Physical Asset Management Handbook

PHYSICAL
ASSET MANAGEMENT HANDBOOK

Fourth Edition, August 2006
By: John S. Mitchell
Edited: John E. Hickman
Contributors: Professor J. E. Amadi-Echendu

H. Paul Barringer, P.E.
James C. Fitch
Grahame Fogel
Gina A. Lewis
Mark T. Mitchell
Robert J. Motylenski, P.E.
Jack R. Nicholas, Jr., P.E.
William T. Pryor
Drew Troyer
Physical Asset Management Handbook i
Table of Contents
Acknowledgements and Preface................................................................................................................. v

I. DEFINITION, OBJECTIVES, BENEFITS AND OPPORTUNITIES.......................................................................1
Background................................................................................................................................................................. 1
Physical Asset Optimization........................................................................................................................................ 2
The Asset Optimization Program................................................................................................................................ 3
Primary Benefits.......................................................................................................................................................... 4
Value Opportunities..................................................................................................................................................... 6
II. PROGRAM NECESSITY, EVOLUTION AND CHARACTERISTICS..................................................................13
Physical Asset Optimization...................................................................................................................................... 13
Physical Asset Optimization Within a Typical Manufacturing Process......................................................................13
Evolution to Physical Asset Optimization.................................................................................................................. 15
The Requirement for Asset Optimization View of the Boston Consulting Group...................................................19
III. PHYSICAL ASSET OPTIMIZATION FOUNDATION PRINCIPLES....................................................................25
Basic Requirements.................................................................................................................................................. 25
Optimization Program Principles............................................................................................................................... 26
Program Objective.................................................................................................................................................... 30
Strategy Begins at Design......................................................................................................................................... 33
Procurement Directed to Optimizing Lifetime Cost...................................................................................................35
Quality Installation is Essential.................................................................................................................................. 36
Correct Operation must be Assured.......................................................................................................................... 36
Optimized Maintenance is a Necessity..................................................................................................................... 36
Reliability The Basis of Physical Asset Optimization............................................................................................43
Failure Analysis (RCA).............................................................................................................................................. 47
Technology Integration.............................................................................................................................................. 48
Asset Optimization Requirements for Facilities and Structures................................................................................48
IV. MAJOR PROGRAM ELEMENTS.............................................................................................................. 51
Change to an Opportunity Driven, Profit-Centered Organization..............................................................................51
The Basic Physical Asset Optimization Process.......................................................................................................54
Physical Asset Optimization The Program...........................................................................................................58
Roles and Responsibilities........................................................................................................................................ 61
Financial Measures of Performance......................................................................................................................... 64
Barriers to Overcome Gaining Successful Physical Asset Optimization...................................................................66
V. CURRENT BEST PRACTICES................................................................................................................. 69
Evolution of Equipment Management Practice.........................................................................................................69
An Equipment Lifetime Optimization Program..........................................................................................................82
Reliability Centered Maintenance (RCM)..................................................................................................................82
Failure Analysis......................................................................................................................................................... 97
Reliability Modeling, Prediction, Lifetime Analysis..................................................................................................101
Total Productive Maintenance (TPM)...................................................................................................................... 101
Six Sigma................................................................................................................................................................ 104
The Balanced Scorecard......................................................................................................................................... 107
VI. AN OVERVIEW OF IMPLEMENTING A COMPREHENSIVE ASSET MANAGEMENT PROGRAM WITHIN THE
POWER
GENERATING INDUSTRY..................................................................................................................... 111
Definition of the Needs of the Project......................................................................................................................111
Cultural Context and the Dynamics of Change.......................................................................................................111
Understanding the Scope of the Opportunity..........................................................................................................113
Creating the Strategy to Address the Opportunity...................................................................................................115
Creating a Methodology to Measure Progress........................................................................................................119
Benefit Realization.................................................................................................................................................. 122
Table of Contents ii
VII. FINANCIAL RESULTS.......................................................................................................................... 125

Introduction............................................................................................................................................................. 125
The Imperative for Physical Asset Optimization......................................................................................................126
The Opportunity...................................................................................................................................................... 126
Profit Center Mentality............................................................................................................................................. 127
Selecting Financial Measures of Performance........................................................................................................128
Accurate Lifetime Cost Tracking (Activity-Based Accounting / Management)........................................................128
The Producer Value Model...................................................................................................................................... 129
Equipment Effectiveness......................................................................................................................................... 131
Leveraging Conversion Effectiveness..................................................................................................................... 132
VIII. LIFE CYCLE COST ANALYSIS.............................................................................................................. 135
Introduction............................................................................................................................................................. 135
Roles and Responsibilities...................................................................................................................................... 135
Science of Asset Life............................................................................................................................................... 135
Do the Analysis....................................................................................................................................................... 145
IX. METRICS AND BENCHMARKING........................................................................................................... 147
Introduction............................................................................................................................................................. 147
Benchmarking......................................................................................................................................................... 152
Use of Metrics in the Asset Optimization Process...................................................................................................156
Commonly Used Metrics, Advantages and Limitations...........................................................................................157
Avoided Cost........................................................................................................................................................... 174
Application of Metrics.............................................................................................................................................. 175
Benefits of Metrics................................................................................................................................................... 176
Measurement Process............................................................................................................................................ 176
X. PROGRAM LEADERSHIP, VALUES AND ORGANIZATION.........................................................................181
Introduction............................................................................................................................................................. 181
Basic Leadership and Organizational Attributes.....................................................................................................181
Values, and Institutional Culture.............................................................................................................................. 184
Organization............................................................................................................................................................ 188
Results Based Compensation (Reward) System....................................................................................................195
Skills Management.................................................................................................................................................. 196
XI. EVOLUTION OF ASSET MANAGEMENT AT EASTMAN CHEMICAL COMPANY.............................................201
The Case for Change.............................................................................................................................................. 202
Learnings from the Pilot Phase............................................................................................................................... 204
Status Update: Where is Eastman today?..............................................................................................................205
Development of the Reliability Management Model................................................................................................207
XII. DATA AND INFORMATION..................................................................................................................... 211
Demonstrate Contribution, Value and Progress to Objectives................................................................................211
Information Requirements and Use.................................................................................................................... 212
Functional Use........................................................................................................................................................ 214
Considerations Favor Open Information Systems..................................................................................................217
XIII. EXCELLENCE AT THE BASICS............................................................................................................. 219
Documentation........................................................................................................................................................ 219
Asset Hierarchy....................................................................................................................................................... 219
Asset Lifetime.......................................................................................................................................................... 221
Prioritizing Systems and Equipment....................................................................................................................... 222
Work Management.................................................................................................................................................. 225
Stores (Spare Parts) Inventory Management..........................................................................................................232
Outsourcing............................................................................................................................................................. 236
XIV. CONDITION ASSESSMENT TECHNOLOGY AND SYSTEMS.......................................................................241
The Basis of Condition Assessment........................................................................................................................ 241
Application of Condition Assessment...................................................................................................................... 245
Establishing a Condition Assessment Program......................................................................................................246
Physical Asset Management Handbook iii
XV. FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY......................................................249

Role of Oil Analysis................................................................................................................................................. 249
Oil Sampling Methods............................................................................................................................................. 251
Oil Sampling Frequency.......................................................................................................................................... 255
Selection of Oil Analysis Tests................................................................................................................................ 256
Monitoring Changing Oil Properties........................................................................................................................ 258
Monitoring Oil Contamination.................................................................................................................................. 263
Wear Particle Detection and Analysis..................................................................................................................... 268
Interpreting Test Results......................................................................................................................................... 270
Importance of Training............................................................................................................................................ 270
XVI. ELECTRICAL ANALYSIS: STATIC (OFF-LINE) AND DYNAMIC (ON-LINE)...................................................273
Condition Monitoring Technologies and Methods...................................................................................................273
Motor Condition Monitoring Technologies...............................................................................................................273
Advantages and Disadvantages of Off-line and On-line Electrical Testing.............................................................281
Recent Advances in Electrical Analysis Information Availability..............................................................................281
XVII. MANAGING THE IMPROVEMENT PROCESS.......................................................................................... 283
Creating the Environment for Transformational Improvement................................................................................283
The Transformational Improvement Process..........................................................................................................287
Transforming the Institutional Culture..................................................................................................................... 288
The Transformation Process................................................................................................................................... 290
XVIII. IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM.............................................................311
The Asset Optimization Process............................................................................................................................. 311
Define the Program................................................................................................................................................. 316
Analyze Identify and Analyze Opportunities.......................................................................................................319
Prioritize Benchmark to Prioritize Improvement Opportunities...........................................................................323
Plan Develop Detailed Improvement Strategy and Action Plans........................................................................329
Do Implement Improvement Plans..................................................................................................................... 334
Check Measure and Manage Results................................................................................................................ 335
Improve Implement Continuous Improvement, Identify and Strengthen Weaknesses.......................................336
XIX. ESTABLISHING A SUCCESSFUL ASSET MANAGEMENT PROGRAM AT A GLOBAL PHARMACEUTICAL
COMPANY ....................................................................................................................................... 339
Objective................................................................................................................................................................. 339
Asset Management Strategy................................................................................................................................... 342
Additional Elements and Technologies................................................................................................................... 347
Reliability Centered Maintenance........................................................................................................................... 350
Performance Metrics and Reports.......................................................................................................................... 352
Requirements to Reach Next Level of Performance...............................................................................................357
Results to Date (2004)............................................................................................................................................ 358
XX. PHYSICAL ASSET OPTIMIZATION FOR CAPITAL PROJECTS...................................................................361
Building Reliability and Maintenance Expectations into Projects............................................................................361
Work Process Overview.......................................................................................................................................... 363
Work Process Elements.......................................................................................................................................... 363
Management Support.............................................................................................................................................. 364
Project R&M Goals.................................................................................................................................................. 364
R&M Program......................................................................................................................................................... 366
Define R&M Objectives For Critical Equipment And Systems................................................................................367
Designing for Reliability........................................................................................................................................... 369
Designing for Maintainability................................................................................................................................... 371
Plan Implementation Timetable............................................................................................................................... 372
Ensuring Reliability and Maintenance Performance...............................................................................................373
XXI. INDUSTRY BEST PRACTICES, RESULTS, ISSUES, CHALLENGES AND LESSONS.....................................375
Best Practices......................................................................................................................................................... 375
Results.................................................................................................................................................................... 376
Issues...................................................................................................................................................................... 378
Challenges.............................................................................................................................................................. 378
Lessons................................................................................................................................................................... 379
Table of Contents iv
APPENDIX A. GLOSSARY...................................................................................................................... 381

APPENDIX B. HANDBOOK REFERENCES................................................................................................ 387
APPENDIX C. PRACTICAL ASPECTS OF IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM.......391
Applicability............................................................................................................................................................. 391
Establishing the Basis for a Physical Asset Optimization Program.........................................................................392
Directing the Physical Asset Optimization Program................................................................................................392
The Mission Statement........................................................................................................................................... 393
Reliability Metrics and Best Practices..................................................................................................................... 393
Begin The Physical Asset Optimization Program from Improvement Opportunities...............................................394
Program Implementation......................................................................................................................................... 394
Personnel Issues..................................................................................................................................................... 396
Thoughts about Maintenance.................................................................................................................................. 397
Sustaining and Institutionalizing the Physical Asset Optimization Program............................................................398
APPENDIX D. PRACTICAL THOUGHTS REGARDING RCM IMPLEMENTATION..............................................399
Effectiveness and Value.......................................................................................................................................... 399
Elements for Success............................................................................................................................................. 400
Consider Streamlined RCM.................................................................................................................................... 402
APPENDIX .E. SCORECARDS.................................................................................................................. 405
Scorecard Objective................................................................................................................................................ 405
Reliability Scorecard Overall Description and Content...........................................................................................405
Vibration Condition Monitoring Program Scorecard................................................................................................407
Lubrication Scorecard............................................................................................................................................. 407
Physical Asset Management Handbook v
ACKNOWLEDGEMENTS AND PREFACE
The purpose of writing is to inflate weak ideas, obscure pure reasoning and inhibit clarity. With a
little practice, writing can be an intimidating and impenetrable fog.
Calvin; Literature of Calvin and Hobbes
I sincerely hope this book will convey strong, practical ideas, help you develop a plan to increase the
effectiveness of your physical assets and add a little clarity to what is quickly becoming an area of great
interest and potential value!
In any book of this size and complexity that has developed over so many years there are many to thank.
My sincere apologies if any of the many who have contributed are left out.
First of all, thanks to all who made the first edition possible back in 1999: Bill Nickerson; The
Pennsylvania State University, Applied Research Laboratory; The Best Manufacturing Practices Center of
Excellence; the Office of Naval Research; CSI; now Emerson CSI, and all who were interviewed
developing material for the first edition.
To the people and companies who wrote entire sections your outstanding contribution is invaluable and
greatly appreciated. Contributors, in alphabetical order are:
Paul Barringer: Chapter VII, Life Cycle Cost; excellent, thought provoking ideas from a real expert!
Grahame Fogel: Chapter VI; a terrific description of the development and implementation of an
Asset Management program in a power generating company.
Gina Lewis and Mark Mitchell: Chapter XI; an excellent summary of the Asset Management program
implemented by an industry leader.
Bob Motlyenski: Chapter XX; a thorough description of Asset Optimization for Capital Projects
based on long years experience with Exxon.
Jack Nicholas: The excellent, comprehensive description of RCM in Chapter V, Chapter XVI,
Electrical Analysis plus your encouragement over the years.
Noria Corporation: Jim Fitch, Drew Troyer and staff: The truly outstanding Chapter XV, one of the best
introductions to fluid analysis available, and the check off in Appendix E.
Bill Pryor: The basis for the Vibration Condition Assessment Scorecard in Appendix E
Many thanks to all who contributed to this edition by reading some or all of the material and providing your
excellent comments and suggestions for improvement. In alphabetical order: Boyd Beal, Grahame Fogel,
Willie Gerrits, Steve Johnson, Jay Padesky. Several discussions with John Wood solidified ideas and
expanded areas of particular interest to companies considering Asset Management / Optimization.
Professor Joe Amadi-Echendu contributed significantly to the international flavor, greater awareness of
cultural and social issues as well as expanding the concept of Asset Optimization into the public sector.
Thanks to all the participants in the many Asset Optimization Workshops. Your questions and comments
led to the reorganization and most of the added material in this fourth edition. It is fair to say that in every
case I learned a great deal as hopefully you did as well. Special thanks to all the participants in the Sasol
workshops, especially Willie Gerrits who made the workshops possible and Bram Whittaker who kissed
the teacher! The time spent with you was most enjoyable and informative keep up your excellent work!
Thanks also to the many excellent presentations and articles that have been delivered on subjects
associated with asset management over the past six years. Many notes, some on paper napkins, are
incorporated in this text. If you recognize words that are not credited; I apologize. In all too many cases I
failed to list the author / presenter, in most cases even the venue or date, on notes taken during many
excellent presentations. Special thanks to Heinz Bloch who has added so much in terms of stimulating
discussions and encouragement over the many years we have been friends.
Acknowledgements and Preface vi
My greatest appreciation to a long-time, wonderful friend John Hickman who volunteered to edit the
manuscript and did so magnificently. It has often been said that nothing tests a friendship like writing and
editing. We certainly had difficult periods, early in the process seeking the optimum flow and organization
for the first few chapters and later reading the same material for the umpteenth time! In the end friendship
prevailed thankfully!
Speaking of editing I must acknowledge the contribution of another great friend, Tom Bond, who co-edited
the first edition and contributed so much to the thinking described in the handbook. My prayers for comfort
and strength to you and your family.
Finally, a few paragraphs about the organization of the fourth edition handbook:
The first four chapters comprise a basic introduction. They identify objectives, benefits and opportunities,
define the program, describe the evolution to Asset Optimization, Asset Optimization principles and major
program elements.
The middle of the Handbook, Chapters V through XVI, describe the elements necessary to implement and
sustain a successful Asset Optimization program. Woven within these chapters are two chapters
describing actual implementation. Chapters VI and XI describe the practical aspects of implementing
asset management within a power generating company and a ten year retrospective by an industry
leader. Chapter XIX describes a third implementation to complete the user series.
Chapters XVII and XVIII define the elements involved with implementing an Asset Optimization program.
Five Appendices, including a Glossary of Terms, Appendix A, and Scorecards, Appendix E, provide some
additional information including more detailed best practices.
Hopefully, you will find the information useful, informative and of value in your endeavors. Ill welcome
comments and suggestions for improvements.
John S. Mitchell
August 2006
Physical Asset Management Handbook 1
I. DEFINITION, OBJECTIVES, BENEFITS AND OPPORTUNITIES
Companies that refuse to renew themselves, that fail to cast off the old and embrace new ways
could well find themselves in serious decline. Those who hang on to weaknesses for whatever
reason tradition, sentiment, or their own unwillingness to address the necessity for real
improvement, wont be around to see what the best have achieved.
Jack Welsh, former CEO General Electric
Physical Asset Management (PAM) is directed to a single objective increasing the value and return
delivered by the physical assets (Return On Assets) that are the source of revenue generation and
profitability within process, production and manufacturing industries. The principles are extensible to
include all the physical assets that make up the built environment.
This Handbook is directed primarily to heavy industry; oil production and refining, chemicals, minerals,
metals, paper and automobile manufacturing, electrical generation, transmission and distribution. It is
equally applicable to the pharmaceutical, food, resources, transportation, telecommunication and other
industries as well as public and private organizations any entity that relies on a built infrastructure of
physical assets as the principal means for operations and / or to meet mission and service obligations.
BACKGROUND
Physical assets utilized as the means of revenue generation and service delivery are expensive, usually
represent the major percentage of an organizations capital investment in productive resources and are
subject to unprecedented operational demands. Virtually all production and operating companies must
achieve significantly improved productivity from physical assets to meet business and mission
requirements. In many industries demand is creeping ever closer to capacity. In others excess capacity is
becoming financially unsustainable. In all, the tempo and intensity of operations are continuously being
elevated. Physical assets that form the production process must operate uninterrupted for longer periods
at higher rates than ever before.
Asset Management
Asset Management is a general term that is commonly utilized in finance, real estate, building space,
resource allocation and a host of other areas to mean maximizing utilization and return on assets,
primarily financial. The term has been adopted by process, manufacturing, production, operating and
service organizations to describe a concept of managing the lifetime utilization, operation, performance
and effectiveness of physical assets.
Asset Management has become the Holy Grail to manufacturing,
ARC Automation News, August 27,1999
There are at least four published definitions for Asset Management:
Plant Asset Management (PAM): The integration of on-line, real-time Condition Monitoring and
analysis, combined with a predictive maintenance strategy such as Reliability Centered
Maintenance (RCM). Automation Research Corporation
The set of disciplines, methods procedures and tools to optimize the Whole Life Business Impact
of costs, performance and risk exposures (associated with the availability, efficiency, quality,
longevity and regulatory / safety / environmental compliance) of the companys physical assets.
Institute of Asset Management (UK)
The systematic and coordinated activities and procedures through which an organization
optimally manages its physical assets and their associated performance risks.
British Standards
To provide agreed level of service in the most cost effective manner for present and future
customers. International Infrastructure Management Manual 2006 Edition
Published by NAMS NZ; contact and ordering info-
www.nams.org.nz
Some consider the term Asset Management to be too generic when applied to physical assets in an
industrial or operating environment. Physical Asset Management (PAM) may offer a more specific
Definition, Objectives, Benefits and Opportunities 2
description of the concept, process, and applicability. However, as stated above the acronym PAM defines
a system architecture in the control automation and information fields and is thus a bit different than the
methods and objectives most are attempting to convey with the term Asset Management. Perhaps
Physical Asset Optimization may be better yet. Physical Asset Optimization identifies both target (physical
assets) and objective (optimized utilization, effectiveness and performance).
From this point on Asset Management will be used as a general concept, Physical Asset
Optimization refers to the specific program and aggregation of processes advocated and
described in the Handbook.
PHYSICAL ASSET OPTIMIZATION

The more detailed definition of the Physical Asset Optimization program described in this handbook is:
A comprehensive, fully integrated strategic program directed to safely gaining and
sustaining greatest lifetime value, utilization, productivity, effectiveness, value,
profitability and return (ROA) from physical manufacturing, production, operating and
infrastructure assets.
Note that the preceding is a results definition, specifying what is expected and the target.
Physical Asset Optimization is accomplished by:
Deploying and institutionalizing a strategic, fully integrated, array of comprehensive
transformational improvements to: organizational values, behavior and culture; the functional
organization; process, practice and technology. These improvements are applied to business,
management, organization, engineering, operating, control, work and logistics processes.
Unlike many sequential or linear processes, the implementing sequence utilized by the Physical Asset
Optimization program is determined by opportunities to create greatest value in areas such as improved
availability and reduced spending.
Physical Asset Optimization is applied to:
Physical assets and systems such as machinery, heat exchange equipment, electrical
transmission and distribution components, valves, controls, piping, structures, civil infrastructure,
etc.
Many organizations correctly consider their personnel, organizational culture, information and institutional
knowledge as major assets. There is undoubtedly a great deal of value resident in these areas; however,
asset optimization described in this Handbook is directed to physical assets. Personnel, organizational
culture, information and institutional knowledge are considered from the standpoint of their major
contribution to value rather than their value as physical assets.
A Physical Asset Optimization program is directed to:
Establishing / maintaining full compliance with all safety, social and environmental best practices.
Gaining greatest business value through optimum availability, technical integrity, operating
performance, capital effectiveness and least sustainable cost for specific market, operating and
business conditions.
Applying systematic, value driven prioritization and opportunistic implementation of optimized
improvements to the processes, practices and technology that determine the utilization,
effectiveness and reliability of physical assets.
It must be emphasized that Physical Asset Optimization is a business initiative. It requires a close
partnership between Maintenance and Production and is directed to increasing value produced,
minimizing waste in all forms.
Asset Lifetime
Physical Asset Optimization addresses the definition, acquisition, installation and operation of physical
assets to ensure they operate safely, reliably, effectively and within performance expectations throughout
lifetime.
Asset lifetime: Span of time over which the asset is designed, acquired and utilized to fulfill its
intended purpose, including end-of-life disposal.
Asset lifetime is conventionally divided into four stages:

1. Specification, design and procurement
2. Construction, installation and commissioning
3. Operation
4. Disposal
The total cost of ownership over the expected lifetime of an asset from specification to disposal is the
lifetime cost.
Within most production and manufacturing companies the design and procurement of capital assets may
take a year or two. Construction, installation and commissioning may take another year or two. In most
applications the typical production asset operates for several decades during which time it is expected to
provide the efficient and reliable performance necessary to meet service delivery and revenue
expectations. Decommissioning and disposal rarely lasts more than a year and except for some nuclear
power plant assets, insulation, electrical and control system components, rarely involves anything more
than tearing out and hauling away.
It is important to recognize that the first two and the last stages of life are totally cost. The third stage is
the longest and most important for this is the productive, revenue generating stage of asset lifetime. For
this reason, substantial engineering attention is required during the first two stages to assure the asset is
specified, designed, procured and installed for optimum productive lifetime.
Addressed in more detail in Chapters VIII and XX, engineering for optimum operating lifetime includes
assuring the design has optimum intrinsic reliability; robust and adequate margins for the service
including correct materials for the service. Operability, provisions for efficient maintainability including
common parts, ease of access and disassembly are other areas that must be considered and optimized
during design. Industry leaders form an experienced team of Engineering, Production and Maintenance
personnel to audit the entire design, construction and installation phases to make certain that
maintenance and reliability considerations are designed and constructed in to the assets.
A company commented that manufacturing facilities they had benchmarked outside of North
America where the cost of capital was significantly lower had much greater design margins, more
robust equipment, greater intrinsic reliability and operating availability than similarly sized
facilities located in North America.
With that stated, it must be emphasized that this handbook focuses primarily on the operating stage of
asset lifetime where availability and effective performance are essential to meet mission and production
commitments. Design, procurement and installation are covered in Chapters VIII and XX; disposal is not
addressed in the handbook.
THE ASSET OPTIMIZATION PROGRAM

Organizations who observe and understand what is happening within their business environment
recognize that business performance has been optimized to a large degree with the greatest performance
improvements already accomplished. Market conditions are driving including competition, minimum
excess capacity and ever shrinking profit margins. An asset optimization process holds the key to
reaching the next, essential level of corporate effectiveness. Technical audit assessments of the
operations of a variety of organizations has indicated that a set of first principles is emerging and being
refined to optimize the acquisition, utilization, control and effectiveness of physical assets. The processes,
practices, technology and methods to gain maximum return from physical assets are widely known and
readily available. The goal of tailoring an optimum, prioritized mix to create maximum value within specific
business and operating conditions is a safety, economic, environmental and technological imperative for
global competitiveness.
A successful Physical Asset Optimization program depends upon two essential ingredients:
1. Senior management visibly committed to the program and energetically driving for its success.
2. Transformational improvement programs linked to strategic objectives and developed by the
people who will be carrying out the activities the only way to establish the initiative, institutional
culture and values, ownership, enthusiasm and commitment necessary for success.
The Physical Asset Optimization program is directed to ensuring that the physical asset infrastructure has
the required availability, effectiveness, technical integrity and performance needed to meet mission,
schedule, service, yield and quality commitments at cost, profit and delivery objectives. It ensures full
compliance with safety and environmental requirements.
From this point on the concept of Physical Asset Optimization and the implementing program
may be abbreviated asset optimization the meanings are identical.
The Asset Optimization program employs proven processes and methods to convert the philosophy into a
sound business practice. The asset owner and its stakeholders receive full value and return on their
investment in capital equipment, while ensuring that the physical assets capabilities and features are fully
exploited to safely manufacture a product and / or provide a service meeting environmental and quality
standards at a competitive price.
The comprehensive mix of improved processes, systems, practices, and technologies assembled within
the Physical Asset Optimization program are implemented strategically and opportunistically.
(Opportunistically defined as systematic implementation in prioritized order of value gain to achieve
specific business and / or mission / service objectives.) Fully and properly implemented, a Physical Asset
Optimization program leads to:
Safety, environmental and social excellence
Organizational, process and equipment effectiveness
Operating excellence and efficiency
Effective work and logistics (supply chain) management
Optimized spending and capital effectiveness.
The Physical Asset Optimization program begins with the recognition that every organization and facility
has a specific purpose, business and mission objectives; unique strengths, weaknesses and barriers to
full success. This is the starting point the initial state on which to build to greater effectiveness. Unlike
many linear improvement programs that require beginning with a specific process or practice regardless
of actual conditions, an asset optimization program begins at the point that creates greatest value fastest!
Applied within a strategic, comprehensive program, the principles of Physical Asset Optimization are
applied by facilitated teams that identify, formulate and implement the most effective strategy and plans
for improvement. The improvement strategy considers current market, business and operating conditions,
related opportunities and the site-specific environment including institutional values and culture,
organizational structure and material condition.
The Physical Asset Optimization program described in this handbook has two essential elements:
1. Identification and prioritization of improvement opportunities based on business objectives,
organizational and site-specific conditions value generating potential and risk. Initial objectives
are to move forward by implementing the most obvious opportunities for improvement as rapidly
as possible, employ resources most effectively and demonstrate commitment to real
improvement all while building support, ownership and enthusiasm for the program.
2. Transformational plans for improving the institutional culture, organizational structure, processes
and practice are formulated and implemented opportunistically by site personnel to gain greatest
value quickly. This reinforces the commitment, enthusiasm and ownership necessary to achieve
rapid gains and sustain the results for the longer-term.
As a closing comment, it should be pointed out that the Physical Asset Optimization program is directed
inward within an organization to assure physical assets have the availability and effectiveness necessary
to meet all requirements for mission, product and / or service delivery in full compliance with schedule and
cost objectives. To assure success there must be a parallel, outward looking, business, product and
quality strategy, not addressed in this Handbook, to assure the products and services delivered to the
customer meet all the customers expectations for performance and quality.
PRIMARY BENEFITS
Asset optimization is an essential enabler for Lean Manufacturing. Improved asset reliability,
performance, utilization and effectiveness; predictable lifetime, defect and work elimination are crucial
elements of minimizing variation, redundancy and waste demanded within the Lean process, see Chapter
II for more detail.
In addition to an essential contribution to lean manufacturing, asset optimization has numerous specific
benefits including:
Greatest value, return and effectiveness derived from physical assets for mission, business
conditions, and objectives.
Maximized reliability and production availability of systems that are critical to operation, at
minimum sustainable lifetime costs.
Optimized, sustainable spending on asset maintenance, minimum unnecessary maintenance
activities.
Methodical problem analysis and elimination of defects that limit operation and cause spending.
Optimized capital requirements for a given production output or delivery of service.
Attention continually directed to highest value and priority opportunities for improvement.
Progressively increased effectiveness through continuous improvement.
Awareness, participatory ownership, and accountability promoted to meet objectives.
Improve Production Availability

Optimum production availability requires effective capacity management; assuring that capacity is
available to meet future requirements. Essentials of capacity management include:
Meet Production expectations for output and time of delivery.
Meet, preferably exceed, business expectations for return on assets. Achieved by optimum
production availability, minimum sustainable costs, operations at or greater than design efficiency.
Increase average production to as close as possible to maximum sustainable production;
minimize the hidden plant. The hidden plant is discussed in more detail later in this chapter with
additional information located in Chapter IX.
In addition to increased output, additional requirements include higher quality, reduced tolerances, greater
agility to meet delivery requirements, conformance within an increasingly restrictive regulatory
environment and demands for increased profitability. In this operating and production environment,
physical assets and systems must perform at unprecedented levels of availability, technical integrity and
cost effectiveness that were not thought possible a decade ago.
When combined with risk and regulatory considerations that continually reduce the envelope in which
most production enterprises can operate acceptably, increased reliability the basis for production
availability and cost effectiveness is essential to meet delivery commitments and financial
expectations. Thus, as unreliability drives cost and risk, optimum reliability is a cornerstone of asset
optimization. Predictable capacity, the ability to accurately forecast the availability of production (asset)
capacity to deliver on time, cost and quality at the time of order derives from reliability and is likewise
essential to the delivery of a product or service. These elements plus value are the focus of the
comprehensive program of asset optimization described in this handbook.
Reduce Operating Costs, Increase Capital Effectiveness
Simultaneous with demands to improve operating effectiveness and revenue, are equivalent demands to
reduce operating costs and increase capital effectiveness. The latter drives demands to reduce
equipment design and operating margins, redundancy, production buffers and spare parts inventories.
With all these demands, operating and manufacturing organizations must achieve new levels of industry
best performance and safely extend the life and effectiveness of new and / or aging equipment all with
minimum expenditures.(41)
Efficiency improvements are another large potential source of cost reduction. With an overall efficiency
improvement of just 5 percent, a facility operating 50,000 HP (37.5 MW) of electrical power consumers
can save 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).
Meet Increasing Expectations for Quality, Reliability and Technical Integrity

There probably would not be sufficient mechanics or repair space available if todays population of
automobiles adhered to the 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 power
train and 50,000-mile tire warranties are expected on many models. Furthermore these warranties are
required under stringent fail-safe conditions!
The same applies to industry. Equipment and systems are expected to operate longer between repairs.
For example, industry-best Mean Time Between Failure (MTBF) for certain categories of process
pumping equipment is pushing 70 months. Overhaul intervals have increased from approximately two
years to six years and are being extended even further. Plants must operate for three to four years
between major shutdowns in order to gain the availability, service delivery capability and production
output necessary to meet profit objectives.
Twenty years ago, todays best practice for asset reliability and availability would have been considered
totally unrealistic, wishful thinking.
Move to Minimum Lead, Make to Order, Demand Pull Operation
Meeting customer expectations in todays climate of instant gratification requires innovative, agile, flexible,
and reliable processes. Dell can deliver a custom configured computer in three to five days from receipt of
order. The Toyota production process is 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 maximum reliability of production equipment.
The necessity to maintain and often increase operational effectiveness, revenue, and customer
satisfaction, while simultaneously reducing capital, operating, and support costs is the greatest challenge
facing operating and production enterprises. Success demands radical change from earlier organizational
culture, functional organization, process and management concepts.
Leading production and operating organizations recognize the essential nature of increasing the
effectiveness of physical assets in the new operating environment.
business is on the verge of an essential next wave of asset productivity improvement one
that must go further and will be more difficult to achieve than past initiatives.
The Boston Consulting Group
VALUE OPPORTUNITIES
For a profit-oriented industrial corporation, the potential value that can be created by asset optimization
represents a significant improvement in gross profit and in capital based financial measures such as
Return On Net Assets (RONA) and Return On Capital Employed (ROCE).
Companies that have implemented improvement programs similar to asset optimization have reported
simultaneously increasing production uptime by as much as 30 percent, improving safety performance
and reducing spending by as much as 40 percent.
To expand on the latter, authoritative sources report that North American industry collectively spends
between $700 million and $1 trillion annually on production equipment maintenance, at least a third of
which is unnecessary.(121) There is a big return by eliminating all forms of waste.
The U.S. Department of Commerce reports that 40 percent of manufacturing revenues are spent
on maintenance (asset care).
For the average process and manufacturing company, 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, scrap, downtime and slow time (diminished production) are
caused by equipment malfunctions.
As much as 50 percent of environmental incidents are reportedly caused by equipment (physical
asset) failures. Collectively, the cost of production losses and environmental and safety incidents
caused by equipment malfunctions is likely to be several times greater than spending on
maintenance and repair costs.(129)
Within asset optimization reliability is optimized for production / mission requirements, maintenance
moves from spending to maintain operations to strategic capacity assurance. The first is reactive, the
latter proactive.
The ability to predict future capacity and deliver on time and cost is real value provided by an
asset optimization process that reduces the necessity for buffer inventory and its adverse impact on
capital utilization.
In the manufacturing industries, unreliability necessitates costly inventory buffers that reduce
capital effectiveness.(129)
Capturing the Value
Within many enterprises, the potential reward from asset optimization is in the tens, even hundreds, of
millions of dollars equivalent to 25 to 40 percent, perhaps as much as 50 percent of non-raw-material
Operating and Maintenance (O&M) costs. For entities such as non-profit state and municipal
organizations, the savings realized by implementing an asset optimization program will increase operating
effectiveness, service delivery, budgetary flexibility and customer satisfaction.
Industry leaders are developing comprehensive processes for asset optimization designed to increase
their lead over competitors. Production and operating entities who may not yet recognize the need for
anything beyond cost reductions, or the differences between short-term and permanent, sustainable
reductions, are or will be at a major disadvantage. The concept and implementation of improved asset
optimization described in this handbook is essential for gaining full operating effectiveness, return, and
stakeholder value.
With business, manufacturing, administrative, and logistics (supply chain) activities improving, asset
optimization is the final frontier for achieving major gains in operating effectiveness, corporate
profitability, and stakeholder value. Organizations that pursue this path will be winners in the years ahead.
As the solution, many have and are proposing practices outlined in this handbook. Facts have
demonstrated that alone, none are capable of achieving the full objectives. Only a comprehensive asset
optimization program consisting of a mixture of best practices specifically tailored for a facilitys unique
business, organizational culture, asset condition and organizational structure can create the necessary
results from the existing conditions and environment. As the program progresses, specific elements from
a combination of practices, methods and technology, together with organizational and cultural
improvement are implemented opportunistically in a value-prioritized sequence. By employing best
practices sequenced to create maximum value, asset optimization is capable of delivering the necessary
level of business, financial and operating effectiveness for competitive success.
Increase Production Utilization and Effectiveness
Improving operating effectiveness enables production and manufacturing enterprises to meet
commitments at less cost or deliver more at the same cost. Currently many manufacturing plants have an
overall operating effectiveness around 50 percent. Industry best performers have an overall effectiveness
above 80 percent and, in many cases, greater than 95 percent. Depending on the industry and process,
most have significant opportunities for improvement.
Within industry, the gap between current and potential performance represents hidden capacity and
return that often represents a large opportunity for profit. (The hidden plant and Overall Equipment
Effectiveness (OEE) are discussed in more detail in Chapter IX.) Increased production with constant fixed
costs and high profit spot market sales are two additional opportunities provided assured capacity is
available.
For many operating companies, the gap between current and industry best practice measured by OEE
may be as much as 40 percent. Few may realize that asset availability and utilization that are less than
industry best benchmarks mean they are actually operating a smaller than nameplate facility. Under these
conditions, benchmarks such as cost per unit (pound, barrel, etc.) must either be adjusted downward, or
availability must be raised to near industry best.
A unit within a large facility was operating nearly 25% below internal benchmarks for the specific
process. The message that they were operating a smaller than nameplate facility was not well
received. They either had to get availability up to the world-class value or reduce expenditures to
gain alignment with actual production output.
This simplified example does not consider additional costs incurred by underperforming assets such as
scheduling disruptions, missed deliveries and diminished capital effectiveness.
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.
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. (129)
Facilities significantly below industry best should be able to increase production and reduce costs by
eliminating losses. Referring again to Chapter IX, losses that make up the hidden plant include
downtime (scheduled and unscheduled) and slow time (reduced throughput), startup and transition
losses, poor quality, waste in all forms, and scrap caused by equipment malfunctions.
One unit in a large production facility significantly reduced startup losses and time to attain on-
specification production by implementing relatively simple changes to the control system
software.
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 unit selling price as
more production becomes available. A financial model, introduced in Chapter VII, is necessary to evaluate
opportunities and value gained from increased production.
Increase 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, more time
to arrange alternative sources of supply and improved work and spare parts management. Industry
leaders recognize that equipment reliability is an essential contributor to stability and minimum variation. A
stable, reliable manufacturing process requires an adaptable organization as well as stable, reliable
infrastructure and equipment.
Meet Delivery Commitments
An article in the August 6, 1999 edition of The Wall Street Journal described how a large
power generating 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-hour, must be purchased at $3,000 per megawatt-hour or
more to meet delivery commitments.
One power company reported that in June 1998, 50MW traded for 16 hours at $5,000 per
megawatt hour (MW-hr.). A power marketer obligated to deliver power at $33.25 MW-hr. had to
purchase energy at $1,300 MW-hr to meet contractual commitments. (7)
As cited above, penalty provisions in many production contracts have major short- and long-term financial
impact in the event of defaults caused by the inability to deliver. 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, equipment and infrastructure must be
maintained and operated at peak performance to gain full profit.
Industry leaders typically have a comprehensive strategy in place that links reliability of systems,
equipment and infrastructure with market conditions, capacity management, facility and mission
objectives. The strategy includes risk assessment and management (addressed in Chapter XIII) and
utilizes layered measures of performance. This promotes optimized process, system, and component
effectiveness and continuous improvement.
One process company anticipates that 75 percent of the increased value objective will be gained
by increased first-run quality and yield, cost reductions will gain the remaining 25 percent. A Vice
President stated that companies cannot starve themselves to prosperity. (129)
Reduce Spending
Within the current economic environment and focus on bottom line financial results, all operating and
production enterprises are faced with the challenge of reducing operating and support costs. Direct
benefits of cost reductions are easier to determine as value recovered is directly reflected in bottom line
profit.
As organizations are pressured to reduce costs, they must produce the same or improved results
(manufacturing productivity, utilization and throughput) with significantly diminished resources including
fewer often less experienced people. In addition, increasingly restrictive regulatory and social
constraints are consuming an ever-greater portion of management attention and capital improvement
funds. All this contributes to reduced flexibility and greater pressure on operating margins.
Maintaining the technical integrity and reliability of physical assets has traditionally been viewed as
budgeted business costs, with spending details largely below the horizon of senior corporate and financial
executives. Todays climate of heavy pressures on profitability 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 and is there a path
forward for the continuing improvement that will be necessary to maintain prosperity?
Many corporate executives order cost reductions without recognizing that unlike a business process,
spending requirements to sustain physical assets are largely dictated by asset lifetime and the necessity
for maintenance to retain the condition necessary for production. Unless asset lifetime is extended and
the need for maintenance and repairs reduced, cost reductions achieved by command are temporary and
illusory.
Participants in asset optimization workshops throughout the world continually bring up
managements conviction that spending on physical assets can be reduced by command as a
significant barrier to real improvement in their organizations. Many cite the difficulty of convincing
management that reduced spending can only be achieved as a result of a solid strategic and
tactical improvement program directed to improving reliability, eliminating defects and
requirements for work.
Optimum asset effectiveness can only be achieved through a well-implemented improvement
program. Optimum asset effectiveness is a result, not a command!
Industry leaders pursue cost reductions from a differentiating perspective. They recognize that increased
effectiveness driven by improved reliability is a profit producer. And they view optimized asset
lifetime 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 identifying, prioritizing and
exploiting opportunities to improve availability, yield, first-run quality and on-time delivery are often more
important than cost.
The clear trend toward placing value on optimized maintenance is as close as the television. When Ford,
Cadillac, and BMW began advertising automobiles that are essentially maintenance free everyone
followed. Why have power train warranties increased to 100,000 miles, engine checks to 20,000 miles or
more; both well over an order of magnitude improvement in less than ten years? The simple answer is the
investment in design to eliminate failure modes and the need for associated maintenance, e.g., electronic
ignition, computer controlled timing, and the use of more robust parts, returns value to the purchaser and
profit to the manufacturer. The lesson is clear. With vision, commitment, willingness to change, and
modern technology, maintenance can be controlled and converted to a profit contributor.
With these substantial opportunities for optimizing the utilization, performance and effectiveness of
physical assets, a typical industrial facility can reduce annual maintenance expenditures by 30 to 40
percent or more throughout operating life; gain large increases in production and free substantial capital.
As an example, General Motors reported that in 1994 its worldwide maintenance spending on production
machinery and equipment totaled $4.7 billion approximately 13 percent of the capital invested in the
physical asset manufacturing infrastructure. The same report stated that a benchmarking survey
disclosed that Japanese automobile manufacturers were spending approximately 3 percent of capital
investment to sustain their physical asset infrastructures. (As a comparison, maintenance spending by the
best in the petrochemical industry is approximately 2 to 2.3 percent of Replacement Asset Value (RAV)
a comparable metric.) Eliminating the gap between GMs expenditures and the Japanese average would
have improved GMs annual profit by $3.6 billion a move that unquestionably would have been
welcomed by shareholders and perhaps avoided the problems they are experiencing in 2006.
A supervisor in an automobile manufacturing facility neatly summed up these conditions:
Until the early 1970s North American automobile manufacturers didnt worry much about
manufacturing failures or the cost of failures. The 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, and higher quality
manufactured at substantially lower cost. To be competitive, North American automobile
manufacturers were forced to simultaneously increase quality and reduce manufacturing costs
and model cycle time. Everything had to change.
The basic problem continues to this day! The difficulty of committing to and implementing real
transformational improvements is demonstrated by constant stories of the continuing travails at General
Motors and Ford.
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 investment -due primarily to
decreasing asset productivity. Consistently poor asset performance (nearly 4 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 and 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!
Another study disclosed that the difference in refining industry profitability between the highest
and lowest performing quartiles had increased from about 5 percent to 12 percent over 6 years.
The divergence was not merely an industry average, but rather a difference in performance
unrelated to industry average performance.(109)
Industry leaders recognize that achieving a sustainable reduction in equipment O&M costs must be part
of a larger strategic process.
Reducing failures demands eliminating the underlying defects that 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 failure events is minimized. Perhaps more important, eliminating defects increases
operating availability and thereby gains additional potentially greater benefits of increased
production effectiveness.
The asset optimization process begins with the understanding that reducing failures, and therefore the
need for and cost of work, is an essential step toward gaining full benefits, value and return. Many leading
firms have plans in place to achieve these objectives; some are well on their way to fulfillment.
Increase Effectiveness by Performing the Right Tasks Efficiently
Throughout this handbook there are references to efficiency and effectiveness. It is important to establish
the difference between the two. Efficiency is activity oriented, performing a given task well. A given task
may well be performed efficiently, but the task itself may or may not be appropriate to the results required.
Effectiveness, illustrated in Figure 1.1 is results oriented performing the right task well.
Asset optimization is directed to results effectiveness!
The
Thepath
pathtotomaximum
maximumeffectiveness
effectiveness
Poor
Poorprioritization:
prioritization:
Performing tasks well

excellence
excellenceininPlanning
Planning
and
andScheduling
Schedulingwith
with
many
manyfailures
failures
Correct
Correcttasks
tasksperformed
performedpoorly
poorly
Performing the right tasks
Figure 1.1 Effectiveness Requires the Right Tasks Performed Well
Industry-leading organizations are the most effective and experience fewer failures. Thus, not only can
they accomplish more work with fewer people than their less effective peers, but they also have less work
to do!
Recognize Increased Consequences and Cost of Operating Variation and Failures
Production interruption, safety (personnel hazard and property damage), and environmental incidents all
cost more with continuing increases anticipated. Several process companies report 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 an
accepted practice while failures were repaired. Todays reduced inventory, environmental regulations that
prohibit flaring and obvious waste would quickly force a plant shutdown. This combination significantly
increases the cost of a given failure.
Improve Maintenance and Reliability
Organizations are under pressure to improve the effectiveness and return on capital assets. Industry
leaders are quickly recognizing the necessity, value and benefits of optimizing the return from physical
assets as demonstrated by the deregulated power generating industry. In this industry, managing a
portfolio of mixed cost and efficiency generators to gain greatest return requires accurate lifetime
prediction, optimized reliability management and an accurate assessment of risk. All are necessary to
ensure availability (predictable capacity) capable of meeting commitments for power delivery.
One power generating company developed 44 initiatives to improve performance. Boilers and
boiler tube defects were high on the list of reliability problems. Condition Based Maintenance
ranked in the top ten.(7)
A manufacturing company implemented 25 quality improvement projects to eliminate
manufacturing process limitations and constraints.(129)
Accommodate more Complex and Expensive Manufacturing Equipment and Systems
Physically challenging, semi-skilled manufacturing tasks are being replaced by automation, resulting in
fewer people being required. 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 Operations and Maintenance.
Systems to manage a manufacturing process are co-evolving and becoming ever more interdependent.
Real-time control systems and strategic supply chain management (Enterprise Resource Planning
ERP) systems must be linked with Computerized Maintenance Management Systems (CMMS) and other
management and information systems. Full interoperability is essential for accurate current and predicted
status of physical assets the predictable capacity mentioned earlier (for more detailed information see
Chapter XII and Chapter XIII).
Maintenance is becoming more expensive increased variation from organizational and reliability norms
is very costly.(129) As stated earlier, many enterprises are finding that the gap between themselves and
world-class performers may be as high as 30 to 50 percent of the total maintenance budget. (109)
Improve Capital Effectiveness, Increase Return on Capital
In many commonly used capital- and asset-based measures of effectiveness such as ROA, RONA and
ROCE, profit is the numerator and capital the denominator. Thus, reducing capital employed (the
denominator) has the same positive effect on measured performance as increasing profit (the numerator).
It should be noted that in terms of ROA, RONA and ROCE capital reduction has the same leverage as
spending reduction, and about ten times the leverage compared to increasing production (based on
typical after tax profit). Within the asset care (maintenance) area, demands to reduce capital appear as
pressure to reduce stocked spare parts (inventory).
Many operating organizations have reduced owned maintenance, repair, and overhaul (MRO) spares by
as much as 50 percent through outsourcing and supplier held consignment spares, see Chapter XIII for
greater details. Achieving this major reduction, without affecting availability and production output,
demands improved reliability, a capability to predict requirements well outside normal delivery time and a
solid logistics management process. All must be gained within a comprehensive asset optimization
strategy.
In addition to the cost of non-performing capital assets, companies who have calculated actual costs
estimate that spare parts inventory consumes between 30 and 40 percent of inventory valuation for
storage, management, damage, loss, and obsolescence. Thus, a company with $5 million in spares
inventory is paying a minimum of $1.5 million per year above usage costs for administration, handling,
warehousing and loss. For companies seeking to maximize effectiveness, this cost must be reduced.
Extending the service life of capital equipment is another important issue. Prudent asset optimization
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.
Demands to purchase least cost (low intrinsic reliability) capital equipment is another area in which there
are pressures to minimize capital. This leads to less redundancy, diminished design margin and reduced
technical integrity in new facilities and requires older facilities to operate closer to design limits.
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. (129)
Although two 100-percent redundant pumps have been the standard for many industries, required return
on capital may well lead to the construction of large, new facilities with single pumps in many applications.
Enlightened companies will recognize that the unspared pump now has the same impact on production as
other traditionally unspared equipment. They will also recognize the need to invest resources and funds to
ensure that single-unit reliability does not compromise overall availability. (129)
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. (129)
Under the circumstances described an asset optimization strategy, program and process are essential to
ensure objective profitability.
II. PROGRAM NECESSITY, EVOLUTION AND CHARACTERISTICS
Innovative practices combined with true empowerment produce phenomenal results.

Commander D. Michael Abrashoff, Former Commanding Officer, USS Benfold (DDG 65) (96)
Industry leaders are following similar, generic paths toward optimizing the utilization and effectiveness of
physical assets. Although the program names, implementation details and some measures of
performance vary across industry groups and companies (primarily overall costs and some specifics such
as MTBF, Chapter IX), there are striking similarities, indicating the emergence of a consistent optimizing
process. The process is quickly translating into substantial competitive advantages for enterprises that
recognize and exploit its benefits.
PHYSICAL ASSET OPTIMIZATION

Physical Asset Optimization implemented using the program described by this handbook, is an essential
contributor to business success for process, production, manufacturing, power generating and service
enterprises that are dependent on a physical asset infrastructure to meet revenue, mission and delivery
requirements. Within these enterprises, optimum equipment availability, reliability, utilization and lifetime
cost effectiveness are essential.
Asset optimization is vital for accurate business and production planning. It assures that production
capacity is, and will be, available to meet delivery commitments in full compliance with schedule, cost,
and quality objectives.
PHYSICAL ASSET OPTIMIZATION WITHIN A TYPICAL MANUFACTURING PROCESS

Asset optimization is a strategic, fully integrated, comprehensive program, institutional culture,
organizational structure, optimized processes and procedures all directed to gaining greatest lifetime
utilization, effectiveness and value from production and operating equipment and infrastructure. The asset
optimization program ensures the resources that have been invested in plant and equipment assets
achieve the maximum sustainable value in terms of safety, business and financial return, operating
results, production, productivity and profit.
The asset optimization program is based on a comprehensive strategy linking market conditions,
business, facility, and mission objectives to availability, capacity management, reliability, risk and cost. A
business initiative, the program begins by identifying opportunities to increase effectiveness and value,
prioritizing these opportunities by value, return and risk. The prioritized opportunities are then used to
develop and implement transformational improvements in organizational culture, organizational structure,
processes and practices. In this way asset optimization builds from actual conditions, utilizes current
strengths to greatest advantage, creates maximum ownership and assures results are gained as rapidly
as possible.
Within a manufacturing / production process asset optimization provides assurance that equipment and
infrastructure assets are in effective, serviceable condition with the capacity / throughput necessary to
meet delivery and business objectives at an optimum sustainable cost. Asset optimization must be a part
of the information infrastructure defining asset condition, current and future delivery capabilities to
business, management, production and process control and information systems, Chapter XII. Asset
optimization is the essential unifying element between Operations / Production and Maintenance and a
major contributor to the partnership that must flourish for maximum success.
A typical production / manufacturing process is illustrated in Figure 2.1. The process is directed long-term
by production management and controlled short-term by process control.
Production Management including Enterprise Resource Planning (ERP) and Manufacturing
Execution System (MES), manage the supply chain, production schedules, flow into and out of the
process.
Process Control (Automation) manages the content and performance of production processes and
controls operating variables to meet rate and quality requirements.
Necessity, Evolution and Characteristics 14
Business and Administrative Support

Physical Asset Optimization
Value-Added
Manufacturing Process
Finished Goods Raw Materials
Supply Chain and Process Control

Production Management
ERP/MRP Logistics Support
Predictable Capacity
Figure 2.1 Physical Asset Optimization Provides Predictable Capacity across all Elements of a
Manufacturing / Production Process
Asset optimization also maximizes stability (minimizes variation) to ensure that capacity is not only
available, but also efficient and predictable. Thus, an asset optimization program provides the third
unifying dimension for without stable assets, capable of delivering effective and reliable production
availability; there couldnt be a manufacturing process to plan or control.
Predictable Manufacturing Capacity
Everyone who has been involved with making a product and operating physical assets knows well the
chaos and inefficiencies associated with surprises: variation, unanticipated failures and unscheduled
outages. All carry significant cost and production penalties.
Plant personnel, from executive management to working level crafts often point to surprises as a
primary performance deficiency within their organizations. Recognizing and understanding that stability,
predictability and minimal variation are essential elements of world-class asset utilization and
effectiveness, industry-leading organizations strive to achieve 100% predictability.
A large facility in Southeast Asia had been struggling for over half a year to meet ambitious cost
and availability objectives. A single unexpected outage, experienced on a Friday evening,
eliminated all chances of compliance for the year, as well as performance-based bonuses.
Another plant established the objective of less than one major unplanned event occurring over a
two-year period. The objective was to be achieved within three years.
Maximizing stability and predictability minimizing variation requires effectiveness across the entire
organization. Within an asset optimization program institutional culture, organization, processes, practices
and supporting technology are all essential, interrelated contributors to stable, predictable capacity.
The benefits of predictable capacity include:
Greatly improved ability to meet mission and service delivery commitments for schedule, quality
and cost; and minimized missed shipments.
Increased value delivered, reduced production costs, greater price competitiveness, and budget
flexibility.
Increased asset utilization and effectiveness.
Increased first-run quality throughput.
Minimized production losses.
Reduced cycle time on customer orders.
Anticipation of equipment aging effects.
Creates Value across the Entire Production / Operating Process

In addition to an essential contributor to operating capacity and effectiveness, asset optimization touches
and creates value across the entire organization, Figure 2.2.
Business
BusinessEffectiveness
Effectiveness
ROCE,
ROCE,RONA,
RONA,EBITEBIT
Administration, Production Operations Maintenance Finance,

Business Systems, IT, HR Asset Optimization Capital Management
Safety, Health, Environment, Risk Management and Control
Production Availability
Effectiveness Reliability
Production Rate
Quality Capital Effectiveness

RONA
Production
Planning O&M Cost
Optimization
Process Control
Information Maintenance
Technology Management
Purchasing Spare Parts

Management
Training System & Operating
Administration Improvements
Figure 2.2 Physical Asset Optimization Creates Value across the Entire Organization
By minimizing variation and providing early warning of problems asset optimization improves safety and
environmental performance. It has a large positive impact on cost and capital optimization, both of which
contribute to profitability and capital effectiveness. A synergistic partnership with Engineering, IT and HR
lead to improved organizational effectiveness.
EVOLUTION TO PHYSICAL ASSET OPTIMIZATION

The evolution toward asset optimization has been in progress for at least 30 years. The movement has
been facilitated by rapid advances and synergistic integration of information and information systems,
electronics, computing, automation and controls technologies. Advanced designs, more accurate stress
and dynamic calculations and simulations as well as improved materials have all contributed to improved
reliability and efficiency. Finally, improvements in the soft areas: organizational structure and business
processes along with the recognition of the necessity for transformational improvement have created the
institutional awareness of the need for and benefits of optimized performance and utilization across the
entire organization.
Until the mid-1970s, physical assets deployed in manufacturing and production operations were primarily
managed to contain costs and comply with a budget within a cost center environment, as shown in Figure
2.3. Inspections and overhauls were scheduled based on manufacturers recommendations and past
practice with little thought given to increasing effectiveness or even the need to increase effectiveness.
Most industries had excess capacity as well as operating and profit margins that were sufficiently ample
to accommodate many small failures, an occasional large failure and production interruption. The
pressure on public sector physical assets was likewise relatively low compared to the demands of today.
There appeared to be ample capacity; delivery and service requirements were seemingly met without
difficulty.
Maintenance was generally reactive with emphasis on as repairing failures and restoring service as
quickly as possible. Regular overhauls were typically scheduled on a time basis regardless of real need
which was largely unknown until the equipment was disassembled. Maintenance personnel were
generally disconnected from a budget process that was typically based on prior years performance and
spending.
Pre-emptive activities to reduce the likelihood of failures that disrupt production and service delivery were
conducted more on an ad-hoc basis, if at all. Apart from technical enthusiasts implementing specific
programs focused on equipment, systems or infrastructure such as Condition Monitoring and Condition
Based Maintenance (CBM) there was little awareness or motivation within the typical organization for the
need, or even benefits, to be gained by improving asset performance and utilization.
Cost Containment Cost Reduction Asset Optimization
Cost Center Reduced Resources Maximum Return on Assets

Budget Compliance People RONA, ROCE
Good Operating Margins Expense Value Driven
Excess Capacity Capital Safety and Environmental
Reactive Maintenance Reduced Operating Margins Excellence
Scheduled Overhauls Less Spare Capacity Optimized Total Cost
More Aggressive Objectives of Ownership
Benchmarking, GAP Sustainable Improvements
Availability Maximum Effectiveness
Cost: %/RAV, $/EDC, Profit Center
EFOR Optimum Reliability
Minimum Variation
Proactive Maintenance
Figure 2.3 Evolution to Physical Asset Optimization
The first real transforming change to occur was the shifting of focus to quality improvement and cost
reduction. Reengineering and rightsizing were just two of the euphemisms for reducing cost, largely
through personnel reductions. Manufacturing and production / operating facilities that had implemented
technical improvement programs such as CBM were the best prepared for downsizing, although in many
cases the very program that had gained effectiveness was itself downsized.
The same basic evolution occurred in the public sector. As far back as the 1970s, the pressure to reduce
taxes and to improve service delivery led administrators to start seeking ways of controlling and utilizing
public sector assets to better effect. For example, the UK Ministry of Technology appointed a committee,
the committee for terotechnology, to investigate maintenance practices in the United Kingdom. This
committee stated that:
The nature of the maintenance activity was determined by the manner in which plant and
equipment was designed, selected, installed, commissioned, operated, removed and replaced.
Major benefits could come to embrace all these areas, and because no suitable word existed to
describe such a multidisciplinary concept, the name Terotechnology (based on the Greek work
terein - to guard or look after) was adopted.
In 1975 the Committee for Terotechnology defined terotechnology as:
A combination of management, financial, engineering and other practices applied to physical
assets in pursuit of economic life cycle costs.
In some countries, the need to sustain ageing physical infrastructure took on higher priority for
administrators. Government treasury departments initiated wider legislative framework for improved public
accountability (see for example, the New South Wales (Australia) Treasury Total Asset Management
Guide). Public-private partnerships became a widely accepted and recognized approach for development
of large infrastructure assets such as airports, seaports, and road networks.
Beginning in the 1980s the larger commercial corporations began benchmarking to determine relative
performance in an increasingly competitive manufacturing, production, process and operating
environment. In terms of physical asset and work effectiveness, many were astonished to find a 30
percent or greater difference between their current performance and industry leaders. For most this was a
wake-up call.
In some cases, people recognized that many of the cost reduction initiatives being implemented were
very short-term 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 activities to well below sustainable levels. For a time, the physical assets in a typical facility
survived on the momentum of previous practices and produced substantially increased profit. The
manager responsible was promoted as a hero just about the time the consequences of his actions 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 successor was fired!
The best executives recognize that commercial operating and production 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, during the 1990s most industrial producers were shocked to
learn that their industries and facilities were not returning the cost of capital. The inability to attract capital
due to low returns eliminated investment for expansion or even improvements. As a result, a low return
facility gradually falls farther and farther behind its higher return competitors. 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 deregulated 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.(129) Spot market operation mandates
the reliability and agility necessary to take maximum advantage of opportunity demands when prices are
highest.
By the mid 1990s there was growing awareness for the necessity to optimize the performance and
utilization of production assets including all surrounding management processes. Availability and service
delivery had to be improved and costs reduced. Improving information, production and business
processes, control, logistics and work management with computerized systems was considered
imperative. Enterprise Resource Management (ERP) systems, Manufacturing Execution Systems (MES),
Computerized Maintenance Management Systems (CMMS) and programs such as Reliability Centered
Maintenance (RCM) were heavily promoted as singular solutions.
Lean Principles Applied to Asset Optimization
Along about the same time, mentions of Lean Manufacturing began to appear in maintenance literature
and conference papers. The concept of Lean originated in the Toyota Production System to describe an
optimized manufacturing process. From these origins Lean gained a larger meaning describing the
application of basic principles to other processes including maintenance / asset care. In this context Lean
is essentially doing more, better with less expenditures and fewer resources. Greater system, equipment
and organizational reliability, along with a quality oriented, minimum waste institutional culture and values
are an essential foundation of lean.
Lean can be defined as:
An overall methodology to minimize the consumption of resources required for production by
eliminating waste (non value activities), poor quality, unnecessary motion and inventory. Waste
broadly defined as non-value added expenditures and activities.
When applied to Asset Optimization, Lean principles include:
Minimized resources; inventory, cost and waste (effort, money, duplication, time)
Design for optimum lifetime effectiveness robust design
Benchmarking disclosed that some facilities had significantly greater design margins, in
some cases as much as 50%, compared to others with the same capacity. The facilities
with the higher design margins had greater production availability.
Quality installation
Optimized lifetime operating reliability
Stable, effective systems and equipment; operating and work management processes
Maximum value delivered by optimizing flow, motion and first-time quality.

Efficient operation
Production availability maximized
Reduced spending maintenance requirements minimized
Optimal asset lifetime, optimum maintenance, minimal failures
Highest quality work, minimum rework
Focused improvement initiatives
Effective institutional values, culture, organization, operating and management processes
institutionalized
Maintenance, Production partnership
Complete, written procedures all involved thoroughly trained
Optimum deployment and use of effective practices: TPM, RCM, RCA, CBM and PM
Step change transition to continuous improvement driven by small multi discipline, empowered
action teams
Prioritization to assure most effective use of resources
Broad access to information and data
It is no coincidence that Lean principles are very much aligned with Total Productive Maintenance (TPM),
Chapter V, as both share the same origin. From a larger perspective these are the same principles
necessary to gain sustainable asset optimization that are detailed in this Handbook.
Improving the Organization
Although there might not have been any connection at the time to Lean, many who embarked early to
implement solutions to meet the broad challenge of improving asset productivity and effectiveness
learned they had to expand both the range and depth of the improvement process. Directing attention to
improving the maintenance function failed without a genuine partnership and full alignment with
production and other support functions as well as a deep commitment to improved effectiveness. Vital
support functions include Engineering, Finance, IT and HR. Concentrating on improving work
management did not produce needed results without a simultaneous effort to improve reliability and the
technical integrity of physical assets. Improved maintenance strategies developed through RCM were
expensive and only partially effective in meeting overall objectives unless accompanied by prioritization
and a focus on eliminating organizational silos, design, acquisition and installation deficiencies. Many
concluded that institutional values, relationships and culture were the real keys to success. Get the
institutional values and culture right and everything else follows. The reverse, focus on improving
procedures first, relationships and culture will follow, is not necessarily true.
Individuals within an industry leading facility that was approximately two years into a major
improvement program heavily focused on a single area lamented the lack of attention given to
associated areas that proved necessary for success. For example, the improvement program
was initially directed entirely to maintenance, specifically work management. Production
involvement was scheduled for later in the process. After two years of excluding production,
gaining production support for a maintenance initiative was proving difficult. Everyone agreed
that the initiative should have begun as a maintenance / production partnership. Further, at
inception the initiative should have addressed cultural issues such as whats in it for me at all
levels of the organization. As a result of these process deficiencies, the participation, support and
ownership necessary to assure success were largely lacking at the working levels.
Industry leaders and public administrators responsible for physical assets are recognizing that a real
solution requires transformational changes to values, institutional culture, the organizational structure,
processes, procedures and practices. All have to be addressed for any to achieve the required results.
People must look at improvement from a holistic perspective of overall system performance to meet
business and mission objectives. Insertion of improved technology, processes and practices has to be
justified by specific requirements and opportunities to improve performance and financial results. Methods
such as Condition Monitoring and RCM, management systems such as CMMS have to be viewed for their
value and contribution within a complex tapestry of current organizational culture, and conditions,
including those of physical assets, and business necessities.
The answer, just gaining acceptance during the first decade of 2001, is some form of asset optimization
that simultaneously encompasses all elements of improvement, from organizational culture to asset
component, in a value-prioritized matrix. Industry leaders are recognizing that simultaneously addressing
multiple opportunities is imperative to gain the synergy and results necessary for ultimate success. Is the
asset optimization approach to transformational improvement difficult to implement and manage
compared to a singular solution absolutely! However, only with this perspective and method can
success be achieved. A broad Physical Asset Optimization program is imperative.
THE REQUIREMENT FOR ASSET OPTIMIZATION VIEW OF THE BOSTON CONSULTING GROUP
In 1988 the Boston Consulting Group published an excellent exposition describing the requirement for
Asset Management. 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 the asset optimization program.
Business is on the verge of a major next wave of asset productivity improvement one that will
go farther and be more difficult to achieve than past initiatives. This next wave is being driven by
several powerful trends:
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 III and VII]
The Next Wave of Asset Productivity Initiatives will Share 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.
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 assets in
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, VII]
Focus on Asset Productivity Makes Strategic Sense:
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
2. Disaggregate your business to identify key areas of need
3. Customize your benchmarking
4. Estimate the impact of operational improvement on shareholder value
Understand your asset structure Many managers still focus almost entirely on their Profit and Loss
(P&L) performance. 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, (GAAP) 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 value to replacement
value in current dollars utilizing latest technology. [Chapter VII]
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. [Chapter VII, IX]
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 IX]
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 sub unit), 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.
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. [Chapters V, VII]
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 IX]
In some business units, the new focus on asset productivity led to a major reorganization of operations.
One unit, for instance, had measured the asset productivity of each of its production facilities for years
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. For instance, some products had
relatively stable demand, which meant that they lent themselves to high fixed-asset utilization. By
contrast, other products 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.
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 (reducing 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 XIII] 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.
Building Line Management Commitment
Unless asset productivity improvement is driven by the line with strong ownership at the working level,
even the strongest program is unlikely 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 VII, IX]
In building line management commitment to asset productivity, three things in particular are critical:
Make the financial case and set the right level of aspiration Asset utilization and productivity are
critical business levers that should be an important part of what line executives manage. At far too many
companies, however, they are 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, line managers and plant level employees are
unlikely to make it a primary focus of attention.
Senior executives 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 improvement efforts. This aspiration will partly be the result of extensive
benchmarking, as described previously. 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?
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 metrics at the cost of neglecting other important priorities or they never really focus on the new
targets at all. [Chapter VII, IX]
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 best-practice
asset performers link this top-level asset-related measure directly to compensation. [Chapter IV, VII, IX]
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
III, VII, IX]
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.
One Example
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 practice for 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.
III. PHYSICAL ASSET OPTIMIZATION FOUNDATION PRINCIPLES
this nation should commit itself to achieving the goal, before this decade is out, of landing a
man on the moon and returning him safely to the earth. But in a very real sense, it will not be
one man going to the moon-if we make this judgment affirmatively; it will be an entire nation. For
all of us must work to put him there. John F. Kennedy
Asset optimization is business oriented; profit centered and directed to attaining greatest lifetime
effectiveness and value from physical production assets. The process begins at design and continues
through procurement, installation and operation. It includes maintenance and finally ends at removal from
service and disposal.
Asset optimization includes safety, environmental and social responsibility, institutional values and culture,
organizational structure and reporting, process, practice and technology. Activities and improvements are
prioritized for the specific business and operating conditions. They are implemented opportunistically
within a value matrix to gain greatest return from increased production capability and effectiveness and
optimized spending. Metrics that link to business and financial objectives are employed throughout the
asset optimization process to establish objectives, identify opportunities and measure progress.
Information and management systems must be integrated and capable of effective mining to identify
performance gaps as well as convey current status, predicted asset lifetime and capacity, effectiveness of
operating, management and logistics processes. Asset optimization requires that maintenance is a vital
part of production, partner of operations and managed as a core business activity to gain maximum asset
effectiveness and return.
BASIC REQUIREMENTS
The following ingredients are essential to ensure the success and best possible contribution of
asset optimization:
Total understanding of the necessity and benefits for optimizing the performance and
effectiveness of the physical asset base including the contribution of essential value to mission
compliance, increased profitability, availability, production output, quality, and reduced cost.
Forceful, energetic top-level leadership totally committed to the program and its success.
Ambitious, optimistic, and achievable objectives established at working levels.
To gain the ownership and commitment essential for success the people who are going to do
the work must identify specific opportunities for improvement and develop the fulfillment plan.
Financial prioritization of improvement initiatives for greatest value and contribution.
Organization, practice, and technology changes implemented to address specific requirements.
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.
Ensuring Success
The asset optimization program must be driven top down, led middle out and accomplished bottom up.
Some have called this process Shared Leadership. (122) Business conditions, specifically value creation
and increasing profit, are the basis for prioritization and provide the sequence for implementing
improvement initiatives. The process requires a clear understanding of the principal factors that determine
and drive profit.
Successful asset optimization typically requires:
An organizational culture shift to initiative, ownership and, accountability.
A streamlined administrative organization.
Foundation Principles 26
Improved coordination and communications.

Commitment to reducing the need for and the cost of maintenance.
An optimized mix of processes practices and technology to accomplish the objectives.
Important actions necessary to derive maximum value and profit include designing for reliability and
maintainability and eliminating root cause problems. The latter includes actions such as upgrading
materials, improving the quality and integrity of basic requirements (lubrication, integrity checks) and
providing better operator and craft training. Systematic elimination of minor deficiencies before they lead
to major damage and interrupt production is the key to optimum asset optimization. Few would argue with
a statement that fire prevention is far more cost effective than fire fighting.
OPTIMIZATION PROGRAM PRINCIPLES

Obtaining the desired product at minimum cost is the goal of all manufacturing and production processes.
As illustrated in the financial model contained in Chapter VI, a production process requires numerous
contributing elements. In addition to raw materials, these include electricity, fuel, water, people, logistics,
administrative and technical support, training, and services such as waste removal.
Dealing with, controlling and optimizing the lifetime cost of ownership requires an understanding of what
the actual life really is and how the operating environment, operations, and maintenance of the plant
affect the bottom line.
Are mission effectiveness and value determined by production availability (capacity), market conditions
(demand), operating (conversion) and maintenance costs? Typically it will be some combination of two or
more of these. The answer is vitally important, because it establishes the prioritization of opportunities
within an asset optimization program, as well as the basis for deployment and allocation of resources.
Safety is always a paramount consideration. Regulatory (environmental) factors have a strong effect, as
do product and work quality. In the following sections some of these philosophical issues will be examined
enroute to a description of the process itself in Chapter IV.
As stated, an asset optimization program necessitates safety and environmental excellence and leads to
improved institutional values and culture, organizational structure, process and equipment reliability,
increased operating efficiency, improved operability and maintainability, effective work and logistics
(supply chain) management and optimized spending. Institutional cultural issues that must be addressed
during an asset optimization program include values, behavior, ownership and communications.
Additional issues include a multi-skilled team workforce compared to the more common functional
workforce; decentralized compared to centralized organization; core competencies that determine the
necessity of in-house or a potential for outsourced work; personnel qualifications and training.
For the purposes of this handbook, core competencies are defined as those that involve critical
business or proprietary information, must be fully aligned with business decisions, deliver a direct
contribution to the dominant value driver and cannot be obtained from multiple sources. Any
aspect of the business operation that delivers a strategic business advantage must be
considered a core competency.
Asset optimization takes a holistic overview of the asset procurement; installation and lifetime care
process. It defines the entire process from top to bottom. 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 asset utilization and optimization have a vested interest in the success and
continued viability of the organization. Soliciting input from reliability professionals may lengthen a
decision process to some degree; however, a mutually agreeable consensus will increase the likelihood
that all potential problems will be identified, an appropriate risk assessment will be made, and the final
decision will optimize risk and costs.
Business Driven
Although most of the processes and practices necessary to assemble an effective asset optimization
program are readily available, many organizations are not yet realizing its full value. One reason appears
to be inadequate communications between reliability professionals and senior management. (The term
reliability professional is used within the handbook in its broadest sense to include all involved in the asset
optimization and care process). Many reliability professionals 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. Seen from managements side, a narrow focus on
physical achievements and technology rather than business constraints, priority and results may inhibit
the necessary dialog.
Corporate executives and financial managers argue that customers, shareholders, and boards of
directors are the primary driving force behind cost reductions. In the past, profit margins and excess
capacity were typically sufficient to allow reliability professionals to pursue narrow goals without much
discipline or requirements to demonstrate real value. With both profit margins and excess capacity being
squeezed, future investment for productivity-improving technology and practices must be supported with
compelling financial justification. As a result, reliability professionals must learn to speak business in order
to translate results into financial terms that are credible and appealing to executives and senior
management executives are not going to make the translation from business to technical reliability!
Asset optimization is a business process. There are permanent cost reductions, value, and profits to be
gained through visionary, enlightened, transformational 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 familiar pay me now
or much more later!
The choice is clear. Lead with asset optimization or wait until it is imposed by the same competitive
pressures that forced adoption of modern manufacturing practices such as Lean, Just in Time (JIT) and
Statistical Quality Control (SQC).
Profit and Results Oriented
Asset optimization is a results oriented lean process, rather than being activity and task protective.
Opportunities, prioritization and measures of performance are financially based. Profit center, rather than
cost center, principles direct the entire process. It incorporates and builds on the best attributes of Six
Sigma, Reliability Centered Maintenance (RCM), Total Productive Maintenance (TPM) and others
assembled and optimized to gain greatest value within specific plant conditions and business / operating
objectives.
Profit Centered Management
The need for asset optimization that differs from past practice is apparent to many professionals. (70) Cost-
centered management; the traditional method of asset care is directed to compliance with an operating
budget. It is activity and task protective, risk adverse and contains structural disincentives for optimization.
Everyone knows the reward for under budget performance in a cost center! In contrast, profit-centered
management advocated within asset optimization is value and results oriented; encourages investment,
and accepts added operating costs in order to increase value, improve efficiency and take advantage of
opportunities. A profit center rewards agility and initiative and demands ownership, responsibility and
accountability. A premium is placed on optimization. Investments and added costs are evaluated from the
standpoint of results and return. A profit center is certainly healthier and better suited to asset optimization
in a complex process or manufacturing environment.
Asset optimization focuses on profitability and value gained over a lifetime of operation. The principles
require seeking improvement opportunities prioritized by value. Opportunities mentioned previously
include improved safety, reliability, production output, quality and capital effectiveness. 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.
Specific examples in the equipment area that can have very attractive returns include:
Assuring that operating conditions match design specifications.
Extending life by upgrading to corrosion resistant materials.
Considering replacement with higher efficiency equivalents.
Installing sealed bearings and / or bearing isolators to ensure contamination-free lifetime
equipment lubrication.
Eliminating failures caused by pipestrain induced casing distortion and shaft misalignment.
Self-venting seal housings.(86)
A facility has a pump improvement program in place that calls for installing a standard suite of
reliability enhancing modifications whenever a pump is repaired. (129)
There are dozens of such opportunities in every industry all must be prioritized by financial return.
An oil refinery increased profit tenfold simply by focusing on opportunity rather than cost. (129)
Within the concept of asset optimization, maintenance (asset care) shifts from keeping individual
equipment operating to optimizing reliability, ensuring process and system integrity and effectiveness.
Directed to Gaining Maximum Value from Operations
Insisting on maximum value over least cost is a long-term commitment that requires a top to bottom
change in organizational culture. This is a concept that 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. (NPV and ROI
are lagging indicators, Chapter IX, results of profit center activities that indicate success only after the
fact!) Framing operational issues and schedule impacting asset care decisions in value terms is a profit
center mentality and greater challenge. For the typical organization trained to think of minimizing costs,
the concept of maximum value may be unfamiliar. The profit center, value concept of reducing costs as a
percentage of operating hours or production output in units MW, pounds, tons, barrels, etc. is quite
different and leads to greater value than cost reduction. It automatically considers opportunities for
increased production, yield, quality, and efficiency. The financial model and process presented in Chapter
VII may be of assistance.
Within the financial model, benefits from improved practice and technology are translated into financial
terms so that decision makers can identify and will support the initial and sustaining investments to gain
maximum value.(34)
An industry leading company reports full access to cost and spending information through their
ERP system. This has led to a worldwide corporate drive to establish cost per unit output as a KPI
for all facilities. From a reliability perspective the organization is being asked for an investment in
time, effort, resources (human and technical) and money to gain a return in terms of:
Improved safety and environmental performance
Increased production due to improved plant availability
Reduced maintenance cost
Improved overall efficiency and effectiveness
All have a positive effect and will lead to a more profitable organization. The company advises
that organizations that can obtain effectiveness information such as cost per unit output, and
more importantly a trend over time, will have an excellent indicator of the effectiveness of the
improvement program.
Benefits of improved equipment management that are driven by asset optimization and translate into real
financial value include:(34)
Reduced safety incidents, elimination of industrial injuries, improved environmental compliance.
Increased utilization, availability and production rate.
Improved quality.
Maximum conversion effectiveness optimized cost.
Minimum failures, scheduled and unscheduled outages.
Reduced O&M costs.
Reduced energy usage
Eliminated maintenance actions, reduced maintenance costs.
Reduced spare parts inventory (increased capital effectiveness).
Unifying Partnership between Maintenance and Production

By definition, asset optimization imposes broad requirements and demands results that are well beyond
the capacity of any single functional area. Perhaps asset optimization is best viewed as a unifying link
between Production, Production Planning, Process Control and Maintenance that requires all functions
fully aligned. Asset optimization provides the production capacity needed to assure that mission
requirements can be met safely at optimum output, quality (yield), efficiency, and profitability.
These concepts are illustrated in Figure 3.1. Note that revenue, asset utilization and cost are the three
prime contributors to corporate / mission effectiveness, expressed as RONA and ROCE.
Increase ROCE / RONA
Increase Asset Reduce Total

Revenue Growth
Utilization Delivered Cost
Market differentiation Increase Capacity: Improve

price Availability/Uptime Operation & Maintenance
quality Production Rate/Yield Effectiveness
response Quality Efficiency
Cash flow Safety, Environmental
Excellence
Capital effectiveness
(spare parts)
Physical Asset Optimization
Figure 3.1 Physical Asset Optimization Focuses on Results
Costs Controlled by Reducing Requirements for Spending

Every company that produces a product, with the possible exception of Ferrari, must operate within cost
constraints. From industry benchmarks and other data all companies know what costs are necessary to
meet overall profitability objectives. They are also well aware of cost metrics for individual activities such
as asset care (maintenance) and work management. In other words, industry benchmark costs define
how much maintenance is affordable for a given business and level of production. If affordable
maintenance is less than what seems necessary to keep the means of production operable, a plan must
be developed and placed into effect to increase reliability and reduce maintenance requirements. The real
question is not how much maintenance is considered necessary, but rather what is affordable for a given
business. Again, this clearly points to a conclusion that eliminating failures and the need for spending
is the only way to reach cost objectives.
Eliminating Defects the Key Imperative of the Physical Asset Optimization Process
A reliability oriented culture of excellence that views defect elimination as a prime opportunity for
improvement is the key imperative to increasing asset effectiveness and reducing spending. Eliminating
defects addresses all the consequences of failures. Focusing solely on labor cost as many do who are
fixated on costs immediately limits improvements to the labor component of a typical repair
approximately 50% of the total cost in North America! By eliminating defects, costs both labor and
material are safely and permanently eliminated. Eliminating defects leads to corresponding reductions
throughout the organization, including cutbacks in idle capital used for redundancy, work-in-process
inventory, and spare parts. Negative cash flow caused by failure events is minimized, operating
availability and production effectiveness increase. Supporting processes such as work management gain
in quality and effectiveness due to the ability to concentrate resources and improve planning.
Risk Assessment, Management and Control are Essential
Risk Management, consisting of threat identification, assessment, prioritization and mitigation is an
essential part of the process used by industry leaders to minimize surprise events. It is proactive in
nature, and directed to identifying threats long before occurrence. Industry leaders understand that risk is
not simply consequences, but probability of the failure event multiplied by consequences if the failure
occurs. Risk Management involves taking solid action to reduce probability or consequences optimally
both.
Industry leaders identify risk and recognize and mitigate problems that have not yet happened. The rest
wait until failure symptoms occur to take action thereby risking costly surprises. Three events are
illustrative:
A refinery recognized that the lubrication and seal oil system on a vital compressor that could
shut down a major part of the facility did not meet current design standards or practice. Controls
were antiquated and many felt that the automatic start system for the spare lubricating oil pump
was unreliable. Although there had never been a failure or outage attributed to this vital system,
most with knowledge considered it a serious event just waiting to happen. Eventually the decision
was made to replace the entire system. The task was thoroughly planned. A replacement was
engineered, procured and installed successfully during a scheduled turnaround.
Two pumps in hot hydrocarbon service were normally operated in parallel as a process reliability
measure. The two pumps had flat head vs. flow characteristic curves and, in parallel, operated in
a risky low flow regime. Both pumps had historically experienced high rates of bearing failures.
The threat was well known. The plant depended on periodic vibration readings and an
assumption that changes would be noted in time to recognize a problem and shut a pump down
prior to failure. Eventually, a multi million dollar failure occurred when deteriorating conditions
were not recognized quickly enough to avoid catastrophic failure and a resulting fire.
A third facility requiring 120 percent capacity, decided to operate two 100 percent centrifugal
pumps in parallel. The rationale was that at 60 percent each the pumps should be loafing and
hence more reliable. They knew about but didnt consider the risks inherent in low flow operation,
the possibility that slight differences could cause one pump to assume more than half load,
starving the other even further and the potential consequences of a low flow induced failure. An
engineer stated that plant policy was not to consider risk in the economic analysis of projects to
mitigate the effects of changes in operating procedures. Since without considering risk the cost of
reduced equipment life was quite low compared to the gains from increased production,
permanent corrective action couldnt be justified. A failure to consider risk when changing
operating conditions is irresponsible.
Industry leading companies utilize risk ranking, described in more detail in Chapter XIII, to ensure that
attention and effort are focused on the greatest threats and potentially most rewarding opportunities. The
risk ranking process must be formulated such that only about 10% to 15% of total equipment and system
assets are in the highest risk category. With a greater percentage of equipment in the highest risk
category there is basically no prioritization or assurance that efforts are applied to the most needed areas.
As a result, corrective efforts are diluted.
In one case a facility conducted a criticality assessment, to identify systems that were critical to
production. The criticality assessment, ignoring actual operating history, identified approximately
1,600 systems out of about 2,200 total systems as critical first priority for application of RCM.
After about a year of effort by a dozen or so reliability professionals, optimized programs had
been developed and implemented for approximately 200 systems 13% of the total considered
most critical. At that point the program was more or less abandoned due to priorities, demotivated
participants, diminished resources and uncertain returns. Did the 200 analyses that had been
completed cover the highest priority / risk systems or address the most threatening potential
problems with greatest value recovery? No one knew that issue hadnt been addressed.
PROGRAM OBJECTIVE
Maximize Return on Assets through an Optimum, Sustainable Lifetime Strategy
Asset optimization focuses on the lifetime cost of ownership, which includes design, procurement, and
installation. As an example, over a full lifecycle the acquisition cost for typical rotating equipment may be
10 to 15 percent of the total cost, lifetime maintenance may be as low as 5 percent with operating cost
typically comprising as much as 85 percent.(25)
A systems approach to the lifetime cost of owning physical production and manufacturing assets 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 each
and every physical asset.
Visionary manufacturers have shifted awareness from the here and now to an extended time
horizon. Physical asset management strategies based on total lifetime ownership have become a
fundamental extension of competitive awareness.(25)
Asset optimization provides the basis for collectively optimizing investment, resource allocation, and
spending decisions to gain greatest lifetime return. The emphasis is on achieving maximum sustainable
lifetime effectiveness from design, procurement, and installation through operation, maintenance, and
eventual replacement or de-commissioning, Figure 3.2.
Cost reductions below a level
required for sustainable operation
consumes the asset, and will
Goal of Physical Asset eventually necessitate major
Optimization refurbishment or replacement
Cost
Minimum Sustainable Cost
Consuming Assets
(Decapitalizing) Age
Ageand
andintensity
intensity
ofofoperations
operationswill
willshift
shift
minimum
minimumsustainable
sustainablecost
cost
Lifetime
Figure 3.2 Sustainable Equipment Asset Optimization
As illustrated in Figure 3.2, the type and tempo of operations may raise or lower minimum sustainable
costs. For example, operating above nameplate production rates may stress equipment and shorten
lifetime. Likewise, shifts in operation to different raw material or fuel may accelerate corrosion rates and
wear. Within the asset optimization process the trade-offs are known and demonstrated with a positive
ROI.
As another example, a decision not to paint and / or preserve a structure for corrosion protection may
require replacement of the structure long before its designed end of life. Examples are readily apparent in
nearly every major cold weather city. Cracks in concrete bridge abutments are allowed to persist. Water
enters the crack, freezes and the crack expands. Eventually the crack reaches reinforcing steel, the
combination of water and road salt causes corrosion and the deterioration accelerates. The section of
concrete breaks off exposing the reinforcing steel to even greater corrosion. Ultimately the entire
abutment will have to be replaced long before the end of design lifetime simply because a small amount
of time and / or funds werent made available to seal small cracks!
This example is all too typical. Cost reductions are often gained by deferring sustaining maintenance on
capital assets. Probably few if any decision makers attempt to assess the risk of deferred
maintenance(7) or calculate the Net Present Value (NPV) of their decisions. Many dont want to be
bothered; others are focused on expediency rather than economic value. The penalties for deferring
activities such as painting, sealing cracks, correcting steam and air leaks, and repairing damaged
insulation are gradual and spread over time. 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. With a bit of luck the imperative for action wont be blamed on the individual responsible for
the neglect.
The following cases demonstrate that maximizing profitable operation requires a program for predicting
lifetime and reliability improvement achieved by correcting defects 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 install an additional boiler.(129)
Another company eliminated lubrication rounds as a cost savings measure. After approximately
six months, valves, dampers, and moving equipment began to stick, requiring expensive
maintenance and, in some cases, replacement.(129)
A third company determined that over lubrication was the cause of most motor bearing failures.
Instead of optimizing the lubrication process for individual bearings they decided the best course
of action was to cease lubricating motor bearings altogether! (129)
In all cases the asset optimization process considers the tradeoffs and value gained to construct the most
effective and profitable lifetime asset management strategy for operational requirements. Within the
balance, knowledge of current life expectancy, the rate of consumption and real cost under a given set of
operating conditions are critical elements of maintaining maximum lifetime effectiveness.
Figure 3.3 illustrates the lifetime profile of typical operating and production assets ranging from process
and manufacturing facilities to 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.
Gradual
Gradualloss
lossin
in
production
productioncaused
causedbyby
process,
process, operatingand
operating and
Demand mechanical
mechanicaldeterioration
deterioration Demand
Best Demonstrated Production Rate Best Demonstrated Production Rate
Breakeven Breakeven
Breakeven
Breakeven moves
moves up
up Out-of-service As
Asnew
newcondition
condition
with Out-of-service
with increased
increased cost,
cost, for
for restoration Improved
reduction in market
reduction in market
restoration Improved reliability
reliability
price; extends
extends the
the interval
interval
price; moves
moves down
down between outages
with
with decreased
decreased cost,
cost, between outages
increased price
increased price
Time Time
a. Asset lifetime profile On
On occasion
occasion itit may
may be
be b. Improved reliability adds to profitable operation
advantageous
advantageous to to operate
operate
temporarily
temporarily below
below
breakeven
breakeven to
to meet
meet
Demand delivery
delivery commitments
commitments Demand
Best Demonstrated Production Rate
Best Demonstrated Production Rate
Profit
Breakeven Breakeven
Loss
Outage
Outageduration
duration De-bottlenecking
De-bottlenecking
reduced
reducedby
by increases
increases rate
rate and
and
improved
improvedplanning
planning capacity
capacity
and
andscheduling
scheduling
Time Time
c. Reduced outage duration increases profitability d. Increasing rate adds to profitable operation
Figure 3.3 Intervention Improves Asset Effectiveness (129)
A gradual loss of profit and operating readiness can be caused by a variety of defects. These include
deteriorating efficiency (greater cost), corrosion, heat exchange limits, mechanical constraints such as
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 must eventually 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 3.3b, c, and d.
Increasing reliability by eliminating life-shortening defects extends the time between restorative outages,
as shown by Figure 3.3b. Profitable operating life, illustrated by the area above breakeven, increases.
Shortening the duration of restorative outages reduces the non-service time that subtracts from asset
operating life, effectiveness, and profit, as shown in Figure 3.3c. Within industry, objectives to double the
interval between planned restorative outages (overhauls / turnarounds) and halve the duration of an
outage are not uncommon. One Operations Superintendent stated an objective of doing away with
planned outages altogether by doing more restorative work during operation and accomplishing
restorative tasks during unplanned shutdowns that occur due to events such as power interruptions.
Figure 3.3c 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.
A manufacturer faced with heat exchanger degradation determined that while production could be
maintained, the loss of efficiency resulted in significant unprofitability. Question halt production
to repair the exchanger or continue at a loss to fulfill customer JIT requirements? The
manufacturer concluded that customer good will had greater value than temporary unprofitability
and continued to supply product at a loss until delivery requirements had been met.
Figure 3.3d 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 operation reducing the
hidden plant described in Chapter IX.
STRATEGY BEGINS AT DESIGN

A 1997 article in Maintenance Technology stated that over 60 percent of equipment lifetime maintenance
costs were caused by preventable errors during design, procurement, installation, operation, and
maintenance, Figure 3.4.(108) Over 20 percent of these lifetime maintenance costs were due to design
engineering and construction errors that could be avoided by appropriate design-related decisions.
Construction 5%
Non Preventable 31%
Management 7%
Operations 32%
Maintenance 8% Design and Engineering 17%
Figure 3.4 Division of Maintenance Costs by Origin (108)
In most facilities, rigorous design specifications are applied to critical equipment typically large,
unspared machines and other equipment whose loss interrupts production. Because of this scrutiny,
critical equipment is usually quite reliable. It is designed with exceptional attention to detail, installed with
great care and subjected to close attention and surveillance throughout its life. As a result, critical
equipment typically operates for lengthy periods without attention or problems. Based on grouped
lifecycle costs, critical equipment may be less expensive to maintain when compared to small general-
purpose machines. Although the cost of any given maintenance event is typically much less for general-
purpose equipment, the population is far larger and may consume more lifetime costs than critical
machines. Chronic, repetitive problems that wouldnt be tolerated on critical machines may be allowed to
exist on smaller, spared equipment simply because they were designed that way! When lifetime costs are
examined in detail it becomes obvious that chronic, repetitive failures, many caused by design defects
and basically ignored, are a major opportunity for improvement.
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 the 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, 129)
Return on capital necessitates that new manufacturing facilities are designed with reduced operating
margin and redundancy. As stated earlier, return on capital has necessitated as much as a 50 percent
reduction in investment for capacity.(129)
An incident that occurred in a new plant illustrates where design can go astray.
Two deep-well pumps were installed 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 highly
unreliable with failures occurring nearly every month. Specifications disclosed that the design
required pumping the tank empty when filled with ammonia-saturated water. While this condition
could occur, it was extremely unlikely and could be accomplished with a portable pump if
required. Plant personnel concluded that the installed pumps 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.
Design Defects Identified and Eliminated Throughout Asset Lifetime
A reliability evaluation involves statistically estimating lifetime reliability. (29) When design and other intrinsic
defects are present during the operating lifetime, 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 Preventive, Condition-Based and Proactive Maintenance on complex, critical
systems and equipment.(68)
Asset optimization demands the elimination of design defects as well as defects introduced
through fabrication, construction, installation, operation, and maintenance due to design
weaknesses. Fundamental reliability-enhancing strategies including a reliability risk analysis are
useful at design to ensure that in-service performance will meet lifetime expectations.
Requirements must be incorporated in the design process. (22) See also Chapters VIII and XX.
Maintenance and other support strategies are important, but they can only preserve the reliability that is
built-into the asset.(22) A maintenance-only focus can consume inordinate resources when activities
attempt to compensate for design or systemic weaknesses that are more effectively and efficiently
addressed or eliminated in other ways. (22) Industry-leading reliability-driven organizations recognize that
defects due to faulty design and installation must be eliminated This includes reduced lifetime brought
about by off-design operation. In some cases components must be modified and materials upgraded. In
others such as the pump example mentioned in the previous section, the equipment must be replaced
altogether.
Correcting design deficiencies is a prime objective of asset optimization. There are opportunities to
reduce spending by hundreds of thousands of dollars in most facilities by eliminating design defects; for
some it may be in the millions! Far too many organizations accept serious design defects simply because
it has always been that way.
In more than 40 asset optimization workshops conducted worldwide since 1997 nearly every
participant cites major and continuing availability and cost problems due to uncorrected design
deficiencies as a real concern.
Maintenance Avoidance / Prevention
Courtesy Heinz Bloch
Maintenance Avoidance / Prevention is becoming a key component in the effort to gain greatest asset
effectiveness. Maintenance Avoidance is based on the principle, stated earlier, that a large percentage of
maintenance requirements for specific equipment are determined by its design. It is noteworthy that many
of the worlds most profitable companies share these beliefs. They know that avoiding maintenance by
applying solid design, operating, repair and upgrade practices is more effective and less expensive than
performing maintenance. That thought process starts at the inception of a plant with the knowledge that
building-in maintenance avoidance is smarter than attempting to optimize maintenance on assets that are
not optimized in design, Chapters VIII, XX.
The most profitable best practices companies:
Know that it makes economic sense to justify, specify, buy, properly install and operate the right
equipment to begin with.
View every maintenance event as an opportunity to upgrade. They will understand measures
available to upgrade and will pursue upgrading whenever the measure is cost-justified. That
requires training, grooming and nurturing of talent. To translate: It requires long-range thinking.
Practice root-cause (failure) analysis.
Have low tolerance for repeat failures and will not accept "mystery explanations." Translation:
There is accountability.
Always pick the ripe, low-hanging fruit first. They make absolutely sure they have the basics
right. Only then will they invest in sophisticated icing-on-the-cake or high-tech approaches.
Maintenance prevention focuses on initial design and design improvements throughout life to improve
reliability and reduce requirements for maintenance. (124)
PROCUREMENT DIRECTED TO OPTIMIZING LIFETIME COST

Procurement based on low initial cost is false economy if unreliability, inefficiency, excessive maintenance
and diminished quality quickly consume the initial price advantage. (25) Measures during lifetime to reduce
cost of replacement 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 two-section turbo
compressors, despite the fact that prior designs had all included an additional third section.
Procurement savings were in the millions of dollars. In every case, design problems delayed
startup for months. And this was just the beginning. The compressors proved highly unreliable in
service, shutdowns were frequent, repairs difficult, expensive and time consuming. With
production losses of $250,000 or more per day, the companies quickly consumed the
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.
Some companies utilize site and corporate experience to 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.(129)
QUALITY INSTALLATION IS ESSENTIAL

Quality installation is equally important to optimized lifetime cost. Industry leaders rigorously apply
equipment installation specifications that include foundation preparation, base-plate leveling and grouting,
pipe flange and shaft alignment, oil system flushing, 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. The failure
analysis disclosed that the problem was due to 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.
CORRECT OPERATION MUST BE ASSURED

The 1997 Maintenance Technology article referred to earlier, Figure 3.4, 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.(129)
Avoidable operating errors include those caused by difficult, unusual, or easily forgotten operating
procedures. Many potential operating problems can be prevented by simple modifications. Posting special
startup requirements near a start switch may avoid problems caused by forgetting infrequently used
procedures. 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.
Following a series of failures, one company found that warm up lines required and called for by
start procedures at least ten years old had never been installed and no one had ever mentioned
the discrepancy.
Improve Operating Efficiency
Electricity consumed during operation often comprises 50 to 80 percent of a motors 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. Considering these figures it is essential
to maintain the highest possible lifetime operating efficiency of driven equipment by assuring operation is
close to Best Efficiency Point (BEP).
In addition to power savings achieved by improved efficiency, facilities with a large number of pumps have
reported substantial savings in maintenance costs by correcting off-design performance. In addition to
operating less efficiently and consuming more electrical energy per delivered flow, a pump operating off-
design is likely to experience 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, differential 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 may be
way off. Begin with those that are farthest 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.
OPTIMIZED MAINTENANCE IS A NECESSITY

Optimized maintenance is an essential part of asset optimization. Maintenance, life extension, corrective
and repair work accomplished on physical assets, has a broad range of technical and conditional
requirements. Maintenance must produce quality results and, at the same time, be highly effective with a
minimum of wasted time and effort. Maintenance people must be motivated, have a high sense of
initiative, ownership, and commitment to quality and improvement. They must be flexible and adaptable to
change, often under circumstances that demand the application of a wide range of competency, skill, and
technique.
Maintenance must be sustaining with the following characteristics:
Broad based but focused
Oriented to improvements, eliminating the cause of failures, not simply repairs and fixing
Directed to minimizing the cost of unreliability and downtime
Emphasis on an organizational culture of initiative, quality, ownership and reliability
Maintenance within asset optimization must be anticipatory. A minor defect is usually controllable and
easy to correct. Left unattended, a minor defect can lead to an unexpected major failure with costly side
effects that may impact safety, quality, and production. Early recognition and correction, avoiding failures
that impact safety, production, quality, and the environment, is a key objective of asset optimization. As
stated earlier focus on fire prevention, minimize fire fighting!
By following the practices and recommendations of industry leaders, maintenance managers can
demonstrate that their activities add to the financial success and profitability of the organization. Good
maintenance ensures that the organization is able to provide high quality products and services that are
delivered on time. Dynamic maintenance practices and 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 the Malcolm
Baldrige Award, the International Standards Organization (ISO), North American Maintenance Excellence
(NAME) award and other national and international organizations that recognize excellence in all aspects
of business.
Stability, predictability, order, organizational efficiency, maximizing advance planning and implementing a
reliability improvement program that will reduce the need for maintenance are a few of the necessary
characteristics when optimizing the maintenance process.
Key elements that should be incorporated to gain an effective maintenance program include:
The balance of cost versus value; initial versus lifetime cost must carefully considered at every
step of the process.
The combination of reliability and economic analyses assures focus into areas with the greatest
value and return
Reliability is an inward goal thinking in terms of profitability will lead to optimum reliability.
Every activity must have associated measures of performance (KPIs). Without measures of
performance there is no way to establish an objective. Without an objective there is no way to
gauge progress and know when you have arrived.
Utilize predictive technologies wherever possible, including the determination of preventive
intervals.
Apply improved methods to gain greater task and work effectiveness.
Design improvements, technology and surveillance must all be considered to alter failure
probability and consequences (risk).
Form cross-functional, multi-discipline, action teams to seek out and implement permanent
improvements.
Many practitioners speak in terms of Maintenance and Reliability M&R. Perhaps it would be better to
reverse the sequence to Reliability and Maintenance R&M signifying that improving reliability leads
to better and less maintenance.
The asset optimization program includes provisions that ensure maintenance requirements are designed
out, see Chapter VIII and XX, and those that cannot be eliminated altogether are made as easy and
inexpensive as possible to accomplish. The order is very important. First, design maintenance out, then
address maintainability, and finally implement a program of defect elimination.
A Canadian Coast Guard Officer inspecting a cruise ship observed a timer-initiated, automated
cleaning system for galley range grease filters designed to eliminate labor-intensive requirements
for manual cleaning and a potential fire hazard when manual cleaning was neglected or deferred.
(129)
A 1986 EPRI report stated 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 documented average savings of over $2 million per
year during the last three years resulting from maintenance, availability, and heat rate improvements
gained with predictive maintenance.
A second power generating company reports that maintenance expenditures are approximately
65 percent of non-fuel O&M costs.(7)
P/PM Technology, a now out of print technical journal devoted to practical applications of maintenance
technology, reported that the savings gained from predictive maintenance represent only 10 percent of
the total potential of long-term programs where the need for and the cost of maintenance is reduced. As
much as 90 percent came from increased availability and production output.
In companies where maintenance costs may exceed annual net profit, optimization is mandatory.
Maintenance is a key component and contributor to success of the asset optimization program.
Maintenance, when optimized for greatest effectiveness and value utilizing asset optimization principles,
ensures the capacity necessary to meet production commitments and contributes significantly to site
financial performance. Within asset optimization maintenance is viewed as an investment in future profits
achieved through capacity assurance, improved throughput, quality and reduced operating cost. In short,
optimized maintenance is essential to asset optimization and site profit.
As previously mentioned, many corporate directors and financial executives view the maintenance
function strictly as a business cost required to repair equipment, structure and buildings. Few think of
maintenance as a profit center source of significant business value. Those who regard maintenance as a
business cost rather than a value added activity should ask themselves how much value would be
produced without maintenance? In too many cases, when expenses must be curtailed, the maintenance
budget is the first to cut, and the last to restore. Incentives to increase effectiveness, replace inefficient
equipment, and invest in new technology (which often incur installation and training costs) are often
rejected strictly on the basis of cost.
A facility that had historically experienced chronic problems with DC variable speed drives
replaced one unit with an AC variable frequency drive as an experiment. Despite a demonstrated
payback in approximately nine months, further replacements were rejected on the basis of capital
prioritization. Had the facility been a bit more creative the local bank would have gladly financed
additional replacements.
Maintenance must be considered as the activity delivering immediate and future assured capacity
without maintenance there wont be any capacity. (Minimum costs to sustain assets have been discussed
earlier see Figure 3.2)
There is another cost issue. A manufacturing or production facility must be able to operate successfully
within a level of maintenance funding that is affordable for the specific business conditions. The issue is
how much maintenance a business can afford not how much is needed. If the need appears to be
greater than what is affordable, a program must be pursued to reverse the situation. This is discussed in
more detail in Chapter IV; benchmarks are discussed in Chapter IX. A manufacturing or production facility
must be within a few percent of the costs of industry leaders if it is to remain competitively viable.
There are five essential actions that must be accomplished to improve maintenance effectiveness:
1. Develop and implement a prioritized reliability improvement program specifically targeted to
reduce the need for maintenance. This is the only way to achieve a permanent, maximum,
sustainable reduction in spending.
2. Formulate and implement comprehensive Preventive and Condition Based Maintenance
programs.
3. Embed an effective maintenance work management, planning and scheduling process.
4. Demand organizational discipline to follow established processes and procedures.

