME is the largest technical society serving mechanical engineering. The ASME Plant Engineering and
Maintenance Division is dedicated to serving the plant engineering and maintenance profession.
American Society for Nondestructive Testing (www.asnt.org)
ASNT provide technical and other information on nondestructive testing and services.
American Society for Quality Control (www.asqc.org)
ASQC is dedicated to the ongoing, development, advancement, and promotion of quality concepts, principles,
and techniques.
American Society for Testing and Materials (www.astm.org)
ASTM has developed and published 10,000 technical standards, which are used by industries worldwide.
The Institute Of Electrical And Electronics Engineers, Inc. (www.ieee.org)
IEEE focuses on advancing the theory and practice of electrical, electronics and computer engineering and
computer science.
Society of Automotive Engineers (www.sae.org)
Resource for technical information and expertise used in designing, building, maintaining, and operating selfpropelled vehicles for use on land or sea, in air or space. Members share information and exchange ideas for
advancing the engineering of mobility systems.

4. Equipment Management Oriented Specifications

American Petroleum Institute Equipment Standards

The following is a partial listing of API Equipment Standards obtained from the American Petroleum
Institute, 1220 L Street N.W., Washington, DC 20005-4070, telephone: (202) 682-8375.
Standard

Description

541
546
610
611
612
613
614
616
617
618
619
670
671
672
674
675
676
677
681
682
683
684

Form Wound Squirrel Cage Induction Motors 250 HP and Larger

Brushless Synchronous Machines, 500kVA and Larger
Centrifugal Pumps
General Purpose Steam Turbines
Special Purpose Steam Turbines
Special Purpose Gear Units
Lubrication, Shaft Sealing and Control-Oil Systems
Gas Turbines
Centrifugal Compressors
Reciprocating Compressors
Rotary-Type Positive Displacement Compressors
Vibration, Axial-Position and Bearing Temperature Monitoring Systems
Special Purpose Couplings
Packaged, Integrally Geared Centrifugal Air Compressors
Positive Displacement Pumps Reciprocating
Positive Displacement Pumps Controlled Volume
Positive Displacement Pumps Rotary
General Purpose Gear Units
Liquid Ring Vacuum Pumps and Compressors
Shaft Sealing Systems for Centrifugal and Rotary Pumps
Quality Improvement Manual
Tutorial on the API Standard Paragraphs Covering Rotor Dynamics and Balance (An
Introduction to Lateral Critical and Train Torsional Analysis and Rotor Balancing)
Machinery Installation and Installation Design

686

ISO Standards on Measurement and Evaluation of Mechanical Vibration

The following is a partial listing of ISO Standards and equivalent ANSI Standards obtained from the
Acoustic Society of America, 120 Wall Street, 32nd floor, New York, NY 10005-3993,
telephone (212) 248-0373.
ISO

1925
1940

2371

Description

Balancing Vocabulary
Balance Quality; Rigid Rotors, Part 1: Determination of permissible residual
unbalance,
Part 2: Balance errors
Field balancing equipment

ISO

2372
2373
2953
2954
3080
3719
3945
4867
4868
5343
5348
5406
6954
7919

8042
8821
10055
10814
10816

10817
11342

Description

Mechanical vibration of machines with operating speeds from 10 to 200 rev/sec Basis
for specifying evaluation standards
Mechanical vibration of certain rotating electrical machinery with shaft heights
between 80 and 400 mm Measurement and evaluation of the vibration severity.
Balancing machines
Requirements for instruments for measuring vibration severity
Balancing marine main steam turbine machinery for merchant service
Symbols for balancing machines and associated instrumentation
Mechanical vibration of large rotating machines with operating speeds from 10 to 200
rev/sec Measurement and evaluation of vibration severity in-situ.
Measurement and recording of shipboard vibration data
Measurement and recording of local vibration data of ship structures and equipment
Criteria for evaluating flexible rotor balance
Mechanical mounting of accelerometers
Balancing flexible rotors
Guidelines for the overall evaluation of vibration in merchant ships
Vibration measurements on rotating shafts, Part 1: General guidelines, Part 2: Landbased steam turbine generator sets in excess of 50 Mw, Part 3: Coupled Industrial
Machines, Part 4: Gas turbine sets, Part 5: Machine sets in hydraulic power generating
and pumping plants
Characteristics to be specified for seismic pickups
Balancing, shaft, and fitment
Vibration Testing requirements for shipboard equipment and machinery components
Susceptibility and sensitivity of machines to unbalance
Evaluation of machine vibration by measurements on non-rotating parts, Part 1:
General Guidelines, Part 2: Large land-based steam turbine generator sets in excess of
50 Mw, Part 3: Industrial machines with nominal power above 15 kW and nominal
speeds between 120 r/min and 15,000 r/min when measured in-situ, Part 4: Gas turbine
sets excluding aircraft derivatives, Part 6: Reciprocating machines with power ratings
above 100 kW
Relative and absolute sensing of radial vibration
Methods and criteria for the mechanical balancing of flexible rotors

APPENDIX E - CASE STUDIES

A.