If Standard Operating Procedures are not written and religiously followed to include a strictly
followed process for identifying and implementing improvements, practice and performance
will slowly degrade.
5. Develop a comprehensive stores management program that optimizes stocking levels,
procurement, storage and issue.
It is essential to recognize that within the asset optimization process the sequence in which improvements
are implemented is based on a value assessment process that prioritizes their potential value and
effectiveness based on actual conditions, potential value, resource availability and probability of success.
For example, if a Planning and Scheduling process is in place and is somewhat effective, beginning an
improvement initiative with an effort to increase reliability may create the greatest value in the least time.
If reactive, break-in maintenance is far too high, beginning with Preventive Maintenance (PM) and
Condition Based Maintenance (CBM) implementation, especially the latter, may be the most effective
action to increase value. Similarly, if data, institutional knowledge or a simple audit discloses a large
number of lubrication induced failures and / or a lubrication program that is below standards, bringing the
lubrication program up to best practice should be initiated without delay.
If resources are available, several improvement initiatives can be started simultaneously. The
management challenge is greater, but so are the rewards and speed of success.
Maintenance A Core Management Responsibility
Within asset optimization maintenance must be a full participant in business decision-making and
productivity reviews. Maintenance experience must be incorporated in key business process decisions
such as constructing or modifying facilities, acquiring new equipment, cost reduction initiatives, and
changing manufacturing processes and tolerances not simply notified as a new decision is being
implemented. Maintenance involvement at the beginning helps ensure that lifetime optimization issues
are addressed to avoid availability and 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. For the foreseeable future business emphasis will be on
availability, throughput, quality, production cost, speed of delivery, and effective service support. When
maintenance is not consulted, operating costs may be greater than expected, equipment reliability and /
or performance may be less than required, and maintenance and repairs may take longer and cost more
than they should. Unfairly, maintenance is usually blamed!
By integrating asset optimization 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. Reliability professionals
provide a critical assessment of problems and future needs associated with system upgrades and/or
equipment replacement.
The Maintenance Function
The maintenance function within asset optimization is illustrated in Figure 3.5. In broad terms
maintenance actions are originated in two ways: unplanned, reactive maintenance and planned
maintenance. The best practice benchmark, detailed in Chapter IX, is 85 percent to 90 percent planned.
Planned maintenance is defined as work that is fully planned and scheduled some time prior to
initiation generally one week.
Referring to Figure 3.5, corrective maintenance may be planned or unplanned (emergency, break-in).
Time based (PM), condition based (CBM) and proactive maintenance are always planned and hence far
more effective in terms of labor utilization (wrench time).
In some organizations time and condition based maintenance are combined under Preventive
Maintenance (PM). In this handbook PM is strictly time-based maintenance.
Life
LifeManagement
Management
Unplanned,
Unplanned, Reliability
ReliabilityImprovement
Improvement
Planned
PlannedMaintenance
Maintenance
Reactive,
Reactive,Maintenance
Maintenance Life
LifeExtension
Extension
Progress
Design
Design
Corrective
Corrective Time
TimeBased
Based Condition
ConditionBased
Based Proactive
Proactive Improvement
Improvement
Some may classify as Preventive
Figure 3.5 Maintenance Hierarchy
Maintenance progress is achieved within asset optimization by moving from unplanned, Reactive
Maintenance toward planned Preventive, Condition Based, Proactive and Life Extension. The gain in
effectiveness as the maintenance process moves from reactive to Preventive and Condition Based is
discussed in greater detail in Chapter V.
Reliability improvement, in many cases a joint responsibility of maintenance and engineering, is targeted
to eliminate the need for maintenance and hence spending for both labor and materials. The necessity for
eliminating maintenance and requirements for work will be explored in detail in the next section.
The Maintenance Process
Among leading corporations, maintenance is considered an integral part of production and part of the
process generating business value. Its importance to the timely, efficient, and effective creation and
delivery of an end product is fully recognized. The process is well defined, as illustrated in Figures 3.6 and
3.7.(129) Just as a car needs tires, an effective and profitable manufacturing process must have an effective
and well-run, maintenance program. The principles expressed in this section apply regardless of whether
maintenance is a function within manufacturing, a stand-alone process composed solely of company
personnel, outsourced to a third party or some combination of the three.
Work Work Work
Definition Planning Scheduling
Scheduled work;
PM, CBM,
Corrective Continuous Sustained
Improvement Maintenance
Analysis Work Work

Complete Execution
Close
CloseOut:
Out:Conditions
Conditionsfound,
found,Components
Componentsaffected,
affected, Emergency,
Work schedule break,
Workaccomplished,
accomplished,Notes
Notesfor
forfuture
futurerepairs
repairs
reactive repairs
Figure 3.6 The Basic Maintenance Process(129)
Referring to Figures 3.6 and 3.7, every facility accomplishes the Work Identification, Planning, Scheduling
and Execution cycle in some form. Within the worst performers the entire cycle is primarily reactive. In a
reactive facility, planning, limited to parts and tools required, is hastily and inefficiently accomplished by a
first-line supervisor or a craft mechanic upon receipt of a work order. Mechanics or the first-line supervisor
are generally responsible for safety checks and production line-up to accomplish the work as well as
locating parts. In many cases, craft mechanics must be moved from a partially completed task to another
higher priority task with significant loss of time and effort caused by the shift. The first line supervisor is
constantly juggling priorities and people in an effort to keep the facility operating and satisfy production.
This brief description does not adequately describe the chaos, wasted time and effort of reactive
maintenance. Suffice to say reactive maintenance is a horribly inefficient and ineffective method that
simply attempts to keep a plant operating there is no time to think about improvements, making
tomorrow better than today.
Figure 3.7 illustrates the maintenance process showing areas in which improvements will affect
expenditures and availability along with measures of performance. This is addressed in detail in Chapter
IX.
Metrics -- KPI's
Maintenance Cost -- % ERV Metrics -- KPI's
Maintenance Cost -- $'s Maintenance Expenditures Production Availability Uptime -- %
Maintenance Equipment Production Unscheduled Downtime -- %

Backlog
Completed Related Related
Maintenance Rework as a
% of Total Maintenance
Maintenance Scheduled Unscheduled Unscheduled Equipment
Downtime -- %
Maintenance Efficiency -- Efficiency Downtime Downtime
Wrench Time
Maintenance Labor as a %
of Total Maintenance Cost Work Crew Materials
Work Order Coverage (Non

Blankets) as a % of Total Work Orders Planning &
Manhours Worked
Scheduling Results
Emergency Work as a % of Process
Total Work
Emergency Planned
Schedule Compliance -- % Drivers
Planning Accuracy -- %
PM and PD as a % of
Corrective + PM & PD Corrective Preventive Predictive
PM and PD Compliance --
%
Failure analysis complete
FMEA Reliability Improvement Process RCFA Failure Analysis -- Corrective

(Work Elimination Through Life Extension) / Mitigating Action
Mean Time Between Failure
-- MTBF Implemented
Vibration Lubrication Thermography Motor Electrical Alignment Ultrasonics Cathodic Voltage
3/08/04
Figure 3.7 The Maintenance Process within Asset Optimization

Showing Performance Metrics
The Maintenance Process must be Value Driven

The maintenance process itself has traditionally been viewed and managed as a cost-center where
adherence to budget is of highest priority and everyone knows and avoids the rewards for managing
below budget! The asset optimization process demands a far more effective profit-center orientation and
mentality that encourages balancing risk and reward to improve effectiveness and gain maximum value
and return. Where small improvement projects are typically started late in a cost-center budget cycle on a
cushion of deferred expenditures, the profit-center focus of the asset optimization process encourages an
early beginning to maximize return.
Reduced costs are not a command, but the result of comprehensive, prioritized improvements
achieved through a rigorous, disciplined process.
Within maintenance, asset optimization requires an objective, value-oriented, complementary mix of
condition-based, time-based, proactive and even run-to-failure maintenance strategies. The mix and
proportion are directed to gaining maximum value for the plant specific process, systems and equipment.
Condition-Based Maintenance (CBM) is typically the most profitable type of maintenance short of
reliability improvement that eliminates requirements for maintenance altogether. Time based Preventive
Maintenance (PM) is utilized in situations where experience or safety considerations require time-based
actions, or when the measurements required for condition assessment are either inaccurate, unreliable,
or too expensive. Proactive Maintenance is applied at design and during operation / repairs to minimize
the probability (risk) of problems. Reactive Run-To-Failure (RTF) maintenance must be based on facts
conclusively demonstrating that this method is most effective when all factors are considered. RTF must
not be a default when there is no strategy in place. In all cases profit centered prioritization is applied to
arrive at an optimum mix and balance.
The Maintenance Technology article cited earlier and summarized in Figure 3.4 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)
The following will elaborate a bit on each imperative for optimizing the maintenance process:
Necessities for a Solid, Effective Work Management Process
There is abundant, proven software available that will enable anyone to implement a solid and effective
maintenance work management, Planning and Scheduling process. Numerous articles, papers and full
conferences have been published describing an optimum implementation.
Demand Organizational Discipline
In far too many organizations most, if not all, work requests initiated are written and submitted as a do
immediately necessity. In many cases those submitting requests believe that without this designation the
work will never be accomplished. It is easy to see how this mentality feeds on itself to make conditions
worse.
Installing a gatekeeper empowered to separate the work requests that actually justify break-in emergency
work from those that can be safely deferred into the planning and scheduling process is an essential first
step in ending a reactive culture. This person must be very familiar with production operations so the task
may fall logically to a scheduler.
When PM and CBM programs are in place, excessive reactive work indicates the programs are
ineffective. Positive action must be taken to determine the cause of the reactive work, why it isnt
eliminated by the programs and develop corrective action.
Periodic reviews of the maintenance backlog are useful in order to visualize the status, priority and aging
of work requests. Non-overhaul work that doesnt move through the management system to closure in
one to two months may be unnecessary. An insufficient backlog detracts from the effectiveness of the
planning and scheduling process. More details about work backlog and backlog management can be
found in Chapter XIII.
Change from Emergency, Break-in, Reactive to Optimum Planned Maintenance
One objective of asset optimization is to minimize reactive, break-in maintenance. Industry leading
facilities operate with reactive, break-in maintenance less than 15% of the total hours expended. Best-of
the-best will be around 10%. The most sophisticated will schedule about 10% to 15% of the weekly hours
available for work on tasks that can be deferred knowing that some break-in work will be required.
Work accomplished in a break-in, reactive mode is chaotic and highly inefficient. Referring to Figure 3.7,
wrench time, explained in more detail in Chapter IX, will be about 50 percent to 60 percent in an industry
leading facility compared 20 percent or less at a site relying primarily on reactive maintenance to keep
operating. Thus, a facility mired in reactive maintenance will need about three workers to perform
the work of one at an industry-leading site. Since a maintenance crew is paid for working hours and
not efficiency, Figure 3.7, a reactive facility will pay far more for the same work accomplished as an
industry-leading facility. The reactive facility is at an even greater disadvantage because the industry
leading facilities have more reliable systems and equipment (greater MTBF) and thus also less work to
accomplish! And this simple example doesnt include additional costs such as degraded quality of
workmanship due to haste and pressure, need for and cost of expedited parts and production downtime
that are typical characteristics of reactive maintenance.
If a facility has an excessive amount of reactive, break-in maintenance work the crucial question is how to
move toward industry best performance. The question is not academic no manufacturing business can
survive long with maintenance costs two to three times the more effective competition!
Evolve into an Optimized Preventive and Condition Based Maintenance Program

PM and CBM, the latter often called Predictive Maintenance (PdM), are successful, proven practices that
must be an integral part of any asset optimization program, Chapter V. PM injects maintenance tasks
designed to avoid failure, for example visual inspections and scheduled lubrication. CBM relies on non-
intrusive condition measurements taken during operation that accurately represent condition and are
capable of identifying problems in their earliest stages. When discovered early minor defects are typically
easily controlled or corrected at minimal cost. CBM measurements can identify the specific flaw,
component(s) affected and approximate time until corrective action will be required. Industry-leading
facilities utilize condition measurements very effectively to avoid outright failure or an unscheduled
interruption in production.
Over the years, industry has recognized that migrating from reactive or breakdown maintenance to
condition-based maintenance has the dual advantages of increased effectiveness and decreased cost,
Figure 3.8.
To
Togain
gainmaximum
maximumeffectiveness
effectivenessandand
Fix it after it breaks, optimum
optimumcost,
cost,organizations
organizationsshould
should
Reactive overtime heroes endeavor
endeavortotomove
movetoward
towardProactive
Proactive
and
andReliability
ReliabilityDriven
Drivenasasquickly
quicklyas
as
possible.
possible. In many cases it ispossible
In many cases it is possible
Maintain before totoskip over Preventive.
skip over Preventive.
Preventive it breaks
Predictive / Identify and correct specific problems

Condition Based before something breaks
Cost
Proactive
Eliminate problems Reliability Driven

eliminate source of breakage
Identify and eliminate
causes of failure,
minimize the need for maintenance
Effectiveness
Figure 3.8 Cost Advantages of Maintenance Types
The EPRI chart cited earlier and shown in Chapter V, Figure 5.4, is used in many industries to
demonstrate the relative improvement as maintenance evolves from breakdown, through Preventive to
Predictive or Condition Based. Figure 5.4 extends the illustration to project the anticipated savings
accruing from implementation of a profit-centered asset optimization program.
Safely Extend Overhaul Intervals
Power-generating companies are extending 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 availability
between overhauls, requires improved reliability and maintainability combined with regular condition
assessment.
RELIABILITY THE BASIS OF PHYSICAL ASSET OPTIMIZATION

Definition:
Reliability The probability that a system, device, component or product will perform its required
functions in a satisfactory manner for a given period of time when used under specified operating
conditions in a specified environment.
The achievement of predictable results with as little variation as specific circumstances permit.
David L. Stringer, Brig. Gen. USAF at RCM / EAM 2006
Expressed in this fashion reliability has three key results oriented objectives:
Satisfactory performance
Predictable
Minimum variation
Reliability has a maximum intrinsic value that is established at design. (22) As has been detailed in earlier
sections, a large percentage of lifetime cost and potential availability are determined during specification,
engineering design manufacturing and installation. Several have stated that as much as 80 percent of
lifetime costs are established at commissioning. Unproven, outdated, or fragile technologies typically
result in unreliable equipment and processes.(22) A key element of the drive for optimum reliability is the
recognition that design, procurement and installation deficiencies must be corrected to ensure that in-
service production availability meets mission requirements (for more detail see Chapter VIII and XX.
High intrinsic reliability is relatively easy to achieve with static equipment such as pressure vessels,
piping, instrumentation and power distribution systems. It is much more difficult to achieve with complex
mechanical equipment and valves that can be subjected to conditions such as lubrication contamination,
turbulence, erosion, unbalance and misalignment.(68)
A Ford Motor Company plant announced:
Zero Accidents, Zero Defects, Zero Breakdowns.
This is an illustration of the importance of production asset performance within a key industry. It may be
the first time a trend setting, world class operating organization elevated the reliability of production
assets to the level of safety and quality.
Value of Reliability
Figure 3.9 illustrates two failure curves, essentially p/f curves upside down. The first, leftmost represents
an intrinsic reliability with approximately 50% probability of failure during the mission. If the curve
represents unspared equipment, there is a 50% probability of interrupted operation / production likely
too high to be tolerated. Assuming the onset of failure can be identified, damage and the outage may be
limited but it will still occur. By increasing intrinsic reliability with a design or other fundamental
improvement, the risk of failure can be substantially reduced. Optimum reliability has a clear value.
80% failure
Failure
FailureCurves
Curves
Mission
Risk of failure
Increasing Reliability
20% failure
Prediction Threshold
Time
Figure 3.9 Value of Improving Intrinsic Reliability
Optimizing Reliability
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 optimum production effectiveness will range
from relatively simple inspections on equipment with high intrinsic reliability to comprehensive Preventive,
Condition-Based and Proactive Maintenance on complex, critical machinery. (68) Occasionally, components
and perhaps even entire equipment must be replaced in order to gain the necessary level of operating
effectiveness.
A reliability improvement program has three primary attributes:

1. Eliminate failures and the cause of failures.
2. Extend asset operating lifetime.
3. Reduce the cost of asset care by reducing the requirements for work.
If a program is not directed at all three, it isnt a reliability improvement program.
As implied by the preceding, a reliability program is a proactive program. It must be managed proactively,
constantly seeking opportunities to increase value through optimum reliability improvements. Once a
defect is identified, RCA and FMEA are tools commonly used to develop corrective action. Design
changes may well be required as well.
The reliability program is constructed around a strategy consisting of the following as a minimum:
Overall objectives with specific business goals
Specific objectives of the reliability program
Prioritization of systems and equipment by risk
Plan to improve production and cost effectiveness
Within the strategy there must be provisions for reliability analysis, RCA and FMEA as noted above, a
process for reliability improvement including follow up to assure improvements are successful, and a
strong reliability input to capital projects, see TPM, Chapter V.
Design for efficient operation and maintenance (maintainability) is important, (22) see also Chapter XX.
Many companies have experienced equipment-operating difficulties that have resulted in failures.
Likewise, routine maintenance tasks can be complicated by factors, such as interference that require
design changes. The cost balance of reliability is illustrated in Figure 3.10. (1, 22) For every process, system,
and asset there is a point of optimum effectiveness that balances the cost of improved reliability with the
cost of unreliable manufacturing.
Low Hanging Fruit
Total Cost of
Optimum Improved Reliability
Effectiveness
Total Costs
Cost to Improve
Profit gained Reliability
from improved availability
Cost of Unreliable
Manufacturing
Reliability
Figure 3.10 Optimum Reliability
An example is illustrative:
Variable speed DC motors used in a main production process were unreliable and costly to
maintain. Replacing the DC motors with variable frequency AC motors essentially eliminated the
problems. The AC motors proved orders of magnitude more reliable, far less costly to maintain
and paid back the investment for replacement by increased production and reduced costs in less
than a year.
This case illustrates the advantages of looking beyond maintenance to lifetime reliability and cost. In this
example, would a conventional maintenance improvement program have led to the conclusion, reached
through asset optimization, to replace fundamentally unreliable equipment? Or would it have concocted
more extensive and costly monitoring and maintenance actions to mitigate design deficiencies?
Every organization should strive for the lowest cost reliability that meets mission requirements. (19) A level
of reliability that guarantees availability when required is a key issue, see Timed Availability, Chapter VI.
Required availability in a defined increment of time may range from 100 percent to less than 60 percent
for spared equipment. 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 heat wave that forces the purchase of expensive replacement
power on the spot market, or results in the default mentioned earlier, is a another example.
Improved Reliability is the Only Way to Reduce the Need for Maintenance Spending
A well-implemented Work Management, Planning and Scheduling, process can potentially gain
approximately 15 percent to 20 percent reduction in maintenance costs through improved labor efficiency
(wrench time). Optimizing stores management might gain a further reduction of about 10 percent. The key
question for those mandated to reduce spending by more than 25 percent is where can the remainder be
gained? As illustrated in Figure 3.11, the remaining cost improvement must come from improved reliability
eliminating defects and the need for maintenance. This is a fundamental value principle of asset
optimization and the only way to permanently reduce maintenance costs.
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
95% 82% 75% 67% 60%

Maintenance Spend Objective
Increase Efficiency
Eliminate Work
Contribution to Profit from Increased Availability

Value Added %
Combined Savings
Reliability
Planning & Scheduling
Materials
Reliability: Increase MTBF = Less Work Required, Less Reactive, Less PM / PdM
EARLY YEARS BENEFITS COME FROM IMPROVED EFFICIENCY AND WILL SLOW IN CONTRIBUTION.
LATER YEARS BENEFITS ORIGINATE FROM ELIMINATING THE NEED FOR WORK
AND ARE SUSTAINABLE LONG TERM.
Figure 3.11 Contribution of Three Elements of Maintenance Optimization
Experience demonstrates that the best way to reduce cost begins by increasing system,
equipment and component reliability. This leads to a reduction in requirements for work and
hence the necessity for spending.
Within a reliability improvement program:
Every repair is considered an opportunity for improvement
Equipment and components with substandard life are continually upgraded.
Upgrade procedures are continually reviewed and improved.
Surveillance is improved to minimize surprises.
Communications and follow up are embedded in the process to assure evaluations of potential
problems, requirements for immediate and long-term corrective action are received, understood
and acted upon.
Improving reliability compliments both Planning and Scheduling and Stores Optimization. When
improvement initiatives are started together in all three areas, reliability improvements begin bearing real
fruit just about the time maximum gains have been achieved in the planning and scheduling and stores
areas. In addition, and as shown in Figure 3.10 reliability improvements lead directly to improvements in
availability, production output and profit.
Reliability is sustained by adherence to designated standards and specifications. Reliability is enhanced
by modification and improvement projects.(129) There is a general feeling in industry that reliability is a
valuable commodity.(7)
Any approach to reducing spending other than reliability optimization is temporary at best and gains only
a 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. The asset optimization program 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 and risk analysis and continuous
improvement.
The key lesson is that by eliminating defects, improving reliability both labor and parts costs are removed
reliability improvement addresses 100% of the maintenance costs!
FAILURE ANALYSIS (RCA)

Reliability analysis, including lifetime prediction (prognosis), and failure analysis and elimination provide
the information necessary to extend life and avoid unplanned outages. Together, these lead to, and will be
the cornerstone of continuous improvement. Continuous improvement progressively eliminates cause,
extends life, and ensures full effectiveness and return from physical assets. Failure analyses, initiated by
a variety of triggers (safety, environmental, one-time and cumulative cost) typically provide a great deal of
avoidance information. However, pre-failure risk analysis, anticipation and early recognition are far more
effective methods to improve life compared to waiting for failures. Waiting for failures to initiate corrective
action is not a sound practice.(68, 76, 129)
There is a growing recognition that many mission-jeopardizing defects that are responsible for reduced
effectiveness and resource consumption may be separated in time and space by months or even years
from the point where symptoms are initially recognized. This requires extensive documentation and a
more holistic process of analysis and improvement. Three examples from an engine manufacturer are
illustrative:
A search for the cause of coolant leaks following delivery disclosed that the process of attaching
a subassembly altered the engines integrity. (129)
Correctly torquing a pipe fitting led to leaks much later in the process when the fitting had to be
turned to obtain the correct angular position for the mating hose. Ultimately, this problem
necessitated a re-design to remove two potentially mutually exclusive requirements. (129)
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,
an expensive 100-percent radiography inspection of all of the raw castings was justified. (129)
A fourth example involved a series of bearing failures that were ultimately traced to a change in
suppliers that had occurred more than four years earlier.
The latter example identifies some of the considerations that must be evaluated before making changes.
If the MTBF of a typical component is 4 years or longer, how long will it take to discover reduced lifetime
caused by a change in suppliers, design or materials? By the time a problem is discovered all involved
with the decision may have moved on.
Ownership of reliability is a major key to success. Ideally, the individual(s) who are accountable for plant
capacity should own reliability.
An important point to remember is that reliability is a means to an end not an end in itself.
TECHNOLOGY INTEGRATION
Technology is a prime enabler and necessity for asset optimization. Asset optimization requires that
control, information, management and monitoring technologies are all assembled into an integrated,
interoperable structure that is accurate and accessible; see Chapter XIV for more details. Technologies
provide a basis and focus for strategy development. For example, technology must enable rapid
identification of systems and equipment that have demonstrated the largest detriments to revenue,
availability and spending (both historical and potential losses) objectives together with cause of the
variations. Having all available within an accessible, web enabled structure provides better, more effective
communications between all who need to know specific performance information
ASSET OPTIMIZATION REQUIREMENTS FOR FACILITIES AND STRUCTURES

Asset optimization is normally associated with production equipment. All too often buildings, structure,
heat exchangers, piping, piping supports and valves 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
sustaining maintenance. This only shortens lifetime and, when the end is reached, repair or replacement
is likely to cost several times that of effective lifetime care. In these examples, what are the real costs of
deferred preservation?
Deferred preservation, such as painting, has a cost that can be expressed in NPV.
One industry leading company has a procedure for estimating the cost of deferred structural
painting at several stages of corrosion. Calculating NPV 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 assets the well known pay a
little now or a lot later mentioned earlier.
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. As an example, in the late 1970s and early 1980s North
American automobile manufacturers finally had to come to grips with production costs. During the
introspective analysis, 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 painting 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
including:
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 lifetime asset optimization in their
operation / business and how a proactive program will positively affect the bottom line. Here are a few
examples:
Electrical: Electrical demand has grown dramatically over the years. New production equipment for
capacity expansion (often computer controlled), variable frequency drives, computer networks, and other
high technology information equipment are multiplying exponentially and placing burdens on the
distribution system that were never anticipated. Electrical systems can remain in place for decades, in
many cases a half-century or more. 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 operate at peak efficiency and / or
service life may be diminished.
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 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. Without proper care, significant roof failure may begin in less than 20
years.
One individual lamented that his company never repairs roofs we wait until they are about to collapse,
then initiate a capital replacement project.
IV. MAJOR PROGRAM ELEMENTS
And gentlemen in England now-a-bed Shall think themselves accurs'd they were not here, And
hold their manhoods cheap whiles any speaks, That fought with us upon Saint Crispin's day.
William Shakespeare, Henry V
Industry leaders are quickly beginning to recognize that asset effectiveness is a greater profit opportunity
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. Industry leaders have a comprehensive
strategy that links equipment reliability and utilization, i.e., availability and capacity management, with
market conditions, facility and mission objectives. The strategy is translated into high-level plans that drive
planning and resource allocation. The high level plans provide the basis for detailed operating plans and
performance scorecards for the major strategic and functional performance areas of the business. It
intertwines layered measures of performance and promotes profit-oriented process, system, and
component effectiveness.
Asset optimization is accomplished by institutionalizing a strategic, fully integrated, array of
comprehensive improvements to business, management, engineering, operating and maintenance
processes. It requires continuous improvements in technology, practice, process, organizational culture
and organization.
On new equipment, asset optimization begins at design with risk prioritized (Streamlined)
Reliability Centered Maintenance (RCM) and Failure Modes, Effects, and Criticality Analyses (FMECA).
When a facility, system or equipment has been in operation and has a history, asset optimization begins
with identification and prioritization of availability, cost and organizational improvement opportunities.
These include identifying unreliable systems and equipment, an assessment of the effectiveness of
maintenance and operating practices, technical and financial risks and conducting Failure Analyses
(RCA). High-risk systems and equipment that have experienced problems are evaluated first. (See
Chapter XIII for details of risk ranking) Implementing improvements in a prioritized order to achieve
maximum value is the objective.
CHANGE TO AN OPPORTUNITY DRIVEN, PROFIT-CENTERED ORGANIZATION

A profit-oriented process balances immediate results with long-term prosperity. In many cases deferring or
reducing costs in the short-term may have a negative Net Present Value (NPV) 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 of this short-term approach abound. Discussed in
the last chapter, many highway bridges, particularly in large cities that experience below freezing weather
for significant periods during the winter, are in declining condition from the effects of corrosion
compounded by lack of preservation.
Clear Statement of Objectives
Asset optimization is an integral, inseparable part of the production and manufacturing processes. As
outlined in Chapter III, design, procurement, installation, operation, maintenance and maintainability are
all included in the asset optimization process to ensure that in-service reliability complies with business
and mission requirements. Risk assessment, control and management are equally essential to successful
asset optimization.
The asset optimization process must begin with a clear statement of business objectives. What does
executive management want the outcome to be? Is it increased production, greater effectiveness,
reduced spending or some combination. Suffice to say that if executive management cannot state a clear
objective, including measures of performance, the best program staffed with the best people cant
possibly get them there.
Major Program Elements 52
A major corporation stated the following overall goals in terms of optimizing asset performance
and utilization:
Control assets; spend resources most effectively proactively rather than reactively
Apply funding based on enterprise needs; fund requirements that add greatest value in priority
order
Move toward commonality of systems, equipment and components reduce the number of
different designs and suppliers
The preceding doesnt quite describe the specific outcome desired it is more of what to do rather than
what to achieve. Within an Asset Optimization program, executive management should define the
outcome, perhaps amplified by what they consider important to achieving the goals, with specific business
metrics.
Build from Strengths
Asset optimization builds from current strengths to gain industry leader operational effectiveness.
Opportunities for improvement are identified and ranked (prioritized) by risk and value. Business
objectives are linked from top to bottom of the process from business and strategy to individual
program effectiveness and training. Linked, layered measures of performance are utilized to promote
optimized process, system, and component effectiveness as well as monitor improvements implemented
by asset optimization. Within the asset optimization initiative there must be clear sight lines from top to
bottom and bottom to top so that all involved see their contribution and how it relates to the overall
objectives.
Asset optimization demands safety and environmental excellence. A facility cannot have excellence in
asset optimization without the cultural mindset required for excellence in the safety and environmental
areas.
At a kick off meeting for an asset improvement process the plant manager stated a clear
objective of attaining a cultural and organizational commitment to asset performance equal to the
excellence the facility had achieved in Safety, Health and Environmental areas. Everyone
understood the message and exactly what was required.
This leads to the necessity for excellence in the soft human issues of leadership, ethics, values,
relationships, institutional culture, organizational structure and reporting, communications,
team performance and change management. All are essentials for success. Production must be involved
as a full partner from the outset of the asset optimization initiative. Supporting functions must all be
aligned with and fully supportive of the initiative.
Capitalize on Opportunities for Improvement
Successfully improving asset effectiveness requires simultaneously addressing availability, production
rate (yield), quality, conversion cost and capital effectiveness to demonstrate a solid financial return.
Achieving an optimum balance among the five for business and market conditions is all-important.
By focusing solely on cost, organizations risk reduced availability, production rate or quality, the
conventional profit related variables.
One company, directing attention and efforts to quality improvements, found that a concurrent
decline in availability had nullified quality improvements. (129)
The balance will often vary with demand.
Gaining short-term results at the expense of long-term prosperity can be counterproductive.
Concentrating solely on reducing costs by eliminating people and programs, and outsourcing specific
activities to low cost service providers may well reduce fixed-costs in the short-term. However, results
gained in this fashion are typically not sustainable, may consume assets and result in hidden costs such
as added management and supervision. Furthermore, there may be added fixed and variable costs in the
future, when fewer options and operating alternatives are available the often stated pay now or pay
much more later. Finally, the loss of the institutional knowledge necessary to understand and evaluate
the effectiveness of outsourced activities must be mentioned. (See Chapter XIII for more considerations
involved with outsourcing.) It cant be overstated that permanent improvement requires comprehensive
changes to values, culture, organization, process and technology implemented in a logical sequence to
maximize effectiveness and value creation.
Industry leading facilities invest in productivity improvements when times are good. This provides
a position of strength when economic conditions turn down.
Participation from all Disciplines
As illustrated in Figure 4.1, The Physical Asset Optimization Process is the same regardless of discipline
the asset optimization process can be compared to a sporting activity played in a stadium with multiple
entrances. Entry may be through several corporate disciplines. However, once inside the stadium there is
but one objective and one set of rules on the field. Whether entry is from Finance, Information
Technology, Maintenance or Operations the principles of asset optimization apply to all. All must be
aligned in pursuit of a common goal.
Business
Businessand
andFinance
Finance
Engineering
Engineering Information
InformationTechnology
Technology
Operations
Operations Control
ControlAutomation
Automation
Maintenance
Maintenance
Figure 4.1 The Physical Asset Optimization Process is the Same Regardless of Entry
Alignment means that not only must Production and Maintenance be fully committed to the asset
optimization partnership as a business imperative, but that Engineering and support functions such as
Finance, Human Resources (HR) and Information Technology (IT) are fully supportive of the common
goal and enthusiastic participants. Workshop discussions throughout the world often identify
support functions that attempt to control rather than support as major barriers to gaining business
objectives.
Implement Organizational Changes
North American industry is moving toward de-centralized, multi-function team organizations.
Empowering people, requiring greater initiative, responsibility and accountability and broadening
participation in the decision process builds the initiative, commitment and ownership necessary for
success.
The team approach requires a continuous effort to achieve greater communication and understanding.
The typical production facility moving toward a de-centralized, multi-function team organization must
focus increased attention to quality control, consistency, specialist functions and optimal use of tools and
spare parts. This is similar to the collaborative principles advocated by Total Productive Maintenance
(TPM) which are being used effectively by many industry leaders.
In many facilities, skill levels and institutional knowledge are declining with early retirements, outsourcing,
less emphasis on mechanical and problem solving skills in secondary education and fewer craft
apprentice programs. Industry is responding with more training in everything from safety and basic skills
to team building, communication, and specialized technology. Some industrial plants are forming training
alliances with community colleges.
Many industry leaders are following a similar process toward optimizing asset performance and utilization.
Although implementation details and specific measures of performance may vary between industry
groups, strong similarities are firm evidence that an optimizing process for asset optimization is
coalescing. The emerging process will become a substantial competitive advantage for enterprises that
recognize the opportunity and are capable of capturing the benefits.
THE BASIC PHYSICAL ASSET OPTIMIZATION PROCESS

To summarize, the asset optimization process:
Extends from design, procurement, and installation through operation and maintenance.
Requires a results oriented profit centered mentality rather than cost center operation.
Connects and aligns operations, maintenance, technical, financial and support functions.
Begins from where you are (current conditions) building from strengths, correcting weaknesses,
taking maximum advantage of opportunities to achieve greatest value in the shortest amount of
time.
Demands optimized reliability achieved by 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 sustainable, continuous improvement.
The Process
The asset optimization process is represented by the circular process illustrated in Figure 4.2 following. It
is exceptionally important to recognize that Asset Optimization is a business improvement process and
imperative that demands Maintenance, Production partnership, full alignment and support throughout the
organization from the very beginning of the initiative. History has demonstrated that internal maintenance
organizational and process improvements can only go so far a solid, constructive Production,
Maintenance relationship is crucial for success.
Figure 4.2 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 assessment of results and continuous
improvement. It is important to repeat that the asset optimization program is opportunity driven from
prevailing conditions to gain the highest return in the least time. It is not a linear progression that begins
with a process or processes that may or may not produce greatest value for internal conditions and
opportunities.
This type of circular process is not new. It probably began with the Shewhart or Deming PDCA cycle
utilized by the famed W. Edwards Deming. The PDCA cycle consists of four actions: Plan (what to
accomplish), Do (initiate the strategy or plan), Check (evaluate the outcome), Act (on what has been
accomplished). The idea has been borrowed and modified by many since. DMAIC: Define, Measure,
Analyze, Improve, Control is utilized within Six Sigma; explained in detail in Chapter V. Observe, Analyze,
Prioritize, Do, Measure (results) and Improve is another variation. There is even a military variant called
OODA Observe, Orient, Do, Adjust. All emphasize thinking and planning before doing. Thinking and
planning are much less costly than doing!
The basic asset optimization process illustrated in Figure 4.2 draws on all the preceding processes in the
following five primary stages:
1. Define Establish Requirements, Formulate Strategy.
2. Plan Identify, Prioritize and Plan Opportunities for Improvement.
3. Do Develop and Implement Improvement Action Plans.
4. Check Measure Results.
5. Improve Continuously Refine and Improve Results.
Physical Asset Management Handbook Establish 55
Business Requirements
Define
Collect Facts
Define,
(need to do)
Improve Need to Do
Improve
Institute Continuous Develop Strategy
Improvement
Plan
(going to do)
Plan,
Check, Going
Check
What to Do
you
(what Diddid)
you
Measure Results Do
Deploy People,
Practices, Technology
Do
Figure 4.2 The Physical Asset Optimization Process
Process Stages
The asset optimization process builds on plant specific strengths and opportunities to achieve business
objectives as quickly and effectively as possible. Proven practices and technology are introduced to
capitalize on opportunities and implement a plan developed by site personnel.
Define Formulate Strategy
The overall strategy for asset optimization will be developed to gain corporate and site business
objectives typically improved availability, reduced spending (cost) and greater capital effectiveness. If
specific numerical objectives have not been defined, performance benchmarks for availability, cost and
other top-level program objectives should be published and made readily available. Targets must include
both numerical and qualitative performance objectives as well as time to achieve the objectives for
example, achieve an asset care cost objective of 2.3 percent of RAV in three years, improve employee
work environment within a year, etc.
When establishing top-level strategic objectives the gap between current and objective performance must
be taken into account. For example, it probably isnt possible for a facility spending 3.5 percent or greater
of RAV on asset care to accomplish a sustainable reduction to a world-class value of 2.3 percent in three
years while simultaneously increasing availability by 5 to 10 percent. It is better to establish an ambitious,
but achievable, stretch objective that will gain enthusiastic support from all stakeholders.
During this stage a mission statement is written describing objectives as concisely as possible (the
elements of a mission statement are discussed in Chapter XVIII). Along with the mission statement, a
procedure for assessing performance improvements must be devised and approved. It could be a
financial model similar to that discussed in Chapter VII, or specific metrics. All this should be rolled into
the structure of a formal business plan. The business plan will be completed during the planning and
implementation steps to fully define the improvement process.
The overall business strategy might state in general terms how the objectives will be met improve
reliability, minimize unexpected major events (failures). The amplifying program may delve deeper
identifying organizational and other specific areas for improvement. Again, top-level objectives might
include examples such as 85 percent of all work accomplished will be planned (one week in advance of
work) rather than reactive, and 65 percent of work accomplished originated by Preventive and Condition
Based activities. Here again gaps to best practice benchmarks drive the process, Figure 4.3, see also
Chapters IX and XVII.
Us Best in Class
Practices
Practices Metrics
Metrics Metrics
Metrics Practices
Practices
What
Whatare
are How
Howwell
wellare
are How
Howwell
wellare
are What
Whatare
are
GAP
GAP
we
wedoing?
doing? we
wedoing?
doing? they
theydoing?
doing? they
theydoing?
doing?
Opportunity
Opportunity
Prioritization
Prioritization
Strategies
Strategies
Action
Actionplans
plans
Implementation
Implementation
Results
Results
Figure 4.3 Gaps to Best Practice Drive the Asset Optimization Process
The demarcation between the strategy and tactical planning stages is a narrow one. In general, it is better
to leave specific details of process, organizational and technical details of what is to be accomplished to
meet the overall objectives to those who will be developing tactical action plans. That gains ownership
and commitment for the improvement initiatives.
Plan Identify, Prioritize and Plan Opportunities for Improvement
The planning stage converts strategic objectives to implementable improvement action plans. The
planning stage has three identifiable steps:
1. Identify gaps between current and objective performance within asset related processes. How are
assets, processes and people performing compared to benchmarks? Performance includes areas
such as availability, reliability (MTBF), cost, work effectiveness and management, materials
(spares levels, procurement, storage and issue). Chapter IX provides guidance.
2. Establish preliminary performance objectives for each gap. Determine the value improvement
available from each gap closure opportunity in terms of its contribution to the strategic objective.
3. Prioritize opportunities by value potential (value of the gap), risk (probability of successful
accomplishment), time and cost to achieve required performance. Select improvement
opportunities that cumulatively total approximately 120 percent of the overall strategic objective.
It must be noted that prioritization is extremely important. Getting off to a fast start with quick
results, demonstrated financial return and real examples of what can be accomplished is
absolutely essential to create the climate of ownership, enthusiasm, cultural acceptance and
support that are needed for sustainable success.
The new organizational infrastructure is typically formed during the planning step. This consists of
steering teams, improvement champions and improvement teams. Training is commenced to acquaint the
improvement teams with the latest practice and technology that can be applied to reach industry best
performance.
Details of how this and all stages of the asset optimization process are accomplished are contained in
Chapter XVIII.
Action planning begins by identifying, in detail, strengths to build on, barriers to success and the desired
end state including interim objectives for long-term improvements. The latter might include annual
objectives for spending as a percentage of RAV over a three to five year period.
This step is best accomplished in a facilitated workshop composed of management and crafts from all
applicable disciplines production / operations, maintenance, engineering; perhaps stores, finance, IT
and HR. The action plan will designate a champion, list resources, best practices and training necessary
for the implementation as well as coordination / co-operation, such as HR assistance for training,
certification and resolution of any contractual issues, IT for information entry, management and access.
Corporations leading the application of the principles of asset optimization state that work groups
are the biggest motivator and contribution to success when the need is understood and
accepted, buy-in, commitment, and ownership follow.(129)
Quite often workshops will conclude that changes to the organization, communications and reporting
structure are high priority improvements that must be implemented before process and reliability
improvements can occur. Added training for operators and crafts, more specific operating instructions and
greater ownership are other frequently mentioned organizational improvements, Chapter XVII.
In addition to overall objectives, it is wise to establish leading metrics to provide confidence that the
improvement process is moving in the correct direction, Chapter IX. Leading indicators might include
percentage of training completed, new practices and procedures installed and in use, percentage of PM
and CBM routines developed and implemented and lower level compliance metrics such as percentage of
total work (hours) covered by work requests.
Do Implement Action Plans
Improvement action plans are implemented as soon as possible following completion and approval.
Deploying improved practice and technology is the first step in the implementation process. This typically
begins with training in areas such as reliability improvement, planning and scheduling, lubrication,
vibration and failure analysis. Actual implementation is accomplished by teams, ideally on a small-scale
pilot basis to work out any minor deficiencies, prior to full deployment, see Chapter XVIII for more detail
about pilot implementation.
One final point: asset optimization requires lots of data to identify and formulate objective improvement
initiatives. Many facilities are data poor at the beginning of the initiative. As a result, it is imperative to
implement a robust procedure for data capture as part of the initial improvement action plan. This will
build the base of data needed to evaluate results and progress as well as form the objective basis for
identifying the next round of improvements. In effect the improvement program builds its own history. The
necessity for this step cannot be overemphasized.
Check Measure Results
With improvement initiatives implemented and moving forward it is necessary to measure results
periodically and compare actual performance to expectations. Did the improvements produce the
expected results?
The entire purpose of this step is to ensure satisfactory progress, increase ownership, support and
enthusiasm for the improvement initiative, identify and resolve any barriers to success and initiate
modifications to action plans where necessary.
Implementation teams must have specific objectives with performance (numerical results and time)
reviewed monthly as the improvement program lifts off. Production, Maintenance and Engineering
Superintendents as well as members of the improvement program steering team (Chapter XVIII) should
participate in review meetings. Human Resources (HR) should participate where organizational, cultural
and / or contractual issues are involved in the improvement process. Others such as finance and
engineering should be represented where improvement activities overlap with their responsibilities.
On large sites with multiple areas / units, individual area / unit meetings should be considered for detailed
discussion with a second level combined meeting for all units and the steering team. The second level
meeting is directed to reviewing overall performance, identifying potential barriers and any mid course
corrections that may be required.
Participation by the plant manager and corporate executives is a powerful demonstration of commitment
that goes a long way toward driving the initiative to success.
Improve Institutionalize, Refine and Improve Results
Asset optimization must be a living program, continuously reviewed, refined and improved. Each
successful improvement shifts opportunities and prioritization for additional improvements. Overall
reviews should occur every six months or so depending on the state of improvements. The improvement
program business plan should be reviewed annually and revised as required.
In the longer term, improvements must be institutionalized such that results are permanently sustained.
This takes time as much as five to seven years for the major organization cultural shift required to go
from reactive to reliability driven, planned maintenance with most activities originated by Preventive and
Condition Based tasks.
PHYSICAL ASSET OPTIMIZATION THE PROGRAM

The asset optimization program is a hybrid that combines a tailored mix of elements from proven
practices such as Total Productive Maintenance (TPM), Reliability Centered Maintenance (RCM), Six
Sigma, Preventive, Condition Based and Proactive Maintenance. All are described in detail in Chapter V.
Elements are assembled to produce a program that will yield greatest sustainable short- and long-term
value under plant / facility specific conditions. As has been stated, asset optimization applies to physical
assets primarily equipment and structures 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, mining, cement, printing, shipping and
others including service providers and the public sector that are dependent on physical assets to meet
delivery, service and schedule obligations.
Program Imperatives
The asset optimization program is constructed on the premise that application of the processes, practices,
and technology to gain optimum effectiveness is market, business, and site specific. Asset optimization is
value and profit oriented. A site program begins with identification, prioritization and rapid exploitation of
value opportunities transformational quick wins that gain enthusiasm and support for the program
followed by 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.
An asset optimization program provides the tools for both step change transformation and continuous
improvement.
Essential Characteristics
Top-down Vision, Drive, Support and Participation beginning with a visible, energized commitment
by the CEO, plant and functional managers to permanent, sustainable improvement. The CEO, plant and
functional managers or their equivalent must lead the effort to introduce and drive asset optimization by
originating overall objectives, framing the transformation initiative, providing visible, enthusiastic, inspiring
leadership, aligning resources and focusing on long-term results.
Executives and senior managers responsible for improving the effectiveness, utilization and return from
physical assets must have some working knowledge of the application and benefits of component
processes such as Lean, Six-Sigma, TPM, RCM, CMMS, CBM, Supply Chain, etc., to assure greatest
effectiveness and results. This knowledge is necessary to gain the necessary alignment within the
administrative organization and unlock full tangible and intangible benefits and return.
Executives within industry leading companies and operating organizations continuously demonstrate their
engagement and total commitment to the improvement process by action. It is astonishing to see how a
plant managers demonstration of interest in the improvement process by occasional active participation
in team meetings and congratulating program participants for efforts and accomplishments during tours of
the facility energizes people and the process.
Ambitious Objectives that are optimistic, challenging, and crystal clear to all. Clear objectives ensure
that funds and resources are invested to gain the greatest results and profit / return. Ambitious objectives
ensure that all potential improvement opportunities are identified and considered, all elements of change
are evaluated. Timid objectives and the incrementalism they encourage will not achieve maximum results.
Comprehensive, Business / Mission-Centered Strategy that optimally balances immediate results
and long-term sustainable success. The strategy serves as a direct connection between the
organizations business / mission and its daily operations. The strategy must be opportunity driven and
profit and results oriented. It must focus on optimum asset reliability for the business and mission, identify
and assess risk and maximize capital effectiveness.
Financial Model to assess total return on investment for improvement initiatives. The financial model
must be able to quantify risk and show changes in value return in response to variations in market,
business, and internal conditions. Results must be presented in financial terms that are meaningful and
credible to executives and management to ensure continued high-level support.
Benchmarking to define best practice performance and opportunities for improvement. Performance
benchmarks, gaps to best practice and the resulting prioritized opportunities for profit and mission
optimization assure an effective value, oriented strategy.
Detailed Business Plan that fully defines and prioritizes objectives, requirements, initiatives, time
schedules, and measures of performance. The plan links corporate business objectives to the operating
goals. It must be a living document that is reviewed and revised at regular intervals.
Strong Leadership beginning with senior management who direct the formulation of clear value and
mission statements that provide the basis for action. High-level steering / leadership teams provide
coaching, active guidance, barrier removal and the advocacy necessary to maintain support.
Experienced, well-qualified champions who are respected, energized, committed, persuasive team
builders, flexible, and eager to learn lead the improvement process. Working level teams develop and
implement specific improvement initiatives and are accountable for results.
Effectiveness-Oriented Organization including multi-skill, multi-discipline, high impact improvement
action teams supported by skilled, engaged technical specialists.
Comprehensive Tactical Action Plans consisting of prioritized improvement initiatives defined and
developed by champions and improvement teams. Tactical action plans include specific deliverables,
recoverable value, schedule of fulfillment, risk and accountability for each initiative. Action plans must also
address the transition required to bridge the gap from current conditions to required results.
Initiation and Management of Organizational Values and Culture, Behavior and Process Change
to establish the environment and conditions necessary for the major improvements required to gain
maximum value and effectiveness.
Implementation Beginning with Radical, Transformational Change One giant step is often
required to jump-start the transformation of organizational values, culture and practice necessary to
achieve ambitious objectives including major gains in effectiveness. Values, organizational culture,
practice, and the administrative organization must all undergo varying degrees of improvement,
depending on objectives and the gap between current and required performance.
Technology and Practice Selected for Optimum Results as a means to create value. The asset
optimization process is value and results driven technology and practice are introduced to meet clearly
defined, prioritized objectives. The technology and practice selection process must result in a value-
oriented, complementary mix of proven methods and practices. Each makes a tangible contribution to
enterprise objectives. As an example in the maintenance arena, Condition-Based Maintenance is used
where most effective. Preventive Maintenance is optimized by a continuous review of task requirements
and interval. Run-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 risk (probability and cost) of failure.
Risk Assessment and Control to identify potential future deviations from objective performance for
correction in the present before they occur. One or both elements of risk probability and consequences
must be controlled whenever possible. In many cases, reducing probability through the use of better
materials, increased lifetime and improved technology may be the best method of control. In other
situations, controlling consequences may be the best method of risk reduction. In some cases both may
be addressable.
Training for Success focused on specific objectives needed to successfully implement the process in
safety, technical, skills, interpersonal, and other areas. Training must be immediately reinforced with the
opportunity to apply and solidify skills in a work situation. Note that industry leading companies provide 80
hours (4 percent) or more of training per year to each employee.
Support from All Levels of the Organization including an understanding and acceptance of the need
for improvement and the importance of success across the entire organization. Personal objectives and
performance must be aligned with the corporate strategy as part of the asset optimization process. All
must be willing to assume new relationships, roles, and responsibilities. Ownership and commitment to
the process is established and reinforced through fair treatment, consideration and respect for all
involved, continuing communications, coaching and training as well as recognition for results. Incentive-
based compensation is a strong motivator. Functions that may not be directly involved in the
transformation; Finance, Human Resources, Information Systems, etc., must be made aware of
objectives and their anticipated contribution, aligned to the transformational objectives and included within
the asset optimization program communications process.
Comprehensive, Fully Integrated, Open Information Systems with the means to extract and
combine data from a broad variety of sources. The information systems must provide quick, accurate
access and data mining to identify deviations from required performance. Estimating and displaying
current condition and status, an accurate assessment of asset lifetime remaining, the operational and
financial consequences of any departures from normal, and recommendations for avoidance or mitigation
are likewise essentials. The system must be able to communicate and exchange information with
enterprise, production management, control, and logistic systems. If an effective information system isnt
present at the beginning of the improvement initiative it must be established in parallel.
Results Measured and Managed by collectively using benchmarks, metrics, and Key Performance
Indicators (KPIs) to measure progress, manage the improvement process and identify additional
opportunities for improvement. Metrics convey corporate value and return (in terms of availability,
production output, quality and cost objectives) achieved via improved reliability and overall effectiveness.
Performance to metrics demonstrates value created and justifies the sustained investment in personnel
and resources required to gain full results from asset optimization. Metrics are also used to monitor the
performance of specific processes, systems, equipment, and components. Metrics are directed to specific
results and cascade in a linked fashion from high to low levels. In this way process and programmatic
improvements connect directly to overall business, mission, and performance objectives. Metrics,
explained in more detail in Chapter IX, include:
Corporate typically asset- or capital-based metrics linking performance to shareholder value,
such as RONA and ROCE.
Production effectiveness such as Overall OEE the product of normalized availability
(uptime), production throughput (yield), and first-run-quality, forced outage rate and availability.
Cost effectiveness in terms of Maintenance Cost as a percentage of RAV, and costs per unit
production (ton / pound, MW, barrel, etc.)
Equipment reliability measured by KPIs such as MTBF, total cost and unavailability by asset.
Work process, quality and management effectiveness planned as a percentage of total
work, rework or repair success to measure work quality, inventory value and stock outs to
measure capital and storehouse effectiveness.
Program effectiveness defects identified prior to failure and avoided cost indicate the
effectiveness of programs such as condition monitoring.
Others the amount of training per employee is a good leading indicator to demonstrate
organizational commitment to, and progress toward, achieving objectives.
Success Rewarded with performance- and results-based compensation. Real rewards are necessary
to effectively increase personal awareness, ownership and involvement in the improvement process as
well as encourage responsibility and accountability for results. Performance-based compensation is
generally based on organizational and team objectives. Compensation for advanced individual
qualifications is often included, Chapter X.
Commitment to Continuous Improvement driven by prioritized failure analysis (RCA) that includes
proactive identification, prioritization by history and risk, and action required to eliminate the basic defect.
The asset optimization program strategy and implementation is adjusted and refined as necessary to
ensure progress toward increased value by identifying and minimizing defects.
Improvements Sustained and Institutionalized based on 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. The process is
complete when there is no longer any institutional memory of the old way.
ROLES AND RESPONSIBILITIES

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 prove results and demonstrate progress.
Executive and Operating Management
Success requires energetic, visible commitment and consistency of purpose to attain permanent,
sustainable improvement at the CEO and plant management levels, and a three- to five-year time horizon
to meet objectives. Full participation in the initiative, which includes energetic involvement, and effective
communication, is essential. Energetic, participatory involvement is much more than a few written
communications, occasional attendance at meetings and answering questions. Patience is imperative. All
of these qualities must originate at the top to drive the major changes in organizational culture,
administrative organization, and practice that are essential to gain full benefits and value from
asset optimization.
Participatory involvement must include
Lead Organizational Culture Change
The organizational culture change required for success will not occur without energy, a sense of urgency,
commitment, forceful drive, inspiration, and thorough involvement from senior management. Hollow words
and a lack of real commitment are quickly apparent to everyone involved. Instead of the commitment and
ownership necessary for success, everyone ducks waiting for the latest program of the month to roll
past. The importance of senior management interest, continuing personal involvement, and
communication cannot be overstated.
Provide Consistent, Continuing Support
Mature asset optimization is characterized by few problems, surprises. 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. Removing emphasis and resources too soon from immature improvement initiatives is a
temptation that must be avoided; for more detail, see Chapter XVI. 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 an improvement process requires the establishment of optimistic
objectives. The individuals responsible for implementing the improvements should determine what can be
gained if everything works as anticipated. The highest optimistic objectives ensure that all potential
opportunities for improvement are identified and subjected to detailed evaluation and 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 transformational improvement
through ambitious objectives demands irreversibility and, thereby, helps institutionalize the results of the
improvement process.
Create Financial Awareness
Virtually everyone in a corporation understands financial issues. With a little help and enlightening
communications, most can relate corporate financial performance to the process they go through when
deciding to purchase a house, an automobile or a motorcycle. 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. The financial model presented in Chapter VII 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.
In a chemicals plant, the additional production throughput necessary to gain the profit equivalent
of increasing pump average MTBF by one year required 104 percent availability!
Flaring reportedly cost close to $1 million per month in another hydrocarbon processing facility. In
addition to the waste, the highly visible flaring detracted from the commitment needed to identify
and correct other sources of inefficiency and waste. So long as the flaring is allowed to continue
why should anyone worry about a few $5,000 to $10,000 repairs?
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 (mentioned earlier and often discussed in the
media) results from such ill advised 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 instigate and lead the change process. Within the leadership structure, champions must
be identified, encouraged, and empowered.
Deploy a Mission-Centered Strategy
The development of a solid, mission-centered strategy, with supporting measures of performance, must
be directed and nurtured to ensure that everyone is pulling in the same direction. Within the strategy,
management must verify that prioritization is on target and resources and funds are invested to gain the
greatest results.
Move to a Profit Center Mentality
A profit center is results oriented. Management must encourage, facilitate, and support the evolution of
asset care from a cost center to a profit center mentality. Improvements are encouraged and will occur
so long as they are supported with incentives for results. A cost center mentality is activity and task
protective and resistant to change. To repeat an earlier statement, a cost center has institutional
disincentives for improvement everyone is familiar with the rewards for doing well and finishing under
budget!
Time based Preventive Maintenance (PM) is a good example. Within a traditional cost centered, task
protective organization people typically resist optimization that results in less PM, regardless of whether
activities produce real value. There are many reasons for this, including a fear that a reduction in PM is
an excuse for downsizing personnel. With a profit center mentality value is the prime objective. Everyone
recognizes that reducing low value PM makes time and resources available for higher value activities
such as identifying and correcting equipment and organizational defects.
Inspire and Manage the Improvement Process
Business is constantly changing; however, corporate culture rarely embraces radical change. Reluctance
to change virtually guarantees sub-optimal results. The successful are those who thoroughly understand
the need for change, are willing to change, and are capable of initiating, driving and managing the
improvement process while patiently awaiting results. Directing the improvement process, maintaining
consistency of purpose once the process has begun, and injecting improvements carefully and
incrementally are vitally important challenges for results-oriented management.
Be Patient for Full Results
Although improvements will be observed almost as soon as an asset optimization process is begun, full
results will take a minimum of 3 to 5 years. Complete cultural institutionalization where all memories of the
old ways are gone may require 7 to 10 years. Interim goals, typically annual, showing progress to key
objectives and solid, demonstrable results, establish and maintain the confidence necessary to pursue
long-term goals most effectively.
Program Management
Program management typically has to work at gaining influence upward in the organization. Influence
includes credibility by action and interim results. In turn, credibility builds the upper management
confidence and patience necessary to achieve permanent, sustainable results from an asset optimization
program. People at this level must ask: What can I do to maximize my influence and contribution both up
and down the organization and act on their conclusions.
At the conclusion of an asset optimization workshop participants, primarily mid level managers
and technical specialists, were asked the question what can you do personally to contribute to
the success of the asset optimization initiative? Their answers, some of which are listed below,
were very enlightening:
Lead by example. Walk the talk. Be a visible, positive speaking and acting leader. Advocate and
drive the asset optimization initiative. Demonstrate commitment. Live the culture of Asset
Optimization. Be an advocate for change.
Support and coach the team in asset optimization concepts. Assure all are informed and
understand the importance, principles, process, roles and benefits of asset optimization and how
they gain personally. Encourage teamwork and monitor performance.
Establish and sustain motivation through regular and better communications of the process,
objectives and benefits. Develop a learning organization with empowered employees. Explain to
all the required end state "world class standard".
Improve the relationship between Maintenance and Production with more communications.
Engage with Production to create a mutual understanding of goals and strategy.
Remove barriers and facilitate solutions so that team members can participate and contribute fully
in the asset optimization process.
By following these guidelines, mid level managers can drive the asset optimization process, create the
culture, motivation and ownership necessary for success and build the credibility with higher-level
management needed to sustain the initiative.
The Improvement Process
Figure 4.4 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.
Business/Mission Identify Current
Objectives State/Performance
Identify & Prioritize

Improvement Opportunities Implement Improvements
Organization
Develop Strategy,
Improvement Action Plans Systems Technology
Resources
Continuous Improvement
Measure Results
Improved Availability
Reduced Costs
Figure 4.4 Simplified Asset Optimization Process
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 perform vital tasks safely and effectively.
Communications are essential to answer questions, head off rumors and minimize resistance. During the
implementation of any change, rumors inevitably become far harsher than facts or intentions. Replacing
rumors with facts is essential, even when the facts may be unpleasant such as projected personnel
reductions to meet long-term spending objectives.
Time after time, manufacturing companies determine that a solid cost reduction plan can be met or
nearly met by normal attrition through retirements and voluntary resignations.
FINANCIAL MEASURES OF PERFORMANCE

Financial results are essential to demonstrate the full value of asset optimization toward mission
compliance, production effectiveness, and profitability. Demonstrating the value of equipment
effectiveness must:
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 asset optimization.
Ideally, the financial measure or measures should 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. Business rules in the production and manufacturing world 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)
A financial model designed to account for all of the value and benefits generated by asset optimization will
be described in Chapter VII. 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 Timed Production Effectiveness (TPE) and commented that results were greatly dependent
on how aggressively objectives were set.(129) Another company testing the model determined that
completed and planned reliability improvement projects improved return over the cost of capital by nearly
8 percent.(129)
Success Measured by Financial Results
Reliability professionals within industry leading companies recognize that investments for improved
practice, process, and technology will be approved only when justified by undeniable and compelling
financial return. Show me the money is much more than a catchy line from a popular movie (Jerry
McGuire).
Metrics such as costs as a percentage of Plant Replacement Value (RAV) are used to benchmark
spending on equipment assets, primarily in the petrochemical industry. Cost per Equivalent Distillation
Capacity (EDC), is a similar normalized metric widely used within the refining industry, Chapter IX.
Measuring maintenance effectiveness in terms of costs as a percentage of plant replacement value, in
this case Estimated Replacement Value (ERV) was originated by DuPont. When the cost as a percentage
of RAV metric was initially defined in the early 1990s industry best was about 2.5 percent. The
benchmark value has declined in the fifteen years since its origination. Today, maintenance costs of about
1.8 to about 2.3 percent of RAV are considered to be world class. For added detail refer to Chapter IX.
DuPont reportedly reduced their index from 3.3 to 2.3 percent during the 1990s, are gaining $400 million
per year corporate wide in reduced costs and are aiming for 2 percent (see also Chapter XVI). The cost
reduction results from a focus on excellence that emphasizes planning and scheduling, optimum
materials management and procurement, a mixture of Condition-Based and Preventive Maintenance, and
reliability improvement.
Cost effectiveness, measured as a percentage of RAV, does not consider several influential factors and
therefore should be applied with caution. Plant age, operating hours, and intensity of operations all affect
costs and the optimum expenditures for a given operating regime. None are considered in the cost / RAV
calculation. In addition, replacement value itself is difficult to estimate and typically inconsistent between
companies even production facilities within the same company. Professionals within industry leading
companies have recognized that despite its shortcomings as an effectiveness measure, cost objectives
expressed as a percentage of RAV are going to be demanded by many companies and take the following
actions to assure best results:
Make certain the estimate of replacement value is consistent from year to year and that any
changes are fully understood prior to reporting RAV based measures.
Recognize that the greatest utility for RAV based metrics is as a relative gage of improvements
over time based on a constant denominator. Once the objective is set for a given plant, it
shouldnt be adjusted to conform with results at another plant without first assuring that the
estimate of RAV itself is consistent between plants.
A major company in the chemical industry was about midway through a cost reduction effort and on-track
to gain objectives. Reducing the cost / RAV index from approximately 4.5 percent to their objective of 2.5
percent will gain savings of about $100 million at the bottom line. (129) Another company reported
expectations for both increasing asset utilization and reducing maintenance costs expressed in the
following table:(100)
Increase
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
Where ROE is Return on Equity and RONA is Return on Net Assets
A third company estimates that maintenance costs can be reduced by nearly $500 million by
implementing best practice.(35)
Because the benchmark is so widely known, many companies require the use of costs as a percentage of
RAV as the objective and justification for virtually all aspects of maintenance and asset optimization. Two
progressive petrochemical companies went a step further to define their total labor hours available and
workforce composition (by craft and position) using overall affordable cost (as a percentage of RAV at the
benchmark objective), site average labor costs and the proportional costs of labor and material
(approximately 50 percent-50 percent split in North America).
From here they defined the labor hours available for Preventive, Condition Based and corrective
maintenance using the percentages detailed in Chapter IX.
When a facility goes through this exercise they typically find that historical requirements for corrective
maintenance (repairs) and / or Time Based PM exceed the hours available from the workforce at the
objective value of cost / RAV. This leads to the essential premise of asset optimization that eliminating
defects, reducing the need for maintenance and rationalizing PM tasks and interval is essential and the
only way to attain the cost objective.
In some cases, facilities have found that the workforce level at the final objective cost / RAV can be
gained by expected retirements and average historical attrition. This is a very desirable situation that must
be communicated to people fearing layoffs as their reward within the improvement initiative, see Chapter
XVII for more details about managing the improvement process.
One company performing a demographic analysis of their workforce discovered that expected
retirements and average historical attrition resulted in a personnel count that was less than the
cost / RAV objective. This unexpected discovery led to re-activation of an apprenticeship program
to meet the unexpected needs.(129)
Four key points should be considered:

1. An objective to reduce costs as a percentage unit output (ton, MW, barrel) creates greater value
and results than a simple cost objective. An objective of costs as a percentage of unit output
requires addressing all contributors including increased production and reduced waste.
Concentrating solely on reducing labor costs by eliminating people and / or outsourcing
addresses 50 percent or less of the cost of maintenance. Alone, it is unlikely to produce
permanent, sustainable results until the origins of spending defects are identified and
eliminated.
2. A focus on defect reduction through reliability improvement is the most effective, perhaps
the only, means to permanently reduce costs. Improved reliability simultaneously increases
production availability, reduces repair labor and material costs and has the greatest impact on
profitability.
3. The workforce reduction that may be necessary to meet final cost objectives must be
accompanied with a plan and process to reduce the need for work. A workforce reduction without
eliminating any work typically extends backlog and creates more inefficient and costly reactive
work, see Chapters IX and XIII.
4. Real change must be accompanied by a means to determine long-term effects. As mentioned
earlier, facilities have reduced their workforce to cut costs, only to discover that the knowledge
and experience necessary to perform vital tasks safely and effectively had been irretrievably lost.
Progressive leaders report that when all factors are considered safety, quality, availability and
production output to name four optimum sustainable cost typically produces greater value than least
cost.
BARRIERS TO OVERCOME GAINING SUCCESSFUL PHYSICAL ASSET OPTIMIZATION

In any change process, some individuals will resist. In fact, organizational conflicts are typically more
pervasive and difficult to solve than technical issues. Several companies stated that middle management
and older crafts were typically most resistant to change and found change most threatening.
Companies that have successfully implemented major process and organizational improvements
accommodate resistance. Some valuable, productive employees simply cannot adapt to change. Skilled
crafts accustomed to working independently or with a subordinate helper may not be able to maintain the
same level of effectiveness in a peer team environment. There may be interpersonal friction and / or
competition. Progressive companies will provide additional training, adjust the organization as required
and create special assignments to retain the full use of loyal, talented individuals. However, individuals
who openly oppose the improvement process and attempt to convince others to resist must be replaced.
The dissonance they create can derail the entire improvement process.
Discussions during asset optimization workshops conducted worldwide since 1997 have validated the
asset optimization process and identified a number of barriers that must be overcome. Action required
includes:
Greater management engagement, full understanding and total commitment to eliminate the
fundamental sources of waste and lost profitability in order to take maximum advantage of
opportunities for real, sustainable improvement.
An optimum balance between short-term cost reduction and the risk of mid to long-term
consequences of neglected care (see Sustaining Cost in Chapter III).
Management recognition that permanent, sustainable cost reductions can only be gained with a
successful program to improve asset lifetime and cannot be ordered by command.
Increased recognition of the potential and benefits of improving asset utilization and effectiveness
that can be accomplished simultaneously with and are an essential element of successful cost
reduction.
Recognition that the asset improvement initiative is a strategic essential and not simply another
short-lived project commanded by management.
Management, organizational control and trust consistent with stated objectives of empowerment,
ownership, responsibility and accountability.
A true partnership between Maintenance and Production. The maintenance function treated as a
valued partner in the production process with real respect, prestige and stature in the
organization rather than a service provider.
Real attention to the soft issues of values, behavior, relationships, organizational culture the
administrative organization and change management. See Chapter XVII for details.
Full acceptance / buy-in for the asset optimization program at all levels of the organization.
Full appreciation for the holistic, fully integrated processes, systems and organization necessary
for success.
Focus on value prioritized opportunities rather than single areas of potential improvement.
Innovative implementation directed to results rather than tasks and activities.
Good communications, remove institutional and organizational barriers to teamwork and
coordination.
Solid, accessible information systems with the information necessary to accurately identify
departures from required performance and prioritize opportunities.
Full attention and effort to failure analysis and correction.
Whats in this for me clear at all levels of the organization
The asset optimization program develops answers in all these areas to assure substantial rewards in
terms of increased utilization and increased profit. Vigorously pursue the objectives, correctly implement
the principles and practices outlined in this Handbook and you will gain the value and rewards.
V. CURRENT BEST PRACTICES
This chapter introduces and discusses some of the best practice maintenance and management
processes that must be included in an Asset Optimization program. Reliability Centered Maintenance,
Total Productive Maintenance, Reactive, Preventive, Condition-Based and Proactive Maintenance, Six
Sigma, and The Balanced Scorecard all have their place within an Asset Optimization program and
contribution to success. Assembled and applied opportunistically in prioritized order, these
complementary practices contribute vital elements that collectively strengthen the effectiveness, utilization
and value gained from physical assets.
For example, Reliability Centered Maintenance (RCM) provides a systematic means to develop an
optimum maintenance strategy for high-risk equipment, Total Productive Maintenance (TPM) shows the
path to create an effective organization, including the essential Maintenance / Production partnership. Six
Sigma includes a control stage to assure sustainability. A Balanced Scorecard assures that the interests
of all participants are considered and weighed. The Asset Optimization program adds financial
prioritization to the process to assure that practices are applied for greatest effectiveness and value within
specific business, site and mission requirements.
EVOLUTION OF EQUIPMENT MANAGEMENT PRACTICE

Over 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 5.1. 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 supplement Preventive. In the early 1990s, Reliability Centered
Maintenance (RCM) and Total Productive Maintenance (TPM) were promoted as the conclusive
processes, further clouding the issue.
Constant surprises Identify and correct defects before surprised

Impose process discipline Eliminate defects, Eliminate sources,
Maintain before surprised minimize surprises never surprised
Planned
Reactive Preventive Condition Proactive Reliability
Based Driven
Fix it after it breaks! Design, material,

Overtime heros! Scheduled by time Preoperational action component changes
- costly Determined by
- reduce failures to eliminate potential to eliminate sources
- risky - costly an objective sources of failure of failure
- may be strategic - may cause measure of need - effective - most effective
damage - more effective - minimize failures - eliminate failures
- reduces failures - reduce maintenance - minimize maintenance
Asset Optimization - safely reduce PM
Preemptive action to optimize reliability, - reduce capital
eliminate defects, avoid failure
- most effective Although
Althoughthis
thisand
andmost
mostgraphical
graphicalrepresentations
representations
- minimizes failures illustrate
illustrateaalinear
linearprogression,
progression,
- reduce capital an
anorganization
organizationcancanskip
skip
from
from Reactive to Condition Basedas
Reactive to Condition Based asan
anexample.
example.
Figure 5.1 Evolution of Equipment Management
In the late 1990s, we learned that all of these processes have a place. Asset Optimization uses concepts
and ideas from all the processes, assembled in a prioritized mix to build most effectively from current
strengths to gain mission, business and operating objectives.
Commonly mentioned objectives are a combination of Condition-Based and time-based
Preventive Maintenance of 65 percent or greater, the division will depend on the process and
Current Best Practices 70
equipment, and corrective less than 35 percent of the total. Industry leaders set an objective of
less than 15 percent of the total corrective maintenance as break-in reactive maintenance on
failure or threat of failure.
These objectives are illustrated in Figure 5.2.
A survey disclosed the following objectives:

Reduce total maintenance by 50%
Maintenance Shift the proportion of maintenance:
Eliminated Current Objective
Corrective 65% 30%
Preventive 25% 30%
Condition Based 10% 40%
Percentage
Corrective Maintenance
Preventive Maintenance
Condition-Based Maintenance
Current Objective
Figure 5.2 Current and Objective Maintenance Work by Origin
In the past, many 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, programs fail to make distinctions 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 obvious allow the pump to fail
then install the replacement stocked on board!
All programs designed to achieve optimized asset effectiveness require visible investment and
sustaining cost compared to the hidden, but much larger costs of reactive, repair on failure programs.
With the growing emphasis on cost reduction, many find investment and ongoing funding for any
optimizing or avoidance activity increasingly difficult to justify. One principal reason only 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, see Chapter VII. Moreover, a successful asset optimization 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 lifetime optimization programs such as Condition-Based Maintenance are being
curtailed, even terminated, as cost reduction measures. The solution develop 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 programs could be quickly lost
unless training and resources are allocated in anticipation of future needs.
The following sections identify current practices for equipment management and summarize strengths
and limitations that determine optimal use in an integrated program of Asset Optimization.
As a preface it is important to understand the contributions of each best practice:
Lean Manufacturing improve process flow, minimize waste
Maximize value delivered by optimizing flow, motion and quality. Minimize resources;
inventory, cost and waste (effort, money, duplication, time)
Total Productive Maintenance (TPM) improve organization, teamwork, ownership
Maintenance / Production partnership, small group activities, cleanliness, orderliness
Reliability Centered Maintenance (RCM) establish maintenance requirements to address
potential failure modes
Failure Modes and Effects (Criticality) Analysis FME(C)A
Six Sigma statistics utilized to identify performance deviations, sustainability
Root Cause Analysis, RCA identification of failure cause for elimination
Planning and Scheduling (CMMS) optimize work management, history
Materials MRO Stores Management optimize spares, repair parts management
Condition Monitoring (CM) define current performance
vibration measurement and condition assessment
fluid (lubricating oil) monitoring
Thermography
motor impedance, current analysis
ultrasonics; active and passive
Condition Based Maintenance (CBM) maintenance on actual need
Time Based Preventive Maintenance, PM maintenance on time (calendar or operating)
Based on statistical and historical lifetime
Proactive Maintenance pre operation actions to reduce failure
How all fit into a comprehensive Asset Optimization program is illustrated in Figure 5.3.
Change
ChangeManagement
Management
Asset
AssetManagement
Management
Six
SixSigma
Sigma
Business / Mission Optimized Effectiveness

Physical Assets & Processes, Practices &
Organization Infrastructure Procedures
Values, Culture, Knowledge & Skills
Behavior Management
Risk Assessment Work MRO Stores
Functional & Results Based Management Management
Admin. Alignment Compensation
& Reporting Reliability
Improvement
Operations / Maintenance Maintenance Management
Partnership TPM
System CMMS
Asset Lifetime Optimization

Asset Optimization Strategy
Program
RCA RCM
Lubrication PM CBM Proactive
Technologies
Figure 5.3 Values, Relationships, Processes and Technologies within a Comprehensive Asset
Optimization Program
Corrective Maintenance:
Corrective action taken on failure or obvious, unanticipated threat of failure
Corrective maintenance typically consists of problems, often identified by Production, such as loose
bolting, leaks, insulation failures, instruments suspected out of calibration, noise from equipment,
excessive temperatures, etc.
Corrective maintenance may be planned (identified, planned and scheduled one week or more prior to
action) or unplanned, break-in. The planned, unplanned category depends on the urgency of the problem.
Correcting an insulation failure would typically be planned work. Smoke emanating from a bearing
housing or an instrument that cant maintain control would certainly initiate an emergency, break-in
request for immediate, unplanned, work. Work that needs to be accomplished immediately is generally
termed reactive or run-to-failure maintenance.
All too many facilities operate largely reactive, run-to-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. It is also the most stressful for all,
including production and has morale implications throughout the organization. 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, run-to-fail maintenance is by far the most costly and least
effective form of maintenance and must be minimized for greatest effectiveness and least cost.
Reactive maintenance pays little if any attention to ensuring that operating conditions are within design
parameters. Consequently, actual equipment service performance and life span may be substantially
below normal. 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 holiday 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. (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, or 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 sense as in the case of replacing easily
accessible light bulbs. Some experts believe that driving the percentage of break-in reactive maintenance
below 10 to 15 percent may be indicative of risk management that is too conservative. The decision must
be based on probability, cost, and consequences it must be a defined strategy based on highest value;
not simply be a default in the event that funding for failure avoidance is not available. Since the 1950s,
industry has generally agreed that reactive maintenance is costly, inefficient, often unsafe and should be
avoided.
Preventive Maintenance (PM):
Maintenance tasks, including inspection, service and / or replacement, conducted at
regular, scheduled intervals of calendar or operating time established to avoid failure
based on average statistical / anticipated lifetime.
PM is generally invasive and requires an outage and disassembly for visual inspection and / or overhaul /
replacement regardless of condition. The intervals between specific PM 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).
Some who use the acronym PM for Preventive Maintenance may include time-based and
Condition Based Maintenance (CBM) in the definition. Others include only time-based
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 time-based
maintenance.
A PM program can be cost effective when:
Equipment operation is consistent.
Average life is predictable within a reasonable spread (which, in the case of industrial equipment,
necessitates reducing outside effects such as shaft misalignment and contaminated lubricating oil
to a minimum level)
Failures are well understood.
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 frequently referenced study conducted by EPRI in 1986 reported lifecycle cost savings for PM in the
range of 12 to 18 percent compared to reactive maintenance, as shown in Figure 5.4. PM significantly
reduces Operations and Maintenance (O&M) costs compared to operate-to-failure; however, costly
unexpected failures may still occur when the difference between average and minimum lifetime is large or
external, localized conditions affect lifetime.
Figure 5.4 Comparative Maintenance Costs (EPRI 1986)
Advocates recommend a living PM program consisting of the following key elements: (24, 129)
Mandated tasks identified, documented and executed to ensure regulatory compliance.
Processes, procedures, tasks and interval periodically reviewed for applicability and effectiveness
optimized in terms of task and interval as required.
Consistency maintained and enhanced on a site, system, and component basis.
Complete task instructions for every PM including safety precautions, tag-out procedures, tools
and parts required to maximize work efficiency.
Work completion reports including conditions found to provide basic information for effectiveness
review.
New technologies (including Condition-Based Maintenance) applied to supplement or replace PM
where effective.
Skills training to ensure accurate interpretation, quality work, and recommendations.
There are cautions regarding the application of PM

No more than 20 percent of total failures are time based, wear out, in nature, see Figure 5.12.
Thus, PM is an ineffective avoidance action for about 80 percent of probable failures.
Intrusive inspections are often conducted and components replaced unnecessarily with
equipment in good condition.
Time based PM can introduce failures and variation into an otherwise stable process. Equipment
in good condition can be hazarded / harmed and is frequently degraded by an intrusive
inspection. Intrusive inspections are a real risk to equipment in good condition and should be
avoided whenever possible.
As will be noted later, everyone has stories of equipment that was damaged during an intrusive
PM task and returned to service in poorer condition than prior to PM.
Generalized failure statistics do not account for localized conditions such as the environment
(temperature), operating regime, quality of installation, and service. At the component level of
mechanical equipment, adverse external conditions such as excessive shaft misalignment,
unbalance, and contaminated lubricating oil can significantly reduce the safe operating lifetime of
affected parts significantly below statistical lifetime.(111)
It has been reported that as much as one-third of PM expenditures are wasted. A study conducted in the
UK in the mid 90s revealed that about 50 percent of PM has no value in terms of failure avoidance, see
Figures 5.5 and 5.13. (110)
When evaluated on a benefit/cost

basis, approximately 50% of PM
tasks have essentially no value (110)
Benefit / Cost 25% 50% 75%

PM Maintenance Tasks
Figure 5.5 Benefit/Cost of Preventive Maintenance Tasks (110)
The widely varying environment and operating conditions found in most industrial facilities can result in
broad component failure distribution. For example, within a site population of industrial equipment such as
centrifugal pumps, the average lifetime may vary by as much as 600 percent or perhaps even more (12
month or less low MTBF, 70 month or greater high MTBF is not uncommon). The lifetime of individual
components may vary by an even greater percentage, Figure 5.6. Thus, basing decisions to perform PM
on a statistical average lifetime may result in excessive PM on equipment with high reliability / MTBF
while allowing failures on low MTBF / reliability equipment an average does not recognize distribution.
Figure 5.6 Pump Failure Distribution
To minimize the risk of failures, personnel responsible for recommending PM tasks typically select PM
intervals on the low side of average lifetime. As a result, some equipment will be over maintained with
components replaced that were in excellent condition with substantial life remaining. In other cases,
components will suffer failures within the PM interval.
Intrusive PM based solely on statistical average lifetime doesnt always prevent failures and, worst of all,
forces equipment back to the infancy failure regime shown in Figure 5.13. Compared to work performed
as needed, Preventive Maintenance, conducted at arbitrary intervals, is often unnecessary, overly
expensive and labor intensive.
As a solution, PM tasks are frequently altered to gain the same results with less expenditure of time and
resources. In one instance, a PM program required sight glass disassembly and cleaning at regular
intervals. Not only was the work unnecessary in most cases, 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 time and work required, did not hazard
equipment in good condition, and ensured that dirty sight glasses were located and cleaned.
There are many reports that PM conducted 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 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 amiss 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 safety and operability of the system. They might have gone further
except for the loss of nerve.
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, power generators have increased case opening turbine overhaul intervals from three
years to six years or greater. How much longer overhaul intervals can be extended calls for a great
degree of engineering judgment. Safely extending overhaul intervals necessitates added measures such
as periodic borescope inspections of turbine internals. 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 six-year overhaul cycle cause an outage at the longer overhaul interval? These are
questions yet to be answered.
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)
A boiler feed pump operating well and thought to be in good condition had to be
disassembled for an insurance inspection. The inspection, lasting all of 5 minutes, 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.
As a final comment PM may be viewed as job security. When attempting to optimize a PM program it may
be difficult to convince individuals who derive a significant portion of their compensation from performing
PM tasks, that PM reduction and improved effectiveness is in their personal best interest.
Although the origin of PM tasks was uncertain, one facility erected major barriers to any change
including a requirement to perform a full RCM analysis prior to making any changes. As one
example, daily PMs were required on weekdays only were they less necessary and did the
equipment know that conditions were not allowed change on weekends and holidays? As a result
of the difficulty to make changes, PM that everyone knew was unnecessary continued.
To summarize, it is essential to review and rationalize Preventive Maintenance tasks frequently.
Requirements and intervals must be optimized and / or PM replaced by more effective Condition Based
Maintenance (CBM) where maintenance is accomplished on need rather than time.
Predictive or Condition Based Maintenance (PdM, CBM):

Maintenance action based on actual condition (objective evidence of need) obtained from
in-place, non-invasive tests, operating and condition measurements
Condition measurement and assessment technology, methods, and practice are proven beyond question.
Applied correctly, all work well in a variety of situations for most facilities and people. Some successful
programs are led and operated by engineers. Many more are operated very successfully entirely by crafts
or former crafts.
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 5.4, 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, run-to-
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, ongoing involvement and training to maintain proficiency may strain management support
and funding.
CBM has proven capable of identifying anomalies for correction early enough to minimize the risk and
impact of operational interruptions. With that stated, people are beginning to recognize that CBM is still
reactive, the warning of a problem simply occurs sooner hopefully in time to avoid expensive failures,
including collateral damage; permit avoidance action that minimizes cost and production losses and
significantly reduce the cost of repairs.
Carrying that thought to conclusion, greatest benefits are gained by coupling CBM and Root Cause
Analysis (RCA) within a reliability program directed to eliminating defects. The concept of reliability
improvement by eliminating defects is an essential element of a comprehensive asset optimization
program. Defects are identified with CBM and RCA, eliminated by reliability improvements.
Many leading companies in the process, paper, power generating and manufacturing, industries have
shifted the majority of their maintenance tasks from time-based PM to CBM.
Condition Based Maintenance is driven by asset health. Real returns in terms of increased operating
effectiveness and reduced costs of five to seven times the annual cost of equipment and labor are
typically reported across a broad range of industries as a result of CBM.
CBM is composed of at least three identifiable activities:
1. Condition measurement: non-invasive measurements that define mechanical and operating
condition, e.g., vibration, fluid condition (lubricating and hydraulic oil), operating performance (typically
temperature and pressure), thermography, ultrasonic leak detection and electrical characteristics.
Measurements may be recorded continuously (on-line) from installed transducers or periodically with
portable (walkaround) 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 a prime measurement on complex rotating equipment for
accurate condition assessment, earliest flaw detection (recognition), identification (diagnosis), and lifetime
prediction (prognosis). These measurements are typically high bandwidth a factor that influences the
system design necessary to gain full use. This topic is discussed in greater detail in Chapter XIV.
It is important to note that the rich condition content of complex dynamic signals require special methods
for signal processing and comparison. These methods assure earliest recognition of a change in
condition, provide essential information for problem diagnosis and estimating severity and are typically
unique to application specific condition assessment systems. As on-line condition monitoring systems
become more fully integrated with process control systems, the necessity to retain and fully utilize the rich
content of dynamic vibration signals must be accommodated in the design.
2. Condition monitoring and assessment: individual and collective comparison of condition
measurements, value versus time trends, and measurement arrays, e.g., Fast Fourier Transform (FFT)
signatures, oil wear debris, Thermography pictures, motor current signatures and operating data to arrive
at an appraisal of current condition, identify and analyze defects, and estimate remaining life (prognosis).
A condition assessment system identifies mechanical and performance anomalies and diagnoses the
nature and severity of the problem. Identifying requirements for maintenance in time to avoid, or at least
minimize, a production outage assures highest production availability. By allowing all labor, tools and
parts to be assembled within a normal planning / replenishment cycle, condition assessment is also
essential for optimum maintenance and logistic (spare parts) management. The Asset Optimization
process and its information system assure maximum production availability and effectiveness combined
with optimized, least cost planning, work execution and spare parts availability. Production outages and
the necessity for costly emergency repairs and expedited parts are minimized.
Condition assessment is also directed at detecting and identifying degradation mechanisms. The cause 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 assessment the
objective evidence of need.
Root Cause Analysis
Within the Asset Optimization program there is another essential component to CBM the previously
mentioned Root Cause Analysis to identify cause and the action required to eliminate the defect. This
closes the loop to ensure CBM is not limited to repeatedly warning of and avoiding the same failure.
Measuring and condition assessment are just the first steps of CBM. The process is not complete until
design, operating and maintenance recommendations based on condition assessment information are
implemented to assure that problems are fully understood and eliminated.
For the purposes of this Handbook, RCA is treated as an essential part of the Asset Optimization
program, separate from CBM.
Avoided Costs
Avoided cost is used by some facilities to estimate the true value of CBM. However, avoided cost
taking credit for events that didnt happen is often a difficult concept for management to accept. 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.
A base loaded power plant claimed avoided costs that were more than an order of magnitude
greater than repair costs by including the historical production profit loss whenever a found
potential failure was averted by condition monitoring.(129)
Reference 91 in Appendix B addresses avoided cost in detail and contains a solid procedure for
calculating avoided cost that was approved at a large nuclear power generating plant.
Some disallow all or a portion of avoided cost if the condition would have been discovered by other
means in time to avoid failure and production outage. 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.
Considering cost distribution around an average and calculating the value potential to be gained by
improving below average performers may be a better method of justification. It has the advantage of using
facility numbers and is independent of industry baselines which are always treated skeptically by low
performing facilities.
For further information, see Chapter VII.
Value of Predictive Information

In addition to its value in CBM, the predictive information developed in the condition monitoring and
assessment processes has substantial value on its own. Predictive information:
Uniquely predicts the ability to meet future production within time, quality, and cost commitments
Predictable Capacity.
Provides warning that minimizes the risk of failures, safety, and environmental hazards, and
reduces the costs of primary and collateral damage.
Condition Monitoring can identify growing anomalies in time to eliminate at least 75 percent of
unscheduled shutdowns in a typical industrial application. Many industry leaders who are
experienced with condition monitoring have eliminated unexpected equipment failures altogether.
(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 may eliminate time-based PM.
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. (129)
Provides a great deal of the information necessary to assess requirements for and timing of
scheduled equipment shutdowns and overhauls. In this fashion condition monitoring is one of the
essential sources of information for a strategic / risk driven maintenance strategy.
It must be noted that condition monitoring is not currently effective for determining the
condition of many electrical, electronic and control components. It may not be effective for
warning of material fatigue failures. In each area condition monitoring must be assessed for
its effectiveness recognizing expected failure modes with experience and risk applied as
required to develop the best overall strategy.
Provides information for process and system reliability analysis RCM, Failure Mode Effects
and Criticality Analysis (FMECA) and RCA.
Supplies knowledge of equipment operating problems and operator training requirements.
Several organizations have reported results similar to Figure 5.7, where maintenance costs decline in
direct proportion to vibration amplitude.
Vibration Level
Costs/Vibration Level
There is an optimum vibration level at

which maintenance costs reach an
effective, sustainable minimum
Maintenance Costs
(87)
Figure 5.7 Maintenance Costs as a Function of Vibration Level
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 PM.
Minimize cost and hazard to equipment as a result of unnecessary overhauls, intrusive
disassemble and inspect PM.
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. (129)
Reduce requirements for stocked spare parts.
Increase awareness of equipment condition.
Form the core of effective asset 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 PM, e.g., lubrication, leak inspections, gas turbine combustion path inspections, and
thermographic inspection of electrical connections and insulation.
Reliably and effectively warn of fatigue failures (with current technology).
Warn of electronic failures within computer, automation, control, communications and information
systems.
Reduce personnel or produce a major decrease in lifetime maintenance costs without a
commitment to improving reliability by 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. Measurements to assess condition may be overly difficult, e.g., require major equipment
modifications for sensor installation, costly, inaccurate, or unreliable.
As a final comment, many believe that applying PM and CBM will magically reduce maintenance costs.
While both optimally applied may reduce unexpected failures, secondary damage and some lost
production, only reliability improvements will eliminate the defects causing the failures. That leads to RCA,
Proactive Maintenance and reliability improvement by eliminating design defects.
Proactive Maintenance:
Typically non-repetitive activities and actions such as precision shaft alignment and
balancing, piping and coupling flange alignment, installation of lubrication reservoir filter
breathers, bearing isolators and moisture traps that are 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. This
enables changes to processes, programs, and technology, e.g., design or metallurgy, prioritized by cost
and return, to be defined and implemented to eliminate defects and extend equipment lifetime. (87) The
proactive maintenance program must be directed to improving safety, predictability, asset lifetime and
performance in a cost effective, technically defensible fashion.
A facility has initiated a pump improvement program where a defined set of proactive
improvements / upgrades are implemented whenever a pump is in the shop for repairs. In this
way the entire population will be upgraded to latest specifications for optimum reliability in four to
six years.
Figure 5.8 illustrates another 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.
Proactive reliability improvement program

increases production, reduces maintenance
costs
Production
Maintenance Costs
Reliability
Figure 5.8 Improved Effectiveness Gained By Implementing

Precision, Proactive Practices (87, 129)
At the beginning of an initiative to implement CBM, many facilities found a large percentage of their
rotating equipment had symptoms of shaft misalignment. Based on that information, proactive programs
were 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.(87,129)
Some may include review and improvement of practices and procedures as proactive maintenance.
Included are:
Operating and maintenance (repair) procedures and checkoffs
Troubleshooting guides
Improved lubrication systems, Figure 5.9
Design criteria for new equipment (see TPM, early equipment management, later in this chapter,
Chapters VII and XX
Figure 5.9 Bottom Sight Glass Installed as a Proactive Improvement to

Detect Water in Lubricating Oil Photo courtesy Gerry Trodd
AN EQUIPMENT LIFETIME OPTIMIZATION PROGRAM

Many organizations have promoted the benefits in progressing from reactive to proactive to reliability
driven equipment management as illustrated in Figures 3.5 and 5.1. Leading practitioners recognize that
a comprehensive equipment management strategy will include a blend of Reactive, Preventive,
Condition-Based 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 optimization program requires:
Gaining support from the top by demonstrating a credible improvement toward corporate
financial objectives (RONA, ROCE) by improvements in areas such as Overall Equipment
Effectiveness (OEE) and conversion cost. (129)
Ruthless prioritization of efforts to gain greatest value and return.
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. (129)
Ensuring that people remain connected to equipment and not disconnected by measurements.
(129)
A commitment to continuous improvement directed to identifying, prioritizing, and eliminating

defects
This leads to the next concept, how best to design an equipment management strategy for a given set of
conditions.
RELIABILITY CENTERED MAINTENANCE (RCM)

Contributed by Jack R. Nicholas, Jr., P.E., CMRP and Thomas H. Bond
Definition: A systematic, disciplined process to ensure safety and mission accomplishment
through assurance of continuity of system functions.
The RCM 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 what maintenance tasks to perform to assure an applicable and
cost-effective asset management strategy directed to reducing the probability of functional failure.
Reliability Centered Maintenance (RCM) was developed to optimize maintenance, availability and profits
on commercial aircraft starting with the Boeing 747 and later all wide body jet aircraft. It was introduced in
the early 1960s as a fundamental methodology upon which to base and develop a maintenance program
to replace the earlier time-directed, largely intrusive, maintenance programs used on commercial aircraft.
Subsequently it was applied to other assets, both mobile and stationary as described by the late John
Moubray in his book RCM II.
Reliability-Centered Maintenance has been applied to all types of manufacturing facilities,
equipment and vehicles. These include oil refineries, steel and aluminum manufacturing plants,
power generating facilities, railways, water utilities, mines, commercial and military aircraft, and
nuclear submarines. RCM has also been applied in plants that produce automobiles, beer,
cosmetics, textiles, fibers, paper, food products, cigarettes, office equipment, photographic
equipment, and paint.1
A standard, discussed later, defines the Classical RCM process. There are many books and articles
promoting the necessity and virtues of RCM. As a carrot, promises of a positive Return on Investment
1
Moubray, John, Reliability-Centered Maintenance RCM II, 2nd Edition, Industrial Press, N.Y., N.Y., 1997
(ROI) in months are not uncommon. On the stick side of persuasion, some have gone so far to state that
a failure to implement RCM may have legal ramifications in the event of mechanical malfunction or
personal errors such as happened at the Union Carbide pesticide plant in Bhopal, India in 1984.
RCM analysis is used 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. It establishes a framework for anticipating, identifying, and developing proactive work tasks
directed at maintaining system functions needed to assure safety and mission accomplishment. RCM
requires task implementation and continuous improvement (a Living Program) 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, (over) 90 percent of equipment has an unlimited lifetime and does not follow the
classical bathtub curve of failure rate versus operating age.(12) The bathtub curve and other conditional
probability of failure profiles are discussed later in this section.
The original or classical RCM process has seven steps:(13) 2
1. Define assets, systems and required functions. Identify desired standards of performance of
the asset in its operating context, Define all assets and system boundaries to be analyzed and all
inputs and outputs through them, ideally in block diagram form.
2. Identify all reasonable ways the asset can fail to perform its required functions. Define
functional failures and specific component failure modes that can defeat required functions.
3. Establish what causes each functional failure.
4. State what happens when each failure occurs.
5. Establish consequences of each failure.
6. Determine what should be done to predict or prevent each failure. Select the most applicable
and cost-effective PM countermeasures for each failure mode. 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.
7. Determine what should be done if a suitable avoidance action is not practical. This may be
a temporary measure used while a more permanent solution is found and implemented
The classical RCM analysis process is illustrated schematically in Figure 5.10. The process blends
history, risk analysis, and economic considerations with actual condition to estimate the risk and
consequences of failure and identify optimal decisions.
2
Smith, A. M. Reliability Centered Maintenance McGraw Hill, NY., NY 1993 ISBN 0-07-059046-X
Figure 5.10 Classical RCM Analysis Process
Professor Andrew K.S. Jardine, PhD., in various papers and presentations, recommends using
Proportional Hazards Modeling, a sophisticated multi-variate regression analysis procedure to optimize
the content of a maintenance program. (20)
A NASA version of RCM seeks to develop the optimum synthesis of corrective, preventive, condition
based, and proactive maintenance strategies to provide required reliability at least cost.
An RCM strategy being pursued by the US Navy asks the following questions:
Has a failure occurred? If not, could it occur? (This is the risk assessment step mentioned in an
earlier paragraph)
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 analysis team led by a skilled facilitator
or analyst. The facilitated team (team meetings) approach to analysis has been proven to work very well
but is not the only way in which a valid result using the RCM methodology can be achieved. A skilled
analyst can extract sufficient information from documentation and key subject matter expert interviews
and validate the integrated results very effectively. Knowledge of current process performance, state of
compliance, equipment history, and variability over time are valuable inputs to the RCM analysis. RCM
analysis should also use (if it is available) resident information from a Computerized Maintenance
Management System (CMMS), including PM routines and findings, field notes of conditions found and
components affected, as well as observations on every piece of equipment to be addressed. (18)
Some of the elements that are needed or are highly desirable, if available, to assure a successful RCM
outcome includes:(124)
Knowledge of RCM methodology and documentation techniques and tools
Organizational management support for the entire project
Availability of the best and brightest cognizant plant personnel for the project
Trained and disciplined RCM facilitators (or analysts)
Cross-functional detailed equipment analyses
Interaction with manufacturing Failure Modes, Effects and Criticality Analyses (FMECAs), if
available
Defined plans prepared (in advance of analysis) to implement recommendations
Manpower and budgetary support for implementation
Operator involvement with the project in as many ways as possible
Periodic review of project progress and resulting benefits
RCM Projects often fail because the results of analysis, while perfectly valid, are never implemented.
There are many reasons for this including the two most important ones:
1. Support (budget, manpower, management interest) for implementation not provided or not
provided soon enough to assure project continuity
2. No buy-in by personnel not involved with the RCM project analysis, but whose support is
needed at time of implementation
So, an RCM project should be looked at from the start in its entirety to give it the best chance of success,
as illustrated in Figure 5.11 following.
Figure 5.11
RCM Project Process Using Classical RCM Analysis and Including Task Comparison,
Consolidation into an Optimum Plan, Implementation and Establishment of a Living Program and
Establishment of Links to Other Asset Management Elements
Selection of tasks is often a stumbling point in an RCM project, especially if participants are not familiar
with modern condition monitoring and predictive maintenance technologies. The tendency in such cases
is to select time directed tasks, even though there is no known or knowable basis for their periodicity.
One of the ways to arrive at the optimum maintenance plan for an asset is to follow the logic of the task
selection process depicted in Figure 5.12. The logic provides for considering on-condition based task,
then time directed (repair or discard and replace) tasks. All are evaluated on the basis of cost
effectiveness with the task that is most cost effective being the one favored over all others. More often
than not on-condition tasks will be the most cost effective, since no action other than monitoring is
required until the condition directs a repair action.
Can you
effectively detect NO
symptoms of a gradual
loss of function?
YES
Is an Can you
on-condition task NO repair and restore NO
technically feasible performance and will this
and worth doing? reduce failure rate?
YES YES
Perform the Is a
on-condition task scheduled Can you
at less than restoration (PM) task NO replace the item
the warning interval technically feasible and will this reduce
if most cost effective and worth doing? failure rate?
YES YES
Perform the Is a
scheduled restoration task scheduled
at less than the age limit discard (replacement) NO Run-to-failure
if most cost effective task technically feasible Action depends
and worth doing? on consequences
YES
Accomplish the
scheduled replacement task
at intervals less than the age limit
if most cost effective
Figure 5.12 Task Selection Logic to Arrive at the Optimum Plan for Maintenance
If no applicable and cost effective task can be found, the only immediate option may be run-to-failure. If
the failure mode has safety or severe economic consequences, a re-design may be required to eliminate
or mitigate the consequences of failure. Here, too, on-condition options should be considered. Often, a
low cost modification to a component or system providing for installation of some monitoring
instrumentation can give early indication of the onset of degradation well in advance of a condition that
constitutes functional failure. This makes the failure mode manageable.
The rationale for adopting this approach is based on the idea that the less intrusive a maintenance
program is the more reliably an asset will perform. Maintenance often creates the basis for failure, if not
done correctly. As described in the following paragraphs, it was concluded by early study groups that
infant failure, failures shortly after manufacture, maintenance or installation was performed was the
dominant cause in commercial aircraft. Observers in other venues have reached the same conclusion,
albeit without the statistical proof comparable to that from commercial aircraft fleets.
RCM Principles Applied to the Selection of Condition Measurement Technology and Condition
Based Maintenance
A paper presented to the American Society of Naval Engineers (ASNE) described how the U.S. Navy
applies RCM to select of appropriate tasks and enabling technologies. (114) Three of the major points from
this paper are summarized as follows:
1. 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.
2. 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 identified quickly, repaired promptly and cheaply, devoting
resources to prevent every failure may not be worthwhile.
3. 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 maintenance program designer.
Figure 5.13, taken from the original 1978 report on RCM by United Airlines for the U.S. Department of
Defense and enhanced, illustrates six common failure modes or conditional probability of failure profiles.
Note that of the six only three, with rising failure probability at end of life, can be mitigated with active
intervention. The total of these profiles having any wearout is 11 percent.
Intervention may improve reliability

Bathtub Increasing failure rate end of life Steadily increasing failure rate
Failures
4% 2% 5%
Time
Intervention point
Intrusive intervention does not improve reliability
Low early failure rate, constant after Constant failure rate throughout life High infant mortality, constant after
7% 14% 68%
Percentage of individual equipment following curves from Nowlan & Heap
Figure 5.13 Six Common Failure Profiles and Percentage of Occurrence in Pre-Wide Body
Commercial Aircraft
Three other statistically significant studies done using the same methodology over the past 40 years have
confirmed virtually the same conclusion.3 Profiles containing a wearout characteristic totaled no more
than 20 percent in any of these four comparable studies. Profiles exhibited a constant or slightly
increasing conditional probability of failure characteristic in 80 to 90 percent of cases. What this means is
that, if there is no wearout, that time directed tasks cannot be nearly as cost-effective nor as applicable
as are condition monitoring tasks and condition directed repairs. While you may not have such extensive
failure profile data for the particular asset for which you may be responsible, any RCM practitioner with
broad exposure in many different venues can with confidence state that non-intrusive, condition
monitoring and on-condition tasking is the way to go wherever feasible and most cost effective. When
constructing a Physical Asset Optimization program these failure profile realities must be taken into
consideration.
3
The four studies from which failure profiles and statistics are taken are: UAL Study - DOD Report on Reliability-
Centered Maintenance by Nowlan & Heap of United Airlines, dated December 29,1978, which used data from the
1960s and 1970s and earlier papers and studies referenced therein; the Broberg Study believed done under NASA
sponsorship (reported in 1973) and cited in Failure Diagnosis & Performance Monitoring Vol. 11 edited by L.F. Pau,
published by Marcel-Dekker, 1981; the MSP Study - long title Age Reliability Analysis Prototype Study- done by
American Management Systems under contract to U.S. Naval Sea Systems Command Surface Warship Directorate
reported in 1993 but using 1980s data from the Maintenance System (Development) Program; and the SUBMEPP
Study reported in 2001, using data largely from 1990s, and summarized in a paper dated 2001, entitled U.S. Navy
Analysis of Submarine Maintenance Data and the Development of Age and Reliability Profiles by Tim Allen,
Reliability Analyst Leader at Submarine Maintenance Engineering, Planning and Procurement (SUBMEPP) a field
activity of the Naval Sea Systems Command at Portsmouth NH.
Based on an appreciation of the failure process, RCM presents decision criteria for evaluating
maintenance strategies: the presence of a dominant failure mode, task applicability, and task
effectiveness
Dominant Failure Mode
Maintenance focuses on dominant failure modes failure modes that are specific and reasonably likely
to occur. The likelihood will vary to some extent with the severity of the failure modes effects. For
example, if the failure mode is potentially lethal but highly improbable a typical finding due to emphasis
on safe design it may be less dominant compared to a less severe failure mode with a higher
probability of occurrence.
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 such as the failures that
go unreported, and the failures that have been reported but cannot be found in history databases.
Failure histories only look backwards. They do not reveal failures waiting to happen. These include
potential failures that either have been prevented by luck or havent yet occurred because conditions
necessary for the failure to occur havent aligned. In either case, potential failures must be identified and
the risk analyzed because most will eventually take place when the right combination of circumstances
are aligned.
In order for a Condition Based Maintenance or monitoring technology to meet the goals of RCM, it must
provide affirmative answers to the following questions:
Does the technology monitor for condition leading to a specific failure mode?
If so, what is the failure mode?
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 acquire or apply the technology to prevent the failure.
Applicability
RCM has rules for applicability for each type of maintenance task - time directed, condition monitoring
and directed, and failure finding. First, any task must be technically feasible enabling a person to find,
mitigate or prevent an actual failure or degrading condition leading to failure. For time-directed tasks to be
applicable (i.e., they work) the interval between failures (by calendar or operating hours) must be known
with reasonable accuracy.
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 or automated tool performing the technique). In practice, a
parameter is not always quantifiable.
Condition monitoring technologies must meet the following applicability requirements:
The measured parameters must correlate to deterioration and related failure modes previously
identified.
The parameters must be measurable. The measurements must be repeatable and sufficiently
stable over time to serve as reliable triggers for corrective action. In addition, measurements must
be sufficiently consistent over every unit in a specific population to assure that a given
measurement more or less represents equivalent condition and severity of a problem every time.
There must be sufficient time between the discovery of a potential failure and the onset of actual
functional failure to take appropriate corrective (condition-based) action.
If condition-monitoring interval using periodic measurements is less than the minimum time
between warning and functional failure for a critical (e.g., safety related failure mode), on-line,
continuous monitoring may be the best solution.
These points are related condition measurements must be accurate, consistent and available at the
correct intervals (or continuously) for a condition monitoring technology to be used reliably to 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 task must reduce the risk of failure to a tolerable level.
For all other failures the task must be cost-effective (e.g., cost in lost production to find a
hidden failure).
If mission or economics are involved the investment required in executing the task (e.g., for
capital and operating cost for a condition monitoring technology, including manhours, etc.,)
should be less than the resources required to repair the failure after it has occurred.
When failure consequences affect the mission of an asset, the alternative to technology may be
redundancy (to cover the mission requirements of the unit that suffers unplanned failures). Here, the
tradeoff is one investment (technology) vs. another (capital equipment). There is a third alternative
increased spare parts (or a whole spare unit). In any case, the decision between technology and capital
equipment or spares must be based on risk, financial considerations and the confidence in the strategy
chosen to avert functional failures and their consequences.
Streamlining RCM
Virtually everyone with RCM experience validates that use of the Classical RCM or more rigorous
approach is the best way to determine what maintenance must be performed to assure results that
exceed any approach to maintenance program formulation used before it existed. However, after many
years of extensive experience applying it in a large number of assets, many RCM practitioners and users
(as well as some potential users) have concluded that in too many cases, Classical RCM is too expensive
and time consuming to justify the results gained in the majority of total assets. By 2006, as this is written,
this conclusion has become general industry consensus. Classical RCM is too resource and time
intensive to be applied cost effectively across a broad range of industrial equipment. It is justified
economically when directed to the most critical, high-risk equipment and systems in many fixed or mobile
assets.
To address this issue in commercial utility application Streamlined RCM, illustrated schematically in
Figure 5.14(31), was developed in the late 1980s and early 1990s under Electric Power Research Institute
(EPRI) sponsorship. The approach was to apply templates developed from nuclear powered generating
plants to common systems in fossil plants. The EPRI contractor (Erin Engineering & Research, Inc., of
Walnut Creek, California, now an SKF Group Company) later developed a broader set of templates for
application beyond electric power generating utilities. Their version is called SRCM.
EPRIs Streamlined RCM differs from Classical RCM in three principal areas:
1. The RCM process is preceded by a risk ranking to assure resources are applied most effectively
to equipment and systems with greatest opportunities for improvement.
2. General templates are utilized to make the most of broad knowledge regarding failure modes and
maintenance actions.
3. Analysis results are compared with existing maintenance tasks to arrive at an optimum strategy.
Existing maintenance tasks that do not clearly address a failure mode should be abandoned if no
other rationale for their application can be established.
Templates or maintenance standards for specified components (motors, pumps, circuit breakers,
transformers of specific design, manufacturer, application, capacity, etc.) include:
Typical operating conditions
Common functions
Typical functional failures
Alternative functional failure mitigation strategies, tasks and other items (e.g., redesign, changed
operating procedures, etc.) resulting from previous RCM analyses
(31)
Figure 5.14 The Streamlined RCM Process and its Relationship to Classical RCM
Risk ranking is designed to identify systems and assets that have greatest risk threat to operational
requirements and cost objectives and hence opportunity for improvement. Applying Streamlined RCM
to highest risk systems and assets in a sequential order assures that the time and resources available for
RCM gain greatest value in terms of both availability and cost.
Stated another way, every facility has systems and assets that are behaving well and seldom, if ever,
experience problems. Whether it is design, installation, the operating context, to use a term from RCM, or
the current maintenance program, these systems and assets dont need immediate attention. Scarce
resources are not expended on systems and assets that are performing well where there is little value to
be gained.
To assure greatest opportunities are addressed first and the number is manageable, the risk rank process
must be forced to categorize no more than 10 percent to 20 percent of the total systems and assets in the
highest risk group.
One facility performed a criticality assessment, identifying approximately 1,600 systems out of a
total of about 2,200 as most critical and having first priority for RCM. After about a year of effort
by a dozen or so reliability engineers RCM had been completed on approximately 200 systems
13 percent of the total considered most critical. At that point the program was essentially
abandoned due to more urgent priorities, resource availability and uncertain return. Did the 200
RCM analyses that had been completed cover the highest priority systems or address the most
threatening potential problems with greatest value recovery? Could streamlining have covered
more? No one knew. It hadnt been tried.
The streamlining concept also 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
4
Note that this was six years before publication of the U.S. Department of Defense-sponsored landmark text,
Reliability-Centered Maintenance, by Nowlan and Heap of United Airlines. The text is out of print but reproductions
from microfiche (for a fee) are still available in micro-fiche from the U.S. National Technical Information Center, in
edited form published by Maintenance Quality Systems, LLC, Millersville, MD (for a fee) and from
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 missile 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.
Although the initial program was successful, there was general recognition that the process could be
made more effective in terms of both cost and resources. The tasks used for the first class of missile
submarines were ship checked for differences on other classes of missile submarines, adjusted to
account for the differences (configuration, operating profile, original equipment manufacturer, building
yard variations, etc.,) and implemented, without additional extensive RCM analysis. This streamlining
approach worked.
By the late 1970s the US Navy had proven the concept of streamlining RCM. A number of lessons had
been learned, including:
Applying the principles of risk management as early as possible in the conversion to an RCM-
based program significantly reduced the time and resources necessary to gain real benefits.
Concentration on mitigating only a few highest probability failure modes in systems brought
significant increases in projected and actual overall reliability and availability of subsystems.
Maintenance costs were 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.
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.
Even the most thorough RCM analysis often did not identify all potential failure modes. The few
that were missed could be readily managed by effective feedback and a follow-up program,
referred to as an RCM Living Program.
After applying the streamlining concept to 31 FBMs, the Navy began using it more broadly in the 1980s.
It employed RCM on all newer classes of attack submarines (SSNs) by using streamlining. Even though
operating context for SSNs was quite different from FBM submarines, context of many systems was the
same. Post ship check adjustment of RCMbased tasks from FBMs was enough to make them work on
SSNs.
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, the FBM submarines, 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 eight (8)
years beyond their nominal 25-year lifespan.
Streamlining RCM requires the following actions: (7, 8, 31, 78) 5
Formulate a clear statement of purpose, intent and overall scope
Identify processes, systems, and components to be subjected to analysis
Develop a component analysis list (type, tag number, manufacturer, and model)
Gain complete understanding of system and component functions
www.reliabilityweb.com for free download (23MB)

5
Nicholas, J. R. and Young, R.K. Advancing Maintenance and Reliability (Workshop Edition) Maintenance Quality
Systems LLC Publisher ISBN 0-9719801-2-8
Risk rank equipment to focus on highest risk equipment, first. Process, system and component
selection is based on failure rate or significant problems determined by reviewing production and
incident reports, financial and maintenance records and interviews to identify potential problems
that may not have yet occurred.
Prioritize prior to analysis (which systems to analyze) and during implementation (which failure
modes to mitigate) based on risk. A Pareto risk analysis, shown in Figure 5.15, is often used; see
also Figure 13.3.
Focus
Focusattention
attentionand
andeffort
effort
on
on10%
10%toto20%
20%ofofequipment
equipment
with highest Risk Rank
with highest Risk Rank
Risk
Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Equipment Numbers
Figure 5.15 Pareto Risk Ranking

Focus on dominant failure mechanisms; low-risk, low-probability items are not pursued
Use generalized component templates (or standards) to ensure that a broad range of potential
failures and solutions are identified for consideration. Use of templates assures that analysis
teams have access to earlier efforts of other groups using RCM on similar equipment and
consider them during their analysis. The use of templates or maintenance standards starts the
analysis process at a higher state of awareness of functions, failures, and failure modes. It is far
more effective to modify templates that contain vast experience encountered in many different
applications of common equipment rather than constructing maintenance analyses from ground
up.
Referring to Figure 3.5, corrective maintenance may be planned or unplanned (emergency, break-in).
Time based (PM), condition based (CBM) and proactive maintenance are always planned and hence far
more effective in terms of labor utilization (wrench time).
In some organizations time and condition based maintenance are combined under Preventive
Maintenance (PM). In this handbook PM is strictly time-based maintenance.
A template is a starting point that exposes best strategy alternatives for countering functional
failures at a component level. Even experts may miss something. Templates are modified to
accurately account for local experience, conditions of operation and environment. (8)
Templates are customized and turned into parts of the RCM analysis for an asset by doing the following:
Consider criticality, consequences of failure, environment, duty cycle and other factors for the
components being analyzed
Evaluate performance and document current equipment management tactics, including operating
procedures; requirements for additional activities (e.g., condition monitoring, statutory or
regulatory [e.g., OSHA 1910] activities, and insurance); and anticipated results
Evaluate for applicability and effectiveness all current tasks and periodicities needed to counter
functional failures
Select maintenance tasks that are traceable to specific functional failures
Include all alternatives for reliability improvement, including design enhancement, operational
procedure modification or equipment replacement
The streamlined RCM project is completed by performing the following steps:
From the customized templates or standards derive a comprehensive surveillance, inspection
and repair strategy that is specific to the asset being analyzed in its operating context. (The newly
modified templates or standards may also be used in follow-on analysis at additional site(s) in the
same organization or elsewhere.)
Establish an audit trail for follow-on reference
Add, delete, modify or consolidate tasks as appropriate to optimize the new program and
minimize maintenance burden.
Develop plans early (preferably before beginning the analysis) to implement results from a given
analysis, so that benefits can be realized quickly and applied to other critical systems on the
priority list
Implement a Living Process or program for continuous improvement
Link the Living Program to other elements of the Asset Management Program
Modify the strategy to add more detail as required by experience after implementation of the
RCM-based program
Requirements for success include:(8)
Clear, understandable goals, objectives, and expectations
Strong and continuous management support
Dedicated staff
Ownership
Processes and systems selected to gain best results
Strategic and rapid implementation
Accurate measurement of results
By streamlining the RCM process, time and resources are utilized most effectively to pursue high value
opportunities for improvement. This leads to essentially the same appreciation for potential losses and the
optimum processes to reduce risk as Classical RCM. Leaders who have compared this approach to
Classical RCM report arriving at the same results with about one-third to one-fourth the cost and time of
analysis.(8)
RCM Variants and Derivatives
The RCM process can be classified into at least three variants / derivatives. Definitions are:
Super-Classical RCM A methodology that is more rigorous than the Classical RCM methodology
described in the United Airlines report to DOD in 1978
RCM Variant An RCM methodology that skips or combines steps found in Classical RCM or
incorporates substitutes for or supplements to Failure Mode and Effects Analysis in order to reduce
the time and resources needed for a project
RCM Derivative An analysis methodology that produces a non-redundant, RCM-like set of tasks
(Time Directed Intrusive and Non-intrusive, Condition Directed and, Failure Finding) derived from
what is already in the Preventive Maintenance and/o, Predictive Maintenance (PdM) Program or
within the capability of PdM technologies used.
In the late 1990s two schools of thought were developing in the world of RCM. On the one-hand, there
was a movement for greater rigor in the application of the RCM methodology in order to reduce the
probability of a Bhopal type disaster.
On the other hand, for the same economic reasons that streamlining of RCM was developed, other
supplier practitioners and services providers began developing offerings that promised to produce an
RCM-based solution without the rigor required by the Classical RCM approach so that it could happened
cheaper and faster.
The relationship between Classical, Super-classical, RCM Variant and RCM Derivative methodologies is
illustrated in Figure 5.16.
Figure 5.16 Relationships between RCM Methodologies based on Rigor, Speed and Cost
The table following outlines offerings from a sampling of suppliers of RCM services and some of their
distinctive features, sometimes implied in the trade name of the approach and/or described in the Key or
Additional Features column.
Examples of Differing Approaches to RCM Offered Commercially
Trade Name & Source Methodology Key or Additional Distinctive Features
RCM II Aladon-Ivara Super-Classical Most Rigor, Certified Facilitators, More Understandable Terminology,
Environmental & Regulatory Focus separate from safety
RCM by AMS Associates Classical Task Packaging, Living Program & Compatible, Proven Analysis Software
(RCM WorkSaver by JMS Software)
RCM Blitz by Reliability Classical Facilitator/Recorder Teams, Incorporates Spare Parts Analysis &
Solutions, Inc. Consequence Reducing Tasks
Value Based RCM by TM Classical Monetary comparison of cost of maintenance with its benefit in the course of
Power Systems Inc. and as a basis for analysis
RCM by Core Inc. RCM Variant RCM Trim Software allows full life-cycle multi-template integration and
reporting that is simpler, faster, easier
Abbreviated Classical RCM RCM Variant Less documentation and no task comparison = Less time & lower cost for
by AMS Associates analysis6
Streamlined RCM by EPRI RCM Variant Templates derived from EPRI-Sponsored RCM Experience at Nuclear
Powered Electricity Generating Plants and subsequently refined by use in
other venues
SRCM by Erin/SKF RCM Variant PERMON Software with integrated templates for analysis in multiple venues
RCM Turbo by Strategic RCM Variant Touted as the only complete Windows-based RCM tool for fast & effective
Corporate Assessment implementation. Incorporates criticality assessment, optimized frequencies,
Systems, Inc. work flow smoothing and extensive failure mode libraries. Exploration of
alternative strategies by what if analysis as it applies to cost and reliability
RCMCost by ARMS RCM Variant Supplements FMEA with Weibull Analysis, Monte Carlo Simulation combined
Reliability Engineers with RAM Modeling &, Queuing Theory for impact of logistics over expected
system lifetime
PM Optimization by Fractal RCM Derivative Limited to existing program where each task is evaluated for functional value,
Solutions, Inc. & impact on safety, operations & environment to arrive at an RCM-like basis
for the PM program. Tasks with no value or impact are dropped
Experienced Centered RCM Derivative
Three methods used as short cuts to an RCM-like set of tasks based on
Maintenance (ECM) by
effectiveness and applicability. Applied to well-behaved assets 7
AMS Associates
Constructive critics have proposed a risk-based approach to RCM that is similar to an RCM Variant or
Derivative.(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 an RCM Derivative that moves an
organization from reactive towards a more proactive approach by: (17)
6
Smith, A.M., & Hinchcliffe, G., RCM: Gateway to World Class Maintenance, El Sevier Butterworth-Heinemann
Publishers, 2003 ISBN 0-7508-7461-X
7
Ibid.
Identifying the most critical short-term tasks required for the largest initial improvement in overall
machinery reliability
Building a long-term reliability plan of all necessary maintenance tasks for all critical machinery
Providing 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
Diminished numbers of personnel on staff
Decreasing budget
The need to reduce maintenance 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)
Risk was a central focus of the U. S. Nuclear Regulatory Commission when it contracted for development
of a study that provides for selection of risk-critical components using two different methods 8. The first
uses results of Probabilistic Risk Assessment (PRA), a technique developed as a result of the Three Mile
Island, Pennsylvania reactor incident in 1979. The other approach has a basis in PRA but does not use
the results of a PRA study. Basically this requires determination of what maintenance to perform on
nuclear reactor (primary systems) and cooling systems associated with accident mitigation using
Reliability Centered Maintenance. Other balance of plant system maintenance requirements are left to
the plant owner to determine.
In the category of RCM Derivatives, a process called PM and PdM Conversion was articulated by
Nicholas & Young9. The approach (not an offering such as listed in the table above) subjects the tasks in
an existing program to five tests. The end result is a set of non-redundant RCM-like tasks and a set of
inspections of opportunity. The latter are called out when the equipment must be opened for any reason
and provide instructions for data recording of conditions found. Like Experienced Centered Maintenance,
the last item in the table of offerings, this is applied to well-behaved systems. The purpose is to free-up
maintenance and operating staff man hours for participation in more rigorous RCM analysis on critical
systems. Thus, PM and PdM Conversion may be part of a broader strategy, involving application of
different RCM methodologies to assets of varying criticality. JEA, the utility providing electricity, water and
sewer services to the City of Jacksonville, Florida, incorporated this concept into their Production Smart
Reliability Initiative for the St. Johns River Power Park fossil powered generating plant. The purpose was
to make time available for Streamlined RCM analysis and implementation on six troublesome
environmental control systems critical to their regulatory compliance obligations, the top priority at the
time this was done in 2002.
In many cases spending considerations dictate a reduction in maintenance tasks. Recall that RCM was
originally designed to safely reduce PM burden to maximize availability for income production. In keeping
with this intent, both RCM and TPM have to be managed to implement reliability improvements that will
reduce maintenance burden while preserving or improving reliability and profits. The temptation to allow
RCM and/or TPM to increase maintenance requirements must be resisted. The idea must be work
smarter and less not longer and harder!
RCM Standards
In early 1999, after several years of effort, a technical committee sponsored by the International Society
for Automotive Engineers (SAE) produced a draft standard for defining what constitutes Reliability
Centered Maintenance. The standard partially fulfills a mid 1990s mandate by the Secretary of Defense
for the U.S. military to have non-government standards replace military standards for supporting assets of
the Department of Defense. The SAE technical committee on RCM was made up of members
8
Lofgren, E.V., Cooper, S.E., Kurth, R.E., & Phillips, L.B. Science Application International Corporation, A Process
for Risk-Focused Maintenance NUREG/CR-5695, March 1991
9
Nicholas, J. R. & Young, R.K, Advancing Maintenance and Reliability (Workshop Edition) MQS LLC Publisher, 2006,
p3-3-25 ISBN 0-9719801-2-8
representing the U.S. military and some commercial parties interested in the outcome for a variety of
reasons. For example, it provides 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
a recognized standard.
The SAE RCM standard JA1011 - Evaluation Criteria for Reliability Centered Maintenance (RCM)
Processes was adopted and issued in 2000. The standard provides criteria defining the essential
elements of RCM and defines compliance with full effort RCM. This phrasing distinguishes full-fledged
Classical RCM from Streamlined, or any other method (e.g., Total Productive Maintenance [TPM]) for
developing a program leading to machinery reliability.
In 2002 SAE Standard JA 1012 - A Guide to the Reliability Centered Maintenance Standard JA 1011
was issued. This is a how to guide explaining what must be done to comply with the RCM (definition)
standard described above. Another SAE standard, J1739 Design, Process and Machinery FMEA also
issued in 2002 is a useful guide to accomplishing the central step in most RCM methodologies as well as
other approaches to improvement in maintenance and reliability, such as Six Sigma.
RCM Scorecards
In late 2004, the concept of an RCM Scorecard was developed, in part to settle a controversy within the
community of service providers, users and potential users of the various methodologies as to which
approach to RCM was best. Under sponsorship of NetExpressUSA.com a preliminary document entitled
The RCM Scorecard was published on the Internet in January 2005 for review and comment. In March
2005, at the RCM 2005 Conference in Clearwater Beach Florida, a workshop was held to refine the
preliminary document and reach a consensus as to what its purposes should be and what it should
contain. The workshop was attended by over 100 people from 16 countries, including several recognized
experts in the field of RCM. The end result of this full days effort was a consensus on all parts of this 22
page document10.
Objectives of this Reliability Centered Maintenance (RCM) Scorecard are to:
Provide prospective and actual RCM users, participants and other interested parties with a
tool to help decision-making on whether or not to initiate an RCM project. Then, given the
decision to proceed, one may use the scorecard guidelines to determine progress while the
project is under way and benefits after it is completed. RCM Scorecard metrics, measures or Key
Performance Indicators (KPIs) use data collected:
When considering whether or not to conduct an RCM analysis on an asset (selecting 6 to 8 items
from 33 metrics)
Prior to performing an analysis, (prior to the RCM Analysis Phase) using the metrics selected
above and any others needed for goal achievement as a baseline for future assessment of
benefits
During the RCM project Analysis Phase (selecting from 31 metrics) to determine the changes
needed to convert a program to one having an RCM basis
During and after RCM analysis as resulting action items are implemented (RCM Project
Implementation Phase) (selecting from 12 metrics to determine progress)
From the point after implementation begins and throughout defined period(s) when benefits are
realized. During RCM Project Benefits Phase one uses the same metrics selected during the
Decision Phase (and pre-analysis period) of a project for comparison.
Provide cognizant managers, supervisors and/or champions with a tool to help justify an
RCM Project and to measure RCM project progress on a given asset or set of systems during
analysis and implementation phases. In addition, it provides a basis for measuring the benefits
derived from the overall RCM effort.
Provide a basis for comparison of differing approaches to RCM (which was the originally
proposed solution for settling the controversy over relative goodness of various RCM
methodologies mentioned at the beginning of this section).
At about the same time an Australian, Daryl Mather, was formulating another RCM Scorecard. It was
published in his book, The Maintenance Scorecard - Creating Strategic Advantage which became
10
The consensus RCM Scorecard is available for free download from www.reliabilityweb.com
available in early 2006.11 He focuses attention on the performance aspects of RCM analyses rather than
only focusing on variable benefits cases.12 The five areas described in the text and an appendix fall
under the headings of and suggest or define metrics for:
Performance (of equipment and the maintenance team)
Cost effectiveness
Policy effectiveness
Risk assurance
Project performance
Conclusions Regarding RCM

All RCM methodologies, including variants and derivatives provide a logical approach to
determining what (but not necessarily all) maintenance to perform for improved reliability and
economic potential.
More rigorous RCM methodologies provide best value for the most critical systems, processes or
components of an asset probably not more than 20 percent of the total.
A variety of methodologies (e.g., Super-classical, Variant and/or Derivative) should be considered
for employment when one of the goals is to convert to an RCM basis for all assets of a facility or
vehicle.
A little RCM is better than no RCM.
FAILURE ANALYSIS
Failure: Inability to meet the normal and / or specified operating characteristics of the
component or system.(23)
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 identify the
root of a problem by guiding the analyst / user through a sequence of steps. (86)
As illustrated in Figure 5.17 following, there are basically two types of failures. In a normal condition the
capability of a component, system or asset to deliver is equal to or larger than the demand (need) as
shown at the left. A failure occurs when the capability to deliver (can) falls below demand (need) as
pictured in the center. This type of condition that has not yet resulted in a total loss of function is termed a
partial failure. In extreme cases of total failure, the system or asset cant deliver at all. The second type of
failure is illustrated on the right of Figure 5.17. In this case, demand increases to a level greater than the
system or asset is capable / designed to deliver. This type of failure / inability to meet demand generally
occurs during a system uprate and leads to potentially risky actions such as operating centrifugal pumps
in parallel.
There are many publications and methods commercially available for failure analysis. All include a
rigorous process for locating the actual, or root cause, of a given failure.
11
Mather, Daryl, The Maintenance Scorecard - Creating Strategic Advantage, Industrial Press, NY, NY, First Edition
Feb 2005 ISBN 0-8311-3181-0
12
Ibid.
Need
Can Can
Need Need
Can
Normal Failure
Can > Need Need increases > Can
Need constant; Can decreases to < Need
Figure 5.17 Failure Modes
An integrated, comprehensive failure analysis process begins by defining the deviation, or stating the
problem; what, when, where, impact. Next the process mandates, methodical analysis and definition of
failure modes; cause and consequences. The cause, effect (what, why) path is followed until the
underlying cause and permanent corrective action can be identified. Finally, solutions are developed and
implemented to eliminate the cause and improve reliability. If an operating or maintenance strategy
necessary to eliminate the problem is not cost effective, design changes are likely necessary.
The typical procedure employs pre-existing or developed-as-you-go checklists and troubleshooting tables.
It 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 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, unintended or especially hostile service conditions
6. Maintenance deficiencies, including neglect
7. Improper operation
Failure Modes, Effects, (and Criticality) Analysis (FMECA)
FME(C)A is a pre-failure systems analysis accomplished within RCM to identify and prioritize potential
failures and formulate avoidance action. Failure effects are not just in terms of immediate severity but also
how they might undermine the ability to meet future expectations. Followed through to implementation,
FME(C)A leads to a maintenance strategy designed to proactively neutralize reliability problems and
potential threats to successful operation.
The FMEA process consists of the following:
System description
System function what does it do
Functional failure what happens
Failure mode immediate cause
Failure cause root cause
Failure effects consequences, penalty

Probability how likely
Criticality risk
Preventive, corrective measures
The FMEA process may identify design defects that cannot be effectively countered by a maintenance
strategy. When that occurs the process must include a method for passing the defect along to
Engineering for correction and follow up to assure that action is taken.
The basic FMEA process is illustrated in Figure 5.18.
Some benefits of the FMEA process include:
Cleans up existing CMMS data base
Develops and verifies asset hierarchy; assures accurate parent child relationship
Focuses resources on highest risk ranked equipment
Captures maintenance and engineering knowledge
Provides training to less knowledgeable personnel
Identifies and eliminates unnecessary maintenance
Increases satisfaction
Function
Function Requirements
Functional
Functionalfailure
failure Event
Mode
Mode Characteristics
Cause
Cause Root cause
Effects
Effects What happens
Compensating
CompensatingProvisions
Provisions Alternatives
Criticality
Criticality Impact
Risk
RiskAssessment
Assessment Probability X Consequences
Figure 5.18 Basic FMEA Process
Root Cause (Failure) Analysis (RCA)

Root Cause Analysis is a rigorous, logical and systemic post-failure analysis to determine the root cause
and effect relationship of a problem. The process must include acting on the causes to minimize or
eliminate reoccurrence of the specific and similar problems.
Some have claimed that a prioritized, properly conducted RCA program and defect elimination can
produce twice the business value of implementing an improved maintenance strategy. This is because
RCA, by its nature, concentrates efforts and resources on real problems. In fact, both are required; RCA
driving an improved maintenance strategy directed to eliminating defects, both equipment and process.
The RCA program includes the following elements:
Documented means to determine the necessity for RCA
Formalized, detailed process for identifying root cause including data gathering, RCA team
organization, accountability and documentation
Written instructions for follow up and the application of corrective action
Training requirements and certification for RCA facilitators; awareness training for crafts and
management
Numerous RCA processes are available commercially. All are designed to uncover the fundamental cause
of a failure recognizing that there may be many contributors. RCA is used to identify opportunities for
improvement and must involve the entire organization. (23) RCA may be conducted in three tiers for
greatest effectiveness:
RCAs on major failures are generally accomplished by a facilitated multidisciplinary team including all
skills (engineering, reliability professionals, operating and maintenance supervision and crafts) required
for examining all aspects of the failure, conduct a thorough analysis and formulate definitive
recommendations to avoid repetition. Implementing the findings is mandatory.
Minor, repetitive events are analyzed by small teams. The analysis could be conducted by a single
person, including crafts or a craft, operator pair.
Minor, first-time failures may not call for immediate RCA, however, data should be collected and recorded
in case the first-time failure repeats.
Root Cause Analysis requires identifying in detail:
What happened
Why did it happen
Why wasnt it discovered or prevented
Corrective action to assure it doesnt happen again
RCA must be conducted in accordance with a detailed, written procedure that defines when and how an
RCA is conducted including the following:
Value threshold / triggers: safety, environmental, cost, production loss; one time and cumulative.
Failure analyses are typically triggered by safety incidents and single failures that result in costly
damage and / or production interruptions. Some facilities apply a cumulative cost criteria that
requires failure analyses based on multiple smaller failures that total more than a declared cost,
e.g., $10,000 cumulative during a twelve-month period.
Data collection process. It is essential to begin data collection, including interviews, immediately
upon failure.
Detailed RCA process to assure identification of root cause
Organizational definition RASCI (Responsibility, Accountability, Support, Consult, Inform) for the
process, Chapter X.
Named, accountable champion, trained and competent RCA process facilitators
All crafts provided with awareness training in the necessity, basis for, requirements and benefits
of RCA
Selected crafts and professionals trained as RCA facilitators
Periodic review of proficiency, effectiveness of the RCA process
Requirements for communications and follow up
Reviews / audits of completed RCAs, refresher training on lessons learned
KPIs established; percentage RCA completed for major and minor events within 60 days
Mandatory follow up procedure to assure action is taken
RCA includes identifying limitations due to design. The objectives are to identify any shortcomings in the
intrinsic reliability necessary to meet operating requirements recognizing that intrinsic reliability may
change over time due to changes in operation. Further, that intrinsic reliability is the province of design
rather than maintenance.(23) For further information see Chapter III.
One company applies RCA to identify the root cause of similar problems / failures experienced on multiple
assets. It applies RCM / FMEA when multiple, apparently disconnected, failures occur on a single system
or asset.(78) Another company maintains a continuous RCA process to eliminate complex and chronic
problems. The company requires action on corrective recommendations. (129)
Benefits of RCA include:
Significant savings by avoidance of future failures.
Employee ownership for improvements, contribution to reducing failures. Operators and crafts are
an essential part of RCA, in many cases RCA can and should be completed entirely by crafts and
operators.
Develop solutions to plant wide recurring problems.
RELIABILITY MODELING, PREDICTION, LIFETIME ANALYSIS

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)
TOTAL PRODUCTIVE MAINTENANCE (TPM)

Total Productive Maintenance: Optimization of manufacturing / production processes and
results through a Production Maintenance partnership and a localized knowledge-based
stratagem developed and carried out in small groups. (110)
TPM is a multi-discipline, team-based, plant improvement methodology. TPM emphasizes an operations /
maintenance partnership and cooperation; autonomous, operator conducted maintenance (a process in
which small multi-skilled work teams composed of equipment operators and maintenance accept and
share responsibility for the cleanliness, performance and maintenance of their equipment Operator /
Maintainer CLAIR: Clean, Lube, Adjust, Inspect, Repair); small group activities; zero defects / zero loss
operations and cleanliness. TPM gains rapid, continuous improvement of the manufacturing process
through use of employee involvement, employee empowerment, and closed-loop measurement of results.
(124)
TPM is a long-term strategic initiative and approach to production optimization, rather than a short-term
tactical fix.(124)
The original (Japanese) implementation is constructed around the following five principles (pillars):
1. Improving equipment effectiveness.
2. Autonomous maintenance performed by operators.
3. Preventive Maintenance by maintenance department.
4. Training to improve operation and maintenance skills.
5. An early equipment management program that injects reliability and maintainability into the
design process to prevent problems occurring during new plant or equipment startup.
A study of four award-winning Japanese facilities that had implemented TPM revealed the following: (92)
All four sites had substandard performance in the five years prior to implementing TPM.
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. It took nearly three years to achieve. Continuous improvement followed. The
combination required thorough cleaning, 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. Maintenance took the lead for periodic and Preventive
Maintenance. Maintenance was assigned primary responsibility for repairing breakdowns and
improving maintainability.
Skillrefinement,
Skill refinement,institutionalization
institutionalization Perfecttotoprosper
Perfect prosper
SkillsTraining
Skills Trainingand
andStandardization
Standardization
Correctto
Correct toperfect
perfect
ImproveEquipment
Improve EquipmentReliabilityPM,
ReliabilityPM,CBM
CBM
AutonomousMaintenance
Maintenance Detectto
Detect tocorrect
correct
Autonomous
Cleaningand
Cleaning andlubrication
lubricationstandards
standards
Inspectto
Inspect todetect
detect
Generalinspection
General inspection
Initialclean
Initial clean----identify
identifydefects
defectsfor
forrepair
repair Cleanto
Clean toinspect
inspect
Figure 5.19 The TPM Process (112)
To fit corporate objectives and organizational culture, TPM implementations in North America typically
follow the process shown in Figure 5.19 emphasizing the following: (30, 39, 48, 93, 112, 124, 129)
Corporate process to maximize the effectiveness of production systems.
Cross-functional, multi-level steering team. The steering team will include managers, supervisors,
support staff personnel and workers, all from various departments including maintenance,
production, engineering, and stores.
Multi discipline team organization (maintenance / production partnership) constructed from the
working level and dedicated to stable operation, identifying and solving problems, creating value
and preventing losses over the life of the production system. Goal of zero accidents, zero defects
and zero failures.
Essential to have operators and crafts working together productively and effectively
All departments involved in the process, including Engineering, IT, Finance, Purchasing and
Administration.
Full involvement from all personnel from top management to the working level.
Focus on production capacity, quality, delivery, revenue and spending optimization, work
productivity and quality, capital effectiveness.
Initiative, ownership culture
Energized, committed personnel
Program champion(s)
Published Master Plan
Objectives
List of all activities
Time schedule for initiation and completion of defined activities
Estimated resource requirements
Defined roles / responsibilities for participants
Criteria for measuring progress and success
Safe, clean, orderly workspace
Initial cleaning.
Cleaning prioritized to gain greatest benefits from time expended
Proactive problem discovery and prevention
Sense of ownership and pride in work by operators, crafts and support staff
Initial cleanup of the plant and equipment can require as much as 120 hours per employee
and was often performed on an overtime basis. When problems identified during the initial
cleanup were corrected, financial benefits up to 300 percent of the initial cleanup costs were
realized.(124)
Improve asset ownership through autonomous maintenance by operators / production.

Autonomous maintenance is the process by which equipment operators accept and share
responsibility (with maintenance) for the performance or health of their equipment. Autonomous
maintenance includes:(124)
Development of cleaning and lubrication standards
Preventive cleaning measures
General inspection to identify and correct chronic problems such as leaks, loose bolting,
missing guards, etc.
Problem identification and correction is designed to demonstrate commitment to quality
processes and workspace, minimizing waste, building pride and ownership
Process / operating discipline
Independent autonomous (minor) maintenance and adjustments
Adjustments in organization, culture, labor agreements and attitudes are often required to
gain full benefits from autonomous maintenance
Optimized initial and continuing Asset Optimization 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 achieve greatest effectiveness for local
conditions.(129)
Maintenance effectiveness improved through focus on reliability and maintainability during
design, manufacture and installation continuing with optimal lifetime management accomplished
with a team-oriented equipment improvement program
Set reliability metrics that maximize equipment effectiveness
Monitor condition, predict failures, identify and correct root-cause
Proactive activities to increase equipment reliability and maintainability
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
Focus on and motivate by results: OEE, described in greater detail in Chapter IX is a KPI that
originates in TPM. OEE, an effectiveness measure of availability, quality and production rate as a
percentage of objectives, is widely used in discrete manufacturing to assess results. Results
require:
Following the money: direct attention and efforts to consumers of highest costs, including lost
production
Following the data: prioritize by types / reasons for failure, failure causes for ten highest cost
consumers.
Following the interruptions: greatest process downtime and / or business interruptions
Connecting the dots: identify worst performers for permanent corrective action
A company in North America condensed the principles into the following nine steps for improved
productivity:(112)
1. Cleaning, cleanliness and order in the workplace.
2. Increasing equipment effectiveness (OEE) by focused improvement, locating failure sources,
correcting the source of major losses.
3. Standard machinery inspection list.
4. Routine surveillance, service, adjustment, and repairs conducted by engaged operators.
5. Personal checklists and responsibility.
6. Improved maintenance efficiency and effectiveness.
7. Objectives for management and quality measures.
8. Training for everyone involved to improve knowledge and skills.

9. Lifecycle equipment management; preventive, maintainable designs to assure greatest intrinsic
reliability in new designs
Essentials for success include:(39)
Top management commitment, visible support and involvement
Continuing, visible commitment and support from the highest levels of management is
required to drive major gains throughout the organization. (124)
Clear strategy
Production Maintenance partnership
Effective communications; objectives detailed, why necessary, understood and accepted
Employee involvement and empowerment (multi discipline improvement teams), strong pride and
ownership
Prioritized implementation of improvements
Rewards and recognition for results (Whats In It For Me)
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, avoids a proliferation of work
requests for deficiencies that can be corrected quickly. (30)
A company that implemented TPM reported a 30 percent reduction in maintenance costs in two
years.(93)
As a final point, it should be mentioned that a TPM implementation can benefit significantly from initial
prioritization. By initially applying the TPM process, including cleaning, to systems and equipment with
known deficiencies, the process gets off to a good start, quickly gains value and builds ownership and
enthusiasm through results and improvement. Nothing succeeds like success!
SIX SIGMA
Based on First Edition Contribution by Tim Murnane
Six Sigma: The use of statistical tools applied in a disciplined manner to identify and correct
defects / problems and thereby improve productivity and effectiveness
Although originally a quality process, Six Sigma has been extended to include business and asset
optimization processes that can be analyzed and improved through statistical methodology. Six Sigma
utilizes the statistical tools developed and popularized by Dr. W. Edwards Deming. A Six Sigma project is
selected, defined, and quantified to meet specific objectives. A team is formed and mentored by a trained
black belt who is accountable for results. Management and champions support the team and remove
barriers. The final, control phase of the Six Sigma project is focused on institutionalizing the solution.
Success is derived from optimizing a process and eliminating defects.
Six Sigma is constructed on the premise that Organizations that cant describe their processes in the
form of numbers cant understand their processes.(123)
Technically Six Sigma is equivalent to 3.4 defects in one million tries, where a defect is anything from
substandard production to misrouted luggage. Most industrial activities are at a Two Sigma (2S) level,
which produces 308,537 defects (roughly a third) per million. The airline industry performs well above a
Six Sigma level for safety. Airline baggage handling, drug prescription writing and tax advice from the IRS
are said to perform at the 2S level. Achieving Six Sigma 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.
Within Six Sigma companies the process comes close to a religion!
To create synergy, shared goals and values and assure results and success, the Six Sigma
initiative needs to infiltrate the mind-set and behavior of every employee in every corner of the
organization.(123)
Six Sigma is based on the DMAIC circular process illustrated in Figures 5.20 and 21.
Define
Ca
lib
ra
t e
f it
ne
Be
Control Measure
Six Sigma
iz e
Improvement Program
er
ract
Op
t im
Cha
ize
Improve Take Action Analyze
Figure 5.20 DMAIC Process adapted from The Center for Excellence in Operations Inc. Webcast
Define Measure Analyze Improve Control

What is the problem? What is the current What are the major Are their any barriers to How will you measure
baseline performance? root causes of the successfully results to confirm
problem? completing the improvements?
improvement plans?
What is your objective? Is the problem What are the options What metrics will be Does the improvement
confirmed with data for improvement? monitored to measure solve the problem?
and facts? success?
What is the goal for What are the financial What is the best Is there buy-in and Are other actions
improvement? benefits of improving? option? support from all necessary?
parties?
What are the benefits What is the schedule How will improvements
of improvement? for implementing the be sustained?
change?
What are the steps to
improvement?
Figure 5.21 DMAIC Details adapted from The Center for Excellence in Operations Inc. Webcast
Six Sigma is promoted as a Total Quality Management type of initiative. However, as stated earlier, Six
Sigma may be focused more on producing specific business results rather than achieving Six Sigma
quality. 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. In the companies that have top-level
executive support, Six Sigma can effectively integrate tools and techniques. It is process and results
focused, rather than task oriented. Because it does not attempt task-oriented heroics, Six Sigma can be
synonymous with the culture change that so many companies desire.
Six Sigma is a relentless, endless companywide search for a better way to do everything we do.
(123)
The three overall metrics used by Six Sigma are:

Rolled Throughput Yield (RTY), Cost of Poor Quality (COPQ), and Capacity. Capacity is measured in a
similar way to Overall Equipment Effectiveness (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. Cost of Poor Quality is divided into five groups: (123)
1. Cost of failure in the field
2. Internal failure costs
3. Costs of appraisal and inspection
4. Costs related to improving poor quality
5. Opportunity cost of producing more products with the same assets
These include waste, returns, rework, unscheduled downtime, yield loss, downgrades, costs to assure
quality including inspections and quality testing, defective inventory, blending and special handling,
claims, credits, and special shipping. The definition of COPQ is much more rigorous than quality from
TPM. For many companies, COPQ is 25 percent of sales. Six Sigma companies commonly expect to
halve this. See Results, Chapter XXI.
The basic assumption behind Six Sigma is that process variability is the enemy of quality. The more
variation in a process or product, the smaller the output that will meet specifications. The mission of Six
Sigma is to relentlessly reduce variability that causes defects in products and processes by eliminating
the root causes. Examples of asset optimization metrics in which variability must be minimized include
MTBF, maintenance efficiency (wrench time) and schedule accuracy.
Six Sigma projects are generally classified in two groups. Smaller projects are designated as Green Belt.
Successful completion earns the individual responsible designation as a Green Belt. With successful
experience demonstrated on one or more Green Belt projects, larger projects are developed for
advancement to Black Belt. Personnel aspiring to Black Belt are typically given four weeks of training and
then must successfully demonstrate applying the techniques to a project worth at least $100,000 (often
more than $250,000). Training takes place in increments, typically one week per month. The prospective
Black Belt is generally relieved from all other duties to concentrate time on the project until completion.
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. General Electric reportedly has 15,000 middle managers serving
full time as black belt teachers and facilitators and spends $500 million per year on Six Sigma training!
(126)
There are eight phases13 to a Six Sigma project:

1. Project Definition: define needs and identify opportunities for improvement a project must be
quantified and have realistic boundaries
2. Map the as-is process
3. Define the process inputs and outputs
4. Process Measurement (a key step) gather data including the number of defects
5. Process Analysis analyze and test failure occurrence and modes
6. Establish expectations and develop an action plan for process improvement
7. Validate Improvements key variables identified above are tested using Design of Experiments
and other techniques
8. Institute process Control Plan improvements are sustained and institutionalized so that
backsliding does not occur. See Chapter XVII for details.
The major tools14 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-variable 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
Statistical Process Control (SPC) 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).
13
Adopted from Sigma Breakthrough Technologies, Inc. training materials.
14
Ibid.
A caution regarding Six Sigma: Six Sigma initiatives are often very narrowly focused on one or more
specific results. While gaining the immediate objective care must be used that an overall process or
system is not sub optimized as a result. Two examples:
A Six Sigma project was initiated to reduce production inventory in a multi product plant. As a
direct result, production runs were shortened to closely coincide with delivery requirements even
though there were orders in-house to deliver the same product at a later date. This significantly
increased changeovers and downtime. The question whether the value gained by minimizing
finished inventory was greater than lost availability and changeover cost (cleaning and, in some
cases, changing components) was never addressed.
Another Six Sigma project determined that maintenance costs could be reduced by removing
supervision from night and weekend shifts that only had three or four people assigned. As soon
as supervision was removed, productivity dropped significantly. Whether this was an actual drop
or simply due to unrecorded work could not be determined only supervisors were authorized to
sign work orders. As soon as the supervisors were eliminated all documentation for night and
weekend work stopped.
THE BALANCED SCORECARD

The Balanced Scorecard is a management philosophy, management system, and method of measuring
compliance to objectives defined as follows:(95)
A 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
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 5.22. 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 number-one supplier into terms that provide useful guidance for action at the operating level. (94)
(95)
Figure 5.22 Balanced Scorecard Translating Vision and Strategy
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 5.23.(94) These are:
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.
Communicating and Linking:
Ensures that all levels of the organization understand the long-term strategy and that departmental and
individual goals are in alignment.
Business Planning:
The basis for allocating resources and setting priorities so that only those initiatives that move toward
strategic objectives are implemented.
Feedback and Learning:
For monitoring short-term results from three additional perspectives and using the information to modify
strategies.
Communicate
Communicateand andeducate,
educate, Translating
Translatingthe
thevision
vision Clarify,
Clarify,gain
gainconsensus
consensus
link
linkrewards
rewardsto
toresults
results and
andstrategy
strategy
Communicating
Communicatingand
and Balanced
Balanced Feedback
Feedbackand
and
Linking
Linking Scorecard
Scorecard Learning
Learning
Establish
Establishtargets,
targets,align
align Articulate
Articulatethe
thevision,
vision,
objectives,
objectives,allocate
allocateresources,
resources, Business
BusinessPlanning
Planning supply
supplyfeedback,
feedback,strategy
strategy
establish
establishmilestones
milestones review
reviewand
andlearning
learning
(94)
Figure 5.23 Balanced Scorecard Links Strategy to Four Processes
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 ownership, enthusiasm and
productivity than less empowered teams. Winning results from generating employee enthusiasm and
aligning plant and employee goals.(77)
Elements for Success
There are eight essential elements for Balanced Scorecard success: (95)
1. Strong, visible executive sponsorship
2. Balanced Scorecard is an integral part of the change process
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
SUMMARY
This Chapter describes many processes that can provide highly useful contribution to an Asset
Optimization program. You have hopefully noted that all are complementary with very few conflicts. Thus,
facilities needing to improve the Production / Maintenance relationship might begin with the elements of
TPM. A facility concerned about the institutionalization and sustainability of an improvement initiative
should examine Six Sigma, especially the control plan. If a specific element of Asset Optimization such as
lubrication is considered deficient, the facility should look at Proactive Maintenance earlier in this chapter
and the Fundamentals of Fluid Analysis in Chapter XV.
In the final analysis, success is not measured by how well a single program can be implemented but
rather the results that are gained by implementing elements of multiple programs to address specific
problems and opportunities and elevate site performance.
VI. AN OVERVIEW OF IMPLEMENTING A COMPREHENSIVE ASSET MANAGEMENT PROGRAM

WITHIN THE POWER GENERATING INDUSTRY
Contributed by: Grahame Fogel, Capaciometrics, Hout Bay, South Africa, gfogel@iafrica.com
DEFINITION OF THE NEEDS OF THE PROJECT

Indonesia is a recent democracy, having emerged out of a complex political past that involved
circumstances under which public assets had been undervalued and under maintained. Today, there is a
National Priority to place the Indonesian economy on a footing that will allow it to compete with the other
fast emerging SE Asian economies. One of the fundamental prerequisites for this is to provide an
affordable, stable, dependable power supply. However, within Java Island, where the main concentration
of industrial output and power consumption resides, the electricity demand curve is fast approaching the
supply curve, and in some instances has indeed already surpassed it.
As an emerging economy that faces significant economic challenges, including the devastation of the
recent Tsunami, Indonesia has restricted access to capital. Therefore, any strategy that is developed to
address the power situation has to ensure that what little capital becomes available is employed to:
Ensure the existing infrastructure operates as close as possible to its capacity; and
Improve capacity factors, where possible.
PJB (PT Pembangkit Jawa Bali) is an Indonesian state owned power utility. It manages four major thermal
generating stations together with two hydro generating units. It has a total generating capacity of 6526
MW. As a response to the national need to become a cost effective supplier, PJB has developed an asset
optimisation and productivity program, the goal of which is to optimise asset contribution in order to
become a more effective power generator. With the support of outside expertise, PJB developed a
response to the situation and has implemented an integrated asset management optimization
programme; abbreviated Maintenance Optimization Programme (MOP).
PJB developed a broad definition of what constitutes an asset, as anything which creates strategic value.
As such, four classes of assets were defined. These are:
1. Physical assets (the plant)
2. Human and work culture assets
3. Knowledge assets
4. Accessible capital (for improvements)
In the following, we will describe the methodology and procedure that was followed in the design and
implementation of MOP, the integrated asset management optimization programme adopted by PJB.
CULTURAL CONTEXT AND THE DYNAMICS OF CHANGE

Delimiting Factors for an Integrated Asset Management Strategy
Irrespective of the globalization of economies, fixed and human asset dependent production oriented
businesses continue to operate within their specific cultural contexts. These contexts are highly formative
and define many of the functional and behavioural characteristics of the businesses soft assets - first and
foremost, human workforce and knowledge and their degree of performance and utilization.
Key factors that determine the mentality of any human being are the religious and / or philosophical belief
system as well as the set of social norms and values to which the individual subscribes. In the case of
PJB employees, these key factors include:
A majority Muslim religious orientation on Java Island, which has a strong influence and defines
long term spiritual goals over short term material orientation;
The historical background of a paternalistic mentality, which is particularly deeply ingrained in
PJB as a state-owned concern that until recently was protected from capitalist free economy
market forces;
Implementing an Asset Management Program within the Power Generating Industry 112
Indonesian social and behavioral norms which value non-confrontation, politeness, conformancy
and obedience, co-operation and group orientation, while generally despising of self-serving let
alone openly aggressive pursuit of individualistic goals.
Under these conditions, the successful planning and implementation of a complex change oriented
strategy faces two key challenges. One, key concepts such as strategy or accountability have to be
communicated in terms that are culturally compatible to Indonesian (Java) mentality. 15 Two, the concrete
strategy chosen MOP must be developed and implemented in as transparent a fashion as possible.
This is a prerequisite for creating the necessary buy-in that will sustain the strategys medium to long-term
implementation and impact.
Accordingly, during the various workshops and training initiatives that were conducted throughout the
organization three key aspects of MOP were constantly reinforced:
1. MOP is an integrated asset optimization programme. The programme fully acknowledges the
dynamic interrelation of four asset types (physical, human / work culture, knowledge, capital)
which interact throughout the business process. Within this scenario, MOP places particularly
high value on the human and work culture dimension, and on so-called intangible assets
particular to the human domain.
2. MOP is a strategy driven programme. In other words, it is not just an import of ready-made
solutions for pre-defined problems. Rather, MOP implementation constitutes of an ensemble of
mutually enhancing change processes that share a common strategic goal. Each of these
processes must run the full cycle of problem analysis, goal setting, potential benefit assessment,
design and implementation of a customized optimization strategy for a particular asset, and
strategy evaluation and adjustment.
3. MOPs effective implementation at PJB is dependent on and at the same time bound to reinforce
a significant change in work culture. Work culture is defined by the de facto (not just the
outwardly professed or prescribed) set of mutually acknowledged norms, aspirations, habits,
motives and cognitive procedures. In a work environment this set of behavioural determinants
effectively governs why people do what they do in the way that they do it.
The impact of the third aspect on PJBs day-to-day business practice cannot be over estimated. For the
majority of PJB employees, successful MOP implementation amounted to a mentality change from a re-
active (follow procedures and orders) to a pro-active (think ahead and in terms of functional and
business goals, take initiatives) behavioural orientation. One can only appreciate the difficulty of this
change process when taking due cognisance of the individuals cultural context, as outlined above.
Would the investment in such a far-reaching, carefully introduced mentality change be worth its while for a
company like PJB? Would it not be more practical to identify concrete technical or business process
problems and then immediately enforce new standards and procedures of asset management practice?
The answer to these crucial questions lies in the realisation by PJB of the long-term, sustained effect of
effecting change in its intangible (soft) assets. Provided the necessary resources are available, physical
assets and other tangible elements of the operations domain can be changed or replaced at relatively
short notice. However, the longevity of the effect of these interventions is also bound to be limited, among
other by rapid technological development and the comparatively short life cycle of many fixed asset
components. Conversely, investments into human assets and changes in the human domain may in
general be slow to yield an initial effect. However, once successfully implemented they can be expected
to be of sustained and long-term benefit. In an integrated asset management strategy, like the MOP
adopted by PJB, both aspects go hand in hand. This relationship is illustrated in Figure 6.1:
15
Our reference to Indonesian culture and mentality is necessarily sketchy. For a multi-facetted overview on
Indonesian business culture, see George B. Whitfield, Cross-Cultural Training
(http://www.expat.or.id/business/crossculturaltraining.html ; seen 19.01.2006)
.
Figure 6.1 Change Management Input-Output Ratio in an Integrated Asset Management Strategy
These considerations formed the background to the MOP design and implementation process, which we
will now outline in more detail.
UNDERSTANDING THE SCOPE OF THE OPPORTUNITY

As a start to the strategy development and implementation process, a series of workshops was held in
order to clearly understand the scope of the opportunity which MOP would address. During these
workshops a set of Key Business Drivers was defined. These business drivers were ranked as to their
impact on the business as follows:
Business Driver %*
Increase process efficiency & reduce fuel consumption 23%
Increase asset reliability and availability 16%
Increase utilisation of potential installed capacity 8%
Procure quality spare part cost effectively 8%
Figure 6.2 Table of PJB key business drivers.

* The % indicates the proportion of opportunity that this business driver represents.
According to a Pareto analysis conducted, the top four business drivers contribute to over 55% of the
strategic opportunity at PJB. This is represented in a traditional Pareto Analysis Plot shown in Figure 6.3.
Figure 6.3 Pareto Representation of the Business Drivers
Long Term Value
Productivity Strategy Growth Strategy
Improve Cost Increase Asset Expand Revenue

Structure Contribution Opportunities
Enhance
Customer Value
Customer
Profitability
Customer
Reduce input costs Increase capacity & Relationship
Optimum maintenance capacity utilisation
mix Eliminate bottlenecks Ensure product
Increased reliability Solve problems quality
Spares Right price
Figure 6.4 Mind-map of the Broad Strategic Themes of MOP.

From the understanding of the business drivers the management team concluded that a broad
productivity and cost management strategy had to be put in place. A mind map outlining the
interdependencies and synergies among the strategic themes that were discussed is presented in Figure
6.4.
Three areas of value contribution were identified and researched. These were:
1. Additional revenue from increased sales
2. Improved thermal performance
3. Additional potential cost savings
The investigation then reviewed the scope of lost opportunity costs and these were quantified as follows:
Contribution Factor Lost Opportunity Cost
Additional Revenue (from increased sales) > $25m (per year)
Improved Thermal Performance > $7m (per year)
Additional Potential Costs Savings > $1.5m (per year)
Total lost opportunity costs >$33m (per year)
On understanding the lost opportunity costs, PJB management committed itself to embarking on a
corporate program (MOP) to address and realise the opportunities. MOP was designed as a broad asset
management strategy to galvanise actions broadly across the four main generating plants and the
central head office support organization.
CREATING THE STRATEGY TO ADDRESS THE OPPORTUNITY

Strategy by definition involves change, doing something different or organizing an existing activity in a
different manner, in order to realise a high-level goal. More importantly perhaps, strategies are by
definition complex: they integrate, control and orientate a multitude of contributing processes and tactical
actions. Due to these characteristics, strategy development and implementation is by nature disruptive
and demands key resources from an organization. Strategies therefore have to be clearly beneficial and
developed from the top down in order to ensure alignment towards an organizations high-level goals.
The development of the detailed PJB strategy was initiated with a multi day strategy workshop attended
by executive management and the Board of Directors. This workshop reviewed the options available for
setting up the organization to become a low cost high productivity producer, and transformed its findings
into an asset management strategy. The workshop had the joint purpose of informing participants of the
asset management opportunities combined with strategy formulation. Expert facilitation of the workshop
ensured the balance between information and formulation.
Supporting the PJB mission The reliable electricity producer for today and tomorrow the
strategy was further broken down into four supporting areas of strategic contribution: Reliability Strategy,
Efficiency Strategy, Supply Chain Strategy and Fuel Strategy.
Figure 6.5 Developing the PJB Asset Management Strategy
The four supporting strategic aims are the core element of PJBs asset optimization program MOP. In
other words, PJB focused on MOP as the central strategy to support the ultimate financial goals. The final
graphical representation of the overall strategy is given in Figure 6.6, in the form of the Global PJB
Strategy Map:
Financial
Perspective
Ensure Financial
Strength of PJB
Profitability Asset Development

Strategies Strategies
People &
Internal Customer
Work Culture
Perspective Perspective
Perspective
Heath Exceed Develop a Strategy

Safety Optimised plant Strategy
Implemetation Distribution To align the
&
Performance Strategy
Environment
Companies Work Culture
Expectations To the future needs
of PJB
Acquire best in
Class support
For MOP
Program
MOP Create Solution for
Materials Management
Financial
Perspective Price Strategy Ensure Required Enhance PJB
Quality Public
Image
Reliability Supply
Program Chain Create Develop skills Design aligned
Productivity Enhancement & Organisational
Strategy Strategy Strategy for Training structure
People & Human Assets Strategy
Work Culture
Perspective
Figure 6.6 Global PJB Strategy Map and the Role of MOP as the Key Asset Management Strategy
Accountability for the project was defined and delegated to teams and individuals using what is referred to
as action tables. Action tables define a single point of accountability for the execution of coordinated
strategic actions. An example of an action table is shown in Figure 6.7.
Strategy name
1. Strategic aim: Why do we do this?
2. Critical success factor: What must be achieved?
3. Owner: Who is responsible?
Pak
Budi
4. Actions: Which steps will we take?
5. KPIs: How do we measure progress?

6. Agents: Who must execute?
Figure 6.7 Functional Components of an Action Table
The corporate strategy was then cascaded to the individual plants in order to create a focused and
aligned approach to local issues. Each plant then went through the same process of developing its
specific individual strategy in alignment with the overall corporate strategy. Throughout this process
expert facilitation ensured there was close alignment to the overall strategy.
Once the individual plant strategies were in place, an overall project implementation plan was drawn up in
detail. To create orientation and a graphic understanding of the elements of the project a visual Project
Atlas was created which is illustrated in Figure 6.6. The MOP Atlas provides visual representation of the
whole program. The atlas has since been used as the main tool for developing awareness across the
organisation. It also serves as a common reference for all discussions regarding the implementation
aspects of the project.
The MOP Atlas itself outlines six asset improvement themes. These themes are:
Strategy / Change Management which develops and manages corporate and individual unit
strategies;
Business Process Improvement, which includes the work planning and control setup, CMMS/ERP
alignment, business process integration and task execution/continuous improvement.
Reliability Improvement, which includes reliability modeling, system / equipment criticality
analysis, failure mode & effect analysis, root cause failure analysis, equipment condition
assessment etc.
Process Efficiency Improvement, which consists of development of a tuned heat balance model
and the development of performance monitoring system
People & Work Culture, which includes the organizational alignment to support MOP, training
need analysis, training execution and level of awareness development, implementation of an
Intranet-based knowledge management tool.
Asset Contribution Measurement, including development of leading & lagging KPIs to measure
progress, development of a management dashboard, development of assessment and
benchmarking framework.
Figure 6.8 MOP Project Atlas
PJB has a total of four thermal power plants and two hydro power groups that are scattered throughout
Java Island. To ensure the alignment of unit strategy with the corporate strategy, a series of activities
were set to cascade the corporate strategy into individual unit strategies. This is essential since each
generating unit has unique characteristics and differing asset challenges. Orientation of the individual
plant strategy towards the corporate strategy and the overall implementation plan as defined by the Atlas
was ensured by mapping the corresponding elements as illustrated in Figure 6.9.
PJB top-level
strategy
Optimized
plant
performance
Plant strategy MOP Atlas

Structural
mapping
MOP = key methodology
Figure 6.9 Mapping the Plant Strategy onto the Corporate Strategy and the MOP Atlas
In summary, PJBs top-level corporate goal to become the leading high productivity, reliable power
producer on Java Island translated into six strategic goals which had to be reached by developing and
executing appropriate action tables. These goals were:
1. The development of an overall strategic management plan which provides direction and creates
accountability towards the corporate goals.
2. Optimise existing maintenance tactics to ensure optimum reliability.
3. Develop and ensure conformance to best practice businesses processes, especially within work
planning and coordination and thermal efficiency.
4. Ensure a continuous improvement process was in place, and to create a continuous improvement
culture which identifies and solves priority problems.
5. Create a supporting work culture which is aligned with the strategic intents.
6. Create a management culture which is focused on execution, and an execution plan which is
visible and defines the accountability of all role players.
CREATING A METHODOLOGY TO MEASURE PROGRESS

In order to ensure that the strategy was working and to derive an overall accountability a measurement
system based on key performance indicators (KPIs) was developed. This measurement system had to
take into account combinations of overall long-term goals with necessary short term intents. Moreover, the
measurement methodology was expected to employ shorter term leading indicators as well as longer
term lagging indicators. The complexity of these various indicators is symbolized in the form of the KPI
Ice Berg, Figure 6.10. It demonstrates that the outwardly visible tip of the ice berg productivity,
performance reliability and revenue earned is in fact measured in terms of lagging indicators.
Figure 6.10 KPI Ice Berg Leading & Lagging Indicators
As the overall key performance indicators (KPIs) for the project were all lagging KPIs, they could be
expected to take a period of time before changes were observed. Among these, five key strategic KPIs
were identified:
EAF (Equivalent Availability Factor)
Function of unplanned downtime (reliability, planning, skills; measured by availability &
downtime).
Planned downtime (planning; maintenance tactics, skills; it is measured by MTTR).
Derating (design capacity actual capacity) generating stability (reliability).
NDC (Net Dependable Capacity)

A measure of the net power output; calibrated over defined period (measure of the ability to
sustain stable net power generation).
It is a function of generating efficiency (system performance) and generating stability (reliability).
Heat Rates
Efficiency of the transformation of the energy source to power.
Key Spares Management

Hot parts, OEM issues, critical spares, capital deployment.
Generation Costs
$ / KW hour produced.
The project was faced with measuring short and medium term progress towards improved performance in
the above categories, such that the combined influence of the effects would alter the lagging KPIs. To
achieve this, the influencing leading KPIs were identified and encapsulated in a structure which would
show their direct impact on the lagging KPI. This is illustrated in Figure 6.11.
Corporate KPI Owner Overall

Performance
Customer People Customers

Internal Financial
Technical KPI Owner Retailers

MOP Supply
Consumers
Chain
Customer
Reliability
Service Efficiency
Efficiency Contacts
Spares Fuel
Survey
Supply
On-time
MTBF
Delivery Shortages
MTTR
Figure 6.11 Leading Lagging KPI Hierarchy
Today, many of the leading KPIs are already indicating a positive change as illustrated in Figures 6.12
and 13.
Figure 6.12 Example of Improving a Leading KPI: Work Order Completion
Figure 6.13 Example of Leading KPI: Schedule Compliance

In addition to developing and measuring the KPIs, an assessment tool which accurately measures
specific progress has been developed, so as to be able to precisely measure performance at any point in
time. The assessment framework was developed during the first phase of implementation. It consists of
ten targeted Key Performance Areas. Performance in any of these 10 areas can be measured with a
degree of precision:
1. Strategy Management
2. Reliability Management
3. Work Planning & Control
4. Performance Management
5. Organizational Alignment
6. Material Management
7. Information & Knowledge Management
8. Continuous Improvement
9. Work Culture & Motivation
10. Life Cycle Engineering
The assessment methodology is designed so that the assessor will be able to measure both business
practice maturity and related KPI performance in each of the 10 areas. Assessment results are then used
for management to identify both positive and negative performance and prioritise areas of attention.
BENEFIT REALIZATION
Typically similar integrated asset optimization initiatives will show tangible benefits after 2 to 3 years of
rigorous implementation. Therefore measuring leading indicators will enable PJB in the short term to
control the progress towards the overall longer-term goals.
Other tangible benefits were driven from Plant Efficiency Improvement Program. Here PJB individual
plants have been able to improve their fuel consumption and dependable capacity by implementing
computer based modeling using GateCycle platform. An example of the Heat Rate calculation can be
seen in the following charts.
MKCC HeatRate
October November
Baseline 2+2+1 Baseline 3+3+1 Estl Apr
2500
2450
2400
HHV kcal/kWh
2350
2300
2250
2200
2150
2100
200 220 240 260 280 300 320
Load MW
Figure 6.14 Heat Rate Improvement Calculation at Muara Karang Plant
In this example, the respective plant was able to save up to US$ 160,000 in the first 2 month of
implementation, based on the fuel price of US$2.45/mmBtu. The savings are realized from a series of
performance driven maintenance actions that are carefully calculated using Cost-Benefit Analysis.
In the short term a series of detailed assessments were undertaken, using the assessment tool which
measures both business practises and leading KPIs. Current results show that the business practices
maturity continues to grow along with implementation. An example of an assessment result is shown in
Figure 6.15.
Figure 6.15 MOP Business Practices Maturity Assessment Result for Gresik Plant.
A crucial benefit that has been realized from MOP in the domain of intangible assets is the gradual
change in work culture within the PJB work force. Most managers up to supervisor level are demonstrably
more conversant in MOP terminology and able to explain their respective activities in relation to strategic
concepts and goals. New business processes also require the work force to spend more time to do
planning and analysis. Furthermore, the implementation of the leading KPIs & KPI measurement
hierarchy has ensured that each individual can now understand their role in achieving the ultimate PJB
strategic goal: to excel as: The reliable electricity producer for today and tomorrow.
Grahame Fogel
gfogel@iafrica.com
VII. FINANCIAL RESULTS
The capital market is the ultimate judge of success. Is a business growing and improving the
effectiveness, productivity and return gained from capital assets?
Noel Tichy (126)
In todays process and manufacturing environment, tighter operating constraints, intense pressures to
reduce spending, and declining resources all necessitate new methods to identify opportunities, prioritize
and align improvement activities, and measure results. The comprehensive financial model introduced in
this chapter is primarily designed to demonstrate essential methodology to prioritize opportunities, justify
investments and credit results within a Physical Asset Optimization program.
INTRODUCTION
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 unexpected failures few and far between, are problems corrected
promptly, are operations superintendents 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 successful reductions, maintenance spending will inevitably
flatten at a lower rate. At that point, some managers assume that most potential 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.
For all these reasons it is becoming increasingly difficult to justify investment in any asset optimization
initiative. Lacking a counterbalancing proof of the value potential to be gained from reliability
improvement, management is increasingly obsessed on reducing spending. An accurate basis that
compares value improvement to spending reduction and includes financial consequences of sub optimal
performance is an imperative part of an Asset Optimization program.
Performance Measures
Overall performance measures that combine availability, production output, and lifetime cost are
necessary for prioritizing resources and assessing the effectiveness of optimizing efforts (this is described
in detail in Chapter IX). 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), also discussed in Chapter IX, 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) detailed in Chapter V, 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.
Financial Results 126
THE IMPERATIVE FOR PHYSICAL ASSET OPTIMIZATION

Definition
To differentiate efforts for effectively managing production assets from those of a financial portfolio
manager, realtor or transportation manager, more specific terminology is appropriate Terminology that
differentiates physical from financial assets by defining applicability, objectives, a process, and measures
of performance. All must be aligned to gain maximum value from the means of production. Asset
Optimization is the name coined for the optimization process applied to production assets.
Asset Optimization is a global, enterprise view of equipment optimization. It is directed toward increasing
the worth, financial return, and value generated by assets production equipment in a manufacturing,
process, or production facility. This definition leads to a primary objective of Asset Optimization: Managing
the means of physical production assets to gain greatest lifetime value.
This means increasing availability the ability to produce more product, Increasing yield and quality,
producing higher margin products? Yes. How about reduced costs? Again, yes. Asset Optimization is
directed to increased availability, yield, and quality and reduced costs. These are results rather than
activities.
With this perspective, sights must be elevated above cost reduction 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.
Asset Optimization begins with the recognition that financial measures are the fundamental measures of
enterprise success and the specific contribution of processes and programs. Asset Optimization 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 Asset Optimization and will reduce costs.
As mentioned in Chapter III, a recent study asserts that as much as 60 percent of lifetime maintenance
costs are expended on preventable problems caused by faulty design, installation, operation, and
maintenance practices. Surveys consistently demonstrate that facilities with highest reliability also enjoy
lowest lifetime costs. The two are inseparable.
Financial Orientation
Analysts and investors state that the value of a company is driven by its ability to generate increasing
levels of free cash flows year after year. Free cash flow is the level of cash flow generated by a business
in excess of the investments necessary to sustain the current activity.
A clear and credible connection between lifetime cost and profitability must be established for production
equipment assets. Capital based metrics such as Return On Net Assets (RONA) and Return On Capital
Employed (ROCE) appear to be better measures of the value creation process than Return On
Investment (ROI). Some companies are using some variation on Earnings Before Income Tax (EBIT). In
terms of evaluating the performance of specific asset optimizing functions, the capital based metrics offer
a far better statement of contribution to organization and business objectives than cost-based measures
such as 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.
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 they
are a changing. Staff is being reduced. Senior level management no longer respond to emotional
appeals. They do respond to a business plan clearly outlining costs and benefits 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 assertion leads to another concept: the advantages of shifting from a cost-centered to a profit-
centered mindset, discussed in detail in Chapter III, 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 an organization toward protecting tasks rather than
directing efforts to improving 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. A
reported ROI of 7 to 10 times 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 that 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 processes, technology and practice typically do not
account for market and business conditions. Changes in either or both can have a significant
impact on the return gained from an improvement initiative.
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 programmatic changes such as improved reliability, planning
and scheduling or lubrication.
The best practicing maintenance and reliability professionals are passionate, often overly
optimistic, and may be totally consumed by technical results. Many have 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. As stated earlier, 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 system, asset and even component. The exact cause of a
failure, components involved, and the cost in terms of both lost production and restoration to service are
all imperative information that must be sortable by equipment type, cause, component, manufacturer,
model and other criteria to detect patterns. If improvements are made in materials or practice (e.g.,
alignment), 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 improvements driven by a
systematic program of Root Cause Analysis (RFA) and defect elimination may not be seen for several
years.
As stated in an earlier chapter, identifying the potential value recovery by improving poor performers to
the population average (e.g. pump / motor MTBF) utilizes facility data and may well be far more credible
to finance compared to citing benchmark performance as the objective.
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 FINANCIAL MEASURES OF PERFORMANCE

Financial measures of performance are essential to demonstrate the full value of Asset Optimization
toward mission compliance, production effectiveness, and profitability. Financial measures must have four
primary attributes:
1. Credible to business and financial executives who may have little or no appreciation for the
potential contribution of asset optimizing processes, practice and technology toward the creation
of enterprise value.
2. Accurate represent the value of increased asset utilization and effectiveness, taking into
account market opportunities for increased production and / or quality, product margins,
manufacturing performance and cost reductions.
3. Impartial arbiter that indisputably demonstrates the necessity for, priority of, and enterprise
profit impact of investment to eliminate defects.
4. Inspirational promote commitment, ownership, and a profit-centered mentality
Ideally, the financial measure or measures apply top to bottom within an enterprise. The measure used by
a senior executive focused on shareholder value must be consistent with and linked to measures used by
line management, engineers, process operators, craft and support personnel. All must understand the
strategy, priorities, their individual contribution and how it creates value. 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. Business rules in the production and manufacturing world and
profit is the score!
The financial matrix must depict a real relationship between reasonable expectations for improvement
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)
A financial model designed to account for all of the value and benefits generated by Asset Optimization
will be described in the next section.
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 Timed Production Effectiveness (TPE) and commented that results were greatly dependent on
how aggressively objectives were set.(129) Another company testing the model determined that
completed and planned reliability improvement projects improved a financial effectiveness
measure by nearly 8 percent.(129)
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 Pareto analyses of cost times occurrence that are 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 Asset
Optimization.
Some companies use lifetime cost to favor suppliers with high initial cost and low lifetime cost as well as
penalize those with low initial cost and high lifetime cost.
THE PRODUCER VALUE MODEL

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.
Figure 7.1 illustrates the proposed Producer Value Model (PVM), its major elements and their
relationships. The top tier represents the business process. It is constructed as a simplified income
statement that begins with revenue from sales and concludes with a calculation of RONA, ROCE or Free
Cash Flow (FCF). From the variables pictured, other financial metrics can be calculated. It is absolutely
essential that the output of the PVM conforms exactly to financial measures utilized in your organization.
The middle tier represents the production process including OEE measures of production and conversion
cost effectiveness. The middle, production, and the top, business are linked by production yield multiplied
by price of finished goods. Revenue, the product, is the top line of an income statement. Thus, the PVM
uniquely links OEE, asset and cost effectiveness, to sales revenue and the business process.
Within the proposed model, conversion costs are defined as inside the fence costs required to produce
a given product. Categorized conversion costs are itemized in the lower tier of the model. These include
all areas of production support costs including utilities, Operating and Maintenance, safety and
environmental, administrative and waste disposal.
Utility costs include 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. Utility use should be metered
wherever possible and not allocated.
Administrative costs are apportioned. The costs of complying with safety and environmental requirements
as well as any fines for non-compliance must be included. As illustrated in the model, some elements of
the conversion process are strictly costs, e.g., administrative. Others have costs but also produce value.
As an example, a reliability improvement program should reduce Operating and Maintenance (O&M)
costs, will improve availability and thus contribute to production output, and can reduce inventory spares
and, as a result, net capital assets.
Income Statement
Revenue from Manufacturing Sales and After Tax (1) Capital Expenditures
Finished Goods Costs Administrative
Taxes = Operating Profit
plus changes in = FCF
working capital

Price of Net Assets RONA,
Finished Goods (Capital) =
ROCE
Overall Equipment Effectiveness (OEE)
Six Sigma (COPQ, RTY)
Conversion Cost Quality Production Rate Availability

(objective) (actual) (actual) (actual)
Raw
Production _.
Yield . Materials
Conversion Cost Quality Production Rate Availability
(actual) (objective) (objective) (objective)
Market Conditions
Value
Operating & Maintenance, O & M
Safety, Operations Utilities;

Administrative Maintenance Waste Disposal
Environmental electric, water
material, labor efficiency
Cost
(1) excludes depreciation 04/26/04
Figure 7.1 Producer Value Model

The PVM facilitates what if opportunity assessments, such as investment to increase asset
effectiveness, on the only measure that counts bottom line profit! The effect of a change in product
sales, transfer pricing and the cost of raw materials can be modeled to demonstrate a positive return
within anticipated bands. Production yield and conversion costs are the links between conventional
measures of asset effectiveness and financial results. Regardless of production effectiveness, an
enterprise will not long survive if the cost of finished goods exceeds price.
A facility testing the PVM learned that completed and planned plant, process, and equipment
reliability improvements were on track to increase a performance equivalent between 6 and 8
percent. These improvements represent a gain of more than $100 million at the bottom line. (129)
Regarding electric power use, 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 within Operations and Maintenance
O&M costs include salary and wages, fringe benefits, repair parts, and consumables. In addition to
improvement programs O&M itself can produce value. Good O&M practices have a positive impact on
production output by increasing availability, production rate, and quality. Effective O&M practices reduce
maintenance costs caused by operating errors. Good practices reduce utility costs by reducing fluid, air,
and heat leaks and directing attention to the benefits of operating equipment at best efficiency. Likewise,
good O&M practices reduce the risk of safety and environmental violations.
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.
Industry leaders recognize that conversion effectiveness, measured as a reduction in conversion costs,
can occur only by a reduction in defects. They also 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 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 RONA / ROCE 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.
In a real enterprise, the dispersion of producer value to individual pieces of equipment and even
components is 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 users
activity-based accounting.
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. As stated earlier, production effectiveness is often measured in terms of
OEE. (To refresh, OEE is a normalized quantity representing net production yield. It consists of three
components: availability, production rate, and quality all expressed as a percentage of objective.) The
values in the numerators lead to production yield. Many companies utilize OEE as a prime measure of
equipment effectiveness. An OEE of approximately 85 percent or greater is considered world-class
performance in the manufacturing industry. The number may be considerably higher in continuous
process industries such as refining and chemicals.
OEE has two weaknesses:
1. In terms of OEE, a process can be highly effective and very unprofitable if 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 improvements on the wrong activity.
Timed Production Effectiveness
To incorporate the crucial importance of conversion cost toward enterprise profitability, an expanded OEE-
based effectiveness measure has been proposed Timed Production Effectiveness (TPE):
TPE = production output x timed availability x conversion effectiveness
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 and
on specification. 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
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
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 effectiveness terms in OEE. Conversion
effectiveness is used to measure the conversion efficiency of a specific component, unit, or facility. All
applicable conversion costs utilities, O&M, administrative, and waste disposal must be included.
Real Compared to Normalized Values
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 in itself. Other vital measures 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 cost a critical mistake in
todays highly competitive climate where cents per unit may be the difference between profit and loss.
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 improvements to conversion
effectiveness that reduce cost. 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 leverage of increasing conversion effectiveness, there
are other major contributions to value illustrated by the upward arrows in the PVM model. When
production is sold out, increasing output by increasing availability or run-rate contributes significantly to
profit. Some companies have been able to avoid capital investment for added production by recovering as
much as 40 percent hidden capacity within existing facilities. In this situation many executives and
managers dont recognize that in reality they are operating facilities at an output significantly below
nameplate. In addition, increasing production output with O&M costs held constant results in a per-unit
reduction.
Whatever the measurement criteria and benchmarks for conversion effectiveness, they must connect
directly to unit profit objectives and be accepted by senior executives. Nothing else will gain support from
those who control the funds. All involved with asset utilization and performance 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 Asset Optimization leading to greatest value, there will be a race to the bottom immediate
and arbitrary spending reductions without any permanent, 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 results even
when separated from results 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 well 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.
This Chapter is a revised and updated version of an article, Understanding Producer Value, by John S. Mitchell
that appeared in the May 1999 issue of MAINTENANCE TECHNOLOGY, the magazine of plant equipment reliability,
maintenance, and Asset Optimization, published by Applied Technology Publications, Barrington, IL. Used with
permission.
VIII.LIFE CYCLE COST ANALYSIS
Paul Barringer, P.E.

Barringer & Associates, Inc.,
The objective of Life Cycle Cost (LCC) analysis is to establish the lowest long-term cost of ownership
(usually the viewpoint of the investor) rather than simply cheapest first cost (usually the viewpoint of
project management). Roles and responsibilities for preparing the LCC details are described for
petrochemical and refining applications. Practical tips for effective analysis and presentation are given.
INTRODUCTION
Life Cycle Costs are all costs expected during the life of an item over some finite study period. This
means costs associated with acquisition and ownership of a system over its full life must be estimated
and timed for the year of the expenditure. The summation of all costs from project inception to disposal of
assets must be described in terms of the time value of money, which is the driver, for knowing how much
money will be spent in each time slot.
Net Present Value (NPV), a financial term, is the most important single criteria for LCC. NPV takes into
account financial impacts considering that money has other alternatives rather than being tied-up in a
fixed asset or project. Engineering drives the cost study of alternatives for producing the lowest long-term
cost of ownership which must include consideration for alternatives / trade-offs for completing tasks to
achieve the most favorable NPV.
Life cycle costs are affected by three important issues in addition to the obvious capital costs. These are:
Installation and use practices are influenced by engineering and operations. Practices define loads,
equipment defines strengths, and usage determines life of the components. Equipment life / death must
be converted into money decisions (Barringer 1998).
Component life and death are influenced by the grade of equipment carrying the loads. Equipment
grades have finite load carrying capability that defines when / how components live and die. Death of
equipment defines maintenance demands and equipment outages which denies use of the equipment for
productive use.
Load profiles during various segments of the use cycle are very important considerations. The simple
use of average loads and average strengths are perilous decisions that generate inaccurate cost
profiles and significantly influence life cycle costs. Be wary of the average generalizations they are
traps!
ROLES AND RESPONSIBILITIES

Engineering thinks Accounting should produce the LCC analysis because Accounting is involved with
money. Accounting thinks Engineering should prepare the LCC analysis since the three items mentioned
above (installation / use practices, equipment grade driving equipment life / death, and load / strength
profiles) determine equipment life and maintenance that converts to money. Accounting lacks the
expertise to make the engineering calculations, but Engineering can produce most of the numbers
needed for Accountings oversight review.
Engineering must be responsible for preparing the life cycle cost analysis. Accounting is responsible for
validating / auditing authenticity of the calculations. This defines the first set of roles and responsibilities
for who does what? in LCC. Since Engineering has many disciplines, the life cycle cost problem must be
broken into components for each discipline to solve, and then aggregated into the final LCC model.
SCIENCE OF ASSET LIFE

All systems are born and all systems die following the principles of entropy. Entropy is the scientific
principle explaining why batteries run down with time, why buildings will eventually fall down, and why
components naturally progress from functioning to failed. System deterioration is inevitable and
deterioration drives costs. Deterioration is slowed by preventive maintenance actions to prolong
Life Cycle Cost Analysis 136
equipment life. When all life has been consumed and entropy has moved from order to disorder then
maintenance replacements are required. Each step involves costs.
Propaganda from universities says engineers build systems to never fail using safe engineering principles
(unfortunately many people believe this propaganda). Universities also teach the principle of entropy that
systems move from order to disorder unless interventions occur to prevent the disorder. Unfortunately
engineers often lack ways to calculate the life and maintenance efforts for handling entropy changes
because its too hard to quantify both life issues and maintenance issues thus we ignore the effort and
the costs. Since engineers believe their designs never fail, most engineers lack reliability /
maintainability tools for calculating equipment life / death / maintenance. The inability to compute
equipment failures driving replacement / repair costs means were trapped by our own propaganda this
makes life cycle cost decisions both faulty and difficult.
Reliability problems are entropy driven failures. Failures cost money. Failures occur when a product or
process cannot perform its intended function. Downtime is one measurement of equipment and process
failures. The cost / price paid for failures is highly dependent upon the ground rules used for calculations.
For example, a sold out manufacturing process has a high penalty cost for failures when product cannot
be delivered. However, if the process is not sold out, failure cost may be much smaller. LCC techniques
require a method for analyzing the failure data using appropriate cost profiles to reflect alternatives for
converting failure problems into money decisions. The failure costs also need to reflect the reality that
failures have different prices at different time in the economic cycle. Forecasting future failures is
explained in The New Weibull Handbook (Abernethy 2002).
The Society of Automotive Engineers (SAE) has been addressing the issue of life cycle costs (SAE
1999). Interest is driven by the automotive industries ~US$4-billion / yr capital expenditures. The SAE
model is directly applicable to National Petroleum Refining Association (NPRA) activities. SAEs guide
embraces the concept of up-front engineering plus continuous improvement in the design / operation of
equipment and machinery to work toward the lowest long-term cost of ownership through the use of
Reliability And Maintainability (RAM) principles.
SAEs approach requires up-front engineering efforts to include the use of reliability and maintainability
calculations leading toward lower life cycle costs. SAEs advocacy for reliability improvement is to
increase productivity and throughput by designing-out failures. Increased reliability implies fewer
machinery and equipment failures to provide less downtime consequences and reduce production costs.
SAEs advocacy for maintainability improvement is to insure that reliable equipment is more failure free
and repaired quickly and safely to reduce downtime. Both reliability and maintainability issues work
toward reducing life cycle costs particularly when an organized engineering effort is driven by up front
engineering calculation and not by engineering proclamation (this means making engineering decisions
for plants and equipment based on the numbers not opinions).
In petrochemical and refining businesses, reliability and maintainability capabilities are growing. Sadly,
most RAM effort comes after completion of the engineering design. Late arrival of RAM tools denies
significant gains. Bigger gains in influencing LCC occurs from doing more and better engineering up-front
as shown in Figure 8.1.
Figure 8.1s dashed line shows great opportunity for influencing LCC with up-front decisions. Little LCC
opportunity exists for meaningful changes after the bricks and mortar are in-place as you cant
significantly influence the LCC outcome by making decisions after selection and installation of equipment.
Figure 8.1 is similar to a guided missile where up-front decisions significantly influence the impact point.
Life cycle costs of equipment or a facility begin with setting the design objective and then producing
engineered numbers to design-in availability, reliability, and maintainability, which in turn, drive other
decisions. First a few definitions:
100
Funds 95%
Committed
85%
75
66%
% Of 50
LCC Cost Reduction
LCC Opportunity
Funds
Expended
25
Conceptual Engineering,
Demonstration Production
Design Manufacturing,
And Validation And
Figure 1: Commitment And
Figure 8.1Expenditure
Commitment Trends
And
and Salvage
Expenditure Trends
Construction
Operational availability is uptime Start expressed asCost

Acquisition a percentage of uptime plusEnddowntime. Uptime is time
Sustaining Cost
time as the Of
Of Life Life
for useful production activity where as downtime is not Lifeproductive
Cycle Span system cannot be used for
production activities (the denominator for availability in continuous process plants is 8760 hrs / year). The
issue is to set the availability value and to design the process / equipment to achieve the results.
Reliability is the probability that a device, system, or process will perform its prescribed duty without
failure for a given time when operated correctly in a specified environment. Reliability is paced by the
failure rate, mean time between failures, or the number of failures in a given time period. Failures define
unreliability and absence of failures defines reliability. Restoration of failures contributes to downtime in
the availability equation.
Maintainability is the probability that a machine / process can be retained in or restored to specified
operable condition within a specified interval of time, when maintenance is performed in accordance with
prescribed procedures. Maintainability is a characteristic of design, installation and operation of
equipment. Maintainability is influenced by the time allowed to perform the task and how frequently the
task can be completed within the allotted time.
Maintenance is an activity carried out to keep an item in, or restore it to, an acceptable condition for use
or to meet its functional standard. Maintenance includes scheduled and unscheduled activities but does
not include minor construction or change work.
Setting the availability, reliability, and maintainability goals is an up-front business decision that drives
design of the plant, equipment and process. The business team is responsible for setting the goals for
availability, reliability, and maintainability with primary leadership from engineering plus support from
manufacturing. Engineering is responsible for implementing design, by the numbers, with verification of
the numbers by calculation to achieve the goals set by the business team. The lowest long-term cost of
ownership is LCC resulting from the design with consideration for the trade offs. Implementing Reliability
And Maintainability (RAM) tools into the design effort requires commitment, strategy, and action with
planned activities during each phase of the plant, machinery, equipment, and process life cycle.
Here are some examples of availability, reliability, and maintainability: Airliners are designed to achieve
operational availability of greater than 97%. Airliner gas turbine engines are designed for not less than
25,000 hours per in-flight shutdown. Removal and reinstallation of commercial gas turbine aircraft engines
is planned for 2.5 hours per maintenance event. None of these business-oriented statements were easy
to accomplish. The criteria were driven by economics and the design effort. Up-front reliability and
maintainability improvements lead to lower life cycle costs. Wise men will tell you buying cheap is usually
no bargain. The problem with a mentality of cheap first cost is simple; the first small cost is not the last
big cost. Often the mentality of plant and equipment is to spend a small amount up front and pay through
the nose later because its not on my watch gamesmanship.
One easy way to get the lowest long-term cost of ownership is to require the design team, project
management, and signers of the authorization for expenditures to remain at the new or improved facility
for a period of not less than seven years as a responsible member of the organization. This simple
ownership requirement will avoid the usual buy cheap and pay later for many problems using a Pilate
Pontus justification for lack of responsibility
The new approach espoused by SAE in Figure 8.2 is for reducing life cycle costs by spending more effort
up front for both the conceptual design (+1%) and detailed design (+3%) with emphasis on applying
reliability and maintainability tools to reduce build and install costs (-3%) with greater cost reduction
achieved (up to -15%) during operation of the facility. The way to save life cycle cost money is by using
RAM tools to reduce the long-term cost of ownership.
Figure 8.2 Old / New Approaches to Lower Life Cycle Costs
The structured up front effort in the concept and proposal phase emphasizes setting reliability
requirements, maintainability requirements, defining what a failure is, and establishing the environment /
usage issues as shown in Figure 8.3. The details for the RAM issues drive the way the equipment and
process will look so the preliminary bills of material are set with many thoughtful decisions rather than
based on only a few sketchy details.
Development of the design follows conceptual design by defining loads to be carried with strengths
established to fix the design margins to prevent the overlap of loads / strengths that drive many failures.
Likewise maintainability designs are planned and goals set for the length of allowed downtimes and
achievement of the goals is designed into the equipment and facilities. Reliability predictions are made to
quantify the decisions with Monte Carlo models based on factual details of life / death experienced in
existing facilities. Lessons learned are formally converted to hard copies and meticulously introduced into
the detailed designs. Failure Modes and Effects Analysis (FMEA) are performed during the designs as
bottoms up effort to find weakness while top down experience is introduced during the design with Fault
Tree Analysis (FTA) to include operating experience into the design to attack roots of the problems for
resolution on paper rather than in the operating plants. This effort is driven by both engineering and
suppliers to make issues fact driven to price out the consequences for the important upfront decisions in
Figure 8.3.
Short List Of Reliability and Maintainability Activities Over Life Cycle
Concept & Design & Build, Install & Operation & Conversion or
The Big Picture Tasks
Proposal Developemnt Commission Support Decomm.
Set Availability Requirements X

Set Reliability Requirements X
Define Environment / Usage X
Set Maintainability Requirements X
Define Functional Failures X
Set Design Margins X X
Define Capital Budgets and Make Tradeoff Decisions X X
Make Reliability Predictions X
Do Preliminary Cost of Unreliability X
Do FMEA and Fault Tree Analysis X
Design for Maintainability X
Conduct Design Reviews X
Do Critical Parts Stress Analysis X
Make Machinery Parts Selections X
Do Tolerance / Process Studies X
Do Reliability Qualification Testing X X
Do Reliability Acceptance Testing X
Do Reliability / Maintainability Growth Improvement X X X
Collect Failure Reports and Analyze X X
Provide Data Feedback X X X X X
Figure 8.3 When RAM Tools are Introduced into Project Phases
Details in Figure 8.3 are tailored for each project. More detail for some projects; less for others. Convert
long term consequences into time when expenditures are expected and money to cover the expected
costs into the future. This will balance the usual case of emphasizing the acquisition costs and going blind
to the sustaining costs which give the top level cost details as illustrated in Figure 8. 4, described in
Barringer and Weber (1996) which discusses the nuts and bolts of LCC. Furthermore LCC will also
encourage truthful realization that contrary to good salesmanship, equipment and processes do fail and
they require expensive nurturing for survival (you do recall the usual drill: My equipment and processes
never fail but you should buy this list of spare parts and plan for turnarounds every X-years).
Figure 8.4 Cost = Acquisition + Sustaining Costs with Time Considerations
Defining the costs into the annual periods into which they occur, i.e., time buckets for accumulating costs
to implement Figure 8.4 often results in a knee jerk reaction: If we lay down all the costs, we cant afford
to implement the project. Such head in the sand mentality leads to Enron Stories to show profits on
known losers. It is better to kill a losing project than build a sink-hole for cash at a later date with too little
equipment of too low a grade that cannot function failure free for a highly productive process. Figure 8.5
shows how to convert the concepts into implementation tasks.
R&M Practices For Concept & Proposal Phase
Tasks For Phase 1: Concepts And Proposal User Supplier

Preliminary Availabilitly, Reliability, and Maintainability Planning X X
Define The Availability, Reliability, and Maintainability Plan X X
Implement Lessons Learned X X
Specify Availability, Reliability, and Maintainability Requirements X
Define How Machinery Will Be Used X
Tailor the details to
Specify Duty Cycles For Equipment X
avoid too little or too
Define Environment For Machinery X
much emphasis on
Define Continuous Improvement Monitoring X X
R&M. Meet needs of
Define Equipment Life In Throughput Terms X
the business. Make the
Establish Data Collection Details For R&M X X
effort cost effective!
Develop Application Specific R&M Program Matrix X
Keep profitability in
Develop R&M Program Planning Worksheet Details X
mind.
Establish Criteria For R&M In Design Reviews X X
Design Review Objectives
Concept Review: Focuses on feasibility of the proposed design approach with budget restrictions
Preliminary Design Review: Verifies adaptability of evolving design to meet technical requirements
Final Design Review: Validates the design and analysis are complete and accurate
Build: Addresses issues from equipment build and runoff testing
Installation: Do failure investigation of problems--Do continuous improvement
Figure 5: BigFigure
Picture 8.5 Big For
Of Tasks Picture of&Tasks
Concept forPhase
Proposal Concept and Proposal Phase
From the implementation tasks of Figure 8.5, flow the roles and responsibilities shown in Figure 8.6.
Notice the leadership roles and the supporting roles along with the numerous details rarely studied in
depth for most installations.
First reactions at the detailed list in Figure 8.6 are typically one of alarm at the numerous up-front
requirements this is a standard engineering reaction. However, if youre the investor, what do you want
to know before youre spending big money for bricks, mortar, and piping?
The list of issues and details in Figures 8.5 and 6 provides ideas about where the extra up-front money
goes for the additional conceptual engineering costs. The extra work lays the ground-work for better
designed plants and facilities with consideration for the lowest long term cost of ownership to benefit the
investors. Yes, the pain is greater for Engineering to do a more thorough job using new technology to
enhance the plant and process for the purpose of making more money in the end. Also note that multiple
areas of responsibility carry leadership efforts for LCC.
Figure 8.6 Roles and Responsibilities for Concepts and Proposal Phase
Moving forward to the design phase where RAM details impose greater effort and expenditures for
quantification. This is shown in Figure 8.7 with each case requiring more / less depending upon the
specific situation. Forward-looking companies are now addressing a few of these issues with interesting
results. Seldom are these studies completed without learning something about existing facilities usually
the finding is the facility does not live up to the promised productivity and maintenance expectations.
Usually improvements flow from the studies to make the new plants better and more productive.
Figure 8.7 Big Picture of Tasks for the Design Concepts

Figure 8.7 shows concepts that drive design details in Figure 8.8 with roles and responsibilities. Note the
suggested leadership role for suppliers in driving the design efforts. This, of course, will cost more money
during the upfront effort with the expectation that doing the job right from the beginning eliminates costs
during the construction and operation phase of plant and equipment.
Short List Of Reliability & Maintainability Activities Over The Life Cycle Phases
Legend: L = Lead Responsibility, S = Support The Process, I = Input To the Process, A = Approval Responsibility
Users
Tasks For Phase 2: Design And Development Supplier Engineering Operations Purchasing
Verify Design Margins (Safety Factors) & Do Stress Analysis L S
Specify How Critical Machinery Components Will Be Selected L S S
Do Failure Modes and Effects Analysis:
Process FMEA S S L
Machinery FMEA L S S
Do Fault Tree Analysis & HAZOPS L-FTA S L-HAZOPS
Do Design Reviews L S S
Do Tolerance/Process Studies L S S
Generate Reliability Block Diagrams For Reliability Analysis L S S
Do Accelerated Testing To Validate Critical Equipment Details L S
Do Maintainability Design Details To Minimize Downtime L S S
Defines Maintenance Manuals, PM Requirments & CM Details L S S
Prepare Spare Parts List & Spare Parts Inventory Plans L S S
Prepares Details of Built-In Diagnostic Equipment For Maintainabiltiy L S S
Prepares Details of Captive Hardware For Rapid Maintainability L S S
Identify Spare Parts To Be Managed Based On Criticality S S L
Define Maintenance Procedures For Adjustments/Replacements/Repairs L S S
Define Visual Management Techniques For Workplace Awareness L I I
Define Modularity Of Physical and Functional Units For Removal/Replacement L i i
Define Accessibility Parameters L S S
Consider Life Cycle Cost Impact In Machinery Design L I I
Figure 8.8 Roles and Responsibilities for Design and Development Phase
Figure 8.9 shows the decreasing list of special RAM conceptual requirements for the build and install
phase of projects. Figure 8.9 in turn drives a smaller list of issues to be addressed in Figure 8.10 for roles
and responsibilities.
Figure 8.9 Big Picture of Build and Install Concepts

Legend: L = Lead Responsibility, S = Support The Process, I = Input To The Process, A = Approval Responsibility
Users
Tasks For Phase 3: Build And Install Supplier Engineering Operations Purchasing
Verify Alignment Of Specific R&M Goals During Testing L A A
Do Preliminary Evaluation Of Process Performance To Eliminate Infant Mortality L I I
Do Dry Run Testing In Vendors Facilities For A Specified Duration (e.g., One Day No Failure) L A A
Perform Acceptance Tests L A A
Collect Reliability Data During Supplier Acceptance Testing As Future Precusor L S S
Collect Reliability Data During Acceptance Testing And In User's Plant After Installation S S L
Do Root Cause Failure Analysis To Permanently Eliminate Failures L S S
Collect Life Cycle Cost Data I L S
Figure 8.10 Roles and Responsibilities for the Build and Install Phase
Note SAEs suggestion for vendors to demonstrate compliance of equipment in their own facilities for a
one-day test run, under load, without failures. This occurs during the build and install phase where the
effort is reasonably practical. This puts the onus on vendors to eliminate infant mortality problems with
equipment prior to field delivery. Of course like chemical and petroleum operations, this is never easy for
automotive manufacturing suppliers and of course alternatives for this requirement are allowed.
Reliability & Maintainability Practices For Operation And Support Phase
Tasks For Phase 4: Operation And Support User Supplier

Implement R&M Data Collection, Analysis & Feedback System From Startup X X
Implement Proactive Planned Maintenance Program For PM and PdM X
Implement R&M Growth Program Using Data, RCA & Visual Displays Of Data X X
Implement Closed Loop Failure Reporting & Corrective Action System X X
Implement User/Supplier Data Exchange Of R&M Data To Reduce Cost On Both Sides X X
Implement Feedback Model On R&M Issues For User/Supplier Benefit X
Figure 8.11 Big Picture of Operation and Support Concepts

In working for the lowest long term cost of ownership, SAE recommends a continuing effort of involving
the operations departments into RAM activities as shown in Figure 8.11 with roles and responsibilities
listed in Figure 8.12. This is similar to Total Productive Maintenance (TPM) efforts that have demonstrated
great cost reductions in the sustaining efforts as operations and maintenance departments function in a
teamwork environment rather than the usual adversarial relationship. TPM is described by Suzuki (1994).
One USA refinery has actually won a Japanese award for achieving a top notch rating for their TPM
activities (ConocoPhillips Refinery in Sweeney, Texas). This demonstrates this cost reduction
methodology can be mastered by an American company.
The final phase of the life cycle costing is planning for end of life. Figure 8.13 shows some decisions for
consideration. No manufacturing facility lasts forever. Consideration must be given for the conversion or
decommission phase of life. As remediation and decontamination efforts are looming for many facilities,
this is now a major cost impact driven by the actions taken during design and operation of existing plants.
It is unlikely that these costs will decline in the future and consideration should be given for future costs.
Users
Tasks For Phase 4: Operation And Support Supplier Engineering Operations Purchasing
Implement R&M data Collection, Analysis & Feedback System From Startup S S L
Implement Proactive Planned Maintenance Program For PM and PdM S S L
Implement R&M Growth Program Using Data, RCA & Visual Displays Of Data S S L
Implement Closed Loop Failure Reporting & Corrective Action System S S L
Implement User/Supplier Data Exchange Of R&M Data To Reduce Cost On Both Sides L S S
Implement Feedback Model On R&M Issues For User/Supplier Benefit S S L
Collect Life Cycle Cost Data I S L
Figure 8.12 Roles and Responsibilities for the Operations and Support Phase
Reliability & Maintainability Practices For Conversion And Decommission Phase
Tasks For Phase 5: End Of Life Decisions For Conversion And/Or Decommission User Supplier
Implement Retool Decisions For Make/Buy/Modify/Sell X X
Implement Remanufacture Decisions For Make/Buy/Modify/Sell X X
Implement Rebuild Decisions For Make/Buy/Modify/Sell X X
Implement Retrofit Decisions For Make/Buy/Modify/Sell X X
Implement Rework Decisions For Make/Buy/Modify/Sell X X
Implement Lessons Learned For Future Plant Improvements X X
Decontaminate/Dispose Of Unneeded Assets With Permits As Required X
Figure 8.13 The Big Picture of Conversion and Decommission
Roles and responsibilities for end of life decisions are shown in Figure 8.14. The cost decisions for this
phase are difficult to quantify with any high degree of accuracy. However, if you plan for conversion or
decommission, it leads to more responsible decisions during life of the project for reducing contamination
and waste products that are expensive to neutralize prior to disposal.
How would this system work for forward looking organizations?
Start with an objective such as: We will build an economical and failure-free process that will operate for
5 years between planned outages with an availability of 98% (including lost production time during
turnarounds), and 80% of all component failures must be capable of being repaired in less than 24 hours.
This requires pricing out alternatives for achieving the lowest long term cost of ownership using LCC
techniques to achieve a highly available process which is free from failures and thus lacks instability of
process changes so as to produce consistently large outputs as advocated by process reliability
techniques described by Barringer and Roberts (2001).
The purpose of planning for a failure-free process is to increase manufacturing productivity and
manufacturing throughput recognizing the process is the king while individual equipment are the pawns
for the strategy. This requires planning for, calculating, and understanding reliability principles as
improved reliability tends toward lower life cycle cost.
Users
Tasks For Phase 5: End Of Life Conversions And/Or Decommission Supplier Engineering Operations Purchasing
Implement Retool Decisions For Make/Buy/Modify/Sell I S L
Implement Remanufacture Decisions For Make/Buy/Modify/Sell I S L
Implement Rebuild Decisions For Make/Buy/Modify/Sell I S L
Implement Retrofit Decisions For Make/Buy/Modify/Sell I S L
Implement Rework Decisions For Make/Buy/Modify/Sell I S L
Implement Lessons Learned For Future Plant Improvements I S L
Decontaminate/Dispose Of Unneeded Assets With Permits As Required I I L
Characterize Equipment Reliability And Maintainability I L S
Collect All Data And Lessons Learned I S L
Total Life Cycle Costs And Compare To Original LCC Objectives I L S
Adjust Methodology If Required I L S
Figure 8.14 Roles and Responsibilities for Conversion and Decommission
The purpose of maintainability improvement is to design machinery and equipment that can be quickly
and safely repaired. So reducing downtime of individual pieces of equipment so the risk of failing the
process is low in both probability of failure and low in the $risk of exposure. This requires identifying
planned maintenance actions and improving the reliability and longevity of equipment driven by
economics. Planning for both quick and safe maintenance activities decreases the exposure for safety
issues and exposure for financial damage from the required repairs.
So why would you want to pursue this difficult path of introducing RAM technology into life cycle costing?
The one word answer is money. By the way, forward looking companies are already complaining that the
5 year failure free interval for the process is not good enough because they are planning for a 6 year time
frame!
Of course, the prerequisite for pursing this path for cost reductions is knowing, understanding, and using
technology from the field of reliability and maintainability, which as been summarized in previous
documents, see Barringer (1995). Many other papers concerning reliability and the high cost of
unreliability from failures are available for download at http: / / www.barringer1.com / Papers.htm .
DO THE ANALYSIS
Start with scenarios. Develop costs, by year, for each scenario. Use spreadsheets you can download from
the Internet at http: / / www.barringer1.com / Anonymous / lcc.xls to minimize your effort. Building the
scenarios is the grunt work for LCC. This is the point where you expect to perform one or two scenarios
and have the task completed dont be surprised that youll miss your estimate of scenario quantities by
one order of magnitude. Keep the details in spreadsheets so you have an audit trail and so you can
quickly change the assumptions.
If the task is an improvement program, you MUST find the NPV without any improvements (this is
Accountings default position and Engineerings most hated scenario). This do nothing different scenario
establishes the datum for NPV (most of the NPV values will be negative as you cannot realistic assign the
specific profits from a single portion of the system). Of course the most desirable scenario will be the least
negative scenario and the difference between the winning scenario and the datum scenario will then be a
positive number.
When youre finished with the multitude of scenarios, youll look back and say Is that all there is to LCC?
sure is easy. Keep track of your scenario details and use them for future building blocks.
Finally, youve got to sell the program. This has two detailed requirements:
1. NPV scenarios (please note scenarios is a plural word!),
2. Engineers need their trade-off boxes with effectiveness on the X-axis and NPV on the Y-axis so
they can explain the differences graphically. Effectiveness is explained in more details in the 1996
references shown below. The effectiveness equation can be comprised of meaningful elements of
availability, reliability, maintainability, and capability as they are appropriate to the issues under
study.
Conclusions
Many companies are quietly accumulating their failure data and building models of their operations. They
are doing the fundamental tasks to build more reliable plants that deliver the lowest long-term cost of
ownership for their investors. These improved plants are showing cost reductions and more stable
operations without fanfare as the leading edge of a new wave of improvements becomes based on
technology.
An ancient Chinese warlord summarized the same type of issue succinctly 2000 years ago when he said
All men see the battles I win, but no man knows the strategy for my success. In other words, dont look
for your competitors to advertise how theyre making more money with improved plants. They will not
volunteer to tell you the secrets of their hard work in making better and more effective life cycle cost
decisions though the use of reliability and maintainability technology. Youve got to make a technology
change to get a change in your performance.
References
Abernethy, Robert B, The New Weibull Handbook, 4th edition, published by the author, North Palm
Beach, FL, (2002).
Barringer, H. Paul, "Practical Reliability Tools For Refineries and Chemical Plants", National Refiners
Association Maintenance Conference in Nashville, TN, May 21-24, 1995, download from http: / /
www.barringer1.com / pdf / Prac_Rel_Tools_Refn_ChemPlt.pdf .
Barringer, H. Paul and David P. Weber, Life Cycle Cost Tutorial, Fifth International Conference on
Process Plant Reliability, October 2-5, 1996, download from http: / / www.barringer1.com / pdf /
lcctutorial.pdf .
Barringer, H. Paul, Life Cycle Cost And Good Practices, NPRA Maintenance Conference in San Antonio,
TX, May 19-22, 1998, download from http: / / www.barringer1.com / pdf / lcc-gp.pdf .
Barringer, H. Paul and Woodrow R. Roberts, New Reliability Tool for the Millennium: Weibull
Analysis of Production Data, Hydrocarbons Process magazine, Vol. 80, No. 10, pages 73-82,
October 2001, downloadable from http: / / www.barringer1.com / pdf / HPOct01.pdf .
Reliability and Maintainability Guideline for Manufacturing Machinery and Equipment, Society of
Automotive Engineers, 2nd edition, Document Number: M-110.2, search for the document number at http: /
/ www.sae.org, 1999.
Suzuki, Tokutar, TPM In Process Industries, Productivity Press, Portland, Oregon, 1994 (This book on
total productive maintenance was originally published by the Japan Institute of Plant Maintenance in
1992)
BIOGRAPHIC INFORMATION-
H. Paul Barringer, P.E. is a reliability, engineering, and manufacturing consultant. He is author of the
basic reliability training course Reliability Engineering Principles, a practical financial evaluation course
Life Cycle Costs, and Process Reliability which is a high level method of assessing and understanding
process reliability. He has more than forty years of engineering and manufacturing experience in design,
production, quality, maintenance, and reliability of technical products. He is a contributor to The New
Weibull Handbook, a reliability engineering text published by Dr. Robert B. Abernethy. Barringer is
named as inventor in six U.S.A. Patents and numerous foreign patents. He is a licensed professional
engineer in Texas. His education includes a MS and BS in Mechanical Engineering from North Carolina
State University, and he has participated in Harvard University's three week Manufacturing Strategy
conference. Other details and technical papers on a variety of reliability and life cycle cost issues are
available at http: / / www.barringer1.com. For other background or details, send e-mail to
hpaul@barringer1.com.
June 6, 2004
Barringer & Associates, Inc. 2004 with permission for publication in Physical Asset Management
Handbook, by John S. Mitchell
IX. METRICS AND BENCHMARKING
The great tragedy of science (is) the slaying of a beautiful hypothesis by an ugly fact.
Thomas Huxley
Metrics are essential within the Asset Optimization program. Beginning with benchmarking they help
management and plant personnel understand the business and mission requirements, identify
opportunities to increase effectiveness, measure results of improvement initiatives and performance to
objectives. Program metrics are linked so that improvements in program and work effectiveness connect
and demonstrate contribution to achieving business and operating objectives. Asset Optimization metrics
begin with business effectiveness measures such as RONA and ROCE. They include industry
benchmarks such as cost per unit, as a percentage of Replacement Asset Value and Forced Outage
Rate. Metrics cascade through overall, availability, yield, quality and cost effectiveness measures to the
underlying work management, equipment and program effectiveness measures.
INTRODUCTION
Necessity for Metrics
Metrics are a means of objectively measuring performance and effectiveness. There are numerous
sayings that capture the necessity for metrics:
You will only achieve what you measure.
You can't manage if you cant measure.
Unless you are measuring you are practicing, not competing.
Without data you are simply another person with an opinion.
Metrics are a double-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.(129)
Top to bottom ownership demands answers to the question: How are we doing? Apart from toddlers
games, would any competitive endeavor be meaningful without some sort of scoring system? How is
effectiveness measured? What motivates improvement? Corporations that are immersed in the asset
optimization process report that scoring metrics are essential to increase interest, ownership, and
enthusiasm for the process.
A family of distinct metrics, all linked to corporate goals, is vital to the success of any corporate
improvement program certainly Asset Optimization. Metrics are necessary to identify opportunities,
prioritize resources, and measure the results 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 periodically updated safety, finance, effectiveness, cost, and quality
metrics at both management and working levels is imperative. (129)
Function
Metrics and their associated financial results are key links between business and financial executives and
the working level personnel actively engaged in asset optimization.
Everyone engaged in asset optimization processes must understand how the business operates
and the financial metrics that the business uses to measure results and track improvement.
Metrics identify the starting point of an improvement program and provide performance objectives. They
must be progressive, beginning with leading, behavior and process metrics such as training completed to
establish that the initial steps of improvement initiatives are proceeding effectively with a high probability
of producing the results required within the time allocated. These are followed by more activity and task
Metrics and Benchmarking 148
based metrics as the initiative is deployed and placed in use. Finally, results metrics comprised of both
performance and time demonstrate objectives have been met.
Metrics provide the connection from improved asset performance, i.e., asset utilization, productivity and
effectiveness, to overall operational and business performance, throughput, quality, and cost all of
which are essential mission / manufacturing objectives. Metrics are essential to convey the corporate
value and return gained by improved reliability and overall asset effectiveness. Metrics are used to
strengthen best practices; identify and eliminate poor practices. They also provide the basis for justifying
the sustaining investment of personnel and resources required for successful asset optimization.
There are basic issues to be addressed when commencing performance measurements including:
What is to be measured
Where is the data, is it readily available
How is the measurement made accurately
What does it prove / demonstrate
Who is responsible for the measurement
How will it be reported
How will it be used
The asset optimization strategy is driven by corporate / mission objectives. This includes overall and
performance metrics that cascade from high to low levels. The cascade assures that program objectives
are consistent, activities connected and all asset performance, work processes and technical metrics
contribute to the overall objective. The entire array of connected metrics must convincingly demonstrate
the value of asset productivity improvements in terms of corporate objectives and financial performance.
Metrics thus form the basis for virtually all activities including sustaining investments in areas such as
staffing and training. From this brief description it is easily seen that multiple metrics are required to
assess the performance and effectiveness of a complex, comprehensive asset optimization program.
Metrics are crucial during the strategic planning process and are the only means of securing the
resources needed to implement improvement initiatives.(62, 108)
Asset optimization 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. Activity 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 by encouraging low value tasks.(42, 108)
Participation by all involved in the asset optimization process, especially when setting objectives, is
essential to developing the commitment and optimism necessary to achieve goals. Industry leaders report
that they are often surprised by the ambitious objectives and level of commitment that result from a clear
needs statement conveyed as metrics to working-level teams tasked with developing action plans.
To this end all key processes and practices must have at least one time and result metric to identify the
objective. Likewise, each process and practice must have an owner who is responsible for meeting the
objective(s).
Characteristics
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 RONA, are of greatest importance. At the working levels, RONA holds little meaning and
is only marginally controllable. However, improving MTBF is both meaningful and controllable at the
working level and this improves RONA directly by eliminating equipment defects and associated
spending (cost). Thus, effective metrics measure results that both managers and workers can control and
improve. And this sense of control, span of ownership and contribution are 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 the metrics are important.
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 downtime market effects (lack of sales / demand), operational
considerations (shift to an alternate source for economic reasons), process difficulties, and equipment
malfunctions (unreliability) must be identified. 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 be concise. Focusing on too many areas at once may result in information overload and
diminish the ability to direct limited resources to highest value activities.
Classification
Metrics can be classified into two groups. As illustrated in Figure 9.1, a vertical hierarchy cascades from
top-level business metrics, RONA and ROCE, to program effectiveness.
Within the hierarchy, many metrics are generally applicable across industry groups such as work
management. Others, such as cost per unit production and MTBF are industry and even equipment
specific. The differentiation is somewhat arbitrary and the metrics tend to overlap, see also Figure 9.12.
Flow, linkage and consistency of purpose are of prime importance.
In general terms, all performance measures must be supported by measures in the levels below that
define, clarify and add detail to the metric directly above. As illustrated in both Figures 9.1 and 9.2, it must
be possible to drill down through a stack of metrics, increasing explanatory detail at each level. For
example, is a low value of RONA caused by Production Effectiveness (availability, run-rate, quality) or
cost. If low availability is the culprit where and why? Likewise, cost; where and why are the deviations? In
both cases a properly constructed metric hierarchy should allow identifying specific systems and
equipment responsible for the deviations and the specific cause.
Metric Class Examples
Strategic Asset/Capital RONA, ROCE, ROE
Industry Performance Cost as a Percentage of CAV/RAV, EDC,