The Twenty Nine Palms Project A Proven Success Story

Congressional passage of the National Energy Conservation Policy Act (NECPA) in 1992 emphasized the
role that utilities conservation efforts will play in the federal government for years to come. A key
aspect of NECPA was the mandate that utilities consumption for all federal activities must be reduced by
12 percent from a 1985 baseline by 1995. Energy conservation must continue beyond that to reach a
mandated 20 percent reduction by the year 2000. In light of reduced funding for military base operations,
these mandates place an ever-increasing premium on improved reliability, productivity, and efficiency of
base facilities. This presents a daunting challenge to base facility managershow to increase facility
efficiency under tightened budget constraints.
To further complicate their task, many military base energy managers are faced with a degraded energy
system support infrastructure. This infrastructure often includes physical plants that are old and in poor
operating condition, chronic plant problems that go unsolved and become operations-limiting, and energy
transport and end user systems that are not well designed or maintained. These majorand sometimes
conflictingdemands can quickly outstrip the capacity of the personnel charged with operating and
maintaining the thermal energy systems. As a result, the central heating plant and its associated costs can
consume a large portion of the base capital, as well as the O&M budget.
The central heating plant at the U.S. Marine Corps Base (MCB), Twenty-Nine Palms, CA., shown in
Figure E.1, was selected as the site for the first implementation of the Decision Support for Operations
and Maintenance (DSOM) system. The plant is a gas-fired, 120 Mbtu/hr, pressurized hot water plant that
supports approximately 15,000 Marines and the Air/Ground Combat Center. The DSOM project was
designed to provide a clear comparison of potential cost savings that could be documented by using the
CBM approach. The project integrates:

An understanding of degradation mechanisms from the Nuclear Plant Aging Research (NPAR)
program (which is conducted by the U.S. Nuclear Regulatory Commission)

The latest computer technology

An integral root cause methodology

The many years of hands on experience of the Twenty-Nine Palms O&M staff

The end product is a set of computerized O&M tools, based on accurate plant design information, that
provides the staff with guidance on cost and safety decisions. Both the safety and the efficiency of the
plant processes are monitored and root cause solutions to off-nominal operation are automatically
generated and brought to the operating crews attention. Monitoring for the design-basis condition is
achieved and maintained through continual upkeep of the entire O&M infrastructure, which is required to
effectively run the entire process (Operations, Maintenance, Engineering, Training, and Administration).
The ultimate success of any concept must be judged by how well the concept performs. To draw an
accurate record of change, a detailed baseline characterization was performed. This included common
metrics, like overall plant operating efficiency and maintenance machinery repair records, as well as other
functions that must be integrated in order to provide the infrastructure required for ongoing, efficient
operation. Detailed plant efficiency and equipment availability records continue to be kept and help form
a detailed pattern of change that can be compared to the baseline data.

The initial effect of the 1993 installation of DSOM was an immediate enhancement of the central heating
plants safety, reliability, and available capacity. Quantitatively, the plant has increased thermal efficiency
by 16 percent, thereby reducing the gas bill by $250,000 yearly. An increase in available capacity
eliminated the need for a fourth hot water generator (HWG), which saved an additional $1,000,000. The
real challenge in demonstrating economic return is to show that these very significant savings are actually
the smaller portions of the real life cycle economics. Figure E.2 illustrates a life cycle cost projection
based on four years of data, which indicates expected savings of $42 million over the next 60 years.
This projection shows that fuel conservation is only the first chapter in the plant assets savings story.
Plant life extension, as seen in the capital savings and maintenance cost avoidance, is shown to be as, or
more, important to the overall bottom line than process efficiency improvements.
The goal of any engineering process is to obtain the desired product at minimum cost. Much of the cost
of producing thermal energy is difficult to identify unless one can examine the entire process. It includes
the plant, fuel, and water, as well as people, training, and administrative and technical support. The total
cost of operating and maintaining a plant to provide efficient and reliable performance over the expected
lifetime is known as life cycle cost. To deal with life cycle cost and how it may be controlled, we must
understand what the actual life really is and how the operating environment, operations, and maintenance
of the plant affect the bottom line.
Nominal Life Cycle