Manufacturing Cost per Unit
Operating
Operating Effectiveness OEE, Asset Utilization, COPQ
Safety and Environmental Indices,

Key Performance Indicators
Manufacturing Cost per Unit, etc.
Reliability Management MTBF, MTTF, MTTR
Planned to Total Work,

Effectiveness Work Process Efficiency Overtime as a Percentage of Total Hours
Worked, Storehouse Stock Effectiveness, etc.
Program Effectiveness Faults Detected Prior to Failure, Avoided Cost
Figure 9.1 Metrics by Class
At the top tier, Return on Equity / Assets demonstrates the corporations ability to create shareholder
value. As previously stated, this level must cascade to linked production and asset effectiveness metrics
and, in turn, the elements that compose each of them. Further down in the hierarchy, work and program
effectiveness metrics measure the contribution to profit and value (production or mission capability),
identify costs (to support the budget process) and verify the effectiveness and return gained by
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 crediting the source of improvements and cause of deviations.
At the technical level, metrics are used to monitor the performance of specific processes, systems,
practices, 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. Figure 9.2 illustrates another way of looking at the same hierarchy.
CORPORATE
CORPORATE
RONA,
RONA,ROCE,
ROCE,TRR
TRR
INDUSTRY
INDUSTRYPERFORMANCE
PERFORMANCE/ /EFFECTIVENESS
EFFECTIVENESS
Cost as a Percentage of RAV, EDC,
Cost as a Percentage of RAV, EDC,
EFOR,
EFOR,Manufacturing
ManufacturingCost/Unit
Cost/Unit
OPERATING
OPERATING EFFECTIVENESS
EFFECTIVENESS COST
COSTEFFECTIVENESS
EFFECTIVENESS CAPITAL
CAPITAL EFFECTIVENESS
EFFECTIVENESS
OEE, Asset Utilization, RTY, COPQ
OEE, Asset Utilization, RTY, COPQ Labor
Laboreffectiveness,
effectiveness,cost
cost/ /unit,
unit,RAV
RAV Spare parts inventory % RAV
Spare parts inventory % RAV
RELIABILITY MANAGEMENT STORES

STORES EFFECTIVENESS
EFFECTIVENESS
RELIABILITY MANAGEMENT
MTBF, MTBR, MTTR
Inventory turns, stockouts,
Inventory turns, stockouts,
MTBF, MTBR, MTTR delay
delayfor
forparts
parts
WORK
WORK PROCESS
PROCESSEFFICIENCY
EFFICIENCY
Planned to Total Work, Overtime
Planned to Total Work, Overtime
as a Percentage of Total Hours, etc.
as a Percentage of Total Hours, etc.
PROGRAM
PROGRAM EFFECTIVENESS
EFFECTIVENESS
Faults Detected Prior to Failure,
Faults Detected Prior to Failure,
Avoided
AvoidedCost
Cost
Figure 9.2 Metrics Hierarchy
Some separate metrics in three classes. Quantitative metrics described in this chapter; milestone metrics
that define achievements by dates keeping the timing, tempo and accountabilities in place and qualitative
metrics. The latter include objectives that cant be quantified but describe the nature or quality of an
improvement. Reference tables are advisable to add structure and orientation to qualitative
improvements. An example might be the performance of an asset optimization steering team, Chapters
XVII and XVIII. Working these three classes of metrics simultaneously provides balance and real
accountability e.g., measuring the performance and staying power of management driving the
improvement program. Grahame Fogel
Definition and Comparison
A valid comparison of metrics within and between corporations requires precise, strictly defined terms.
Beginning in the chemicals industry in the early 1990s several metrics used to measure effectiveness
have been expressed as a percentage of Replacement Asset Value (RAV) or Estimated Replacement
Value (ERV). Maintenance cost as a percentage of RAV / ERV is one example. RAV / ERV was originally
proposed as a broadly applicable, neutral measure that could be used as a normalizing factor across
plants and processes. By the early 2000s cost as a percentage of RAV / ERV had gained visibility at the
senior management level and was being applied across a broad segment of industry as the top-level
benchmark for maintenance spending.
RAV / ERV is defined as the current expenditure that would be required to replace production
capacity / output. Note that RAV / ERV is not the same as depreciated value.
With increasing emphasis on cost as a percentage of RAV, many at the working level have begun to
question whether a single Reliability and Maintenance (R&M) spending benchmark value can / should
apply across industry or is the most accurate benchmark value industry, process and perhaps even site
specific? What are R&M expenditures for optimum results? Can a single value of cost / RAV accurately
identify expenditures that are too high in every case? What about too low for sustainability? Should
maintenance cost per RAV be the final arbiter? If not, is there a method to determine an optimum level of
R&M spending for best sustainable production effectiveness?
Companies with a great deal of experience with the metric will state that RAV / ERV calculations are often
inconsistent within the same company and are probably misleading as comparative metrics across
companies and industries.
Furthermore, optimum maintenance costs clearly vary by process; a water purification plant certainly
should have significantly lower maintenance costs as a percentage of RAV than a facility processing
sulfur or hydrochloric acid. This is seen in survey numbers where maintenance costs as a percentage of
RAV that are routinely achieved by one facility are clearly out of the question for another.
Plant age is another factor. Although some claim otherwise, an older plant typically has higher
maintenance costs compared to a new plant as soon as the initial deficiencies have been corrected.
Finally, geographic location will have an effect. Parts costs are typically higher in the Middle East and
Southeast Asia locations, labor costs are much lower compared to North America.
Many corporations / facilities use RAV / ERV as the denominator for key performance / spending
metrics. Recognizing there are inconsistencies in calculation between companies, many limit
RAV / ERV based metrics to initial objectives and measuring progress. Once an initial objective is
established, the site must only assure that RAV / ERV is calculated consistently for the site
throughout the improvement process.
The conclusion: RAV / ERV metrics can be used for guidance as relative metrics to measure
improvements, however, they are not absolutes that can be applied with confidence across industries and
processes.
For all these reasons any benchmark derived from an average claiming to represent best practice across
a range of industries, locations and processes must be viewed with a great deal of skepticism.
MTBF is another example. There are many definitions of failure that significantly affect the value of
MTBF calculated by different companies.
One company reported they spent days attempting to define a failure without reaching
agreement. Another substituted a strictly defined event for failure. With some specified
exceptions, anything that requires lock out is considered an event. They calculate Mean Time
Between Events (MTBE) as their primary measure of reliability.
Definitions should conform to industry conventions. They must include the metric itself, all of its
components, and the method of calculation. Those who will use the metric and are accountable for results
must understand and agree on the definition. Definitions should be printed and readily available to ensure
consistency of application. Appendix A. lists the definitions utilized in this Handbook.
Comparing metrics also requires consistency of mission, overall intensity, location / environment and even
age.(62) Consider a new race car and an older passenger car. Even though both have an internal
combustion engine, four wheels and operate on a road, major differences in mission, operating intensity
and age significantly impact the ability to compare performance with measures such as fuel consumption
and operating cost. This is the same caveat regarding metrics based on RAV / ERV discussed in greater
detail earlier.
As this is written in mid 2006, The Society of Maintenance and Reliability Professionals (SMRP)
is establishing a consensus definition of frequently used terms.
In addition to sharing a common definition of terms and metrics, facilities must assure metrics are
measured and calculated in accordance with common industry practice. 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 also change. In the simplified
example, the metric could be made more descriptive of the process; average driving time to work without
accident delays, stops for gasoline, groceries or other errands. From this basis, one could calculate the
average time required to fill up with gasoline, get groceries, etc. and estimate how many times per week
errands / delays occurred to arrive at an accurate metric for both the normal process and the exceptions.
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 on the basis of
pushback from the gate compared 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 and not to attach blame. 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.
BENCHMARKING
Enlightened managers understand that optimizing asset performance and utilization is a key component
of business success and a contributor to rather than a detractor from production effectiveness and
profitability. In the long run, top-down, peer and working-level support are all essential for success.
Benchmarking reveals the comparative performance required to attain organizational buy-in.
Benchmarking a systematic process for measuring best practice (to be) and comparing the
results to current plant performance (as is) in order to establish performance objectives and
identify opportunities for improvement.(35)
Benchmarking enables companies to accurately identify world-class performance from unbiased,
published values and assess their current performance relative to the best. (123)
Almost every aspect of business can be improved. Industry leaders understand that while they have
pockets of excellence they also have gaps where improvements are necessary. No single facility is
excellent in every area.(22) Leaders also recognize that understanding the tools, techniques, and results
from other companies is a vital part of the improvement 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.
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)
Numerical reference standards benchmarks that define best performance in key aspects of the
Asset Optimization process must be established in order to recognize the need and opportunities for
improvement. A realistic benchmarking effort is the first step toward understanding real conditions and
recognizing opportunities for improving the effectiveness of an Asset Optimization program. Thus,
benchmarks establish comparative standards from which performance objectives are set.
Benchmarking must be done continually. Results of benchmarking must be incorporated in
objectives for day-to-day operations so that organizations can begin to think differently about how
they work and solve problems.(123)
By its nature the benchmarking process has many advantages including:
Promotes awareness and adherence to performance metrics, establishes objectives
accountability for results
Forms the basis for data driven decisions, minimizes bureaucratic objections
Provides the basis for continuous improvement as expectations are defined, met and repeatedly
elevated
The continuous improvement process becomes ingrained in the organizations standard operating
procedures and eventually the culture
Categories
Benchmarks are typically in four categories: industry, process, functional and program. (35) Benchmarks are
obtained from surveys, exchanges with similar organizations or they may represent organizational goals
and objectives. Fortunately, industry-best benchmarks for nearly every asset and work effectiveness area
are published and readily available. Figures 9.10 and 9.11 contain a convenient tabulation of commonly
used benchmarks distilled from multiple sources.
External industry-wide and process benchmarks are valuable to assess performance. Each industry has
generally accepted overall world class benchmarks that are useful for determining comparative
performance, e.g., cost and value of spares inventory as a percentage of RAV / ERV or EDC, 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 element within the overall process to prioritize and drive the
improvement program.
Regardless of the source, care must be taken to ensure that objective values set from benchmarks are
realistic and attainable. Objectives that are unrealistically high will not gain the commitment necessary for
success. Leaders report that allowing working-level implementation teams to establish performance
objectives typically leads to ambitious goals, strong ownership and a high level of commitment to their
attainment.
Benchmarking Process
The general benchmarking process, illustrated in Figure 9.3, has six essential steps: (9, 92)
1. Establish a comprehensive set of performance parameters that indicate contribution and
compliance to principal business objectives.
2. Completely define each parameter; assure consistency with industry definitions. Establish best
practice benchmark objectives; Figures 9.10 and 9.11 both contain typical measures and
published benchmark values. Establish methodology for collecting own data.
3. Collect, measure and calculate current performance for each benchmark category from site
information
Validate accuracy of the information
Establish current (as is) performance
4. Compare current performance measurements with best practice benchmarks; establish Gaps to
best performance.
5. Assess and analyze results.
6. Identify areas of greatest opportunity for improvement based on potential value created by closing
gaps
Select
Selectkey
keyperformance
performance/ /effectiveness
effectiveness
parameters
parameterstotobe
bebenchmarked
benchmarked
Establish
Establishdefinitions
definitionsand
andbest
bestpractice
practice
values
valuesfor
foreach
eachparameter
parameter
Collect
Collectfacility
facility/ /site
sitedata
datafor
foreach
eachparameter,
parameter,
establish
establishcurrent
currentperformance
performance
Compare
Comparecurrent
currentperformance
performance
totobest
bestpractice
practice
Establish
EstablishGaps
Gaps
Assess
Assessand
andanalyze
analyzeresults
results
Identify
Identifyareas
areasfor
forimprovement
improvement
Figure 9.3 General Benchmarking Process(10)
One company elected to benchmark internal quality, performance and effectiveness in six areas: (93)
1. Leadership
2. Planning and scheduling
3. Preventive and Condition-Based Maintenance
4. Reliability improvement
5. Spare parts management
6. Contract maintenance management
Results of this process are illustrated in Figure 9.13. Industry best performance is represented by the
outer circle, site best by the double line, team performance by the solid single line. Gaps between industry
and site best are measured along a radial for each area.
Power generating companies have traditionally benchmarked in areas, such as: (6)
Reliability, Availability, Maintenance (RAM) non-fuel operating and maintenance costs
Fuel costs and heat rates
Capital effectiveness
Successful benchmarking begins with consistent definitions. Activity Based Accounting, Chapter VII and a
chart of accounts delineating equipment, and preferably component level, costs are essential. Accurate
records of availability, downtime and cause must be available or constructed from logs. Data
requirements should be matched to data available for comparison. There is often a tendency to want too
much data.(6)
Benchmarking methodology must be: (6)
Plant, process and / or equipment specific
Cognizant of and account for data availability, reliability and accuracy
Easily understood
Repeatable
Capable of demonstrating cause, effect and results for a resulting improvement strategy
Useful for follow-on monitoring
Figure 9.4 illustrates a corporate level dashboard with drilldown capability to individual plant, system,
program, equipment and component metrics. With this information deviations from objective performance
can be quickly spotted for correction.
Metrics
Orders Share Price
RONA Corporate
Backlog
Safety
Index
Environmental Index RONA/ROCE
RONA/ROCE Plant/Business Unit

RONA/ROCE
Prod.
Prod.Effect. Cost
Effect. Cost
Effectiveness
KPIs Availability Yield Quality Cost/RAV Cost/Unit by
Availability Yield Quality Cost/RAV Cost/Unit
Production
Unit/Line
MTBF Efficiency Equipment

MTBF Efficiency
Pareto
Work Work
to identify distribution WorkEffectiveness
Effectiveness
MTBF affects availability Reliability Program

and cost Reliability
Figure 9.4 Corporate Dashboard with Drilldown to Performance and Effectiveness Metrics
Identifying and Prioritizing Improvements

The comparison to best practice, often called a Gap analysis (see Chapter XVIII), leads to an array of
potential improvements directed to achieving best practice levels of effectiveness. (55) Within the Asset
Optimization program, gap identified potential improvements are risk adjusted and prioritized in order of
potential increased value.
A more detailed diagram of the benchmarking process and how benchmarking fits into an overall
improvement process is illustrated in the following figure. (35)
Corporate Objectives
Identify Key Performance
Indicators
Form
FormBenchmarking
BenchmarkingTeam
Team
Set
SetBenchmarks
Benchmarks
Measure
MeasureCurrent
CurrentPerformance
Performance
Compare
CompareAgainst
AgainstBenchmarks
Benchmarks
Analyze
AnalyzeVariances
Variances
No Performance
PerformanceGap?
Gap?
Yes
Identify
IdentifyImprovements
Improvements Recalibrate
RecalibrateBenchmarks
Benchmarks
Implement
ImplementTrial
TrialImprovements
Improvements
Monitor
MonitorResults
Results
Enhance
EnhanceTrial
TrialImprovements
Improvements
Compare
CompareAgainst
AgainstBenchmarks
Benchmarks
No
Improvement
ImprovementOK?
OK?
Yes
Implement
ImplementFull
FullImprovements
Improvements
Yes
Recalibrate
RecalibrateBenchmarks?
Benchmarks?
No
Implement Continuous Improvement Program
Figure 9.5 Detailed Benchmarking and Improvement Process (35)
In a multi-business enterprise there may be broad variations in performance resulting from factors such
as design, type and intensity of processing. Industry leaders recognize that efforts should not necessarily
be focused on the largest apparent Gaps. Value potential, difficulty, cost and time required to close a Gap
all are considered during a risk assessment. Industry leaders utilize the risk assessment process to adjust
opportunities for improvement and evaluate initiatives to determine which have the highest probable
returns.(129) Typically there are far greater opportunities to increase profits than resources, and this
process assures that resources are allocated to gain greatest risk balanced improvement. (129)
One facility recognized the need for and potential value of permanent improvements to a spared
pair of pumps that continuously cavitated causing accelerated seal and bearing failures as well
as impeller and casing erosion. The pumps sounded terrible in operation, failed frequently and
were a nagging concern to Operations. Operations had written numerous Work Orders to
maintenance as well as requests for corrective action to Engineering. A detailed study disclosed
that the solution required digging a pit to lower the pumps five feet with safety concerns or raising
the tank from which the pumps were supplied by about the same amount. Neither solution was
practical or cost effective. They simply had to suffer the inadequate design.
Gaps to benchmark performance must be followed by a comprehensive improvement plan. The plan must
include interim metrics and performance indicators.(52) Interim or leading metrics, explained in more detail
later, include training complete, improvements deployed and pilot implementation completed. Leading
metrics are used to monitor the continuous improvement process, verify progress to a longer-term
objective, and indicate changing conditions and / or the need for additional action.
Benchmarking is a continuous process where benchmarks are used as performance objectives to drive
the improvement process.(35) When used as performance goals, individual benchmarks must fit the total
improvement fabric. Anything less, e.g., total emphasis on spending reductions, often leads to temporary,
short-term fixes that have an adverse long-term impact. (84)
External Benchmarking
External benchmarking is advantageous. It provides a means to get behind the numbers, to see how
processes function and are conducted by leading performers to achieve industry best results. There are
several rules of etiquette that must be considered when an external benchmarking process is considered
necessary. Perhaps the most important being to refrain from requesting to see or examine any process or
activity that your company would be not able or willing to share with an outsider. The chances are that
others will be under the same restrictions. Benchmarking identical processes such as maintenance
planning and scheduling or stores effectiveness with a non-competitive business avoids many of the
problems associated with giving or receiving proprietary information that may be considered trade
secrets.
A large U.S. maintenance group recognized the need to improve its maintenance processes and
response times. Working partnerships were developed with a national research laboratory, major
university, regional power generating company and county department all non-competitive
entities. 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 discuss related 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.
Benefits of Benchmarking
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 asset optimization process should begin to explore opportunities and detailed initiatives for
improving efficiency and effectiveness.
To take full advantage of the benefits of benchmarking and metrics, key metrics (KPIs) compared to
benchmark objectives should be clearly displayed and updated at least monthly. Displaying metrics often
has an immediate positive effect by elevating awareness, injecting competition, increasing enthusiasm
and ownership and encouraging everyone to achieve the objectives.
USE OF METRICS IN THE ASSET OPTIMIZATION PROCESS

Efficiency and Effectiveness
Before proceeding further it would be well to review the definitions of efficiency and effectiveness
introduced in Chapter I, Figure 1.1.
Efficiency:
Performing a given activity or task well e.g., high percentage completion of PMs regardless of
value
Effectiveness:
Performing the correct task efficiently, e.g., high conformance to industry best safety, availability
and work quality benchmarks
Efficiency is activity and task oriented, effectiveness is results oriented.
Efficiency and effectiveness metrics at each level in the performance measurement hierarchy
must focus on mission and business results.(129)
Within the Asset Optimization program the primary focus of metrics must be on results effectiveness.
Thus, measuring the success of a program, such as CBM it is far better to rely on a results metric of
defects detected prior to failure or even undetected failures (objective of zero!) rather than a task metric of
measurements recorded. The same applies to PM: the key program effectiveness metric should be
defects identified (e.g., PM origin of Work Orders) and failures avoided not PM tasks completed.
Benchmarking produces objectives, par on a golf course is a familiar example. Metrics are the score.
There must be accountability for metrics and the status that the metrics represent. Some organizations
consider it essential to assign people by name to each metric. (129)
Metrics Keep Score
Regardless of the starting point, the gap to best practice, keeping metrics moving forward in a positive
direction is crucial. Displays and charts, Figures 9.10 and 11 should show progress to keep everyone
enthusiastically engaged.
COMMONLY USED METRICS, ADVANTAGES AND LIMITATIONS

Figure 9.1 illustrates a family of production / manufacturing company metrics from asset and capital-
based metrics to process and program metrics. Metrics must link to each other and to financial
performance of the enterprise at several levels. There must be a clear sightline from top to bottom. A
proposed financial model illustrating the basis for metric is discussed in Chapter VII.
For the purposes of this section metrics are divided into six groups:
1. Business operations effectiveness corporate, business unit, plant
2. Operating and cost effectiveness by industry
3. Overall Asset Optimization program effectiveness
4. Process effectiveness work management and stores
5. Program effectiveness PM, CBM, etc.
6. Equipment and systems effectiveness MTBF
Business Operations Effectiveness
Corporate, business unit and plant effectiveness metrics are typically asset or capital based, measure
creation of shareholder value and should have some linkage to share price. As the top tier, business
metrics are the basis for strategic operating and cost objectives that, in turn, are gained by mission,
production, cost, process and program strategies.
Examples of business metrics include RONA and ROCE.
Some companies use normalized capital effectiveness measures called Activity Value or Contribution
Margin. Both essentially represent percent profitability above the cost of capital.
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. (50)
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.(129) At least one company using ROE recognized that in order to attract investment and build
shareholder value it must demonstrate a better return on capital than others in equivalent industries. As
stated earlier, a low return on capital deprives the company of the resources necessary to stay up with the
competition.
There is another category of metrics in this high level group. It consists of non-financial measures of
operational performance that are essential for continued success. Examples of metrics in this category
include:
Safety, Health and Environmental (SHE) indices
Plant performance typically production and cost measures, Capacity Index, described later,
would also fit here
Quality of supply, on-time delivery
Customer satisfaction
Employee satisfaction
Operating Effectiveness Metrics by Industry

Overall effectiveness metrics are measures used to evaluate operating and quality performance.
Examples include:
Asset Utilization, Overall Equipment Effectiveness (OEE), Cost Of Poor Quality (COPQ), Uptime,
Operational Readiness, Availability, Cost of Unavailability, and Downtime
Overall Equipment Effectiveness
Overall Equipment Effectiveness (OEE) from TPM is a commonly used metric that originated in the
discrete manufacturing industry. OEE measures production operating and equipment effectiveness. (10,129) It
is the product of availability (uptime), production throughput (yield) and first-run-quality. All are expressed
as an effectiveness ratio of actual to objective performance. An OEE of approximately 85 percent or
greater is considered world-class performance in the discrete and batch manufacturing industries. An
equivalent to OEE may be considerably higher, above 95 percent, in continuous process industries such
as refining and chemicals. When demand exceeds capacity, any reduction in OEE represents lost profit.
(112)
One caution with OEE availability 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 Chapter VII, requires calculating availability relative to
windows of required operation.
Many North American manufacturing facilities report OEEs at 50 percent or even lower. This indicates a
hidden plant recoverable capacity of at least 35 percent, as illustrated in Figure 9.6. The hidden plant
includes:
Downtime, scheduled and unscheduled
Slow time
Process-related rate losses
Quality and yield losses
A lack of demand may also contribute to the hidden plant. (10)

The idea behind the hidden plant is to exploit the opportunity and narrow the gap between average and
best demonstrated production rate by attacking and eliminating losses of all kinds.
Best Demonstrated, Sustained

Production Rate Scheduled Downtime
Unscheduled Downtime
Production Output Objective
Operations / Process Losses,
Opportunity Slowdown
Out-of-Specification, Scrap
Average Production Output
Net Good Production
Figure 9.6 Real and Hidden Plants(129)

Downtime can be broken down in a number of ways. One reference suggests dividing total downtime into
the following five categories: (112)
1. Process
2. Changeover
3. Set-up and adjustment
4. Logistics
5. Sales
6. Waiting
7. Equipment failure
A case can be made for adding rate reductions as part of category 1 and a 6 th category of maintenance,
both scheduled and unscheduled. It is very important to document every minute of downtime and
slowtime with the cause to an equipment level if possible. This provides essential input for identifying lost
production in terms of equipment and cost.
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, 129)
One facility was able to document lost production in terms of minutes downtime and cause for the
previous two years. Presented on a Microsoft Excel spread sheet, Reliability Engineers could
easily identify specific equipment that needed attention, the specific system or component at fault
as well as the potential value of improvements in terms of production gain. The spread sheet was
well worth reading as some entries were quite humorous.
An industry leader records the individual terms that make up OEE but does not roll the terms into
an overall measure of OEE. The plant states that understanding and correcting details within
availability, yield, quality and cost metrics are highly important. They believe that an overall OEE
calculation offers little added value and may be misleading because beneficial changes in one
term may mask detrimental changes in another.(129)
A third large company has ascertained average and corporate best availability by process and
even specific model equipment.
Since OEE can be increased with more robust equipment and increased maintenance, cost effectiveness
should be added as a fourth measure of performance, see Chapter VII.
Cost of Poor Quality
Cost of Poor Quality (COPQ) from Six Sigma includes the full cost of all quality variations including
inspections, remanufacturing, penalties for missed deliveries and lost customer good will, Chapter V.
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, 129)
Cost of Poor Quality is a stronger and more comprehensive metric than quality from OEE
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 must also be some method to measure delivery reliability, especially when the production output is
part of a JIT supply chain.(112)
Cost Effectiveness Metrics by Industry
Industry cost performance metrics provide a basis for determining comparative effectiveness. They are
often established by upper level plant or corporate management as controlling objectives.
Industry metrics include:

Maintenance cost as a percentage of Replacement / Estimated / Current Asset Value (RAV / ERV
/ CAV) commonly used in the chemicals industry.
When the percentage RAV metric was initially proposed, leading performance in the
chemicals industry was approximately 2.5 percent. Today it is probably around 2.2 percent
depending on the process with some companies claiming less than 2 percent.
One company computes costs per RAV for every production unit, rather than calculating
costs per unit output.(129) Another company, reporting about 1.5 percent above the world
class value, states that the gap represents a potential $32 million annual gain in 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.(129)
Cost and other measures as a percentage of Equivalent Distillation Capacity (EDC). EDC
benchmarks, maintained by Solomon Associates, are universally used in the oil refining industry.
Effective Forced Outage Rate (EFOR) 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. This metric is advantageous in that it incorporates the
benefits of increased production.
To repeat some earlier comments, 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 and often between plants within the same company. Thus,
industry benchmarks expressed as a percentage of RAV must be used with caution. RAV based metrics
have other significant weaknesses. RAV metrics do not consider the process, age of the facility and
operating intensity, all of which have a strong influence on costs. Finally, with the cost numerator as the
sole controllable variable in the effectiveness calculation, reducing cost is the only way to gain a positive
improvement. There are no considerations regarding the sustainability of continuing cost reductions,
impact on availability or production. As one rather cynical person stated:
If a continuing reduction in cost as a percentage of RAV is demanded well eventually have to
shut down entirely!
The use of RAV based metrics are much more effective for tracking performance within a single company
where the calculation is consistent.(129)
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 metrics such as maintenance costs for generic equipment, e.g., motors, pumps and
compressors are understandable to employees, within their ability to control and contribute
strongly to the business metric.(41, 108)
As a final caution, several companies have noted that while a site overall cost per RAV may make sense,
attempting to break the overall number down for individual unit benchmarks within the same site may
produce some startling conclusions. A recommendation is to adjust individual objectives to most
reasonable values within the overall.
At two sites, defining individual unit cost objectives per RAV using replacement values supplied
by Finance, resulted in unattainable cost objectives for some units while allowing greater than
current spending for others. Based on the calculation, the former appeared highly cost ineffective
while the latter seemed very effective. Considering other metrics and personal observation the
reverse was true. Objectives had to be modified to gain conformance with actual conditions.
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 a core
principle of Asset Optimization.
If possible, cost per unit output is a better controlling metric as it encourages increased
production availability as well as cost effectiveness.
Life cycle profit (return on an asset) is an even 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
cost-centered mentality to the more constructive profit-centered mentality. (129)
Overall Asset Optimization Program Metrics
Appendix E contains detailed scorecards including a scorecard outlining all essential activities and tasks
within a comprehensive Asset Optimization program. The program scorecard includes best-practice
benchmarks and proposed weights. A consensus effort, the scorecard, is intended for use to define
elements that should be considered for inclusion in a new program as well as provide a basis for auditing
the content and effectiveness of an existing program.
The scorecard divides a comprehensive Asset Optimization program into twelve program categories:
1. Results / Program Effectiveness
2. Definition, Charter, Organization, Administration, Training
3. Institutional Values, Culture, Relationships
4. Organizational Effectiveness, Knowledge and Skills Management
5. Reliability Engineering, Risk Management, Reliability Improvement
6. Reliability Modeling, Prediction, Lifetime Analysis
7. Reliability / Maintainability for New Equipment
8. Operating Performance Measurements
9. Maintenance Requirements and Program Development RCM
10. Equipment Management Processes
Lubrication Program
Condition Monitoring, Condition Based Maintenance
Time Based Preventive Maintenance
11. Work Management Control and Execution
12. Materials Management, Stores Effectiveness
Results of an actual program survey are illustrated in Figure 9.7:
Figure 9.7 Asset Optimization Performance Survey Results

Capacity Index
Over the past few years there have been an increasing number of inquiries asking about the availability of
a single numerical metric that could accurately characterize and compare current and future performance,
condition, utilization and effectiveness of physical assets across dissimilar facilities and processes. One
person asking stated that his board requested a single number that would, at a glance, enable them to
assess current and expected plant performance across a number of facilities located in several different
countries.
Capacity Index is the term coined provisionally in this Handbook to describe such a top-level metric. As
conceived, Capacity Index would consist of three elements beginning at the equipment and system level:
1. Current mechanical condition; from condition monitoring and / or the process control system for
control system components
2. Current operating performance and condition; from the process control system
3. Expected lifetime; based on change in condition and risk considering:
Operation within design parameters
Known and / or probable conditions that arent yet affecting current performance and
condition, e.g., accelerated erosion, corrosion
Past operating and repair history
The first two elements could be obtained automatically from systems in use at most facilities. At present,
the third quantity would probably call for human judgment and have to be entered manually. As visualized,
capacity index would be calculated at the system level attaching a numerical value for each component
based on the above criteria. Indexs for each system component would be weighted based on importance
to the system and risk. For example, a failure to a spared pump might not affect system function; its
weight within the system Capacity Index would be low. On the other hand, the failure of an unspared
machine, vessel, heat exchanger or control valve would halt the process. In this case the component
Capacity Index would depend on risk probability and consequences of failure combined with time and
cost to restore service. Component weights would be combined into a system Capacity Index and further
into process and plant Capacity Indexs using the same weighting principles.
A second numerical value, plus or minus from zero, has been suggested to characterize changes. A plus
value and conditions are improving; a minus value, conditions are deteriorating. How could conditions
improve? As one example, operating or process changes often can be made to reduce stress on systems
and components thereby extending life.
Although a Capacity Index metric has been discussed and considered a good idea by everyone exposed
to the concept, there is currently no proven implementation. There might be a way to combine the
Capacity Index concept with the implementation developed by Eastman Chemical for their Asset
Management Index described in detail in Chapter XI. The idea is worth pursuing.
Pierr Swart at Sasol in South Africa constructed a proposed metric system level similar to Capacity
Index. His very clever concept, illustrated in Figure 9.8, includes direct access to design and other
documentation for the risk assessment.
Figure 9.8 Proposed System Capacity Index, courtesy Pierr Swart
Process Productivity and Effectiveness Measures

In the asset optimization process, work (maintenance) and stores management metrics fall in this
category.
Work Management
Work process performance measures are used to assess productivity and effectiveness in terms of work
origin, percentage planned, adherence to schedule, work quality and other factors. They measure how
effectively resources, primarily labor, are deployed to meet cost and effectiveness goals. As a result, work
performance metrics, identify opportunities for improvement and define staffing, budget, and training
requirements.
Some measure maintenance effectiveness by the percentage of scheduled to total maintenance, others
by metrics such as PM / PdM as a percentage of total maintenance. The logic behind the first is that
optimized planning and scheduling maximizes maintenance productivity and effectiveness. As expressed
earlier, Asset Optimization regards results metrics as being considerably more representative of value
creation and success than activity metrics such as PM as a percentage of the total. It also should be
recognized that a high percentage of preventive, PM, to total maintenance has little meaning if the tasks
are unnecessary, of little value and / or improperly performed.
The work process productivity measures outlined in the following paragraphs are based on planned
maintenance defined as follows:
Maintenance scheduled in advance of commencement by a specified lead-time (planning
interval) that is typically one week.
Some facilities require a two-week lead-time to qualify as planned maintenance.
Typical work productivity effectiveness measures include:(10, 43, 84)
Labor utilization hours charged on Work Orders as a percentage of total payroll hours (Work
Order Discipline). Ideally the value should be close to 100 percent. Sites that utilize this metric
and strive for accuracy state that maintaining 65 percent to 70 percent is a struggle and
represents high performance. Some organizations report payroll hours from Work Orders and
thus the number is always 100 percent. In the latter case, work effectiveness (wrench time) and
planning accuracy become all important to answer the question is work being accomplished
most effectively?
Planning accuracy actual time expended as a percentage of planned time. This measure
must be monitored closely by first-line supervisors and planners to assure planned time is as
close as possible to the actual time required to perform a task with minimum wasted time. In
addition to inadequate planning, deviations can be caused by additional defects discovered
during the course of work that changes the scope of work.
Many state cynically that planned hours are always reported as actual if the work requires less
time than planned. For this reason some sites do not reveal planned hours on the Work Order.
Planning Accuracy is a key factor for staffing, balancing work and assuring optimum work
effectiveness. Only a few facilities measure planning accuracy, although studies show that those
who do are 40 to 60 percent more productive.(82)
Schedule Compliance labor hours scheduled and completed as a percentage of total work
accomplished. A large corporation in the hydrocarbon industry is achieving 70 percent
compliance with a four-week rolling maintenance plan and 90 percent compliance with a one-
week schedule. Daily schedule compliance is the most important measure in work management.
(19)
Emergency, break-in work required as a percentage of total work. This is the inverse of the
previous metric. Most industry best facilities have an objective of reducing unplanned or break-in
work (defined as work scheduled during the same week as accomplished) to less than 15 percent
of the total. Many leaders schedule 100 percent of available hours with 15 percent to 20 percent
of the total consisting of discretionary work that can be postponed without disruption in the event
of break-in requirements.
One facility divides break-in work into two categories: Work that must be commenced
immediately and continued to completion and work that must be accomplished within the planning
interval but that can be delayed a few days for accelerated planning.
Another leading facility performs a monthly Pareto analysis to identify prime causes of break-in
(unplanned) work.(129) For an example, see Figure 9.14.
Ratio of planners and first-line supervisors to crafts: Approximately one supervisor to 10 to
15 crafts, one Planner to 20 crafts.
Percentage of labor and material cost. The ratio is roughly 50 percent labor 50 percent
material in North America depending on the craft, shifting to as much as 70 percent material to 30
percent labor in Asia and the Middle East. One facility uses the ratio of maintenance labor to
material as a measure of labor effectiveness. They state that as maintenance becomes more
proactive and changes toward failure analysis and prevention, the labor percentage will increase.
(129)
Time expended on standing / blanket work orders as a percentage of total work hours.
Standing or blanket work orders issued for general repairs during a specified time are a
convenient way of circumventing the process necessary to gain maximum productivity and
effectiveness. In general, blankets should be limited to small tasks where records are not
required such as insulation repairs. One organization states that standing Work Orders are used
to cover non-specific routine work such as housekeeping, quick adjustments and meetings as
well as small jobs that take no longer than 30 minutes and cost no more than $200 to complete.
(125)
Blankets must not be allowed for tasks such as pump, valve or instrumentation repairs.
Labor Utilization i.e., wrench time hours expended performing actual tasks as a percentage
of total payroll time. The conventional definition of wrench time excludes time spent locating tools
or parts, delays due to unavailability of equipment, travel to and from the job site, bathroom
breaks and washing up. Wrench time is a very difficult measure to make and generally calls for
observation and estimates.
Fifty to sixty percent is considered world class many facilities average less than 30 percent. (129) At
the low value of wrench time, two crafts are required to perform the work that is accomplished by
one in an industry best facility. It should be noted that within a profit centered organization wrench
time will include time expended on proactive tasks such as RCA.
Rework work hours expended on repeat repairs as a percentage of total work accomplished.
Rework is typically defined as repair work repeated within a given time interval. Many
organizations use one to two weeks; industry leaders will use four to six weeks as the time
criteria for rework. Rework typically indicates faults or errors in the original work. However, the
first line supervisor must be involved and exercise judgment to note successive work that may
not be connected or where repair difficulties were known prior to commencing the original work.
In one organization with very detailed records, rework could be broadly classified in two
categories: The first, where time constraints, parts or the nature of the failure itself diminished the
probability of a successful repair from the outset of the work. The second category consisted of
clearly careless mistakes; bolts missing or not tightened properly, gaskets missing or cut during
installation and similar quality defects.
Repair Success a positive metric that could replace the more frequently used rework. Repair
success is determined by compliance to four criteria:
Actual hours expended within +/- 10 percent of planned hours
Restored to service meeting cost and schedule objectives
No startup difficulties caused by the work accomplished
No rework required
Overtime hours as a percentage total hours worked
Work backlog hours of work planned, but not yet scheduled divided by the number of craft
hours available per week. Generally expressed in weeks by crafts.
Backlog age typically the average time since submission of all work in the backlog. The
necessity of completing work that has been in backlog for more than a few months should be
questioned.
Work Productivity Metrics must be consistent with and reinforce overall optimizing actions. For example,
enlightened practitioners of work productivity optimization view repairs as opportunities to eliminate
defects. They encourage RCA at the craft level, and consider the process as essential to improving
equipment effectiveness.
Stores Management
Storehouse stock effectiveness, i.e., service level, on time delivery percentage of time parts
are available when required
Stockouts percentage of the time that material is not available
Transactions with a Work Order number essential for process discipline
Orders placed by the Planner essential for process discipline
Inventory value as a percentage of RAV. SMRP reports that 1 percent is a best practice
benchmark. Some companies meet parts requirements at inventory levels between .25 and .5
percent of RAV. Best practice is reportedly .5 to .8 percent.
Inventory Quality Ratio (IQR) ratio of active Maintenance Repair Overhaul (MRO) parts
inventory to total inventory.(81) In Japan, stores disbursements as a percentage of total
maintenance material appears in two distinct categories. 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 consignment, just-in-time
(JIT) environment.(92)
Stores value per stores employee Helpful to benchmark requirements for storehouse
personnel
MRO parts inventory turns total value of issues during the year divided by total inventory
value World class is reportedly about 1.5 percent.
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) There is an additional consideration:
Shifting to outsourced and consignment spares to reduce inventory value will typically remove the
standard fast movers. Spares remaining are likely specialized and slower movers resulting in
an undesirable increase in the inventory turns ratio. The two effects must be balanced and all
involved understand the tradeoff.
With good usage measurements it may be possible to safely reduce quantity stocked. This action
will reduce total inventory value and, by so doing, increase turns.
Inactive items inventory items that havent been issued within a specified time period
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 (Work In Process) WIP on hand.) To meet 85 turns, MRO inventory must be addressed. (129)
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. Care and discretion must
be exercised to avoid scrapping vital, long-lead insurance spares that may never be needed until just after
they have departed the premises.
Program Effectiveness
Program effectiveness metrics are used to measure the effectiveness of equipment management
programs and systems at the facility, unit, or equipment level. These metrics demonstrate the value of
programs such as vibration monitoring, fluid (lubricating oil) analysis, thermography and motor analysis as
the first step in linking their contribution to corporate and facility results. Program effectiveness metrics
capture, in objective terms, results that can be trended over time to track progress toward objectives and
demonstrate improvement, e.g., percentage of predictive monitoring performed within one week of
schedule.
During two recent Asset Optimization workshops, participants were asked to indicate their
satisfaction with existing Preventive, Condition Based and Reliability Centered Maintenance
programs. The majority expressed a high level of satisfaction with the programs. A further
question asked for an estimate of unexpected events, surprises that occurred annually. A
consensus average was close to 10 and could have been higher except that the maximum
number on the survey form was 10! How could this be satisfied with activities when the results
are poor? Answer: participants are in an activity and task oriented culture where doing is more
important than achieving. That culture must be reversed and the focus placed on results.
Specific objectives are required for each Asset Optimization program to enable program owners and
managers to determine contribution and identify areas where adjustments may be required to increase
effectiveness. The following are examples of program metrics:
Number of undetected failures surprises for each technology / program in use (e.g.,
vibration and fluid analysis, electric current analysis, thermography, and steam trap surveys) Note
that this is a negative metric. One facility has established an objective of fewer than one
unexpected event in two years.
Percentage of candidate equipment covered by an optimized maintenance program; an
activity metric
Percentage of facility / unit equipment monitored with predictive technology; another
activity metric
In the following two metrics, benchmark values for PM and PdM compliance contained in Figure 9.11 are
lumped together. This is done in recognition that the optimum division between PM and PdM will vary by
plant and process. Continuous processing and power generating facilities with large rotating machinery
will typically have a greater proportion of PdM compared to a plant with smaller machinery and equipment
such as conveyor, packaging, bag and container lines that require more PM.
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.
Many caution about the use of this metric it may result in flooding the system with worthless
Preventive Maintenance tasks, especially if the Maintenance Management System is set up on
numbers of Work Orders rather than hours expended.(129)
In order to fully recognize the contribution of PM and PdM, Work Orders must be traceable to
origin. In many facilities, work originated by PM and PdM tasks are coded as corrective and
therefore not recognized as resulting from improved processes.
Preventive and Predictive completion rate Preventive and Predictive 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 cite a 95 percent total completion rate.
Predictive and Preventive Maintenance completion is tracked by crafts.
Facility average overall vibration levels several organizations report a direct link between
reduced vibration levels and reduced maintenance costs. They monitor this metric as well as high
exceptions as a leading indicator, Figure 9.11. Many will state that the prime importance of this
metric is to form the basis for a watch list and to observe that the average is trending down
indicating that repair processes are improving mechanical conditions.
Equipment alarms:
Number of early warning alerts or alarms by unit or condition survey
Number of second warning danger alarms by unit or condition survey
Percentage false alarms
Equipment Effectiveness
Equipment Effectiveness is measured by either Availability or MTBF / MTBR and MRO cost.
Availability The time a system or asset is in an operable state capable of meeting all mission
requirements. Availability must be maintained by system and equipment with the duration and
cause of non-availability for the purposes of identifying opportunities for improvement. Some
facilities monitor downtime, essentially the inverse of availability.
Mean Time Between Failure (MTBF), Mean Time To Failure (MTTF), Mean Time To Repair
(MTTR) illustrated in Figure 9.9, Relationships between MTBF, MTTR and MTBR.
Percentage improvement in MTBF / MTBR
Cost of maintenance, repairs and overhaul, single incident and cumulative
Equipment effectiveness 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 availability. For example,
reliability improvements to a 100 percent pair of spared pumps may have little overall effect on system
availability. However, reliability improvements to their automatic start switches may have major effects on
both reliability and availability. Reliability investments must be focused on prioritized improvements that
have a direct impact on system availability in other words reliability optimized for the service, system
and operating requirements.
Consistent
Consistent definitions
definitions of
of
failure
failure and
and repair
repair are
are all
all important
important
for
for an
an accurate
accurate
comparison
comparison of of statistics
statistics
MTBF
Mean Time Between Failure
MTBR/MTTF
Mean Time Between Repair
Mean Time To Failure
MTTR
Mean Time To Repair
Figure 9.9 Relationship between MTBF, MTTR, and MTBR

Observations:
MTBR is MTBF minus MTTR and thus, is 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 (the case for most industrial equipment),
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 affect failure characteristics. (129)
Equipment MTBF/MTBR may lose some usefulness as a result of the staggered life of
components and the effect of external influences on component lifetime corrosive or abrasive
environment, harsh loading conditions, contaminated fluids (lubricant and hydraulic oil),
misalignment, and unbalance.(129) In this case distribution is all-important.
Amplifying the last comment, distribution around an average for a specific population is all too often
neglected as a valuable measure of performance. Continuing with MTBF, a broad distribution within a
similar group such as motors, centrifugal pumps, etc. provides valuable insight into opportunities for
improvement. Any departure on the poor performance side of a population average and further away than
30 percent or so from the average value should be examined closely to determine cause. In many cases
the discrepancy is caused by a poor design for the service or environment and may indicate the necessity
of redesign and replacement. In others the problem has been found to be operating changes that werent
considered in the original design.
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 RCA on individual equipment when the cumulative cost of repairs over a 12-month period
exceeds $10,000.(129)
Considerations Selecting Performance Measures and Industry Benchmarks
Organizations must take care in selecting maintenance effectiveness measures. Too often maintenance
effectiveness is judged on time to repair by the maintenance hero, rather the more effective MTBR /
MTBF reliability measure.(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 six years, ten to twelve years for motors. 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. Generally, problems that require intrusive disassembly are
failures. Under these definitions, a bearing, seal, coupling, electrical component, valve or instrument 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, adjusting packing
and belt tension and instrument calibration would not be classified as failures with this criterion. Some
organizations reserve the term failure and repair for intrusive events that require the lock out, tag out
procedure. Events that do not require lock out, tag out are not classified as failures and, hence, are not
classified as repairs.
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 and requirements for instrument
recalibration fit this criteria), define those as failures and designate the corrective action as repairs.
It is often difficult to determining how to record hidden or impending failures that are identified and
corrected during maintenance conducted for another purpose, e.g. during overhaul. As maintenance and
overhaul intervals are extended, these issues assume greater importance.
Figures 9.10 and 9.11, contain a tabulation of some best practice benchmarks. (35, 129)
Maintenance costs % ERV / RAV <2.0 2.0% - 2.5% 2.5% - 3.5% >3.5%
Maintenance costs per unit output Varies by production unit
Overall Equipment
Availability >97% 95%- 97% 95% - 80% <80%
Planning and Scheduling

Reported hours % paid hours >99% 95%-99% 80%-95% <80%
Planned to total w ork >85% 75% - 85% 65% - 75% <65%
Labor as a % of total cost Varies by area
Planning accuracy Estimate 10% Estimate 15% Estimate 25% Estimate > 25%
Schedule compliance >90% 75%-90% 60%-75% <60%
Emergency break-in w ork <15% 15%-25% 25%-35% >35%
Time expended on blanket w ork orders <10% 10%-20% 20%-30% >30%
Labor ef fectiveness (w rench time) >50% 40% -50% 30% - 40% <30%
Work quality (rew ork) <2% 2%-5% 5%-10% >10%
Work Orders closed w ith comments >95% 85% - 95% 70% - 85% <70%
Backlog 3 - 4 w eeks 4 - 6 w eeks 6 - 8 w eeks >8 w eeks
Overtime <5% 5% - 10% 10% - 20% >20%
Preventive and Predictive Maintenance

Preventive and Predictive Maintenance % of total hours 60% 40% - 60% 20% - 40% <20%
Preventive and Predictive schedule compliance >95% 90% - 95% 75% - 90% <75%
Mean Time Betw een Failure / Repair Varies by area
Failure analysis (RCFA) complete >95% 80% - 95% 60% - 80% <60%
Reliability Program Effectiveness

MTBF Varies by equipment
Faults detected prior to f ailure >95% 80% - 95% 50% - 80% >50%
Average vibration level ~.08 in/sec .08 - .12 in/sec .12 - .15 in/sec > .15 in/sec
Failures due to lubrication % of total 0% <5% 5%-20% 20%
Figure 9.11 Best Practice Scorecard

Applicability of Metrics
There have been several comments in the preceding sections regarding the applicability of metrics. Many
metrics are independent of the facility and process. Others are quite dependent on one or both. Figure
9.12 following attempts to identify metrics that are generally applicable as well as those that are
applicable to a specific industry or process.
General Applicability Industry Specific
Corporate RONA, ROCE, ROA
Industry Effectiveness Cost as a % of RAV / ERV, EDC
Cost per unit
Operating, Cost and OEE, Availability, Asset Utilization,
Capital Effectiveness COPQ
Stores inventory value as a % of RAV
/ ERV
Process Effectiveness Emergency, break-in work PM as a % of total work
Planned as a % of total work CBM as a % of total work
Schedule compliance
PM and CBM as a % of total
Work on standing % of total
Labor utilization
Rework
Overtime hours as a % of total
Work backlog and age
Stores stockouts
Reliability and CM PM and CBM schedule MTBF, MTBR
Program Effectiveness compliance
Undetected failures
Avoided cost
FA action implemented
Figure 9.12 Applicability of Metrics

Key Performance Indicators

Key Performance Indicators (KPIs) are metrics selected to demonstrate performance to key strategic
objectives and monitor essential elements of an Asset Optimization program. They are widely used by
industry leaders to show progress to objectives and thereby reinforce ownership and motivation. KPIs are
updated and published regularly and objectives are well known to all involved. KPIs are also used to
measure short-term progress to objectives. Examples of Asset Optimization program KPIs in five
categories include:(10, 21, 108)
Overall facility performance:
Safety and environmental indices
Plant and asset utilization
Production, Operating, Asset and Cost Effectiveness:
Availability / uptime
Units produced / availability hour
Yield loss, percent unplanned production losses
Cost Of Poor Quality (COPQ)
Maintenance Cost / RAV / ERV, unit (ton, pound, bbl, MW, automobile, etc.)
Equipment Effectiveness:
MTBF
Availability
MRO costs, incident and cumulative
Work Process Effectiveness:
Maintenance hours charged to Work Orders as a percentage of payroll hours
Planned work as a percentage of total hours worked
Maintenance schedule compliance
Emergency work as a percentage of total
Backlog, weeks by craft
Repair Success a positive work quality metric that could replace the more frequently used
rework.
Program Effectiveness:
Unplanned events surprises
PM and PdM as a percentage of total work
Condition monitoring / CBM program effectiveness (i.e., percentage fault detection or average
vibration level)
Maintenance utilization indices, i.e., bearings and seals used or number of unexpected failures
Companies typically select no more than six KPIs that best represent conformance and progress to
highest priority business objectives to monitor at any one time.
A leading company has 21 categories of equipment, each with KPIs linked to MTBR. (129)
Another leader measures detailed KPIs for each processing unit. These include utilities: 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.(129)
It should be noted that metered allocation of utilities should be maximized to encourage improvements in
efficiency.
Two papers listed the following KPIs and associated benchmark values for world class organizations. (17,
125)
Note the similarity to Figures 9.10 and 9.11.
Production Availability: 95 + percent
OEE: > 85 percent
Planned Work: 90 percent; Emergency / Reactive Work <10 percent
Schedule compliance: > 80 percent

Labor Utilization / Work Order Discipline: > 90 percent
Preventive and Condition Based Work as a percentage of Total Work (hours): 60 percent
Hours reported on Standing / Blanket Work Orders: < 5 percent of total hours worked
Work Orders closed with feedback: 100 percent
Maintenance Backlog: 3 to 5 weeks
Maintenance cost as a percentage of total sales revenue: < 3 percent (industry specific)
Graphical Displays
Spider charts, are frequently used to compare the performance of multiple work and other process
metrics with benchmark objectives. The spider chart is an especially good way to illustrates gaps to best
performance, see Figure 9.7 for an overall program spider chart showing best, average and worst
performance. A spider chart can also provide a useful display of Balanced Scorecard results, as described
in Chapter V.
One large manufacturer plots audited performance on a spider chart in the following nine areas, as well
as providing an overall assessment, Figure 9.13.(129)
1. Planned maintenance
2. Continuous improvement
3. People, organization and culture
4. Supplies and tools
5. Planning
6. Training
7. Communication
8. Costs and benchmarking
9. Standards and documentation
Planned Maintenance
Continuous Improvement Total score
People, Culture Standards and

and Organization Documentation
Supplies Cost and

And Tools Benchmarking
Team Score
Planning Communications and
and Scheduling Feedback
Training
World Class Performance
Figure 9.13 Chart of Plant Team Performance
This manufacturer operates in work teams. Work teams evaluate each other annually as an auditing,
learning and benchmarking process.
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 9.13, 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 success not 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.(129) 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.(129)
Figure 9.14 illustrates graphical displays of individual KPIs, in this case emergency Work Orders as a
percentage of total work and backlog by crew. In this facility these charts are produced, reviewed and
published weekly.
Total Work Order Backlog
50000
40000
30000
20000
10000
Figure 9.14 Graphical Displays of Unplanned Work and Backlog
Leading Indicators
Leading indicators measure expectations of future improvements in performance. They are task or
behavior specific metrics that are typically utilized to measure the progress of an improvement process as
a first indicator of results likely to be delivered toward a larger or long-term objective. They respond more
rapidly to change than results metrics, particularly in a large population where overall measures may not
change quickly in response to effort. Leading indicators are very effective as the basis for proactive
refinement if initial measures indicate results are likely to fall below objectives. The following are
examples:
Measuring progress during the implementation of a large program might begin by measuring
percentage of training completed followed by percentage deployment and initial results. Each
metric in the sequence is a leading metric for the next and the results expected from the program
as a whole.
The percentage of planned to total work could be used as a leading indicator for a reduction in
maintenance costs. By driving to increase the percentage of planned maintenance, costs should
decrease due to improved work efficiency.
Percentage deployment of a reliability improvement program should be a leading indicator for
improvements in MTBF, availability and maintenance costs, reduction in Emergency Work
Orders.
The MTBF of a large population may not change appreciably as improvements are applied to
individual members. Improvements completed and MTBF of units with improvements could be
used as leading indicators to assess effectiveness far sooner than changes would be observed in
the population averages.
Initiating a program of precision shaft alignment may require years to affect overall reliability
measures such as, MTBF, MTBR. Leading indicators might be advanced alignment tools selected
and purchased, training completed, precision alignment in use and the number of equipment
precision aligned. A second set could be grouped MTBFs or MTBRs for equipment on which the
reliability improvement initiatives had been applied identical to the third bullet. Leading measures
are also an early indication where added improvements might be necessary.
Examples of leading indicators that are in use for work management include: (129)
Schedule compliance (discipline within the maintenance process leading to maximum
effectiveness)
Backlog (too high and work isnt getting done, too low; the planning task is compromised, crew
size may be too large for the work load)
MTBF/MTBR on specific equipment with improvements implemented (progress to elevating
MTBF/MTBR of a large population)
Percentage Preventive and Condition-Based Maintenance complete, percentage overdue (low
compliance with proactive failure prevention activities may lead to unexpected outages)
Overtime hours worked (typically an indicator of excessive reactive work, poor planning and / or
too small crew size)
Emergency work required (poor reliability, excessive variation)
Planning accuracy (maximize work crew effectiveness; wrench time)
Warehouse stock effectiveness (stock levels, replenishment interval, ordering process)
Percent failures subjected to RCA (proactive efforts to eliminate failures)
Hours of training per employee per year (work quality and effectiveness)
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. (129)
Indirect Metrics
Indirect metrics are used to measure the impact of components of an Asset Optimization program on
organizational imperatives such as safety and environmental incidents. They demonstrate the value of the
Asset Optimization program to managers who may not be directly involved but are accountable for vital
areas such as safety and environmental compliance. They also provide another means of demonstrating
the value of an Asset Optimization program to influential decision makers who have little to no awareness
of such programs. Some examples of indirect asset effectiveness metrics are:
Safety and environment incidents
One company reports that 50 percent of all environmental incidents are caused by equipment
failure.(129)
Environmental savings achieved through waste reductions resulting from Asset Optimization
program initiatives
Energy savings attributed to improved equipment management within Asset Optimization
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 probably would have happened had the problem gone undetected. (21)
Repeating some information presented in Chapter VII, Avoided Costs, policies regarding credits for
avoided cost vary by company. One company disallows avoided cost credits if the impending failure
would probably have been recognized during operator rounds and consequently 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., gain agreement that 20
percent of the time a pump bearing failure results in shaft damage, and 10 percent of the time housing
and / or rotor damage, with appropriate added costs. 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 B.
APPLICATION OF METRICS
Significant thought must go into the process of selecting metrics to support the Asset Optimization
program.
The value of meaningful metrics cannot be overstated the impact of metrics that are
inaccurate or inapplicable cannot be understated.
One must first identify the goals and objectives of the organization. Asset Optimization program metrics
must connect to and demonstrate real value contribution to organizational business 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 and systemic capabilities to collect and report metrics must be considered and optimized.
Computerized Maintenance Management Systems (CMMS), Enterprise Resource Planning (ERP),
financial and personnel systems should all be capable of automatically supplying the data needed for
calculating performance metrics. If data is not available for each selected metric at the beginning of an
Asset Optimization program, someone needs to find out where the data resides, and how it can be
obtained and automated. If Engineering, HR, Finance or IT are obliged to spend time every month to
extract and calculate data for Asset Optimization metrics, the task will quickly fall to the bottom of their
priority list. Leaders spend the time and resources to fully automate the data gathering and reporting
process so that people can focus on the highest value tasks of interpretation and developing
improvements.
There are shortcuts for those who have business and ERP systems in which information is difficult and
expensive to access, including specialized applications capable of extracting data into a Microsoft
Access database where it can be mined, manipulated and is available for easily constructed reports.
Several leading organizations have constructed methods for batch extraction of asset and work
effectiveness data from a proprietary database into Access. From there they have created the
reports needed to assess asset and work process effectiveness; Figure 9.14 is a result. With this
process data is readily available to Reliability Engineers for identifying equipment and systems
that consume greatest cost and cause inordinate Emergency Work Orders. Reports can be
constructed with little cost and effort by anyone with a reasonable working knowledge of
Microsoft Access and Excel.
Some companies have one or more people dedicated to the task of accumulating and reporting metric
information. The Asset Optimization process is directed toward adding value. Metric selection and
reporting must be consistent with that principle.
There are several rules to follow applying metrics:
Good metrics focus activities on maximum benefits and value added
Poor metrics can lead away from optimum activities, often to emphasis on low value tasks or
even unintended results
Whenever possible, metrics should be positive, rather than negative (e.g., measure work quality,
repair success, not rework)
The potential for conflicting metrics must be understood as exemplified by the stock reduction
conundrum discussed under the heading Stores Management
Always examine complementary metrics together. For example, theres no 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 for an
example, see Figure 9.15.
Metrics must be used and kept current. Metrics that are not used regularly should be eliminated.
Finally, if the data necessary to calculate metrics in not available at the commencement of an Asset
Optimization program, it must be developed and implemented before improvement initiatives are begun.
This will ensure that improvement initiatives will build the history that is essential to conclusively
demonstrate value.
A facility two years into an asset optimization initiative did not implement any data gathering
process to demonstrate the effectiveness and value created by improvements. As a result, they
cannot demonstrate effectiveness and are concerned that two years of valuable history have
been lost.
BENEFITS OF METRICS
Benefits that should be associated with metrics to identify the real worth of an overall Asset Optimization
program include:
Increased availability and decreased downtime with real numbers to document improvements
monitor availability and convert the increase to product value, reduced spending and / or
increased production.
Increased throughput demonstrated increases in product value gained from fewer outages,
reduced slow time and other equipment delays
Increased product quality with quality value calculated in terms of quality premium compared
to COPQ losses, e.g., rejects, returns, discounted sales, and quality penalties
Reduction in maintenance costs labor hours, parts, and consumable savings realized by
minimizing failures and unnecessary PMs, improving labor effectiveness
Reduction in breakdown costs identification of saves and a reduction in average repair costs
for a typical failure compared to repair costs prior to the Asset Optimization process when
operated to failure
Increase in energy efficiency calculated energy costs for production before and during the
improvement process
Reduction in spare parts inventory current value of freed capital resulting from reduced usage
and better planning
MEASUREMENT PROCESS
The following paragraphs outline a metric selection and measurement process to establish objectives
within an Asset Optimization program. 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 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 plant manager and all corporate executives involved in
establishing performance objectives, and monitoring results. The objectives, needs and concerns of each
team must 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, support and ownership when
the measurement process is installed.
The top metric should be whatever the corporation / facility uses to measure business 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, typically as a percentage of RAV, ERV.
Improvements required at this level to meet the top tier objective should be determined. A financial model
of the type contained in Chapter VII is useful in performing the analysis. The analysis should lead directly
to the selection of key operating, cost, process and program metrics for each of the categories illustrated
in Figure 9.1.
Benchmark values are necessary for each metric to establish objective performance. Objective values
should be realistic and based on industry best practice and objective results. As quoted earlier in this
chapter. Participation by all involved in the Asset Optimization process, especially when setting
objectives, is essential to developing the commitment, ownership and optimism necessary to achieve
goals. Industry leaders report that they are often surprised by the ambitious objectives and level of
commitment that result from a clear needs statement conveyed as metrics to working-level teams tasked
with developing action plans.
If people conclude an objective is impossible many quit trying, so too ambitious an objective will not gain
the support necessary for success. Conversely, an objective that is not ambitious enough encourages
protecting the status quo and minor tinkering around the edges instead of the major transformation
required to achieve the gains necessary in a typical production facility. The ideal objective is ambitious,
optimistic and perhaps appears to be just a little beyond ones grasp challenging, but achievable if
everyone works together.
A large amount of benchmark data is published and readily available from professional societies such as
the SMRP, on reliability-oriented web sites, e.g. reliabilityweb.com, and within articles and texts that have
been published on the subject. Figure 9.10 and Figure 9.11 summarize much of this information. Fellow
professionals are generally more than willing to share benchmarks they use for variables such as cost,
work effectiveness and MTBF they may not be quite so willing to share how they are obtaining results.
While there may be minor differences between sources of benchmarks, including this Handbook, and
some may question whether the companies and facilities listing benchmarks are similar to their own, the
key issue is not a few percentage points but rather the overall picture. A production availability of 60
percent is somewhere between 25 percent and 35 percent low regardless of the facility and process. We
can argue about the added industry specific 5 to 15 percent when we have achieved 80 to 85 percent!
The same is true for work effectiveness metrics. If schedule compliance is below 75 percent, emergency
work greater than 20 percent and / or overtime more than 20 percent there is significant room for
improvement. This is summarized in Figure 9.11. The important thing is to identify current performance,
get started with an ambitious, but achievable objective and then fine tune as results are achieved.
When all involved agree on what needs to be measured, how the metrics are defined and approximate
objective values, the next step is to establish training and get started. Whether establishing an
Asset Optimization program for the first time, modifying an existing process with new definitions or a more
precise focus, sufficient time must be allocated to gather information, identify and prioritize improvement
initiatives.
At the beginning of the improvement process in a typical facility, time will be required to gather sufficient
information to determine historical values for all metrics. Historical values are compared to benchmarks in
a Gap calculation described earlier in this chapter. The Gap calculation identifies opportunities for
improvement and provides direction for prioritization and implementation.
As noted earlier, many facilities embarking on a major improvement program will not have the data or
data structure to accurately identify opportunities or measure results. In some cases stores records may
be the most accurate source of failure data (repair parts issues). When accurate data is scarce, the
improvement program must begin from anecdotal information including known problems and risks,
perceived opportunities and optimistic objectives. In this situation it is very important to fill the data gap
with a collection structure and metric calculation methodology initiated simultaneously with the first
improvement initiatives. This enables results to be tracked against objectives thereby providing the ability
to verify progress. As improvement initiatives progress, results build the history necessary to assess
performance.
When the results measurement process is initiated, a basic decision must be made to determine how
often data should be collected, 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 detailed
results at least weekly and no less frequently than monthly. Formal reports and charts of KPIs are
typically published monthly.
In a new 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, gain accuracy, and reasonably confirm that the data are being reported correctly. Process
refinements, fine-tuning to gain consistency and additional training may be required. Thereafter, the real
data collection begins. Performance data should be collected and analyzed for some period without
further corrections, improvements, or fine-tuning of the measurement process. A stable system is
necessary to prove the measurement process and obtain value from the data.
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 by an individual should be limited to about six and no more than ten as an absolute
maximum. Attempt more and there is a danger of losing focus.
People in one organization complained about the number of metrics in place to measure asset
and program effectiveness. During a discussion, everyone concluded that the number assigned
to an individual was of prime importance, not the total.
Persons directly involved with a specific process may want to track more metrics. Despite the concern
about losing focus just mentioned, additional metrics may 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.
Interim performance results must be established for all long-term objectives (typically spanning greater
than a year) to assure satisfactory progress. As examples, three to five year availability and spending
reduction objectives must be supported with interim annual, perhaps even quarterly, objectives.
In a typical improvement program, objective results are not divided equally over the time period but rather
are divided to reflect when results will be achieved. It is not unusual to have small improvement objectives
during the first year as the program is getting off the ground, progressively greater annual objectives in
the middle, tapering off at the end as most of the gaps are corrected and the program is fine tuned.
The greater the number of factors that are being tracked, the more difficulty that will be experienced
analyzing the results. Monitoring related metrics from different areas of an improvement program helps
head off changes in one area that worsen conditions in another. As an example in the maintenance area,
backlog, PM and PdM completion, break-in work and reliability metrics must be monitored carefully to
assure that a spending reduction objective is not being gained by deferring work seen as indicated by an
increasing backlog pushing problems into the future.
When measuring values such as MTBF, average and statistical spread are equally important, as shown in
Figure 9.15. If the average is low compared to industry best and the spread small, there is probably a
common, facility wide problem. A relatively tight distribution, with a few points significantly above and a
few significantly below the average, leads to a conclusion of specific conditions that must be corrected.
A facility with approximately 2,000 motor driven pumps calculated an MTBF of about 40 months.
By removing the 200 worst performers from the population the average MTBF increased to about
65 months. MTBF of the 200 bad actors averaged about 10 months. The conclusion was
obvious.
Bad actors, equipment with chronic problems requiring attention and correction are found below the
average MTBF the further below the greater the opportunity for improvement. Equipment significantly
above average longevity should also be evaluated to learn if reasons for superior performance can be
replicated on other similar equipment. Control limits can be used to divide equipment into reasonable
below average, average and above average categories to assure focus and concentration of efforts on
the highest value opportunities.
A limit graph similar to Figure 9.15 readily identifies equipment significantly better than and worse than
normal, e.g., equipment with MTBFs significantly greater than or less than the average. Plus or minus
two standard deviations, covering 67 percent of all possible occurrences, may be used to define normal.
The 16 or so percent on the low side of this band would be examined for specific problems that should be
corrected.
Subject the bad exceptions, low

MTBF (red O), to RCFA first to
determine cause of poor
performance. Study above
average performers (blue G) to
learn reasons.
G
G
G
X X
X X
X X X XX X
MTBF X X X X Median
X
X X X MTBF
X X X X
X X X X
X X X
O O
O O
5 10 15 20 25 30 35
Equipment Numbers
Figure 9.15 Control Band
Adjusting the boundaries so that about 10 percent of the total population is above and 10 percent below
the limits provides good prioritization for in-depth RCA or other analyses (FMEA) to determine why a
specific unit deviated. For the initial year of the Asset Optimization program, efforts should be focused on
improving the most blatant low performers. Initiatives designed to improve the median can be developed
when the reasons for distribution within the control limits is better understood.
As stated earlier, a clustered distribution around a low median may indicate the presence of a common
problem. Before the advent of laser alignment, poor coupling alignment was a common, chronic problem
on rotating equipment. Other facility wide equipment problems might include improper bearing or seal
installation, poor lubrication, or unbalance.
Some organizations that are experienced in this process are able to consolidate the type and number of
failures on similar equipment in a Pareto analysis, as shown in Figure 9.16 which is an excellent method
for identifying primary detractors from objective performance by number, cause and cost.
It may be necessary to perform a Pareto analysis of Pareto data to identify the cause of problems such as
bearing failures due to contaminated lubrication.
Figure 9.16 Pareto Chart
At some point, a year or more after the formal measurement period began; further improvements may
need to be implemented. The necessity for additional improvements may result from revised objectives
and a corresponding change in prioritization. Improvements may also be required within the measurement
process itself to identify conditions more specifically. Most often, defect distribution along the median is
examined to identify cluster defects. 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 process must continue tracking all equipment effectiveness indicators, such as MTBF, availability,
spending and Emergency Work Orders. As 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.
Special thanks to Boyd Beal, Jay Padesky and Grahame Fogel for your excellent comments and
suggestions for this chapter.
X. PROGRAM LEADERSHIP, VALUES AND ORGANIZATION
The new world will belong to passionate, driven leaders who not only have enormous
amounts of energy but who can energize those whom they lead and influence.
Jack Welch
This chapter addresses institutional values, leadership, organizational issues and skills management that
are vital foundations for an Asset Optimization program. Necessities for formulating and managing the
improvement process and implementing the program are covered in Chapters XVII and XVIII.
INTRODUCTION
A successful Asset Optimization process has a number of key requirements in leadership and
organization. These include interest, clear vision, continuous drive and participation from senior
executives; ambitious objectives, financial prioritization, initiative, ownership and support throughout the
organization. Organizational excellence is crucial. Training and skills management are essential in order
to maintain and elevate knowledge and skills in all areas of Asset Optimization.
A simplified sketch of the overall Asset Optimization process is illustrated in Figure 10.1. (11)
Objectives Current Conditions
GAP
Opportunities
Prioritization
Continuous Metrics
Improvement
Strategy
Tactical Action
Processes
Plan
Systems
Implementation
Technology
Results
Resources
Figure 10.1 Detailed Physical Asset Optimization Process
BASIC LEADERSHIP AND ORGANIZATIONAL ATTRIBUTES

Some elements of leadership and organization are essential for the success of an Asset Optimization
program. All must be present at the beginning of the process or developed early during its
implementation.
Commitment and Support
Executives and senior management establish the climate and tone that are essential for the success of an
Asset Optimization initiative. Direct involvement through personal leadership, engaged, active and
energetic advocacy is essentials that cant be delegated. Without full and visible commitment at the top
levels of management, success is difficult, if not impossible to achieve.
Leadership, Values and Organization 182
Clear vision, solid objectives, continuing advocacy, active guidance, organizational alignment and close
attention are leadership imperatives to demonstrate the necessity, importance and value gained from the
Asset Optimization initiative. Leadership must strongly communicate the vision, necessity of the process,
what must be accomplished and actively remove barriers that are always present, and will certainly arise,
during any change process.
Industry leading companies drive the improvement process from the top. Leaders in this group recognize
that continuous improvements to the institutional culture, organization, processes and practices are
essential to keep pace in a competitive environment. Executives within industry leading companies are
actively engaged, continuously communicating and promoting the necessity to achieve the highest level
of excellence. They provide a vivid picture of the necessity and process that engages others to create the
motivation, commitment and ownership needed for success throughout the organization.
Appointing operational leaders and encouraging progress are also key functions of executive
management. Executive management must assure that operational leaders have the personal skills,
position, organizational authority and time necessary to achieve success. Operational leaders must be
assigned clear objectives, including a timeline. Real accountability for results, rewards for success and
penalties for failure are essential. Generally speaking, successful improvement programs are led
operationally by an individual at the Superintendent level or above who reports directly to the plant
manager.
Insufficient / inadequate leadership is observed over and over again as a primary cause of improvement
programs failing to meet expectations.
At a staff meeting, a plant manager asked why he hadnt observed improvements resulting from a
major productivity improvement effort that had been in-place for about eight months. After a long,
uncomfortable pause, one of the participants stated improvements had not been implemented
there was too much resistance from the working level and insufficient interest and real leadership
from management to overcome the barriers and get anything done.
While leaders may profess commitment and interest, responsibility of the actual initiative may be a
secondary duty assigned to a very busy executive who doesnt have much time to spare. As a result, the
improvement initiative doesnt get the attention required and is viewed by those involved in
implementation as a low priority that can be avoided. Under these circumstances is it surprising that
expectations arent met?
Finally, executives within industry leading companies continuously demonstrate their engagement and
total commitment to the improvement process by action. It is astonishing to see how a plant managers
demonstration of interest in the improvement process by occasional active participation in steering and
action team meetings energizes the people and process.
Clear Vision and Objectives
As an essential part of leading the improvement initiative leaders must provide clear objectives defining
just what it is they want to achieve. Is the primary objective of the Asset Optimization program to increase
availability and production output, reduce costs or some combination of the two? Leadership must specify
the objective, how much and whether other objectives, such as improved safety and environmental
performance, are included. Clear statements from leadership detailing why the objectives are necessary
(competitive pressure) are vital to gain commitment and ownership.
A US manufacturer discovered that a world-class commodity manufacturing facility in China could
deliver product meeting all specifications to US customers at approximately 75% price of the US
manufacturer. The immediate objective, essential to keep the facility operating, was to close the
price gap to a maximum of 5% at an acceptable profit margin.
Solid Overall Strategy
In addition to defining specific objectives, leadership must establish the strategic basis for the plans that
will be developed to achieve these objectives. Connecting business / market objectives to production,
equipment, and component effectiveness is one example of a key strategic principle of Asset
Optimization. Gaining permanent, sustainable improvements to both availability and costs by eliminating
defects is another.
Industry leaders recognize that producing the short-term results essential to satisfy business
requirements within a long-term strategy of continuous improvement is the best and most certain route to
success. Likewise, executives within industry leading companies recognize that permanent improvement
requires initiative, commitment, ownership and constant effort. It is the reward of a journey a result not
a command and takes time to accomplish. This may be a significant differentiator between the best
and everyone else. Many professionals identify an executive mindset that improvement can be ordered by
command as a major barrier to progress within their organizations.
Total Organizational Ownership and Commitment
Organizational ownership and commitment are continuing major challenges that require constant, highly
visible effort and often strong persuasion. The necessity for success and value gain must be publicized
throughout the organization. Everyone must be committed to the Asset Optimization process. Barriers,
including active and passive resistance, lack of commitment, ownership and cooperation must be
minimized.
Without continuing, visible interest and attention, people affected by the improvement initiative are likely
to conclude it is simply another program of the month that if ignored will go away. Everyone follows a
leader, or at least observes a leaders interests to remain out of trouble. If leaders dont demonstrate real
and continuing commitment by interest in and driving a change process, those who must do the work are
unlikely to invest much emotional commitment, time or effort. The Asset Optimization program is too
important to allow that to happen.
Directed to Success
Leadership attention to master the soft issues that establish initiative, ownership, commitment and
support are crucial toward the success of Asset Optimization. These include commitment to business
objectives, quality in all activities, moving toward a profit-centered mentality, defect elimination and
productivity improvement. It must be recognized that Asset Optimization is a continuous process with
many elements. Leadership must assure that all ingredients are present to assure success, Figure 10.2. If
one or more ingredient is missing the entire process will fail.
Vision Resources Skills Action Plan Commitment Incentive Measurements Results
Success
Confusion
Frustration
Anxiety
Ineffective
Failure
Slow
Temporary
Figure 10.2 All Ingredients must be Present for Successful Physical Asset Optimization
Some have questioned why the third bar down has two gaps. The answer is that without resources there
cant be any skills.
Recognition that Improvement Takes Time to Institutionalize
To achieve objective results there must be a full commitment at the senior executive level to
institutionalizing the Asset Optimization program. For the purposes of this handbook, institutionalization is
defined as occurring when the objective end states have been attained and solid processes are in place
governing all program elements. The optimized way is the only way and there is no institutional memory
of old way pre initiative processes or practices. The possibility of falling back to a former bad practice is
therefore minimal.
Realistically, it will take five years or longer to fully institutionalize optimized practices implemented with
Asset Optimization. Until that occurs, leadership must pay close attention, monitor metrics that might
indicate backsliding and inject corrective action quickly if gains and / or interest appear to be eroding.
Elements of the teams that have implemented successful improvement initiatives must be kept in place
long after the initiative has been implemented to assure improvements are refined and sustained. A post
implementation control plan to assure sustainability is essential. The temptation to demobilize the team
and diminish effort on the first signs of improvement must be resisted.
Many facilities declare victory and demobilize the implementing effort as soon as 80 percent or so of an
objective has been attained. As a result, initiatives remain partially complete with full benefits yet to be
realized. In many cases backsliding occurs. This can be a very emotional issue and source of frustration
for all involved.
To avoid this predictable pitfall, the Asset Optimization program plan must have a sustainability
component to maintain effort through 100 percent completion and full institutionalization of the
improvement process. It is imperative to keep the entire organization mobilized, engaged and focused on
sustainable, objective results. To reduce the resources required as an initiative reaches maturity with
results tracking objectives, people assigned can be reduced and the interval between oversight team
meetings can be extended. The control plan mentioned earlier is detailed in Chapter XVII.
VALUES, AND INSTITUTIONAL CULTURE

It has been stated that values drive behavior, behavior is culture and culture determines results. In order
to succeed in this new environment, the organization must develop and adhere to a set of proven values.
Positive institutional values that are necessary and frequently mentioned by workshop participants
include:
Safety, honesty, integrity, fairness throughout; in all the organizations activities
Mutual trust at all levels; honest, open, fair relationships; positive attitude, good morale
Well defined objectives and responsibilities clearly stated within a cooperative organizational
structure; objectives linked from top to bottom, bottom to top
Initiative, empowered ownership, commitment, responsibility, accountability up and down the
organization, good discipline
Ownership, and pride in all activities
Results oriented, strategic focus, tactical excellence
Passion for the process and outcome
Determination drive to achieve objectives
Intervention part of the culture corrective action initiated when anyone sees anything
wrong
Discipline and work ethic awareness of the cost of waste
Accountability for results within ability to control
Leadership by example; consistent leadership, fairness, treatment; work with all, not simply stars
and slackers, no favoritism
Organizational boldness; new ideas, constant improvement encouraged
People utilized to full capabilities:
Initiative, ownership, responsibility and accountability actively encouraged
People challenged, motivated to improve, exceed requirements
Visible demonstration that contribution is recognized, appreciated and valued, tangible
rewards for those who respond and are successful portion of compensation based on
performance and results within new structure and new objectives
Commitment to reliability, highest quality, consistency, stability across the entire organization;
performing tasks correctly the first time in all aspects of work
Unified mindset that reliability, quality and stability, improving performance and consistency
and creating value, are essential, the expected standard, not afterthoughts or secondary;
deficiencies and defects are unacceptable
Repaired equipment looks (cleaner), feels and performs better
Pick up, clean up after a job
Shortcuts, the easy way avoided
Solid partnership between Operations and Maintenance, good interactions, people work well
together, all supporting functions aligned and engaged
Prioritization time, resources and efforts focused on highest value issues, opportunities and
return
Open atmosphere, excellent communications, consistent messages, constant dialog with people
to improve the organizational culture
Coaching, collaborative learning, questions and suggestions encouraged
Active knowledge sharing most experienced eager to share knowledge rather than
withhold for job security build on and leverage institutional knowledge and skills
Proactive failure identification and elimination mindset shifting focus from doing
maintenance to eliminating cause and work reduction
Eagerness for improvement, real concern; intolerance for deficiencies
Problems utilized positively as learning opportunities for improvement: eliminate defects,
safely extend equipment life, work actively to minimize unexpected problems, every day
viewed as an opportunity for learning / improvement
Direct efforts to problem solution rather than crisis maintenance repair under pressure
Celebrate success!
One company reports success gained by adhering to the following value principles: (99)
Employees have the right to be treated fairly, honestly and openly and must be assured that
they will be
Management is obligated to manage in such a way that employees have the opportunity to earn
according to their productivity, contribution and results
Employees should feel confident that if they do their jobs properly today, they will have a job
tomorrow
Training must be made available so that all employees will have the opportunity to gain the skills
necessary to perform tasks assigned and advance both skill level and position in the organization
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 judgment.
(129)
The company that has implemented the preceding principles states employees are: producing at the
highest rates in the industry and earning wages as high as any comparable industrial business. (99)
Why are values so important?
Many will state that current technology, processes and procedures are more advanced than the ability to
gain full value from their application. The same people often cite removing institutional cultural and
organizational barriers as the largest and most significant opportunities for improvement within their
organizations.
A strong effort to achieve optimum organizational values and culture at the beginning of a
transformation initiative greatly facilitates gaining the necessary improvements in process and
procedure. Essential improvements in process, procedure and habits will flow naturally if the
correct institutional values and culture are in place to build on.
Attempting to improve processes and / or procedures while leaving inconsistent institutional

values and culture to be addressed later in an improvement process allows resistance to persist
and significant barriers restricting success to remain in place the initiative is likely to fail.
Some specific values that will be explained in detail are:
Highest personal and organizational commitment to safety and environmental excellence
Reliability culture and performance equivalent to safety and environmental
Full ownership and accountability at all levels of the organization
High level of teamwork and mutual assistance
Focus on improving productivity
Costs controlled by eliminating defects and the need for spending
Safety and Environmental Excellence

The necessity for safety and environmental excellence has been stressed throughout the Physical Asset
Optimization Handbook. It is an essential element of any successful Asset Optimization initiative. Stated
simply, an organization cannot achieve industry-leading levels of asset effectiveness without industry-
leading performance in the safety and environmental areas. The institutional cultures, absolute
commitment to performing safely and reliably, are one and the same. Repeating an earlier quote for
emphasis, a plant manager stated the following:
We must attain a cultural and organizational commitment to asset performance equal to the
commitment to excellence we have achieved in the Safety, Health and Environmental areas.
Reliability Culture and Focus
The necessity for a reliability culture and focus is also heavily stressed throughout this Handbook as
being the foundation for successful Asset Optimization. Increase reliability availability improves,
spending and organizational demands decline. This is the only way to gain the maximum, sustainable
success.
Ownership and Accountability
Ownership throughout the organization is essential for success; ownership requires accountability and
responsibility. Accountable process owners are a key principle of Asset Optimization. The question is
where does ownership reside for a given activity or task. Asset Optimization asserts that ownership
resides at the lowest level of control. Therefore, a crafts person is accountable for the quality of repairs.
The first-line supervisor is accountable for how people are deployed but not necessarily for the quality of
their work provided skills, experience and instructions match the task.
The time is long past when a first line supervisor can participate directly in each task being worked by his
or her crew. In many cases first-line supervision may not have come from craft ranks and therefore cant
supply direct task supervision even if they wanted to and had time. Industry leading organizations
recognize all of this and implement training that equips people at all levels in the organization to perform
quality work. They trust that those assigned a task will perform it correctly, ask for help when uncertain
and closely monitor metrics such as utilization and rework. Trust but verify!
Industry leading organizations recognize the loss of effectiveness and motivation that results from
downskilling the most highly proficient as an expedient to make up for a lack of knowledge, training and
organizational accountability.
A highly skilled technical support engineer was asked why he personally supervised routine
reassembly tasks on critical equipment. He replied that he was the one whose performance
review and salary increase would suffer if a gasket wasnt installed properly or bolts were not fully
torqued. With accountability shifted in this fashion, what is the incentive for a craft mechanic to
pay much attention to quality?
The control and ownership, ownership and control twin applies equally through all levels of the
organization. If a senior manager ignores an identified risk or potential problem, or chooses not to
authorize mitigating action for any reason, including a lack of funding, he or she is accountable for the
consequences.
High Level of Teamwork and Mutual Assistance

People with different functional responsibilities clearly must see themselves as partners in a team
charged with achieving a common goal. A partnership is a two-way relationship where each partner is
looking out for the interests of the other. A customer / supplier relationship is one way and typically does
not gain optimum results. Pride will only take you so far. (129) 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.
Given the opportunity, employee led leadership teams do unbelievably good strategic and
tactical planning. Most important, they gain total buy-in for the plan, its implementation and
results. Fortune 250 company CEO
Working-level participation in an improvement process results in fresh input, is the source of
many opportunities, sometimes startling revelations, and provides access to a great deal of
wisdom. Continued involvement with opportunity identification, prioritization, developing and
implementing improvement initiatives, is vital for ownership, support and success. (11, 44, 129)
Experience indicates that nearly all successful improvement initiatives are based on some sort of team
approach.
All must recognize that every organization contains vast experience and institutional knowledge often
untapped. In most cases, knowledge is present to identify the greatest opportunities for improvement as
well as potential action. The process of inclusion builds enthusiasm and is the basis for the high level of
initiative and ownership necessary for success.
One company reported that:
Increased employee 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. Employees
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.
Employee involvement and ownership creation must be part of the overall strategy. Employees
must know and believe why they must change and improve. A clear strategy paves the way to
reality and the necessity for changes. (129)
Finally:
When a manager inquired why no one had ever mentioned the huge inefficiencies within the old
system, the workers replied: You never asked! GE Executive
Industry leading organizations get that way by developing great teamwork and mutual assistance. Crafts
who finish early at shift end will return to help teammates who havent yet completed assigned work.
Teammates help each other and eagerly share knowledge that isnt my job goes away.
Improving Productivity
Improved productivity is defined as doing the right task efficiently. Used this way, productivity is work
effectiveness.
Improving productivity requires total involvement of the people actually doing the work. They know where
real problems reside, are in the best position to formulate ideas for corrective action, and must have
ownership for improvements to take hold.
One company involved 50 percent of all maintenance people directly in the process to identify
problems and opportunities for improvement and formulate action plans. (129)
Productivity gained by optimizing PM has been discussed in detail in Chapter V. 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. Who besides those performing the PM work are better qualified to determine how a task
can be performed more effectively or the interval extended when inspection after inspection reveals no
change, nothing required.
A supervisor in a large facility noted that daily PMs were not accomplished on weekends and
holidays when regular work crews werent present. Does the equipment follow the same calendar
or does this experience indicate that daily PMs can be extended to every other day, perhaps
every third day / twice a week without any undue risk? The answer seems to be yes.
The productivity benefits of detailed task instructions, including safety precautions, tools, and spare parts
requirements are obvious. Task instructions recognize that even the best, most experienced and
conscientious people will occasionally forget some details. Both productivity and safety increase when
people have detailed, up-to-date check-offs at the beginning of a task. For this reason, and the potential
consequences of an error, pilots are required to use checklists.
Costs Controlled by Eliminating Defects and the Need for Spending
Within the Asset Optimization culture, cost control is gained by improving reliability permanently
eliminating defects and requirements for spending. Every problem and every failure is viewed as an
opportunity for improvement. In this way the entire organization becomes more effective. With reliability
and asset effectiveness increased, spending requirements, costs and organizational stress are all
reduced. The key question in not how much maintenance seems to be required, but rather how much
maintenance is affordable for the business conditions. If the first is greater than the second, asset
optimization is imperative to shrink costs to an affordable level.
As a facility determines the level of affordable maintenance, it is not atypical to learn that current PM and
CBM requirements cant be fulfilled within the constraints of hours available determined by spending
limits. Preventive and predictive requirements have to be reduced. A complete review for value
contributed, potential substitution of more effective condition-based routines for PM and optimization of
PM (tasks and intervals) is the first step along this path. Next, the organization has to determine where
component or equipment upgrade measures might have an attractive return by reducing or even
eliminating the activity (task) and increasing frequency (interval) of maintenance requirements.
Everyone who has been in maintenance knows full well the huge production impact, cost and effort that
follows any necessity for unexpected, emergency repairs on vital to production equipment.
Defect elimination is essential to gain optimum reliability and a permanent reduction in costs. It is
impossible to starve into prosperity. (129)
ORGANIZATION
Throughout industry, organizations are being reduced in size. Staff reductions of 20 to 40 percent
considered necessary to meet profit imperatives are not unusual. Successfully achieving such a radical
change requires examining every aspect of the organization, management processes and work
requirements.(129)
Three observations describe many organizations:
1. Organizations are being flattened, fewer levels between the very top and working levels. (99, 129)
2. Demographics are clustered between young and old. The average age of professional staff and
workers in many facilities is in the low to mid 50s with few people between 40 and 50 years old.
As experienced crafts and professionals retire, skilled resources are becoming stretched and
scarce.(74, 129)
3. Along with diminished numbers the days of single skilled mechanics and technicians are coming
to an end. One company determined that approximately 65 percent of lost productivity was
caused by delays in matching specialized skills to tasks and getting the individuals in place to do
the work.(129)
Some characteristics of the new, more effective organizations include:
Internal structure and reporting, roles and responsibilities totally defined, see Figure 10.3,
effective reporting chain, assurance that vital information gets to the correct decision makers and
all involved, follow up process to make certain that it does.
Resources used most efficiently, solid teamwork.
Organizational discipline people utilized to their full capabilities within a clearly defined
structure.
Process discipline written procedures for every process and task, followed, reviewed and
updated.
Focus on value creation solid system for prioritizing efforts so that opportunities with greatest
value potential are addressed preferentially.
Full acceptance of the process and organizational structure, active improvements where and
when necessary.
Many operating facilities are promoting relatively inexperienced people to fill supervisory and
management positions vacated by retirements. These less qualified individuals may conclude that
success in their new position requires them to be assertive and demonstrate control. They may not make
inquiries or consider advice because the situation or circumstances are not fully understood and asking
questions might appear indecisive and weak. This can lead to statements and ill-advised decisions that
de-motivate experienced people who have been passed over for promotion. As a result, experienced
people who should be mentoring conclude they dont need to put up with these conditions and
either minimize involvement or take 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 resulted in inexperienced personnel being promoted to
managers. They are responsible for too many people to provide effective guidance and often do
not possess the personal knowledge and skills to conduct on-the-job training. In some cases, the
manager-to-managed ratio, which was formerly 6 or 8 to 1, has increased to 20:1 with a less
experienced manager. Leveraging shared expertise and knowledge must be the rule, not an
exception.(129)
Another issue, rapid promotion combined with incentive compensation that rewards short-term results,
may encourage ill-advised actions that have severe consequences. As one example, reducing or
eliminating Preventive and Condition-Based Maintenance will boost profit for a short period as the
momentum from previous good practice slowly dissipates. The manager will get accolades, a large bonus
and promotion for the short-term results. The replacement 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 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 problem
solving, communications, persuasion, and team skills. (129)
Staffing Levels
Some industry leaders construct a spreadsheet analysis of the number and type of maintenance
personnel at a final objective (e.g., cost / RAV). This is obtained by dividing labor cost at the objective by
average labor rate (assume some split between parts and labor, e.g., 50 / 50 or 55 / 45 percent in either
direction as an average in North America). 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 e.g. number of
electricians, millwrights, pipefitters, welders, instrument technicians, etc. The spreadsheet allows what if
variations in the ratios e.g., the potential increase in the percentage labor as reactive repairs are replaced
by proactive failure analysis and failure avoidance. The analysis examines how the organization will
function at the anticipated levels and identifies the need for training and improvement initiatives. (129)
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.
A demographic analysis of the workforce often discloses that scheduled retirements and historical
attrition will be sufficient to reach the staffing levels anticipated at the conclusion of an
improvement initiative. In some cases the analysis discloses a shortfall. One organization found it
necessary to reestablish an apprenticeship program to fill future personnel needs and preserve a
great deal of institutional knowledge.(129)
Organizational Type Centralized vs. Decentralized

In any discussion of organization and skills, the question of centralized or decentralized organizations
arises. Typically, centralized organizations are characterized by greater specialization. Decentralized
organizations consisting of multi-function teams have less specialization.
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 are two examples.
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 Physical Asset Management.
Core craft and operator-level personnel must be empowered with the practical knowledge, skills
and authority to perform precision practices on a routine, day-to-day basis. (87)
Many advocate shifting a centralized 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 Disadvantages
Better focus on Less responsive to Highly responsive to Difficult to prioritize on
enterprise objectives individual unit individual area a facility basis
and requirements requirements requirements
Difficult to maintain
Greater control of Less individual Strong ownership proficiency in
personnel and quality ownership specialized areas
More efficient use of Sub-optimum use of
warehouse and tools warehouse and tools
Hybrid organization
In a typical hybrid organization individual processing units (specific definition will vary depending on the
facility) have local day shift maintenance people assigned to perform routine tasks. Crew size and
composition is determined by base loading. Total Productive Maintenance (TPM) provides an excellent
guide for these decentralized unit teams.
Trained specialists working from a central facility perform specialized tasks requiring specific skills, audit
safety practices and unit processes to assure uniform performance and quality and augment unit crews
during periods of high intensity, e.g., overhauls.
An area maintenance superintendent concluded that the ideal crew was one that could
accomplish all non-specialized PM / PdM tasks plus take care of normally expected minor
maintenance.
In this type of organization, the optimum location of responsibility for specialized tasks such as instrument
calibration, lubrication, coupling alignment, and collection of predictive measurements always arises. As a
general rule, routine tasks requiring average skills and tasks that are accomplished with sufficient
frequency to assure proficiency are candidates for decentralization. Complex tasks calling for specialized
skills that are not accomplished with sufficient frequency in an individual unit to maintain proficiency
should be centralized. High voltage electrical maintenance, pump bearing, seal replacement and repair
are examples of work that are typically accomplished by a central group. Each must be decided based on
the circumstances at hand. What is best for one organization is not necessarily best for all.
As improvements initiated by Asset Optimization take hold, many tasks that were performed with
sufficient frequency to justify decentralization may begin to occur so infrequently that proficiency
declines over time. For this reason the task division in a hybrid organization must be reviewed
periodically and adjusted as required.
Centralized organizations are typically characterized by greater specialization. Decentralized
organizations usually have less specialization.
One company includes planners and schedulers in cross-functional unit 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.(129)
Another 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.
(129)
This is very similar to the autonomous process from TPM, mentioned in Chapter V. It provides a greater
skill level, promotes teamwork and ownership and gains fast response to problems.
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 lock-out, 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 within a formal, written task
description.
One facility allows a unit team to tag-out and remove most motors for repair, but requires a
qualified electrician to reconnect the motor and check rotation following repairs. Another facility
authorizes the unit team to reinstall a pump, but requires specialists to be present for coupling
alignment.
A major corporation has some plants where all operators are also skilled crafts. This structure minimizes
the wait time for a craft person to solve small problems. To make this type of organization work safely, a
comprehensive training program must be in place that includes safety, operations and crafts skills. (129)
Another company has reduced shift maintenance workers by more than 60 percent through a
cross-training program that enables operators to safely perform minor maintenance. This permits
the transfer of many maintenance workers from shift work to day schedule, increasing their
productivity and satisfaction. (Transferring from shift to day work has between a three four to one
leverage depending on the shift schedule one position transferred is equivalent to three or 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. (129)
Assigning one or more skilled crafts to an operating team is another variation. Within this type of
organization (again, similar in concept to TPM) crafts take care of small adjustments and repairs
efficiently without a Work Order. It unloads the planning system where planners often state that a
significant percentage of Work Orders can be accomplished efficiently without involvement of planning
and dont require the history provided by the planning process.
Some companies that are evolving into team organizations recognize the need for Craft Advisors
skilled 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. (129)
Specialists have another role within a team structure quality assurance across manufacturing teams.
Specialist responsibility for training and oversight in equipment management tasks such as operation,
lubrication, post repair installation, and shaft alignment assures performance of consistently high quality.
Organizations with hybrid team organizations caution that inter-team training must be supplemented with
facility wide refreshers to avoid the slow degradation of skills and quality that may occur with inbred inter-
team training.
A facility that had shifted to a decentralized organization on day shift with centralized support for
some overtime, at night, on weekends and holidays found that gradual variations in procedures
were occurring due to different preferences between units. This complicated off-hour support as
crafts were often called upon to work in other than their home units. In many cases, tasks such
as instrument calibration that had not been carried out in accordance with the units procedures
had to be repeated when day shift crafts returned. The gradual drift and departure from common
site standards also complicated meeting ISO 9000 quality standards.
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. (129)
As a final comment in this area, training and organizational development must include refresher training
and recertification to assure skills currency.
Essential Organizational Characteristics
Within industry leading organizations everyone understands their role and contribution toward objectives
the individual actually performing a task has accountability for successful completion. Responsibility,
Accountability, Support, Consult, Information (RASCI) matrices, Figure 10.3, are typically used for
unambiguous definition.
Figure 10.3 RASCI Diagram
Completely Defined Roles and Responsibilities

Creative, skilled personnel must be continually challenged with new opportunities. The temptation for
routine downskilling because he / she is an expert in a particular procedure / practice must be avoided
unless the individual is utilized in a training role to impart knowledge to another.
In one facility Reliability Engineers complained that their duties were limited to photographing
failures, establishing meeting agendas, taking notes and writing reports. All felt their skills were
not used, most were demotivated. Many supervisors considered Reliability Engineering a non-
value activity. A clarification of qualifications, roles and responsibilities enlightened both sides as
to the value contribution that could be made by Reliability Engineers. Supervisors promised
greater communications and more active involvement in problems where reliability engineering
could make a significant improvement.
Highly Proficient at the Basics

Industry leading organizations are highly skilled in all the basics, Chapter XIII. They have robust
processes, practices and technology in place and / or planned and consistently meet highest quality
standards in all their endeavors.
Although value and requirements are well known, there are still plants that dont have a formal process for
Work Planning and Scheduling, a functional Computerized Maintenance Management System (CMMS) or
standard operating and repair procedures to assure consistency and quality.
Industry leaders will be aware of best practice benchmarks in all aspects of their asset care
(maintenance) operations, Chapter IX. They regularly track current performance compared to industry
benchmarks and key organizational objectives in order to identify areas of potential improvement and
assure their results meet business objectives.
Optimally Implemented and Managed Component Processes
At industry leading facilities, the application and use of Preventive and Condition Based Maintenance
(PM, CBM) and Root Cause Failure Analysis (RCFA) are all defined and documented with standard
procedures detailing application and use. Processes, practices, detailed procedures and task (job)
instructions are all in place and utilized effectively for work identification, prioritization, planning,
scheduling and spares management.
Procedures include safety precautions, tag-out procedures, installation, repair and operating practices.
Specific task instructions include safety precautions, operating requirements, tools, step-by-step
restoration and work practices, replacement parts, calibration, and acceptable tolerances as applicable.
Detailed standard procedures and task instructions, including safety precautions, tools, and spare parts
requirements assure that all activities are accomplished safely, effectively. They are key to consistent
quality particularly when an individual may perform a task infrequently or multiple individuals perform
the same task, i.e., overtime and weekend repairs conducted by people who may not regularly work on
the specific equipment. 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 no matter how many takeoffs and landings
may be in their log book.
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 and making up flanges in a system that cannot be
isolated during operation. Finally, standard procedures assure institutional knowledge is captured and
available for use in training programs.
Many of the most skilled will resist working from detailed procedures citing that their knowledge, skill,
experience and proficiency make detailed procedures unnecessary. There is another, generally unstated
reason: knowledge, experience and skill with tasks represent job security. Capture all the knowledge
necessary to perform my tasks and I can be replaced by a lower paid, less skilled worker.
Benefits of detailed task instructions 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, Buzz off weve 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 bearing 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 check whether changes were required or not. If changes were necessary, the mechanic
was required to identify changes necessary to the instruction as part of the work order closeout. The
facility 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 facility provided boxes on the Work Order for the mechanic to check whether task
instructions did / did not require changes. Checking the box that changes were required initiated
a second Work Order to develop the changes.
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 performing the task the way he
had been trained, 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
work crew was convinced 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. His procedure was so good that it was
later adopted corporate wide.
Reliability Engineering
A Reliability Engineering function has been mentioned and is essential for success with asset
optimization. Reliability engineering is the focal point for identifying deviations from objective performance
and developing corrective action. The Reliability Engineer doesnt necessarily have to perform all the
improvement work personally but is responsible for forming improvement teams, making certain that
objectives meet necessary results and following progress to completion.
During an Asset Optimization workshop the following consensus job description was developed for a
Reliability Engineer:
Owner / champion of the reliability process; leader of the reliability initiative and effort
leads the reliability improvement team
Intimately familiar with the plant, systems and equipment for which he / she is responsible
active participant in maintenance and production meetings
Working Operations and Maintenance shifts for several weeks to a month each is an
invaluable way to gain the intimate experience needed to perform the reliability function. At
the end of the process the candidate should know the location and function of every system
and asset, their history and criticality to the process.
Identifies performance deviations, ranks improvements by potential value gain
lost availability
excessive cost one time and cumulative
emergency Work Orders
Owns and leads the development and implementation of reliability improvement initiatives
assembles skills necessary for development and implementation
monitors results, assures follow up
Personal characteristics
highly motivated, energetic, self starter, action and results oriented
courage of convictions, good advocate
credible in the organization
curious, good problem solver, intense desire to identify and solve problems
organized, good organizer
inspiring, capable of motivating others to action
Evaluated on results KPIs
improvement in MTBF / availability, reduction of unexpected failures
Workshop participants all agreed that practical maintenance and production experience is essential. One
participant stated that in a former facility, reliability engineers all had 25 plus years experience. For
someone new to the facility and / or job everyone agreed that working production shifts for at least a
month followed by working maintenance for a month or so was highly advisable. Following this
introduction, the new reliability engineer should have a sense of the facility, be able to visualize all the
important equipment and know the process well enough to understand how each fits in.
Challenge Individuals to Achieve
Organizations become great because individuals within the organization elevate performance to levels
they may have not thought possible. Inspiring leadership attuned to the small things that motivate
subordinates is an essential ingredient. Too often leadership goes the other direction by habit.
An experienced reliability engineer commented that he spent too much time on nagging small
problems that didnt have any adverse operating or safety implications. Correction was always so
low on the priority list that these problems were never corrected. Allowing them to exist was
inconsistent with the sites emphasis on reliability and quality, the values necessary to meet the
goals and demotivating to the individual. The engineer suggested an annual discretionary budget
of about $75 K per year from which he could draw to eliminate these problems. The request was
denied. What message did that send regarding the plants real trust and commitment to
motivation and quality?
Effective Change (Improvement) Process
The importance of implementing and managing change effectively cannot be overstated. It is so
important that an entire chapter (Chapter XVII) of this handbook has been devoted to the subject.
Realistic Transition Plan
It is relatively easy to formulate objectives and determine where a given facility should be in terms of
benchmark performance. While it may be somewhat more difficult to objectively determine current
performance, the two tasks can be accomplished in a couple of weeks, certainly no longer than a month.
The real challenge is how to get from here to there and create maximum value quickly while doing it.
Thats the Asset Optimization improvement process described in detail in Chapter XVIII.
RESULTS BASED COMPENSATION (REWARD) SYSTEM

Most industry leaders recognize the need for merit compensation that shares the gains made in
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 XVII,
results that affect compensation must be controllable by the people affected.
Factors that affect profitability cost of raw materials and utilities and the price of finished goods are
not controllable or even visible to the people responsible for asset performance and effectiveness. Thus,
RONA is not a good objective basis for compensating Asset Optimization program performance and
results. However, improving reliability, MTBR / MTBF, availability and reducing costs by eliminating
defects are both meaningful and controllable at the working level and hence valid measures of
performance for the purposes of incentive compensation.
Leaders recognize that working-level employees immediately understand that achieving objectives for
increased asset performance and effectiveness will reduce employment and perhaps even the size of
survivors paychecks. Fewer people and less overtime for those who remain are very predictable results
of reducing failures and unnecessary work. As shortsighted as it may be, many employees view
optimizing practices, such as CBM and TPM, as a direct threat to earnings and job security. 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
time planned to reach objectives. The change will be more palatable if accompanied by demographic data
that shows anticipated retirements as well as historical rates of attrition.
Many employees depend on shift differential and overtime earnings to maintain their lifestyle.
Consequently, 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. 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. This includes incentive compensation for meeting improvement
program objectives that that may result in reduced earnings. 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
incentive bonuses based on compliance to objectives. A participant stated that 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 happier as are their families
all adding to enthusiasm, morale, and commitment. (129)
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. (129)
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 encourage cooperation rather than
competition between teams.(48, 129)
All of these plans share a common attribute pay for performance and results, demonstrated and
applied contribution. They are focused on corporate, business, customer and quality requirements. (129)
This concept was neatly summarized:(129)
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:
A 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, 129)
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. (129)
Without a risk / reward incentive compensation scheme, workers are often rewarded for the wrong things.
For example, the maintenance hero who quickly restores an unexpected failure typically gains
management acclaim, overtime compensation and possibly a bonus for correcting a failure that perhaps
shouldnt have occurred in the first place. The proactive worker who identifies and prevents a problem
before it can occur is often invisible, ignored and uncompensated.
Crafts are key; they quickly understand how the real reward system works, what's in it for them
and respond accordingly. (129)
SKILLS MANAGEMENT
Successfully making the transition to a hybrid, multi-skill organization constructed on self-directed, multi-
disciplinary 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.
The day of the single skilled mechanic or operator is at an end. Increased training is imperative with
declining experience and expertise.
The US Department of Labor recently estimated that 19 percent of all workers will be 55 and
older by 2012. Many companies are close to that today and anticipate a severe decline in
experience and performance as older workers retire over the next five years without the
opportunity to mentor their younger successors as was practiced as recently as 20 years ago. In
addition, there is the well-publicized educational gap where potential workers are not gaining the
basic skills necessary to move into highly skilled production and manufacturing positions.
Training is essential to the success of Asset Optimization. Leading companies recognize that training
contributes value. Within Asset Optimization training must be focused on specific competency objectives
that are reinforced by opportunities to practice, gain and maintain real proficiency in the work
environment.
A corporation has a skills aptitude and knowledge testing process that determines who is most
qualified and likely to achieve success in a given skill. Technicians are generally selected from
skilled trades. A joint Union / Management team governs the testing, selection, and training
process.(129)
Training and Education The Learning Organization
The learning organization is a competitive necessity in the global economy.
Every production organization must be knowledgeable and apply best practices across their
entire range of activities. Performance must be close to world class. Anything less is a significant
weakness that has, and will result in failure and closure of an entire operation.
Training creates enthusiasm, ownership for improvement and results. Everyone has observed people
coming back from training totally energized with many new ideas to apply toward improving effectiveness
and productivity. Facilitating broad dissemination and rapid implementation in the learning organization
maintains enthusiasm, builds ownership, improves performance and leverages the time spent on training.
A group of people returning from a comprehensive training course all were very excited and
highly motivated to apply their learning and implement a major upgrade of an existing program.
Faced with a cost / value gained question they had to back up a bit and determine the savings
gained compared to cost of implementation from actual information. It was a valuable exercise.
Since a great deal of training is technical in nature there must be continued emphasis and focus on
business linkage and results. People returning from training often must be reminded that process and
technical improvements must contribute to business results.
Requirements
There are several essential elements that must be considered in developing and managing skills:
Speed of achieving best practice performance is a significant competitive differentiator that is
highly dependent on the quantity and quality of training
Can the best people be expected to perform a task correctly if they have never been taught
and dont know how?
Industry-best organizations devote approximately 80 hours per year per employee (4 percent of
total hours) for skills training (80 hours are in addition to organizational, safety and special, e.g.,
diversity, training). More training is typically provided for specialized skills such as Automation,
Instrumentation and Control (I&C) and Information Technology (IT).
An industry leading company requires that every new employee receives 38 hours of training
before starting on the job and states that if people need training it will be made available. (129)
A second 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. (129)
A third company that doubled training over a five-year period reported gaining an annual
reduction in maintenance costs of $2 million, including the cost of training. (87)
Finally, a company reported that approximately 2 percent of annual labor costs are budgeted
for training. This works out to approximately 40 hours per year per employee, approximately
half the training time dedicated by industry-best. Two questions; with this activity metric are
they aware that their training efforts lag industry-best, and are they gaining satisfactory
results based on performance?
Training must be fully integrated into standard operating procedures train from and to
procedures
Personnel in rapidly evolving disciplines such as Automation, I&C and IT must train for the major
changes taking place in these disciplines
There must be opportunity for immediate on-the-job application
Training in asset optimization skills such as instrument calibration, CMMS operation, shaft
alignment, and failure analysis must be followed immediately by the opportunity to use, exercise
and improve the new skills on the job. Only by use are skills retained and improved.
Periodic follow up after initial training is required to assess proficiency
Periodic refresher training and recertification is necessary, especially for people who are primarily
used to fill in for absence and vacations.
Individuals trained in specialized skills for backup must have the opportunity to apply skills
periodically in order to remain current. For example, an individual trained in condition monitoring,
who is primarily in a backup role, should have the opportunity to take and analyze measurements
at least monthly to maintain proficiency with the process.
Employ performance based compensation for successfully completing training, demonstrating
performance with the new skills
Maintain a skill matrix to indicate requirements for training additional personnel
Training based on facility need training not allowed simply to gain incentive compensation
Categories
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 directed at reducing defects (requirements for work) and instilling people skills (to gain
consensus), is essential for moving successfully into an operating team organization.
Training can be made more effective by addressing chronic plant operating deficiencies and
bottlenecks. In this way people are working to correct real problems that are important to them.
Training in this fashion gains enthusiasm for the solution and ownership for successful
implementation. Lessons learned during this type of training are retained far longer than identical
training addressing hypothetical deficiencies. (77)
Training is conducted in a number of complementary areas. Within the training program it must be
recognized that many elements are complementary and require multiple skills. For example, it is very
difficult to train employees in the operation and use of the CMMS without sufficient computer skills.
Areas of training within Asset Optimization include:
Safety and Environmental regulations, requirements and culture
Organization / team skills and performance
General computer skills
Today, all production and manufacturing workers must have computer skills
Process / manufacturing technology
Years ago every new employee was given indoctrination and training in safety, the plants
manufacturing processes, function of different units and products before assignment to a
work crew. In many cases all except safety has been dropped to the detriment of the
employees performance and ownership.
Job skills; systems and equipment function, operating and repair procedures to assure highest
quality in all areas
Skill (multi skill) needed for advanced levels.
This is particularly important for facilities with multi skilled teams in which the lead may shift
several times during a job with all members expected to contribute.
Specialized processes Instrument Calibration, Lubrication, Failure Analysis (RCA), CMMS, Job
Plan Writing, Condition Monitoring (Vibration, Lubrication, Thermography, Ultrasonics, Motor
Analysis), Shaft Alignment,
The idea that many failure analyses can and should be performed at the crafts level is quickly
gaining acceptance. For this to occur, all crafts need to be trained in the data requirements and
benefits of failure analysis. Crafts who will be performing actual failure analyses need in-depth
training in the process.
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.
Training Program
One company states that an effective training and development program must have the following
attributes: (129)
Regular, reinforcing training in safe work practices, hazard recognition, and prevention.
A focus on providing the means and tools to achieve manufacturing and corporate goals.
A system to assure the continuing development of employee skills and knowledge.
Training constructed around requirements for skills.
Training must be selective and limited by opportunity to practice new skills. One company warns
that making training available without clear needs for the new skilled people allows the training
program to become a dash for the cash.
Opportunity to immediately utilize newly acquired knowledge and skills on-the-job
A means of achieving employee satisfaction, fulfillment and rewards for contribution
Retraining and recertification to assure skills retention and quality
Opportunities for multi-skilled crafts to contribute more to effective operation and gain appropriate
rewards for results
There is a difference between multi-skilled and cross-trained personnel. Too many 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.
Professional Education
In any discussion of skills utilization and management, the reduction in skilled professional staff must be
mentioned. Where even a modest-size facility used to have technical experts in a variety of disciplines,
these people if present at all today are very often heavily overcommitted. There is little time for
professional study and advancement or even identification of risk and opportunity as precursors to the
development of well thought-out, permanent improvement initiatives. Many facilities and companies that
profess a commitment to becoming industry leaders do not allow technical professionals to attend
conferences and seminars. Conference participation, networking, the learning opportunities gained
through the exchange of ideas and successes combined with the enthusiasm and heightened motivation
that always results from peer discussions, far outweigh the cost and perceived loss of time. Conference
participation is definitely a solid value opportunity in the asset optimization, continuous improvement
culture required for business success.
XI. EVOLUTION OF ASSET MANAGEMENT AT EASTMAN CHEMICAL COMPANY
Gina A. Lewis (2000-2003), Mark T. Mitchell (2003-2006)

Managers, Reliability Engineering & Rotating Equipment Group
Eastman Chemical Company
Many changes have occurred within Eastman Chemical Company in the four years that have
elapsed since this chapter was originally written by Gina Lewis. The original chapter has been
updated by Mark T. Mitchell in 2006 (updates are italicized).
Setting a vision is difficult but is often easier than determining the most efficient path to reach it. One
visionary manager at Eastman Chemical Company set the vision to proactively manage physical assets
using optimally applied predictive technologies. It took 6 years, the formation of a new department, and
the continual support of upper management to finally clarify the vision and document a corporate strategy
to attain the objective.
Proactively managing physical assets requires industry established tools such as predictive technologies
and information systems, but also requires the less talked about resources such as money and man-
power, training programs, opportunity, assessment tools and management champions.
This chapter will attempt to present a series of learnings that conclude by showing how all these tools
interlock to provide a comprehensive Reliability Strategy for Asset Management.
Update 2006 While Eastman has been very successful in the development of strategies for and
application of Predictive Technologies, we have found that technologies can only take you so far
if the culture does not support the application thereof. The Reliability Department alone cannot
carry the sole responsibility for a proactive mindset. Without a change in culture throughout the
entire organization, the company remains in a largely reactive state, only sometimes acting
proactively to avoid predicted failures.
Introduction
It is easy to become over saturated with information when looking to pursue asset management.
Reliability and asset management seem to be beloved industry buzzwords for the maintenance,
production, and management communities. It has become a very popular topic at conferences and has
even spawned a series of new technical associations and certifications. How is the term asset
management usually defined? Most literature or presentations tend to center around the one missing
link, technique, process, or technology on which a programs success hinges.
Can asset management be achieved by a single process or technology? Experience within Eastman
Chemical Company says NO. Achieving Reliability and Asset Management takes a number of industry
tools, the proper personnel, and a change in culture organized around a clearly stated goal. There is no
one tool, which can create success but rather each tool integrated with the others within a proactive,
reliability oriented culture to support a common strategy.
Eastman Chemical Company is currently a 7 billion dollar US chemical company with 12,000 employees
supporting 27 manufacturing sites worldwide. Primary products are the marketing and production of
chemicals, fibers and plastics. Within this diverse span of equipment and many discrete organizations,
Eastman initially began its reliability journey 20 years ago with the development of a vibration analysis
program. However, it wasn't until the mid 90's that "Reliability" became a buzz word for the company
because of support from the Vice President level.
Eastman Chemical Companys Asset Management and Reliability efforts have been concentrated at its
largest manufacturing site located in Kingsport, Tennessee. The Kingsport site includes four
manufacturing divisions and one utilities division with approximately 7,500 employees. Site equipment
ranges from small air conditioning fans to multi-million dollar turbine generators, from electrical room
starters to high dollar control systems, along with all manner of piping and fixed equipment.
Evolution of Asset Management at Eastman Chemical Company 202
THE CASE FOR CHANGE

The 1980s initiated a wide spread trend of industry bench marking. Specifically, Eastman, along with 40
other manufacturing companies, participated in Solomons Plant Reliability and Maintenance
Effectiveness study. The Solomons study served as a wake up call, highlighting an opportunity to
redefine maintenance from a cost center into a profit center. The most discussed standard used to
translate between the different manufacturing industries was Maintenance Cost as a percent of Asset
Replacement Value. Suffice it to say that Eastman was not content with their standing in the study. With
the Chemical industry beginning their traditional cyclic down side, cost cutting became a common theme
and this benchmarking data presented a very ready target.
A site Vice President & World Wide Maintenance Manager drove the Solomon benchmarking study from
within Eastman. This level of management support proved to be instrumental to the success of Eastmans
efforts. This Vice President brought three vital components to the initiative.
He owned the Vision,
Had the authority to command results, and
Enjoyed a career stable enough to afford him the luxury of assuming the risk necessary to support a new
initiative.
His first act was to create a new Reliability Department and to communicate his vision.
Update 2006 - While we still track Maintenance Cost as a percent of Asset Replacement Value, it
is not considered a primary effectiveness indicator. Eastman now utilizes other measures to
determine effectiveness such as our Eastman Corporate Reliability Measure (ECRM), where we
track measures such as Process Reliability, Overall Process Effectiveness and Causes of
Production Losses. Our mission in Reliability is to Increase Availability of the plant. Because
Availability is a function of Maintainability and Reliability, we are in the process of developing
measures to monitor our performance in each. Having these measures will allow us to better
direct our Reliability resources.
The Vision 1996
This vision was communicated in two parts. The discussion began with the display of two charts. The
premise centered on Predictive, Preventive and Condition-based maintenance, Figure 11.1. The cost to
perform Predictive or Condition Based Maintenance is very high at the beginning due to the capital
investment, training, and manpower required at the initiation of such programs. However, once absorbed,
this cost decreases and stabilizes unless an additional need for labor occurs. Eastman was in a good
position having already absorbed the steep portion of this curve.
The cost to perform time based Preventive Maintenance is fairly low in the beginning since potentially
defective parts are being changed before causing catastrophic equipment failure. However, costs steadily
increase as the preventive maintenance program begins to reach optimum deployment. Since set time
intervals and previous history are conventionally the only inputs directing program decisions, it becomes
difficult to limit the deployment of this strategy. With over-deployment, the company begins to incur
unnecessarily high spare part costs and takes on the added risk of causing additional equipment faults
due to unneeded human intervention.
The Reliability Department was told that there was a system called an asset manager that would allow
Eastman to perform condition-based maintenance. Management did not know where to find this system,
companies who might be in business to support it, or whether it should be designed in-house. The vision
had been communicated . It became the Reliability Departments job to find a way to align maintenance
with the vision. While this concept is not new today, it was a very progressive approach in 1996.
Preventative
Predictive Maintenance
Maint. Maintenance Maint.
$$$ $$$
Time Time
Figure 11.1 Lifetime Costs
The second half of the discussion followed with a sketched version of Figure 11.2. Chemical processes
are managed by sending process information (pressure, temperature, etc.) to a distributed control system
(DCS). The DCS then sends corrective signals to the field to keep the process operating properly.
Operations learn of a field problem when those pressures and temperatures cease to be controllable or
acceptable. Operations next step is to immediately pick up the phone and notify maintenance that
something is wrong.
Maintenance, on the other side of the manufacturing house, has a number of predictive tools available.
Tools, like predictive technology reports, work order history, etc, but information systems are not linked
to enable mechanics, planners, and schedulers to have early warning of the problem. As a result,
mechanics snatch toolboxes and hustle to the field to diagnose the equipment. Once diagnosed,
Diagram 1
maintenance sets about the repair, hoping parts and tools are available to complete the job. Reliability
was challenged to find an IT tool that must exist somewhere which could continuously monitor equipment
and notify of the mechanical, electrical or performance degradation associated with internal wear.
Reliability was given the command: Go find it! This tool would allow Eastman to perform optimal condition
based maintenance, known internally as Asset Management.
Managements vision was in place. The Reliability Department possessed no firm knowledge of how to
attain it, but at least the destination was known!
Update 2006 - Eastman has added equipment history and reliability analysis tools such as
Weibull Analysis to significantly improve the effectiveness of Maintenance programs. History is
exceptionally important for it represents exactly how an asset has performed in its operating
context as well as the highest probability failures.
By combining accurate historical data with accurate reliability analysis tools it can be determined
if a failure was infant mortality, random or wear out. If it is infant mortality, a proactive elimination
program shifts emphasis to purchase and installation specifications and procedures. If it is
random, predictive technologies are the most effective. If the rare case the failure is wear out, the
analysis helps determine the optimum interval for Preventive Maintenance. With these advanced
analysis tools, Preventive Maintenance can be shifted from suppliers recommendations to much
more effective data driven tasks and intervals. This process results in an initial decrease in repair
costs that are sustainable over time.
An important component of this is that Eastman is making efforts to properly mark failure data
information at the closure of a Work Order. This vital information is the basis of the failure
analysis and is audited regularly for accuracy. Audit reports are sent to work crews as a means to
communicate importance and assure capture of vital history.
The Authority
Solomon benchmarking highlighted Eastmans need to reduce maintenance cost as a percent of asset
replacement value in order to compete as an industry leader. Study results were shared at the executive
level but not well publicized in lower levels of the organization. Resistance to change was strong,
especially in production areas where production initiatives were easier to understand and embrace. Upper
Managements elevated position forced Reliability to become a company driven initiative, on equal footing
with increased production, and second only to safety. Reliability programs driven from the bottom up had
failed numerous times, especially when driven by the maintenance organization. Eastman needed a top
down approach, if for no other reason, to communicate the benefits to middle managers who would not
have slowed down to listen otherwise.
Non-Integrated Condition Guesswork
Process
Process Management
Management Asset Management
Temperature
Pressure Vibration
Flow Rates
Data Oil
Historian Analysis
Process Information
D Infrared
C
S
Etc. . .
Process
Control
SAP
MMIS Work Order
History
Figure 11.2 Information Requirements
Risk Assumption
Doing things differently incurs a level of risk that can be absorbed by a number of individuals lower in the
organization or by one person sheltering those underneath from higher in the organization. The Vice
President position was able to absorb the risk so that the company could experiment, within reason, and
either succeed or learn from failure.
During a two-year period, company investment exceeded over a million dollars directed at piloting various
asset management systems. Of these pilots, the first two returned $0.00 on investment. Had the risk
been absorbed lower in the organization, all efforts would have ceased and the initiative would have been
labeled a failure. Continued Upper Management support for efforts that attempted to attain the vision was
successfully rewarded with the third pilot effort. The third effort returned a NPV of $.5 million deferred
Maintenance Costs and a $1.3 million NPV increased production.
Update 2006 - The system, when applied to a chronic problem, helped solve the problem, but
front-end set-up was enormous. Once the problem was solved, the manpower needed to sustain
it was not easily maintained. The Reliability Group had just added another IT system that
Operations/Maintenance/IT was not interested in learning or sustaining. The system was
eventually abandoned.
The lesson learned was that attempting to solve a problem with tools rather than developing a
strategy for sustainability runs a high risk of failure. Good ideas must have continuing
organizational drive. Long-term management of an IT type tool must include a sustainability
process similar to that of a DCS or PLC system.
LEARNINGS FROM THE PILOT PHASE

The following have been the primary lessons learned during the ten years the program has been in effect:
Equipment tends to be well instrumented in support of process control, however, is usually poorly
instrumented in order to support the physical assets health. It was found that in most cases, this
is sufficient. Eastman found that most machine trains are instrumented adequately to proactively
identify the equipments most prevalent failure modes.
Support from the Top Down is important, especially during initiation, but eventually, Buy-In from
operations and lower ranks must occur for the effort to be sustainable. Allow the program or
system to sell itself based on the value it provides to the user. Upper management tends to move
frequently and cannot be counted on to sustain the effort.
Engineering costs and time requirements are a high percentage of implementation costs of Asset
Management Systems during the early deployment stage. Capital alone will not resolve problems;
an investment in human resources for long-term sustainability is key.
Black Box processes, where the dynamics are not clearly understood, make excellent candidates.
Even if the effort is ultimately unsuccessful, understanding of the process/system/equipment has
most likely occurred to the point that a number of smaller improvements can be implemented.
Time based trends are very limited for general equipment diagnostics. Most trends need to be
qualified by process run conditions so that similar events can be compared.
Update 2006 - It should be noted that Eastman is currently pursuing greater use of the process
historian to correlate operating data with mechanical equipment data via Reliability Databases.
With site personnel very familiar with the process historian it is relatively simple to establish rules
that become part of the historian and thereby circumvent the necessity of supporting a
specialized, foreign system.
Asset Management Systems are too expensive to apply to all processes and equipment.
The Goal should be to identify Chronic Problems, not the sporadic problems. Most things degrade
with age. Unfortunately, the human sensory system cannot detect the subtle daily changes
associated with wear and tear in equipment. On-line systems are great at keeping track of these
small changes. If programmed properly, these systems can notify the equipment owner of the
most cost effective time to intervene and bring the equipment into acceptable operating range.
(This learning highlights a significant difference between an asset management system and a
DCS system. A DCS is typically designed to disguise small deviations until they can no longer be
compensated for. An asset manager captures these deviations so that causes can be determined
and corrected.)
Update 2006 - Eastman never reached this stage. The labor costs to set up the system for
general use were prohibitive. As stated earlier, Eastman determined that Asset Management
capabilities needed to be built into existing systems such as the data historian. It has significant
capabilities and operations people use it very effectively. There are other systems in use and
familiar to operations personnel that allow significant computing/statistical analysis capabilities.
Leverage the vendors knowledge; good vendors know how other companies are managing some
of the same problems.
Update 2006 - Any Asset Management system must have broad acceptance and long-term
sustaining support similar to that of a PLC or DCS.
System Technical Expectations
Compliance with industry standards such as OPC is essential, for both server AND client.
Data Collection Methods are critical to long-term success. Systems must be configurable,
eliminating nuisance alarms, so that system observers know when to take action.
The system supplier must have web-based, net-workable system. PC Client Software can work in
very small companies but again, limits accessibility to the information.
Whichever systems are selected, should, in general, be user friendly and not require extensive
training for casual use.
Most Important Learning:
Asset Management is a business strategy for managing assets!
Asset Management is not a computer system, a toy or a technology
Update 2006 - Eastman Chemical has good plans for managing assets. If there has been one
deficiency in the implementation, it has been the attempt to apply Asset Management practices
and tools without building a long-term management strategy that included changing culture.
STATUS UPDATE: WHERE IS EASTMAN TODAY?

Today, Eastman has learned to approach asset management by breaking equipment down into
manageable groups. Once equipment has been divided into categories, i.e. Electrical and
Instrumentation, Fixed Equipment, or Rotating Equipment, a set strategy can be applied. It doesnt matter
how categorization takes place as long as it provides an organization for strategies to be developed.
Rotating Equipment will be discussed as an example. Eastman calls its strategy for managing Rotating
Equipment, the Asset Management Index (AMI) process. All rotating equipment has been ranked using
three components:
1. Criticality Ranking The Criticality Ranking is a measure of how important the equipment is to
producing a product
2. Estimated Asset Replacement Value Ranking This is a measure of risk. For example, with
current process definitions, two spared pieces of equipment would each have a production
criticality ranking of 3. The company is willing to take more risk with a $5,000 spared centrifugal
pump than with an unspared multi-million dollar turbine generator. Due to the cost of catastrophic
failure and time to repair, the turbine generator requires more predictive and Preventive
management than does the relatively inexpensive pump.
3. Net Present Value of Average 3 year Maintenance Cost This component is a measure of
historical reliability. If certain equipment is costing a disproportionate part of the maintenance
budget and/or manpower, this is a flag to intervene with a management strategy.
AMI indexing results in rotating equipment falling into one of four buckets which allows an appropriate
strategy to be applied from each of the individual buckets. Obvious to this discussion is that Eastman has
a significant amount of data readily available. This was true for most of the 25,000 rotating equipment
trains indexed at the Kingsport Site. This indexing of rotating equipment has also been applied at
numerous small sites without requiring mounds of historical data. A series of simple questions can be
asked of knowledgeable people for similar results.
The corresponding strategies for each of the AMI levels are:
Level 5 Preventive maintenance, but otherwise, run to failure.
Level 4 Preventive Maintenance tasks and frequencies are established per Eastmans Preventive
Maintenance Standard. Focus is on devising the most cost effective means for maintaining equipment, a
Run to Failure strategy may be adopted where appropriate.
Level 3 Standard Preventive Maintenance and Predictive Maintenance activities and frequencies are
established per Eastmans Predictive Maintenance Standard. Focus is on devising the most cost effective
means of maintaining equipment, using Predictive or condition monitoring activities, when applicable.
Equipment falling in the Level 3 category is evaluated for standard walk around analysis using Vibration
analysis, Motor analysis and Oil analysis.
Level 2 Standard Preventive Maintenance; focus is on devising the most cost effective means of
maintaining equipment, including the use of on-line technologies where economically justified. This
includes on-line systems capable of scanning equipment and storing on-line trends of performance
combined with walk around methods.
Update 2006 - Today, wireless methods are becoming more attractive.
Level 1 Standard Preventive Maintenance and Predictive Maintenance activities should be designed
through the application of some disciplined reliability maintenance approach to determine a least cost
maintenance strategy, doing the right maintenance to the right equipment at the right time. This includes
on-line continuous monitoring systems with built in intelligent alerts to notify the user when corrective
actions should be taken as well as less expensive technologies where appropriate.
An internal assessment of AMI Indexing produced the following summary:
Results of AMI Workshops
Asset Mgt. Level % Of Rotating Equipment
Assets *
Level 1 0.5 2 %
Level 2 24%
Level 3 24 30%
Level 4&5 65 75%
* The Kingsport site contains approximately 25,000 rotating equipment trains with slight variation in
results for the various operating divisions.
The results can be loosely interpreted as: 65 to 75 percent of equipment should have the lubrication
serviced on some frequency but should otherwise adopt a run to failure strategy. Approximately 25 to 30
percent of Eastman rotating equipment should be monitored at a set frequency using the walkaround
technologies of vibration, oil and motor analysis. 2 to 4 percent of rotating equipment warrants creating
trends using the plant historian for performance monitoring or scanning type device for mechanical
monitoring and less than 2 percent of the plants equipment warrants a high level of monitoring with on-
line protection and analysis. Level 1 equipment is the heart beat of the plant and may require mechanical
on-line monitoring for machinery protection and trouble shooting. Protecting this equipment at such high
cost must be justified by impact of failure.
Vision 2001 Update for Rotating Equipment:
Maint. Level 3 --
$$$ Equipment
Level 4 --
Equipment Time
Diagram
Figure 11.3 Revised 3.
Asset Management Vision
The 1996 vision has been revised for Rotating Equipment in order to reflect the knowledge gained during
the previous 5 years. See Figure 11.3. The original vision of condition based maintenance for all
equipment is not practical with the tools and technologies currently available. Eastman now applies the
AMI strategy and invests where it makes the most business sense. Similar approaches and strategies
either exist or are being developed for the remaining two categories of manufacturing equipment within
Eastman.
DEVELOPMENT OF THE RELIABILITY MANAGEMENT MODEL

The depth of knowledge gained by having gone through the exercise of pursuing upper managements
vision eventually resulted in the development of a Reliability Management Model. The following
management model summarizes how to approach reliability from a comprehensive business perspective,
including infrastructure, predictive technologies, or any other process or tool thought to be related to
reliability.
Figure 11.4 is a pictorial view of Eastmans Reliability Management Model fondly referred to as the Tank
Model. It has become an effective tool for communicating the big picture, illustrating how each aspect of
reliability ties into one solid approach to moving Maintenance and Reliability into a profit center!
Reliability Management Model
Needs and Opportunity

Assessment
Analysis, Prioritization, and Planning
Reliability Improvement
Process Defect Asset Management

Improvement Elimination Plan Development
Integration into Business Processes
Capital Operations Maintenance

Processes Processes Processes
Remove
Costs
Supportive Management System and Work Culture Changes from the
System
Business Goal Alignment/Vision/Strategy
Management Management Middle Data Collection/
Opportunity Resource Employee
Awareness/ Champion/ Management Information
Assessment Allocation Training
Training Leadership Commitment Systems
Diagram
Figure 11.4 Eastman Chemical 4.
Reliability Management Model
Explanation of the Reliability Management Model

Each sustainable effort must have a solid foundation or the effort will crumble when faced with
challenges. It is believed that before a step change occurs within an organization, the following
foundational areas must be addressed:
Management Awareness/Training Does upper management support the effort? Have they received
adequate training so that they are not only aware of, but can communicate the reasons and benefits of
supporting this effort? If Upper Management does not understand the impact and project time frame for
financial return, support will erode and will either crumble or be crushed from the top down. Never
assume they should know.
Opportunity Assessment What will the organization gain from this effort? Are we looking for increased
production, reduced maintenance costs, consistent meeting of shipment deadlines? What is the big
picture? What opportunity exists? This needs to be simple so it can be held up to the troops. There will be
many details that will side tract the effort unless the one objective is clearly stated.
Management Champion/Leadership Someone within the organization must be assigned the
responsibility of championing the effort. It is often said that if no one is asking about progress, how
important can it be? When there are so many urgent things crowding the work plate, the important tasks
can be pushed aside unless someone in management is tracking and driving the plan.
Middle Management Commitment It is not enough to have buy in at the top and support at the bottom;
middle layers of management must be included in the training so that there is a consistent message
throughout the organization. Middle management can kill the effort by simply ignoring it. Middle managers
are typically pulled in so many directions that the new reliability initiative could get lost when stacked
against the everyday task of shipping product through the door.
Resources Allocation Reliability pays for itself! True, but like any new venture, there are often up-front
investment costs in order to enjoy the pay back. In addition to the capital required to acquire predictive
monitoring technologies, correct defects, or reschedule production to make a process improvement, there
is the need for manpower. Asking someone to work on reliability issues, in addition to their regular
workload, will almost always fail. Reliability, by definition has long-term payback, unlike most of the
urgent-less important things dealt with daily. The reliability initiative will not achieve desired payback
unless the organization counts the costs up front and plans for the required resources.
Employee Training A reliability department was formed in 1996 with the directive of go forth and make
Eastman reliable. Members of this new department required training in the various technologies and
problem solving techniques. Management required training to understand the new language associated
with Reliability. Operators, mechanics, and others required training to understand reasons for doing
tasks differently.
The training program should address the appropriate audience and should be flexible enough to meet
various work schedules. Note also that is does not always need to be formal classroom instruction;
informal mini-topics during team meeting are a very cost effective alternative.
Data Collection/Information Systems Data should drive decisions. Data should drive where root cause
studies are conducted, how predictive technologies are deployed, and how resources are allocated.
Some infrastructure to be considered: A Maintenance Management Information Systems (MMIS) to track
equipment histories and aid the planning and scheduling function, a system to support the consolidated
reporting of predictive technologies, a plan or system to track cost versus savings attributed to the
program, a database to track root cause findings, etc
It is not necessary to have all these foundational elements in place before initiating a comprehensive
reliability effort but know that their absence will make progress more difficult. Manpower and frustration
will replace the investment of infrastructure if the cultural, human and change management elements of
improvement are not in place within a sustainable strategy. Address these issues as early as possible and
proactively decide the manner in which they will be addressed. This approach will minimize confusion and
frustration and will help to sustain the effort.
With these foundational elements in place, one thing is lacking. Reliability initiatives should be tied directly
to both the long and short term business goals and have a vision and strategy to drive them there.
Example: Eastman Chemical Company promised shareholders to shrink cost structure by the year
2000. Portions ($$$) of that promise were assigned to various organizations. Correspondingly,
Maintenance received a significant portion. The Reliability Department worked with Maintenance to
develop a targeted strategy for the reduction. Operations received a portion ($$$) with the direction
to produce more product with existing assets. The Reliability Department worked with operations to
define a plan to improve processing reliability. These plans were unified and were then
communicated throughout the department and presented to all the various business units for
understanding and support. All parties knew how their assignments specifically linked to the
business goal and were met with full support by both operations and maintenance.
Update 2006 - As a point of interest, the drive for improvement continues in 2006. Terms are
bottom line improvements, gained by increased production/sales and reduced Cost of Goods
Sold (COGS). With an objective of improvement at the bottom line, the results of improvements in
both process and technology must be verified by Finance. Traditional measures such as avoided
cost have lost relevance in today's culture.
Needs and Opportunity Assessment
With a foundation in place, the process begins at the top of the tank. A needs assessment is required at
the business unit, process line, or component level. An example might be a combing of process XXX
production line to determine sources of lost product. Corporate Reliability measures may be used to
highlight the organizational need. A maintenance assessment may pinpoint the need.
Analysis, Prioritization and Planning
Once needs are known, they should be prioritized according to their ability to support the business goal. If
the business goal is to increase production, that should drive the prioritization, if elimination of shipment
delays, then process down time should be used to prioritize, etc
What is needed to make the improvement? Does the process require an operational change? Is defect
elimination needed for the equipment, a production line, or an administrative process? Does the asset
have a management plan? The answer to these questions will determine which tool to use in the
resolution.
Integration into Business Process
Once solutions are known, they should be integrated into the associated Business Processes. This step
often includes crossing organizational and functional boundaries.
Example: A manufacturers pump currently causing problems in one area of the plant may be
causing problems in other areas. If so, the solutions should be integrated throughout all affected
systems. Results: Purchasing receives modified purchasing specifications. Component
modifications become integrated into the stores process so that existing bad stock is cleared. The
repaired equipment is temporarily placed on routine vibration monitoring to assess effectiveness
of solution. Etc
Integrate the solution into all affected business processes! This block highlights the resources issue
mentioned previously. If an employee is asked to add reliability to their current job description, it is
doubtful they will have the time to follow all the integration issues to completion. This makes for a very
frustrating job and only localized improvements.
Determine the need. Prioritize according to the business goal and plan resources accordingly. Use the
most appropriate tool to solve the problem! Build the solution into the way you do business. The only note
is that Reliability is not just a maintenance issue. This model works whether trying to drive customer
complaints down or increase pounds produced. If the steps are observed, the process will result in
draining unnecessary costs from your organization.
Conclusion
This is how Eastman Chemical Company, at the Kingsport site, manages Reliability. Rotating equipment
and fixed equipment are both managed by these processes and a strategy for E&I is under development.
These strategies are being shared with all new sites via a corporate integration team as part of the 2001
cost reduction plan. Tennessee Eastman Division has seen a step change in maintenance cost and a
corresponding increase in production output with the added difficulty of having fewer employees.
It works! The difficulty for Eastman was getting organized to drive all the tools from a single business
goal. Perhaps this rings true for your organization as well.
XII. DATA AND INFORMATION
Optimizing operations and maintenance requires everyone on the same page, at the same time,
with the same information.
Asset Optimization requires and generates rich data and information that must be provided by, and
available to, a broad range of providers and consumers. Data and information provide the basis for
identifying improvement opportunities that can be taken advantage of in the Asset Optimization program,
measuring the effectiveness of improvement initiatives and assisting in vital operating and production
decisions. The information structure includes a number of specialized applications that must communicate
in order to derive and present vital information required for effective production and work management.
DEMONSTRATE CONTRIBUTION, VALUE AND PROGRESS TO OBJECTIVES

Asset Optimization must be part of the overall business information and improvement process. The
importance of information cannot be overemphasized. If a product is not delivered within time, cost, and
quality constraints, this vital information must flow back into the Asset Optimization process as an
essential opportunity for improvement. Decisions made by sales, marketing, and operations all affect
opportunity and priority within Asset Optimization and likewise must be communicated throughout the
Asset Optimization program structure.
Asset Optimization is vital to verifying that the availability and effectiveness of physical production assets
(capacity) is sufficient to meet requirements for product and/or service delivery. Production forecasts
based on factors such as order intake, historical demand, season, weather, etc. must be supported with
asset capacity forecasts based on actual condition and scientifically projected asset lifetime. This aspect
of Asset Optimization provides far greater confidence that actual capacity will meet production demands
when compared to the statistical averages commonly employed in less enlightened systems. As the sole
supplier of accurate estimates of current and forecast capacity, the Asset Optimization process is a crucial
element of realistic production forecasting.
All involved in the Asset Optimization process, whether directly or indirectly, must share ideas about
requirements, 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 solutions not used to assign blame. An Executive Dashboard illustrated in Figure 9.4
provides an overall view of the flow of Asset Optimization capacity and effectiveness information through
an enterprise.
Chapter IX discussed metrics and the concept that metrics score performance within a business
environment. To effectively gain and maintain ownership for the improvement process, graphs of
performance metrics should be widely distributed, displayed, and discussed in employee meetings. The
organization should be sufficiently 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 and best practice on the
company's intranet site. Other plants feed back yes / no / 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. (129)
Another company maintains an accessible list of corporate best practices in each of nine key
areas. Each best practice includes a contact person responsible for additional information and
improvement.(129)
Employees ARE interested in performance information! Good performance represents success,
satisfaction and job security. Most employees are interested in what they can do to improve performance,
and delight management and customers. Involved employees should be able to see and be rewarded for
the impact and value of their individual and group efforts. Experience indicates that displaying results
Data and Information 212
encourages employees to offer even more improvement suggestions, regardless of whether or not they
will be rewarded.
INFORMATION REQUIREMENTS AND USE

Information is vital for direction, prioritization, and measurement of results. Information required within an
Asset Optimization program includes:
Current and projected performance and condition, projected lifetime (prognosis).
Equipment specifications, operating and repair history.
Operating and maintenance recommendations.
Task instructions.
Safety precautions.
Continually updated lifetime operating performance and costs.
Sources, flow and use of information is pictured graphically in Figure 12.1.
Decision Support
What is the optimum course of action
Work
WorkManagement
Management(CMMS)(CMMS)
for a given set of circumstances?
Work
Workrequired?
required?What?
What?When?
When?
Business,
Business,Finance
Finance(ERP)
(ERP) Work
WorkPlanning
Planningand andScheduling
Scheduling
Current
Currentlifetime
lifetimecost
cost PM
PMand
andPdM
PdMScheduling
Scheduling
Operating
Operatingeffectiveness
effectivenessofofassets
assets Status
Statusofofexisting
existingwork
work
Material
Materialrequests
requests
Production
ProductionScheduling
Scheduling(MES)
(MES) Work
Workhistory:
history:time,
time,cost
cost
How
Howlong
longisiscapacity available?
capacityavailable
available? Work
Workeffectiveness
effectivenessmetrics
metrics
How
Howlong
longisiscapacity
capacityneeded?
needed? Reporting
Reporting
Process
ProcessControl
ControlAutomation
Automation Stores
StoresManagement
Management
Current
Currentmech.
mech.condition
conditionby byasset
asset Parts
Partsinventory,
inventory,replenishment
replenishmentstatus
status
Rate
Rateofofchange condition
changeininmech. condition
condition Parts cost
Parts cost
Projected
Projectedlifetime
lifetime/ /Capacity
CapacityIndex
Index
Problem
Problemidentification
identification/ /severity
severity Reliability
ReliabilityEngineering
Engineering
Process
Processperformance
performance Ownership
Ownershipofofthethereliability
reliabilityprogram
program
Opportunity
Opportunityidentification
identification
Documentation - -Cost,
Documentation Cost,Availability,
Availability,Emergency
EmergencyWOs WOs
Asset
AssetRegister
Register/ /MEL Risk
MEL Risk/ /threat
threatanalysis,
analysis,prioritization
prioritization
P&IDs Defect
P&IDs Defectelimination
eliminationplans
plans
Asset Design
DesignSpecifications
AssetMROMROHistory
History Condition Assessment
What
Specifications
How
Howdiddidasset
assetperform
performinin Whatisisasset
assetsupposed
supposedtotodo?
do?
the
thepast?
past? Status current condition by asset
Cost
Cost/ /MTBF
MTBF Health assessment, lifetime prediction
Condition Measurements Rate of change in condition
What is Asset doing now? Alarm on change in condition
Problem identification and diagnosis
Projected lifetime / Capacity Index
Figure 12.1 Information Sources, Flow and Users within Asset Optimization
Information Availability and Distribution

Data and information are the internal lifeblood of an Asset Optimization program and one of the most
valuable products. Referring back to Figure 12.1, the information necessary for Asset Optimization is
resident in Production and Enterprise Planning, Process Control, Maintenance Management (CMMS),
integrated Business and Financial systems (ERP/EAM). Asset Optimization draws from and supplies data
and information to all.
Information defining asset status, current performance, availability, projected lifetime and cost are needed
at the outset and throughout an Asset Optimization program. At the top of the information structure, full
information must be widely available to advise executive, managerial and supervisory decision makers of
the optimum courses of action to maximize profitability and return.
An effective information system must provide information, not disconnected data, to management,
support and crafts personnel where and when they need it. This requires not only interoperable computer
systems, but also a reworking of the manner in which computers process equipment data and present it
as information.
Accurate information must be available to Production Scheduling and control systems to detail conditions
that define immediate and long-term production availability and capacity. The work management function
must have access to information such as stores records to determine the availability of repair parts.
Reliability engineering and improvement teams need access to operating, maintenance and cost records
in order to identify and prioritize opportunities for improvement.
The least reliable systems and equipment, those with highest repair costs, lowest availability and
responsible for the greatest number of emergency, unplanned Work Orders, all represent
potentially high value opportunities for improvement initiatives.
Technicians engaged in condition monitoring and assessment must be able to initiate work requests to
correct anomalies that they identify, and follow up to assure corrective action is being taken.
Data developed during the Asset Optimization process are, in many cases, the origin of information that is
vital to production, production planning and supply chain / logistics management. Information includes
current condition and projected lifetime as well as the presence and diagnosis of problems. A potential
problems probable impact on remaining lifetime and / or production rate is especially important. This
information is combined with information derived from control and other management systems such as
operating efficiency, operating and maintenance history, status of work and spare parts availability for a
complete snapshot of current and projected asset performance.
As stated by the Maintenance Superintendent in a world-class refinery: The road to solutions
begins with identifying issues and that requires accurate data.
Essential information that must be accessible within the information system includes accurate figures of
payroll hours and overtime as well as all components needed to calculate metrics.
All the information shown in Figure 12.1 is necessary and must be readily accessible. Information must
also provide answers to the following:
What is a given asset designed to do?
What is it supposed to do? (expectations are often different than design)
What is it doing now?
What can it be expected to do?
Has it experienced problems in the past? If so how were they resolved?
Combine all of this with detailed operating and maintenance instructions and instant communications.
Experienced people with ready access to documentation achieve higher productivity and can accomplish
more with greater efficiency.
Information within a Typical Organization
There is a growing awareness that corporate Information Systems / Technology (IS / IT) departments are
becoming a powerful force in the selection and support of asset management technology; refer to Chapter
XI for some practical experience. Several functions, including IT, Finance, Control Automation and
Maintenance may claim ownership of information vital to the Asset Optimization program.
The real question is who owns and defines technology requirements, access and reporting. Is it those
who know the process, will use the technology, and are responsible for results or those developing the
corporate information structure? The two must meet somewhere in the middle. It is vital to be able to
accommodate and access a broad range of information originated within systems as diverse as finance,
process control, work management, predictive monitoring and others. The key objective is for the
corporate information system to support business, operational and maintenance objectives as effectively
as possible. Effectiveness is more a question of access and ease of use rather than ownership.
Data access for identifying opportunities and measuring performance is often an issue. Organizations with
an integrated business and financial (ERP/EAM) system, typically controlled by IT, often require IT control
of data access. If a user wants information the necessity is specified in a formal request submitted to IT.
IT provides a cost and time estimate that if approved, eventually results in a report that may or may not,
often the latter, meet expectations. The process is cumbersome and often ineffective.
Alternatives for Access to Information
The capability to data mine, analyze and discover opportunities for improvement by information users at
the plant level is absolutely essential. Going through the process of data acquisition and analysis
significantly increases local ownership, enthusiasm and commitment to the ultimate improvement
objective. Question is whether IT provides the data or the tools to access the data.
Many make the case that all the data required for asset optimization is available within a typical ERP/EAM
and can be extracted by people who know the system. A common reply is that the information reasonably
available directly from the ERP/EAM system isnt sufficient for operational purposes and as users they
dont have the time or skills to locate, extract, sort and analyze the detailed information needed in the
asset optimization decision process. Information users must rely on an overloaded plant expert or IT
department for the data necessary to identify and refine opportunities for asset optimization. Not a good
situation.
Many agree that gaining the data necessary to develop improvement initiatives from an ERP/EAM system
is overly complex and time consuming, requires a greater level of proficiency than should be required by
an average user and detracts from the real objectives of locating opportunities for improving asset
performance and effectiveness. A frequent comment is that the bulk of time, energy and intellectual effort
available for Asset Optimization should be spent analyzing data and developing corrective actions rather
than acquiring data from an ERP/EAM system.
Fundamental information requirements for asset optimization include accurately sorting systems and
equipment by parameters such as:
Maintenance cost over a specified time period
Lost availability / forced outage
Source of schedule break, Emergency Work Orders
Other elements that affect performance to individual station objectives
The data acquisition and analysis may be performed by a central group of ERP/EAM experts who then
provide results to the asset optimization team. As stated in the previous paragraph, direct discovery and
analysis by information users rather than ERP/EAM system experts has numerous advantages and is a
key determinant of full success. The best and most effective solution is for the ERP/EAM system experts
to provide easily used tools that support business, operational and maintenance objectives as easily and
effectively as possible rather than simply supplying data. The tools should allow the data mining and
analysis task to be performed by personnel with no more than a few hours training, and possibly
performing no more than two or three analyses per quarter.
The use of Microsoft Excel for data access should be considered. Excel is easy to use, resident on all
desktops and includes powerful sorting tools that are quickly understood by most everyone who uses
Microsoft Office. Constructing easily used access tools is a much better investment in time and
resources than attempting to train numerous people who should participate in the analysis process to the
necessary level of proficiency on the ERP/EAM system.
FUNCTIONAL USE
Accuracy and consistency between information systems is a key element to the specification, success
and evolution of an Asset Optimization process. Major differences often exist between the asset
hierarchies utilized by Production, Maintenance and Finance. When this occurs, it is virtually impossible to
extract comparable cost and availability data. Vital facility documentation such as P&IDs (Process and
Instrumentation Drawings) and the Asset Register / Master Equipment List must be up to date and
accurate to what is actually installed. Each must be verified at the commencement of the Asset
Optimization program. The Production, CMMS and Finance asset hierarchies must all be aligned.
Implementation of the functional hierarchy must provide an accurate cost roll up from the component level
as a minimum, to equipment, system, area, business unit and plant. The ideal configuration must also
have provisions for cross roll up capable of identifying costs by equipment type and component in an
entire area, business unit, plant and enterprise. In this way, common facility wide statistics for equivalent
equipment life and cost, as well as deficiencies, can be identified and evaluated.
Decision Support
Decision Support is the heart and core of the Asset Optimization information system. It converts
equipment operating and condition measurements into actionable, predictive information. The hierarchical
model outlined in Chapter XIII, Figure 13.1, is constructed around the information exchange needed for
decision support. The decision support process itself must accumulate complex static and dynamic
operating data from a variety of sources for collective evaluation. This result is a comprehensive picture of
current asset condition and predicted lifetime.
Today, decision support is largely accomplished manually by experts. With links providing greater access
to more data at less cost, increased resources can be applied to extending and improving the vital
decision support process. Automated systems that are available from several suppliers provide more
advanced screening, recognition of smaller deviations from normal, correlate multiple changes, identify
problem severity and perform diagnostics. Adoption of these systems allows scarce human expertise to
be concentrated on tasks with highest economic value risk and failure analysis as well as developing
corrective action for complex deficiencies.
Accurate decision support increases cost effectiveness, allows tighter delivery schedules and provides
the basis for more accurate business and financial forecasting. It reduces risk, capital and cash outflow
for manufacturing (operations), maintenance and logistics planning and support.
Business and Finance
Business and Finance functions need access to all the information necessary to formulate and issue
management reports. Top-level views such as site and unit RONA / ROCE, cost and production
effectiveness should be producible automatically without human transfer.
Production Scheduling and Control
Both Production Scheduling and Process Control need information that accurately defines the condition
and capacity of all production assets. The primary difference is the time horizon. Production Scheduling
needs assurance that full capacity will be available to meet scheduled requirements this may be days
to weeks, months or even more. Shift change is the time horizon of most process operators if we can
make to the end of shift anything that happens after that is someone elses problem! Between these two
extremes there are many intermediate requirements for the same information.
The information most useful to Production Scheduling and Process Control is typically a gross indication
of current condition and accurately predicted lifetime. Problem diagnosis and the details on which the
diagnosis is based are probably not useful or needed within production scheduling and control.
One organization wanted a simple traffic light system that could be displayed on the control
system mimic adjacent to the asset symbol Green, OK; Yellow caution, anomalies present but
OK to operate; Red; problems present that limit operation, action required.
The same organization (a power generating company) advocated a second, condition rate of
change indication consisting of a zero center display with plus and minus either side to indicate
improving or declining condition. Their logic was that adjustments to parameters such as load
(real and reactive power) often reduced symptoms sufficiently to continue operation through a
period of high demand. They wanted to be able to make and view the effects of operating
adjustments on degradation symptoms in real time.
Another organization, also a power generating company, had implemented a similar system with
drill down capability to allow operators to view comments, work orders and other documentation
pertaining to abnormal conditions displayed on the control mimic. Operators could see up-to-date
status and were given the capability to add comments and observations that could be useful in
diagnosis and solution.
A third 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.
(129)
Work Management
Many organizations state a strong preference for full integration between Work Management and
Condition Assessment systems. When asked for details of an ideal system, few can be specific. A
Maintenance Management (CMMS) System is the repository for a great deal of information that is
essential for both the Condition Measurement and Decision Support functions. However, since both
CMMS and condition assessment systems are specialized applications with unique, exclusive
functionality and displays, many have concluded that interoperability is better than integration.
In this model, Planners and Schedulers have access to all diagnostic information that led to the issuance
of a work request / notification (including the person making the diagnosis as some are typically known to
be more reliable and / or excitable than others).
Scheduling periodic predictive condition measurements is likely to become an 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.
As stated in the previous chapter, designating the origin of work within the Work Management system is
all-important. In many facilities, work that originates from conditions discovered during condition
monitoring is entered into the system as corrective. Without the condition monitoring origin it is impossible
to determine the effectiveness and value produced by the program.
The Work Management function needs direct access to inventory records to determine parts availability.
In all integrated ERP/EAM / CMMS applications this is built-in.
For scheduling purposes the Work Management system needs current status of parts and indication from
stores when all parts required for a given job are available and kitted ready for use.
Comments describing conditions found, components affected, probable cause, corrective action and
anomalies or issues present upon completion of work must be noted in a permanent equipment history
record at Work Order closeout. This information is invaluable for planning future work, e.g., a pump shaft
or wear rings at maximum tolerances that will have to be replaced in the foreseeable future. The
information must be searchable using numerical codes for conditions found, components affected,
probable cause and corrective action. The information must be fully accessible to Reliability Engineers
analyzing failure cause and repairs.
Reliability Engineering
Reliability Engineering needs access to virtually all asset related information. Operating and Maintenance
records are essential for identifying assets that fail to meet availability requirements, consume excessive
costs and are responsible for emergency work.
In some cases, data and information necessary to define major deviations from performance objectives
either doesnt exist or is spread across incompatible applications where access isnt readily available.
Clever professionals find ways to circumvent the barriers. As mentioned earlier some have extracted data
to Microsoft Access and utilized Excel pivot tables very effectively to mine, search and perform Pareto
analyses to identify deficient assets from vital information such as spending, availability and emergency
work required. From there they can utilize time most productively analyzing cost and availability history to
identify potential opportunities and develop plans for improvement.
Use of Access and Excel with all available data has an added advantage over fixed reports. The
Reliability analyst / engineer may not know exactly what information is required in a given situation until
the investigation is well along. Under these conditions it is imperative to have unrestricted access to all
potentially relevant data together with the ability to search and sort in a variety of ways.
It is also necessary to have an unrestricted ability to drill down into data and perform operations such as a
second Pareto on Pareto sorted data.
Although not illustrated in Figure 12.1, reliability systems, including Reliability Centered Maintenance
(RCM), Root Cause Failure Analysis (RCFA) and associated analytical tools such as Pareto Analysis are
included in Asset Optimization, see Figure 5.3. All must be fully interoperable with the condition
assessment and maintenance management systems within the Asset Optimization information system
architecture.
Condition Assessment
Referring again to Figure 12.1, a significant portion of the information needed by an Asset Optimization
program to define current asset condition, predict future capacity and the ability to deliver, originates from
specialized condition measurements. These include on- and off-line dynamic vibration; operating, and
process measurements such as temperature, pressure and flow, fluid (lubrication and hydraulic oil)
characteristics, motor operating current and static impedance characteristics; ultrasonic measurements
and thermographic temperature images.
Described in greater detail in Chapter XIV, mechanical condition measuring and monitoring systems
acquire measurements such as dynamic vibration to define actual condition. The condition assessment
system compares values and complex characteristics to pre-established thresholds, templates and
historical data to determine if current conditions are normal. Most condition assessment systems alarm
when changes from normal exceed preset limits. Condition assessment systems may include an expert
system to identify the problem and assess severity. Some systems express condition as the green,
yellow, red traffic light mentioned earlier, others as a numerical condition index. Rate of change in
condition and projected lifetime are often derived from the same information.
Many control system suppliers view asset condition information as just another measured variable that
can be collected and transmitted over a network the same as scalar control values temperature,
pressure and flow. Some have proposed automatically initiating work requests upon alarm not recognizing
that a process upset can produce hundreds of alarms.
Within the controls community there needs to be greater awareness of the necessity and benefits of the
rich detail resident within complex, dynamic signals, such as vibration for early detection of problems and
accurate lifetime prediction. Similarly, there needs to be greater awareness of the major problems that
can occur if condition alarms automatically trigger maintenance requests. The more sophisticated
systems block additional alarms until the first has been acknowledged.
Communications is a key issue that determines the effectiveness of a condition assessment program.
Two large facilities that had condition monitoring programs in place suffered major, costly failures.
In both cases the problems were known to condition monitoring technicians and had been
reported for several months. In one case, the condition monitoring activity reported to
Engineering reports were submitted to the Engineering manager, copies to Production and
Maintenance. Since reports were directed to Engineering they had always been written from a
technical perspective with potential operating and maintenance considerations secondary. Being
copy addresses, busy Operations and Maintenance superintendents didnt pay much attention to
the reports. No one checked to determine if any action was being taken to avoid failure no one
considered himself responsible beyond submitting a written report or for follow-up to ensure
recommended action had been taken.
Amplifying the last comment, effective follow-up, including ownership and responsibility must be an
integral part of an Asset Optimization program.
As this is written (early 2006) condition assessment information can and should flow automatically to
process control systems. Likewise, people using the Work Management system should have easy access
to all condition assessment information. Conditions requiring notification and / or correction should be
submitted as Work Requests as soon as possible following identification and evaluation by a technician or
analyst. The technician or analyst must have access to the Work Management system, empowerment to
initiate a request for action when an abnormal condition is noted, procedural requirement to check status
of the Work Request / notification and full accountability for ensuring awareness up to the point that a
corrective Work Order is issued.
CONSIDERATIONS FAVOR OPEN INFORMATION SYSTEMS

Many enterprises have recognized the benefits of connecting proprietary Condition Assessment, CMMS,
and ERP/EAM systems in an integrated structure. There is a growing awareness of the necessity to
present refined, actionable information obtained through collective analysis of data from multiple sources
instead of single source data requiring confirmation and interpretation. For a number of years control,
predictive condition assessment (vibration, fluid analysis, etc.), work management and enterprise
information systems were developed independently. These independent, proprietary systems typically
had totally different interfaces, operating characteristics and displays, could not readily communicate with
each other and confounded individual users.
One fundamental question that must be resolved is whether interoperability is better attained by
proprietary or open connectivity. Many suppliers will claim benefits for using their proprietary asset
management systems exclusively. Single source accountability, seamless integration within a larger
network, e.g., control, optimized communications and data integrity are often cited as primary benefits. On
the other hand, is a single supplier capable of offering best-in-class or even acceptable performance
across the broad range of applications needed to meet requirements for asset optimization? Will a
proprietary supplier guarantee to maintain interfaces in perpetuity at a reasonable cost? Finally, consider
who owns the asset optimization system and data if access is controlled by a proprietary supplier?
Open Information 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.
An open system is:
Capable of automatic communication (connectivity) and information exchange (interoperability)
through widely accepted, published conventions without any proprietary or system-specific links.
Open system conventions offer a number of benefits for exchanging Asset Optimization information,
including:
The most flexible, effective and least expensive means to exchange equipment condition, work
management and control information for the purposes of managing availability, reliability and
lifetime cost of ownership
Freedom to assemble comprehensive, easily integrating equipment control and management
systems from multi-source best-for-application components, without expensive, inflexible, and
specialized system integration
Improved enterprise-wide awareness of results, benefits, credibility, and business value of
optimized 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.
Since 1994, the Machinery Information Management Open Systems Alliance (MIMOSA) has been
developing and advocating conventions that will permit purchasers to choose the best equipment
management products with the confidence of full, open interoperability. As this is written in mid 2006,
MIMOSA is gaining real traction as the proven necessity for, and benefits of, interoperability conventions
become increasingly apparent.
The MIMOSA joint Open O&M initiative promotes an integrated strategy that defines interfaces through
which information system components can inter-operate. Interfaces should be widely used, non-
proprietary, and based on Open O&M. This meets demands from business and industrial purchasers for
open connectivity, interoperability, and the ability to migrate information from generation to generation of
hardware, operating systems, and applications software. Companies large investments in information
management technology are fully protected.
XIII.EXCELLENCE AT THE BASICS
"Being the best that you can be is possible only if your desire to win is greater than your fear of
failure." Sammy Lee
Successful Asset Optimization requires that all applicable / related documentation is in place, verified and
fully up to date. Basic documentation includes Process and Instrumentation Drawings (P&IDs), Asset
Register / Functional Hierarchy, Master Equipment List (MEL) and Bills of Materials (BOM). Equipment
must be classified by risk to assure attention and resources are applied most effectively. The program
requires core processes including Work Management and MRO Stores are functioning effectively at best
practice levels of performance. Basic decisions must be made including criteria for outsourcing and
functions to be outsourced.
DOCUMENTATION
Crucial documentation and drawings must be verified and corrected to accurately reflect what is actually
installed at the beginning of the Asset Optimization program. It goes without saying that building a major
improvement program on incomplete and/or faulty documentation will prove a wasteful exercise in
frustration. Foundation documentation includes: Process and Instrumentation Drawings (P&IDs), Asset
Register / Master Equipment List of all facility assets in a hierarchical system and Bills of Materials
(BOMs) for all assets.
A facility utilized a group of operations and maintenance retirees to verify P&IDs and the Master
Equipment List. The process required approximately a year and uncovered massive,
undocumented variations between what was depicted on drawings and what was actually
installed.
Maintaining record accuracy through the modifications and additions that occur in every production /
manufacturing facility requires a document / configuration control process. Absolute adherence must be
demanded to assure records are maintained accurately and up to date.
Comparative checks occasionally determine that the Asset Register maintained by Finance is
considerably different than the physical hierarchy utilized by Operations and Maintenance. It is absolutely
essential to have full alignment or an accurate cross-reference between these important records so that
specifications, Bills of Material, costs, operating, condition and maintenance records all refer to the same
equipment. Without alignment, vital parameters such as costs and lost production availability may not roll
up properly by unit, equipment and system. Tracking the cause of costs and downtime by asset, even unit
in some cases, becomes difficult if not impossible.
A facility that had outsourced maintenance of the Asset Register discovered that equipment being
brought into the plant on new projects hadnt been assigned to the correct units or system by the
contractor. As a result, equipment numbers on the P&ID and Asset Register werent in
agreement, costs and operating history were being assigned to the wrong unit.
ASSET HIERARCHY
Asset Optimization uses a variation of the nine-layer enterprise asset hierarchy illustrated in Figure 13.1.
The Asset Optimization hierarchy contains three to four more levels than some current asset hierarchies,
such as the Operational Reliability Analysis Program (ORAP). (62) It adds an enterprise level at the top to
permit results from multiple geographic plants or facilities to be rolled into a single measure of enterprise
effectiveness. It also adds several levels at the bottom to facilitate more specific measures of
effectiveness and identification of the cause of departures by components and parts affected. The
hierarchy is presented below; specific enterprises may omit one or more levels of the hierarchy that are
not applicable.
Excellence at the Basics 220
Figure 13.1 Asset Hierarchy
1. Enterprise: top level, corporation

2. Facility / Plant geographic entity
3. Unit / Platform: identifiable producer section within a facility or business unit
4. System: a set of physical assets designed to perform an identifiable mission / function (e.g.,
generation, air compression, refrigeration)
5. Subsystem: 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 13.1 most levels of the hierarchy are assets with tangible value. There isnt
a single asset the definition depends on the view. A single person / function is typically concerned with
two levels in the asset hierarchy; the level for which they are directly responsible / accountable and the
level below to identify contributors to objective performance, and where additional effort may be required
to gain objective performance and effectiveness.
For example:
Corporate generally considers the entire enterprise as a single consolidated asset for purposes of
financial performance, ROA. Sites or business units are recognized as constituent assets to
identify contributors and detractors from corporate objectives (see also Figure 9.4). If you dont
believe that you have never had the pleasure of belonging to a unit performing below corporate
objectives!
A plant manager is generally responsible for performance of the overall facility. Thus the facility is
the primary asset from this perspective. A plant manager will probably examine some measures
of unit performance, including ROA, availability and costs, to identify units within the facility
performing above and below objectives.
Production and Maintenance Superintendents view units as primary assets and consider systems
and equipment to determine where improvements need to be made.
Reliability professionals are probably the first function that views systems and equipment as
primary assets.
At the bottom of the hierarchy, individual repair parts within a storehouse are certainly assets and so
appear on the balance sheet.
ASSET LIFETIME
There is another important aspect of Asset Optimization physical assets and components within a
facility or unit have widely varying lifetimes ranging from forty years or more to ten years or less.
Beginning at the unit tier of the hierarchy, there are at least four identifiable layers of assets, each having
its own life expectancy and replacement strategy:
First level: buildings, structure, large heat exchangers, pressure vessels, piping, major mechanical
equipment, electrical distribution components and cabling are typically expected to last for the lifetime
of the facility with proper care.
Second level: equipment such as electrical switchgear, motors, pumps, and valves will have
functionally equivalent replacements available throughout the lifetime of the facility.
Third level: control and similar systems and components have an expected supportable lifetime that
varies from about 25 to 50 percent of the facility lifetime. During the facility lifetime 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 system and components. In many cases there
may be partial, sequential replacement that results in functionally equivalent equipment with widely
varying ages and capabilities within the same facility.
Some facilities will replace systems by units. Components and parts removed can be used as spares
for the systems still in use.
Fourth level: information systems and other components age to obsolescence quickly and, therefore,
have an even shorter supportable asset life. Assets at this level such as computers and software may
require replacement eight to ten times during the lifetime of the facility. The comment in the last
paragraph regarding mixed vintage elements operating simultaneously applies equally here.
The varying lifetime, asset-within-an-asset concept has substantial implications throughout the assets
lifetime. The timing for actions such as inserting technology during an extended design process,
developing optimum asset lifetime optimizing strategies, defining monitoring and overhaul intervals, the
repair replace decision and managing spare parts to optimize quantity and avoid stocking obsolete parts
are just a few of the activities affected.
An 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 possibilities.
The optimum design investment should include provisions for 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
definite and inexpensive upgrade / replacement 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.
Accurate benchmarking and reliability assessment, discussed in detail in Chapter IX, depends on use, the
geographic location and other factors. These include environment, type of operations, operating intensity,
and others. All affect performance and reliability. Consequently, the optimum Asset Optimization strategy
to achieve greatest value varies depending on specific conditions. For example, an electric motor that
spends its operating lifetime partially loaded in an air conditioned environment can be expected to have
greater availability and reliability, better cost profiles, and a different optimum Asset Optimization strategy
than an identical model operated fully loaded on top of a furnace in the Middle East. This assertion was
confirmed by a multi-location production enterprise who found that ideal maintenance costs as a
percentage of RAV varied by a significant amount as a result of process intensity. (129)
PRIORITIZING SYSTEMS AND EQUIPMENT

The effectiveness delivered by an Asset Optimization program depends on prioritizing systems and
equipment by risk including threat, consequences and opportunity at the very beginning of the initiative.
This assures attention and resources are directed to gaining highest potential value. In addition to
optimizing the asset optimization effort itself, early prioritization assures that expensive processes like
RCM are applied to systems and equipment that have greatest potential need and hence return.
Many use the term criticality for the ranking process. In common terminology, systems or equipment
considered critical are those in which any failure affects safety or production. The problem with this use of
terminology is that a large proportion of the systems and equipment in a modern production facility fit the
definition and are thus considered critical. If it isnt critical to production it wouldnt have been purchased!
When a large percentage of a population is considered critical, everything is high priority with the result
there is no prioritization.
Risk Ranking
To overcome this deficiency, systems, equipment, and components must be risk ranked by the probability
and consequences of a failure in the following categories:
Safety, health and environment
Mission, availability
Production output (throughput / yield)
Quality
Cost
Other; e.g., standards compliance in the food and pharmaceutical industries
Risk ranking and management are essential elements of asset optimization. Risk ranking extends the
idea of criticality to ask how probable is a failure? If a failure with large consequences is highly improbable
the risk rank process will rank it somewhere in the middle. Thus, within a rigorous risk ranking process,
systems or equipment ranked highest will have significant consequences and probability of failure, not
just consequences. The basic risk ranking process is illustrated in Figure 13.2.
Establish
Establish Equipment and system limits
analysis
analysisparameters
parameters compared to process requirements
Identify
Identifyhazards,
hazards,risks
risks
Assess
Assessrisks
risks
Industry specific procedures,
probability, consequences
Derive
Deriverisk
riskranking
ranking
Develop
Developaction
actionplans
plans Remediation: reduce probability,
totoreduce
reducerisks
risks consequences
Verify
Verifyeffectiveness
effectiveness
Document
Documentresults
results
Figure 13.2 Risk Rank Process
Most industry leading organizations assess risk within a five by five matrix, Figure 13.3. Consequences
are placed on the vertical axis with safety; potential fatality, ranking highest, followed by a serious
environmental incident / production outage / high cost, production reduction and low. Probability, from
very low to high based on history, experience and judgment is from left to right on the horizontal axis.
Systems and equipment are placed within the matrix based on past performance and future expectations.
The two numbers representing positions on the probability and consequence axes are multiplied together.
The product represents an objective, numerical value of risk. The matrix focuses attention and resources
into highest risk equipment and systems resident in the upper right corner.
Major Event
Consequences IS
K
R
Minimal Effect
Low High
Probability of Occurrence
Figure 13.3 Risk Rank Matrix

The reliability group within a company concluded that data sources, which were the origin of the
risk ranking, should carry different weights. They developed a scoring system and performed
sensitivity analyses to ensure a single data point was not driving system prioritization. Following
an extensive comparison the resulting prioritization was accepted without disagreement. (127)
Another 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.
(129)
The latter company uses essentially the same system to prioritize corrective action (Work Orders). Work
Orders are ranked by probability multiplied by consequences of failure 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.
A third company went through a detailed prioritization effort to focus on highest return
opportunities. Six initiatives were selected for action out of 300 opportunities identified. (33)
The risk rank process must be designed so that no more than approximately 15 percent of the total site
assets are classified highest priority based on history and risk. Detailed RCM or SRCM analyses should
be considered for systems and equipment with known deficiencies to develop optimum improvement
plans.
All involved must recognize that risk rankings will shift with reliability improvement, work completion,
market / mission requirements, and plant and operating conditions. This requires periodic reviews and
adjustment.(129)
Pareto analyses of failures and lost availability by cause and number of occurrences are useful for
identifying systems and equipment with poor history that should require greatest attention.
Criticality is often defined as consequences. The risk ranking process considers consequences
and probability in the past (history) as well as estimates of potential (future) exposure, to arrive at
a final numerical value.
In the following paragraphs critical and criticality are consequences. Site-specific historical performance
and reliability must be combined with expectations of future performance to determine probability.
Risk Ranking 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 a power
plant, cooling, and lubrication systems (sub-systems, as defined in the Asset Hierarchy) are all examples.
Safety considerations also determine production consequences. A fire protection system is classified in
the critical category because of the potential consequences of a system failure when needed to fight a
fire. Environmental systems should also be classified as critical when a failure results in an incident,
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 performance assessed.
Redundancy within a system affects its ability to meet mission requirements, Chapter V. Condensate and
feed systems typically have two redundant (spare) pumps. Piping is generally not redundant and there
may also be system instrumentation and control components with no back up.
Risk Ranking Equipment
Unspared paper machines, power generating boilers, turbomachines, vessels, heat exchangers,
transformers and electrical distribution systems are all examples of equipment that are critical to
production. 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. A cooling tower cell or circulating
water pump that is not required in the winter may be absolutely essential for full production rates during
high ambient temperatures of summer but not necessary at all during the winter.
Many deficiencies and problems originate from inadequate design, fabrication, and / or installation and
operation, as discussed in Chapters III, VIII and XX. 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.
Risk Ranking Components
Critical components within critical systems are often but not always obvious. 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 thought until it fails and the process suffers a major upset or
stops altogether. Switches that provide warning before an automatic shutdown are another example of a
potential hidden failure. If they fail to operate vital warning time is lost. How much functional
consideration goes into purchase and installation? How often are these components tested?
About a month after a thorough RCM analysis an innocuous switch within a complex process
failed bringing down the entire plant. The switch had not been included in the analysis nor were
there any tests or other maintenance routines to assure its function and integrity. After some
study it appeared that system boundaries hadnt been drawn to include all components. The
question is, if the boundaries had been drawn correctly would participants have recognized the
vital nature of the switch prior to failure?
Asset Management Index
Eastman Chemical, an industry leader in Reliability and Maintenance has developed a method for
prioritizing equipment for condition assessment they call the Asset Management Index (API). As explained
in detail in Chapter XI, the Asset Management Index is designed to optimize the application of predictive
technologies to equipment in the most cost effective fashion. Equipment is ranked five categories. Each
category is graded from one to five; the average is the API. Safety and Environmental impacts will move
equipment up in the rankings.
Within the API process criticality to production is not sufficient to justify a high ranking. As a vivid
illustration of the effectiveness of the API process of prioritization, the following table is repeated from
Chapter XI. Note that only 2% of the rotating equipment assets were considered highest priority!
Asset Mgmt. Level % Of Rotating Criticality
Equipment Assets*
Level 1 0.5 2% Most Critical
Level 2 2 4%
Level 3 24 30%
Level 4 65 75% Least Critical
* The Kingsport site contains approximately 50,000 rotating
equipment trains with slight variation in results for the various
operating divisions
WORK MANAGEMENT
Effective Work Management, Planning and Scheduling and Work Execution are essential foundation
elements of Asset Optimization. This section is not an extensive description of all the elements of the
Work Management process but rather addresses details that must be included to gain full value from
Asset Optimization.
Planned maintenance, work scheduled and accomplished in accordance with a plan, typically established
and published one week in advance, is 50 percent more effective than unplanned, reactive work. It utilizes
people far more effectively by assuring that skills, parts and the safety and operational conditions are
brought together with a minimum of wasted effort and time. Work efficiency (wrench time) is maximized by
minimizing the necessity to search for parts and tools and waiting for equipment to be available and
cleared for work. The work management process is illustrated in Figure 13.4.
Maintenance Spend Production Availability

Work Fulfillment
Process
Work Execution Equipment History Equipment Production
Work Efficiency Scheduled Unscheduled
Issue
Maintenance Crew
Order
Inventory Scheduling Risk Rank
Materials, Planning RCM / FMEA RCFA

MRO
Process
Backlog Predictive Preventive Proactive Life Extension
Planning &
Scheduling Vibration Lubrication Performance
Process Routine Emerg. Break-in
Motor Electrical Thermography Alignment
Predictive Preventive Corrective

Reliability Improvement Process
Work Origination Process
Figure 13.4 Reliability and Maintenance Processes Contribute to Availability and Spending
Objectives
The Work Management process must be complete, robust, fully understood and followed by all
participants and include accountability for results. There must be ownership and responsibility for
transmitting information, particularly, when responsibility for vital repairs are handed over to an oncoming
shift.
An offgoing shift had replaced a bearing cap on a gas turbine and hand tightened the bolts. They
did not notify the incoming shift that the assembly was incomplete. The new shift, assuming the
bolts had been tightened, replaced the outer cover. Several days later when the turbine was
started a massive oil leak caused an internal fire. When the turbine was disassembled the cause
was obvious. The breech of responsibility to complete a task or pass along vital status when the
task couldnt be completed resulted in a four-day delay restarting a major production unit.
When work management performance is below standards many will recommend centralizing an
organization that is currently de-centralized and vice versa simply for the sake of change and to facilitate
a needed cultural transformation. An alternative that might be considered is to centralize some non-core
and specialty crafts; pipefitting, welding, etc. to maximize flexibility and decentralize crafts where
specialized process, equipment knowledge and ownership are necessary for maximum safety and
productivity.
An area Maintenance Superintendent decided to size his crew for base load work, PM, PdM and
corrective. Extraordinary and some specialized requirements would be met from a centralized
pool of employees and contractors.
As stated in Chapter IX, industry-leading organizations operate regularly between 85 and 90 percent
planned work with 15 percent or less as emergency break-in. Planning is complete when a job plan is
issued and parts are on hand. Scheduling work for which planning is complete assigns people and a
specific time for the work. Scheduling is typically accomplished by Production and Maintenance on
Wednesday or Thursday for the following week. An experienced Production Coordinator, responsible for
managing the interface, including WO prioritization, schedule coordination and assuring equipment is
ready for work, is absolutely essential. With scheduling discipline, crafts typically will know the majority of
the work they will be expected to accomplish before the close of a week for the week following.
Improving Process Effectiveness
Effective Planning and Scheduling requires the following:
Solid leadership, commitment, support and supervision for the process
Planners and Schedulers assigned full time, able to focus full attention on planning and
scheduling. Approximately 1 Planner to 20 crafts
Values communicated, total commitment to use the Planning and Scheduling system to greatest
effectiveness by Production and Maintenance
Full agreement on Work Order prioritization and overtime. Without discipline and mutual
agreement every task becomes an emergency, every job that cant be completed during
regular working hours must be worked on overtime.
Sufficient training to assure total understanding and proficiency of the process and system. Many
organizations that provide CMMS training neglect process training, Planners and Schedulers
understand the software better than the function.
Full, complete configuration of the CMMS. Set up will require greater investment than software.
Equipment hierarchy accurate and in conformance with financial records
Master Equipment List verified and accurate
Bills of Materials established for all equipment
Standard job plans / task instructions complete, utilized, checked at each use and updated if
necessary
Process discipline that requires following procedures, issuing and following Work Orders for all
work.
Full use of best practices
Work close out procedure that documents work accomplished, time required and reliability
information (components affected, conditions found, probable cause, action taken) with
searchable codes. Also required to identify potential future requirements or items of interest (e.g.,
wear, clearances near maximum) that might require attention the next time work is required
Equipment and failure history, including calibration records, cost and availability, accurate and
readily accessible for the purposes of analysis.
Work Management KPIs closely monitored, additional training if necessary to correct
shortcomings
Continuing procedure and performance audits to assure quality and consistency, training as
required
Rewarding Planned and Scheduled work rather than reactive heroism. Reactive work destroys
a work management system.
The whole idea of Asset Optimization is to move toward greater reliability, fewer surprises, achieving
predictable results with as little variation as circumstances permit and proactive avoidance. Move away
from unexpected problems and the maintenance heroism necessary to quickly restore operation. Effective
Planning and Scheduling is a necessity.
Backlog
Average backlog is a compromise between the time required for orderly Planning and Scheduling and fast
response to requirements. An optimal backlog should be close to industry best practice of 3 to 5 weeks.
Too long a time between notification and initiation of work can allow a simple, easily corrected condition to
degenerate into a major problem. Although the extreme may not happen, the added nagging and
communication may build the perception that it takes forever to get anything done around here,
discourage the essential Maintenance / Production partnership and encourage the initiation of schedule
breaking Work Orders. Examples include leaking gaskets that can be stopped by tightening if addressed
soon enough, dirty oil and out-of-calibration instrumentation.
Too short a time between Work Order initiation and expected commencement leaves little time for orderly
planning, ensuring parts are on hand, and complicates the tasks of scheduling and crew balancing.
A Planner commented that the necessity to track and maintain visibility of a large number of
requirements and partially completed action items within an excessive backlog was a major
burden that invited mistakes. This particular individual had developed a personal spreadsheet
that he updated every Friday at home after work to assure he didnt forget anything a process
that required approximately four hours of personal time. The initiative, commitment and
ownership to job quality are highly commendable, however it demonstrates a serious process
and system deficiency.
Details Required by Asset Optimization
There are a number of details that must be incorporated within the Planning and Scheduling process to
gain full success from an Asset Optimization program. It should be noted that traditional maintenance
management methods and systems focus on efficient execution; Asset Optimization directs attention to
reliability improvement and work elimination in addition to process effectiveness, hence the following:
Eliminating defects, increasing reliability, reducing the necessity for work, especially emergency
break-in work, is the best way to improve the effectiveness of the Planning and Scheduling
process.
Many organizations report that a significant reduction in WOs, as much as 40 percent, is
achievable through improved reliability.
The RCM process must be accessible and interoperable with the work management system.
PM and CBM tasks must be incorporated into and linked directly to work management. Typical
work management systems do a good job of scheduling PM tasks; most arent nearly as good at
CBM tasks.
Coding in use to accurately identify origin of work initiated by Preventive and Predictive routines.
The origin of work must be accurately noted when a Work Order is initiated in order to identify
the value contribution of Preventive and Predictive programs and accurately define the
percentage of work in the Preventive, Predictive and corrective categories; a key work
management metric. As stated in Chapter IX, work originated by Predictive and Preventive
processes should total approximately 60 to 70 percent of the total hours worked. Many
facilities incorrectly classify all work initiated from Preventive and Predictive programs as
corrective, thereby underreporting their contribution to increased effectiveness.
Optimum, standardized job plans to assure consistent quality, minimum waste, containing the
following:
Safety precautions, lock out, tag out requirements, Personal Protective Equipment, PPE
Operating considerations, access, availability, system line up
Permits required
Detailed task instructions with reference drawings, specifications, clearances, etc.
Manpower and skills required
Tools and special equipment, rigging, etc.
Support equipment, tools, facilities
Special considerations: interference, etc.
Time required
Parts
When necessary, scope and expectations should be confirmed by walking / reviewing the job with the
requester. Complete job plans combined with good scheduling minimize wasted time looking for parts
and tools, waiting for equipment availability.
Periodic evaluation of the backlog and workload balancing to assure crews are optimally sized.
Some facilities examine the balance biweekly on a four-week planning horizon. If the backlog for
a specific crew gets too low they may transfer personnel to another crew with a greater backlog.
Component, Condition, Cause and Action codes in place and entered at Work Order close out
Searchable (numerical) codes in four groups define the component affected, conditions
noted, probable cause and action taken. Codes must have sufficient detail to form the basis
for identifying site wide problems, e.g., failures due to improper lubrication, and for failure
analyses. Codes must be established by equipment type, sorted and distributed such that
only applicable codes will be listed for specific equipment, e.g., burned contact or transmitter
out of calibration will not appear on the list of conditions noted that is supplied with a pump
Work Order. A list of applicable codes should be attached to Work Orders the craft
mechanic completing the work makes the required entries at close out.
Active monitoring of reliability and quality metrics such as unit repair costs, lost availability,
emergency Work Orders as a percentage of the total, MTBF, Rework; Chapter IX.
These are key Asset Optimization metrics that must be monitored and acted upon regularly.
Monthly monitoring, basing improvement initiatives on unit repair costs, lost availability and
the source of emergency Work Orders is a typical best practice.
Failure analysis (RCA) process in place with a trigger mechanism to identify and initiate an
analysis of chronic problems as a condition of WO close-out, Chapter V.
Failure analysis must be an integral part of the work management process similar to lock-out,
tag-out. A trigger mechanism must be established that will automatically identify chronic
failures in terms of lost availability and cost single event and cumulative. The latter to
identify equipment with continuous small failures the death from a thousand cuts.
Continuous review of Planning and Scheduling process effectiveness, including requirements for
emergency work and schedule compliance. See Chapter IX for metrics.
The Planning and Scheduling process and participants should be thoroughly reviewed at relatively
frequent intervals to assure quality, consistent performance and efficiency in all activities.
A large organization with multiple de-centralized planning and scheduling groups has a central
audit group that conducts continuous reviews, training and coaching.
Several planners have commented that many work orders they receive for planning could be handled far
more effectively by someone specifically tasked to conduct minor maintenance. In concept this is similar
to operator conducted, autonomous, maintenance within the TPM process. As an alternative, some
facilities have considered / are using permanently assigned area mechanics tasked to perform minor
adjustments and maintenance. The area mechanic will review Work Requests, decide which are minor
maintenance that he / she can take care of and pass the remainder to planning. The area mechanic idea
promotes ownership by assigning responsibility and accountability and the partnership with Production.
The same caveat expressed for the loss of historical cost and reliability data when using Standing /
Blanket Work Orders expressed in Chapter IX applies to the area mechanic concept.
As reliability improves during the Asset Optimization program the planning process typically becomes
more orderly and disciplined. Planners can utilize the time effectively to improve the process and the
following:
Build / refine the equipment history
Prepare, refine and improve standard job plans
Check quality of completed work, incorporate lessons learned into job plans
Improve and optimize PM and CBM, assure the correct tasks are being performed at the correct
intervals
Verify Bills of Material
Initiate more Root Cause Analysis, participate more actively in the process to identify and
eliminate defects
Refine and optimize the Work Order system
Improve planning and scheduling methodology / execution
Contingency Plans
Contingency plans are another often-neglected aspect of the Planning and Scheduling process that must
be developed within an Asset Optimization program. Contingency plans should be available for moderate
to high-risk potential incidents.
Contingency plans fall into two categories; plans for unexpected failures of major equipment and
preplanned opportunistic job packages for tasks that can only be accomplished during a shutdown.
Contingency plans for unexpected failures should include the following:
Identify specialized repair facilities, sources of long-lead unstocked parts and assemblies
Identify sources for unusual repairs such as metal stitching, large transformer repairs and
rewinding
Negotiate shop turnaround. Some may pay an annual retainer to assure shop priority in the event
of unexpected requirements.
Identify potential sources of used, surplus equipment. Facilities have found that equipment
purchased on the surplus market offered the only alternative for returning to service within any
reasonable period of time following a major failure.
A full job plan including personnel, material / parts, operating line-up required and special,
potentially long lead, tools such as cranes.
Opportunistic work packages are intended for tasks requiring shutdown that can be completed relatively
quickly in the event of an unexpected outage due to power failure, lightening strike or some other
unanticipated event. Opportunistic work packages take advantage of an unexpected outage to improve
condition, extend life and avoid / minimize scheduled shutdowns
Opportunistic work packages are fully planned and ready to work with parts reserved and available.
Packages are typically assembled for 12, 24 and 48 hour duration. They are reviewed and updated
periodically. The review includes the benefits of delaying production recovery for the various intervals in
terms of the benefits of life extension and improved effectiveness.
The key for success in this area is to have all alternatives explored, discussed and decided prior to an
actual event. With this completed, resources can be mobilized and applied immediately without a costly
delay, or worse lost opportunity, due to a lengthy decision process.
A facility suffering through a nagging problem that would eventually force shutdown experienced
a momentary power interruption in the middle of the night. Instead of delaying restart for the
couple of hours necessary to effect repairs they restarted immediately. A major opportunity to
avoid an additional outage and production loss was missed.
A Production Superintendent concluded that his unit could eliminate scheduled outages
completely by relying on preplanned tasks that could be immediately implemented in the event of
an unexpected outage.
Other facilities are using this idea in combination with performing more work during operation to
extend the interval between planned outages and diminish duration.
Planners and Schedulers.
In industry leading facilities, Planners and Schedulers typically have the experience to quickly and
accurately define tasks and recognize potential problems. They are also the primary users of the
Computerized Maintenance Management Systems (CMMS) discussed in the next section.
Planner
Critical functions of a Planner include:
Review WOs and develop manpower, skills and time requirements
Communicate with the job originator to review and verify work requirements
Determine material and parts requirements, assess availability in site stores, order as necessary
Determine requirements for special tools, support, e.g. rigging, scaffolding and facilities
Develop and verify Bills of Materials to ensure quick accurate access to parts requirements
Assemble and issue the job plan
Pass the WO to Scheduling when all parts are available
Verify completion with requestor at Work Order closure, confirm comments made and entered in
CMMS
Planners must be able to focus attention on future work. The inevitable involvement in daily crises
detracts from the attention and quality time needed to deliver effective work packages.
A typical complaint voiced by most Planners is the necessity for their involvement in expediting
parts for Emergency, break-in work. Several Planners stated that the majority of their working
hours were spent expediting parts required for immediate use. This again points up the necessity
of improving reliability within an Asset Optimization program to limit Emergency, break-in work.
Scheduler
A Scheduler:
Review planned, ready to work jobs, identify jobs that can be worked from production
requirements
Along with the Planner, schedules jobs for accomplishment based on system, equipment, tool
and manpower availability
Communicate weekly and daily work schedules
Coordinate with production to ensure equipment is available for work, work is accomplished on
schedule
Computerized Maintenance Management Systems (CMMS)
A Computerized Maintenance Management System measures, analyzes, and manages the entire
maintenance cycle.(102) Specifically, the CMMS manages the work process, facilitates the flow of
information, tracks costs and improves decision-making.(110)
It has been stated humorously that with a CMMS companies can continue to do the wrong work,
but do it more efficiently!
The addition of an Asset Optimization program will assure that the right work is performed at the right
time!
In its Work Management role a typical CMMS facilitates the following functions:
MRO work management, including receiving Work Requests (Notifications) and issuing Work
Orders
Task planning and scheduling
Labor resource management, including skills management, allocation of personnel and resources
Backlog management
PM management and scheduling
Labor and material budgeting, cost control and accounting
Purchasing and inventory (spare parts) control and management
Data management, equipment cost and repair history
Reporting KPIs
Added functionality:
Managing RCM, RCA processes, incorporating results into task and schedule requirements
Condition-based task scheduling
Reliability tracking
Successfully implementing and utilizing a CMMS requires an institutional culture that values teamwork,
quality, consistency and reliability; depreciates reactivity and siloed processes.
To gain maximum utility, the CMMS must be properly configured. A full and accurate configuration
requires time and resources to verify basic documentation and assure that the correct nomenclature,
asset hierarchy, Bills of Material and task instructions are assembled into the CMMS. The configuration
must assure the roll up and report information that will be needed for reliability analysis. A reliability
analyst must be able to quickly identify and rank parameters such as repair costs, unscheduled downtime
and number of emergency work orders originated for all equipment in a production unit. Information such
as repair costs for specific components must be identifiable for a unit, across an entire site and within a
multi site enterprise. Further, an analyst must be able to quickly identify equipment that is unreliable and /
or consumes inordinately high resources. Finally, the analyst should be able to identify cluster problems
by equipment manufacturer.
Access to the CMMS must be sufficiently broad that everyone who needs information has access. In
some cases security profiles are so strict that the people who need to see the data cant.
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 performance 62%
Budgeting 39%
Track integrated procurement 39%
Benchmark maintenance 34%
Use with PdM 33%
Regulatory and/or quality documentation 31%
Financial/ROI calculation 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. Greater equipment uptime was cited by 55 percent of
the respondents and 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 evolving from
specialty programs constructed to control work, to integrated management and information systems that
support self-managing maintenance teams and link directly into business systems. 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
understand the necessity to provide essential information and communicate results in relevant business
terms. Executives and senior management must learn enough of the process and technical vocabulary to
ask relevant questions, understand the risk, and recognize the real value of results.
STORES (SPARE PARTS) INVENTORY MANAGEMENT

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 $5 million in spare parts pays $1.0 to $1.5 million per year for the
privilege.
The Stores process is tasked as follows:
Manage MRO parts and supplies inventory in an as new, ready to issue condition
Maintain critical spare parts
Maintain consumable supplies. Many sites are moving to outsourced consumables where a
contractor automatically replenishes open consumables at a regular scheduled interval. This
avoids the necessity of inventorying and multiple purchase orders placed for inexpensive items.
Identify and maintain optimum inventory levels based on priority, usage and lead-time
Initiate outsource suppliers where practicable
Document cost and usage
Contribution includes:
Cost effective acquisition and storage of repair parts in time to meet requirements
Accurate coding to minimize the potential of issuing an incorrect part
Minimizing emergency stock required for contingencies. Agreements with outsource suppliers
can be very helpful.
Maintaining a cost effective min / max to meet requirements
Constant efforts to identify and reduce obsolete and inactive stock
A detailed inventory in a large facility disclosed a significant number of parts for equipment
that had been removed from service as many as ten years before the inventory. The problem
was twofold: There was no procedure for reporting to stores when equipment was removed
from service. Second, Stores did not routinely track usage to discover inactive parts.
The drive to reduce capital explained in Chapter VII creates pressure to reduce the cost and quantity of
stocked MRO spare parts, in some cases by as much as 50 percent. Leading enterprises are employing
multiple strategies to reduce stocked spare parts, while simultaneously ensuring availability in the event of
need. In most production enterprises, a simple delay in restoring production caused by the unavailability
of a spare part will cancel all of the capital and cost advantages of reduced stocking.
Stores cost optimization strategies include:
Reduced inventory; number and quantity (requires greater anticipation of need)
Supplier custody and managed inventory
Fewer suppliers; supplier rationalization
Less expediting (again, requires greater anticipation of need)
The solutions are to increase reliability thereby reducing requirements for spare parts,
transferring as many spares as possible to suppliers as consignment spares, and implementing
information systems that improve planning and allow required parts to be ordered for standard
delivery through normal channels. (81, 129)
Centralized versus satellite, OEM, and supplier stock are clear opportunities for major capital and cost
reductions.
The first step in the process to minimize spare parts inventory is to reduce failures and the corresponding
necessity for maintenance and spare parts. A second step is to greatly extend the interval between
detection of a potential failure and the time corrective maintenance has to be performed. With the
knowledge of requirements well within the normal delivery interval of a parts supplier, the number of
stocked parts can be safely reduced. Some standard parts can be shifted to consignment owned by a
third party supplier until use. Others can be eliminated altogether. Many facilities are implementing efforts
to increase parts shared between multiple assets and thereby reduce unique parts. In some cases, slight
design alterations may eliminate a single use spare and allow a process or equipment to share a
component, such as a transmitter or bearing that is used elsewhere in the facility.
Comprehensive Stores Management Program
Stores management optimization creates real value in terms of both capital and expense. Better parts
purchasing, custody, utilization and issue saves cost. Reducing the number of stocked spares reduces
working capital.
The following areas must be addressed:
Stocked spares rationalized for number and quantity: This to assure that stocked spares
support operating equipment and are at levels reflecting anticipated need compared to normal
delivery from suppliers. As mentioned earlier audits often disclose a considerable number of
stocked spares for equipment that has long before been removed and / or levels that are
excessive based on use.
The petrochemical industry average for stocked 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. (129)
Seek less expensive methods for meeting requirements for repair parts: Consignment
spares where a supplier either maintains a site stock that is not charged until use, or guarantees
delivery within a fixed period following notification is an attractive alternative to owned spares.
Elimination of informal, uncontrolled spares often purchased and maintained by crafts
personnel. Squirrel spares maintained off the books in this fashion are typically not stored to
assure long-term quality and may become lost altogether when the purchaser moves on or
forgets they have them.
A diligent area stores audit at a large facility disclosed squirrel spares totaling more value
than the official warehouse stores.
Repair and refurbish rather than purchasing new. In many cases, standard valves and
transmitters, are examples, a supplier will collect and refurbish non-performing parts removed
from service. As part of the arrangement the supplier offers rebuilt and tested replacements with
an equivalent to new guarantee at a significantly reduced price compared to a new part.
A large facility estimated an annual savings of $500,000 by employing this strategy
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. Insurance spares: Unique, high cost, long lead delivery capital spares required for insurance
against failures that would cause a lengthy production interruption. For example, spare rotating
elements for large turbomachines, gears and generators and special valves.
2. Spare parts that cannot be procured confidently through normal channels within a reasonable
time interval beginning with identifying the need and necessity for the part.
3. Standard parts such as valves, transducers / transmitters, couplings, rolling element bearings and
electronic control devices 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.
Spare parts in category 1 are typically maintained in stock. Sharing category 1 spares between multiple
sites, and even multiple corporations, is often used to gain substantial savings. Proper storage and
preservation, especially bearings and journals is essential.
Real savings are available in categories 2 and 3. Some facilities offer incentives to suppliers to maintain
dedicated on- or off-site spares, owned by and in custody of the supplier until use. An annual fee plus net
15 day payment on use is one successfully used incentive. A guaranteed delivery time from a suppliers
stock is another alternative. In this alternative, parts are not allocated; the supplier depends on their
inventory to meet the guaranteed delivery. Standard gaskets, bearings, and mechanical seals are
examples.
Many facilities are reducing storeroom inventory by shifting stocking to OEMs and suppliers with
consignment either on-site or at a supplier site. Some companies no longer stock high cost,
standard spares such as motors, bearings, seals, or couplings. They rely on one or more
distributors. (76, 129)
A facility that is outsourcing spare parts discovered a requirement to improve and expand
specifications for warehouse facilities and storage procedures to assure quality, performance and
reliability of parts received from outsourced suppliers. (129)
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, 129)
A particularly clever operating company reduced in-house requirements for specialized spares
such as pump shafts by paying an annual fee for maintaining stock material on-hand, assuring
priority shop time for fabrication and guaranteed delivery from placement of order. In the event a
replacement shaft is required, the operating company provides the drawing. The fee paid is
based on cost of raw material rather than the cost of finished machining. In addition, a wide
variety of shaft types can be covered with a single sized bar stock. The facilitys only additional
requirement is to maintain the drawings.
Demanding compliance with site standards for new equipment purchases, and modifying existing
equipment to increase the quantity of common spares are additional methods for reducing the number of
different parts stocked.
Category 4 consumables are typically open issue small gaskets, pipe and tubing fittings, nuts and bolts. In
a typical facility with outsourced consumables, the outside supplier checks and replenishes stocks at
regular intervals and guarantees quantity. As stated this gains the best prices for bulk purchases, frees
stores personnel from managing consumables and eliminates purchase orders for individual items.
Many companies rely totally on distributors for consumables. (76, 129)
Two elements must be in place to make a stores minimalization strategy work: (81, 129)
1. Increase reliability to reduce requirements for spare parts.
2. Implement predictive information systems that extend the interval between the discovery of a
problem and the necessity for a replacement part.
Together they allow parts to be ordered for standard delivery through normal channels.
Stocking Levels
Stocking levels are important within an optimized organization. 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 time for delivery via normal procedures and
channels compared to need time. Stocking levels are most effectively based on these factors plus
predicted usage rates, as shown in Figure 13.5. When stocking level decisions are made, care must be
taken to ensure production outages do not occur or extend as a result of a spare parts shortage (Stock
Out).
Some global companies are attempting to link spare parts worldwide by stock numbers. They will
not stock anything locally unless it is the highest criticality. (129)
Assuming insufficient spares levels to cover all potential requirements. When the need for a spare part
becomes evident, the condition of all other equipment using the part must be reviewed in order to
determine whether there are other latent defects that could have a higher priority use for the part within
the lead-time for a replacement.
Cost
Outsourcing spare parts with

guaranteed delivery reduces
cost and risk of unavailability
No spares,
high risk, low
cost
Risk
Optimum
Number of Stocked Spares
Figure 13.5 Risk and Cost Determine Optimum Spare Parts Stocking Levels
Stores Metric Considerations

Stores metrics are detailed in Chapter IX.
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 insurance spares such as rotating elements
and large critical valves. When this occurs, the nature of the remaining parts may cause the inventory turn
metric discussed in Chapter IX 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, which should never be scrapped without study, consideration and extreme caution. Finding that a
recently scrapped spare part has a 24-week lead-time can cause major headaches following a failure!
Optimized Spare Parts Management Process
An optimized MRO spare parts management process used by several companies includes:
Direct supply and automatic re-supply
Accurate inventory and cost accounting
Parts kitting by Work Order to a secure storage for issue
Hourly personnel authorized to order small parts charged to a Work Order for direct delivery on a
consumer charge card
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 provided they are in the main inventory system. (129)
Storage procedures, including PM, to assure quality standards at issue
Periodic review of usage 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.
Procedures must include storage requirements, e.g., vertical storage of long rotors, and PM routines
performed on warehouse spares, e.g., periodically turning motor and pump shafts, to assure that
warehouse equipment is maintained in first-class condition. (52, 129)
OUTSOURCING
Outsourcing can add significantly to skill flexibility and cost effectiveness. By outsourcing selected
activities, a facility can concentrate employees to gain greatest performance and effectiveness within
areas of core competency. As part of the decision to outsource the challenge is to identify core
competencies that must be retained.
Core Competencies
As discussed in Chapter III, the definition of core competencies used in this handbook are those that
require specialized and / or proprietary business, plant, operating or process knowledge; must be fully
aligned to all requirements within a business decision process; deliver a direct contribution to the
dominant value driver and cannot be obtained from multiple sources. A core competency is any aspect of
the business operation that delivers a strategic business advantage. Core competencies must be
protected and constantly improved.
There is another factor; the ready availability of equivalent experience and skill. During the process of
identifying core competencies it should be realized that outsourcing risks losing not only the competency
itself but also the technical expertise necessary to understand the competency and evaluate performance.
This includes the ability to assess quality and effectiveness and recognize the application of potentially
valuable improvements. Ultimately the outsourcing entity can become totally dependent on the
performance and recommendations of contractors without any inherent capability to judge and control
quality or effectiveness. In some cases it may be possible for the outsourcing entity and contractor to find
themselves in a position where the best interests of one is contrary to the interest of the other.
One example: In the mid 1980's, condition monitoring contractors had been providing outsourced
measurement and analytical services based on the time required to collect and analyze measurements
with manual instrumentation. The introduction of microprocessor based walkaround data collectors and
automated screening software initiated a shift to this new technology. The new systems reduced the time
required to collect and analyze measurements by one-half to two-thirds. Condition monitoring contractors
who had been billing for services by the time required found themselves in a very difficult position. They
either had to increase the hourly rate, downsize their organization to reflect the increased productivity or
double the client base. There was another alternative; charge by the number of equipment monitored
rather than time. Attempting to maintain the same charges risked loss of the client to a new organization
unencumbered by the past who could offer a significantly lower price. Some might say this is survival of
the fittest; a more enlightened view might be that it is in the interest of both parties to share the benefits of
unforeseen process and technical improvements. A key question is whether Purchasing will take the more
enlightened view or move to low cost.
Core competencies are typically in areas where institutional and process knowledge, skills, the
importance of factors within the decision process, business objectives and contribution to business value
all must be aligned. These must have an institutional focus and are protected and improved. Control and
alignment might be key considerations in this area. Does the facility need the skill and control of the
competency to assure the institutional knowledge necessary to make optimum business decisions? If so it
should be considered core. In the second case, will company and contractor objectives be aligned for
every conceivable business decision? If not the competency should be considered core.
As an example of the second case, a contractor responsible for asset operation and maintenance, with
incentive compensation based on cost and availability targets, is not likely to accept any added risk of
increasing operating intensity to improve business return. Similarly, a contractor needing skilled personnel
for a more lucrative contract could very well transfer key personnel at a crucial time.
A large facility with all maintenance; including planning and scheduling, labor and even
maintenance engineering, contracted to a third party experienced a high level of success for
about a year following contract initiation. Gradually the experienced people the plant had come to
depend upon were transferred to other jobs. Replacements were not nearly as experienced,
knowledgeable or accessible. Although the contractor was in full compliance with the contract,
the plant felt that the contractor was not meeting expectations. The collision between
expectations and contractual obligations slowly eroded the relationship necessary to gain
maximum results. Ultimately the contractor was replaced.
Within the maintenance area, Instrumentation and Control (I&C) troubleshooting, some PM and PdM are
generally considered core competencies. Outsourced contractors can provide readily available skills such
as motor, valve, transmitter and pump seal repairs, pipe fitting, insulation, welding, rigging and carpentry
plus augmenting labor during intense periods such as unit overhauls (turnarounds, shuts).
Virtually all industrial organizations use some form of outsourcing for activities considered non-core.
Outsourcing can be implemented at five identifiable levels, as shown in Figure 13.6. These range from
supplying labor only through total asset operation and maintenance:
1. Specific specialized tasks:
Transmitter, motor, pump and / or valve repairs
Radiography, thickness, and condition measurements (e.g., vibration, thermography, and oil
analysis)
Contract labor for specific, e.g., project, or general, e.g., pipefitting / welding
2. Labor plus work process management, planning, and scheduling (e.g., contract maintenance)
3. Parts management ordering, ownership, and custody
4. Maintenance process redevelopment and implementation
5. Asset operation and maintenance with guaranteed availability (i.e., power by the hour)
Outsourcing adds cost and skill flexibility. A facility can base load employees within core competency
areas that require specialized process and operating knowledge. Instrumentation and Control (I&C), PM
and most PdM generally fit in this category. Contractors provide non specialized skills such as pipe fitting,
insulation, welding, rigging and carpentry, and can also augment labor during intense periods such as unit
overhauls (turnarounds, shuts).
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. Some use outside shops for transmitter, valve and pump repairs. Work is accomplished
by skilled specialists who are equipped to, and perform, the tasks most effectively. Outside contractors
are often used for tasks requiring expensive, specialized equipment, such as radiography, thermography,
and oil analysis. The number of facilities outsourcing predictive vibration measurements appears to be
increasing.
Asset
AssetOperations
Operations&&
Maintenance
Maintenance
Process Redevelopment
and Implementation
Spare Parts Management,

Storage, Replenishment, Custody and Issue
Work Process Management,

Specialized Services Technology Labor
Pump, Motor, Valve PM, CBM/PdM, RCM, TPM,

Repairs etc., Program Consulting
and Services
Figure 13.6 Outsourcing Pyramid
Pressures to reduce cost are resulting in more outsourcing. Many companies are already 50 percent
outsourced and the percentage is increasing. An outsourcing contractor offers additional savings by
spreading the costs of specialized technology and skills over a wider base.
Several manufacturing companies outsource maintenance on all non-production equipment
including HVAC systems, vehicle and equipment service and lubricant testing. Production
equipment is all managed and serviced by employees. (129)
In some cases outsourcing has been taken too far. So called Master Contracts negotiated by corporate
purchasing for nationwide support often exclude local, highly responsive suppliers and service shops in
favor of larger organizations. While the larger organization may offer some cost advantages they may be
too far distant from an individual plant for the close relationship and personal direction that is all important
when something unexpected occurs at an inconvenient time.
In many cases, the effort a plant is required to expend justifying exceptions needed to operate
effectively more than outweighs the potential cost savings of a master contract.
Outsource providers must have the knowledge, tools, personnel, and control procedures to ensure
delivery to expectations and standards contained within customer specifications. (18)
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)
Specialized Repairs and Expertise
Many process, production, and manufacturing facilities are moving toward outsourced repairs and
overhauls for transportable equipment such as transmitters, valves, pumps, and seals as described in the
previous section.
A few companies are contracting responsibility for pump seal availability to outside sources. In this type of
contract, the service provider typically provides an on-site engineer or technician and 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 considering extending this method to complete 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 is typically responsible for spare parts ordering, inventory and
custody.
Automobile engine, transmission and component replacement is an established model. In this example a
defective component is removed and returned as a core to a specialized remanufacturer that stocks all
spare parts, performs the overhaul and supplies a remanufactured component meeting all specifications.
The unit removed is remanufactured and eventually resold with an equivalent to new guarantee to
continue the process. Facilities that have implemented this type of repair process typically state that it is
more effective, produces better results and is less expensive than traditional on-site repair methods.
Many believe that industry practices will evolve to this type of model.
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, $5 million annually. (129)
There are certainly exceptions to these generalized models. Some repairs and overhauls must be
conducted in place. Large specialized machines such as paper machines, turbo compressor trains,
turbine generators and feed pumps cannot be removed. The question in these cases is whether
specialized repairs and overhauls that must be done on-site can be performed more effectively by
employees or contractors. The typical answer is a combination of the two.
Outsourcing professional expertise follows the same concept. Most operating organizations can no longer
justify the time and ongoing training necessary to maintain the proficiency of an underutilized site expert
in a specific area such as metallurgy or electrical distribution. Many operating companies have
consolidated site experts into a central engineering group.
The costs and training to maintain proficiency in a specialty can be justified when shared over a
larger base. (129)
Labor
Industry is using more contract labor; and the experience seems to be mixed. The hourly rate of contract
labor is typically less than that of employees with full benefits. However, many facilities utilizing contract
labor cite hidden costs, such as parts and assembly quality control, diminished skills, added supervision,
added requirements for safety and other types of training, lack of awareness of importance, e.g., a gasket
failure that requires a total shutdown to replace, and mistakes that later impact on production. There are
also union issues (mentioned earlier) that must be addressed, especially where the operating facility is
non-union or utilizes multi craft work crews.
Educating outsource suppliers about the new requirements and demonstrating intolerance for
not meeting standards has taken a couple of years. (129)
Work Management
It is a large emotional step from contracting labor to outsourcing maintenance planning and scheduling.
Although the skills required certainly can be resident in a contractor, many consider planning and
scheduling a core competency due to operating and safety considerations. 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. (129)
Some facilities outsource work order initiation and measurements required for Preventive and Condition
Based Maintenance to a remote supplier that performs all administration. The actual work can be carried
out by employees or contractors.
Full Process Responsibility
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. (129)
Asset Operation and Maintenance
Full asset operation and maintenance, with an entity, typically the Original Equipment Manufacturer
(OEM) guaranteeing availability, is frequently utilized for gas turbine generators. Several forces are
converging to make this alternative more attractive. Achieving an advantageous return on capital for the
operating company is most important. Leasing with guaranteed availability reduces capital requirements,
and therefore 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, outsourcing operation and maintenance 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.
Outsourcing in Physical Asset Optimization
In the final analysis, outsourcing, regardless of the extent, does not affect the principles of
Asset Optimization. It appears highly likely that future Asset Optimization will be accomplished with an
optimal combination of employees and third party expertise used for facilitation, training and coaching.
Employees build ownership and 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; transmitters, valves, motors, pumps, and seals, will probably all be outsourced
to specialized, central facilities. Outsourced labor will be used during intensive activities such as plant
turnarounds and overhauls.
XIV.CONDITION ASSESSMENT TECHNOLOGY AND SYSTEMS
Its that moment of dawning comprehension that I live for!