Rather than try to understand the entire plant, lets examine a piece of equipment that performs a specific
job in the plant. By focusing on this smaller piece of the process, we can more easily understand what
goes on and we can then generalize to systems, and finally, to the entire plant. Lets start with the
nominal life cycle of a small circulating pump that provides chilled water to the air conditioning in the
plant. Assume that your facility is ready to start operation of a new centrifugal water pump for the first
time.
1. Several assumptions regarding the pumps operation have already been made by its designer. They
are called the technical design bases and they tell the operator or maintenance technician what the
intended operating limits are for this piece of equipment. The limits are stated in terms of
temperatures, pressures, clearances, vibration levels, and other considerations necessary to get the
desired performance from this machine for the lifetime intended by the designer (the design life).
2. If you read the technical manual and carefully operate and maintain the pump as prescribed by the
designer, the pump will operate well for many years. Under what is called the design basis
operation, the pump will slowly degrade in performance over the years, but this by the book
operation should allow the pump to perform well and last as long as predicted by the manufacturer.
3. Whether operating or not, the material condition of the pump is expected to degrade at some known,
controlled rate called the design basis degradation rate. If the component is operated within its
design limits, it is expected to last for the advertised design life.
4. The preventive maintenance approach is to both follow the manufacturers guidance as to type and
frequency of prevention activities, as well as measure and trend the performance of degradation-prone
areas. As time consuming and sometimes costly as this maintenance effort is, it has proven to be cost
effective in many capital-intensive processes.
5. At some point in the life cycle, component repair or refurbishing is necessary to bring performance
back up to an acceptable level. The time to refurbish can be determined by poor performance during

operations (We cant lower the room temperature any further because the chilled water pump wont
put out enough flow) or through the preventive maintenance overhaul measurements limits (The
impeller clearances are way out of specification). Refurbishing involves replacing major partslike
the impellerrather than smaller, more traditionally replaced parts (like the shaft seal packing).
6. Finally, rebuilding the old pump will no longer pay (Yeah, we can put new bearings in it again, but
the housing is so out of round that itll still vibrate like crazy). So, after 15 years of continuous
operation, rebuilding the pump to restore the standard performance specifications is no longer
economically justifiable and the original pump is scrapped.
7. A new componentwith operating characteristics similar to the old oneis selected and purchased.
Any changes between the old and new equipment must be carefully noted, because the original
system has changed as a result of aging, and a new pump could cause significant damage to itself and
the system if its effects are not carefully considered.
Abbreviated Life Cycle

Lets examine some other, very real alternatives to the nominal case. The following examples illustrate
how the component life cycle can be shortened.
1. The new chilled water pump has been installed and the system works better than ever. Maybe that can
be attributed to the fact that the new pump can put out twice the pressure the old one could. However,
now, every week or so, we find that the system piping springs a new leak. This component upgrade,
although intentional and in the interest of increasing system capacity, did not consider the design
limitations of the existing system. The discharge pressure of the new pump exceeded the maximum
allowable pressure for much of the piping system. This degradation is an example of an applications
error.
2. The maintenance force quickly determined that the new pump was probably the reason they had to
keep working so hard at keeping the system from leaking. They also figured out a solutionthrottle
back the pump to where it no longer causes leaks. The chilled water system would still provide more
air conditioning than it originally did and the leakage problem would disappear. So they partially shut
the valve leading to the pump until the discharge pressure was only 50 percent above the old pump
discharge. No more leaks occurred and the system seemed to work just fine. What they missed was
the alert in the pump operating manual that warned against shutting down on any of the suction side
valves. By throttling back on the suction side of the pump, the workers caused the pump to cavitate
(or form bubbles) inside the pump. One problem had been traded for another one that will appear
down the road. This kind of operation outside of the conditions specified by the designer is called an
off-design operation and can cause the material condition and performance of the pump to degrade
very rapidly.
3. The maintenance people noticed another problem with the circulation water systemwhat appeared
to be slime was growing inside the pipes. They told the maintenance engineer who looked and said
that is was a slime mold that is often seen in cooling systems. The engineer told the maintenance
workers to add a quart of bleach to the system once a month and the problem should disappear.
Figuring that if a quart of bleach was good, then more would be better, the maintenance team added a
gallon. They rationalized that they would only have to add bleach once every six months instead of
every other week. The chlorine did destroy the slime mold; unfortunately, at the higher concentration
level, it also affected the copper/nickel pump body material. It leached out the nickel and in only
about six months a soft, spongy copper base was left behind. The system designer never intended the

use of chlorine as a biocide. The addition of chlorine placed an additional chemical stressor on the
system materials that was unanticipated by the designer.
4. One last thing was found when the useless pump was examined nine months latertwo of the four
hold down studs on the pump base were missing. It seems that when the old pump was removed, it
wasnt lifted off of its pedestal base very carefully and as a result, the stud threads were badly
damaged. The repair mechanic was able to clean up two of them, but the others were too badly
damaged and he removed the problem fasteners with a welding torch.
5. The fractured pump casing material testified to the stresses placed on it both by the chlorine and the
vibrations caused when the pump became misaligned with two of its mounting studs missing. The
failure of the maintenance mechanic to replace the studs was blamed for the pumps destruction. In
truth, a combination of engineering, operating, and maintenance errors led to an actual component
lifetime that was 5 percent of what it should have been.
This simple illustration explains nominal and alternate life cycles of a plant component. Although many
more considerations must be factored into operating and maintaining the entire plant, the same
fundamental process (based on the concepts of design basis and economics) still holds true. Many of the
conditions cited in this abbreviated life cycle example are precisely what we look for in a condition-based
maintenance (CBM) approach.