Calvin, Literature Calvin and Hobbes
Condition assessment technology and practice is an essential core element for successful physical asset
optimization. It is applicable to equipment such as pumps, motors, turbines, gears, valves, heat
exchangers, electrical distribution equipment and even piping and structures. Condition assessment
technology provides the best information to define current condition and performance and provides the
basis for projecting future lifetime and availability.
If an operating or production facility finds itself in a largely reactive mode, responding to unexpected
events and failures, condition assessment is the best way to gain the foresight necessary to identify and
evaluate anomalies in time to avoid the surprise of outright failure and operational interruption. For this
reason, implementing comprehensive condition assessment should be given high priority at the
commencement of a physical asset optimization program.
Condition assessment must include modern technologies for measurement, information management and
communications combined with intuitive, user-friendly displays. All personnel working directly with
physical assets must have immediate access to vital operating and prognostic information developed by
condition assessment. This includes current mechanical and operating condition, predicted (prognostic)
lifetime and an estimate of risk; see Capacity Index, Chapter IX. In a world of limited resources, all are
essential to assure the success of physical asset optimization.
THE BASIS OF CONDITION ASSESSMENT

Condition Assessment utilizes an array of technologies and measurements that accurately represent the
condition of operating equipment. Condition measurements are recorded in place without affecting normal
operation. They are compared to normal and past values and examined for anomalies and trends to
arrive at an assessment of condition and stability of condition.
Methods of condition measurement, monitoring and assessment are well known, widely accepted,
thoroughly understood and proven beyond question. Major equipment is automatically provided with
condition monitoring instrumentation as a mandatory part of the control and protection suite. Nearly all
essential equipment in industry best facilities has some sort of condition monitoring strategy in place for
early warning of abnormal and / or deteriorating condition. With the advent of smart controls, condition
assessment is quickly spreading to electrical distribution and process control systems.
Benefits
Overall considerations and benefits of condition assessment were detailed in Chapter V. An actual
example of the cost penalty that can occur when condition assessment recommendations are ignored is
shown in Chapter XIX, Figure 19.5.
Condition assessment technologies
Condition assessment technologies include the following:
Vibration monitoring continuous on-line, scanned on-line and walkaround (principal difference
is the interval between measurements)
Lubrication (fluid) analysis
Motor electrical analysis
Equipment and heat exchanger aerothermal, thermodynamic and hydraulic performance and
efficiency
Infrared Thermography
Ultrasonics (passive valve, piping, vessel and trap leak detection, active thickness
measurements)
Valve and controls action and response (hysterisis)
Visual inspections
Condition Assessment Technology and Systems 242
Many consider precision alignment and balancing as predictive technologies. For the purposes of this
Handbook they are considered proactive activities.
Vibration
Vibration measurements can identify commonly encountered life-limiting defects such as rotor unbalance,
coupling misalignment, mechanical looseness, and rolling element bearing flaws. In general, the
amplitude of vibration is a measure of severity. The frequency of vibration and / or frequency patterns
typically identify the type of defect. The presence of a specific frequency (e.g., bearing inner race defect),
or frequency characteristics such as sidebands may also indicate severity.
Figure 14.1 illustrates a series of vibration amplitude vs. frequency spectra recorded during a rolling
element bearing failure. The appearance of high frequency energy at the right of the vibration spectrum
beginning on 9/25 is clearly indicative of a rolling element bearing flaw. These energetic signatures
continue to 11/11. From the spectrum recorded on 11/14 it is apparent that conditions have significantly
worsened and the bearing will have to be replaced in the immediate future. In fact the bearing had
approximately one more month of operating life before it had to be replaced. A skilled analyst can
determine exact condition and estimate remaining lifetime from vibration spectra recorded in exactly the
same way as Figure 14.1
Figure 14.1 Series of Vibration Signatures Recorded on a Rolling Element Bearing
A bearing removed from the same machine (a high temperature ID Fan) following failure is pictured in
Figure 14.2.
Figure 14.2 Failed Bearing Removed from High Temperature Induced Draft Fan
The subsequent Root Cause Analysis of the bearing shown in Figure 14.2 determined that the majority of
damage occurred when the motor driving the fan on which the bearing was installed lost electrical power.
The heat from the fan shaft equalized through the bearing seizing the races and causing the outer race to
spin when the fan was restarted. Operating procedures and reassembly instructions were modified as a
direct result of this RCA.
The necessary elements for establishing a vibration condition assessment program as well as the
application and interpretation of vibration measurements are covered thoroughly in several
comprehensive texts.
Fluid Characteristics
Methods of assessing equipment condition from fluid characteristics are detailed in Chapter XV. 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 rotor bars and asymmetric air gaps. Methods of using electrical characteristics
to assess equipment condition are detailed in Chapter XVI.
Operating Performance and Efficiency
Operating performance and efficiency measurements provide insight into internal conditions that may not
be visible in mechanical characteristics. Conditions include increasing clearances, distributed
erosion/corrosion and build-up. Knowledge of load and efficiency is vital to identifying off-design
conditions, calculating equipment operating cost and lifetime.
Aerothermal and hydraulic performance and efficiency are calculated from combinations of process
pressures, temperatures, flows, and specific gravity / molecular weight. Assessing heat exchanger
performance from process measurements is relatively straight forward. The equations for pumps and gas
compressors are well known and contained in many texts on mechanical equipment. Calculating
performance on gas and steam turbines is more difficult. However, there are several computer systems
available that perform turbine performance calculations.
Pumps operating at part load conditions may consume as much as 40 percent more power than required.
In addition to wasting energy, part load operation increases turbulence and stresses, that can result in a
variety of premature failures, including mechanical seal, bearing, impeller, and shaft failures. (57)
Many transmitters, control and electrical components are provided with means to identify anomalous
behavior and report through the process control system. This adds to reducing variation, greatly facilitates
troubleshooting and assures the planner and technician know exactly what is wrong as well as parts
required when work is necessary.
Systems are available that take this idea several steps further by examining all measured variables in a
complex process, calculating a value for each from the remaining variables and then comparing the
calculated value with the measured value. Differences are analyzed to identify process and component
condition and identify anomalies.
Thermography and Thermal Imaging
Thermography employs a camera that is sensitive to infrared radiation. It produces images that show
temperature variations as differences in color and intensity. Interpretation is intuitive and relatively easy.
Cool areas are blue and purple; hot areas are yellow and red, Figure 14.3.
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 through IR transparent windows to gain safe access with the
transformers powered. This test is accomplished without any interruption in service in a fraction
of the time and cost that previously was required for mechanical checks. (129)
Figure 14.3 Thermography Image of a Hot Bearing
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 power leakage caused by dirt or
salt build-up. Hot insulators readily show up in a thermal image and indicate the need for cleaning.
Breakdowns in thermal insulation (e.g., in building roofs, furnaces, piping and heat exchange equipment)
are readily apparent in a thermal image.
Handheld temperature guns, Figure 14.4, are very useful for quickly checking temperatures on
connectors, insulation, bearings and exchangers.
Figure 14.4 Handheld Infrared Temperature Measurement courtesy Ralph Copp
Ultrasonic Measurements
Active ultrasonic measurements are utilized to measure thickness.
Passive ultrasonic measurements are employed to detect internal and external leaks through valves,
traps, gaskets, and flanges; from and to piping and vessels. 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 for trending
and heterodyned into the audible range so that it can be heard on headphones.
APPLICATION OF CONDITION ASSESSMENT

Most equipment is, and remains, in good condition for extended periods. Therefore, a major portion 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. Figure 14.5 primarily addresses vibration
monitoring systems, however, the principles apply to condition monitoring in general.
Type of Monitoring
Type of Protective Predictive

Equipment (API 670) On-line Off-line
Critical
Non Critical
Figure 14.5 Condition Monitoring System Applications
Protection Systems
Permanently installed, continuous, on-line protective systems are proven and universally required for
monitoring large critical equipment (e.g., process turbo compressors, power generators, large pumps and
propulsion turbines). Failures on this type of equipment can occur rapidly, may hazard safety, are always
costly, typically interrupt production and may result in collateral damage. Protective systems must be
continuous on-line to assure immediate response to sudden changes in condition. Requirements,
performance and reliability standards for installed vibration and temperature protection systems have
typically been governed by the provisions of American Petroleum Institute [API] Standard 670.
More permanently installed on-line protective systems are being equipped with diagnostic capability.
These modules are capable of performing more in-depth analysis for the purposes of earlier discovery of
potentially threatening anomalies and providing a detailed diagnostic history to aid in determining risk,
likely cause and corrective action. Most diagnostic modules include an expert system to aid discovery and
identification of cause.
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.
Protective systems must respond instantly to potentially damaging changes in condition. In contrast,
predictive condition monitoring systems are designed for a much more thorough and detailed analysis of
complex characteristics for earliest detection of life threatening defects. By nature, the time required for
predictive analysis precludes its use for protective monitoring.
Predictive Systems
Periodic, predictive condition measurements, recorded manually with portable equipment, are widely used
where safety is not an issue, failures typically develop slowly and/or operating alternatives are available.
Periodic vibration measurements recorded with walkaround data collectors, routine oil analysis,
Thermographic and ultrasonic surveys are examples. Measurements are typically recorded on
established routes at regular intervals.
Since only a small portion of periodically measured condition monitoring values 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
and are advantageous in a number of circumstances. These include applications where safety or
environmental considerations or restricted access prevent manual collection with the equipment in
operation. On-line predictive systems are also used where comparing predictive and process data offers
insight into cause and effect. (129) 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 periodic manual measurements. A compromise
solution uses permanently installed sensors that are connected to a field-mounted termination box,
allowing manual, periodic data collection from equipment and components that cannot be accessed safely
during operation. Many facilities are shifting some measurements to this configuration to 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.
ESTABLISHING A CONDITION ASSESSMENT PROGRAM

Establishment criteria for a successful condition assessment program is discussed in Chapter XI. Detailed
best practice criteria for vibration and oil condition assessment programs are contained in Appendix E.
A typical condition assessment program must include the following:
Program governing procedure including objectives, organization, safety requirements, results
required and performance measures / metrics
Application of condition assessment technologies, measurements and measurement interval
standards by equipment type and risk rank
Procedure for establishing warning alarm levels and security protection of alarm values
Quality standards including measurements, measurement instrumentation and software
Procedure for reviewing measurements, identifying anomalies, diagnosis of problems, results
reporting and follow up
Procedure and criteria for acceptance testing and baselining new equipment and following repair
Preservation / storage of data
Periodic effectiveness assessment based on results compared to cost of application
Training, proficiency and certification
Application of Condition Assessment Technologies

Application of technologies begins with constructing condition assessment templates by equipment type
in order of risk rank. Templates must assure a representative and responsive picture of condition and
include the following as a minimum:
Condition assessment technologies to be utilized by equipment type considering construction and
components such as rolling element or fluid film bearings.
Number and type of measurements (continuous, periodic), sensors and method of monitoring for
each measurement
Measurement / sensor / sample location, interval between measurements if applicable
Monitoring methodology: level/value, trend, bands, frequency spectrum, etc.
Connections to other systems such as the DCS
Recommendations / requirements for integrated, automated diagnostics
Methods for reviewing measurements, monitoring and trending results, identifying problems,
diagnosing cause
Procedure for reporting results including follow up to assure results, operational limitations and
any action requirements are received and fully understood
Warning Alarm Levels

Each condition assessment technology, program, monitoring system and measurement must have preset
alarm points to warn of abnormal conditions. Typically there are two:
Alert or lower alarm to warn of an abnormal condition that should be watched more closely for
continuing change
Danger or upper alarm indicating a serious deficiency, action required
In many cases, an upward trend will initiate an alarm depending on the rate of change.
Reviewing Measurements, Identifying Problems
A condition assessment program is only as good as its ability to recognize change as early as possible,
identify the cause, probable lifetime remaining and communicate information forcefully to all with
responsibility. Since all condition assessment application programs include automated recognition of
change and exception reporting it is essential that these are set up and fully utilized. As a quality check,
groups of measurements should be checked manually at periodic intervals to assure that features such as
alarm bands (vibration) and warning alarm levels are set correctly.
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 condition assessment displays allow personnel to quickly identify changes and
abnormal conditions; focus their expertise on solving complex problems and improvements that reduce
the need for maintenance 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 physical
asset optimization. Corporate metrics, primary management and operating metrics, and Key Performance
Indicators, Chapter IX, should be displayed on a management dashboard with capability to drill down for
the exact cause of deviations.
Condition Assessment Reports
Information that remains within the condition assessment program uncommunicated is of no value. There
are far too many cases of catastrophic failures that have occurred because information revealed by
condition monitoring and assessment was either not transmitted or ignored by a busy manager because
of a lack of emphasis.
A condition assessment report should list the following as a minimum:
Equipment with problems in order of severity / deviation from normal condition.
Condition information expressed in tabular, coded form for quick examination, see Chapter XIX:
Equipment number and description
Problem diagnosis, assessment of severity coded number / colored box from severe, action
required immediately, to watch
Recommended action
Action required by date
Last reviewed, inspected, monitored
Changes noted; e.g., stable, problem worsening
WO written, number, date work scheduled
Comments
Details
Detailed diagnosis of problem
Operating limitations if any
Estimated lifetime remaining to failure
Interim corrective action, e.g., alter operating conditions
Recommended permanent corrective action such as design changes
XV. FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY
By: James C. Fitch, Noria Corporation
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.
ROLE OF OIL ANALYSIS

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 does 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 fine tunes
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 15.1 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.
Fundamentals of Fluid Analysis 250
Figure 15.1 Overview of the Application of Oil Analysis
By monitoring the symptoms of oil, we are able to respond to the true and changing conditions of the oil.
Figure 15.2 illustrates this point. And, in some cases, reconditioning the oilincluding 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.
Figure 15.2 Monitoring and Responding to Oil Condition

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 15.3 demonstrates this concept.
Figure 15.3 Wear Detection Is Secondary to Failure Avoidance
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 condition measurements, 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.
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:
Selecting the Ideal Sampling Point

In circulating oil systems, such as the one shown in Figure 15.4a, 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 15.4b 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.
Figure 15.4a Optimum Sampling Point in Circulating Oil Systems
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 the
filter) must be used. Figure 15.4c 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 15.5). A vacuum pump may be required to
assist the oil flow for high viscosity lubricants, as shown in Figure 15.4d.
Figure 15.4b Options for Sampling Low Pressure Return Lines

Figure 15.4c Options for Sampling Pressurized Fluid Lines
Figure 15.4d Vacuum Pump Assists the Oil Flow of High Viscosity Lubricants
Correct 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 15.5. Alternatively, drop-tube vacuum samplers could be used, as demonstrated in Figure
15.6a. 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.
Figure 15.5 Sampling for Splash, Slinger Ring, and Flood-Lubricated Components
Figure 15.6a Using Drop-Tube Vacuum Samplers for Static Sampling
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 15.6b.
Figure 15.6b Clean Oil Sampling Using Zip-Lock Bags with Sampling Hardware
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.
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.
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.
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.
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.
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.
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
Equipment Type Hours
Diesel engines - off highway 150
Transmission, differentials, final drives 300
Hydraulics - mobile equipment 200
Gas turbines - industrial 500
Steam turbines 500
Air/gas compressors 500
Chillers 500
Gear boxes - high speed/duty 300
Gear boxes - low speed/duty 1000
Bearings - journal and rolling element 500
Aviation reciprocating engines 25-50
Aviation gas turbines 100
Aviation gear boxes 100-200
Aviation hydraulics 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.
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 15.7 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.
Figure 15.7 Routine Tests Combined with Exception Tests Provide Comprehensive Test Bundles
by Machine Application
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, acid number, base number, infrared for oxidation, emission
spectroscopy for additive elements, flash point, specific gravity, and rotating pressure vessel oxidation
test (RPVOT).
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.
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 non-
complying 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), RPVOT 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 15.8 illustrates this concept.
Figure 15.8 Contamination Either Can Thicken or Thin the Oil, Depending on Contaminant
Viscosity and Emulsifying Characteristics
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 15.9 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.
Figure 15.9 A Common U-Tube Kinematic Viscometer
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 15.10 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.
Figure 15.10 An Absolute Viscometer Designed for Plant-Level Use
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 15.11.
2. Acid number (AN) 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 Pressure Vessel Oxidation Test (RPVOT) 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. Linear Sweep Voltammetry is a new technology that has shown particular promise in trending the
depletion (mass transfer and decomposition) of phenolic and ZDDP inhibitors.
Figure 15.11 Infrared spectroscopy (FTIR)
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.
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.
Acid number (AN) will quantify the growing acid constituents in oxidizing oils.
Oxidation results in the polymerization of the base oil and the discharge of oxide insolubles,
causing the viscosity to increase.
Color-bodies form in oxidized oils, resulting in a marked darkening of the oils color.
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, AN, or FTIR for oxidation.
However, sophisticated labs that have experience with hydraulic fluids employ specialized tests such as
ultracentrifuge, 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 analysis. 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 15.12 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).
Figure 15.12 Common Methods for Monitoring Additive Depletion

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
15.15. 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.
Figure 15.13 ISO 4406 Two-Range Number System for Representing

Particle Counts in Oils
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 15.14. 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 15.15. 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 15.16.
Figure 15.17 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.
Figure 15.14 Target Cleanliness Determined Based on Need for Machine Reliability and Machines
General Contaminant Sensitivity
Figure 15.15 Particle Counters Using Laser or White Light Can Count
Particles Across a Wide Range of Sizes
Figure 15.16 Pore Blockage-Type Particle Counters Can Discriminate Between Hard Particles and
Other Impurities
Figure 15.17 Particle Count Trends Vary Depending on the Machine Application and the Presence
of an Onboard Filter
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 15.18, also influences the saturation point.
Figure 15.18 Oil Temperature 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 15.19.
Figure 15.19 Visual Differences Associated with Progressive Concentrations of Water

Contamination Detected via the Crackle Test
Other widely used methods to detect water include:

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).
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 6304).
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.
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 15.20 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 15.21 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:
Direct Reading Ferrograph: reports results in Wear Particle Concentration units
Particle Quantifier: reports an index scale
Wear Particle Analyzer: output in micrograms/ml
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 15.22 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 15.23.
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 15.24.
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.
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:
Lubrication fundamentals and their use
Mechanical failure analysis
Proactive maintenance and root cause analysis
Troubleshooting hydraulic systems
Lubrication and maintenance of bearings and gear units
Oil analysis fundamentals
Oil analysis data interpretation
Filtration and contamination control
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.
XVI. ELECTRICAL ANALYSIS: STATIC (OFF-LINE) AND DYNAMIC (ON-LINE)16
By: Jack R. Nicholas, Jr., P.E., CMRP Maintenance Quality Systems, LLC.
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.
CONDITION MONITORING TECHNOLOGIES AND METHODS

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)
Newest method available commercially
Model based fault detection and diagnosis
MOTOR CONDITION MONITORING TECHNOLOGIES

The technologies described below can be applied to all types of motors (and generators) and associated
circuits of any size. There is beginning to be considerable overlap between the capabilities of electrical
analysis equipment from various vendors. However, none of the commercially available products have the
complete range in all parametric or technology categories to meet total market requirements.
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
16
Material in this chapter is extracted from Predictive Maintenance Management by Jack R. Nicholas, Jr., P.E., CMRP
and R. Keith Young, ISBN 0-9719801-2-8 and Motor Electrical Predictive Maintenance and Testing (Ninth Edition) by
Jack R. Nicholas, Jr., P.E., CMRP ISBN 0-9719801-4-4. Both books are published by Maintenance Quality Systems
LLC, Millersville, MD.
Electrical Analysis 274
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 ratios is the Polarization Index Profile or PIP of an electrical circuit.
In this method, resistance to ground using a 500, 1000 or 5000 volt DC test voltage is plotted every three
to five seconds for up to 10 minutes. Weak systems exhibit a profile or resulting plot of RTG versus time
that has frequent dips or spikes. Even though the ratio may indicate a good condition, the stability of
the profile as indicated by the size and mere presence of dips or spikes 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 and/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 reveals 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. The oscilloscope traces
should be closely matched, stable and not shifted relative to the input pulse.
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. Comparing traces
taken months or years apart on DC, single phase, and polyphase AC motor circuits allows more reliable
evaluation of changes in motor electrical condition to be performed.
Many motor manufacturers use surge testing as a quality tool. Motor rewind shops use the method for
diagnosing incoming motors. Many motor users employ 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 multiple paths 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. Electrical apparatus
repair shops and use this method frequently for evaluation of incoming machine insulation systems and
during winding replacement and insulation system integrity restoration. Some facility maintenance teams
use this method, taking care not to overstress insulation in the course of in-service testing.
Many surge testers, such as those by the Baker Instrument Company and Electrom Instruments, also
contain HiPot, temperature compensated RTG, Polarization Index and dielectric absorption ratio
capabilities. The latest Baker instrument, the Advanced Winding Analyzer (AWA), also has the ability to
measure, compare, and trend winding resistance (in the conductor path), a feature of Motor Circuit
Analysis (MCrA) technology. This topic is covered in greater detail later in this appendix.
Motor Current Balance Analysis (MCBA)
For polyphase electrical circuits, taking a set of 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. For best indication the
readings should be taken when the motor carries a significant load.
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 source voltage unbalance
due to faults in power utility 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 significant (e.g., >15%) unbalance is not corrected.
Partial Discharge Monitoring (PDM)
Partial discharges (PD) 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.
Early versions of this technology, applied to turbo and hydro generators, used antenna-like sensors
mounted inside the machine. The electronics were much like an AM radio, indicating the presence of PD
like static. In current versions, the presence of partial discharges can be detected using electronic
circuits that can decipher PD characteristics, sort or filter out noise from sources outside of the machine
and indicate magnitude, intensity and internal location of the PD. Capacitive sensors called couplers
located in slots of the stator core and/or mounted on power supply busses in the motor or generator
connection box detect the PD pulses and channel their indications via sensor cabling to an electronic data
acquisition unit mounted for easy access on or near the machine. Data may be downloaded locally or
routed via network connection to a computer for alert, alarm, analysis and reporting. As conditions
become more favorable to electrical discharges, the discharges become more frequent and stronger,
accelerating the deterioration. The discharges, like lightning discharges in the atmosphere, create
pulses in the electronic circuit of the PD detector. The more intense the discharge activity the worse the
condition of the insulation systems and the closer it is to complete failure.
Partial discharge monitoring has been used for over 40 years on medium and high voltage motors and
generators (6kV and above) to give two or more years warning of insulation degradation caused by PD
leading to inevitable failure. Two companies with the longest history in this technology field, Adwel, Inc.,
and Iris Power Engineering, both from the Province of Ontario, Canada, produce partial discharge
monitoring systems for high voltage generators and motors. Their efforts were the result of research and
pursuit of solutions to the problem of PD by Ontario Hydro, the provincial electric utility. Other companies
now produce PD monitoring equipment for power cables and other applications.
In lower voltage motors 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 (3.3kV to 4kV) voltage motors used
in many power generation and industrial facilities. MotorTrac, a successful continuous, on-line
monitoring system, consisted 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 successor to MotorTrac , called PDTrac can be used to monitor
motors, switchgear, generators and dry transformers. Like MotorTrac the unit front panel provides local
indication of alert or alarm conditions. Data are stored for periodic download to a portable computer
containing software for presentation analysis and reporting via RS232 output, or the units may be
connected by Ethernet or RS485 link to a personal computer containing presentation, alert, alarm
analysis and reporting software 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 and associated
couplers can normally be installed on a motor during a one-day outage.
In late 1999 and early 2000 two other products were introduced by Iris Power Engineering (now a
subsidiary of Koch Industries) for monitoring motors. The first, SurgAlert, measures magnitude, rise
times and number of voltage surges or spikes from variable frequency drive (VFDs) and switchgear.
Surges can cause damage directly or, if high enough, induce partial discharges that cause progressive
damage to insulation systems. Poorly performing or improperly installed VFDs - including those supposed
to develop output voltages of only 460 volts - can create much higher voltage spikes that exceed PD
inception voltage. Even motors with spike resistant magnet wire may be subject to premature failure.
The second product, PDAlert, measures PD in each phase under fast rise time surges. Combined with
certain surge testers it can indicate the inception voltage at which PD first occurs. An output analog signal
of PD can be displayed on a high speed digital oscilloscope for more detailed analysis.
Motor Circuit Analysis (MCrA)
Motor circuit analysis (MCrA), also known by many large manufacturers and electric power generation
companies as Motor Circuit Evaluation or MCE17, involves off-line measurement of four natural electrical
parameters using closely controlled AC and DC input signals from a computer-based test unit. MCrA
became economically feasible about 1991, when field portable computers and micro processors with
sufficient memory and speed entered the marketplace linked with portable test packages. MCrA testers
measure: (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 and identification of suspected defects.
Results may be compared to well-accepted standards (e.g., for RTG) or empirically derived guidelines.
The guidelines are based on analysis of tens of thousands of motors and reflect experience of MCrA
equipment vendors as well as many utilities, government organizations, and manufacturers. Using MCrA
data, motor predictive maintenance personnel can quantitatively characterize present and predict future
motor circuit (and small generator and transformer) electrical conditions. This method is growing in
popularity and is now 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)
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
17
MCE is a registered trade mark of PdMA Corporation, Tampa, Florida. Another company, BJM, Inc, of Old
Saybrook, Connecticut produces lower cost versions of Motor Circuit Analysis equipments and associated software
suites.
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 18. The significance of
this has only recently become apparent to many people including electrical apparatus repair shop
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 and field) circuits. However, just a 5
percent resistive unbalance can cause significant circulating and/or unbalanced currents in AC motors,
generating heat in excess of that needed to rapidly age and ultimately cause failure in electrical insulation.
Inductive unbalance can cause the same types of degradation, although most machines can tolerate
higher levels (20-25% inductive unbalance) before suffering adverse results. Unbalanced resistance in
DC circuits can interfere with machine control.
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. The technology was developed in Scotland and used initially
on off shore oil platforms in the North Sea in the early 1980s by Professor Bill Thompson of the Robert
Gordon University.19 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 speed in revolutions per second. 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 driven
device(s).
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
18
Presentation by Jim Berry at 1998 Machinery Reliability Conference April 28, 1998, Charlotte, NC
19
Bill Thompsons website, www.mcsainterpreter.com, provides much information and an MCSA
consulting/subscription service (for fee). He is also visiting professor in Electrical Engineering at University of Abertay
in Scotland and has written over 80 papers on this subject.
Mechanical defects associated with the rotating element (e.g., bearing or gear degradation)
A large number of companies produce equipment, accessories and software for MCSA.
Motor Power (or Electric 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 significant amount of load. Power or electric signature analysis provides a
potentially huge amount of data and opportunities to detect degraded conditions at early stages of
development. From 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 electric machine 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. Harmonics create unwanted
heat in proportion to the square of the harmonic frequency relative to that of the power supply line,
harming electrical insulation.
Motor Flux or Leakage Flux Analysis (MFA) 20
Magnetic flux created by currents in motors is concentrated largely inside its casing, enclosure or shell.
The rotating magnetic flux field creates motor action causing the rotor to turn and react to the load
demands. However, some magnetic field flux lines 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 including one by a U.S. Navy laboratory 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), now a division of Emerson Electric Company,
introduced a patented method for consistently positioning a flux detection coil in the same place on
motors, the key to repeatability of observations and conclusions derived from their analysis. Once the coil
is positioned it is connected to a vibration data logger for collection. Data from the data logger are
uploaded and analyzed in CSis Motor View software programs.
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.
Iris Power Engineering recently introduced an on-line monitor, FlexTrac, for remotely acquiring
measurements of magnetic flux from air-gap mounted flux probes in synchronous motors and generators.
The output of this instrument is used to assess integrity of inter-turn insulation.
20
See application paper entitled Proactive Motor Monitoring by S.V. Bowers, W.A. Davis and K.R. Piety of
Computational Systems, Inc., at www.compsys.com/expertise/productsupport/applicationpapers
Motor Normalized Temperature Analysis (MNTA)21

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. The normalization algorithm is:
T pt Tamb
Tn 100
% Load
Where:
Tn = Normalized thermal parameter
Tpt=Measured motor temperature point
Tamb=Measured ambient air temperature
% Load = percent of full load of motor at measurement time
Emerson CSi has developed a software program module (part of the Motor View 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. Many systems capable of TDR are also capable of measuring resistance in the
conductor path, capacitance-to-ground, resistance-to-ground, and inductance - all parameters associated
with Motor Circuit Analysis, described earlier in the appendix. All of these measurements are performed
off-line, with the circuit de-energized. An Internet search engine inquiry Time Domain Reflectometry will
generate many hits on this subject.
21
Ibid
Model-based Fault Detection and Diagnosis

In the 1990s, a Turkish firm, Artesis 22, under the direction of a professor of Electrical Engineering at
University of Miami (Florida, USA)23 developed and introduced Motor Condition Monitor (MCM) and
Predictive Fault Sensor (MCMSoC) technology and associated products to European and North American
markets. The technique uses motor input voltage and current (vectors) and waveform data analysis to
detect fault indications. These were first used successfully in the 1980s by the U.S. National Aeronautics
and Space Administration (NASA) and Department of Defense (DOD) to assess condition of motor
circuits. However, the technique developed and marketed by Artesis goes well beyond the early
applications, Motor Current Signature and Motor Power Analysis, described earlier in this section.
Voltages applied to and currents demanded by a motor in response to even very small variations of the
load on it affect and are very sensitive to the relationship between the magnetic field created by current
flow induced in the rotor and its interaction with the rotating magnetic field of the stator. The stators
magnetic field is a result power source current flowing (and changing at line frequency) in its winding
conductors. As motor inductance varies in response to load changes and defects, so does the current
waveform. MCM learns what the characteristics of a good motor are and then uses what it has learned
as a baseline against which to compare future performance. The model it creates uses data acquired
and/or calculated using a set of differential equations, resulting in 22 different parameters, classified as
follows:
Eight (8) electrical parameters which generally are sensitive to changes in supply voltages
(including harmonics), loading conditions and electrical faults
Two (2) current fit parameters which are sensitive to load changes, line changes and electrical
faults developing within the motor
Twelve (12) mechanical parameters generally sensitive to conditions such as load unbalance,
coupling, bearing and driven end problems.
In the simplest version of the associated equipment, comparison is made point-by-point between the
baseline that has been learned and real time data. If differences exceed a set of thresholds beyond what
is normal the system provides a warning by means of a liquid crystal display and a set of light emitting
diodes on the front panel of the MCM device. The device is mounted on the outside face of the control
center cabinet for the motor being monitored. The thresholds for the warnings are typically based on
relative magnitude of differences - one or two standard deviations from a Gaussian distribution norm -
and the multiplicity of differences that is, the number of the 22 parameters that are at or beyond the
threshold differences from the corresponding parameters in the reference model.
MCM devices and associated product outputs can be integrated into a SCADA system using Modbus
communications protocol. An RS 485 serial output can be connected to a laptop or personal computer
equipped with monitoring software for presentation and analysis of graphs for each of the 22 parameters
over time.
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 14.1.
22
Artesis A.S. is a subsidiary of Arelik, a major European manufacturer of domestic appliances. The first version of
this fault detection and early prediction technique was introduced in 1998 as an end-of-production line motor testing
device for small appliance motors. The DEI Group of Millersville Maryland is the North American distributor of Artesis
products and software.
23
The professor is Dr. Ahmet Duyar, Ph.D. e-mail: duyara@arcelik.com.tr
Figure 14.1: Major Advantages and Disadvantages of Static (Off-line)

and Dynamic (On-line) Motor Electrical Condition Monitoring Methods
Off-line Monitoring On-line Monitoring
Advantages 1. Active, known, and controlled test 1. Passive no test signals needed
signals used 2. Monitoring can be done without
2. Fewer extraneous signals on de- interfering with production when
energized motor circuits to mask equipment is permanently installed
test results 3. Hookup and/or data collection may be
achieved for some methods and
installations without special electrical
safety considerations (MFA, MNTA)
Disadvantages 1. Motor must be shut down to 1. Many normal conditions provide test
perform testing, which may interfere indications which mask fault indications
with production (MCSA, MPA, MFA)
2. Circuit must be proven safely 2. Test hookup for periodic monitoring may
de-energized before hookup of ALL be difficult to achieve safely without
off-line methods motor shutdown at some installations for
3. Test signals used are not some on-line methods (MCBA, MCSA,
always the same for different MPA)
vendors, making correlation of 3. Local conditions may influence test
results more difficult results (MNTA)
4. Residual magnetism may
influence some results (MCrA)
RECENT ADVANCES IN ELECTRICAL ANALYSIS INFORMATION AVAILABILITY

Those involved with Electrical Analysis predictive and diagnostic tools have formed the Institute for
Electric Motor Diagnostics. The institute was activated officially on 1 January 2006. The mission of the
IEMD is to share information, set standards and best practices, develop certification programs and
promote Electrical Motor Diagnostic (EMD) technologies and motor-system health information as it relates
to the reliable and efficient generation, transmission, distribution, control, conversion, coupling, load and
process of energy. Technologies that fall within the scope include, but are not limited to: Current
Signature Analysis, Electric/Power Signature Analysis; Motor Circuit Analysis; Vibration; Infrared;
Ultrasonics; Partial Discharge; Insulation testing; Software; and, all other technologies and methodologies
used for condition based monitoring and testing of motor systems.
Institute membership is open to end-users, vendors, manufacturers, consultants and other system stake-
holders with an interest in application of EMD in an effective manner.
Additional information on the institute is available at its web site, www.iemd.org.
XVII. MANAGING THE IMPROVEMENT PROCESS
Old organizations were built on control but the world has changed. The world is moving at
such a pace that control has become a limitation. It slows you down. Youve got to balance
freedom with some control, but youve got to have more freedom than you ever dreamt of.
Results and what you contribute are the measures of value not what you control.
Jack Welsh
The asset optimization program is directed to gaining organizational and operational excellence, effective
processes and optimized reliability. Within asset optimization the improvement process is focused on
establishing the values, institutional culture and behavior that are essential for success, gaining mutual
trust, ownership for excellence and positive, constructive working relationships. Gaining these objectives
is a difficult task that must be driven, led and closely managed.
CREATING THE ENVIRONMENT FOR TRANSFORMATIONAL IMPROVEMENT

Transformational improvement, like any change will be viewed by most as a threat and by many a
large threat that is to be resisted. The real question and challenge is how to accomplish the necessary
changes quickly and in the least threatening way so that as many as possible support the process and
contribute positively with minimal disruption.
Transformation used in this chapter describes a rapid and dramatic process of total
change in values, culture, organization and procedure to attain significantly higher levels
of performance and effectiveness. In a transformational improvement process all
opportunities for improvement are considered, changes are accomplished simultaneously
in multiple areas within an overall strategy to gain results as quickly as possible.
Transformation is an essential element of asset optimization. It begins with establishing initiative,
ownership, responsibility, and accountability. This is combined with knowledge and empowerment that
maximizes individual contribution, rewards initiative and results, and accelerates the decision making
process. Organization, coordination, communication, and supervisory functions are all streamlined. Waste
and non value-added elements such as bureaucracy, compartmentalization, hierarchical decision-making,
excessive handoffs from one individual or function to another, and redundant approvals are eliminated.
People must be educated about the business and why, as individuals, their positive participation
and contribution are imperative. They must understand the business process and relationships as
well as the importance of and connection between business success and their personal
happiness, success, and security. Understanding a compelling business necessity for
transformation can energize the entire organization. (129)
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 real
accountability for decisions and results.(129)
The transformation process must have everyone on board or at least neutral, not impeding progress. It
has been reported that shifts in values, attitude, mindset and discipline (institutional culture) are more
important to success than the application of technology and capital investment. Achieving this shift in
institutional culture is a prime objective of the Communications Program described later.
Within a physical asset optimization program itself, gaining a productive partnership between Production,
Maintenance, support functions and plant management is essential. As an organization applies a
transformation initiative it is common to find intellectual support for the objectives and program that
doesnt translate into emotional buy-in. As an example, instead of using an unexpected failure as a lesson
of how to avoid a problem in the future there may be a natural tendency to look first for someone to
blame. This action will quickly restrict the open dialog that is necessary within an asset optimization
program. Others may cite an unacceptable loss of capability because the transformed, lean organization
may not have the people immediately available as they would / might be in an undisciplined reactive
maintenance scheme where response to failures and rapid failure correction are the expected norm rather
than the exception.
Managing The Improvement Process 284
A new plant manager touring for the first time asked the Unit Production Manager why all these
people were sitting in the lunchroom during working hours. His reply they are maintenance
people making us thousands of dollars since by sitting here there is nothing needing immediate
attention in the unit!
Necessity for Transformational Improvement
The necessity for transformational improvement must be detailed, communicated and heavily promoted.
Two necessities for change that can be communicated effectively are:
A major improvement in results is essential to remain in business in the face of competitive
threats:
A facility that had been manufacturing a product since its invention and enjoyed patent
protection suddenly found that a Chinese manufacturer could deliver identical quality at 70
percent of the price they needed to remain in business. While financial analysts concluded
that they could sell successfully at a premium due to supply chain considerations, they would
have to reduce manufactured cost by 20 to 25 percent in order to remain in business. Raw
materials were commodities, governed by global pricing. Thus, the bulk of the savings had to
be gained from conversion costs, primarily O&M.
Adaptability to meet a changing market environment is essential for success in a competitive
world. In many areas of the US abandoned factories are mute testimony to leaders who didnt
recognize competitive threats and / or do anything to assure survival in a changing business
environment:
Until the mid 1990s US power generators lived in a heavily regulated environment with a fair
amount of reserve capacity and guaranteed profits. Power stations were typically well staffed
with highly experienced local and centralized technical support. As the electric power market
became more competitive, reserve capacity, technical support and many optimizing programs
were reduced as economy measures some would say false economy. Diminished
generating margin and fewer experienced people stretched thinner, combined with reduced
surveillance requires a significant change in thinking.
A multi-plant power generator quickly evolved a networked, highly automated surveillance
center manned 24-7 by experienced specialists. With capabilities for monitoring all plant
variables in real time, specialists at the center often noted deviations before the plant,
particularly during intensive periods such as start up where the local operators were fully
occupied with the procedure. By communicating the existence of a potential problem and
recommending corrective action well before a major event occurred, the surveillance center
leveraged experience and demonstrated value many times over.
Organizational Culture
There are two opposite extremes of institutional 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-the-month, that will likely blow over. The military is close to the do exactly as instructed.
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 and extensive training for every
task. In the asset area 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, more rewarding and
increasing security and value for the person performing the task.
No matter which end of the scale an organization finds itself, the objective of a transforming improvement
process is to increase ownership, initiative and responsibility. For the person who says: Its been good
enough this way for 30 years and Im certainly not going to change for some fad, program-of-the-month,
that will likely blow over the operative question is whether the current way meets business requirements
and if not how can it be improved. Every person must accept individual responsibility for improvement.
The same holds true for do exactly as told. Is this the best, most effective way, how can a process or
procedure be improved and all can.
Successful Transformation
Any change initiative requires a set of processes that ensure the improvements are identified, prioritized
and implemented in a visible, orderly and controlled fashion. The process, roles and responsibilities must
be fully defined, see Chapter X.
A successful improvement process has three overall characteristics:
1. Pulled by necessity reasons recognized, understood and accepted.
2. Organizations and individuals are required to think, behave, act and perform differently.
Many would like to believe that major improvements can be gained by continuing to do the
same things better. This conclusion implies that current processes are satisfactory, people
are inefficient, incompetent or both. A close examination almost always concludes it is the
culture and processes that need to be improved along with values, and behavior to utilize the
improved methods most effectively.
Appointment of a senior, respected leader for the transformation program is one of the first things
that must be done if others are to be convinced that the program is for real, Chapter X.
A Fortune 250 company that has employed this collaborative philosophy very successfully
calls the process shared leadership, inspired by Noel Tichy.
3. Everyone is involved and must change leaders set the vision and drive the process, mid
level managers lead, supervisors and workers develop and implement details the process
unfolds middle out.
Characteristics of the Transformed Organization
The transformed organization will have a number of recognizable characteristics including:
A flatter organization, with fewer levels in the hierarchy. Individuals are expected to assume
greater ownership, initiative and responsibility
People in the transformed organization are expected to perform at higher levels of
proficiency. Hourly crafts will be expected to perform technical and analytical tasks such as
failure analysis, many of which are currently being performed by salaried professionals.
Great reliance on cross-functional, multi-skill teams formed to identify and exploit opportunities.
Increased energy, initiative, motivation, ownership, and better relationships
The lean transformed organization relies on cross-functional teams empowered to identify
and solve problems and inefficiencies. Bureaucratic, command and control silo organizations
characterized by barriers between functions and layers of approval required for minute
improvements stifle initiative and motivation and are eliminated during the transformation
process.
Greater flexibility in the work process
Many transformed organizations cross train technicians to assume multiple roles. For
example, a technician with primary mechanical skills assigned to a job requiring multiple skills
might act as an instrument or electrical helper to avoid the necessity for a third person with
these skills.
In some cases mechanics are permitted to tag out and disconnect electric motors that are
being removed for repair. (Some US states require a certified electrician.)
People stretched thinner with the ratio of supervised to supervisors continually increasing. Self
directed work teams with less assistance and supervision are a necessity
Core craft and operator-level personnel must be empowered with the practical knowledge,
skills and authority to perform precision practices on a routine, day-to-day basis.(87)
Effectiveness increases in all tasks tasks are prioritized by risk and value, only the most
important are done, wasted time and effort are minimized
Change is Threatening
While there are large variations in any population, on average, people have reservations about change.
People can talk and talk about the necessity for change. However, most are comfortable with current
conditions and the status quo, no matter how inefficient. People feel threatened by change. Perceived
threats from change must be relieved early in the process, communicated again and again and finally
demonstrated by action in the improvement process itself.
Every major transformation process will be viewed very skeptically as a stealth way to eliminate
jobs. If left unaddressed this skepticism can be the downfall of an essential improvement process
why should I cooperate if success will reduce my pay or perhaps even cost my job?
Recognizing the issue will be uppermost in many minds, facilities must identify how many jobs
will be lost and how they will be lost at the very outset of the transformation program. If a facility
is fortunate, expected retirements plus normal attrition and an early retirement program might
avoid involuntary layoffs.
Responses
Faced with an essential transformation process many will react in well-known, predictable stages:
Fear and concern of the unknown I dont know how, I cant do it, its asking too much, I dont
have the training or resources
A natural reaction that can be headed off by effective communications. The leadership,
training and continuing support necessary to show how, provide confidence and assure you
that success will be achieved.
Denial the requirement is overstated, Ive been doing the job this way for 20 years, dont see
senior managers concerned
An employee of a privately held company with approximately 2,500 employees that was in
serious financial difficulty informed a division manager with detailed knowledge of the overall
precarious financial situation that he didnt see any urgency or necessity for change. He
had been working there over 25 years, knew the owners well and they didnt look worried.
Until he saw them visibly worried he wasnt going to change. The company went bankrupt,
was sold in receivership and today is less than 20 percent of its pre bankruptcy size!
Anger Why us? Why me? What did we do to deserve this? Its really a failure at a lot higher
level, I just work here.
Anger and blame dont get anyone anywhere. In this situation, communications need to
redirect anger toward ownership, initiative and motivation to accomplish the improvements
required to gain necessary results.
Despair, Depression this transformation process is too complicated, its too hard and simply a
way to eliminate my job work hard, do well, executives receive bonuss and Ill be out on the
street
Again, the issue is communications. This stage can be anticipated and must be mitigated by
training, support and facts expressed within the transformation strategy and implementing
plan
Bargaining just another program of the month, if I do nothing it will blow over like so many
before
High level management must demonstrate with full commitment and constant action that the
transformation initiative is not just another program of the month, especially if there have been
programs in the past commenced with great fanfare only to wither away with little or no visible
results
Acceptance maybe we really have to do things differently, Ill do my best
Almost home!
Satisfaction this really did work, Im happier and in a more personally rewarding environment
Demonstrate with well-publicized metrics, surveys, action on deficiencies and continuing
improvements, all widely communicated. Reinforce with results based compensation, greater
responsibility and accountability
THE TRANSFORMATIONAL IMPROVEMENT PROCESS

The process begins with the appointment of a Change / improvement Manager / Champion. The best
facilities will have dedicated people assigned to the task and focused solely on the improvement process.
The position is a field job for the individual must have a solid sense of the facility, the institutional culture
and relationships. The Change / Improvement Manager may be the leader of the Communications Team
described in a later section.
Implementing a Transformation Initiative
There are fundamentally four ways to implement a successful transformation initiative:
1. Utilize the very best people on-site; train as necessary
2. Increase staffing; one organization augmented staff with retirees to perform vital verification tasks
3. Augment staff temporarily with additional people from corporate; if available
4. Utilize an outside, third party contractor
Using site personnel is the best and most effective way to capture institutional knowledge and gain the
ownership that is essential for success.
It is often difficult to increase staffing when most transformational initiatives are directed at reducing
staffing. Temporary assistance is one solution, retirees on a short-term contract is even better because of
their specific plant, process and organizational knowledge.
Corporate personnel are often viewed as outsiders with an agenda that may not be totally aligned with the
local plant.
There are two primary ways to implement a transformation process with a third party:
1. The third party team develops the entire transformation process with supervision by
site personnel. Transformation includes reorganization, selection and documentation of revised
practices, e.g., Work Management, PM, CMMS, CBM, materials optimization.
2. Joint effort the third party team advises, facilitates and trains site personnel. All actual work
performed by site personnel
Several potential pitfalls must be recognized when a third party develops the entire transformation
initiative. They include:
The plan typically follows the outside teams standard process and is not necessarily optimized
for site-specific culture, conditions and opportunities implementing the plan may be quite
difficult.
The objectives / priorities of site and third party may be difficult to align. The site wants a practical,
solid reorganization; the third party wants a rapid solution and payment.
Site personnel may not feel much, if any, ownership in the process and may not agree with and /
or support the results with the enthusiasm and commitment necessary for success.
A plan formulated by a third party may exacerbate existing organizational tensions; they are
forcing something ill advised on us again.
It is more difficult to assign responsibility / accountability for results from a plan developed by a
third party are the lack of results due to an inadequate plan or its implementation?
A transformation plan developed solely by a third party typically ends when a voluminous, and expensive
report is turned over and typically put on a shelf never to be opened again.
Use of a Third Party Change Agent / Facilitator

A joint, implementation using third party facilitation offers a solution to the preceding pitfalls plus several
major benefits:
Site personnel are integral to the improvement process. Opportunities and action plans are
primarily developed by site personnel who therefore have intimate knowledge of the changes
required, ownership of the process and commitment to success.
Site personnel rapidly and effectively gain proficiency with core best practices through
personalized, totally applicable training and on-the-job practical experience.
Development by site personnel minimizes us-them tension; whatever may develop is addressed
and resolved immediately.
Joint development offers the potential to establish a long-term win-win relationship with a third
party who can periodically audit performance and bring latest improvements.
An experienced third party change agent / facilitator should be considered early in the process to work
closely with the site Change Manager. A third party facilitator brings knowledge of what has worked well
elsewhere and can help to minimize the apprehension that is inevitably experienced at the beginning of a
transformation process. An experienced facilitator will have the ability to quickly identify and prioritize
opportunities for improvement brought forth by participants, as well as the sensitivity for building team
relationships and effectiveness. The site Change Manager learns quickly with minimized potential for
misunderstandings.
For maximum contribution, a third-party change agent / facilitator should have broad, state-of-the-art
knowledge and experience with the organizational transformation process and supporting practices.
Having this knowledge will enable able them to focus their time and efforts on the site-specific strengths,
relationships and opportunities, and quickly and effectively convert the opportunities into an actionable
reorganization plan.
Another advantage of utilizing skilled facilitators is the sensitivity to conflict, combined with the
skill and experience to identify and resolve individual difficulties as soon as they arise and before
they become intractable.
A third party also serves as new eyes in the pursuit of world class performance. All too often waste and
ineffective conditions are not recognized by participants. People are accustomed to and comfortable with
the old way.
An experienced facilitator will help in the buy-in process, motivate the team and keep them on track to
objectives. Rapid formulation, deployment and implementation of best practice total solutions will move
change faster and farther. A third party can drive the improvement process and develop the relationships
necessary to make the process go with minimum time wasted on struggling with the process itself.
Some companies might want to consider a long-term shared risk-reward contract with a third party. The
contract operates on a business basis with objectives and interests fully aligned. Success requires
openness, full cooperation and everyone looking out for each other a partnership for success. In this
type of relationship one question always comes up. With both parties working together to achieve an
agreed objective how is each parties contribution to success apportioned and the third party
compensated? The only answer is that a percentage division is agreed on ahead of time and followed
throughout the duration of the contract. If either party feels they are doing more, and the other less than
anticipated there should be a means in the contract for renegotiations.
An experienced facilitator can make the difference between success and failure.
Anthony M. (Mac) Smith
TRANSFORMING THE INSTITUTIONAL CULTURE

Within asset optimization the transforming the institutional culture is focused on establishing the values
and behavior that are essential for success, gaining mutual trust, a commitment to organizational and
operational excellence, and positive, constructive working relationships. A reliability oriented, profit center
mentality, and mutually reinforcing teamwork are essential characteristics.
The CEO of a large company commented that an optimum organizational ethos, defined as
values, culture and guiding beliefs, is essential to ensure optimum results. (129)
Cultural transformation is directed to creating a fertile environment with embedded values and processes
in-place that encourage employees to assume new behaviors, roles, relationships, and approaches to
work. Industry leading 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) Industry is progressing from supervised workers with little or no say in the work
process and who largely follow instructions, to energized, empowered technicians identifying, analyzing
and correcting defects.
Cultural improvement typically must address six areas:(112, 129)
1. Gain broad and deep acceptance for the need for improvement
2. Create and embed an excitement and energy for achieving shared objectives, the future state
3. Promote initiative, commitment and ownership for improvements and the transformation process
4. Develop and implement an effective plan to achieve the objectives
5. Align processes and functional components to the plan, gain full understanding and support
6. Establish and reinforce change through communication, training, and coordination
Many of the successes gained by the Japanese can be attributed to culture and the high value placed on
trust and relationships. Trust between Japanese workers and management is unquestioning and strong.
Partnerships with suppliers and contractors are at levels yet to be achieved in the U.S. 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 and recognized. (129)
The preceding was illustrated by union agreement to work in mixed crews with non-union site personnel
and under site supervisors during a unit maintenance outage. During prior outages the union had always
demanded union only work crews and union supervisors. Perhaps the steady reduction of opportunities
for union members promoted the flexibility.
Within North American industry the generally prevailing asset culture has been to repair defects and
control cost to budget. If a process such as planning and scheduling was awkward and not particularly
effective, it was up to participants to figure out how to make it function without any changes in the process
itself. Process improvements were not encouraged and had little possibility of being implemented.
Improved practices such as PM, CBM, and even RCM, generally focused on taking action on expectation
of failure or earlier discovery to avoid failure. This is more or less the firefighting example referred to in a
previous chapter. The only improvement made with predictive technologies is that the firefighter may be
dispatched in expectation of a fire to put it out while it is still smoldering. There was little emphasis on
increased reliability the equivalent to a fire marshal acting to eliminate problems.
The culture necessary for successful asset optimization must include a safety-conscious and
environmentally aware, profit-oriented mindset. This is combined with a commitment to improving
reliability by eliminating defects; and increased effectiveness through more efficient, accurate task
performance.(129)
Within industry, the best not only perform work more effectively they have greater reliability and
thus less work to do!
Most major producer corporations have a high awareness of safety and environmental issues and
perform well in these areas. Many recognize gaps to best practice and therefore have room for
improvement in other areas. Improvement requires directing the same level of attention to mission
compliance, production, and equipment effectiveness that has proven highly successful in maximizing
safety and environmental performance.
Asset optimization calls for initiative, energy and ownership. All participants are encouraged to identify
opportunities for improvement. Opportunities are identified, prioritized and implemented as low in the
organization as possible. When Production and Maintenance Superintendents must get involved to
arbitrate, the process has failed.
THE TRANSFORMATION PROCESS

There are basically two types of improvement processes. One is step change transformation, which can
be described as an exponential change that rises very quickly, the other is continuous, which can be
described as a saw-tooth, gaining an objective in small incremental steps. An elephant being eaten one
bite at a time. A Step change transformation process is advisable when a required process or function is
nonexistent, dysfunctional or so far away from benchmark performance that a major improvement is
required to gain objective performance. A continuous process is appropriate when a process or function
exists, includes all necessary elements and needs only fine-tuning and refinement to gain objective
performance.
Step Change (Transformation)
As stated in the quote by Paul ONeil in Chapter IV: I believe we have made a major mistake in our
advocacy of continuous improvementwe need rapid, quantum-leap improvement; step change. Step
change has the following attributes:
Objective breakthrough improvement in performance and effectiveness, leap into an ideal
future state
Entire organization subject to review and major change everything; organizational structure,
roles, methods, values, culture, policies, processes and procedures
Transition plan is all important to avoid costly interruptions as major changes are implemented
Perform many changes simultaneously despite the difficulty of coordination and management
High risk / high potential gain create greatest value most rapidly, very rewarding
organizationally and personally
A large organization that had been mandated to improve performance and effectiveness settled
on an objective of 12 percent improvement in five years. A third party pointed out that such an
unambitious objective immediately moved all participants into a task protective role on the
conclusion that the objective could be satisfied by tinkering without addressing any of the major
processes and gaps that really demanded improvement.
Continuous Improvement
Continuous improvement is advisable when analysis demonstrates that some or all of the current
structure, methods, cultural values, policies and procedures are close to best practice and require only
fine-tuning. Continuous improvement:
Builds from current structure, policies and procedures
Changes are incremental, designed to optimize existing practices
Ensures little disruption, an orderly transition
Is low risk / medium gain
What Form of Change is Required?

As detailed in Chapter IX, benchmark values identifying industry best performance are readily available in
virtually every area of management and operations. When a comparison of industry best to current
performance yields a gap the gap determines the necessary action. Where there are voids and / or
deficiencies a step change transformation is necessary, whereas only reinforcing improvements are
necessary in the case of a small gap,
Institutional culture and organizational deficiencies are subjective and somewhat more difficult to
determine. Employee interviews and facilitated workshops are two methods used successfully to identify
value, cultural and organizational deficiencies. Deficiencies are typically marked by lack of trust,
discouraging initiative (you cant do that), inconsistent / inadequate processes (people making
dysfunctional processes work by brute force), ill-defined roles and responsibilities, poor relationships (its
not my job) and excessive layers of management approval that discourage initiative.
A supervisor at a large production facility stated that procedures required signatures from two
levels above his own in order to requisition stocked repair parts in excess of a specified value. He
expressed frustration in the lack of trust, stating that the process was time consuming (managers
were often absent), managers seldom knew, or cared, what the parts were or their use, and in
any case his name was on the requisition.
The difficult part is separating complaints from structural deficiencies and placing a time, cost and value
on improvements.
Step Change and Continuous Improvement are Typically both Required:
Step (transformational) change to implement non-existent processes, correct non functional processes
Continuous improvement applied to processes in-place and working at some level of effectiveness
An Overall Plan for Transformation
The following lists the essential steps in a transformation program. Most will be expanded in subsequent
sections.
Senior management decision that transformation is imperative, full commitment to the
implementing program
Communicate a vision and mission that are inspiring and clearly worth achieving
Vision and initial steps must be sufficient to overcome inertia of the status quo
Establish and communicate a sense of urgent need that is clear to everyone
Create a clear set of organizational objectives that stretch abilities, each with a tangible
measure of success
Develop the transformation initiative organizational structure. Align participants around the
necessity for improvement, business imperatives, current and required values.
Select transformational change agents; champions
Create a spirit of teamwork were all in this together
Construct overall transformational improvement strategies to meet business objectives
Commence educational and communications campaign to establish the necessity for
improvement
Discuss, test and refine improvement strategies in larger groups within the organization; develops
ownership for the process and resulting strategy as well as invaluable background for producing
implementing action plans
Set forth rules for dialog and contribution
Launch transformational implementation teams, trained for high performance; fully align
implementation teams with organizational business objectives, metrics and constraints, develop
leadership skills
Identify strengths, weaknesses, barriers, values, behaviors and culture
Strengths, positive values, behaviors and culture that must be retained and strengthened
Weaknesses, non constructive values, behaviors and culture that must be improved
Barriers and challenges to improvement
What changes have been successful why?
What changes did not succeed why? What could have been done differently to improve
probability of success?
Formulate a cohesive and compelling strategic plan for transformational improvement; Build a
platform from which to spread knowledge
Develop implementing action plans that address each element in the strategy, assign results
oriented objectives for each initiative
Specific activities
Results expected and time line
Value generated
Estimated resources
Roles responsibility, RASCI
KPIs
Develop specific action plans within small groups

Define the issue
Measure present performance
Establish specific objectives, results time
Brainstorm ideas
Decide on a plan
Implement the plan
Measure and monitor results
Create an environment where team members are confident they can meet objectives
Establish reporting and refinement processes
Monitor progress, reevaluate priorities, refine improvement plans, continue improvement
Create a sustainable system capable of driving real transformation; sustain and institutionalize
results
Elements of a Successful Transformation Process
Sixteen principal elements of a successful transformation process are outlined below in a categorized,
numbered list with amplifying comments. The list form is intended as a check list to guide organizations
and people engaged in a transformation process.
1. Establish requirements clear, concise, objectives that can be understood by everyone
Its one thing to establish objectives. Its quite another to get people to passionately believe they
absolutely must reach them to succeed! GE Executive
2. Detail improvements that must be accomplished increase availability and reduce costs
along with the organizational and process changes necessary to attain the objective(s)
Address all anticipated concerns; e.g., personnel reductions and reduced compensation as a
result of reduced overtime
3. Communicate shared values to establish the basis for the transformation process
Safe, responsible operation
Honesty and integrity in all aspects of business
Honest, open, fair dealings with employees, mutual trust, transparency, promises kept
Respect for the individual
Good attitude and relationships throughout
Focus on objectives and value
Values drive behavior, behavior drives results
Curiosity, initiative, ownership and accountability encouraged at all levels
Empowerment, teamwork, coaching for mutual success
Effective involvement in activities and the decision making process
Continuous, open communications
4. Assure all employees understand the necessity for improvement and visualize how they
must contribute to and will benefit from success
Focus on changing attitudes and beliefs by stressing necessity, results and benefits, thoroughly
explain reasons, create a vivid picture of the necessity (why we must improve) destination and
journey (how we get there)
Establish ownership of the process, accountability for results
Conduct training; in-depth for those directly involved, awareness for all others
Stress primary benefits

Safer, cleaner, more stable work environment, greater quality of work life
Increased pride, ownership, personal satisfaction in job
Greater job stability and security
Greater professionalism
Greater voice in plant operation, more control, fewer surprises
Better relationships
More and better training, continuous learning, gain full potential
Opportunities to gain additional knowledge, learn and apply new capabilities and skills
Skill, contribution and results based compensation
5. Create direction, energy, commitment and motivation
Communicate continuously, create communications look for the improvement process, provide
as much information as possible, repeat the message
Listen carefully to concerns, address and answer every question (although some may not like the
answers)
Strengthen commitment by simple repetitive communications of the necessity for improvement
stated in terms everyone can understand.
Build trust
Trust is built from action, not communications. Actions must be visibly consistent with
program objectives, honest and fair to all thereby building trust in the process and in the
management of the process.
6. Build the organizational structure
Appoint an executive level transformation program champion. Attributes include: energy,
enthusiasm, the position, authority, time and willingness to build success, facilitate cooperation
and remove barriers
Identify and appoint champions with real credibility, position and authority for each key process
and sub process, e.g., Planning and Scheduling, Materials MRO, Reliability, Condition Based
Maintenance (vibration and lubrication), Electrical, Instrumentation and Control
Define roles / responsibilities of all principal participants required to implement the improvement
strategy. Responsible Accountable Consulted Informed (RASCI) diagrams are commonly used to
ensure all participants have a full understanding of the roles and responsibilities of others as well
their own, Chapter X. The positions with defined responsibilities must as a minimum include
Executive Champion and Program Leader, Steering Team, Operations and Maintenance
Superintendents and process champions
Consider experienced facilitation to assist in establishing the implementing vision (future
state), organization and boundaries; identifying opportunities for improvement, strengths and
barriers; translating objectives to actionable tasks and keeping the improvement initiative on track
Facilitation by experienced leaders produced an excellent improvement process. Monday
morning the entire change team and facilitators met to review progress and establish goals
for the week. Following the Monday morning meeting, teams, including individual facilitators,
met separately to work on issues and develop improvement action plans. Facilitators held a
meeting mid-week to review progress and assure efforts were aligned. A short all-hands
meeting Friday afternoon was established to review progress and set a preliminary action
agenda for the following week.
7. Align supporting functions and processes
Support organizations such as Engineering, Human Resources (HR), Information Systems (IS),
Finance and Safety must all be aligned and kept up to date by means of periodic communication
and reports to ensure they are fully supportive of the transformation effort and prepared to
participate and contribute when needed.
While discussing potential improvement initiatives that involved advanced skills, it became
apparent that task certification and union rules would have to be considered in order to arrive
at an acceptable solution. HR involvement was imperative.
8. Identify potential improvements, formulate initiatives
Maximize use of institutional knowledge create ownership and motivation
Every organization has a vast pool of institutional knowledge of what works well, what doesnt
and ideas for improvement. Harnessing this knowledge creates the ownership and
enthusiasm necessary for program success. Facilitation, or at least an impartial participant, is
generally advisable to keep solutions on track, practical and in concert with good practice as
well as focused on clear, defined objectives of both results and time.
In addition to identifying and prioritizing improvement opportunities based on potential value,
improvement teams must examine cost, time and risk to attain objectives. In a typical
transformation program an array of improvement initiatives (approximately five) should be
constructed for each objective, amounting to approximately 120 percent of the objective. This
ensures the objective will be achieved even if one or more initiatives encounter unexpected
delays or problems during implementation.
9. Establish a reward system to boost performance and enthusiasm
Construct tangible rewards for meeting objectives to show real appreciation. Performance
based compensation based on successfully meeting objectives is a direct method. Awards such
as family dinners, gift certificates, jackets with a transformation team logo and other similar
tangible gifts can be a substitute.
In order to comply with essential objectives, a technical group had to significantly increase
productivity for approximately three months. Incentive pay was not allowed. Instead, the
company agreed to compensate overtime with purchased goods provided objectives were
met. Several obtained major appliances, washers and dryers, others sound systems, one
traded his considerable overtime for a two week vacation in Fiji!
Address compensation issues such as reduction in overtime.
In many cases, employees eligible for overtime base their living style on compensation that
includes overtime. An improvement process with an objective of reducing overtime wont be
received very well by people dependent on overtime to pay for toys; motorcycle, boat,
airplane, summer cabin, jet ski, and so on. To gain the level of motivation and ownership
necessary for success, the transformation initiative must address whats in it for me (WIIFM)
and demonstrate tangible personal benefits for improved performance across the entire
organization. Many organizations reward senior executives and managers for successfully
meeting objectives the working level people who do the actual work, often at personal
sacrifice, go unrecognized and unrewarded.
Faced with this dilemma, one company proposed adding 50 percent of the savings in monthly
overtime to employee compensation.
10. Overcome barriers
Resolve organizational and personal conflicts. Rules to avoid conflict must be established and
enforced from the outset of an improvement program. The basic rule is that people and their
ideas must be treated with respect. Facilitators and everyone in charge of meetings and dialog
must be sensitive to this issue and stop infringement immediately.
In some cases the barrier may be organizational, procedural or operational; and cant be
eliminated without a major change that requires additional involvement or a production outage.
Anticipating barriers, personnel implementing an improvement initiative developed parallel
paths so that if one was blocked for any reason activities could be shifted to a second
initiative without any loss of momentum while the barrier was being addressed and resolved.
Make resources, time and training available
A company launching a major improvement program reorganized and reassigned tasks so
that improvement team members could devote a minimum of 50 percent of their time to the
initiative process. The realignment had a number of significant advantages: The improvement
initiative benefited and was significantly strengthened by the participation of the most
experienced employees with greatest insight into the company organization, strengths and
weaknesses. Less experienced employees had the opportunity to step up into greater
responsibility with assurance of readily available support in the event of uncertainty or
questions.
Provide team and individual counseling and training. In most cases in-depth team training is
essential at the beginning of a transformation process so that everyone understands the
principles and etiquette of working productively together in a team, understands the mission and
can quickly focus on the tasks.
11. Install metrics
Metrics, discussed in detail in Chapter IX, are essential to set objectives and measure progress.
Metrics must demonstrate compliance to program objectives and measure performance of key
initiatives.
In addition to overall objectives it is wise to establish monthly or quarterly progress
objectives. These assure incremental progress sufficient to meet the overall objective and
provide the visibility necessary to implement adjustments when necessary.
Metrics of interest to and controlled by working level personnel should be published
periodically (monthly) on internet / intranet and printed media, and widely available. A
successful transformation demands that everyone, from top to bottom, has a vital role in
gaining success. Everyone wants to know how they are doing; that their job is important and
that they are not just a cog in a giant machine. Published metrics are a powerful
reinforcement.
12. Implement initiatives
Implement for quick success harvest low hanging fruit. Identify and solve known problems
that can be corrected quickly. Nothing builds motivation, enthusiasm and confidence better and
faster than successfully solving real world problems!
An improvement process began with several months classroom training followed by several
more months of detailed effort to apply the training in areas where success might not be
observed for years. The process failed in less than six months. When asked (some
volunteered) participants stated they couldnt maintain interest or the motivation necessary to
continue with a process that didnt appear to contribute anything significant to solving
problems they had to deal with on a daily basis.
13. Drive the improvement process
The Plant Manager, Executive Champion, Program Leader, Steering Team and all process
champions must continually press for action and results. Their regular, continuing presence
reinforces the importance of participating in, and the relevance of the program. In too many cases
people directly involved with implementing improvement initiatives will have so many demands on
their time that todays crises always push everything else aside. Senior corporate executives and
management cannot expect people to make a commitment to a difficult initiative if all they do is
say some good words at a kick-off and then disappear.
Everyone must understand that time invested in the transformation initiative is essential and
well spent. Without investment in improvement tomorrow, and the next day will be just like
today!
14. Measure results to feed back team performance and progress to objectives
One team had a beginning of year objective to improve availability by 10 percent. Nothing
had been accomplished by November. There was no energy, no sense of urgency and no
commitment. Improvement projects were postponed with statements like no time to work on
the task this month. For ten months no one had been held accountable for results. Needless
to say the crucial objective was missed.
Today, more and more organizations are moving toward score carding as an optimal way to
measure results, Chapter IX, Appendix E. Simple color coding, red, yellow, green, can be
used very effectively to denote performance.
15. Recognize team and individual accomplishments. The communications program outlined
earlier is a good means to publicize team and individual accomplishments.
A monthly change report that attempted to praise team and individual accomplishments was
read minutely by all involved. After a few months teams were complaining, not always good
naturedly, that more words or better language were used to praise other people and other
teams. Eventually the writer gave up in frustration and stopped mentioning any individual or
any team by name!
16. Improve and institutionalize the process
Feedback to improve the process and results. Feedback gained by comparing expected results to
objectives provides indication that improvements are or are not proceeding as planned. Feedback
indicates the necessity for modifications and / or additions to the improvement process and / or
plans.
Critical Factors for a Successful Transformation Process
Shared vision the compelling need for change understood and accepted
Constant communications are essential to assure full and widespread understanding of the necessity to
improve, what the key objectives are, the progress towards meeting these objectives, and the urgency of
moving the improvement process forward as quickly as possible.
People working in a typical facility find it difficult to understand the necessity of change. Many have been
there for years and cant understand why improvements are suddenly required when current practice has
been acceptable for so long. As stated earlier, there are many regions in North America where the fallacy
of that reasoning is graphically illustrated by once thriving factories that are now lying abandoned.
To establish the necessity and urgency for improvement, familiar metaphors from everyday life should be
considered when creating advocacy communications. Housing, food, automobiles and gasoline are living
expenses incurred and understood by all. By connecting the necessity to search for affordable goods in
order to keep within a housekeeping budget, to the budget with which their company must comply, the
necessity for change can sometimes be driven home.
People will not change by command they must see the necessity for it and want to change. They must
accept change as being necessary and attractive. Establishing the necessity for, and the benefits of
change, of which job security may be the highest, is essential. This again confirms the need for effective
communications.
Clear, Specific Objectives, Understood by all
Throughout the transformation initiative, objectives, program and improvement initiative goals are crucial.
Objectives must be highly ambitious, but seen by most as attainable. Objectives set too low are not
energizing. Believing that the goals can be met without major change, people work around the margins
rather than making a real effort. Objectives set higher than anyone can imagine simply discourage people
from trying.
Suppose a 50 year old out of shape former collegiate basketball player was offered a $1 million reward if
he could play in the National Basketball Association? Suppose the same person was offered $50,000 if he
could average 20 points per game in a recreational basketball league for the over 40s? Which objective
would create the greatest commitment, effort and potential reward?
When establishing objectives it is better to err on the high side rather than low. Experience indicates that
establishing an objective of a 25 percent improvement that everyone agrees is possible under best
circumstances, may result in a 21% improvement. If the objective had been set at 10%, which everyone
agreed could be easily accomplished, that result might be a 12% improvement. Which would be better?
Which would energize people to higher levels of performance?
There is another issue to be considered while establishing objectives the implementation of a control
plan, discussed in detail later, to assure gains are sustained. Without a control plan the stretch to achieve
objectives can be thought of as a rubber band just waiting to snap back when pressure is removed. A
control plan snips the rubber band, preventing the snap back to the old ineffective ways.
The establishment of objectives begins in the executive suite. Objectives must be very specific and
augmented with as much information as possible to initiate the actions that will be necessary. The
following, paraphrased from the web site of a major corporation that had announced the necessity for
major improvement, caused real concern and a great deal of uncertainty:
We must make changes to more tightly align our manufacturing with market and customer
requirements and reform our cost structure for greater consistency with business and market
realities.
The message says nothing that is clear or specific to plant people. It implies a workforce reduction that
can hardly be comforting. Making matters worse, several months elapsed before specific plans were
developed and announced. If a general announcement is published, specific implementing plans must
follow immediately. Otherwise there is a significant risk that the best and most qualified employees, who
are also most mobile, will quickly depart for other less unsettled opportunities the dreaded migration of
the best!
Strong Leadership Universal, Committed Participation Throughout
Committed participation begins at the top of an organization. The Plant Manager sets the tone. He or she
must be a highly visible advocate an invisible shrinking violet wont create the excitement and energy
necessary to succeed. Similarly, visible energy and commitment across all levels of leadership are
essential to create the working level ownership and participation required for success. By setting an
example, by persuasion and individual counseling (kick in the stern) when necessary, plant management
must assure that everyone is on board and contributing.
A critical mass is necessary. It is established when all management has the improvement process at or
near the top of their interest and implementing personnel are assigned with real objectives and authority.
In one facility with a major transformation initiative in progress the leader was a highly regarded,
top executive. The transformation initiative was one of many collateral duties. What message did
that send to all involved in the initiative?
There must be a dedicated leader for whom the transformation initiative is a primary, rather than an
additional responsibility. Unless the organization sees transformation as the leaders primary responsibility
they will quickly conclude that the entire initiative is of secondary importance, and are unlikely to invest
the emotional energy necessary for success or feel much ownership. It is human nature to do as others
seem to be doing, rather than what they say should be done. When the others are your boss or bosss
boss, who ask you to do one thing while doing something different themselves, what would you do?
Everyone Committed to Making a Personal Contribution to Success
This means that everyone in the organization must understand the objectives of transformation and do
everything within their control to make the initiative successful.
At one facility, a post workshop survey asked what is your commitment to assure success?
Responses varied from Walk the talk to Assure subordinates are fully trained, motivated,
encouraged and made an integral part of the process. The responses were universally excellent
and demonstrated the personal commitment necessary for success.
As part of the commitment process all must understand and commit to the decision process illustrated in
Figure 17.1.
All key stakeholders involved

All required information and
resources made available
All participants agree to a non-
adversarial role
All agree to work in collaboration for
resolution
Thorough discussion of alternatives
-- all views expressed
Group recommendation(s)
70% agreement
Decision
100% support
Figure 17.1 Program Decision Process
Value Performance Metrics in Place Regularly Reviewed and Published

Participants respond to the score. How many athletic teams play beyond their ability when behind? How
many slack off when ahead? Metrics inject the competitive spirit, increase the energy necessary to gain
commitment and peak performance and identify areas where adjustments need to be made.
Continuous Communications
This is a recurring necessity for success. A communications team, detailed later, is an essential part of the
transformation initiative. Communications must be regular, reinforce the necessity of transformation,
publicize activities and successes and answer questions of concern.
Control and Sustaining Plan
A comprehensive Control and Sustaining Plan must be constructed into the transformation process from
inception. The Control and Sustaining Plan assures that improvements are stabilized and institutionalized,
momentum and gains achieved by the Asset Optimization program are continued and improved.
Key elements of an asset optimization program control and sustaining plan include:
Identify specific, continuing overall objectives; e.g., improve safety and environmental
performance, production uptime and reduce maintenance costs. Specific short and long-term
objectives for results and time must be stated.
State the values, behaviors, actions necessary for meeting objectives, sustainable transformation.
Identify specific issues that warranted special attention during the program implementation, e.g.,
improve core competencies, craft skills, minimize off-books squirrel stores.
Establish metrics; results required for specific, continuing objectives: what is to be achieved,
when
Define the scope of the control plan:
Program elements: Details of all elements within the Asset Optimization program and
expectations for future progress
Organization, detailed, defined roles and responsibilities; RASCI: From site manager to
reliability improvement team members, including succession plans for key participants
Processes and systems included in the program: CMMS, Planning and Scheduling, Stores
Management, critical spares, risk ranking, RCM, condition monitoring, PM, RCA, etc.
Foundation documentation and procedures: All the general documentation and procedures
necessary for the program including revision / configuration control. Note site procedures
should be cited as references and not duplicated to eliminate the necessity of plan revisions
whenever a site procedure is updated
Identify program procedures and instructions: Procedures and instructions that are included in
the program
Include standard procedures
Specify program elements, including:
Maintainability, including safety and environmental issues
Assuring accuracy within CMMS
PM / Predictive processes; application, use and procedure for changes
Operational check off lists, startup, post repair turnover plans
Punch list development, sign offs and follow up
Specify critical documentation: MEL, asset hierarchy, risk rank, critical spares
Establish roles and responsibilities, RASCI
Responsibility for the process and plan, schedule for plan review and revision if necessary
Responsibility for review and updates
Communications, interaction, linkage, integration between program elements (including IT
requirements)
Skills management; coaching, training, retraining and certification requirements
Perform periodic audits to confirm performance
Leaderships Role
The following is intended as guidance for leading the transformation initiative:
Establish the Requirements and Necessity for Improvement; Overall Objectives
Where the organization can / must improve the ultimate destination of the improvement process and
the necessity of improvement in simple, clear terms must:
Establish overall objectives and results that must be achieved; preferably expressed in terms of
specific safety, environmental, production output and cost metrics
Direct attention to factors that contribute directly to organizational objectives
Communicate Vision
Energize the organization by creating and communicating a clear vision, a sense of the possible. How
together we can arrive at the destination, a vivid picture of the journey and benefits of success.
Express organizational imagination and expectations for participation, ownership and initiative
Describe the future state (To Be)
Develop and publish a Vision Statement
Sponsor, Energize, Motivate and Drive the Improvement Process

There must be highly visible, open commitment, unqualified support, drive and consistency from the
highest levels of management that energizes, motivates and creates enthusiasm in all personnel who are
involved in the transformation process. Specifics include:
Continually reinforce the necessity for improvement
People immediately sense when leadership is truly committed to an objective, they also know
when exhortations are only words with no real drive or commitment. They tend do as the
boss does, not necessarily what the boss says!
Maintain awareness of performance, drive results
Identify areas that require additional improvement
Maintain unity, consistency of purpose
A large manufacturing facility has embarked on a major transformation initiative directed to
increasing asset utilization and effectiveness, organizational and work quality. The first thing
to be seen when approaching the facility is highly visible waste, reportedly close to $1 million
per month. Under these circumstances how can a craft mechanic be motivated to worry
about repetitive $5,000 equipment failures when management tolerates waste that is 200
times greater?
Energize Enthusiasm, Commitment and Ownership
Senior management must demonstrate personal commitment by periodically participating in improvement
program, steering team and area action meetings. This encourages questions and ensures personnel
raise any concerns they may have. Senior management should also personally congratulate contributors,
which will demonstrate their knowledge of and interest in the program.
Select Transformation Program Leader
The position of transformation program leader is crucial. He / she will be responsible for energizing and
driving the program, and personally accountable for results. The transformation program leader must be
able, comfortable and effective at working both up and down in the organization. The personal
characteristics of the leader are crucial. They must:
Be at least at the level of Manufacturing / Production or Maintenance Superintendent and report
directly to the site / facility manager. The transformation initiative must be a primary responsibility,
not just an additional responsibility.
Have organizational stature, credibility, energy, authority, time and ability to make things happen
within the organization a proven motivator and leader
Establish a Program Steering Team
The transformation program steering team has program oversight and is responsible for establishing the
organizational environment that will assure success. The steering team must be strategic oriented and
have enough status to resolve any functional and departmental differences that may inhibit full
exploitation of the team-based transformation. The program steering team is:
Composed of senior managers: Plant Manager (ex officio) Operations / Production, Maintenance,
Engineering, Stores and Finance plus improvement program leader
Chartered to establish program objectives, review and approve improvement plans, provide
guidance for implementation, monitor results, facilitate interdepartmental coordination, remove
institutional and procedural barriers, reward success.
The Steering Team must be fully engaged in the asset optimization process. Meetings should be used to
drive toward performance objectives, identify weaknesses and barriers to resolve not used for detailed
reviews of implementing tactics. Performance, gaps to required performance, barriers holding back
results should all be identified before the meeting
Strategic direction and program facilitation are the primary roles of the steering team. They must
concentrate on objectives and results while avoiding involvement in tactical, implementation
issues. Membership in the steering team should be limited to senior management.
Refocus From Tactics to Strategy
In any operating environment the natural movement is from strategy to tactics. Without conscious
discipline, tactics those actions necessary to continue operations will always take precedence.
While not losing sight on the tactical necessities of maintaining operations, leadership must assure the
continuing discipline necessary to work within the long-term improvement strategy. It is essential to think
and work on two levels simultaneously:
Tactical - maintain production and existing processes
Strategic - improve process and asset reliability, effectiveness and return, identify and eliminate
defects, reduce necessity for work make tomorrow better than today
Motivate all participants to work effectively short-term while thinking long-term
Identify, Select, Support and Encourage Motivated Working Level Leaders Champions
Within any organization there are people with the motivation, capability and enthusiasm to lead the
transformation process. These people must be identified, encouraged, trained and coached to become
champions. The benefits are many. Most important, there is greater use of brainpower, initiative and
institutional knowledge.
A key individual became seriously ill immediately before an important engagement. A potential
replacement had excellent technical knowledge but was very quiet and had never been
considered an advocate or leader. The replacement performed superbly so well that a position
in leadership was created to develop this previously hidden talent.
In two other facilities individuals decided that they wanted to become lubrication champions and
could contribute a great deal. Both personally organized comprehensive lubrication programs that
within a year had generated substantial savings.
Specific attributes of a successful champion include:
Credible within the organization respected equally by peers, subordinates and supervisors
Positioned in the organization to assure priority for the program
Competent, skilled, strong leadership capabilities
Committed, believes in the program
Positive, persuasive
Open to new ideas and methods
Enthusiastic, energetic
Team builder, good coach, gains the best from people
Good problem solver, creative problem solving skills
Well organized, follows up
Strong communication skills, up and down the organization
Good technical knowledge
Trains successors
Every organization has hidden talent. By its nature, a transformation initiative is an ideal vehicle for
identifying and encouraging people who may never have had the opportunity to utilize their full talents and
capabilities. With opportunity and encouragement many people suddenly blossom in terms of leadership
and contribution.
Move the Organization from Management Control to Team Partnership
The command and control organizational structure under which workers, having clocked in, stop thinking,
and perform exactly as they are told no more, and no less is a relic of the past. Competitive
pressures have made it essential to use everyones brain, not just their brawn.
An employee at a major automobile manufacturer commented that relations between union
workers and management were highly adversarial. Workers were expected to adhere strictly to
the contract in terms of both work scope and performance. Suggestions for improvement were
not encouraged and certainly not considered.
The organizational transformation process typically unfolds as follows:
Replace hierarchical command and control organization with a multi discipline team organization
empowered to identify and correct deficiencies. People directly performing work are well aware of
any deficiencies and problems. Given the chance and properly supported they will come up with
innovative improvements to help overcome these issues.
The transformed organization will probably be a matrix with people having both functional
and team responsibilities. It is up to functional and team leadership to work out details of time
allocation to optimize results in both areas.
Teams have responsibility for defining improvements, ownership and responsibility for
implementation and accountability for results.
Team capabilities must be created and strengthened, an awareness of objectives and
expectations established and training conducted to assure teams function effectively.
The scope of improvements must be controlled. For example, teams should be empowered
to implement improvements such as improved communication and coordination as well as
low cost material and process improvements. Larger scope improvements that may require
design or process modifications should have formal approval with the proviso that the
approval process itself may have to be streamlined and improved to fit within the guidelines
of the transformation program.
It should be noted that it may take as long as 1 to 2 years to get team members fully aligned
and working effectively together.
As the transformation program progresses, leadership moves from command and control into a
role of facilitation, removing barriers, coaching and monitoring results.
The building of individual and team capabilities is a prime role of leadership. With time, teams gain
greater self-reliance and direction, control over tasks, prioritization and accountability for results.
Leadership assures that teams progress by:
Establishing performance measures effectiveness KPIs
Providing training and coaching
Respecting and considering team recommendations
Explaining deviations when recommendations cant be implemented for any reason
Quantify and Prioritize Opportunities in Business Terms

Teams are typically very good at identifying opportunities for improvement, but they often need help
determining the potential value of improvements. With a broader knowledge of the value creation process,
financial elements of the business and the balance between increased production and reduced spending,
team leaders may have to help establish the value that will be employed to prioritize opportunities.
Utilize financial model similar to that outlined in Chapter VII, Financial Results to establish a
valid comparison of cost and value gained by initiatives to increase availability and effectiveness,
and reduce spending
Prioritize initiatives based on the cost to implement, the risk, and value returned
As stated earlier, there should be approximately five to seven working improvement initiatives
totaling approximately 120 percent of the results required for any given objective.
Emphasize Increasing Process and System Reliability, Effectiveness and Quality
Permanent improvements must be directed to improving the underlying structure and cause of inefficiency
/ ineffectiveness. Under normal operating pressures, and multiple simultaneous problems, it is often
difficult to resist the temptation to accept the expedient quick fix rather than permanent corrective action
that takes more time to develop and implement. Leadership must hold fast. Stating the necessity for a
commitment to quality, that tasks must be done right the first time followed by continually demanding
instant action, temporary solutions and rewarding people who comply is a highly visible demonstration of
what the boss really wants despite words to the contrary.
Immediately following a meeting between Maintenance and Production, where the necessity of
quality and longterm permanent solutions were stressed, a Production Superintendent walked
out into the maintenance shop where a small turbine was being repaired. Although the turbine
was not required for several days, the first question asked by the Production Superintendent was
when repairs were going to be completed. That was immediately followed by several strong
suggestions for quick, less than optimal repairs to accelerate completion and reinstallation. What
lesson did the craft workers present take away? Is quality paramount in the bosses mind or is
speed, and for which will I be rewarded?
Leadership must work toward establishing a reliability and work quality culture within the
asset optimization program that is equivalent to safety. Everyone knows that expedient shortcuts are
never acceptable when safety is an issue. To accomplish this goal within the asset area, leadership must:
Assure that all necessary changes to organizational, process and program practices that are
necessary to ensure the ongoing strategic, reliability and quality oriented culture required to
achieve maximum lifetime utilization, effectiveness and return from physical assets are planned
and implemented.
Clearly define the roles of top and mid-level management, supervisors and employees.
Continually emphasize quality in all aspects of work, the need to minimize variation; and to
perform all tasks effectively and correctly the first time.
Carefully explain the reason for any deviations from quality and reliability principles that may be
required due to operational necessities with emphasis on why they are necessary. Any expedient
activity that becomes necessary must be followed by the permanent solution that is consistent
with the quality culture demanded by the transformation initiative.
Maintain Motivation and Enthusiasm, Focus on Long-Term Objectives

In parallel with increasing emphasis on reliability and quality, leadership must maintain their focus,
enthusiasm and motivation on long-term objectives. As stated earlier, it is always easy to slip into a short-
term tactical focus where all efforts are concentrated on solving immediate problems.
While maintaining the pressure necessary to solve operating problems, leadership must maintain the
discipline necessary to ensure that tactics are within a long-term strategy. As stated in the previous
section, short-term fixes that are mandated by operational necessity must be followed by long-term
solutions while knowledge is fresh. Point solutions must be leveraged with broader application wherever
possible.
In a typical production facility, real discipline is required to direct any level of attention toward
long-term improvement. There are generally so many problems requiring immediate attention that
any lull in intensity is welcomed and taken as a well-deserved break. Under these conditions it
takes solid leadership, continuously applied, to achieve long-term gains that may not be
considered by those involved as contributing much to their short-term needs.
Clear Acknowledgement that Sustainable Progress Requires Time
Leadership must recognize that improvement is not a command, but the result of a comprehensive, well
thought out and implemented process. Time and continuous effort are required to assure the
transformation takes hold and is institutionalized.
In numerous mid level asset optimization workshops, participants state that managements belief
that improvements in asset availability and spending can be ordered is one of the most significant
obstacles they have to face.
Optimize Company and Contractor Work Force
As a final comment under leadership, there is always a question about employees compared to
contractors in terms of cost, proficiency and value. Outsourcing, covered in detail in Chapter XIII,
Excellence at the Basics, is never too far from mind. For the purposes of this discussion, it is imperative
that leaders lead and oversee the requirements and rules developed for outsourcing. In particular,
leadership must be involved in the identification of core and non-core competencies as it may involve
safety, proprietary operating and business details that are better protected by employees.
Establish Effective Communications
Real communications is an attitude, an environment, a constant interactive process aimed at
creating consensus. Effective communications are simple, consistent and repetitive. Getting the
message across requires countless hours of back and forth. Jack Welsh
Communications are one of the most important aspects of a transformation initiative and also frequently
one of the most ignored. Effective communications are essential to establish and maintain the energy,
enthusiasm, ownership, commitment and constructive internal environment necessary for successful
change / improvement. Constant communication is essential to maintain the necessity for transformation
and the objectives of transformation uppermost in everyones mind. Some assert that it is better to keep
people largely in the dark when faced with the necessity for major organizational and process changes
that many would find highly threatening. Others argue that communicating frankly and addressing
concerns as they arise is far better than attempting ad hoc answers to rumors that fly whenever any
uncertainty or unexplained activities are in the air.
The following attempts to list some of the aspects of a communication program that should be considered
as an integral part of the transformation process:
Select and Assemble a Communications Team
The primary objectives of the communication team are to identify the issues and concerns that must be
addressed and answered to maintain positive, participatory environment, energy, enthusiasm and
ownership for the improvement initiative. The team doesnt necessarily have to answer questions, their
primary task is to identify and frame real questions. The communications team makes certain the question
and its importance is understood, answered completely by the appropriate people within management
and / or steering team and communicated back within a reasonable length of time.
The communications team should represent a cross section of facility personnel. Members should include
management, the professional staff, production and maintenance personnel salary and hourly. The
members should be selected for their sense and knowledge of the plant, people and culture, their
credibility and confidence within their peer group, their willingness to contribute and eagerness to improve
conditions. In effect the communications team can be considered as equivalent to a plant ombudsman.
It is advisable to form the communications team early in the transformation process. The team
should be made up of people with a good feel for the mood and spirit of the facility and in whom
others confide.
The steering team typically meets every two weeks at the beginning of the transformation program. They
should endeavor to produce a site wide communication that is issued at regular intervals, no greater than
monthly, to reinforce the initiative and address issues and concerns.
Reinforce the Transformation Initiative, Address Uncertainty and Concerns
The communications program is a key element for building the trust necessary for success. It must be
directed to conveying straight answers in simple terms. The use of metaphors that connect to everyday
experience has been mentioned as a good method to convey complex ideas.
The means of communication can be varied depending on circumstances and the facility practice.
Although internet communications provide broad, rapid communications, a printed newsletter that can be
posted throughout the workspaces should be strongly considered with or without internet
communications.
Communications must be concise and brief to ensure that people will take time to read it. To gain
attention, transformation communications should have a distinctive look that differentiates it from other
facility communications.
One organization established a special format, logo and colors for transformation program
communications. The logo was a butterfly implying metamorphosis to a new form. The same
organization used symbolic musical notes in the left margins of communications to indicate an
action that was playing from the strategy.
All communications from the transformation team should be checked before release to ensure they can
be easily understood by all personnel who will read or listen to them.
Organization
The principal organizational elements and considerations are detailed in Chapter X, Leadership and
Organization. The following is intended as specific guidance for organizational improvement within a
transformation initiative:
Establish Guiding Principles
In general terms, the objective of reorganization is to:
Streamline the organization and make it more responsive and effective
Increase the energy, ownership, responsibility, accountability, teamwork and effectiveness of all
personnel
Delegate greater responsibility and control to the lower levels of the organization and shift
behaviors to ensure greater individual initiative, ownership and accountability
Energize positive contribution, and improve relationships, communications, teamwork and
response to problems
Reduce non-value added activities, bureaucracy and layers of management required for
approval.
Guiding principles must address the improvements required of the new organization. What strengths
should be retained and built upon, what weaknesses need correction? What improvements are
necessary?
All organizations have different institutional culture, values, relationships, individual personalities,
behavior and controls so there is no single, one size fits all, solution.
Identify Potential Structural and Organizational Improvements

In most, if not all companies the reorganization plan must be developed from inside by people who are
intimately familiar with the current culture, conditions, values, organization, individual personalities,
strengths, weaknesses and opportunities for improvement. These areas are best explored, discussed and
refined in a series of workshops.
Workshops must include a broad cross section of people within the organization (professional, managerial
and supervisory; salaried and hourly) so that all current structural defects and opportunities for
improvement will be identified and examined from every perspective. The resulting improvements will
make the maximum contribution to process effectiveness.
Within the new organization the roles and responsibilities of essential functions, and their location and
reporting hierarchy must be defined. The location of some functions, for example reliability, is sometimes
questionable. Will reliability be most effective as part of Engineering, Maintenance or Operations, given
that they may all have different methods and priorities? The same question must be answered for
specialty functions such as lubrication and predictive monitoring. .
Move from Command and Control to Individual Commitment, Initiative, Ownership,
Responsibility and Accountability
The principal objective of a transforming reorganization is to move away from the old command and
control organization that places the burden for thinking and direction on management and supervision to a
new energized organization that emphasizes initiative, self direction and accountability for results by
those performing the work. The new way utilizes all employees to their full potential and demands much
more in terms of individual commitment, initiative, ownership, accountability and collaborative
relationships.
As soon as the new organizational structure has been conceived, a parallel effort must be initiated to
assure best practices are identified, and communications, procedures, resources, support and training are
all in place to support the organizational change. These include communications and training for all
personnel in the new values (initiative, ownership, responsibility, accountability) and the added knowledge
necessary to successfully fulfill greater responsibility. The objectives, requirements, reasons and benefits
of the new structure must be thoroughly understood.
Reorganize for Maximum Effectiveness
As mentioned in previous sections, the transformed organization is typically a flatter, team based, multi
skill organization that is organized by objectives rather than function / crafts. In this type of organization it
would not be unusual to find a technician or team of technicians identifying and correcting a potential
problem, performing an analysis and communicating results to prevent repetition.
As stated earlier, the reorganization must include a detailed transition plan to map the process for getting
from the current to the new organization effectively and without any confusion or loss.
Develop Personnel
Personnel development is a key element toward a successful reorganization. Everyone must know what
is happening, why its happening, and their individual roles and responsibilities. Training was covered in
detail in Chapter X. Reorganization typically demands changes in values, thinking, relationships and the
individuals concept of responsibility and accountability. Although many may like the new organization and
the idea of greater individual initiative and responsibility in theory, training is required to assure everyone
has a full understanding of the new concepts and organizational and individual requirements, in a
consistent way. Training will be necessary for effective participation in the transformed organization.
Form Improvement Teams
Identifying opportunities for improvement through a series of workshops was discussed earlier. With
opportunities identified, action teams should be formed to fully define the opportunity, the results / end
state to be achieved, and to develop detailed plans to transform from the current to the improved. The
team members selected to address specific opportunities are typically those from the initial teams having
special interest and knowledge, augmented by others who wish to participate and can contribute.
The team based improvement process typically consists of the following:

Appoint the top-level coordinator a post required when multiple teams are chartered, each
addressing a slice of the total. This individual must participate in all teams and be authorized to
adjust team charters and objectives if and when necessary to ensure consistency in the
reorganization process and that all improvement initiatives combine to produce the optimum
result.
Team composition is determined by area and opportunity. All interests and institutional knowledge
of the particular area / opportunity must be represented within each team
Establish team rules, conduct training communications, trust, cohesiveness, common ground,
courtesy; establish methods to resolve any potential friction and conflicts within the team.
Conflict during a brainstorming session is typically one of the first disruptions experienced by
a new team. When this occurs everyone must be reminded that brainstorming is directed
solely to identifying ideas. Discussions of the pros and cons of individual ideas occurs later in
the process after as many ideas as can be identified are listed and each is opened for
detailed examination and discussion.
Define the issue and direction opportunities to be addressed, conclusions from the initial
teams, strengths to be preserved and boundaries are all established at the outset of the process.
These objectives must include results (reorganization plan, roles, responsibilities in the new
organization, benefits, any expected difficulties and a transition from current to new) and the time
allowed to accomplish the results. Ensure the issues are completely identified and discussed
openly; and that there is good participation from all members.
Every team seems to have one or more people who want to take charge and dominate every
discussion (often not the person with the most to contribute) and one or more who are
content to say nothing (often the individual with the most to contribute). A facilitator will
recognize this dynamic and take steps to assure effective participation and contribution from
all.
Each team meeting must be preceded by a detailed written agenda listing subjects to be
discussed, objectives, responsibility and participants. Meetings must be followed with a written
report including highlights of the discussions, actions taken and any future requirements.
Because of the complexity of discussions and the difficulty of simultaneously taking notes
and participating, especially for the facilitator, it has been found helpful to tape record entire
meetings. The recording can be reviewed later to assure all nuances of complex, often
heated, discussions are accurately reflected in the written minutes. Experience has
demonstrated that recording meeting discussions has no adverse impact on the openness of
discussion by participants.
Measure current performance in the applicable areas, define current state, objectives for
improvement; qualitative and quantitative; brainstorm ideas for improvement, prioritize
opportunities.
Define specific actions required to achieve the new objectives. These may include redefining
processes, roles and responsibilities, additional resources, technology and training
Formulate practical action plans to meet objectives including resources required, risk evaluated,
value calculated and measures of performance
Build ownership, commitment, motivation, enthusiasm, involvement, mutual respect (members
respect and support one another) and cooperation.
By its nature the team process builds the initiative, ownership and teamwork values that are
required in the new organization. In addition to utilizing institutional knowledge most
effectively to develop the transformation plan, team development builds positive relationships
with others involved in the activity and plants the seeds necessary for ultimate success.
Recognize that it will take time, in some cases years when a major shift in institutional culture is
required, to get people aligned and working together effectively in teams.
Decisions made by consensus

No matter how hard everyone may try, it is often impossible to go beyond 70% or so
consensus. When that occurs, all must agree to fully support the majority with the proviso
that if results later demonstrate the 30% way was best, the plan will be adjusted.
Implement solutions apply resources, technology
Measure and evaluate performance monitor and feedback results, team effectiveness
Many initiatives have failed because the process is considered complete as soon as the
action plan is implemented. The team, or at least a core group of the team, must remain
together, active and meeting periodically (typically at lengthening intervals as the actions
mature) to evaluate performance, conduct ongoing assessments of progress to objectives
and develop any refinements or alterations that may be necessary. The teams work is not
complete until the improvement is institutionalized a process that typically requires years.
Adjust action initiatives to improve performance and results.
Finally, it must be noted that gaining participation of the best people on site for the transformation initiative
will likely require some schedule flexibility. Since the people who can contribute most are also likely the
busiest with heavy responsibilities, it is generally best to stagger schedules so that people work the
transformation initiative a week or so a month, staggered two or three days at a time. Recognize also that
the plant may have its own ideas of when people can be made available and that interruptions and
rescheduling cannot always be avoided. Flexibility is key.
Resolve Conflicting Priorities
Along with periodic evaluation of performance and results, the team must continue to examine the original
objectives, and even the overall reorganization, to assure their solution was optimal and contributing the
greatest amount possible to overall organizational effectiveness. This evaluation must focus on
effectiveness and quality metrics to judge success and identify areas where adjustments / further training
might be necessary (see Chapter IX).
Successful teams, who presumably believe in the process, must be celebrated in
communications to increase the enthusiasm, ownership and belief in the necessity and value of
improvement.
Maintaining Enthusiasm, Good Relations
Maintaining enthusiasm, motivation and good relations throughout the transformation process is essential
for success. The transforming organization must work toward establishing and maintaining positive,
constructive values, culture and relationships just as hard as in the process and procedural areas. This
final section will reveal some ideas as to how that can be done.
First and foremost, there must be mutual acknowledgement that optimizing the productivity of physical
assets is a vital business necessity and an essential contributor to production, profitability, job security
and personal satisfaction. Production and Maintenance are partners with joint responsibilities for success,
not a customer and supplier. This has been mentioned earlier as a crucial ingredient and will be
mentioned again.
Ownership and commitment to value must be continually reinforced. This includes, but is not limited to the
following:
Knowledge of and contribution to safety, mission and business requirements.
Continually meeting all formal requirements as well as informal expectations
Tensions within an organization often occur not because people arent performing to
procedure but rather they are disappointing someones expectations. Complying with informal
expectations may be more important to good relations than meeting formal requirements.
Mutual agreement on procedures for identifying, discussing, prioritizing and resolving cultural and
relationship issues. Frequent discussions are necessary to review activities, assure objectives
remain aligned and problems resolved.
Motivation
Along with initiative and ownership, enthusiasm and motivation are essentials for success. To a large
degree success builds motivation and motivation creates success. A chicken and egg situation!
Surveys have shown that people believe individual success depends on the following in order of
importance:
Coaching to achieve success
Enthusiasm, commitment
Implementation of best practices
Sound organizational procedures
Process effectiveness
The key message is that contrary to the teachings of W. Edwards Deming, some people believe that
coaching is significantly more important than process effectiveness. That may mean that a good coach
can obtain good results from a flawed process. It also may be that responders are considering individual
success, a feeling of worth and contribution that will be conveyed by an exceptional coach rather than
success of the process itself. Perhaps the most important lesson is that real success requires all
ingredients.
The same people indicated that satisfaction was based on again in order of importance:
Recognition for success / results
Honest, open, fair treatment
Ownership
Compensation
Encouraged to take initiative
Reasonable control over conditions
Kept informed
Consideration for the individual
The only surprise here is that consideration for the individual is at the bottom of a list that has honest,
open, fair treatment second highest the two would seem to go hand in hand. People reviewing the
results explain compensation in the middle by noting that participants were all relatively senior people,
and probably satisfied with their compensation.
Empowerment
While empowerment is an important attribute of the transformation process it is a fact that everyone wants
to be considered, but not all want the responsibility and accountability that go along with empowerment.
And thats acceptable the same as not everyone can or should be a chief! The key elements are that
team members must complement each other and teams must work well together. Within a team there is
plenty of opportunity for individuals to contribute, even though they may not want to be a leader or
empowered.
Our urge to liberate and empower the work force is not enlightenment its a competitive
necessity! Jack Welch
Gaining Individual and Organizational Success

Identifying and encouraging competent, motivated and fast-learning individuals, giving them as much
responsibility as they can accept effectively and moving them into influential positions as rapidly as
possible is another key element toward gaining a successful empowered, self-directing organization.
Some individuals will shine and these must be given advanced training and increased responsibility as
quickly as possible. Building on success in this fashion self perpetuates the new organization.
When individual success is combined with team-based rewards, peer pressure becomes a powerful
incentive to elevate ownership and performance. Recalcitrant members must be urged to participate fully
and raise their performance to team average as a minimum. That said, they may be potentially strong
contributors who simply do not fit the new team model. In this case some effort must be made to find
ways to preserve and reward their contribution.
Measuring and Maintaining Satisfaction
Conduct Formal and Informal Satisfaction Surveys
Periodic employee surveys are a must. They provide a means to evaluate attitudes and ensure that all
sources of friction, frustration and ineffectiveness are identified, understood and corrected. Surveys
provide a means to legitimize complaints and a positive vehicle for suggestions. Employee surveys are
typically developed and implemented as part of the communications program. They should be performed
regularly within the framework of an overall strategy designed to develop specific information.
Surveys can be developed and conducted in-house or by an experienced third party. Anonymous inputs
are advisable to encourage candid evaluations and comments. It is generally agreed that participants are
more open when surveys are conducted by a third party and as a result the survey may reveal more.
Having completed the survey it is essential the results are publicized and communicated, along with an
evaluation and conclusions identifying the positive as well as any identified need for additional
improvement. The survey must result in a formal action plan defining tasks and any changes required to
address and correct the major issues.
A survey increases awareness among participants and elevates expectations that real changes will be
made. If the survey is not followed by a detailed summary of results, evaluation and an action plan people
become cynical and conclude the survey is simply another exercise where management wants to feel
good but doesnt really want to hear or even care about what is actually going on within the organization
For these reasons it is best not to conduct a survey unless management is prepared to listen to and act
on the surveys results.
Some of the topics that have been covered in surveys are listed below. A single survey should have no
more than five or so basic questions centered on the theme that is being examined. Too many questions
and responders will either not answer at all or not in the detail necessary.
Safety culture
Values, guiding principles, understanding the necessity for improvement
Understanding of strategy
Understanding / agreement with organizational values, endeavoring to comply
Effectiveness and satisfaction in the following areas:
Leadership and management
Provides leadership / coaching
Creates positive environment, optimum working conditions
Supportive
Considerate of people and the opinions of others
Decisive
Committed to
Workplace safety
Environmental compliance
Quality work
Creating maximum value
Organization and organizational structure
Well organized, organization understood
Compliance to objectives with optimum effectiveness and efficiency
Good communications
Clear process of decision making, timely decisions
Improvement proposals evaluated quickly and fairly, implemented as soon as conditions permit
Individuals able to influence the organization
Good teamwork and relationships within the organization
Considered effective
Communications and information:
Information readily available
Good communications between units, functions and operations
Well informed, including individual and business performance
Effective follow-up
Individual employee satisfaction

Overall satisfaction
Honest and fair treatment
Clarity of purpose
Challenge, ownership, participation and control within the work environment
Working conditions
Job security
Adequacy of tools and work procedures
Availability and completeness of information and training necessary for job success
Consideration, respect for opinion
Fair compensation, tangible recognition and rewards for quality performance, value
contributed
Opportunities for personal betterment
Sustain Momentum, Institutionalize the Improvements

The final step in the transformation process is to sustain the momentum gained and institutionalize the
results. This process closure will take years, typically several times greater than the time required for the
transformation.
As stated earlier, there is a great temptation to demobilize and slack off the effort a soon as results begin
to appear. This temptation must be resisted. Sustaining and institutionalizing success requires continuing
effort and a process not unlike the transformation itself. Assumptions are continually reviewed and tested.
Has the environment changed, have market and / or business conditions changed? If so are changes to
the process advisable in order to meet the new conditions? Does the transformed process still meet
objectives? Have objectives changed?
Results are continually monitored to assure compliance with industry best benchmarks. If benchmarks
have / are changing can the process effectiveness be improved or must the process be transformed
again?
As the excitement resulting from success fades into distant memory there is a need to keep the people
involved enthusiastically committed to the transformation goals continually seeking improved
performance and effectiveness. The communications program must be kept alive and evergreen.
Publicize results with individual credit to maintain enthusiasm and commitment.
Some Lessons Learned
Organizations who have instituted major transformations mention some lessons learned:
Make certain leadership is committed, aligned and on the same page
Manufacturing organization must own the process
Gain buy-in across the entire organization, dont forget supporting functions; Finance, HR, IT
Assign the best people
Formulate and implement a solid process
Assure stability in management during the transformation
Implement for results
Maintain focus on results
Communicate frequently at all levels
Listen to and consider feedback, dont assume all is well
You will have to make hard choices
Change will take time
One person alone cannot make change
You will need outside help
Publicize and promote results and successes
XVIII. IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM
Its one thing to establish objectives. Its quite another to get people to passionately believe they
absolutely must reach them to succeed! GE Executive
Implementing the Physical Asset Optimization program begins by assembling a Steering Team to
establish overall business and operating objectives, organizational values and oversee the process to
reach the objectives. Multi discipline Action Teams are formed to identify and prioritize specific
opportunities and construct detailed improvement action plans including cost, results expected, probability
of success and time required. Having defined the action plans, the Action Teams proceed to
implementation in defined steps. The results of each step are measured and the plans adjusted if required
to ensure each objective is achieved. Finally, program success is institutionalized
THE ASSET OPTIMIZATION PROCESS

The asset optimization process described in this chapter is divided into seven phases. The Plan phase of
the process described in Chapter IV has been subdivided into three phases, Analyze, Prioritize and Plan
as listed below:
Define program objectives, conduct asset and process effectiveness audit
Analyze identify improvement opportunities by comparison to benchmarks
Prioritize potential improvements based on value opportunity, cost, time to implement and
probability of success
Plan improvement strategy, develop detailed action plans, gain approval
Do deploy resources, implement improvement initiatives
Check measure and manage results
Improve adjust initiatives as required, initiate continuous improvement, institutionalize success
Figure 18.1 illustrates a simplified version of the Asset Optimization process:
Key
Keyareas
areasof
ofimprovement
improvement
from
frombusiness
businessrequirements
requirements
Identify
Identifyspecific
specificinitiatives
initiatives
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Name
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each
eachspecific
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Define
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improvementstrategy
strategy Adjust
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strategies
Develop
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Evaluate
Evaluateprobability
probability
of
ofsuccessful
successfulcompletion
completion
Implement
Implementaction
actionplan
plan
Measure
Measureand
andtrack
track
performance
performance
Figure 18.1 The Overall Physical Asset Optimization Process (10)
Figure 18.2 is another way of looking at the asset optimization program. Phases of the program can be
illustrated as shown:
Implementing A Physical Asset Optimization Program 312
Benchmarking Best
BestPractice
Practice Current
Objectives CurrentConditions
Conditions
Objectives
Asset
AssetEffectiveness
Effectiveness
Assessment
Assessment Gap,
Gap,Opportunities
Opportunities
for
forImprovement
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Business
BusinessCritical
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Operating
OperatingObjectives
Objectives
Prioritize
Prioritizeby
byImpact
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onObjectives
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Corporate
CorporateBusiness
Business
Plan
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Continuous
Form
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Strategies,
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DevelopMetrics
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People Formulate
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Action
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Gain
GainApproval,
Approval,
Obtain
ObtainResources
Resources
Systems
Systems
Measure
MeasureResults,
Results,
Implement
Implement
Technology Metrics
Metrics
Technology
Figure 18.2 Business Plan, Improvement Process (11)
Essentials for Success

The asset optimization program requires the following; all have been discussed in detail in preceding
chapters.
Top-level commitment an absolutely essential ingredient. Motivation for improving production
and asset effectiveness and asset optimization Program Leadership must originate at the top
levels of an enterprise. Demonstrated commitment, involvement, and continuing drive from the
CEO and / or plant manager are essential for gaining success and value. Top management must
be visibly and energetically committed, constantly driving for success with both words and
actions.
Solid values established, communicated and adopted by all in the organization
Energized, empowered and motivated champions with real responsibility and accountability
leading the program
Initiatives formulated for maximum contribution to business objectives / mission compliance:
increased profitability, availability, production output, quality, and reduced cost
Ambitious, optimistic, and achievable objectives established by implementation action teams
Detailed improvement plans developed and owned by the action teams, prioritized and
implemented in value order
Optimal practices and technology deployed to address specific requirements
Activity-based accounting to accurately assess the real costs and value produced
Effective training initiated at launch, and continued throughout
Array of layered metrics to measure and assure compliance with interim and final objectives
Complete information structure to monitor and display performance, and communicate results
Full commitment to continuous improvement and identification of additional opportunities for
improvement
Tangible rewards for results and value created
Organizational transformation is discussed in Chapter XVII. The principles are an essential part of asset
optimization.
Figure 18.3 illustrates the asset optimization process from yet another direction; this one showing process
steps in finer detail along with the implementing organizational structure.
Appoint Leadership, Steering Team

Corporate
Establish Mission from Corporate Business Objectives
Establish Program Overall Objectives Define
Steering
Team Create Business Model
Publicize Need for Improvement, Develop Consensus
Select Champions, Assemble Implementation Teams
Identify Highest Priority Systems and Components
Benchmark, Perform Gap Analyses Plan
Identify and Prioritize Opportunities, Assess Risk
Leadership &
Establish Strategy
Implementation
Build the Organization
Teams
Construct Tactical Action Plans
Do
Select Technology and Practice
Gain Approval, Implement Improvement Plans
Measure and Manage Results Check
Identify and Strengthen Weak Links
Improve
Maintain Ownership and Support, Institutionalize Success
Figure 18.3 Details of the Physical Asset Optimization Process
Implementing Methodologies
There are two basic methodologies for implementing a process to improve asset performance and
effectiveness. The first, essentially a bottom up strategy, begins with the premise that certain foundation
processes; planning and scheduling, materials MRO and work quality to name three must be perfected
before an organization can move into more advanced, optimizing processes and practices. The second
treats the asset optimization process as a matrix of organizational, practice and technology where each
organization identifies site-specific strengths, opportunities and weaknesses and moves to implement
improvements in areas that offer greatest value and highest probability of success.
If a facility is experiencing many failures and has too much reactive maintenance work it would seem
logical to target and correct the causes of unreliability rather than concentrating on improving the work
management process to deal more effectively with conditions that shouldnt exist. Hence the focus of
asset optimization is to constantly direct efforts at greatest value.
This handbook and chapter advocate and describe opportunistic implementation within a matrix similar to
Figure 18.4 rather than sequential implementation. The former is considered the more effective way to
gain enthusiasm and ownership for the process, demonstrate results, and achieve maximum value as
early in the program as possible. The process is constructed around action teams chartered to identify
and implement improvements within the matrix to gain greatest business value in the least amount of
time. These teams constantly monitor progress and seek additional opportunities for improvements within
the program framework that will add still more value.
Achieve Market, Business, Value Driven Physical Asset Optimization

Institutionalize Results, Success Control Plan Communicate Publicize Promote
Increase Ownership and Support
Improve
Implement Continuous Improvement Process Practice Technology Organization
Review, Adjust and Improve Business and Action Plans
Measure and Manage Results Actual Results Metrics Gap Corrective Action Check
Communicate & Promote Results Wins Lessons People Continuing Work
Activities Reliability Prediction Failure Analysis (RCA) Risk Analysis Lifetime Analysis
Supporting Programs CBM PM RCM / FMEA Proactive
Information Management Document Availability Access / Use Updates Revision Control
Skills Management - Training Safety Team Professional / Craft General Learning
Systems CMMS Condition Monitoring Reliability Expert Decision Support
Organization & Administration
Do
Org. Linkage/Alignment Leadership Champions RASCI
Foundation Processes Criticality / Prioritization Work Management Materials Management Lubrication
Basic Documentation P&ID Asset Register Asset Hierarchy Equipment History
Values, Culture, Relationships Reliability Culture Production / Maintenance Partnership Change Management
Deploy / Improve Personnel, Skills, Processes, Practice, Systems and Technology
Implement Improvement Plans
Gain Approval for the Detailed Action Plan
Build Organizational Support
Plan
Develop Business, Tactical Improvement and Control/Sustainability Plans, Establish KPI's
Develop and Publish Preliminary Improvement Objectives: Systems and Equipment
Highest Priority Opportunities Objectives: Results, Time Risk Responsibility Prioritize
Prioritize Opportunities for Improvement Based on Value Potential, Probability of Success
Identify Gaps to Best Performance / Practice, Opportunities for Improvement
Benchmark Results expected Value Potential Probability of success Metrics
Establish Current Conditions Strengths Weaknesses Barriers Desired Future State
Analyze
Risk Rank Systems & Equipment History Probability Consequences Future
Categorize Areas For Improvement Material Organization Culture Processes & Procedures
Establish Action Teams; Initiate In-Depth Improvement Workshops
Gain Approval for the Initial Improvement Strategy
Formulate a Preliminary Improvement Strategy and Process
Write Program Mission Statement
Initiate The Change (Improvement) Develop Organizational Consensus for the Necessity for Improvement
Management Process Form Communications Team; Develop Communications Strategy
Establish Program Vision, Objectives and Overall Strategy Define
Conduct Leadership Workshops
Appoint Program Action Organization, Change (Improvement) Manager, Initial Implementing Team
Create Business Model
Establish Overall Business and Mission Objectives Top Metrics
Appoint Steering Team, Program Leader / Champion
High Level Agreement on the Need For Improvement, Commitment to Program and Success
Figure 18.4 Physical Asset Optimization Program Improvement Matrix
Where and How to Begin?

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 asset optimization initiative.
Unfortunately this is not always the case. Management and / or priorities can and often do change.
Although asset optimization is a long-term sustaining concept, continuing short-term results, quick wins
are imperative in order to build and maintain enthusiasm, confidence, credibility and support. As in so
many activities, long-term support and funding is often dependant on the achievement of solid, short-term
results.
A number of fundamental issues should be considered as the implementing strategy is developed.
Mission, business and economic conditions, and the resulting managerial priorities have a way of evolving
over time. The implementation plan must have sufficient flexibility and adaptability to contribute continuing
value and results to the business despite changing conditions.
When processes and practices are present and close to objective performance, a continuous
improvement optimization process can begin immediately. But when vital functions, processes and
practices are absent, or there are major deficiencies compared to world-class performance,
transformation is required to make a step change into the new processes. The step change,
transformation process is described in Chapter XVII. When the transformational change is complete, the
process changes to one of continuous improvement. One expert has suggested calling this sequence an
Asset Transformational Improvement Process, ATIP.
Ultimate success will be determined by how well the strategy and implementation plan addresses the key
areas with the greatest impact on profit:
Safety and the environment
Events, conditions or problems that have an effect on business / mission / operating performance
Gaining performance objectives in availability, yield, quality, and conversion cost
Ability to take maximum advantage of opportunities for increased production and / or quality
Improvements in process effectiveness
The business model presented in Chapter VII is a starting point. An economic analysis enables
improvement initiatives to be developed and prioritized in terms of real value. What is the potential value
of available courses of action including no action? How much does each action cost to implement?
What is the probability that improvement initiatives will achieve their objectives? What is the return in
financial terms such as RONA or ROCE? In virtually every case, far more opportunities for improvement
will be present than there are resources for their implementation.
Considerations for Commencing with a Pilot
As with any new concept, the introduction and first-use of the asset optimization program should be
carefully controlled in a way that maximizes the potential for success and minimizes barriers to gaining
success. Corporations with facilities in several geographic areas should consider a pilot program at a
single facility. Facilities with multiple units might consider a single unit pilot program.
Many of the asset optimization concepts may appear threatening to workers. When beginning with a pilot,
fewer people are involved and it is far easier to establish the communications and dialog necessary to
gain and maintain ownership, enthusiasm and support for a new, potentially threatening program.
Selecting a facility or unit whose personnel are considered to be reasonably receptive to change greatly
improves the chances for success. A controlled, pilot introduction thus establishes the most favorable
conditions possible from the beginning to assure long-term success and the best interests of the
organization.
A number of factors should be considered in the selection of facilities and units for the pilot installation:
Workforce receptiveness and enthusiasm for change
Improvement opportunity based on mission, business, market and operating conditions; current
performance and results
Degree to which a facility or unit pilot program is applicable and can be transferred to other
enterprise / plant businesses
Independence of the pilot entity providing freedom to improve processes and practices within the
pilot without outside interference or veto by another because the improvements dont comply with
institutional or procedural standards.
Reasonably close physical proximity to corporate resources and Steering Team to ensure
continuous involvement, communications and support throughout the pilot.
A large, multi site corporation decided to pilot a major improvement initiative at the facility
considered to be most receptive to change, even though it was not the largest facility or believed
to be most in need of change. The pilot proved highly successful and led to spontaneous appeals
from other sites wanting to implement the program.
To achieve success, a pilot often requires modifications to be made to the corporate infrastructure
and interfaces. Areas that may require administration and organizational changes to fully test pilot
improvements include reporting, information flow, finance, logistics, HR and the supply chain. Any of
these and others that remain in the old mode can have an adverse impact on the improvements
implemented within the pilot; dilute and diminish results.
Workshop participants engaged in transformation initiatives frequently state that they (senior
management) demand and expect new values and new behaviors, but continue to evaluate
individual and group performance based on the old values and behaviors. Why is there any
surprise that nothing significant changes?
When it isnt possible to change the infrastructure, and the transformational pilot must operate in all or
part of the old organizational environment, any potential conflicts should be identified at the beginning of
the pilot initiative. With inhibiting conflicts identified, their impact on the implementation of the pilot and the
results should be assessed and understood by all. The expectations and objectives of the pilot must be
adjusted accordingly.
As an alternative, a pilot may be authorized to operate with modifications to corporate administrative
practices, reporting and approval procedures or even granted permission to operate outside current
administrative procedures with controls appropriate to the pilot.
Beginning with a pilot installation is a good way to learn and prove an asset optimization program. It
retains flexibility, can be altered quickly to fit unanticipated conditions, is less risky, and is generally easier
to sell to management. Expanding a successful pilot is much easier than downsizing an ambitious effort
that failed to meet expectations. The latter may also discourage others from considering future
improvement projects.
DEFINE THE PROGRAM

Overall objectives, what the asset optimization program must accomplish in terms of business / mission
results, are established at the top levels of the organization. The senior executive sponsor of the Asset
Optimization program must state specific program objectives in clear, objective language that will lead
directly to operational objectives and performance metrics. Overall program mission / business objectives
are passed to Program Leadership as the program basis.
If top management cannot describe exactly where they want to go with clear, specific,
quantifiable objectives the very best teams are incapable of getting them where they want to be!
Business objectives typically originate from corporate planning and are generally based on improving
RONA, ROCE or some other high level metric. At the plant level this must be translated by the Steering
Team (discussed in the next section) into increasing production output (availability and yield), quality and
reducing cost.
One large company stated their overall objective was to be the best in their industry. But what did that
mean, especially when there was serious consideration being given to outsourcing all activities? Did best
mean the most profitable? In the extreme case of total outsourcing they would become a holding
company with little control over quality or customer satisfaction.
In several large companies that have successfully implemented an improvement process, the
programs requirements and objectives originated from the CEO or Office of the CEO. (129)
Plant managers in one company 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. (129)
Appoint Program Leadership
Steering Team
The Steering Team for an asset optimization program is chartered to identify and translate business
objectives into program goals, select Program Leadership and champions, energize the implementation
and assure the organization is fully aligned and working toward success. The Steering Team oversees the
working level planning process, evaluates the potential business value of proposed improvement
initiatives, serves as a facilitating resource during implementation and reviews the function, progress and
results of the various action teams. The Steering Team must remain concentrated on strategy and results,
becoming involved in tactics only when reviewing results and acting to eliminate organizational barriers.
As detailed in Chapter XVII, appointees to the Steering Team must be the best, most highly motivated
managers in the corporation / on the site that are capable of driving a demanding initiative to successful
completion. They must have credibility within the organization and be able to gain consensus and
support, and remove barriers; the latter by command if necessary. In addition to the asset optimization
Program Leader, a site Steering Team is typically composed of Production / Operations, Maintenance and
Engineering Superintendents, Finance, Purchasing, HR and IT Managers and is chaired by the
Operations or Maintenance Superintendent, preferably the former. The Steering Team reports to the Plant
Manager who is an ex officio member of the team.
Program Leader / Champion
Appointed by the Plant Manager with input from the Steering Team, the asset optimization Program
Leader is the key to success of the program. The individual appointed must be respected and credible
within the organization, have the initiative, enthusiasm and drive necessary to achieve success and
possess excellent leadership, organizational and people skills both up and down the organization. The
Program Leader must be dedicated to the task, have real authority and be a member of the site
leadership team.
Continuity of leadership
Many major improvement programs flounder when the program executive or champion is promoted out of
the job or retires. When that occurs, the successor often has no ownership for the program and either
terminates it in favor of a new program of which he / she will be seen as the initiator, or allows the
program to wither away from lack of priority. To address this potential problem, the probable successor(s)
should be assigned to the asset optimization program from the beginning if at all possible. Unfortunately,
especially in the case of the Executive Sponsor, the succession is rarely known at program
commencement.
To assure the program survives a change in leadership, the building of corporate and institutional support
must begin immediately. Developing internal ownership and commitment, as well as documentation
demonstrating progress, is part of the process needed to assure the program continues through any
leadership changes.
Establish Program Objectives
First order of business for the newly appointed Steering Team is to translate the overall business / mission
objectives, business basis and contribution into specific objectives for the asset optimization program.
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?
Business conditions, specifically the origins of profit, are the foundations of asset optimization. The
identification and prioritization of opportunities for improvement requires a clear understanding of the
principal factors that determine and drive profit. Is profitability driven by market conditions (demand),
production capacity (availability, yield, and quality), operating and maintenance (O&M) costs, or some
combination of the three? If a facilitys production is sold out, the balance between availability, yield,
quality, and conversion costs probably determines profit. Under these conditions, incremental increases in
production are highly profitable. If production is not sold out, the prime emphasis shifts to controlling
operating and maintenance costs.
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 in order to
guarantee a minimum quality 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 heating and air conditioning systems are not operating. Within these
seasonal swings there will be day-night and weather-related variations.
Create a Business Model
With business conditions understood, a business financial model linking improvements to financial results
must be constructed in order to provide guidance for establishing profit-driven priorities. The model must
take into account market conditions and be capable of reporting results and predicting return for any given
set of circumstances. Financial considerations and a model for implementation are presented in Chapter
VII.
Companies often state that they have saved several million dollars in cost through a reliability
improvement program and gained two or three times that amount in terms of increased production. The
financial model must identify which creates more value, how much and hence what initiatives should have
highest priority.
Establish Asset Optimization Program Vision and Objectives
The Steering Team has to translate all of the preceding into the mission and specific objectives of the
facility asset optimization program. If the overall corporate objectives are to increase RONA, and perhaps
reduce expenses, these objectives must be translated into definitive top-level objectives, such as increase
production availability by a stated percentage or to a specific value, and reduce expenses to some
number, either absolute or a percentage of Replacement Asset Value (RAV); for examples see Chapter
IX. Because large changes require time to achieve, the Steering Team must assign a time line and define
interim objectives to demonstrate progress and thereby promote confidence that the objectives will be
met.
Appoint the Program Action Organization
Program Leadership Team
The next task to be addressed is the selection of the Program Leadership Team. The Program Leadership
team will have primary tactical responsibility for achieving results, Figure 18.5. With concurrence of the
Steering Team, the Program Leader, Maintenance and Production Superintendents will identify and
appoint members to the Leadership Team. Leadership Team members should be among the most
knowledgeable, experienced, and credible in the facility. Their experience and skills must cover all
aspects of the production process operations and maintenance, hourly and salaried; supervision and
skilled crafts (mechanical, electrical and instrument), planning and scheduling and stores, engineering,
finance and information systems as required. As a group they must be capable of identifying improvement
opportunities, developing the action plans necessary to convert opportunities into measurable results. The
whole idea is to place key people in an environment where their knowledge and experience are leveraged
to the maximum.
Steering
SteeringTeam
Team
Change Manager Program

ProgramLeadership
LeadershipTeam
Team
Communications Team
Area
AreaImprovement
ImprovementTeam
Team Area
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ImprovementTeam
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Improvement Action
Action Team
Team Improvement
Improvement Action
Action Team
Team Improvement
Improvement Action
Action Team
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Team Plant
Plantand
andBusiness
BusinessManagers,
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andMaintenance
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Teams Reliability
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required
Figure 18.5 Physical Asset Optimization Program Organization
The Program Leadership Team is the heart of the asset optimization program. The actual improvement
strategies and action plans are developed and planned by this team. Led by the asset optimization
Program Leader, the Leadership Team will write the mission statement, perform the opportunity
assessment, gap analysis, identify and prioritize opportunities and supervise the development of action
plans by the implementing teams. In large facilities there may be multiple leadership teams, one in each
unit.
Team members are senior engineers, supervisors, operators and skilled craft employees selected
for their broad knowledge, credibility within the organization, ability and willingness to contribute.
The team must include in-depth experience in operations / production, maintenance and reliability
A large facility organized multiple leadership teams. Due to the make-up of individual teams and
leadership they had remarkably dissimilar personalities. Members of one team, led by a
production superintendent, had no doubt about the importance and priority of improvements. Two
others, led by reliability engineers with strong support of the area maintenance and production
superintendents, were highly data oriented and also very effective.
Change (Improvement) Management
An asset optimization program must include management of change and a designated Change Manager,
Figure 18.5. In larger programs the task is sufficiently demanding to call for a dedicated person, for
smaller programs the Program Leader can probably also serve as Change Manager. In either case, the
position of Change Manager is a field position, not an office administrative task. The Change Manager
works with the Leadership Team and has primary responsibility for the communications program
discussed in the next section. He or she must have an intimate sense of the plant and change process
developed by contact within the work environment such that potential problems involving institutional
values and relationships, concerns, feelings and motivation can be anticipated, identified addressed and
corrected.
Establish Communications Team and Communications Program
With the necessity for the program, its overall objectives and leadership established, it is time to begin
increasing awareness and broadening support for the asset optimization program. The Communications
Team described in Chapter XVII should be formed as part of program leadership.
Developing consensus for the need to improve, enthusiasm and support for the improvement program is
the primary responsibility of the Communications Team. The Communications Team works alongside the
Program Leadership Team to develop the communications necessary to sell the process and its benefits
to skeptical and concerned employees. The Steering Team must be involved in this process as many of
the initial questions regarding why is this necessary will require business based answers that must be
supplied by the Steering Team.
ANALYZE IDENTIFY AND ANALYZE OPPORTUNITIES

Expand the Leadership Team
At some point during the process of identifying opportunities, consideration should be given to expanding
the Leadership Team to include individuals who will become leaders, champions and core members of
Improvement Teams and accountable for the resulting action plans, see Figure 18.5. Early involvement,
participation in the process, creates the enthusiasm and ownership necessary to gain the highest
confidence of reaching objectives.
Referring again to Figure 18.5 it should be noted that in smaller facilities with only one unit, Leadership
and Improvement Teams can be combined. In this case the Steering Team is concerned with the overall
business strategy and results, the Leadership Team with the tactical improvements necessary to meet the
overall objectives.
Conduct Workshops
The Program Leadership Team commences their real work with a facilitated workshop to establish a
working relationship and cohesion within the team, see Chapter XVII. The workshop begins by reviewing
the overall mission and objectives, followed by an explanation of the optimization process and program. If
team training is considered necessary to assure a productive environment it begins at this initial
workshop.
The most important element at this stage is to get all the experts with process, practice and reliability
information together to identify the largest specific opportunities for improvement. They have the most
accurate information regarding deviations from required performance, corrective actions that have been
tried and the outcome.
It is advisable to have someone familiar with the process facilitating the initial team workshop to keep
participants focused, on track and assure the time is used most productively, Chapter XVII. The facilitator
should also convert ideas expressed to improve the mission statement into a proposed draft for comment,
discussion, modification and approval by participants.
Identify Highest Priority Systems and Equipment
Prioritization begins with business objectives and the recognition that they can change with time,
conditions and seasons. In the power generating industry, a market goes from sold out in winter to excess
capacity in summer. One multi-business company reports that prioritizing is easiest to accomplish within
the same business unit. Prioritization across business units is much more difficult because the units may
have significantly different market and operating conditions. (11)
Methods for prioritization / risk ranking are discussed in Chapter XIII. Systems and assets are risk ranked
by probability and consequences of an event in approximately five categories from high risk / cost /
probability to low. Systems and assets in the first group have the highest risk and historically poorest
compliance to objectives, i.e., safety, production availability / quality, costs. This first category is where
most of the initial analysis and effort will be directed and should consist of no more than 10 percent of the
total assets. A Computerized Maintenance Management System (CMMS) provides invaluable costing
information. If this data isnt readily available it may be possible to utilize standard tools to search
whatever data is available to identify primary deviations, see Chapter XII. If accurate data is not available
from any source institutional knowledge should exist to make a reasonable classification.
Conduct Audit
An audit of results, processes and practices must be accomplished to establish the program starting point
and identify the gaps to objective performance and best practice from which the action plan will be
developed. The audit is the initial step to ensure plant performance targets are identified, improvements
will meet business, availability, reliability and cost effectiveness objectives and expectations will be met.
The audit consists of appraisals of the integrity and performance of physical assets together with the
supporting processes and management systems. The audit also establishes the basis to assure that plant
assets are not being abused, life span shortened for short-term gain.
The audit consists of a series of inquires to establish the following:
What are current performance and effectiveness objectives? Are objectives established and being
achieved? What are gaps from current performance and effectiveness to business requirements?
Are best practice procedures established and utilized? Are they in use for operating equipment,
work and stores management and supporting programs? How do they compare to industry best
practice?
Are employees enthusiastic, motivated, are they doing things right, following procedures?
Is the organization disciplined, are rules being applied?
An audit can be used in two ways:
Define elements that should be considered for inclusion in a new program
Provide a basis of judging the content and effectiveness of an existing program
The scorecards detailed in Appendix E can be used to guide the audit process.
The following are general objectives of effectiveness audits:
Management direction clearly defined
Improvement program directed to and consistent with business objectives
Goals and objectives established and broadly understood
Comprehensive asset life cycle management in place long-term plant and equipment health
indicators and KPIs in place and monitored
Operating utilization and effectiveness accurately tracked
Costs defined and traceable
Results conforming to objectives
High level of ownership and effort
Agility in response to change
Satisfaction of all involved, good employee morale and development

Write Mission Statement
The mission statement must be descriptive, concise, follow directly and support the business strategy. A
good mission statement clearly defines objectives with specific measures of performance. 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 87 percent. Reduce cost to X dollars per unit. Reduce
safety and environmental incidents to zero.
This more detailed example of a mission statement was constructed during an improvement workshop:
The Asset Productivity Optimization Program will elevate the utilization, effectiveness and quality
delivered by site assets and improve the work environment by:
Safe performance of all tasks without injury or significant incident
Compliance to business requirements for availability and cost
Minimizing controllable unplanned events
Gaining full commitment to quality work, personnel and organization
Improve repair success, minimize rework
Identifying degrading conditions of monitored equipment as early as
possible no surprises
Continuing to improve MTBR and maintenance cost performance
Utilizing human resources more effectively
Achieving mutual trust and support, high level of ownership, teamwork,
morale and proficiency
Accepting responsibility for results
Note that performance to all but the last three points can be measured with very specific, numerical
metrics.
The following is a mission statement from a power generation company
Goal 2000: Achieve market price production, capacity factor greater than 70 percent, equivalent
availability of 90 percent, improve heat rate by 5 percent, and reduce O&M costs to 3.5 mills per
kWh.(33)
The mission statement must be accompanied by definitions for each term availability, production rate,
capacity, first-run quality, etc. as well as performance objectives.
Team members must assure the mission statement concisely describes the program goals and must be in
agreement on the general improvements necessary to meet program objectives. Although the formal
process for identifying and prioritizing specific opportunities is in the future, numerous workshops have
validated the concept of an abbreviated introductory process where participants make a preliminary
identification of improvement opportunities, describe the ideal future state, list strengths to build on and
barriers to overcome, and formulate preliminary action plans. This exercise can be accomplished in a day
or so and is an excellent way to quickly build interest, ownership and motivation.
Very basically the Mission Statement must clearly state objectives the destination with enough detail
to lead to the linked improvement program
Experience demonstrates that identifying the necessities for the mission statement in a workshop,
designating someone to write a draft off-line, circulating the draft for comment, and finally conducting a
second workshop to develop a final version is the most effective use of time and resources. Attempting to
draft a mission statement and conduct detailed wordsmithing within a meeting or workshop are not
effective uses of time.
Build a Preliminary Improvement Strategy
An optimum, comprehensive improvement strategy is required to accomplish the objectives within specific
market, mission, business, and operating conditions. Areas that should be addressed in the preliminary
strategy and eventually a detailed action plan include: (66)
Safety improvements
Reduced environmental incidents
Improved production output and quality
Increased equipment uptime
Reduced costs
Improved organizational values and structure
Optimized organization: effective professional leadership, fewer layers, decision making at
lowest effective levels in the organization, reliability orientation
Reduced delivery time
Reduced energy consumption
Optimized effectiveness of vital processes such as work planning and scheduling, stores
Proactive asset lifetime management
Reduced production buffers (Work In Process) and Maintenance, Repair, and Overhaul (MRO)
stores inventory
Improved skills, development and training for success
Greater worker-directed activities such as failure analysis
Operations-conducted asset surveillance and maintenance
Improving workspace cleanliness (to more readily identify defects)
Continuous improvement
The initial asset optimization strategy will be translated into high-level plans that drive planning and
resource allocation. The high level plans provide the basis for detailed operating plans and performance
scorecards for the major strategic and functional performance areas of the business.
Every element of an asset optimization strategy must focus on benefits to the organization. Identified
opportunities for potential improvements must be subjected to a rigorous financial analysis. This identifies
the most profitable corrective remediation alternatives for the highest priority defects and leads to a
prioritized list of actionable faults, corrective initiatives, and results. As a result, the Steering and
Leadership Teams gain confidence that the proposed improvement initiatives do represent the greatest
opportunities for improvement and their potential value.
Strategies employed to address greatest risks and dominant failure modes are typically the most
reliable and effective.(18)
Prepare a Program Summary and Preliminary Plan
The analysis phase closes with the Leadership Team preparing a summary of the optimization program
definition and a preliminary plan for its implementation. The summary plan should include:
Mission Statement
Strategic basis for the program
Program objectives, linked to business objectives
Program organization, personnel assigned
Anticipated changes to the organization and processes that may be required
Potential barriers
Next steps
Anticipated date for commencing the actual implementation
The summary and preliminary plan is circulated for approval.
PRIORITIZE BENCHMARK TO PRIORITIZE IMPROVEMENT OPPORTUNITIES

At this point in the asset optimization process there should be an understanding of mission requirements,
what drives requirements, the systems and components that are critical drivers, how each contributes to
objective performance and an accurate risk ranking to delineate the systems and equipment on which
efforts should be directed.
The necessity and process of comparing current performance to benchmarks and other objectives was
discussed in Chapter IX. Measures of current performance such as asset utilization, production
effectiveness (availability, throughput, first-run quality), cost per unit (MW, pound, ton, EDC, etc.) or cost
as a percentage of RAV are the essential first steps in identifying opportunities for improvement.
Gap Analysis, Current Compared to Desired
A Gap Analysis compares current performance to objectives. It is an essential part of benchmarking. The
Gap defines where we are, the current situation, compared to where we must be, the desired situation,
Figure 18.6.(112) The Gap analysis identifies opportunities for improvement that are prioritized by value and
lead directly to action plans.
Benchmarking
Where
Whereweweare
are Where
Wherewewemust
mustbe
be
GAP
GAP
As Is
As Is To
ToBe
Be
Opportunities
Opportunities
for
forimprovement
improvement
Improved
Improved Reduced
ReducedCost
Cost
Effectiveness
Effectiveness
Value
ValuePrioritization
Prioritization
Detailed Improvement Action Plans
Figure 18.6 The Gap Process Identifies Opportunities for Improvement
Objectives, the where we must be, are established from industry benchmarks, listed in Chapter IX, and
internal requirements for improvements in areas such as production effectiveness.
In monetary terms, Gaps to best practice may total tens or hundreds of millions of dollars,
depending on the size of the enterprise.(100, 129)
Unless objectives have already been prioritized in the improvement process charter, e.g., reduce costs;
separate Gap Analyses should be conducted in the key categories of Availability, Yield, Quality, Cost and
Process Effectiveness itemized earlier. Many industries have benchmarks based on RAV, commonly used
in the chemical processing industry; Effective Distillation Capacity (EDC), used in the oil refining industry;
and Forced Outage Rate (FOR), used in the power generation industry. In each case, the objective is to
identify and value the magnitude of differences between current and objective (best practice benchmark)
performance. To complete the picture the internal risk assessment, described in Chapter XIII, must be
added to the mix.
High-level gaps to best performance benchmarks are not particularly informative in terms of devising
improvement initiatives. Reduce conversion cost per unit output is a typical overall objective that must
be cascaded to lower-level implementable initiatives.
The detailed benchmarks needed to construct an improvement plan must include high-risk systems and
components as well as reliability; work, materials and stores process management effectiveness. Specific
areas to benchmark include (refer to Chapter IX for values):
Overall Effectiveness
Availability and / or downtime
Production rate and quality
Maintenance costs (per unit, percentage of RAV)

Reliability
MTBF for major equipment (pumps, motors, turbines, compressors, etc.)
Unscheduled events (failures)
Work Management
Work accomplished on Work Orders (non standing / blankets) as a percentage of total hours
expended
Emergency, break in work as a percentage of total work
Schedule compliance
Work originated from PM and PdM as a percentage of total work
Work quality (repair success, rework)
Materials and Stores Management
Inventory value
Stock outs
As stated earlier, Gap determined improvement program objectives must connect directly to enterprise
objectives for increasing profitability and shareholder value. And the relationship, up and down, must be
thoroughly understood by everyone. 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 asset optimization objectives must be
understood and agreed upon by all concerned.
Some general 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. (129)
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 MRO costs constant, the company was
able to decrease the cost per unit output.
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 asset optimization.
A potential value for each Gap deficiency is determined from a financial analysis. For example, an
analysis based on average repair costs might determine that increasing average MTBF / MTBR on
centrifugal pumps by 12 months will reduce maintenance spending by approximately $2 million per year.
That will be the value used to prioritize potential improvements. This, more detailed information, will be
used to develop detailed action plans discussed in the next section.
One facility determined that increasing the MTBR of approximately 200 of the worst performing
pumps from the current 8.5 months to 30 months (average of the overall population) would save
approximately $85,000/month (over $1 million/year) in repair costs.
To complete the picture of current conditions four additional areas should be examined during the
benchmarking process:
Organization
Is the optimum organization in place? Are the right people in the right positions? Are they working to their
full capabilities? How proficient are they? Do people communicate effectively? Is there waste in the
process? Are efforts prioritized by value?
When asked to rank workforce proficiency in three categories; totally dependable, highest quality
work; undependable in both proficiency and quality; and everyone else, several organizations
stated approximately 15 to 20 percent totally dependable, 50 percent undependable and
approximately 30 percent somewhere in the middle between the two extremes. These companies
have major problems!
Processes
Are all asset optimization processes in place and functioning effectively? (Appendix E contains a detailed
list of program essentials in abbreviated scorecard format)
Work management, planning and scheduling
Stores management
Information
Procedures
Are detailed procedures in place and followed for:
Operating and repairing critical and general equipment
Coded entries utilized at Work Order close out to document vital reliability information, describe
abnormal conditions, conditions found, components affected and action taken
Repair / replace decisions
Outsourcing and contractor administration
New equipment design, purchase, installation, operation and maintenance
Practice implementation and efficiency
Are the results and effectiveness of practices such as Lubrication, Condition Monitoring, Motor
Testing and Thermographic surveys audited periodically? Have failures occurred that should be
identified early with a predictive technology?
Asset Performance and Effectiveness
In virtually every enterprise, data and / or institutional knowledge exists to identify specific assets that
continually cause problems, those that sometimes cause problems, and those that never cause problems.
In the detailed analysis this information is tempered by consequences. If a problem has safety or
environmental consequences, or interrupts production, the potential value of problem elimination is
significantly greater than the direct cost of the failure.
The detailed analysis task begins by either determining or reconstructing operating and maintenance
history and lifetime cost. Some facilities have an automated system for tracking operating availability. A
Computerized Maintenance Management System (CMMS) is another major resource. If operating or
CMMS data is not readily available or is of questionable accuracy, operating logs, work orders, spare
parts usage, and people directly involved can be queried to reconstruct failure history and create a best
estimate of costs, including downtime, by asset.
Failures are prioritized by number of occurrences, cost, and consequences. Failures that have caused
safety or environmental incidents, slowed or interrupted production should be investigated with a Root
Cause Analysis (RCA), described in Chapter V, to determine optimum remedial action. A Pareto
representation is a useful way to classify and present information. (26) The Pareto analysis, shown in Figure
18.7, was developed from sources of lost production as an initial indication of where to focus attention in a
process cascade. The Pareto shows clearly that four of thirteen units cause 75 percent of the total losses.
Figure 18.7 Pareto Analysis Identifies Sources of High Production Loss
Locating faults and defects and developing remedial action requires discipline discipline to search for
the real root cause and develop optimum improvement plans. Plans must be incorporated into the
proactive defect elimination process.(112)
It is often advisable to perform a second Pareto of the highest ranking data within a Pareto; a Pareto of a
Pareto. Figure 18.8 was developed from the data represented by one of the largest bars in Figure 18.6 to
determine more specifically what was causing the losses.
It should be noted that the two highest causes in Figure 18.8 are Unknown and Other. This is not an
unusual outcome with real data. The next step to establish cause is to go back to the basic data, resort
the data in the Unknown and Other categories and then attempt to determine real cause for the
highest contributors from logs and other documentation. Here again the 80 20 Pareto rule applies. If
exact cause can be determined for 80 percent or so classified as unknown and other the analysis is
valid. In this particular case a relatively small percentage of the events accounted for most of the
production losses.
Figure 18.8 Pareto Analysis to Determine Cause

The Pareto analysis and display illustrated in Figure 18.9 (26) is useful to identify specific problem areas or
equipment on which to focus improvement efforts.
Cost per Incident X Number of Incidents

Focus attention
and effort on problems
with highest total costs
Seals Coupling Motor Wear Erosion Piping Other

Bearings Impeller Rings Baseplate
Cause of Pump Failures
Figure 18.9 Pareto Analysis Identifies Primary Sources of Pump Failures
A Pareto distribution such as that shown in Figure 18.9 and process 2 in Figure 18.10, indicates clustered
(localized) problems, the bad actors mentioned earlier, that can be resolved with specific corrective
actions. A tight, non Pareto distribution, Process 1 in Figure 18.10, can indicate one of two conditions
depending on the average value. If the average is close to a best practice benchmark, the entire
population is in good shape and doesnt require immediate attention, subject to a risk analysis. A Process
1 average off the best practice benchmark indicates facility wide systemic deficiencies such as equipment
coupling misalignment that call for procedural changes and training. A broad random distribution such as
shown in Process 3 is difficult to analyze and requires additional localization.
Process 1

Process 2

Process 3
Figure 18.10 Data Distribution
The same line of thinking holds for operating parameters, which should be compared with design
specifications to identify significant departures from design specifications and / or best efficiency.
During the localization process it is a good idea to physically inspect systems and equipment 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 type of equipment mounting, level base plates, pipe supports,
shaft and piping alignment, component location, orientation and piping unions for maintainability. Vibration
and oil surveys are useful to determine mechanical condition. Discrepancies noted should be added to
the list of potential improvements.
As a final comment, this stage of developing the asset optimization program must be data driven
wherever possible. In some cases guesstimates of poor performers may not be supported by actual
data. Whenever there is a difference between perceptions of bad performance and a data driven risk
analysis the differences must be resolved.
New Equipment
If any new equipment is included in the asset optimization program an operating history has not been
established and much of the preceding wont be applicable. In this case, a design audit substitutes for
lifetime assessment. The design audit must include installation specifications and assurance that safety
precautions, operating and maintenance procedures, test, calibration lubrication and other instructions
and spare parts requirements are all established and complete.
Procedural, Productivity, Effectiveness
Productivity improvements must address two issues: First, is the system itself optimal and are tasks
required within the system being performed at optimal effectiveness? Using Preventive Maintenance as
an example, the first issue is whether the correct tasks are being scheduled and performed at optimal
intervals. The second issue is whether each task in the procedure is fully documented by a detailed, up-
to-date task instruction, if sufficient people have been trained to perform the task and skill documentation
is available and up-to-date.
Safety precautions, Master Equipment List, P&IDs, operating and repair procedures, task instructions,
and spare parts requirements should also be checked for completeness and accuracy. Deficiencies are
added to the improvement list.
The work management, planning and scheduling process is another example. Is a work management
process in place and being fully utilized? If so there are many follow-up questions: Is the CMMS being
utilized to accurately track hours expended and costs by asset and component? Are work effectiveness
KPIs, Chapter IX, being measured and reviewed? Do planners have Bills of Materials (BOMs) and ready
access to spares inventory records for most equipment? Are they accurate? Can they reserve spares and
easily check the status of parts ordered? Are planners and schedulers spending most of their time with
planning and scheduling duties such as walking jobs, assembling work packages and communicating with
operations to establish optimum times to perform the work or do they spend inordinate time on reactive
work and expediting parts?
Check off lists, similar to the scorecards in Appendix E, have been published and are available for use in
auditing the effectiveness of asset optimization processes.
Identifying productivity improvement opportunities requires total involvement of the people actually
performing the work. They know where real problems are, where time is wasted and are in the best
position to formulate ideas for optimum 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. (129)
Risk Analysis Addressing the Future
With current departures from best practice identified and localized, the process concludes by identifying
the risk of deficiencies that havent yet caused problems. This is where RCM, examining the top 10
percent or so of equipment and systems based on probability and consequences of failure is utilized very
effectively to assess risk.
Identify Value Potential, Probability of Success

Prioritization by risk ranking is critically important to ensure that improvements are delivered without
exceeding the available cost and resources. (18) Risk ranking defines the initiatives that have greatest
impact on mission / objectives and opportunities expressed as safety, environmental, business
opportunity (availability, production rate, and first-run quality), and cost. As improvement initiatives to
achieve the mission and strategy objectives emerge, each initiative must be assessed in terms of the
priority of the equipment, systems and individual components, and ranked accordingly.
As mentioned in Chapter V, many companies who have been through the process of developing
improvement initiatives recommend Streamlined RCM with initial prioritization to assure attention and
resources are focused on highest potential value / risk. In addition to optimizing the improvement effort,
early prioritization assures that expensive processes like RCM gain 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.
(129)
The company uses essentially the same system to prioritize corrective action (Work Orders).
Work Orders are ranked by probability multiplied by consequences of failure to determine the 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.
Another company went through a detailed prioritization effort to focus on highest return
opportunities. Six initiatives were selected for action out of 300 opportunities identified. (33)
All involved must recognize that constraints and risk rankings change with work completion, market /
mission requirements, and plant and operating conditions, so periodic reviews and consequent
adjustment is essential.(129)
Construct Priority List for Improvement
With the information developed thus far the Leadership and Improvement Teams can identify the specific
areas in which improvements offer greatest value and contribution toward mission and business results.
PLAN DEVELOP DETAILED IMPROVEMENT STRATEGY AND ACTION PLANS

With overall objectives set forth in a Mission Statement and agreed upon, current performance and
effectiveness identified and benchmarked, and a Gap Analysis completed to identify opportunities for
improvement, the augmented Leadership Team constructs a preliminary improvement strategy for the
highest value opportunities including:
Objectives, required end state, improved performance, KPIs and time to achieve
Current conditions, strengths to build on, barriers to overcome
Potential value gain
Preliminary improvement action initiatives including:
Deliverables; interim and final measures of performance; results and time line
Investment required, people, technology and funds
Forecast return
Probability of successfully achieving objectives, barriers and potential risks, mitigating action
Recommendations for further investigation and / or changes to design, procurement and
installation practices, safety and operating procedures, repair task instructions, and spare parts
levels
Supporting improvements recommended in other areas, i.e., organization, procedural and
compensation, with advantages and benefits
At this point, the Steering and Leadership Teams must be absolutely convinced that the enterprise-level
and mid-level objectives can be met and be totally committed to making that happen.
Although the gap analysis, prioritization and planning stages of the asset optimization process are
discussed separately; they are most effectively accomplished together. The first phase, discussed in the
previous section, identifies and prioritizes overall opportunities by potential value. Value in areas such as
availability, spending, average deviations e.g., low average MTBF / MTBR and process effectiveness e.g.,
percentage emergency, break-in work. The next stage, described below, builds on overall value
opportunities to develop an improvement strategy that includes detailed action plans. The processes are
continuous and iterative. Information developed in the initial Gap analysis is refined, directed to specific
improvements, tested for practicality, potential value and probability of achieving expected results.
Appoint Champions
Champions are essential to the success of the asset optimization program; they drive the improvement
process and are its source of inspiration and leadership. Champions are selected for personal attributes;
enthusiasm, commitment to success (i.e., passion for success), knowledge, and experience in one or
more areas of asset optimization. They become champions through ownership and results. The selection
of champions and their required attributes are discussed in detail in Chapter XVII.
Repeating some information from Chapter XVII, the champion must be credible within the entire
organization and possess the leadership skills and persuasiveness to sell concepts and requirements to
people at all levels of the organization. Perseverance, and the ability to convince others who may be
skeptical, recalcitrant and even resistant to change, is essential. The latter requires the champion to have
an acute sense of final objectives and an understanding of how and where change can be introduced to
ensure progress and continuing support.
Experience with mechanical equipment or process control systems, preferably in a maintenance or
operations organization, is desirable. Individuals who have performed well in these positions will have
acquired the process and technical overview necessary for successful asset optimization and possess the
required familiarity with the people and processes as well as a direct knowledge of opportunities for
improvement. In addition, these individuals are likely to be familiar with the practices and tools necessary
to identify defects and devise corrective solutions requirements of asset optimization. (e.g., Root
Cause Analysis [RCA]) Specific training is utilized to gain or reinforce the required knowledge.
People with the required enthusiasm, commitment, and credibility to become a successful champion are
generally known and visible within an organization.
Form Improvement Teams
As stated earlier, as general objectives are mapped out at some point in the analysis and prioritization
process, additional members will be added to the Leadership Team. The new members will become
champions for specific initiatives as well as the core of the Improvement Teams, Figure 18.5. They are
brought up to speed during the gap analysis and prioritization process. The Improvement Teams break off
to develop detailed action plans for high priority opportunities that have been identified in the overall
process. The idea is to maintain continuity as program focus shifts from identifying, analyzing and
prioritizing opportunities to planning and executing specific improvement initiatives.
As the groups responsible for defining and implementing improvement action plans, the Improvement
Teams are key to the success of an asset optimization program.
Conduct Workshops
Workshops, detailed in this section and in Chapter XVII, are used to define and refine specific
opportunities, build the implementation strategy and develop detailed improvement action plans. A typical
example is the one cited earlier where a facility quickly identified about 10 percent of their pump
population as bad actors requiring special attention. Within this population there were some units that
could be identified as worst of the worst. By quickly concentrating attention and action on a small
segment it is often possible to make huge gains by solving just a few particularly egregious problems.
Outside facilitation should be considered when any major changes to asset care processes are likely.
Facilitation can go a long way towards establishing a positive environment, providing an impartial
perspective, and gaining best compromises between functional groups and people who may feel very
threatened.
During the workshops, improvement opportunities are examined from the perspective of value potential
by correcting known problems including risk and process improvements.
Formulate Detailed Improvement Action Plans
When the strategy is approved, the Leadership and Improvement Teams, principally the latter, construct
more detailed action plans. These plans define tasks very specifically, assign responsibility, state time to
complete, list specific measures of performance / KPIs, and identify any anticipated risks or restrictions.
Individual initiatives necessary to meet objectives are prioritized and assembled into a business plan for
the asset optimization program.
There are several strategic characteristics that are common among the organizations leading the
migration to asset optimization:
Individual initiatives to close Gaps Industry leaders have learned that when developing
improvement initiatives and action plans to address Gaps, the safest course is to implement a
group of smaller initiatives to fill the gap, rather than attempting to accomplish everything with a
single initiative. With multiple initiatives directed to achieve about 120 percent of a given
objective, there is greater confidence that the objective will be met. From the opposite
perspective, 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 placing all eggs in a basket of
one or a few large improvements.
Improvement initiatives formulated for maximum contribution Improvement initiatives
must be valued in terms of a monetary contribution to mission compliance, increased profitability,
availability, production output, quality and reduced cost.
A company calculated that a 1 percent improvement gain in availability was worth $2.5 million
at the bottom line.
Active participation of people at the working level is essential to gain ownership and
commitment. With knowledge of where the opportunities are located people at the working level
often propose more ambitious results than management might believe possible. With inspiration,
ownership, understanding, and access to the proper tools, the effort quickly gains critical mass.
Agreement on ambitious, optimistic, and achievable objectives established by
Improvement Teams. An array of layered metrics are developed and published to measure and
assure compliance with interim and final objectives.
Ambitious objectives require time for implementation Most improvement programs include
time to reach objectives 1,000 days in one case, three years for a second facility, four years for
another.(129) Intermediate goals are established to ensure progress to final objectives.
Formulate Business Plan
Facilities that have been through the improvement process cite the advantages of a formal business plan
and the business planning process that compile all the individual improvement action plans into an
integrated overall strategy. This helps ensure that requirements, objectives, 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 achieve the required results. (129) The business plan must
be reviewed and revised at regular intervals to account for changing conditions and circumstances.
Business Plans are typically constructed in two layers. An overall plan states broad corporation and / or
Business Unit mission, operating, and production objectives. Specific initiatives, detailed plans and goals
for individual units developed by Leadership and working level Improvement Teams specify how the broad
objectives will be met.
In one company, strategic planning groups develop business plans, which include a forecast of
product throughput, production balance and requirements to meet both. The plan contains
initiatives for process changes and new equipment as well as requirements for investment,
personnel training, and information systems. It is also layered to provide guidance throughout the
organization. (129)
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. (129)
Identifying broad areas in which improvements will meet overall and operating objectives is the first step
in the business planning process. This process was discussed in detail earlier in this Chapter. The plan
must address mandated improvements, identify initiatives and investment required for compliance. (101) All
detailed improvement initiatives must be supported by logic demonstrating that action is directed to
real defects, will produce the required results (probability of success) and resources are applied most
effectively. Likewise, improvement initiatives that involve changes to process and / or work practice must
be accompanied by actions to sustain the changes. (11)
Specific areas that are addressed within a typical business plan: (129)
Corporate objectives
Business unit / facility objectives (carried through to individual unit plans) and mission statement
Improvement Team goals to meet business unit objectives
Safety and environment
Throughput
Reliability
Cost
Quality
Yield
Improvement project detailed action plan (for each initiative)
Specific tasks
Deliverables
Objectives, results and time Metrics, KPIs
Resources, technology, people, processes, systems
Probability of success, barriers, risk; actions to maximize probability, minimize barriers and
risk
Assignment / Responsibility
Control and sustaining plan; refer to Chapter XVII for details.
A strategic business plan outline used successfully by a leading company utilizes the following format: (10)
Objective / Mission
Executive Summary
Business strategy
Planned results
Resources required
Risk
Needs analysis considering opportunity and Gap to optimum performance
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 (KPIs) 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 Key Performance Indicators (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. (129)
The plan developed by another company was constructed on three pillars: (33)
1. Improvement process (involvement and accountability) to any condition, situation, or event
(existing or potential) that does not support the vision or mission and / or conflicts with our values
2. Labor relations shared goals and teamwork
3. Incentive plan communication and reward (10 percent of base pay)
Build Support
To gain maximum results, the workforce must support the improvement process and the specific initiatives
of the effort. This requires recognizing and accepting the reason and necessity for adopting the process
along with an overview of improvements being planned. The Communications team mentioned earlier is
central to this effort. The following are essential to building and maintaining support:
Communication, education and training Beginning with the CEO / Plant Managers
explanation of why change is necessary, messages must be simple, 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, ownership and commitment.
Consistency of both purpose and implementation Consistency is necessary to minimize
the fears of change. All involved with leading the improvement process must recognize that to
many, change is unsettling and threatening.
Ownership, responsibility and accountability Multi-function Improvement Teams
responsible for results formulate detailed implementation plans with participation from the
Leadership Team.
Reward performance People who are responsible for results must be rewarded for success.
Results based compensation is discussed in Chapter X. Other rewards that have been used
effectively for achieving success include personal gifts selected from a catalog, team dinners, and
travel.
A learning organization dedicated to defect elimination and continuous improvement can
move the organization from a problem-solving organization to a problem-preventing organization.
(22)

With the strategy and action plan constructed and approved, the next step is to select specific practices
and technologies to implement the initiatives, e.g., TPM, PM, CBM and Proactive, RCM / FMECA and
RCFA, which are outlined in Chapter V. A comprehensive lubrication program must be considered as an
essential for immediate deployment when failure analyses disclose an abnormal number of bearing
failures. Similarly electric motor analysis (Chapter XVI) thermography and ultrasonic monitoring must be
considered when appropriate.
The application of technology and practice must be directed to specific opportunities in which its
application will generate demonstrable results. 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 18.11 illustrates one companys
process for selecting key initiatives.(10)
(10
Figure 18.11 Process for Selecting Initiatives
Optimizing maintenance, particularly time-based, Preventive Maintenance (PM), is essential for gaining
greatest maintenance effectiveness. Reports 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
time-based Preventive to Condition-Based Maintenance (CBM) are plentiful.
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 PM 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.
While analyzing methods to increase maintenance effectiveness one company found that its
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. Criteria are explained in more detail in Chapter XIV.
Each technology and practice deployed must be accompanied by training to ensure that the skill level will
enable the organization to realize the full benefits of asset optimization and collect metrics to confirm its
effectiveness.
Gain Approval
The planning phase is completed when approval is gained to proceed into implementing the improvement
initiatives. In many cases the Steering Team has authority for final approval. In others, particularly when
resources are required, a more formal approval process may be required.
DO IMPLEMENT IMPROVEMENT PLANS

If the planning stage has been accomplished completely and thoroughly, the implementation process is
simply carrying out the plans. Thus, a successful implementation is totally dependent on planning.
Successful implementation depends on three additional factors ongoing financial justification,
immediate access to information demonstrating results, and continuing high-level support. Improvement
project milestones and meeting objectives should be part of every salaried persons list of objectives for
annual salary review.
Implement Plans
Improvement plans are typically executed, managed and monitored by the teams that developed the
details augmented as necessary with specialized skills. Teams should begin with weekly meetings to
assign action, assess progress, identify any adjustments that might be required and / or unexpected
barriers. Communications are exceptionally important to assure a fast start, increasing momentum,
enthusiasm and ownership. The team leader needs to push early and hard. As initiatives mature, action
progresses and problems are solved, meetings can be reduced to bi weekly or even monthly. However, all
involved must be alert for any slackening of effort or results. Early recognition and immediate correction is
essential.
Deploy Supporting Processes
Ensure a Complete Information Structure
A well-configured information and reporting system is essential to convey the results gained by the asset
optimization program in terms that will attract and maintain interest and support at the highest levels of a
production enterprise.
Information must be readily available to automatically calculate each optimization program metric and
KPI, and to create periodic reports communicating progress, performance and results, see Chapter IX,
Figure 9.14. As discussed in Chapter XII the information system must be capable of collecting and
consolidating data from disparate sources and displaying results in easily understood dashboard
presentations Figure 9.4.
If the information structure is not present at the initiation of the asset optimization program it must be
created and implemented as soon as possible so that the improvements create a history of progress as
they are implemented.
Implement Activity-Based Accounting
Similar to the information system, a structure to accurately assess real costs and value produced must
either be present at program initiation or implemented soon thereafter to enable reporting real results.
Deploy Optimal Practices and Technology
Practices and technology: TPM, PM, CBM/PdM and Proactive, RCM / FMECA and RCA are deployed in
accordance with the improvement plan. Some, that may be present prior to the asset optimization
initiative, will be upgraded and improved, again in accordance with the plan. It is particularly important to
review the lubrication program to assure all aspects including lubricant selection, receipt, storage, issue
and disbursement are all up to standards, Chapter XV will be instructive. Electric motor analysis, Chapter
XVI, Thermography and ultrasonic monitoring are deployed / improved to address specific requirements.
Build the Organization
Many of the companies implementing asset optimization 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
crafts do not hesitate to perform cross-craft tasks on their homes or automobiles. The fact is that artificial
boundaries, applicable only at work, limit efficiency, which cannot be tolerated in todays climate. The
challenge is how to make this type of organization perform most effectively. A pay structure that
encourages qualification in different cross-functional skills can be used as an incentive.
CHECK MEASURE AND MANAGE RESULTS

As discussed in Chapter IX, metrics demonstrate compliance to objectives and real value in terms of
improved production effectiveness and profitability. Each improvement initiative must have one or more
key metrics (results and time) with which to measure performance. In addition to measuring performance
and results gained by the individual improvement initiative, metrics must fit in the cascade from corporate
profitability through operating and equipment effectiveness, to program and technical performance.
Although they may be at a fairly low level, essential improvement initiative metrics demonstrate
contribution 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.
For action plans that may extend over a relatively long period of time and involve preparatory steps such
as reorganization, training, improvement / insertion / deployment of practices or technology, leading
indicators, Chapter IX should be employed to assure prerequisites are being completed on schedule.
Performance to plan should be measured frequently, at least monthly. Most team leaders will make every
effort to get ahead of plan
IMPROVE IMPLEMENT CONTINUOUS IMPROVEMENT, IDENTIFY AND STRENGTHEN WEAKNESSES

Continuous improvement requires defined and agreed upon goals and objectives, performance
measures, and tracking. Continuous communication and training are essential. (30) The continuous
improvement aspect of the asset optimization program is not unlike the planning stage. But in this case
program results are reviewed and plans adjusted as necessary to maintain momentum and progress
toward objectives.
Using Pareto analyses to identify the root causes for deviations from objectives is equally
essential during an improvement process. It helps to locate deficiencies in the plan, identify
further opportunities for improvement, and serves as the basis for corrective action. (129)
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.
Establish and Maintain Full Commitment to Continuous Improvement
Nothing succeeds like success. Demonstrating real improvements and progress toward an important
objective creates enthusiasm, ownership and identification of additional opportunities for improvement. In
many cases people observing the enthusiasm and success developing in a pilot improvement project will
ask: When can I / we participate? When that happens the facility is on the road to real, sustainable
success!
Institutionalize Success Sustain Results, Maintain Ownership and Support
Almost anything can be accomplished on a temporary, one-time basis. The key to sustaining success with
an asset optimization program is to institutionalize the concept and process. The program is
institutionalized when there is no memory remaining of the old ineffective processes. Management,
champions, and team members can be promoted for outstanding results without diminishing program
results.
Results-based compensation that rewards compliance and results within the new scheme can be a key
factor in institutionalization.
Although full institutionalization may take as long as seven to ten years, the facility will be gaining solid
rewards from the program inception throughout!
A time line for a complete implementation through sustainability is illustrated in Figure 18.12.
Opportunity Assessment Mobilization Implementation Institutionalization

2 Months 4 Months 20 Months 34 Months
As Is
(Current Conditions Related to
Business Objectives)
Mission Statement Gap

(Requirements to Meet (As Is Compared to To Be)
Business Critical Objectives)
To Be Identify, Value and Prioritize

(Benckmark Performance for Improvement Opportunities
Business Objectives) (By Contribution to Business Objectives)
Formulate Work Elimination

Improvement Strategy (Reliability Improvement
(Results Oriented) Program)
Select Teams, Develop Detailed Select Practices,

Improvement Action Plans Methods, Technology
(Specific Results, Progressive Metrics)
Work and Materials Conduct Results

Process Optimization Oriented Training
(Maintenance Process)
Develop and Apply
Business Valuation
Business Model
Implement Team
Uptime and Cost Data Action Plans
Opportunity Ranking of
Systems / Equipment
Measure Results to
Metrics
Identify and Apply Establish AP Data Mine to Identify
Industry Benchmarks Index Baseline Specific Opportunities
Cost Excessive Cost
Apply Corrections,
Uptime Excessive Downtime Implement Control Plan
Program / Process Excessive WO's
Perform Continuous
Verify, Update, Install Insert Best Practices Improvement
Foundation Processes RCM
System/Equipment - FMEA
Apply Resources Six Sigma
Hierarchy
Organization TPM
Master Equipment List Conduct Periodic Program
People - operator assisted maintenance
P&ID Drawings
Technology
CMMS Planning and Scheduling Review
- job plans Verify Business Case
Materials, MRO Validate Benchmarks and Metrics
Obtain and Commission - BOM, critical spares Review Program and Results
Systems - kitting Confirm Performance to Objectives
Predictive Technologies PM Recommend Program Revisions
- vibration PdM (CBM) Conduct Coaching for Success
- fluid (lube oil) analysis Proactive Failure Avoidance Introduce and Implement New
- Thermography Reliability Driven Life Extension Practice and Technology
- others RCFA
Deploy Subject Matter Experts
Program Lead
Reliability
Planning & Scheduling
Materials MRO
Contracts
3/09/04
Figure 18.12 Time Line for Asset Optimization Program Implementation

XIX. ESTABLISHING A SUCCESSFUL ASSET MANAGEMENT PROGRAM

AT A GLOBAL PHARMACEUTICAL COMPANY
The following is based on a paper presented at the Maintenance and Reliability Technology
Summit (MARTS) 2004.(128) Any variations from the original are the sole responsibility of John
Mitchell who transcribed the material from the conference proceedings.
Your system is perfectly designed to give you the results that you get.
W. Edwards Deming
OBJECTIVE
Implement an Asset Management process across all sites that will maximize the availability of
facilities and equipment utilizing optimal resources.
For the purposes of the program, Asset Management is defined as follows:
A systematic prioritization and implementation of processes, practices and technical
improvements to ensure full compliance with safety, availability, performance, and quality
requirements at the least sustainable cost for operating, market and business conditions
The Necessity for Asset Management
From our perspective there are four primary elements driving the necessity for Asset Management:
1. Maximize customer satisfaction: optimize system reliability and equipment availability
2. Assure quality products
3. Optimize lifecycle costs:
Equipment life
Performance / efficiency
4. Reduce maintenance costs by optimizing:
Equipment reliability to reduce the need for and cost of maintenance
Preventive and Condition Based Maintenance to assure the correct tasks are accomplished
at optimum intervals
Employment of personnel and material resources through accurate forecasting of
maintenance requirements
The Asset Management Program:
The Center of Excellence (COE) team was created in 1998. The team created a strategic map to identify
all components that must be addressed to develop a successful Asset Management program, Figure
19.1, next page.
A Maintenance Model Team (MMT) was created during 1990 2000. The mission of the MMT was stated
as follows:
Develop a maintenance model that provides our customers with cost effective, high quality, value
added customer service that supports their business drivers.
The MMT identified eight focus areas:
1. Customer service (meeting all business drivers)
2. Work process
3. Performance tracking metrics
4. Maintenance standards including RCM
5. Organization
6. Systems (CMMS)
7. Training
8. Supplier management
Establishing an Asset Management Program at a Global Pharmaceutical Company 340
Customer Service
Metrics &
Security
Benchmarks
Administrative Materials &

Services Supplies
Facility Systems
Energy / Utilities
Support
Building
General Services
Maintenance
Food Services Production

Maintenance
Contract
Management
Figure 19.1 Asset Management Program Elements

Outside expertise was employed early in the program to educate both maintenance management and
maintenance staffs in areas to be addressed by the program. The following individuals contributed to the
effort:
Mark Galley
Bill Keeter
John Mitchell
Doc Palmer
The maintenance model constructed to meet program objectives has six key elements all centered on
the customer, Figure 19.2:
Asset Care
Customer
Ex
W cuti
O
e
or on
MR
Customer
Pe Tra
du &
g
rfo ck
he ing
lin
rm ing
Sc ann
an
Care
Pl
ce
Organization
of Resources
Figure 19.2 Elements of Maintenance
Customer Care: entails looking at absolutely everything we do from the viewpoint of the customers to
assure their objectives are fully met. Requirements include:
Procedural/Process Cultural
Centralized call center Customer feedback and communication
Customer choice for submission of Building or process managers as
service requests customer advocates
Managing resources Aggressive maintenance / operations /
business partnership
Asset Care: An aggressive program of caring for company assets was defined to prevent failures, which
disrupt our customers productivity. The program includes:
Asset indexing Asset care as a priority
Preventive & Predictive Maintenance Failure Analysis (RCA)
RCM program Life-cycle planning
Systematic processing of assets
A detailed process flow map for Asset Care was developed.

One region organized an Asset Care Department in 2001 to formulate an optimum strategy for all their
physical assets. The region consists of eight sites. Each site includes:
Research buildings
Office buildings
Pilot plants
Utility plants
Data centers
Global Facilities and Engineering Management Organization

A Global Facilities and Engineering Management organization was established in 2004 covering North
America, Puerto Rico and Europe. The vision and mission statements for Global Facilities and
Engineering Management are:
Vision: To create a high performing, integrated Facilities and Engineering network that delivers
optimal value to stockholders, competitive advantage, customer satisfaction and models the One
Company culture.
Mission: In support of the One Company culture, the Global Facilities and Engineering effort will
achieve sustainable process, performance and productivity improvement by focusing on
specifications and standards, aligning facilities efforts, rationalizing service levels and leveraging
economies of scale.
Key goals of the Global Facilities and Engineering Management organization are:
Reduce facilities costs through the elimination of unnecessary redundancies, continuous process
improvement and global leveraging of improvement opportunities
Develop a One Facilities operating model and culture in support of the One Company strategy
and culture
Develop a consistent approach to our investment in, and management of, facilities across our
businesses and globe
Increase the productivity of our customers by increasing the reliability of the services provided
thereby maintaining and enhancing customers satisfaction.
Planning & Scheduling: is a systematic method of optimizing the use of company and contact
resources, integrating requests for work from numerous sources (PM, PdM, Work Orders, etc.) and
focusing these resources to furnish the optimal value-add for our customers productivity. Essential
areas of the process include:
Dedicated planners Adhering to planned work
Master planning schedule Customer focused teamwork between
Planning & Scheduling and work
execution
Identification, kitting, skidding and Expecting excellence in Planning and
scheduling of all materials Scheduling.
Managing resources
Work Execution: is the key customer interface within the maintenance model. A key objective of the
process is to enable those who do the work to shine before the customer with performance and results
leaving a highly positive impression. This process includes:
Thoroughly planned jobs, leading to Customer focus and response
most effective accomplishment
Jobs completed in a safe, high quality, Excellent communications and
expeditious fashion; job site left cleaner cooperation between maintenance and
than before the work with equipment / production
system performing better
Radio dispatch Do-it-now teams
MRO Stores: is an outsourced activity for most operations in our industry. Because of its criticality in the
delivery of best-in-class service to the customer, the interface of MRO to each of the processes must be
firmly established and performance expectations clearly understood. This includes:
Establishing clearly defined performance metrics
Imbedding performance requirements into outsource contracts
Electronic interfaces between requirements and supplier
Maximum use of consignment inventory
Focus on maximizing maintenance productivity
Open stockrooms
Organization of Resources: requires designing the optimal organization structure to support the Asset
Management processes, enhance customer results, productivity and satisfaction. This process impacts:
Levels and spans of control Customer as the driver of the organization
Centralized, decentralized or regional Empowered crafts people
organization
Functional vs. Process vs. Asset based Transitions of supervisor and manager
organization roles from command to coach.
Performance Tracking: uses cascading metrics (level 1, 2, 3), that are aligned to maximize efficiency,
assure attainment of a satisfying customer experience, improve customer productivity, and maintain
acceptable risk. Key Performance Indicators (KPIs) are structured to build ownership at the operator /
mechanic level with linkage at every level upward to demonstrate business results. Automatic generation
within the CMMS is highly desirable essential for greatest effectiveness.
ASSET MANAGEMENT STRATEGY

The asset management strategy was constructed on three principles:
1. Maximize reliability of critical systems while minimizing life cycle costs
2. Improve reliability and reduce preventable maintenance activities
3. Methodical problem analysis and ongoing optimization of maintenance requirements, including
time based PM and PdM activities and frequencies
The big question to ask is Do we manage the process or does the process manage us? Our conclusion
was that Asset Management provides the tools to enable us to manage the process.
Maintenance
Maintenance was divided into three categories for the purposes of increasing effectiveness within the
Asset Management program. Characteristics of each are:
Reactive Maintenance:
Unplanned work
Emergencies and perceived emergencies
Breakdowns, run-to-failure (RTF).
Preventive Maintenance:
Planned inspections and replacement on a time basis
More effective, greater percentage of planned work
Reduce surprises, failures, emergencies
Time based intrusive inspections and replacements are costly and can hazard equipment in
otherwise good condition
Predictive / Condition Based Maintenance
Since maintenance is accomplished on need, Predictive / Condition Based Maintenance is proven the
most effective. It provides earliest warning of an impending problem thereby minimizing failures and
emergencies.
The steps required to establish an effective Predictive Maintenance program include:
Identify critical (highest risk) equipment
Review equipment specific surveillance procedures
Develop standardized PdM tasks and frequencies (intervals) utilizing templates, FMEA
Establish optimal equipment trending and predictive condition monitoring programs utilizing the
following:
Vibration Analysis - Infrared Analysis
Ultrasonic Analysis - Oil Analysis
Statistical Analysis - Laser Alignment
Machine Balance - Motor Circuit/Current
Review current work process, insert PdM tasks
Document equipment history
The PdM process requires the following core competencies:
High Technology
Vibration analysis
Infrared analysis
Motor Circuit / Current Analysis
Laser Alignment
Lower Technology
Oil Analysis (sampling)
Ultrasonic Analysis (passive, leak detection)
Steam Trap Testing
Within maintenance the Asset Management strategy breaks down into six areas:
1. Planning and Scheduling
Planning
Scheduling
2. Work management and execution
Work Management System, CMMS
3. MRO Stores
4. Metrics / KPIs
5. Cause Mapping (RCA)
6. Failure Mode and Effects Analysis (FMEA, from RCM)
A results oriented objective for Planning and Scheduling was adopted for the Asset Management
program:
Increase our Effectiveness Through Optimal Resource Allocation
The definition of Planning and Scheduling cited in the Allied Reliability Work Execution document was
utilized to develop the Asset Management program improvements, Figure 19.3.
Predictive and Preventive work

80% of total Equipment
Reliability
PM 15%, PdM 45% Improvement
Job Plan
Planning Improvement
Requested Work
10% of total work Scheduling
Weekly Schedule
Daily Coordination
Job kits
Craftsmen
Feedback
Work Performed
Work Quality Checks
Figure 19.3 Planning and Scheduling Process

Duties of the Planner that were optimized to maximize effectiveness include:
Reviews work requests and develops manpower requirements
Determines parts requirements and places orders
Obtains required approvals
Develops accurate bill of materials to ensure quick and accurate parts lists
Duties of the Scheduler that were optimized to maximize effectiveness include:
Develops accurate schedules
Communicates weekly and daily schedules
Communicates with customers and work execution
Confirms availability of required parts
Based on published reports, improving the Planning and Scheduling process can produce productivity
improvements of up to 60%. That improvement in productivity would allow shifting 10 percent of our
workforce to Capital Projects for a profit gain of $1.5 million.
Some elements to achieve the objective include:
Appropriate Manpower to Planner ratio, 20 to 1 (rule of thumb)
Planners able to focus on planning and scheduling as sole function
Planners focus on future work and separated from day to day operation
Operations managers intimately involved with the prioritization of work orders
Planners have the time necessary for communication between the customer, craftsmen and
customer care
Focus on achieving scheduled work
Work Order Prioritization

The following prioritization is utilized for Work Orders:
Emergency:< 30 minute response
Urgent: < 2 working days response
Priority: < 5 working days response
Normal: >1 week from request date, for Planning and Scheduling purposes
Shutdown: Accomplish during shutdown
A key objective of the Asset Management program is to increase reliability and predictability so that most
work shifts to priority 4 and thereby allows full Planning and Scheduling.
Work Management and Execution

Work execution is the key customer interface within the maintenance teams. It creates the optimum
balance between efficiency and effectiveness defined as follows:
Efficiency: Performing a given task well (task oriented)
Effectiveness: Performing the correct task efficiently (results oriented)
Some work management areas requiring emphasis to maximize effectiveness within the Asset
Management program include:
Customer focus
Jobs thoroughly planned
Trained mechanics
Empowerment of mechanics
Call centers and radio dispatch
Do-it-now teams
Job Plan Templates

Complete, written job plans are essential to gain maximum work effectiveness. Formalized templates
containing a detailed listing of work, including full job steps for repairs and PM are an effective and easily
expandable method to gain standardized, consistent quality. In addition, templates provide an ideal basis
for training and quality audits. To date, a standard library has been created with a total of 245 templates.
The templates are easily searched and copied for application and modification to specific equipment.
Each Job Plan Template contains all requirements and detailed instructions for:
Lock out, tag out
PPE
Work permits
System isolation and line-up
Any evacuation, draining, cleaning required
Detailed job plans, including parts and tools
Restoration to service
Historical information to be recorded upon completion of work including conditions as found, as
left
Work Management System, CMMS:
Areas within the CMMS that had to be optimized to fulfill the objectives of the Asset Management program
included:
Work order management
Planning and Scheduling tool
Data Management cost and repair history
Purchasing and Stores Management
Document control (status)
Proper allocation of personnel and resources
Over the past two years the CMMS has accommodated the following:
Equipment 35,453
Work Orders 135,459
PMs 20,409
Job Plans 4,109
GMP Items 13,945
Inventory Items 7,964
Labor IDs 3,394
Materials MRO / Stores:

Functions within MRO Stores include:
Manage parts and supplies inventory
Maintain critical spare parts inventory
Frequently used parts
High value, long lead critical spares
Consumable supplies
Document costs and usage
At the beginning of the Asset Management initiative maintenance stockrooms were found to have the
following general characteristics:
The stockrooms were inadequate
Stockrooms did not have sufficient inventory
Inventory mix was inappropriate
Item descriptions were incomplete
Inventory locations were inaccurate
Inventory management was very poor
The following improvements were made during the Asset Management program:
All stockrooms in one region were placed under one management
Integrated supplier managing the stockroom was replaced
Stockrooms were improved
All 26,000 items were checked
The inventory was cleaned up
Descriptions improved
Items were matched to a location
High value and specialty items were placed in a restricted area
Instituted weekly cycle counts
Stocking and issuing procedures were implemented
Critical spares were identified and linked to critical equipment
Max and min levels established for every item in stock
Performance tracking metrics put in place
Stockrooms reorganized for better flow
All 26,000 stock items will be transferred to and issued from the CMMS
Stockrooms and improved stockroom effectiveness make the following contribution to the Asset
Management program:
Planners immediately able to identify parts on hand to meet job requirements
Reduction in ordering parts that are in stock, reduction in expediting costs
Reduction in stocked inventory achieved by:
Increased reliability, fewer emergencies, reduced necessity to maintain a high level of emergency
stock
Max and min levels set in a logical way based on risk analysis
Stock room optimization
To date there have been four additional accomplishments toward improved stockroom effectiveness:
Reorganized four sites
Conducted Bar Code pilot
Spares consolidation 2,800 items valued at over $1 million
Inventory catalogs at all sites, prepackaged parts kits at two sites (trial)
Savings gained includes:

Reduction in overhead charge at sales: $75k
Teaming with Planner Scheduler to reduce expedited orders: $200k
Standardization of light bulbs: $60k
Elimination of P-Card: $120k
Metrics/KPIs:
Factors to consider selecting metrics and KPIs include:
Individual and department goals matched to corporate objectives
Indicators to measure performance at all levels of the organization within span of control
Metrics linked bottom to top and contribute to performance at next level up
What gets measured gets done

Cause mapping, Root Cause Analysis (RCA):
Root Cause Analysis is a formalized post failure analysis designed to identify specific defect(s) that
caused failure so that it / they can be eliminated. Root Cause Analysis directs attention to improving
reliability, failure prevention and reducing requirements for maintenance the key elements of gaining
greatest asset and cost effectiveness. Thus, RCA is an essential component of Asset Management that
contributes greatly to success.
Failure Mode and Effects Analysis (FMEA):
Failure Mode and Effects Analysis is a systematic pre failure process to identify, prioritize and develop
failure avoiding reliability strategies. The process defines a system, its function, failure modes and the
failure avoidance strategy in the following nine steps (actual illustration):
1. System description (lab air compressor)
2. System function (provides compressed air to lab)
3. Functional failure (failure to meet demand)
4. Failure mode (leaking piping)
5. Failure cause (loose connection)
6. Failure effects (lost research)
7. Probability of failure (once every 2 years)
8. Criticality of failure (ranking system A1 very serious)
9. Preventive / corrective measures (Preventive / Predictive Maintenance, including periodic
walkaround inspections / job plan)
ADDITIONAL ELEMENTS AND TECHNOLOGIES

A successful Asset Management program requires consideration of many elements plus deployment of
technologies that will contribute to the overall objective. Additional elements and Technologies that
havent been discussed include:
Total Productive Maintenance
Craft skills enhancement
Life Cycle Costing
Total Asset Care
Proactive Maintenance is defined as improvements accomplished to increase lifetime and reduce
requirements for maintenance. It is a key element of Asset Management. Some elements that must be
considered when applying Proactive Maintenance include:
Emphasis on reliability improvement
Identify preventable maintenance approach
Align engineering and maintenance goals
Perform CMMS data analysis to identify equipment and systems with problems
Conduct Root Cause Analysis; assure lessons / improvements are applied on the specific and
similar equipment
Accomplish reliability improvements at commissioning / re-commissioning
Focus on maximizing planned maintenance by improving reliability, minimizing variation
Total Productive Maintenance
The concepts of Total Productive Maintenance address institutional culture, organization, teamwork,
ownership and values. These concepts are exceptionally valuable within an Asset Management program
with the following benefits:
Prevention at source culture
Partnership between maintenance and operations
Clean, orderly workplace
Commitment to quality
Sense of ownership by the plant and equipment operators, maintainers and support staff
Craft Skills Enhancement

A successful Asset Management program depends on awareness, initiative, ownership and commitment
to quality at the craft levels. In order to gain the skills necessary to realize full effectiveness from
empowered mechanics, craft skills had to be extended and improved. The following areas were
incorporated into the training program:
Root Cause Analysis (RCA) cause mapping; overall awareness and benefits to promote craft
participation (facilitation for process leaders)
Failure Mode and Effects Analysis
Lubrication
Bearing, belts, sheaves; installation / repairs
Laser shaft / sheave alignment
Pump reliability
Introduction to vibration analysis
Vibration certification level I
IR/Thermography certification level I
Motor circuit/current analysis
Steam trap testing (Trapman)
Ultrasonic testing certification level I
Job plan writing (primarily planners)
CMMS system
Life Cycle Costing

Life cycle costing is designed to maximize the useful life of our assets and optimize maintenance costs.
Asset lifetime strategies are designed for optimum performance, including safety and environmental
throughout lifetime including:
Design
Procurement
Installation / Commissioning
Safety, Environmental
Operation
Organization
Reliability (availability)
Efficiency
Maintenance (including work practices)
Total Asset Care

The concept of Total Asset Care is an important requirement that must be institutionalized to gain a
successful Asset Management program. All levels in the organization from senior executives to crafts
must be engaged, involved and reach the level of excellence necessary to achieve program objectives.
Within the Asset Management program an Asset Care Department was formed with a 5 year
implementation plan, Figure 19.4.
Ass
e t Re
gist
Plant Inventory ry
2001
Improve Web Access
2002
CMMS Integration
CMMS 2003
Pilot CMMS
Conversion to Documentation
2001
2004
Implement Initial CMMS
2002 CMMS Validation
2003
Links to Supporting Systems

2005 Reliability
port
Asset Sup Centralize MRO Stockrooms
Scrub MRO Inventory 2004
Computer Based Inventory 2003
Upgrade Stockrooms 2002
2001 Fine Tune RCM Strategy
2005
Implement Motor Circuit Testing,
Transformer Fluid Analysis,
RCM Reliability Engineering
2004
RCM Site Studies, Asset Health Reports,
Cause Mapping and Commissioning
2003
Train RCM Technicians,
Implement Vibration and Oil Analysis
2002
Figure 19.4 Asset Care Five Year Implementation Plan
The essential nature of Asset Care was illustrated by a decision to defer some PMs on twelve pieces of
equipment. One year of deferred PMs generated $3,100 savings and cost $34,000 in repair labor, a
cost penalty of over ten fold!
This concept is illustrated in Figure 19.5 showing an actual example of the impact of deferred action.
Misalignment detected
by vibration analysis Realignment should have been
planned & scheduled
Bearings damaged
due to misalignment Bearings should have been
scheduled and replaced
Other components
Proactive identified as failed
Cost to align
$650.00
Predictive
Cost to replace bearing and align Catastrophic failure
$2920.00
Reactive
Costs:
Replace bearing
Repair collateral damage
Realign
Downtime
Emergency OT
Expediting parts
$13,345.00
Figure 19.5 Cost Impact of Deferred Action

RELIABILITY CENTERED MAINTENANCE

RCM determines the optimum mix of reactive, preventive, predictive and proactive maintenance practices
for equipment under its operating conditions. The maintenance strategies are integrated to take
advantage of their respective strengths in order to maximize the efficiency of facility equipment while
minimizing life cycle costs.
Some of the key benefits of RCM are:
Safety enhanced
Uptime increased
Production throughout increased
Asset life extended
Maintenance needs accurately forecasted; predictable performance, reduced variation
Unplanned work reduced
Maintenance costs optimized
Spare parts inventory reduced
Energy costs reduced
Customers satisfied
An RCM program was implemented at one site. The goal was to find a systematic and structured
approach (FMEA) to identify an optimum maintenance and reliability strategy. The RCM program
incorporated procedures based on:
Classical RCM Nowlan and Heap
Abbreviated RCM Anthony Smith and Jack Nicholas
SAE JP 1011 and SAE JP 1012
The RCM process consisted of the following steps:

Perform a systems criticality assessment
Identify all critical and non-critical equipment
Analyze failure modes, mitigating activities, FMEA in a criticality prioritized order
Develop detailed PM job plans and intervals
Develop specific PdM procedures
Establish equipment monitoring routes
Implement the new PM / PdM procedures
Baseline all critical equipment
Train crafts on the new PM / PdM procedures
Implement a monthly Asset Health Report
A standard application was developed to discipline the process with the following fields:
System Description
System Function
System inputs / outputs
Functional Failures
Failure Modes
Failure Causes
Failure Effects (FMEA Risk Matrix)
Criticality Rating
PM Measures
Preventive / Predictive Maintenance Implementation

A standard form was developed to specify PM / PdM requirements to assure consistency and maximum
effectiveness, Figure 19.6.
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Figure 19.6 PM / PdM Standards
Following are some statistics describing the FMEA process for critical systems:
Systems analyzed: 580
Safety / Environmental Critical Systems 115
Economically Critical Systems 360
Maintenance critical systems 105
The resulting RCM Equipment Database required 36 weeks to complete and produced over 25,000 new
data points. The equipment list went from 3,442 in the old CMMS to 6,469 in a new CMMS. Six hundred
new detailed job plans were added. Predictive Maintenance is now performed on 1,119 pieces of critical
equipment.
With a more systematic approach to maintenance the existing upward trend in costs should be
controllable as illustrated in Figure 19.7.
Existing Trend of Maintenance Spending

Maintenance Costs $$s
RCM Implementation Costs
Where Maintenance Costs Should Be
Figure 19.7 Financial Benefits of RCM

Benefits of the FMEA process include:
Clean up of existing CMMS Equipment Database
Develop an extensive parent / child equipment database
Focus resources and attention on the highest rated equipment
Capture maintenance and engineering institutional knowledge
Provide training to less knowledgeable personnel
Identify and eliminate unnecessary maintenance
Increase customer satisfaction
PERFORMANCE METRICS AND REPORTS

Metrics
Metrics are an essential tool for improvement and greatly assist in directing attention and priorities within
the Asset Management program. Metrics must be developed by level and category to demonstrate
benefits and value of the program, including progress during implementation.
For greatest effectiveness, metric collection and reporting must be fully automated. In order for metrics to
be accurate and remain consistent within automated reports, certain fields in the CMMS must be filled out
correctly.
Metrics by Categories
Metrics are classified in eight categories:
1. Safety / EHS / Energy
2. Customer satisfaction
3. Maintenance
4. Planning and Scheduling
5. MRO
6. RCM
7. Training
8. Financial
Considerations
Metrics must connect to and demonstrate value contribution organizational objectives
The path must work down from financial to EHS, equipment and program effectiveness and
customer satisfaction
All key processes should have at least one or more key metrics (KPIs) with identified goals
Each key process should have a process owner to shape the direction of the metric
Good metrics focus activity on maximum benefits and value added (Reward for results)
Processing of metrics must be automated as much as possible utilizing CMMS data collection
and reporting capabilities
Metrics should be limited in quantity to what can be processed with the current workforce and will
provide benefits.
Maintenance and Operations potential metrics are tabulated in Figure 19.8.
MRO Planning & Scheduling Maintenance RCM

(Man hours) Work Orders/PM's
(Man Hours)
Level 2 Level 2 Level 2 Level 2

Inventory turnover Schedule compliance (scheduled vs. Work Order priorities Ratio of reactive/corrective manhours
(rolling 12 months) completed) vs. PM/PdM Corrective manhours
One time buys ($ per month) PM compliance
Benchtop buys ($'s per month)
Level 3 Level 3 Level 3 Level 3

Stock availability Actual hours vs. planned hours Overtime by craft Number of critical equipment failures
Inventory accuracy Schedule breakers Available hours vs. actual hours Equipment in alarm
posted in CMMS
Order returns Schedule compliance Customer request vs. Facility Equipment in caution
generated (by priority level)
Shipping costs (rush orders) WO backlog Manpower vs. backlog tracking Total equipment failures
One time buys (stock Total number of hot/cold calls Number of WO's generated from
recommendations) PdM
Source of materials request (Planner) Number of WO's generated from PM
Number of material requests linked to

WO's
Need by date compliance
Rush orders vs. regular orders
Safety Customer Satisfaction Training Financial

EHS Work Order Survey Technical
Customer Assessments Leadership Development
Expo Surveys Customer Service/Cultural
OSHA reported Customer call back WO's Hours training per employee M&O cost
Safety and Environmental incidents Quality customer service Energy/Utilities per unit
Materials cost per unit

Hours tracked per category with
established goals
Include representative from EHS Include representative from Include representative from Human
Customer Care Resources
Figure 19.8 Proposed Metrics

Metrics Review by Level
Tier Review By: Description / Examples
Level 1 Senior Management EHS, Customer satisfaction and financials
Schedule compliance, PM Compliance, Reactive Corrective vs.
Level 2 Program leadership
PM/PD Corrective
Available hours, Customer Generated, Overtime by craft, Inventory
Level 3 WE, Frontline, Site Specific
accuracy, Training schedules, etc.
Reports
Reports are prepared and submitted at regular intervals to identify asset condition, measure performance,
demonstrate and publicize program benefits in a summary form. Specific benefits of the reports include:
Keeps track of problem equipment
Builds equipment history
Tracks Preventive and Predictive work
Promotes program results
Reports are designed to demonstrate:
Improved safety record
Increased availability and decreased downtime
As Asset Management takes root in the culture of the facility, equipment availability increases
along with reliability
Reduction in maintenance costs labor hours, parts, eliminating unnecessary PMs and
minimizing failures
Reduction in breakdown costs Proactive instead of Reactive
Improved customer service
Reduction in spare parts inventory
Decrease in environmental resources
Certain fields in the CMMS must be filled out for the metrics to calculate correctly and remain consistent.
A note is provided at the end of each report explaining exactly what is measured.
Asset Health Report
A typical Monthly Asset Health Report is shown in Figure 19.9:
Date PLANT MONTHLY ASSET HEALTH REPORT

TECHNOLOGY RECOMMENDATION
EQ TIME IN
EQUIPMENT VIB UE AIR PDM RECORDED RECOMMENDED ACTION WO #
STATUS MONTHS
BLD 17
EF7 EXHAUST FAN ALARM X SHEAVE MISALIGNMENT PM INSPECT BELTS / ALIGN 80266 2
EF6 EXHAUST FAN CAUTION X DRIVE BELTS TRENDING 2
EF5 EXHAUST FAN CAUTION X DRIVE BELTS INSPECT BELTS / ALIGN SHEAVES 80265 2
EF3A EXHAUST FAN ALARM X DRIVE BELTS CHECK FOR SLIPPAGE 80262 1
ACS 5 AIR HANDLER CAUTION X DRIVE BELTS TRENDING 2
Bldg 17 MR ALARM X COMPRESSED AIR CORRECT AIR LEAK AT RELIEF VALVE 86911 2
Figure 19.9 Monthly Asset Health Report
Vibration Predictive Program Report

A similar report for the vibration predictive program is submitted monthly, Figure 19.10:
Figure 19.10 Monthly Vibration Predictive Report

Managers Report
The Managers Report includes five different reports in one concise format:
1. Backlog Summary
Ten oldest Work Orders
Average Days to Completion
2. Work Order Compliance (based on priority windows)
Estimated vs. Actual Hours
Cancelled Work
3. PM Compliance; goal is 95% completion
PMs Completed
PMs Incomplete
4. Reactive vs. Proactive Work Orders
Corrective Work Orders
PM/PD, CM Generated Work Orders
5. Two RCM Reports
Corrective maintenance from a PM/PdM origin vs. all Corrective Maintenance
Corrective maintenance from a PM/PdM origin vs. all Preventive and Predictive Maintenance
The Work Order Compliance section of the Managers report is shown in Figure 19.11:
Figure 19.11 Managers Metric Report Work Order Compliance

Two reports show compliance to principal reliability and work optimizing metrics, Figures 19.12 and 19.13.
Figure 19.12 Corrective Compared to PM/PdM Generated Work Orders
Figure 19.13 PMs Completed goal is 95% completion
Backlog Report
The backlog report displays all Work Orders that do not have a status of CANCELLED, CLOSED or
COMPLETE. All Work Order types are included (Preventive Maintenance, Customer requests, Corrective
Maintenance)
There is no need for data prompts on the report as the backlog should always contain all open
Work Orders in the system.
A Complete summary is provided at the end of the backlog report including:
Backlog Man Hours (time required to complete all Work Orders on the backlog)
Count of PM vs. non PM work
Number of future PMs included in the backlog (due to lead times).
Breakdown of how long the work orders have been in the system. (number of work orders in the
system less than 30 days, less than 60 days, etc.)
MRO Metrics and Reports
The following eight metrics are used to track and evaluate the activity and effectiveness of the stockroom
and assess the ability of meeting needs of the customer:
1. One time buys
2. Re stocked items
3. Inventory turns
4. Stockouts
5. On time delivery
6. Inactive items
7. Orders placed by Planner
8. Number of transactions with Work Order numbers
Stock purchases and inactive inventory are reported graphically, Figure 19.14 and 19.15:
Figure 19.14 Stock Purchases by Location
Figure 19.15 Inactive Inventory
REQUIREMENTS TO REACH NEXT LEVEL OF PERFORMANCE

Five areas have been defined that require additional effort to gain full effectiveness from the Asset
Management program:
1. Develop:
Training program
Distribution plan
2. Expand the metric program
3. Track life cycle costs
4. Conduct external benchmarking
5. Review emergency work, identify and recommend ways to eliminate or minimize emergencies
The use of handheld PDTs is being considered to minimize the necessity for paper records. Handhelds
offer the following advantages:
Ease of use
Paperless work orders
Capture all work
Accurate reporting of work
Accurate reporting of failure cause and components affected
Less training required
Improved productivity
Feeling of ownership by technicians
Conducting rounds
Accurate collection of readings from multiple equipment
Readings are entered directly into the device
Previous readings can be viewed from the history tab
Details about the points can be viewed
Visual observations can be entered
RESULTS TO DATE (2004)

Cost Avoidance / Cost Savings
Specific examples of cost savings
Damper actuator, cause mapping, $10,392/year
Motor misalignment, Laser alignment, $3,400/year
PM Optimization, One site, $305,000/year
Helium leak, Ultrasonics, $24,725/year
Generator oil analysis, Oil Analysis, $3,200/year
Vacuum pump leak, Ultrasonics, $2,260/year
Circuit breaker, IR Electrical, $25,000
Reduction in failed steam traps, Steam trap survey, 2001: 19.14%, 2003: 8.2%, 2004: 4.38%,
reduction of $127,000
Skill Enhancement Craft Training
The following have been completed to date (2004):
Cause mapping (240 trained and 20 facilitators certified)
Laser Shaft / Sheave Alignment (40 trained, 12 certified)
Steam trap testing (6 trained, 2 certified)
Ultrasonic testing I (50 trained, 19 certified, train the trainer)
IR / Thermography (12 certified)
Motor current / circuit (10 certified)
Introduction to Vibration Analysis ( 12 trained)
Vibration I (8 trained, 3 certified)
Job Plan Writing (10 trained and 10 future)
Failure Mode and Effects Analysis / FMEA (9 trained)
Pump Reliability (40 certified)
Future plans are for additional technical training including: bearings, belts, sheaves and lubrication.
Failure Analysis Cause Mapping

Thus far 37 RCA Cause Maps have been completed at one site detailing:
Safety issues
Mission Issues
Equipment failures
Miscellaneous Items
Standards, Specifications and Contracts

A team is developing company standards in the following areas:
Vibration
Oil Analysis
Alignment
Balancing
Motor repair
Cause mapping Maintenance Standard Operating Procedure (SOP)
Switchgear Testing Maintenance SOP
Commissioning Engineering specification
Similarly, engineering specifications for commissioning, testing and balancing are being developed in the
following areas:
Alignment tolerances
Soft foot tolerances
Balance
Bearing temperatures
Pipe strain tolerances
Future: grouting, belt tensioning, etc.
Regional standardization will maximize effectiveness, assure consistency, facilitate the interchangeability
of people and maximize the applicability of internal best practices. Regional standards and regional /
national / global contracts are being developed for PdM in the following areas:
Hardware
Software
Services
Training
The Reliability Team is / will be involved in the following:
Engineering commissioning / acceptance testing
CMMS new equipment, job plan edits, maintenance strategy failure analysis
Work Flow Planning and Scheduling
MRO BOM, spare parts optimization
Cause Mapping Internal and External
Communication / Documentation Web Site
A desktop knowledge portal provides access into the companys reliability system. The portal includes the
following:
Facility folders containing all information pertaining to the specific facility
Charters
Whats new
Links
Content manager
In closing, the ultimate goal is to perform the right tasks, on the right components, at the right time by
having the right mix of preventive and predictive maintenance tasks.
XX. PHYSICAL ASSET OPTIMIZATION FOR CAPITAL PROJECTS
Contributed and copyrighted by:

Robert J. Motylenski, P.E.
Used with permission
Since the objective of Physical Asset Optimization is to obtain the greatest lifetime value from a
company's assets, it follows that a similar approach needs to be applied to capital projects to ensure they
will startup unimpeded, operate efficiently, and meet business objectives. By implementing an asset
optimization program during the planning, design, and engineering phases of a project, the new facilities
will achieve the levels of availability, reliability, and maintainability needed to achieve economic success.
Thus, an asset optimization program for capital projects that will potentially avoid major corrective activity
in the future is just as important, if not more so, as managing the assets of existing facilities.
With an eye towards increasing overall profitability, most major process companies have concentrated on
reducing operating costs during the past years, while either sustaining or improving process availability.
The operating cost most likely to be reduced was maintenance. In some plants, this was done using asset
optimization, while in others management took the quick-fix route by eliminating people and
indiscriminately reducing maintenance work. The more successful and sustaining efforts involve
developing systematic approaches for defining what maintenance work needs to be done and how to
perform it effectively. To ensure that these efforts are not jeopardized and future profitability does not
suffer with the addition of new facilities or equipment plants need to implement a program for Projects that
parallels asset optimization. Today, there is more pressure for new facilities to startup unimpeded and
operate with lower maintenance cost and limited manpower. By applying the principles of
asset optimization to expansion projects, a negative impact on existing plant availability and maintenance
cost can be averted. Similarly, when grassroots facilities are built, the design process must ensure that
the expected plant availability will be achieved and maintenance cost will be within expectations.
This chapter describes a work process that includes elements of an asset optimization program and
ensures reliability and maintenance is considered during all phases of project development. The process
can be applied to grassroots facilities and plant upgrades.
The process consists of five major activities, starting at the screening stage and ending with plant
commissioning. Most of the activities are similar to those for asset optimization, and make common
sense. However, a commitment of skilled resources is necessary for the process to be effective and
efficiently performed. In today's tight resource pool this can be a problem, so management commitment is
required to staff the activities. Also, checklists should be used to ensure a consistent work process and
assist less experienced participants.
BUILDING RELIABILITY AND MAINTENANCE EXPECTATIONS INTO PROJECTS

The main reason reliability and maintenance (R&M) must be considered during project development is to
ensure that the new facilities do not jeopardize the profitability gains already achieved from the application
of asset optimization principles and systematic improvements to plant maintenance and reliability. Also, to
stay competitive, companies need to ensure that new facilities will operate reliably and with low
maintenance costs.
A number of activities are underway by different organizations to ensure reliability and maintenance is
being considered during capital project development. Industry leaders use Independent Project Analysis
(IPA) to assess project performance and one of their indicators is plant reliability post start-up. Reliability
and maintenance programs, including maintainability checklists, are now used by most engineering
contractors. Professional organizations have also developed programs for assessing the implementation
of R&M principles to projects. However, these are generalized activities and usually do not cover specific
requirements or the needs of individual owners. Owners need to have their programs and check lists to
ensure their specific requirements and situations are adequately covered. To avoid a non-optimum
approach to applying R&M technology to projects, each company needs to develop and implement their
own program based on asset optimization principles.
Asset Optimization for Capital Projects 362
One objective of the work process is to ensure that the inherent reliability imparted to the design is
compatible with that needed to achieve the business objectives. This needs to be accomplished at
minimum investment cost and without jeopardizing future plant availability. A second objective is to ensure
the plants future maintenance cost and resourcing will remain competitive by including equipment
maintainability in the work process. Another driving force for implementing the R&M work process is that
many companies are using front-end loading for projects, which necessitates that R&M be emphasized
early in project development.
A generally expressed concern is that by focusing on R&M during project development, project cost will
escalate, engineering time will lengthen, valuable resources will be diverted from other activities, and
equipment will be gold-plated. That is not true if the process is implemented in a timely fashion with the
right resources, and the project business objectives are the basis for decision-making. The balancing of
capital investment, business objectives, and operating costs is an important consideration. The process
will result in the facility having an overall life cycle cost less than a similar facility designed and
constructed without R&M principles being applied. Earlier involvement of R&M specialists will be required,
as well as, possibly, additional engineering effort, but the improved profitability will more than offset the
additional front-end cost.
The following are three examples where the up-front additional engineering emphasis on reliability and
maintenance resulted in considerable savings.
An aerospace company implemented a program focused on high reliability costing about 10%
more than their nominal reliability program. The program resulted in a 68% reduction in
maintenance cost and a 58% savings overall.
A grassroots refinery consciously made an additional capital investment of 5 to 10% for improved
reliability and better maintainability. The results over a 15-year period were an average reduction
of 36% in maintenance cost and a 29% reduction in unplanned downtime.
A third company reported that early reliability and maintenance involvement in design,
procurement and installation resulted in the following:
One time savings of approximately 5% in project cost
Continuing savings of approximately 1.5% maintenance costs / RAV throughout lifetime
Runtime improvement of 3% to 5% above industry standard throughout lifetime
These examples show that additional up-front engineering effort and investment result in higher
availability and lower maintenance cost.
Benefits of early reliability input and a solid asset optimization program beginning at design are many:
Minimize number and cost of changes
Reduce duplication of effort
More effective commissioning and startup; improved safety, reduced duration and number of
problems at checkout
Opportunity to include optimum maintenance technologies and maintainability at least cost
Build condition based, PM and spares around strategy
Effective maintenance system in place at startup
Greater reliability and effectiveness during operation
Reduce lifecycle cost
In addition to improved availability and lower maintenance cost, implementing an R&M program early in a
project's development provides direction and focus for subsequent activities and benefits to other areas,
such as safety and environmental. It is ten times more costly to make a change during construction
compared to early design.
WORK PROCESS OVERVIEW

The work process follows the same major elements as asset optimization. The overall process is shown
in Figure 20.1. The key elements are:
Secure Management Support
Define Project Business Goals
Formulate a Plan
Implement Plan Activities
Measure Success
MANAGEMENT
SUPPORT
PROJECT
MEASURE
BUSINESS
SUCCESS
GOALS
WORLD CLASS
PLANT
IMPLEMENT FORMULATE
PLAN PLAN
Figure 20.1 Implementation Process Overview

To maximize the benefits from the work process, involvement needs to begin as soon as screening and
early planning are underway. This reduces the potential for cost and schedule impacts from changes
made later in project development, since the cost of design changes geometrically increases as a project
moves from one phase to the next. Another reason for implementing the work process during screening is
that about 95% of the life cycle cost of a project is established upon completion of detailed engineering,
and any changes that are required after the design is finalized will affect both the schedule and the cost.
WORK PROCESS ELEMENTS

First and foremost, Management Support is required to implement the process. Management needs to
endorse the work process for imparting R&M to a project and provide resources and funding needed for
early involvement of the right people during the front-end screening and planning phases, as well as
engineering.
Defining the Project Business Goals translates into establishing the project R&M Goals in the early
screening/planning phase. The overall R&M Goals are confirmed in a document that guides project
development and supports the business and investment goals. The planners, designers, and engineering
contractors use the R&M Goals as the basis for making decisions on R&M questions. The goals are a
strategic item in the overall work process.
The R&M Program is the Plan for ensuring R&M is considered during project development. It defines the
activities that occur during the screening, planning, and engineering phases of a project to ensure the
R&M Goals are achieved. A different R&M Program is required for each project. The scope of the R&M
Program will depend on the process technology employed, newness of equipment design, business
objectives, and front-end engineering budget. The activities in the R&M Program need to be carried out in
a timely manner to minimize the impact on cost and the schedule of the overall project. The R&M
Program consists of three specific areas with different activities under each.
1. Defining R&M objectives for critical equipment and systems
2. Designing for Reliability
3. Designing for Maintainability
Implementing the Plan is the next step in the work process, and this requires manpower and possibly
outside experts, who are familiar with the equipment and work process. Each of the areas of the R&M
Program is presented in more detail, including the purpose of the activity, applicability, timing, and
potential implementation tools or techniques.
The last part of the process is Measure Success, to ensure the project has achieved the overall R&M
goals. This is not an easy task and is a function of the technology used for the activities of the R&M
Program.
MANAGEMENT SUPPORT
As with any program, management support is
necessary. It is essential that management:
Actively Support Work Process Endorses and actively supports the
MANAGEMENT Endorse Project Goals work process to impart R&M
SUPPORT Provide Needed Resources technology to projects.
Align Thinking
Participate in establishing the project
goals or, as a minimum, endorse the
goals.
Provide the resources, both manpower
and funding, so that R&M focused people can participate at the start of screening and initial
planning, and continue into engineering. Typically, these individuals are called into the project
after the design is finalized and detailed engineering is started, making it too late to have any
significant influence on the design without substantial economic and schedule impact.
Alter their thinking with regard to projects and understand that the key objective of the project is
not cost and schedule, but constructing a facility that meets the business objectives. This
translates into a plant that produces quality products, operates efficiently with excellent
availability, and at the lowest possible cost.
Project timing is important with regard to the marketplace, but needs to be considered in the context of
availability and plant operability. That is why it is so important that the right people are used on the project
early in its development.
PROJECT R&M GOALS

Typically, a planning or design basis document
that outlines the business and investment
objectives is used to launch a project. The
Mechanical Availabilities
PROJECT document may also include the process
Planned Run-length
R&M technology to be used or alternatives that need
Maintenance Cost Targets
GOALS to be evaluated. The project staff and
Other R&M Issues
contractors use this document for guidance in
making engineering decisions during project
development. In order for the document to be
completely effective it must include the projects R&M objectives, so that decisions about equipment,
process configuration, and process alternatives can be properly evaluated. Typically most companies do
not include specific R&M goals in their planning or project philosophy document, but base their economics
on their own or licensor operating experience, and assume the new facility will duplicate past
performance.
Project Investment Objectives
The project investment objectives need to be known before the R&M Goals can be defined. The business
objectives will determine what availability is required for the facility to meet market demand at startup and
in the future, and how much money can be spent annually on maintenance and still remain competitive.
Is the project to have a short life?
Is the project to be built with minimum investment?
Are the new facilities expected to achieve benchmark reliability at reasonable investment?
What is the planned life of the facility and will it be subject to major process changes in the
future?
Are the manning levels, process operations, maintenance and technical support, to be
minimized?
Are future operations going to be considerably different from the design and initial conditions?
When investment cost and short plant life are a priority, reliability and maintenance costs are not primary
concerns. When benchmark performance is the goal, both reliability and maintenance costs become
major considerations.
The answers to these types of business questions influence the reliability and maintenance goals for the
project. In the end, the R&M goals need to be realistic, achievable, and complement the business
objectives. Also, the goals need to consider the project budget, schedule, and process technology.
Establishing goals does not mean that high reliability and low maintenance cost are automatically key
objectives.
Project R&M Objectives
The R&M goals must be defined for each project and included in either the project planning basis
document or a separate R&M document. This document provides the project team and engineering
contractor guidance for reviewing alternative designs, selecting equipment, and making other engineering
decisions. The goals need to be congruent with the business and investment objectives. The key issues
that need to be addressed in the document include the mechanical availability for the project and
individual units, anticipated run-length, maintenance cost target, and other key R&M issues.
Define the mechanical availability goal for the project, and establish minimum availability targets
for each process unit in the project and existing units that support the project. The individual
process unit mechanical availabilities complement the overall availability goal for the plant, which
in most cases is to be a world-class performer. Typically, the availability requirements for the
project are not included in the project document because the economic analysis for the project is
usually based on the availability achieved with similar or identical process units.
This results in the general feeling that it is not necessary to define the availability requirements,
because they will be easily achieved. However, the availability does needs to be defined so that
everyone involved with the project understands the basis for the ROI and can use that information
to make decisions that support the project goals. In addition to defining the overall project
mechanical availability, the availability of individual process units included in the project must also
be defined. This requires an understanding of how the units interact and their relative importance
to the business. Existing process units that will interact and support the project need to be
included in this evaluation, to establish whether or not they have the availabilities to support the
operation of the new facilities. This is a form of reliability allocation. The individual unit
availabilities do not necessarily have to be benchmark, but must support the investment
objectives.
The technology that can be used to assist in defining the overall project availability goal and the
availabilities of the supporting units is Reliability Modeling. This technology has improved over the
last few years and is now regularly used in defining business objectives, assessing plant
reliability, and evaluating maintenance practices. In the project area, Reliability Modeling can help
in assessing the trade-offs between investment, operating cost, and reliability and, if a reliability
model is used in defining the project goals and during project development the model can be
used in measuring success at project completion.
Define the planned unit run-length with the anticipated drivers for the turnarounds. This is needed
to guide equipment design and selection and evaluate alternative designs. By knowing the
expected run-lengths and drivers for periodic shutdowns, changes to the design may be possible
that can either reduce turnaround frequency or decrease the length of downtime. Also, identifying
the drivers defines whether the turnarounds are process driven or mechanical in nature.
A long-term maintenance plan for the plant is a document that should be available when
establishing run-lengths and turnaround drivers. The plan is used to determine how the new
facilities fit into the overall plant maintenance plan and if they will be influenced by turnarounds of
existing process units. It is important to know the turnaround schedules and plans for nearby
plants when developing the site maintenance plan in order to avoid potential conflict in acquiring
skilled manpower during the turnarounds.
Define the maintenance cost target. This can be in the form of estimated annualized maintenance
dollars, percent of investment cost, or in terms of industry benchmarks. Establishing the targets
can be relatively easy, but ensuring they are achieved is more difficult. In today's environment,
everyone wants to have the lowest possible maintenance cost without jeopardizing plant
availability and have generally established a plant maintenance cost objective, e.g. Solomon Q1.
Thus, in order to ensure that the project does not jeopardize the site cost objective, project
maintenance cost targets need to be defined and be in line with the plant goal.
The cost objectives and the availability objectives can be the basis for performing life cycle cost
analysis and evaluating trade-offs between different equipment types and manufacturers. One of
the most difficult parts of the task is acquiring past maintenance and operating histories for the
equipment to carry out a proper evaluation, especially for new equipment with little or no
experience. Life cycle cost analysis is an important tool that should be readily applied on projects.
Include other key R&M issues. Other R&M concerns, such as the return required for additional
investment for R&M items, manpower restrictions, equipment or component standardization,
spare parts, etc., should be defined in the basis memorandum. This information is needed so that
the appropriate decisions can be made during planning and engineering.
A comment about equipment standardization: Purchasing equipment and components that duplicate
equipment and components already in the facility have several advantages. Demonstrated reliability and
performance, workforce familiarity that eliminates the necessity for specialized operator and maintenance
training and reducing the need to stock additional spare parts are three tangible advantages that reduce
the cost of ownership.
Unless R&M goals are defined for every project, regardless of size, project decisions will be made
haphazardly and without any consistent guidance or direction. The overall R&M goals, however, need to
be reviewed as the project progresses to ensure they comply with the current business climate and
thinking. If the goals are changed during project development, prior decisions need to be reevaluated to
ensure they are in line with current thinking.
Examples of R&M Goals
The following are some goals from project philosophy documents:
"The mechanical availability target will be a minimum of 94% and will provide a minimum two-
year-run length".
"Provide minimum return of 20% for R&M and other hard credit operating expense reduction
investments during the process design phase."
"Projected annual maintenance cost during the first through the fifth year of operation is estimated
to be $X.XX/BOE, with a total operating cost of $Y.YY/BOE".
".... a refinery maintenance cost index within Solomon 1st quartile".
"The maintenance cost target is 1% of direct cost".
"Spare parts inventories will be based on reliability and life cycle cost considerations."
R&M PROGRAM
Equipment/System R&M Objectives

R&M
Designing For Reliability
PROGRAM
Designing For Maintainability
The purpose of the R&M Program is to ensure

that attributes of design and engineering that
have an impact on reliability and
maintenance are considered during the
planning and engineering phases of the

project. The Program outlines a number of
different R&M oriented activities that occur
during the screening, planning, and
engineering phases of the project.
The R&M Program, which is unique to each project and specifically designed to cover those areas that
are most critical to the project, is the plan that defines those tasks that are considered necessary to meet
the project reliability and maintenance goals, including those of the implementation plan. Issues to
consider when developing the Program are:
Project investment and size
Similarity to existing facilities
Criticality
Use of new technology
Anticipated operating life
Project R&M Goals
Because it provides direction and focus in subsequent phases the R&M Program must be defined early in
the planning phase and should be prepared by the plant R&M stakeholders, in conjunction with the
project team. But a Program prepared using a cookbook approach can lead to an expensive plan that
adds little value to the project and may require excessive manpower to implement. The R&M Program is
an action plan that defines what tasks need to be performed, who will perform them, and their timing.
In addition, the Program can include any other R&M related issue or activity that the plant management,
R&M stakeholders, and project team consider important and that need focus and emphasis. Such items
may include the roles and responsibilities of each party involved in the Program, minimum predicted
equipment life, guidance in applying life cycle cost analysis, spare parts considerations, and any other
concerns.
Key R&M Program Areas
The R&M Program is divided into three areas. A number of tasks are included in each of the areas.
1. Defining R&M Objectives for Critical Equipment and Systems. This task not only includes defining
specific R&M objectives for individual pieces of equipment or systems, but defining the equipment
and systems. This entails some form of criticality analysis.
2. Designing for Reliability involves conducting periodic assessments and reviews of the project. It
also includes assessing if supplementary testing of critical equipment is required to ensure the
equipment will perform in accordance with design requirements.
3. Designing for Maintainability involves conducting periodic reviews of the project from a
maintainability perspective, preparing equipment management programs that are available prior
to startup, and developing a long-term maintenance plan.
DEFINE R&M OBJECTIVES FOR CRITICAL EQUIPMENT AND SYSTEMS

Developing specific reliability and
Reliability Criticality Analysis
DEFINE EQUIPMENT Reliability Allocation
R&M OBJECTIVES Equipment Life Requirements
Maintenance Cost Objectives
maintenance objectives for critical equipment

and systems, or sub-systems, involves two
distinct steps. The first is to define the
equipment or systems that are critical to
operations and need to have specific
objectives. The second is to define specific
reliability and maintenance objectives.
Several different methods can be used to define the critical equipment and systems. These include:
Reliability Centered Maintenance, (RCM) or a similar approach can be used where the equipment
or system is assessed as to its relative importance to process operation.
Using a ranking system that not only includes operational importance, but also considers design
maturity, manufacturing complexity, financial consequences, ease of maintenance, and operating
experience. This approach not only identifies equipment that may require specific reliability or
maintenance objectives, but also equipment that may need special attention during engineering.
Figure 20.2 is an example of a ranking system.
Using Reliability Modeling to identify equipment and systems that cause process bottlenecks, or
pinch points.
Reviewing operating and maintenance experience of identical or similar equipment or systems.
Criterion Criticality Area Ranking
Long unplanned outage

Moderate unplanned outage Reliability
Reliability
Short unplanned outage Reliability Ranking
Slowdown Consequence
Consequenc
No disruption
e
Establishes T/A frequency
Costly planned maintenance Planned
Planned
Moderate planned maintenance Maintenance Ranking
Limited planned maintenance Maintenance
Maintenanc
No maintenance
e
Excessive financial loss
Moderate financial loss Financial
Financial Financial Ranking
Small financial loss
No financial loss
Consequences
Consequenc
New, innovative design
e
Extrapolation of proven design Design
Design Design Ranking
Modification of proven design
Duplicate of proven design
Maturity
Maturity
Very high failure rate
Moderate failure rate Operating
Operating Operating Ranking
Low failure rate Experience
Experienc
Seldom fails
e
Many complex steps
Some complex manufacturing Manufacturing
Manufacturin Manufacturing Ranking
Many simple steps
Simple to manufacture gComplexity
Complexit
y
Significant % of investment
Moderate % of investment Investment
Investmen Investment Ranking
Small % of investment
Insignificant % of investment
Cost
t Cost
Overall Criticality Ranking XX

Figure 20.2 Example of a criticality ranking process
In addition to identifying what equipment or systems require individual objectives, the criticality analysis
can be used to identify equipment or systems that may need additional focus or review in the R&M
Program. The document resulting from the analysis is a table listing each piece of equipment and system
with its criticality rating and reason for the designation. The table should also include the actions that are
needed to reduce the criticality of equipment and systems with a high rating.
Reliability Allocation
Once the critical equipment and systems are identified, specific reliability and maintenance objectives are
assigned. For reliability, this is a form of reliability allocation where individual pieces of equipment are
assigned specific reliability values that complement the overall reliability goal. The allocation process
ensures that no equipment or system will require a reliability that is unrealistic or unachievable. The
reliability allocation process also identifies the equipment and systems that should receive more attention
and design improvement efforts during the design and engineering phases. It also helps avoid over-
designing or requiring higher than needed reliability, which would have little or no impact on overall
performance, but could affect the investment cost. If the reliability requirements are unrealistic, a review of
the equipment arrangement and sparing needs to be carried out.
Allocating reliability or defining specific reliability objectives is not an easy task. Depending on the amount
of sparing and redundancy the reliability requirements of individual equipment will, in most cases, be
greater than that of the overall system. Several methods are available for assigning individual reliability
objectives.
Reliability modeling is one method for determining the reliability required of individual pieces of equipment
and systems. The model will identify pinch points and critical equipment, assuming certain failure and
repair rates. The key to using the results is ensuring that the inputted rate data are realistic and
representative of commercial equipment and planned operation. An advantage of using modeling is that it
allows one to test different equipment configurations and assess overall performance sensitivity to
changes in equipment failure and repair rates.
Another approach is using past performance of identical or similar equipment. Providing the performance
information is realistic and representative of the anticipated operating and maintenance practices this can
result in more viable objectives. A concern is that the data is sometimes optimistically extrapolated to
higher values because of new maintenance practices or better equipment design that are not proven to
result in improved reliability.
The purpose for defining reliability objectives is to ensure the equipment and system performance
supports the availability requirements of the overall design and that of the project.
Specifying Objectives
In addition to reliability, equipment life requirements may also be defined. These would be outside those
included in industrial standards and practices. The life should complement the run-length objective in the
overall R&M goals and the required turnaround interval.
Specifying individual maintenance objectives for equipment and systems is the other area that needs to
be considered. These can take the form of specific maintenance cost requirements. However, it is more
realistic to specify maintenance cost objectives for systems and individual process units, rather than
individual pieces of equipment.
Having defined the objectives they must be included in the specifications so that manufacturers know the
project requirements and can comment on their ability to meet them. Vendor bid proposals need to
include experience that demonstrates the equipment will meet the specified objectives. These are,
typically, experience lists with user references. Part of the bid review is an assessment of the vendors'
ability to meet the R&M objectives.
Establishing specific reliability and maintenance objectives should be done during the initial project
planning and design stages. A team of people who are experienced with the equipment and process
operation should do the criticality analysis and identify the critical equipment and systems. The reliability
stakeholders, in conjunction with experienced equipment and process specialists, should establish the
specific reliability and maintenance objectives.
DESIGNING FOR RELIABILITY

As a project progresses through planning and
engineering, periodic assessments of the
Reliability Reviews design are made from a reliability perspective.
DESIGNING FOR
Reliability Checklists
RELIABILITY The main purpose of the reviews is to ensure
Special Equipment Testing
the design is reliable and will meet the overall
project goals within the cost constraints
imposed on the project. The process is
ongoing, the number of reviews being dependent on project size, complexity, maturity of technology, and
operating experience. The reviews are conducted at key milestones in planning and engineering, e.g. plot
plan finalization, completion of design specifications, and availability of the CAD computer model.
The reviews focus on reliability and understanding what the consequences are on process operations
when either a system or a piece of equipment fails, and what can cause that failure. The critical
equipment identified earlier should be the focus of the reviews. In addition, the reviews evaluate the ease
of operator interface and inspection, and challenge the design from various viewpoints, i.e. safety,
environment, operation, and human interface. As a minimum the reviews should detect conditions that
degrade reliability.
Conducting reliability reviews is an important aspect of the project design and engineering process. The
prime objective of each review is to determine whether or not the design meets the overall goals within
the cost and schedule constraints. To some extent it will also test the validity of the overall goals within
those constraints.
Those conducting the review must be familiar with process operations and the equipment and should
include process designers, mechanical and process operations representatives, and other experts as
needed. Experience with the process technology and equipment is a requirement, even if they need to
come from outside the local organization. Reliability reviews should be conducted on all projects, their
number and extent of will depend on the project size and criticality.
Reliability Checklists
Checklists of reliability-focused questions are used to expedite the review. They can be divided into areas
with different reliability emphasis, for example, plant or unit operating philosophy, equipment reliability and
design, equipment manufacturers, and operating conditions and environment. Similarly, checklists can be
used for assessing the human interface. Although ergonomics may not be considered a primary reliability
issue, the majority of unplanned plant interruptions are caused by human error. Ergonomics therefore
needs to be considered during design.
The following are reliability checklist questions.
"Will bypasses improve operating flexibility and the ability to perform on-line maintenance - cost
vs. payback?"
"How far can the process operating technology be pushed? What is the recent operating
experience with these units?"
"Are all operating conditions known and specified, including the variations in the conditions?"
"Are the operators/maintenance people knowledgeable and familiar with this type of
equipment/technology, or is training needed?"
"Is the location of utility service stations based on a review of the Operating Procedures,
particularly for cleaning, purging and blinding?"
"Can operators read instrument dials or digital displays from the path of the normal walk-
through?"
"Are valves arranged to prevent squatting, stooping, kneeling, bending, twist stretching, or
extending the body or arms in order to operate or inspect the valves?"
Startup Checklists
Startup checklists are essential to assure all safety and operational procedures are observed for new
equipment; repaired equipment restored to service and for restarting following a plant shutdown.
A detailed check list utilized by one company consisted of seven sections:
1. PPE requirements
2. Detailed information describing hazards
3. Requirements for pre operational inspection
4. Detailed operational check off, Figure 20.3
5. Post start up readings to be recorded
6. Observations during and following startup
7. Sign off
Pump B
Pump A
Action steps Deviations / Corrective actions
Commission auxiliary equipment

1 Ensure pump and piping system has been purged with N2 so Use purging procedure.
Pump B
Pump A
Action steps Deviations / Corrective actions
that the system is air free.

2 Ensure field switch is in stop position.
3 Ensure orifice is installed in arc valve bypass line.
FO 10 P01A/B1.
4 Open tempered water supply valves, VA50 & VA51 fully. Flow must be visible in sight glass.
5 Ensure LP Nitrogen quench valve VA31 is closed, then open
VA30.
6 Set pressure P30 by slowly opening control valve VA31 so that Beware that pressure is not exceeded since damage could
P30 reads 50 kPa. Flow must be visible in sight glass F30. occur to the pressure gauge or mechanical seal.
Figure 20.3 Six Steps of a One Hundred Plus Step Detailed Startup Check Off courtesy Hein Bootes
Special Equipment Testing

Another area needing consideration in Designing for Reliability is the identification of equipment requiring
special testing outside industry standards. The reasons for the extra testing are: unique or innovative
design, limited operating experience, equipment manufactured using many complex and unique steps, or
equipment purchased using standards which require insufficient testing. The purpose of these extra tests
is to ensure the equipment meets, or exceeds, the needed performance requirements. Very few pieces of
equipment should require extra testing, but all designs should be evaluated for this requirement.
Specialists should be consulted when establishing if extra testing is needed.
DESIGNING FOR MAINTAINABILITY

Three different activities are included in
Maintenance Reviews Designing for Maintainability. All are aimed
DESIGNING FOR at optimizing maintenance effectiveness
Maintainability Checklists
MAINTAINABILITY
Turnaround Reviews and cost. The activities are:
Equipment Management Plans
1. Periodic maintainability reviews
2. Assessment of turnaround requirements
3. Preparation of equipment management
plans
Periodic Maintainability Reviews
Similar to the reliability reviews maintainability reviews ensure that the equipment layout permits ease of
maintenance and accessibility. In addition, the reviews are used to identify mandatory and cost-effective
facilities that would improve process unit startup, shutdown, and the preparation of equipment for
maintenance, i.e. cleaning and clearing. The maintainability review is an emerging technique that moves
maintenance from a reactive phase to proactive. Its use in the industry is increasing. Considerable cost
savings are achieved by incorporating changes early in a project design, rather than later.
Maintainability reviews are conducted by maintenance and operational personnel who are familiar with
the process operations and equipment. Three dimensional CAD models, which help to better understand
the relation of the piping to the equipment and to assess the space available around equipment for
maintenance and operator access should be used during the review. Maintenance and operational people
who carry out the reviews need to walk through the model and check for accessibility. A maintainability
checklist is another useful tool for conducting the reviews and ensuring there is consistency between
reviews. The use of personnel who are experienced with the process unit and respective turnaround work
is invaluable.
Assessment of Turnaround/Overhaul Requirements
The reviews conducted to assess turnaround requirements focus on several different areas, including:
What cost effective changes can be made to the design to either reduce turnaround downtime or
ease turnaround work. The focus is on those repetitive maintenance preparation activities that
primarily involve the installation of temporary facilities at each turnaround.
What changes to the design would ease repetitive turnaround maintenance activities, such as the
orientation of catalyst unloading nozzles. Any proposed change needs to be justified using life
cycle cost analysis.
Equipment accessibility and orientation. This includes such items as lay down area size and
location, manholes size and orientation, heavy equipment accessibility, and traffic patterns for
moving mobile equipment.
The above are just extensions of the maintainability review, but focusing strictly on one aspect of
maintenance that is infrequent, but costly.
The next focus area for turnaround reviews is preparation of a long-range turnaround outlook and
schedule. Drivers, both mechanical and process, for establishing the run times between turnarounds are
identified and any possible design changes evaluated that would reduce downtime duration and/or
increase run time between shutdowns. Again, any design changes are evaluated using life cycle cost
analysis and must concur with the goals established for the project. These will tend to be large investment
items rather than simple design changes, i.e. reconfiguration of the heat exchanger bank to include more
exchangers and/or bypassing, or installation, of another reactor.
Equipment Management Plans
The last subject for Designing for Maintainability is the preparation of equipment management plans.
These are plans that plants prepare for existing equipment, using either an RCM, or a similar process.
They focus on the detection, mitigation, and/or elimination of expected failures, and define periodic
maintenance and inspection tasks. They include reactive, condition-based elements, and proactive
elements that are based on the operating condition and the probability of failure and potential
consequences that might occur. On a project, preparation of equipment management plans for critical
equipment starts soon after the equipment is purchased and needs to be completed prior to
commissioning. People with direct operating and maintenance experience should be used to prepare the
plans. Assistance from either the vendor or outsiders should be sought if equipment is unfamiliar to the
site. An assessment of spare part requirements is a by product of this activity.
As with reliability reviews, maintainability reviews should be conducted on every project. Their scope and
extent being depend on the size and criticality of the project. However, as a minimum, the site long-term
maintenance plan should be updated to include the new facilities and equipment management plans
prepared for the critical equipment and systems.
Maintainability Checklists
Like the reliability checklist, maintainability checklists are typically developed for each equipment
category, in addition to general maintenance and layout considerations. This approach makes it easier for
each equipment discipline to use the list.
Check that access ways and roadways have sufficient head clearance for vehicles, mobile
equipment, etc., for construction, operation and maintenance".
"Check that the piping design includes drain and vent valves in accessible and suitable locations".
Check that platform space is available for refractory installation and repair equipment".
Check that rodding connections for fluid solids units are accessible and there is sufficient space
for insertion of rodding tools".
"Is adequate space provided for extracting tube bundles and the bundle extractor?"
"On fixed bed reactors, is a trolley beam or davit provided to facilitate removal of the catalyst
dump flanges and catalyst handling equipment? Can the platform accommodate the equipment?"
"On pressure vessels, is internal bolting made of non-corrosive materials?"
PLAN IMPLEMENTATION TIMETABLE

In order for the process to be effective it must start when early planning for the project begins, and end
when the plant is commissioned. The work process is continuous with interaction at all phases of the
project. A true assessment of how effective the process was, however, does not occur until after the
facilities have been operating for several years.
Figure 20.4 shows the duration and intensity of each element as the project is developed. The darker the
arrow, the more activity is underway.
Management Support is required over the complete project, with active participation at the beginning
when the goals are established. The Project R&M Goals are defined at screening and early planning, but
need to be constantly reviewed as the project progresses. The R&M Program activities are intense during
design and engineering, but need to be kicked off during planning and when contractors are brought
onboard. Advising the contractors of the activities that will take place during development is important so
that they can be prepared for and actively participate in reviews Measuring Success can start early if
reliability modeling is used for developing R&M goals and objectives. Otherwise, the activity may not start
until after startup and continue into operation.
Figure 20.4 Implementation Plan Timing and Intensity
ENSURING RELIABILITY AND MAINTENANCE PERFORMANCE

The final phase of the work process is ensuring
the R&M goals established at the beginning of
the project have been achieved. This is a
MEASURE Reliability Compliance compliance check and is an essential part of
SUCCESS Maintenance Cost Compliance
the overall program. In addition to ensuring the
project meets the business objectives, it also
confirms, or identifies, areas in the work
process that need to be changed or modified,
and helps improve the tools used in implementing the R&M Program.
Checking for reliability compliance and confirming that the design will achieve the required availability is a
difficult task because it will be based on performance estimates obtained either from experience, industry
or equipment manufacturers. In some cases these estimates may not be any different from those used in
the initial planning stage. However, the constructed project should include cost-effective design changes
that were not included in the previously designs. In the end, the proof of the pudding will be several years
of operation and, probably, several turnarounds.
The best tool for checking for reliability compliance is reliability modeling. It can be a simple block model,
or a complex simulation model that includes scheduled refurbishes and turnarounds. The type of
techniques used will probably depend on project size, complexity, and criticality. The cost for performing
modeling is another factor that needs to be considered. The availability of reliable and representative
input data is crucial.
Estimating overall maintenance costs (routine and turnaround) and resourcing requirements may be
easier, providing completed equipment management plans are available and a long-term maintenance
outlook is available. Using the equipment management plans, reliability modeling results, life cycle cost
analysis, and experience with similar units, an estimate of maintenance cost and resource requirements
can be made.
Assessing compliance at project completion is also tool dependent. If a model was used to develop the
initial goals and determine applicability of design changes, estimating overall reliability performance
should be accomplished relatively easily and inexpensively. However, if a model was not used, some form
of that technology will need to be applied to estimate overall reliability performance. The other option is to
forego the check and let the proof of the pudding be in the operation.
SUMMARY
In the recent past, plants have focused on improving profitability by reining in operating cost and moving
from reactive maintenance to proactive maintenance, and to equipment management programs. With the
potential for new investment to meet the increased demand for petroleum products and environmental
regulations, plants need to use a work process to ensure reliability and maintenance are considered
during project development. If reliability and maintenance is not considered, the past efforts to better
control operating costs will be jeopardized and plants will undertake new initiatives in the future to rein in
high operating costs and poor reliability.
A work process, which closely follows asset optimization, is available for ensuring reliability and
maintenance is considered during project development. The ideas and practices are not out of line with
common sense, or good business practices; so acceptance of the process should be relatively
straightforward. The biggest drawback seems to be resourcing the front-end review activities and the
concern that the activities will increase cost and schedule. Management, as part of their support for the
program, should understand that the additional funds for early involvement will be paid back in lower life
cycle cost. Similarly, project management needs to recognize that projects are not an entity unto
themselves, but part of a bigger business picture. If action is not taken, life cycle cost will not be
optimized, firefighting will continue into the future, and the competition will move ahead.
References
Blueprint for Product Reliability, "Defining Reliability Programs", RBPR-1 May 15, 1996, Reliability
Analysis Center Rome, N.Y.
Blueprint for Product Reliability, "Developing Reliability Goals/Requirements", RBPR-2, October 1, 1996,
Reliability Analysis Center Rome, N.Y.
Blueprint for Product Reliability, "Designing for Reliability", RBPR-3, October 1, 1996, Reliability Analysis
Center Rome, N.Y.
Ferguson, Darrell, "A Best Process Model for Asset Optimization", Maintenance Technology, Volume 13,
No.10 (November 2000)
Hough, James, "Reliability Program Tutorial Notes", 2001 RAMS Conference
XXI. INDUSTRY BEST PRACTICES, RESULTS, ISSUES,

CHALLENGES AND LESSONS
There is a tide in the affairs of men, which taken at its flood leads to fortune.
William Shakespeare; Julius Caesar
This, the final chapter summarizes the best practices, results, major issues, and challenges that must be
addressed in a program of Physical Asset Optimization.
BEST PRACTICES
Following are some examples of best practices, procedures and instructions that are required for
successful Physical Asset Optimization. They are not comprehensive descriptions of all the elements
necessary to establish an industry best program but rather highlights. For details, refer to the applicable
sections in this Handbook as well as the many books and papers that are available on each of the topics.
Equipment Management
Lubrication
A comprehensive program that is specified by a detailed, written procedure and followed meticulously.
The procedure must specify lubricant type for each use / point; approved suppliers; requirements for
receiving inspection / testing, storage and issue; detailed instructions for checking, delivering and
replenishing lubricants, both grease and oil, and procedures for disposal of used lubricants. All
information necessary for quality lubrication from cleanliness, to operation and assurance of lubrication
system integrity and quality must be covered in detail. Appendix E contains an abbreviated audit
scorecard as a beginning.
A comprehensive lubrication program must include instructions for sampling and testing to include a
regular schedule, see Chapter XV for details.
Where regular oil changes are specified, industry best typically test at regular intervals determined by
equipment type, service and environment. Test intervals are typically less than the manufacturers
recommended change intervals. Oil is replaced on actual condition rather than time.
Condition Assessment
Defined by a comprehensive written procedure that includes application, organization and reporting; the
latter to include anomalies, responsibility for action and cost / benefit.
Condition assessment is applied where cost effective to critical and general-purpose equipment.
Monitored variables (vibration, lubricating oil, thermography, etc.), type (continuous [installed] or periodic),
and interval are based on equipment type; defect symptoms; and the probability, cost, and consequences
of failure, see Chapter XIV.
Work Management
An effective Work Management program and process is essential. The process must include a fully
functional and effective CMMS, detailed instructions for planning and scheduling and the organization and
trained personnel necessary to accomplish effective planning and scheduling. Metrics must be in place,
regularly measured and publicized to gauge performance and effectiveness.
Stores, Materials Management
An effective materials ordering, management, storage and control process must be in place and
functioning effectively. Access to stores must be controlled. Off hours controls when a warehouse may be
unmanned is always a challenge. The process must include outsourcing parts and remanufacturing,
Chapter XIII. Controls to restrict orders that result in off the books squirrel stores and routine
maintenance tasks to assure stored parts retain delivered quality and are ready for issue are essential.
Reliability Program
A strong reliability program is essential. Appendix E contains the vital elements of a comprehensive
reliability program along with consensus weights of each program element to prioritize importance.
Industry Best Practices, Results 376
Precision Balancing
Applied to rotating equipment, prioritized by size and shaft speed. Requires detailed procedures, quality
standards and skilled personnel.
Precision Shaft Alignment
Applied to all rotating equipment and reciprocating equipment as applicable. Requires detailed
procedures, equipment, training, skilled personnel and quality standards.
Repair Procedures
Detailed task instructions including safety precautions, operating restrictions, if applicable, parts and tools
required, tests and measurements required upon completion as well as historical information such as
parts replaced, final clearances, etc.
RESULTS
This section illustrates one difficulty of establishing credible support for Physical Asset Optimization
managers who have had achieved success are often reluctant to publicize that success fearing the loss of
a competitive advantage.
Some typical results are illustrated in Figure 21.1.
OEE Maintenance cost % RAV
Reactive <60% >5%
<60% >5%
World Class >80%
>80% <2.5%
<2.5%
Profit from increased production, OEE

5% to 15% increased profit
Typically break even end of year one
Maintenance costs
10% to 20% cost increase
for first six to nine months 30% to 40% cost reduction
achieved end of year three
Figure 21.1 Typical Results That Can Be Expected From a Well Executed
Physical Asset Optimization Program
Published results confirm the generalities:

A company reduced defect losses by 50 percent; its ultimate objective is to reduce defect losses
by another 30 percent.(129)
In seven years, a second company achieved more than a 60 percent increase in production
output with only a 10 percent increase in O&M costs. (129) Some specifics include:
1990 1997
Tons throughput/year 2.4 million 3.9 million
Maintenance shutdowns 8 hours per week 8 hours per 3 weeks
Maintenance manpower 208 146
The preceding benefits resulted from the following improvements:

Implementation of ISO 9000, 9002/QS 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, effective use 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. This will reduce equipment expenses by $100 million. The organization has
achieved 60 percent of its goal with two years remaining. (129)
A fourth company stated that conformance to best in class performance produced the following results
that contribute directly to the bottom line:(50)
Increased capacity: 5 percent/year
Increased yield: 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
was reported by another company.(129)
Improving Asset Utilization by 5 percent and reducing Maintenance Costs as a percentage of RAV by 1
percent produced the following results, note the conversion to increased earnings per share: (129)
Return Return On Earnings
On Equity Net Assets per Share
Asset Utilization +3.5 percent +1.5 percent +$1.30
Maintenance Cost/RAV +1.5 percent +.8 percent +$ .60
A plant doubled throughput and improved effectiveness while meeting customer demands for increased
delivery and quality.(129)
An analysis disclosed that completed and planned plant, process, and equipment reliability improvements
will increase overall effectiveness between 6 and 8 percent. These improvement represent a gain of more
than $100 million at the bottom line.(129)
Over the past three years, a company gained the following improvements in effectiveness (129):
Total Plant Maintenance Maintenance Cost/
Uptime C Unit
O Producti
P on
Q
1995 85.4 percent $80,000 $0.038
1997 90.6 percent $45,000 $0.036
Improvements achieved, 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.
ISSUES
The following issues must be addressed and accommodated in a program of Physical Asset Optimization:
Safety and environmental excellence
Senior executives and management visibly committed to the effort, program and consistency
Optimum institutional values identified and in place from top to bottom in the organization;
initiative, commitment, ownership and responsibility for maximizing effectiveness, minimizing
waste of all kinds
Continuing financial justification for the investment and continuing cost necessary to gain and
sustain equipment at optimum effectiveness
Effective organizational structure and people within the organization
Identification of principal detractors from objective performance by number of occurrences, lost
production and cost
Active programs in place and functioning effectively to reduce all forms of waste, lost production
and effectiveness including the preceding
Resources prioritized to gain greatest value and return
Measures of effectiveness in place, monitored regularly and publicized metrics that focus
attention and priorities on the highest value opportunities, determine if results are meeting
expectations
Technology insertion based on value contribution; validated by results
Basic processes: Planning and Scheduling, Spare parts management, Preventive, Proactive and
Condition Based Maintenance all in place, effective and providing demonstrable results.
CHALLENGES
Create and sustain support and real commitment from senior executives and management. Gain
involvement, communications, and drive; establish consistency of purpose, recognition that
sustainable improvements are results and not a command.
Recognition that operations have become more intensive; interrupted production, quality
deficiencies and waste are increasingly costly.
Focus on the right issues; i.e., process changes to gain long-term sustainable value, rather than
short-term cost reduction
Resist the temptation to defer maintenance (i.e., pay some now or pay much more later)
Work at the Maintenance Production partnership. Minimize cultural issues / differences within
maintenance, between maintenance and production and other functional areas.
Recognize that the combination of increasing technical complexity, declining institutional
knowledge and skills as experience retires requires increased emphasis on training.
Actively promote ownership and commitment at the level of individual control what can I do
personally to improve conditions, performance and effectiveness?
Gain the maximum understanding of the necessity for change and improvement; minimize
resistance to change
LESSONS
The following lessons were reported by an organization who had been through the improvement process:
(33)
Individuals cannot accomplish the improvement process alone; a successful effort requires
everyone participating, good teamwork, commitment, ownership and outside facilitation.
Must have competent, enthusiastic and committed champions driving the process
Focus on employee needs Whats in it for me is essential to gain participation and ownership
Involve always, empower when possible; crafts want to be involved, respected
Allow for and expect failures
Work tirelessly to overcome resistance
Demand accountability for actions at all levels of the organization
All who contributed to this text hope it is helpful to you and produces the real value potential available
from Physical Asset Optimization!
GOOD LUCK!
APPENDIX A. GLOSSARY
Availability:
The time a system or asset is in an operable state capable of meeting all mission requirements
Asset Lifetime:
Span of time over which the asset is designed, acquired and utilized to fulfill its intended purpose, including
end-of-life disposal.
Asset Management:
The set of disciplines, methods procedures and tools to optimize the Whole Life Business Impact of costs,
performance and risk exposures (associated with the availability, efficiency, quality, longevity and regulatory /
safety / environmental compliance) of the companys physical assets.
Institute of Asset Management (UK)
Asset Optimization:
A comprehensive, fully integrated strategic program directed to safely gaining and sustaining greatest
lifetime value, utilization, productivity, effectiveness, value, profitability and return (ROA) from physical
manufacturing, production, operating and infrastructure assets.
Requires systematic prioritization, implementation and institutionalizing a strategic, fully integrated, array of
comprehensive transformational improvements to: organizational values, behavior and culture; the functional
organization; process, practice and technology. These improvements are applied to business, management,
organization, engineering, operating, control, work and logistics processes to ensure full compliance with
safety, availability, performance, and quality requirements at least sustainable cost for operating, market,
and business conditions.
Asset, Physical:
Fixed and rotating equipment, fired and unfired heat exchangers, electrical distribution systems including
transformers, substations, breakers, starters and cabling, control instrumentation, piping, valving and
structures
Asset Utilization:
Percentage of time a plant is operating at Maximum Demonstrated Production Rate, with specified quality
and defined yield
Balanced Scorecard:
A 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 systematic process for measuring and establishing best practice performance (to be). Results are
compared to current performance (as is) in order to establish performance objectives and 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)
Blanket (Standing) Work Orders:
Work Orders that are typically written to cover multiple tasks for a stated period, e.g., repair insulation month
of June.
CBM:
See Condition-Based Maintenance.
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, labor and material cost accounting.
Condition Assessment:
A process for judging the condition of operating equipment through a detailed, collective evaluation of
condition measurements including anomalies from known condition, trends and departures from previous
characteristics.
Condition Monitoring (CM):
The process of recording measurements that define condition without disrupting operation (e.g., vibration,
fluid and electrical characteristics, and thermal gradients) and comparing each to limits.
Appendix A. Glossary 382
Condition Based (or Predictive) Maintenance (CBM / PdM):

Maintenance based on actual condition (objective evidence of need) obtained from in-place, non-invasive
tests, operating and condition measurements
COPQ:
Cost Of Poor Quality (from Six Sigma) includes the following:
Internal cost of failure: labor and material consumed by scrap and rework including added inventory
made necessary by increased cycle time
Costs of inspection: samples, testing including equipment and labor to identify defects prior to shipment,
quality audits and time spent addressing supplier problems
Costs related to improving poor quality: including equipment and programs
External cost of failure: warranty claims including field service
Lost opportunity costs: producing more products with the same assets, including customer loyalty and
lost sales due to poor quality
Core Competencies:
Competencies that involve critical business or proprietary information, must be fully aligned with business
decisions, deliver a direct contribution to the dominant value driver and cannot be obtained from multiple
sources. They are any aspect of the business operation that delivers a strategic business advantage.
Corrective Maintenance:
Maintenance initiated by failure or threat of failure. Corrective maintenance can be planned or unplanned
reactive. Note: Evaluating the effectiveness of PM and PdM programs requires identifying the origin of every
maintenance action.
Criticality:
Typically used as a measure of safety or production consequences, e.g., failure of critical equipment. See
also Risk.
Defect:
Anything that fails to meet expectations or requirements.
EDC:
Equivalent Distillation Capacity: A normalized value for comparing refinery processing units based on
processing intensity. Determined from criteria developed by Solomon Associates
Effectiveness:
Performing the correct task efficiently results oriented
Efficiency:
Performing a given task (not necessarily the correct task) well task oriented
EFOR:
Effective Forced Outage Rate An EPRI measure expressing the probability of experiencing either a forced
outage or forced de-rating when called upon to deliver load
Emergency, break-in Work Orders
Work Orders for reactive work that break / interrupt an existing work (typically weekly) schedule. Some
organizations may have several levels of break-in work depending on safety or production impact, start
requirements (immediately) and automatic overtime authorization.
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
ERV:
Estimated Replacement Value: The current cost to replace the asset capacity or production output; same
as RAV
Failure:
No longer capable of performing the intended function.
Hidden Failure: A failure whose effects wont be discovered until a second failure occurs; e.g., failure of the
auto start switch for standby equipment
Partial Failure: A condition that has not yet resulted in a total loss of function.
FA / Failure Analysis:
See RCA, Root Cause Analysis
FME(C)A:
Failure Modes, Effects, and Criticality Analyses: An integral part of RCM directed to determining type,
probability, cause and consequences of potential failures.
Hidden Plant:
Term from Total Productive Maintenance describing production capacity lost to downtime, slowtime, startup
and transition losses, poor quality, waste and scrap
HVAC:
Heating, Ventilating, and Air Conditioning
HR:
Human Resources; the department generally responsible for training certification, compensation and other
personnel issues
ISO:
International Standards Organization
IT:
Information Technology; the department generally responsible for business software applications, data
storage and communication. Also may be called Information Systems IS.
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
Lean:
Applied to Asset Optimization: Process and equipment reliability, predictable lifetime, defect and work
elimination minimize variation, redundancy and waste
MES:
Manufacturing Execution System schedules, tracks, and manages production; helps manage
manufacturing labor, quality assurance, and maintenance; collects data generated by factory automation
systems and creates production histories.
Metrics:
Objective, numerical measures of performance and effectiveness
MIMOSA:
Machinery Information Management Open Systems Alliance: A non-profit 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: Calendar time from the onset of one failure to the next; includes time required
to effect repairs.
MTBR:
Mean Time Between Repair: Calendar time from the restoration of one failure to the onset to the next;
excludes time to repair.
MTTR:
Mean Time To Repair: Time necessary to complete a repair, restore to service
MRO:
Maintenance, Repair, Overhaul
NPV:
Net Present Value: The current value of future revenue based on the time value of money
O&M:
Operating and Maintenance
OEE:
Overall Equipment Effectiveness: A term from Total Productive Maintenance that defines actual output
compared to objective calculated from Availability, Yield and Quality, each expressed as an effectiveness
percentage of objective.
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 system-specific links
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
Partial Failure:
A condition that has not yet resulted in a total loss of function.
PdM:
Predictive Maintenance: See Condition-Based Maintenance.
Physical Asset Optimization:
See Asset Optimization
Planning:
Identifying safety precautions, procedure, tools, skills and time necessary to perform a given task.
Planned Maintenance:
Maintenance planned and scheduled in advance of commencement by a specified lead-time (planning
interval), typically one week.
PM:
See: Preventive Maintenance:
Predictable Capacity:
Ability to meet future product delivery requirements on time, quality and cost
Preventive Maintenance (PM):
Maintenance tasks conducted at regular, scheduled intervals based on average statistical / anticipated
lifetime to avoid failure. PM tasks may include inspection (with or without disassembly), service and / or
replacement. Task intervals may be scheduled by calendar or operating time. Unless specifically stated
otherwise, PM used in this Handbook refers strictly to scheduled, time based maintenance.
Proactive Maintenance:
Typically non-repetitive activities and actions applied to equipment prior to and during operation to gain
greatest reliability, prevent problems, and minimize failure. Examples include pipe flange and precision shaft
alignment, precision balancing, installation of lubrication reservoir filter breathers and moisture traps.
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: The current cost to reproduce the asset capacity or production output
Repair Success:
A positive metric that could replace the more frequently used rework. Repair success is determined by
compliance to four criteria:
Actual hours expended within +/- 10 percent of planned hours
Restored to service meeting cost and schedule objectives
No startup difficulties caused by the work accomplished
No rework required
RCA:
Root Cause 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 through the development of 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.
RCM defines system boundaries and identifies system functions, functional failures, and likely failure modes
for equipment and structures in a specific operating context.
Reactive Maintenance:
Corrective action taken upon failure or obvious, unanticipated threat of failure
Reengineering:
Applied to business processes: A fundamental rethinking and redesign to achieve dramatic improvements in
performance
Reliability:
The probability that a system, device or component will perform its prescribed duty without failure for a given
time when operating correctly in a specified environment.
Reliability Centered Maintenance (RCM):
A systematic, disciplined process to ensure safety and 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. It 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
Risk:
Probability multiplied by consequences of an event
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 (from Six Sigma):
The probability of being able to pass a product or service through an entire process defect free
The likelihood of doing all things right at each step across an entire series of process steps
SAE:
Society for Automotive Engineers
Scheduling:
Combining the resources: procedures, people (skills), parts and operating line-up to perform a given task
effectively. Sequencing work to assure most effective use of resources, production availability.
Six Sigma:
Established as a system of Quality Assurance, defined as 3.4 defects per million chances. The use of
statistical tools applied in a disciplined manner to identify and correct defects and thereby improve
productivity and effectiveness. The Six Sigma process includes:
Define improvement projects based on business objectives, customer needs and feedback, define
Critical To Quality (CTQ) characteristics
Measure key processes that influence CTQs and defects related to the processes
Analyze why defects are generated
Improve the process to stay within required ranges
Control to ensure variables remain within acceptable ranges
SMRP:
Society of Maintenance and Reliability Professionals
SPC:
Statistical Process Control
SQC:
Statistical Quality Control
Standing (Blanket) Work Orders:

See Blanket Work Orders
Streamlined RCM (SRCM):
Streamlined Reliability Centered Maintenance: An optimized form of RCM that begins with a risk rank
prioritization to assure resources are applied most effectively to equipment and systems with highest
potential for value and return and builds from templates and predetermined maintenance lists to 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 multi-discipline, team-based approach to equipment management that emphasizes cooperative
maintenance (autonomous maintenance), team activities, zero defects / zero loss operations, and
cleanliness. Pillars of TPM include:
Improve equipment effectiveness and reliability
Target management and quality metrics
Failure source location and correction
Autonomous maintenance by operators
Checklists and accountability
Basis for Clean, Lubricate, Adjust, Inspect, Repair (CLAIR)
Preventive and Condition-Based Maintenance by maintenance department
Training to improve operation and maintenance skills
Early equipment management improve equipment design, manufacture and installation
Prevent problems occurring during new plant or equipment startup
TQM:
Total Quality Management
Transformation:
As used in this handbook: A rapid and dramatic process of total change in values, culture, organization and
procedure to attain significantly higher levels of performance and effectiveness.
Unplanned Maintenance:
Typically emergency or break-in maintenance that must be accomplished inside the normal planning cycle.
VFD:
Variable Frequency Drive: A method of controlling the rotating speed of an AC electric motor
APPENDIX B. 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 Performance
11. David Hilliard, Measuring Contribution to Corporate Profits
12. Robert D. Harrington, RCM, How to Install a Simple, Effective Program
13. Robert Ladner, Dennis Westbrook, and Anthony Smith, RCM Comes Home to Boeing
14. Kevin E. Cary, Management Issues Arising From the Use of Advanced Maintenance Strategies
15. Robert Matusheski, The Role of Information Technology in Plant Reliability
16. 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. Kyoumars Bahrami, A Maintenance Improvement Program-Benchmarking
36. John B. Bowles, Constant Failure Rate Models May Be Hazardous to Your Design
37. J. Thome and M. Stephens, The Challenge of Organizational Change
Appendix B. Handbook References 388
38. 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. Ron Moore, Reliability as a Corporate Strategy
53. Paul Smith, Controlling Demand to Increase the Value of Maintenance
54. George Van DerHorn, Beyond Detection Realizing the Value in a PdM Program
55. Borden Coulter, Benchmarking A Tool To Achieve World Class Maintenance
56. Hal Aikens and Sunitha Zacharia, Reinventing Maintenance: How Far Up the Learning Curve Are We?
57. D.A. Casada and S.L. Bunch, Reducing Operating and Maintenance Expenses Through Periodic Engineering
58. Blake Van Hoy and Bob Bracher, The Road to Proactive Maintenance
59. C.M. Pisozczyk, Acceleration Reliability, Availability and Maintainability
60. Jill Farmer, David Walker, and Chris Yerger, Fundamental Elements of Reliability Management Applied to the
Maintenance Organization
61. Andrew Ginder, The Reliability and Maintainability Balanced Scorecard
62. Sal Della Villa, R.F. Steele, Risk and Asset Management -- An Industrial Focus on Reliability
63. Roy Schuyler III, A Systems Approach to Improving Process Plant Performance
64. Robert G. Batson, Expanding the Role of Preventive Maintenance to Enhance Product Quality
65. S. Bradley Peterson, Strategic Asset Management
66. Richard Elliott and Jerry Shockey, Saturn Corporation Maintenance Strategy and Assessment Process
67. John Flude, Combining Process Modeling and Reliability Centered Maintenance to Optimize Maintenance
Schedules
68. Gilles Zwingelstein, Reliability Centered Maintenance - An Efficient Alternative to Implement a Smart
Maintenance Policy
69. Lawrence B. Durham, Performance-Based Maintenance Training in the U.S. Nuclear Utility Industry
National Manufacturing Week 99 Conference Proceedings (three volumes)
70. Gino Palarchio, The Physical Asset Management Profession in 2010
71. Randy Mattison, Selling Equipment Upgrade Projects to Management
72. Dean Gano, Root Cause Analysis and the Bosses Thinking
73. Ernst & Young LLP, The Connected Enterprise
74. Eric Marks, Infocentric Automation: An IT View of Controls
75. Bill Maggard, Achieving Total Quality
76. Steve Clouther, CMMS and Enterprise Asset
77. Klaus Blache, Reliability and Maintenance Operations For Your Competitive Advantage
78. Jo-Ann Bellucci and Andrew Jardine, Optimizing Reliability Maintenance Decisions
National Manufacturing Week 98 Conference Proceedings (three volumes)

79. Robert D Harrington, How to Install a Simple, Effective, RCM Program
80. Scot Bryon and David Gross, Reliability and Maintainability Through Process Improvement
81. Gary Grossard, Improving Inventory Performance and Bottom-Line Profits
82. Thomas Westercamp, Management Strategies for Maintenance Process Improvement
83. David Staat and Al Lawler, Increasing Up-Time A DuPont Success Story
84. 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.
Appendix B. Handbook References 390
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.
116. 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.
117. Goldman, Steve. Vibration Spectrum Analysis, A Practical Approach. New York: Industrial Press, 1991.
118. Mitchell, John S. Introduction to Machinery Analysis and Monitoring. Second Ed. Tulsa, OK: Penwell Publishing,
1993.
119. White, Glenn D. Introduction to Machine Vibration. Bainbridge Island, WA: DLI Engineering Corp., 1993.
120. Wowk, Victor. Machinery Noise and Vibration Measurements and Analysis. McGraw-Hill, 1991.
121.SAP/NRX White Paper, Maximizing the Benefits from Implementing Enterprise Asset Management
122. Arensman, Russ, Re-Aiming Arrow, Can CEO William Mitchell get all the employees behind his new strategy at
Arrow? Electronic Business, April 2005, Vol. 31, No. 4
123. Harry, Mikel, Schroeder, Richard, Six Sigma, The Breakthrough Management Strategy, Doubleday, 2000.
124. Robinson, Charles J. and Ginder, Andrew P., Implementing TPM, Portland, Oregon, Productivity Press, 1995
125. Jay Padesky and Daniel A. DeFazio, Tracking KPIs Across Multiple Plants and Business Units, Maintenance
Technology, February, March 2006
126. Tichy, Noel M., The Cycle of Leadership, with Nancy Cardwell, New York, Harper Business, 2002,
127. Arnold, Paul V., The Remedy, Reliability Prioritization Initiative Helps Eli Lilly Insulin Plant Focus On Whats
Important, Reliable Plant, May-June 2006
128. Elton Ebersole, Eric Newhard, Virender Parmar, Jeff Scaramozzino, George Veitengruber Asset Management
At A Global Pharmaceutical Company, Conference Proceedings, Maintenance & Reliability Technology Summit,
Rosemont, IL May 24-27, 2004
129. Comments from interviews and workshops conducted by the author:
Allied Signal
AMOCO
Champion International
Commonwealth Edison
Dofasco
Dubal, Dubai Aluminum
Duke Energy Systems
DuPont
DuPont, Tyvex
Ford Production Systems
Koch Industries / Flint Hills Resources
KoSa
Navistar
Nebraska Public Power District
NOVA Chemicals
Pacific Gas & Electric
Rhom & Haas
Sasol
Saturn Corporation
Southern Company Generation
Tennessee Eastman
APPENDIX C.
PRACTICAL ASPECTS OF IMPLEMENTING A PHYSICAL ASSET OPTIMIZATION PROGRAM
From a paper delivered by John S. Mitchell

MARCON 2004, The University of Tennessee Maintenance and Reliability Conference
Programs and methodology for improving asset effectiveness and productivity are widely promoted. It is
relatively easy to find literature, training courses, conferences and organizations addressing many
elements of a Physical Asset Optimization program. Most are narrow solutions in a sea of opportunity.
Few begin with an idea of building on current conditions; strengths, opportunities, weaknesses and
barriers. Fewer still address corporate culture and commitment, working level acceptance of the necessity
to improve or the range and depth of support needed for the program to succeed. All are highly important
issues that must be addressed in detail and fully satisfied.
How to achieve the objectives obtain the necessary results is a second issue. Motivating people
with varying interests and priorities as well as accommodating conflicting demands on the time of those
individuals needed most for a successful transformation process are important challenges. Add to this the
difficulty of convincing Plant Management and Production that asset effectiveness is a business issue in
which Production participation is essential and not simply a maintenance initiative gives some idea
of the size of the mountain that must be climbed.
How well and how quickly these two issues can be resolved in a real environment to produce measurable
improvements will, to a large extent, determine the success of the Physical Asset Optimization program.
Take any single program element; RCM, TPM, PdM/CBM, PM, RCFA, etc., all excellent practices yet how
does one determine which to apply, where and in what order?
The answer has multiple dimensions. It begins with business information to direct prioritization. Do market
conditions place greatest premium on production effectiveness (availability, yield, quality), cost or some
combination? Are there market or seasonal variations that affect value potential? What and where are the
greatest detractors to production availability? What are the greatest cost consumers? What and where
are the greatest opportunities for improvement; short and long-term? Although a reliability professional
might prefer to address asset effectiveness, many executives will demand reduced cost. Both of these
seemingly conflicting objectives can be achieved simultaneously by a reliability driven Physical Asset
Optimization program directed to reducing the need for maintenance (eliminating work) through improved
reliability!
Without a great deal of insight and acceptance of these basic issues from the inception of a program, it is
easy to spend a barrow full of money and lots of time without achieving needed results. And that leads to
another question: How to establish benchmark performance, how accurate are measures performance
and how is performance to objectives monitored?
Fortunately there are answers to all these challenges. Applied with diligence and driven by champions
there are clear opportunities to make an Physical Asset Optimization program a key and recognized
element of the overall success and prosperity of your business.
APPLICABILITY
The Physical Asset Optimization program must be equally applicable to equipment; rotating, reciprocating
and stationary, piping and pressure vessels, valves and control components, electrical transformers and
distribution components and structures. In short all the physical assets found in a typical manufacturing
facility (manufacturing used in the broadest sense to include all industry whose output is a product).
Greatest results are achieved when stewardship of all physical assets is consolidated in a single,
integrated Physical Asset Optimization program the program described in this handbook. With a fully
integrated program, reliability processes are finely tuned for results. With common processes personnel
can contribute expertise across conventional discipline boundaries. For example, a mechanical specialist
could immediately fit into an electrical component reliability investigation without having to learn another
reliability analysis procedure.
Appendix C. Practical Aspects of Implementing a Program
392
Describing an integrated Physical Asset Optimization program is far too involved for a single paper in
fact there are books on the subject. To reduce the subject to a manageable size this deals with practical
issues involved in justifying, establishing and implementing a Physical Asset Optimization program.
ESTABLISHING THE BASIS FOR A PHYSICAL ASSET OPTIMIZATION PROGRAM

To establish the basis for a Physical Asset Optimization program one must first examine the overall
process. On the cost side of the ledger there are four principal avenues for increased asset effectiveness:
1. Increased reliability that reduces requirements for maintenance
2. Preventive and Condition Based Maintenance directed to eliminating failures
3. Improved work efficiency (wrench time) that will allow the same work to be performed more
effectively by fewer people
4. Reduced material costs
For those beginning the journey to optimum asset effectiveness and productivity it will be necessary to
demonstrate the ability to reduce asset care costs by at least 30% and probably 40%. This while
simultaneously increasing availability in order to gain support for any program requiring expenditures from
executives who are likely focused totally on cost reductions.
In most manufacturing facilities improving wrench time by 20% to 30% to around 55% to 60% is a
reasonable objective. But labor (wrench time) represents only about 50% of the total maintenance cost
(assuming labor and materials are divided approximately 50% 50%). Improvements in wrench time are
primarily achieved through better Planning and Scheduling directed to achieving something around 85%
planned work adherence to a weekly schedule.
Material cost is the other 50%. In the materials area a typical facility may be able to reduce costs by 10%
to 15% through strategies including consignment stores, increased use of outsourcing, reduced inventory
and eliminating unnecessary purchases for local stashes, squirrel stores.
Implementing optimized Preventive and Condition Based Maintenance programs will go a long way
toward warning of problems prior to failure but neither will eliminate the problems themselves. World-class
facilities originate 50% to 60% of their total maintenance from Preventive and Condition Based tasks; the
division between the two is heavily dependent on the plant, specific process and equipment. Cost
reductions are gained by eliminating damage and downtime caused by unexpected failures combined
with improved maintenance effectiveness achieved through planned as opposed to break-in corrective
maintenance.
Working through reasonable estimates of what cost reductions can be achieved from improving work
efficiency, materials management and implementing programs such as Preventive and Condition Based
Maintenance the answer typically comes up short of the objective by 10% to 15%. That leads to a
question of where to go for the missing increment.
Fortunately there is an answer that not only provides the necessary 15 or so percent but also contributes
greatly to success in all the other areas a reliability driven program focused on safely eliminating the
necessity for work. A reliability improvement capable of doubling Mean Time Between Failure (MTBF) will
reduce maintenance cost by 50% and increase availability by the same amount! In practice, most find
they can readily identify a relatively small population of bad actors on which focused efforts to improve
reliability will yield huge results. As one example, a medium sized facility with approximately 2,000 pumps
having an average MTBF of 40 months or so identified about 200 as bad actors. When this population
was removed from the total the remaining 1,800 pumps had an average MTBF of approximately 60
months close to a world-class total. In this case where to focus efforts is obvious improving MTBF of
the bad actors will have far greater benefits than any other action.
DIRECTING THE PHYSICAL ASSET OPTIMIZATION PROGRAM

No matter from which direction results are required, it quickly becomes apparent that the Physical Asset
Optimization program must be driven from a reliability perspective of eliminating problems and increasing
MTBF. This simultaneously eliminates work and increases production availability. The philosophy will have
the greatest impact on asset and cost effectiveness, lead to improvements in other areas and enhance
both Preventive and Condition Based Maintenance. Sole focus on processes such as RCM, improved
Planning and Scheduling, Preventive and Condition Based Maintenance are likely to come up short.
The reliability focus must be strongly embedded in every aspect of the Physical Asset Optimization
program. It begins with a mission statement described in the next section and continues through to the
continuous improvement and institutionalization phases of the transformation required to achieve greatest
asset and cost effectiveness and productivity.
THE MISSION STATEMENT

At the very beginning of a Physical Asset Optimization program it is essential that the mission and
objectives are clearly presented so all involved understand the necessity, goals and value proposition of
the transformation process.
In the typical modern manufacturing facility there is a continuing requirement to produce more and reduce
costs not necessarily in that order. In most cases both must be accomplished simultaneously.
The mission statement for a Physical Asset Optimization program must clearly spell out objectives and
broadly specify how they will be met. The following is offered as an example:
The Physical Asset Optimization program at (your plant) will establish and maintain a controlled,
sustainable level of asset reliability and cost effectiveness necessary to assure current and long-term
competitive performance in our business. Results must satisfy shareholders and customers and assure
our job security. Mission objectives will be met by a combination of program elements designed to safely:
Increase production availability, run rate and quality
Reduce the amount and cost of maintenance through reliability improvements that increase Mean
Time Between Failure (MTBF) and thereby eliminate the need for work
Optimize asset productivity processes including work Planning and Scheduling, Materials
Management, Preventive (PM) and Condition Based Maintenance (CBM)
There are several key points in the Mission Statement: First the program must be both controlled and
sustainable. Although harvesting the so-called low hanging fruit will be an important part of the value
generated by initial implementation of the program, long-term sustainability must be a strong
consideration from the beginning. The primary focus on reliability means not simply performing tasks
better and more efficiently but making every effort to safely eliminate repair requirements altogether by
increasing MTBF.
This gives the Physical Asset Optimization program a double-barreled impact improved availability and
reduced costs! Eliminate work safely is therefore the strategic, mission orientation. There may be a
tendency to look first at increasing work effectiveness. However, how much value can be recovered from
improving work process effectiveness and what happens when work processes have been optimized in
an environment of many unexpected failures?
A reliability-oriented program directed to eliminating work will lead to work process optimization the
reverse is not always the case. With a reliability strategy, elements can be inserted to take advantage of
immediate opportunities rather than attempting to develop a strategy in a fixed sequence or from a series
of short-term fixes as is so often the case in a world dominated by short-term thinking.
RELIABILITY METRICS AND BEST PRACTICES

MTBF, Mean Time Between Failure, is the key reliability metric or measure of performance. Facilities
beginning a reliability driven Physical Asset Optimization program must have the data necessary and
know how to calculate MTBF for classes of equipment.
Knowledge of world-class benchmarks for classes of equipment is also essential. As one example,
leading facilities are reporting average MTBFs for process pumps of over eight years (96 months)!
Performance significantly below indicates opportunity for improvement. Lacking world-class benchmarks,
classes of equipment can be compared internally. What is the maximum, average and minimum lifetime?
Any significant difference between the maximum and average values points to opportunities for
improvement. Additionally, equipment significantly below the class average indicates bad actors with
improvement opportunities.
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Distribution around an average may lead directly to corrective action. A low average MTBF with most
equipment clustered around the average leads to a conclusion that the problem is most likely systemic
and site wide. Poor lubrication or coupling alignment are equipment examples of this category.
In a reliability driven Physical Asset Optimization program best practices are inserted to meet a given
objective. As one example, an optimized lubrication program would be installed in response to an
opportunity defined by equipment failures caused by poor lubrication. Failure Modes and Effects Analysis
(FMEA) would be applied to a system or equipment with a poor history of reliability from seemingly
unconnected failures. Root Cause Failure Analysis (RCFA) is used to develop corrective action for a
single problem or cluster of clearly related problems. In all these cases reliability drives process
application not the other way around.
BEGIN THE PHYSICAL ASSET OPTIMIZATION PROGRAM FROM IMPROVEMENT OPPORTUNITIES

As stated, the optimum Physical Asset Optimization program is formed around the concept of improving
reliability to eliminate work. This reduces stress on work and material processes and leads to greater
effectiveness. Improving work effectiveness through better Planning and Scheduling as well as optimizing
materials procurement and stores management are essential elements of the program but may not be the
starting point.
As stated, practices such as RCM/FMEA, TPM, PM, PdM (CBM) and RCFA dont drive but rather are
proven tools that are applied to meet specific, identified requirements. For example, instead of beginning
with RCM, TPM or CBM, the Physical Asset Optimization program begins with a benchmark process to
identify performance gaps that will generate real value. The benchmark process must include a business
model capable of translating performance improvements into sustainable bottom line value. With this
model, availability improvements can be compared to cost reductions gained by improved reliability and
greater effectiveness. Many might say that a given improvement to production availability far outstrips a
cost reduction gained through improved reliability. Without an accurate business model that includes the
relationship between increased production and reduced cost that statement cant be made with any
certainty.
Without data you are just another person with an opinion!
The initial benchmark process will typically consider performance in vital areas such as the following:
Reliability of major equipment measured by MTBF
Production effectiveness measured as OEE or Uptime
Maintenance cost measured as a percentage of Replacement Asset Value (RAV) or another
accepted industry benchmark
Process effectiveness in key areas:
Stores inventory as a percentage of RAV
Work performed on work orders as a percentage of total work
Schedule compliance to a one week work schedule
Backlog
Emergency, break-in work as a percentage of total work
Preventive and Condition Based work as a percentage of total work
Preventive and Condition Based task compliance
If data is incomplete or missing altogether, a fairly good picture of process effectiveness can be derived
through interviews with directly involved maintenance and production people.
PROGRAM IMPLEMENTATION
Although the Physical Asset Optimization program itself is far too complex to cover in a paper, the next
few paragraphs will discuss some of the issues and challenges that must be addressed and resolved as
the program moves form implementation to institutionalization.
Focus
First and foremost keep the mission and results expected uppermost in mind. As a program progresses it
is very easy to be diverted from the laser strategy necessary for success. New practices are inserted and
old practices refined based on their contribution to the program objectives. A lubrication program is a
simple example.
In most facilities disciplined lubrication, regular analysis of the lubricant in critical equipment, consolidation
of lubricants and a quality storage and issue system will pay large dividends in terms of improved
reliability. With this stated it is necessary to establish current costs of less than optimal lubrication prior to
program insertion so that the return can be demonstrated conclusively.
Initiation of a Condition Based Maintenance program requires the same justification and demonstration of
value. Many people have experienced the demise of highly successful programs due to a withdrawal of
funds because the return couldnt be demonstrated.
Reliability Action Teams
Early during the Physical Asset Optimization program there will be a necessity to construct teams to
accomplish one or more objectives. Reliability action teams identify deficiencies, develop prioritized
corrective plans and establish metrics to demonstrate progress and value contribution.
Reliability action teams need to be facilitated and coached by an experienced, impartial individual. Teams
must be kept on track identifying and developing solid and practical corrective action for real deficiencies.
There are a number of methods for prioritization. In some cases problems with a lesser potential value
may be addressed earlier in the process to gain the quick results necessary to build enthusiasm and
support.
The best teams will be assembled from people with varying experience and interests. A typical reliability
action team will have participation from production, maintenance, engineering, supply and possibly
finance to assure access to all the viewpoints necessary to gain ultimate success. Production participation
cant be overstated. In fact, Production Superintendent participation and drive assures alignment,
essential support and ownership from a crucial position.
In a typical reliability team, individuals are likely to pursue totally different approaches to the same task.
See if you can identify with the following individual characteristics:
A practical field oriented individual who has spent a great deal of time as a troubleshooter ride
in, identify and correct the immediate problem and ride out into the sunset with another notch for
success.
Very detail oriented; typically an office engineer who is very good with procedures and drawings,
may be uncomfortable in a field environment where people must speak up to be heard, decisions
must be made and actions taken with incomplete data.
Fascinated with data and what can be identified from data thrilled with the discoveries that may
follow hours or even days going through tremendous amounts of data.
Doggedly committed to one or more improvement initiatives may believe each is the solution to
the worlds problems and is willing to drive for however long it takes to convince everyone else.
A team has real strength when all these characteristics are combined so that the individuals build off one
another. Each individual contributes complementary strengths that lift the others. The result will be
sounder than any one could have devised alone. Most important all will have ownership.
Foundation Documentation and Processes
Physical Asset Optimization programs require solid documentation and foundation processes:
Foundation documentation and processes include:
P&IDs up to date and complete
Master Equipment List (MEL); complete, up to date verified list
Plant, system and equipment hierarchy with cross search capability, e.g., plant wide failures due
to lubrication
Computerized Maintenance Management System (CMMS) with a solid Planning and Scheduling
process in place and fully utilized including standard work instructions and current Bills of Material
Materials and Stores Management including optimized inventory levels and pay on use
consignment stores
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If best practice foundation processes (Planning and Scheduling, Materials and Stores Management) and
a fully populated data structure dont exist at the beginning of the program they must be constructed.
Processes must be reviewed for function and compliance to best practice benchmarks.
Some may suggest that foundation processes and best practices must be introduced in sequence in a
Physical Asset Optimization program. In truth, improvements in several areas may be introduced
simultaneously provided the program is thoroughly understood and well managed, overall objectives are
kept clearly in mind and a plan is designed for convergence as improvements take hold. As one example,
there is no reason why simultaneous improvements cannot be implemented to Planning and Scheduling
and Materials Management at the same time a major reliability improvement program is being developed
and installed.
Data and Information
Essential data includes elements to reveal the metrics cited in an earlier section. Production availability
recorded for reliability purposes must include the total time from specification product to specification
product for a given outage. Detractors from production effectiveness; availability, run rate and quality must
be very specifically identifiable. Likewise, the source of unreliability and cost must be objectively available.
As an example, the failure of a valve that can be repaired in a couple of hours yet interrupts production for
a day or more must be calculated at the full loss. This demands an accurate data structure including a
disciplined method for recording component affected, conditions found and action taken on all work
orders in a searchable form (codes) prior to work order close out. Likewise, materials management must
guarantee replacement parts are stored properly, available when needed and at optimum inventory levels
considering time constraints.
PERSONNEL ISSUES
People involved in the transformation process will hopefully participate willingly. Even though so doing
may ultimately take them well outside what many may consider their comfort zone at the beginning of the
transformation process. An effective mission statement must make it clear why the transformation is
necessary. Everyone understands that industries are a business that must be competitive to survive and
provide secure jobs for employees. In any business from grocery stores to pet grooming, competitive
means delivering a quality product at a competitive price. The competitive price must produce sufficient
profits to satisfy shareholders (owners) and pay employees at a satisfaction level. Industries that arent
competitive cant meet either of the two basic criteria for satisfaction and wont survive.
When implementing a Physical Asset Optimization program, many of the people involved will resist the
transformation process. Excuses include weve never had to do it this way before why now? The
heavy emphasis on reliability improvement is simply to reduce employment. Process and documentation
requirements being demanded as part of improving work effectiveness are simply positioning the
company to outsource jobs. Why should I help the company with tasks that are designed to eliminate my
job?
All the preceding have answers. For the Physical Asset Optimization program to succeed, answers must
be very specific and effectively address personal concerns. People naturally resist change the greater
the change the greater the resistance. For most employees, any major change in the way they are
accustomed to doing things is seen as a threat to their personal security. Many will conclude the asset
productivity transformation process is simply a layoff in disguise. General statements made by the
company to justify the process such as We must make changes to more tightly align our manufacturing
with market and customer requirements and reform our cost structure for greater consistency with
business and market realities. dont offer much comfort to an employee fearing job loss. Far better to
state from the beginning that the transformed company will have fewer employees and explain exactly
how the reduction will be accomplished.
Many, if not most who have gone through a major transformation find that the length of time required for
the transformation typically three to five years combined with workforce demographics, allows any
downsizing required to occur through retirement and other normal attrition. With long-term cost objectives,
projecting workforce levels is a relatively simple calculation. The result will go a long way toward
establishing a positive climate for chance by relieving the fear of job loss. A principle of transformation that
cannot be overstated:
For the transformation process to succeed work requirements must be removed before people!
THOUGHTS ABOUT MAINTENANCE

In virtually every facility there is some tension between Production and Maintenance. Constant effort is
required from both sides to keep tension and the inevitable flare ups at the minimum level necessary for
greatest effectiveness. Both Maintenance and Production have to recognize that effectiveness must be
increased and costs reduced in order to assure continuing prosperity and their jobs. People must work
together within an environment of diminishing resources to keep the engine going. Competitive pressures
combined with business economics simply do not tolerate inefficiency. There are many examples of
production units that have been downsized, decommissioned or sold due to their inability to produce
product at a competitive cost. The positive side of that coin is the investment and expansion that goes into
production units that demonstrate superior performance.
The Maintenance and Production organizations must recognize that both are on the same team, working
to achieve the same objectives. With that said, many of the processes and practices that may have been
accepted in the past cannot continue under the new conditions of intense pressures on cost they are
simply too inefficient.
Cost of manufacturing, and the necessity to approach world-class competitive levels to maintain business
profitability demanded by shareholders, are the fundamental issues that creates tension between
Production and Maintenance. The real issues dont begin with numbers of people, and the support they
might seem to represent, but rather what level of maintenance costs can be supported by a given
business. This is followed by the translation of business supportable costs into personnel levels and
finally, how can the number of people that can be supported by a given business assure production at the
necessary levels. There are answers to all three questions that lead to several conclusions.
Estimating competitive performance is fairly straightforward. Worldwide surveys taken over the last fifteen
or so years show that maintenance expenditures necessary to perform competitively in the chemicals
industry are currently about 2 percent of Replacement Asset Value (RAV). The percentage has dropped
about .5 percent in ten years and will probably continue to drop by another .2 percent or so. A current
facility Replacement Asset Value will lead directly to a site objective for maintenance expenditures.
Finance can provide unit Replacement Asset Value so that each unit can determine the level of
maintenance expenditures that can be supported by a specific business area. Business supported
maintenance expenditures can be converted to approximate manning levels by assuming that
maintenance is approximately 50percent material and 50percent labor in North America and applying a
fully burdened average cost of labor. The best companies will take this several steps further by estimating
manning levels at the required level of expenditures by skill including planning and scheduling. This in
turn can be converted to accomplishable work and work that must be eliminated through a combination of
improved reliability and increased wrench time attained through better planning and scheduling.
It must be noted that the 2 percent Replacement Asset Value target for maintenance expenditures
assumes world-class uptime, between 85 percent and 95 percent depending on the process and specific
type of production units. Unit uptimes significantly below world-class standards mean that considering
actual output, the plant is smaller than assumed by the RAV. Thus, reduced uptime requires either an
increase to the percentage attained by the competition or a further cut in maintenance costs to be at a
business sustainable level at the lower output.
Gone are the days when any operating unit can afford to have people sitting around to assure instant
response to virtually every conceivable demand or upset. Manning levels that were common twenty years
ago would be laughable today and are constantly being forced lower by pressures on product cost.
Reactive maintenance, viewed by some as fast, responsive support, is actually the least efficient means
to achieve maximum effective uptime at optimum cost. Pressures on cost demand improved reliability in
order to reduce requirements for maintenance to match the costs and people available to provide
maintenance. It should go without saying that reactive maintenance must be kept to an absolute
minimum.
With less people and fewer resources driven by business economics the need for coordination and
mutual support between Production and Maintenance has never been greater. Operators should gladly
help maintenance when and where they can. It is to their mutual benefit for if the plant cant run there is
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no need for operators or maintenance. Having equipment cool, clean and operationally ready for
scheduled maintenance is essential to save time and must be a part of the culture. In production terms
the added cost of having people standing around for a couple of hours because equipment isnt ready for
scheduled maintenance is ten times the actual cost. This occurs due to product profit margins that
probably average around 10 percent across most industry requires $10 of production output to balance
every $s worth of wasted time. When this message gets across operators with spare time will gladly act
as maintenance helpers during off-hours when three hands may be necessary to perform a given task.
Whenever someone is called in on overtime to perform a task that could have been accomplished by a
person on shift, all should recognize that the cost has to be made up by increased production or a
reduction somewhere else it is a zero sum.
Maintenance has a similar obligation to Production. Equipment turned back for operation must be tested
and ready. When equipment is returned post PM in inoperable condition everyone loses. Time wasted is
money lost and it certainly doesnt help the reputation of maintenance or the team spirit that must exist
between Production and Maintenance.
The longest possible warning of changing conditions and deteriorating components is essential for the
production effectiveness necessary to retain a competitive market position. Many times a condition that
will require maintenance is known well in advance yet it is not communicated until the last minute. When
anyone recognizes a deficiency they must provide a "heads up" to assure action is planned long before a
crisis occurs.
Scheduling work as far in advance as possible is absolutely necessary to assure most efficient use of
limited resources. The best facilities achieve 60 percent compliance to a monthly work schedule; 90
percent plus to a weekly schedule. Many have difficulty complying with a daily work schedule. Schedule
changes that should have been anticipated, rapid changes in priorities and classifying every work order
as an emergency must be avoided. Production has to understand the full cost and lost efficiency
whenever a schedule is broken, just as maintenance understands that not all requirements can be
anticipated. World-class performance requires understanding, flexibility and discipline by everyone
involved.
Constant personal communications are a key vehicle to gain mutual success. Most people will make
additional efforts to work productively, show greater flexibility and be much more objective in their
conclusions toward those who they see regularly and are hopefully friends. Maintenance should have a
strong presence and participation in production meetings. Likewise, production should participate in
maintenance meetings. In the world of limited resources each must understand the others constraints
and problems. To take the concept further, every Maintenance Superintendent should meet informally with
the applicable Production Superintendent at least twice a week to go over any problems or rough spots.
Joint Production / Maintenance focus or action teams to identify and solve specific problems are an
excellent means to simultaneously acquaint people, solve problems that make everyone's life easier and
build the cooperative team spirit necessary to work together efficiently. There is a great deal of tolerance
and good will among people who have won together as a team. Who is happier and more forgiving, the
Super Bowl winner or the team that is privileged to have first draft pick by virtue of last in the standings?
Asset Optimization encompasses the entire range of asset productivity. Driving increased reliability to
eliminate requirements for work by extending Mean Time between Failure (MTBF) and more effective
PMs are obvious components. Asset Optimization also has to include the cultural changes necessary for
everyone to understand that we are operating in a new environment. A new environment where efficiency,
effectiveness and minimizing wasted time and material are all important to keeping the facility a thriving
source of profitable income for the company and jobs for the people who make it all possible.
SUSTAINING AND INSTITUTIONALIZING THE PHYSICAL ASSET OPTIMIZATION PROGRAM

The Physical Asset Optimization program isnt fully sustaining and institutionalized until all memory of the
old way has been replaced by the optimum way. This will typically require five or more years of constant
effort, close management and coaching. When champions can depart and people can switch jobs without
any loss of continuity or momentum you know your program is institutionalized and is sustainable. That
doesnt mean the task is complete for a Physical Asset Optimization program includes never ending
continuous improvement where the principles are continually applied to identify and capitalize on
opportunities.
APPENDIX D.
PRACTICAL THOUGHTS REGARDING RCM IMPLEMENTATION
From a paper delivered by John S. Mitchell

Noria Corporation Lubrication Excellence and Reliability World 2005
RCM is publicized as the latest silver bullet solution to developing an optimum maintenance program.
Many organizations have and are expending large amounts of time and resources implementing RCM to
gain assurance that their systems and assets have maximum production availability. While some
companies do not experience the vast improvement that may have been expected, most will comment
that the requirements and discipline necessary to implement RCM have many positive non-monetary
benefits.
Six considerations are outlined below to assure the time and resources expended on RCM gain maximum
value:
1. RCM was originated to reduce maintenance requirements by applying optimized tasks focused
on specific failure modes to assure system function. During the implementation of an RCM
program it must be recognized that the objective must be to preserve function while
simultaneously reducing maintenance.
2. Since there will always be more opportunities for improvement than resources, the first systems
and assets selected for RCM should be those that constitute greatest risk (threat) to production
availability and cost objectives. Greatest value and return is gained by a prioritized
implementation taking largest threats (and opportunities) first. This is the risk ranking process
described in Chapter XIII.
3. Ultimately, any successful reliability improvement program must improve availability and reduce
cost. Care must be exercised to assure that RCM is directed to increasing reliability and uptime
while simultaneously reducing the need for maintenance.
4. In a production / manufacturing facility more than ten years old, most probable failure modes
have likely occurred at some time in the past. Failure history and current estimates of potential
problems should be used as a reasonable predictor of future performance.
5. In some cases, an improved maintenance program by itself is incapable of meeting availability
and cost objectives of a system or asset. Material and component upgrades, even outright
replacement, may be required.
6. The RCM program must be kept evergreen. Conditions, the operating context, as well as the
probability and consequences (risk) of failure may change necessitating corresponding changes
to the Asset Optimization process.
EFFECTIVENESS AND VALUE

Amid all the fanfare about RCM, there is a growing uncertainty about effectiveness and value. There
appears to be a gap between what suppliers state can be delivered and typical results. A general
consensus is emerging that classical RCM is too resource and time intensive to be applied cost effectively
across a broad range of industrial equipment. Classical RCM is only justified when directed to a small
percentage of high-risk equipment and systems where the time and resources necessary to complete the
process have a clear return.
The conclusion was substantiated by a reliabilityweb.com RCM survey initiated in early 2005. Of the
respondents who had implemented RCM, approximately 50% expressed satisfaction with the results.
Those who had discontinued RCM programs cited the following reasons:
Appendix D. Practical Thoughts Regarding RCM Implementation 400
Insufficient manpower to support the analysis 24%

No (or too little) management support 23%
Analysis completed, results never implemented 17%
Produced desired results project concluded 15%
Too difficult 7%
Did not produce the desired result 6%
Funding ran out 5%
No support for changing from current program 4%
Not effective 2%
Reliabilityweb.com survey, January 2005
A key question: if you are a third or fourth quartile performer in terms of maintenance costs, should RCM
be the first program implemented to begin the journey to competitive excellence? Where do you start? If
you are experiencing a large number of failures and accomplish most maintenance reactively, which
should be accomplished first, an RCM program or identifying the principal causes of failure utilizing RCA
and implementing focused corrective action? How about the opposite end of the scale? Is it an effective
use of resources for a first quartile performer to implement RCM on all systems and assets to improve
performance even further?
The answer to both the questions may be the same RCM is a powerful tool when used selectively to
improve performance. Facilities at both the top and bottom of the performance scale can gain by utilizing
RCM very selectively to devise an optimum management strategy for low performing systems and assets.
For a mid sized facility, applying RCM to all equipment and systems will probably cost approximately
$500,000. At that level of investment, RCM will have to show a minimum of $750,000 improvement within
18 months or so. Those considering RCM must recognize that the RCM process must return an attractive
ROI.
And these observations lead into the first factor that should be considered to assure success of an RCM
program:
ELEMENTS FOR SUCCESS

Apply Resources in Risk Ranked Order
Accomplishing an RCM analysis requires a large investment of resources. A typical medium sized system
may require a couple of man months, possibly more, to step through all the essential elements of RCM
defined by the SAE Standard and formulate an optimum maintenance program. In this situation it makes
sense to prioritize systems and assets so that entities with the greatest known and probable deficiencies
are addressed first. That action will assure that scarce resources are applied selectively to those systems
and assets that will gain greatest value and return
A good case can be made that preceding the RCM process with a risk ranking of systems and assets will
assure that time and resources gain greatest value. The risk ranking is designed to identify systems and
assets that have greatest risk threat to operational requirements and cost objectives and hence
opportunity for improvement. Put another way, every facility has systems and assets that are behaving
well and seldom, if ever experience problems. Whether it is design, installation, the operating context, to
use a term from RCM, or the current maintenance program, these systems and assets dont need
immediate attention.
Risk ranking will provide assurance that initial efforts are directed to real problems with greatest potential
for recovering value in terms of both availability and cost. Likewise, resources are not expended on
systems and assets that are performing well. To assure greatest opportunities are addressed first and the
number is manageable, the process must be forced to categorize no more than 10 percent to 15 percent
of the total systems and assets in the highest risk group.
Improve Availability AND Reduce Cost

Today, most companies in North America have gone as far as they can by reducing numbers of
personnel. Outsourcing labor may reduce cost, however, that too quickly reaches a floor. The only way to
permanently reduce maintenance costs is by increasing reliability so there is less maintenance required.
The success of this concept can be observed in modern automobiles where maintenance requirements
have been designed out. As a result, todays automobiles are far more reliable with maintenance a
fraction of what was required only fifteen to twenty years ago.
Industrial facilities contemplating RCM recognize that a maintenance program must increase availability
and reduce cost. A methodology that adds work, such as more PM with added cost and / or downtime to
accomplish, probably wont prove acceptable over the long term. Added work risks later abandonment to
reduce costs and / or improve production availability. Thus, in addition to asking what should be done
to predict or prevent each failure the improvement program must also ask what can be done to eliminate
the failure altogether. Heavy emphasis should be placed on the latter.
Use History as a Basis
Classical RCM was developed as a means to scientifically formulate a safe and effective maintenance
program for systems and assets that had never been operated. Today, most industrial systems and
assets on which RCM is applied have ten or more years operating history. Over that period, those
responsible for operation and maintenance should have acquired a reasonable idea of past and potential
problems, causes and consequences. While not all inclusive, history should certainly be considered when
implementing RCM.
There may be concern that records are inaccurate, history is largely anecdotal and causes have never
been formally determined through a rigid Root Cause Failure Analysis (RCFA). Despite these concerns,
there are ways to determine the frequency of problems. For example, purchase records for rolling
element bearings and other components will provide an accurate basis for determining MTBF
independently of maintenance records. If this examination reveals a particularly low MTBF (less than
about 48 months for rolling element bearings) investigating the lubrication program to optimize receipt and
storage, issue and application through disposal is probably a better investment of resources than RCM.
Since most failed motors are either repaired by an outside service shop or replaced, purchasing records
will be an accurate indicator of motor MTBF and repair costs.
If a system or asset has operated essentially trouble free for an extended period, longevity would indicate
the existing maintenance program (whatever it may be) is more or less adequate. This successful system
or asset would probably fall well below the threshold set for initial application of RCM in the risk ranking
order discussed in the section Apply Resources in Risk Ranked Order on page 400. If applied at all to
systems and assets with a successful history, RCM should ask what if any improvements are necessary
rather than beginning with a blank sheet of paper. Major changes from the program that produced
success should be closely evaluated.
If extending overhaul interval is one objective of the reliability improvement process, history must be
examined even more closely to determine whether unexpected conditions that could cause a forced
outage with an extended overhaul interval were found and corrected at prior overhauls.
Additionally, one would hope that RCM is not the first or only method applied to mature systems and
assets. For example, can the application, effectiveness and value potential of CBM be ascertained if there
is no institutional knowledge of the technology, its application or the results that can be expected for the
facilitys systems and assets? Should an RCM program be necessary to justify an optimized lubrication
program?
Consider Upgrades or Replacements
Most facilities operate some systems and assets that are not suited for the current service. They may
have been designed incorrectly, for service conditions that never occurred or conditions that occur so
infrequently that design compromises werent required. Additionally, service conditions might have
changed since design and installation.
During the RCM analysis of equipment with known problems one must ask whether modifying or
replacing unreliable assets is a more cost effective solution than increased surveillance and more
maintenance. Those conducting RCM must assure that the process will consider design and material
improvements as well as outright replacement as an alternative course of action compared to more

extensive maintenance.
Keep the RCM Program Evergreen
In most industries the operating context may change over time for both systems and assets. The
necessity for greater availability (less excess capacity), more intense competition (demanding reduced
costs), operating at higher rates (business / market demands), changing operating mode, e.g., base load
generating to peaking, changes in the composition of raw materials (refining and petrochemical
industries) and more restrictive environmental regulations are a few examples.
All of the above can significantly alter the risk (probability and consequences) of failures and downtime.
Thus, a system or asset that was reliable when installed and a maintenance program that was highly
effective when implemented may not continue to be so if conditions and priorities change. For this reason,
the risk rank of systems and assets, assumptions used in the reliability improvement process and the
maintenance program itself must be periodically reviewed in order to ensure the activities are most
effective and meet latest requirements.
There have been a number of recent cases where Production has elected to operate two 100
percent centrifugal pumps in parallel to gain an additional 10 percent to 20 percent capacity. This
practice can be a very hazardous and must be studied in detail to ensure the pumps do not go
below minimum flow and / or a slightly stronger pump does not force the weaker so far back on
its curve that if fails rapidly.
CONSIDER STREAMLINED RCM

Streamlined RCM has been given a bad name, primarily by purists who dont have to deal with real world
priorities and the limitations on time and resources present in an operating facility. If implemented properly
Streamlined RCM can be a substantial time saver while at the same time preserving the benefits of
classical RCM.
The most generally accepted form of streamlined RCM applies the following four principles outlined in the
preceding paragraphs:
1. Initial prioritization based on a risk rank to establish sequence of application and thereby assure
greatest value. Initial prioritization will assure that the first systems and assets subjected to RCM
are those where the program will do the most good and create the greatest benefit. Furthermore,
whatever is accomplished, and very few facilities will have the luxury of being able to subject
every system and asset to RCM, initial prioritization will assure the most pressing threats and
opportunities are addressed within resource availability.
2. Maintenance templates utilized to assure that vital experience is fully utilized, minimize redundant
effort required for essentially identical assets. While classical RCM requires constructing a
maintenance strategy from the ground up, the use of readily available maintenance templates can
save a considerable amount of time. The use of templates also assures a full range of industrial
experience is considered in the development of a maintenance program for common assets such
as motors, pumps, fans, gears and valves. In each case, common maintenance procedures can
be utilized effectively with variations to accommodate design details such as sealed or lubricated
bearings, the environment (operating context) including ambient and operating temperature,
exposure and aggressive contaminants. Variations in any of these areas may dictate additional
maintenance routines, altered intervals and expanded surveillance
3. Existing monitoring and maintenance processes considered in the analysis. Every system and
asset has some existing maintenance program. This may range from reactive, repair on failure to
condition based maintenance. In any case there will be a failure pattern or perhaps absence of
failures. If purely reactive maintenance has been the norm, the failure history should provide
valuable input as mentioned earlier. Similarly, there should be a history of conditions discovered
and repairs initiated as a result of condition monitoring. All existing information combined with a
risk / threat analysis will be considered in the Streamlined RCM process.
4. Periodic audits performed to assure the program is effective and meets latest requirements. The
necessity of maintaining the program evergreen has been mentioned. The Streamlined RCM
process institutionalizes periodic audits, reevaluation of conditions and conclusions to assure that
the program and results delivered continue to meet requirements. Have availability and Mean
Time Between Repair increased? Have costs been reduced? If the answer to both is yes, your
program is a success.
Summary and Conclusions
RCM is a powerful process. It forces discipline into the maintenance process, requires that vital
supporting documentation such as Process and Instrumentation Drawings (P&IDs) and Bills Of Materials
(BOMs) are up to date. Properly implemented RCM will arrive at an optimum maintenance strategy
meeting operating requirements and conditions. Having said that there are some caveats that are worth
repeating in order to ensure an RCM program gains greatest value and benefits:
Very few production facilities will have sufficient time and resources to subject every system and
asset to RCM. Creating maximum value requires prioritization to assure that RCM is applied, in
order, to systems and assets with the greatest need and opportunity for improvement. When
RCM is accomplished in priority order, implementers are assured that whatever RCM can be
applied within constraints will do the most good.
For most operating organizations history is valuable guidance of what can/might occur in the
future. Operators and mechanics can pinpoint systems and assets that give the most trouble.
Similarly, assets and systems with a good history are likely to remain tame in the future. When
going through the RCM process, history is a good guide to indicate the most likely failures and
failure modes. Here again prioritization is key.
Recognize that reducing the need for maintenance is a key element of meeting objectives for
increased availability and reduced cost. People implementing RCM should be on the alert for
improvements in materials, added and/or upgraded components and even outright replacement
to eliminate rather than mitigate problems. While increased maintenance may accomplish the
latter, only the former will meet all cost and availability objectivespermanently.
An RCM program must be viewed as a continuing process rather than a one-time event. As conditions
change, requirements will also change. Periodic audits and continuing improvement are the hallmarks of
a successful reliability improvement program and a vital step on the road to excellence.
APPENDIX E. SCORECARDS
Scorecards are becoming an increasingly popular method for identifying elements necessary for success
in Reliability and Maintenance and providing an objective benchmark to measure own performance
compared to best practice. Scorecards are available for evaluating the effectiveness of work and stores
management processes (Reliability Magazine Volume 10, Issue 3) and Chapter IX. During 2005, Jack
Nicholas introduced a comprehensive RCM scorecard to measure the extent and compliance of a RCM
program that was subsequently published by and is available from reliabilityweb.com. The Reliability,
Vibration Condition Monitoring and Lubrication Program scorecards contained in this Appendix add to this
body of knowledge with a list of the principal elements for each program.
The Reliability Scorecard was developed during four 90-minute workshops conducted at IMC 2005,
sponsored by reliabilityweb.com. Additions and modifications suggested by workshop participants were
incorporated into the version contained in this Appendix. The Vibration Condition Monitoring scorecard is
based on material originated by Bill Prior. The Lubrication scorecard was developed by Noria Corporation
from their comprehensive audit procedure.
SCORECARD OBJECTIVE
The scorecards contained in this Appendix are an effort to outline the total scope, content and best
practice guidance for comprehensive reliability, vibration and lubrication programs. The scorecards are
intended to define elements that should be considered for inclusion in a new program as well as provide a
basis for auditing the content and effectiveness of an existing program.
RELIABILITY SCORECARD OVERALL DESCRIPTION AND CONTENT

The reliability scorecard, in spreadsheet format, divides a comprehensive reliability program into twelve
program categories. The scorecard consists of two worksheets as follows:
Category Summary
Detailed Scorecard
The first worksheet of the Reliability Scorecard, Category Summary, lists the twelve program categories
and the highest weighted elements within each category. In the spreadsheet, available from
reliabilityweb.com, the second column on the Category Summary, Element Weight - %, calculates
automatically through the Detailed Scorecard (second worksheet) from Category Weight - % entered
manually in the third column. This will be explained in detail later.
Many of the following comments assume access to the Excel version available at reliabilityweb.com
Note: Elements in each of the twelve categories listed on the Summary worksheet have been
sorted by weight in descending order. This is intended to emphasize relative priorities of the
elements listed. It results in a different sequence than will be found on the Detailed Scorecard. If
there is any question regarding origin, the element weight cell in the spreadsheet will identify the
row in the Detailed Scorecard.
It also should be noted that the wording of elements on the Category Summary may differ slightly
from wording on the Detailed Scorecard. The description and quartile ranking on the Detailed
Scorecard provides an assessment of effectiveness. The Element Weight listed on the Category
Summary is the maximum. If a program has high plant and system reliability, optimum
maintenance costs, minimum emergency work, to name three elements, the Element Weight
listed on the Category Summary is the contribution to total program effectiveness. Taking the
logic further, the Category Summary implies that a reliability program with the elements listed,
performing at best practice levels, constitutes almost 80% of an optimum program.
The second worksheet within the reliability scorecard is the Detailed Scorecard. The Detailed Scorecard
lists elements of each of the twelve program categories in ten columns. The leftmost column lists
individual elements that are considered necessary for each program category. The next three columns,
Appendix E. Scorecards 406
from left to right, define necessity, comparative metrics and any additional requirements such as a charter
or procedure that must be published to meet requirements.
The fifth and sixth columns assign percentage weights for each element within the category. Individual
weights for each element within the category are manually entered as a percentage of 100% in the fifth
column. Element weights within the reliability program as a whole are automatically calculated based on
the relative weights entered in the third, Category Weight, column on the Category Summary (first
worksheet) and repeated in the top row of each category.
Note: The spreadsheet is constructed such that changing a Category Weight (third column) on
the first worksheet, Category Summary, will apply the change to the corresponding category in
the Detailed Scorecard. All program element weights within the scorecard category automatically
recalculate using the relative weights in the fifth column of the Detailed Scorecard. The only
requirement when adjusting either category weights in the Summary sheet or element weights in
the Detailed Scorecard is to manually maintain the total at 100% shown in the last line of the
Category Weight column in the Summary, top line of the Element Weight column in each
category on the Detailed Scorecard.
To provide a check on the math and formulas, the Program Weight listed in the top row of each category
in the Detailed Scorecard, shown as a percentage, is the value transmitted from the Category Summary.
The last row in the same column, expressed as a decimal, sums the individual program weights for each
element within the category. If the formulas and entries are correct the two numbers (absolute) will be
identical.
The four rightmost columns on the Detailed Scorecard denote quartile spread between the best
performers and the rest. As an example, first quartile performers should have an overall plant, system and
equipment availability greater than 95%. An overall availability less than 70% indicates fourth quartile
performance. It is recognized that there may be adjustments required for specific processes and industry
groups.
Several essential elements of a total maintenance program such as Work and Stores Management
processes are not listed beyond metrics that are key to the effectiveness of a reliability program. For
details in these areas see Chapter IX. For other essential elements such as RCM and RCA, the scorecard
only asks whether the program is in place and effective. In both cases, details necessary to evaluate the
completeness of these processes / programs and assess their effectiveness are available in literature on
the subject. The details will be necessary to assign partial scores indicating the completeness and
effectiveness of the program.
Use of the Reliability Scorecard
The scorecard can be used in any way. As one way to get started you might begin as follows:
1. Review the Category Summary worksheet to determine if all the elements you consider important
to your site are listed.
During the preparation of the scorecard, and especially during the workshops conducted at
IMC 2005, it is very apparent that a wide diversity of opinions exist on the composition of a
reliability program and weight of elements depending on the specific facility and type of
process. Hopefully this scorecard will provide you with a good starting point.
2. Review the Detailed Scorecard, second worksheet. Are there any elements listed on the Detailed
Scorecard that are important to your site but dont appear on the Detailed Scorecard or Category
Summary? You can easily add to the Scorecard or Summary
It is assumed that that you are sufficiently competent with Excel to be able to add rows on
both the Summary and Scorecard, insert the correct formulas in the weight cells and the
necessary formulas on the Summary and Detailed Scorecard to link the two. If there is any
doubt, you can view current cell formulas and simply copy an existing cell formula into an
added cell and revise the references as necessary.
3. With all the important elements listed on the Category Summary, adjust the weights to obtain
more or less the importance you consider applicable for your facility. You may have to adjust
weights on the Detailed Scorecard as well to obtain the results you are seeking.
Remember, to make the weights work you must manually adjust the weights of each category
on the Category Summary and individual elements on the Detailed Scorecard to total 100%.
Scorecard results can be plotted on a Spider chart. An actual example will be found directly following the
Detailed Scorecard. The spider chart requires an addition to the Excel spreadsheet published on
reliabilityweb.com. If interested in the plot spreadsheet please contact the author.
VIBRATION CONDITION MONITORING PROGRAM SCORECARD

A Vibration Condition Monitoring Scorecard based on material provided by Bill Pryor is found directly
following the Reliability Scorecard. The Vibration Scorecard is divided into twelve program categories.
Each category describes an aspect of the program and contains a list of elements necessary to achieve
best practice performance. Elements are listed in two columns:
1. KPI / Best Practice
2. Rationale / Objective
The KPI / Best Practice column is a brief statement of best practice requirements. The second column,
Rationale / Objective, describes the reason for the best practice and amplifying information when
applicable.
Scorecard results can be plotted on a Spider chart to identify opportunities for improvement. An actual
example will be found directly following the Vibration Program Scorecard. The spider chart is derived from
an Excel spreadsheet tabulation of estimated performance in each of the twelve categories. Please
contact the author if interested in the plot spreadsheet.
LUBRICATION SCORECARD
A Lubrication Program Scorecard provided by Noria Corporation follows the Vibration Scorecard. In a
similar format to the Vibration Program Scorecard, the Lubrication Program Scorecard is divided into
seven categories of best practices with one or more elements in each category. Results can be plotted on
a spider to identify gaps to best practice and thereby show opportunities for improvement.
Acknowledgements
The contribution of all participants in the IMC 2005 reliability scorecard workshops is greatly appreciated.
Your comments and suggestions contribute significantly to the range and depth of the Scorecard and the
value that will be gained by all users. Special thanks to Terrence OHanlon for encouraging the effort and
sponsoring the four workshops at IMC 2005. Very special thanks to Jack Nicholas for continuing words of
encouragement, thoroughly reviewing multiple drafts and numerous highly constructive comments.
Thanks to Bill Pryor, Noria Corporation and Heinz Bloch for the material and comments on the Vibration
and Lubrication Scorecards.
I hope the scorecards will be helpful for you. Please feel free to contact the author if you have any
questions or ideas for improvement.
John Mitchell
August 2006
Reliability Program Scorecard

Created by John S. Mitchell; jsmitchell@worldnet.att.net
August 2006
Reliability Program Category Summary
Reliability Program Elements Element Weight -% Category Weight -%

Results / Reliability Program Effectiveness
High plant, system and equipment availability 2.7%
Optimum maintenance costs 2.7%
Minimum Emergency, break-in work 2.6%
Few unexpected failures last two years 2.0%
Failure rate trending down 1.9%
Total 11.9% 17%
Charter, Organization, Administration, Training
Skills management, training and certification in place and documented 1.2%
Control plan established for sustainability 1.1%
High level management champion actively involved 0.9%
Risk analysis and ranking procedure established and followed, < 20% in highest risk 0.9%
Reliability champion appointed and actively leading program 0.9%
Specifications, procedures and practices documented, up to date and available 0.8%
Component, Condition, Cause, Action codes established and in use at WO close out 0.8%
Document revision / configuration control process in use 0.8%
Program business value contribution determined 0.6%
Vital facility and and equipment records up to date 0.6%
MTBF determined 0.6%
Total 9.0% 15%
Institutional Values, Culture, Relationships
Good partnership between Production, Maintenance 2.8%
Reliability culture in place and effective 2.0%
Training and coaching available and effective 1.2%
Change Management process in place and effective 0.8%
Total 6.8% 8%
Maintenance Requirements Analysis and Program Development RCM / FMEA 5.0% 5%
Continuous reliability improvement program active and effective 2.4%
Participation by Production and Maintenance 1.6%
Reliability improvement teams chartered and active 1.4%
Total 5.4% 8%
Failure Analysis RCA
Corrective action reviewed, applied and checked for effectiveness 1.0%
Implementing procedure established and followed 0.9%
Failure analyses accomplished 0.9%
Total 2.8% 6%
Reliability Modeling, Prediction, Lifetime Analysis 2.0% 2%
Maintenance, Maintainability for Capital Projects
Comprehensive maintenance strategy in place and followed 1.8%
Witnessed testing of critical equipment 1.8%
Comprehensive procedure followed to assure optimum reliability and maintainability 1.4%
Total 4.9% 7%
Supporting programs
Lubrication Program 8.0% 8%
Condition Monitoring / CBM Program in place and effective 2.6%
Lubrication; chemical and wear debris analysis 2.2%
Vibration, on-line continuous and periodic 2.1%
Temperature; infra red imaging and measurement 0.7%
Process / operating performance 0.7%
Motor electrical analysis 0.5%
Air and gas leakage; out, through and in (hazard, waste, lost efficiency) 0.4%
Ultrasonic -- active (thickness measurement), passive (leak detection) 0.3%
Steam trap performance 0.3%
Transformer oil, gas and temperature 0.2%
Total 10.0% 10%
Time based Preventive Maintenance (PM) Program 8.0% 8%
Lubrication system integrity 1.5%
Clean and orderly plant and workspace 1.1%
Precision shaft alignment utilized effectively 0.9%
Total 3.5% 6%
Total 77% 100%
Vibration Condition Monitoring and Predictive Maintenance Best Practices

Based on material originated by Bill Pryor: bill.pryor@vibralign.com
Program Results
KPI Rationale / Objective
Results and benefits demonstrated, Clear demonstration of financial benefits generated by the program,
recorded and reported in financial terms. preferably in terms of bottom line profit, are essential to ensure program
support and continuation. Avoided cost should be viewed with
skepticism, as finance and executive management may not accept
program credit for events that did not occur.
Annual number of unexpected events, Minimize unexpected events, objective of zero potentially predictable
surprises events.
Facility average vibration level; equipment Objective is to have in place a means to assure total awareness of
greater than 20%, 50% and 100% above equipment in questionable condition; a watch list, that identifies
the facility average identified and reported. potentially failing equipment for added surveillance and corrective
Number of vibration measurements in action.
alarm. Secondary objectives:
Create awareness of the importance of vibration level on reliability.
Objective is a trend down.
Minimize measurements in alarm by correcting problems, not
resetting alarms. Uncorrected alarms desensitize personnel to
significance of Condition Monitoring program.
Objectives, Culture, Values, Awareness, Motivation and Performance

Best Practice Rationale
Specific program objectives published, Specific program goals are necessary to keep resources and efforts
periodically reviewed and updated. fully aligned. Periodic review and updating are necessary for currency
and to assure latest practices are incorporated. All involved in the
program must be aware of the goals and working toward compliance.
Participatory, proactive culture in place An energized, ownership culture is essential for success. Many believe
within the institution and group. that efforts to achieve the correct culture will pull all activities to
Clear group and individual motivation, maximize equipment reliability.
enthusiastic commitment and ownership
to gaining current and long-term goals,
program success and results.
Reliability, PdM mindset is present.
Appropriate performance measures / Performance indicators established. Progress in developing and
metrics in place to track performance. refining PdM work habits and program success developed, tracked, and
highlighted.
Cost benefit analysis conducted regularly Essential to maintain program support. Where cost / benefit indicates
and publicized. low performance, improvements / modifications are necessary.
Greatest portion of work directed to Greatest effectiveness gained by directing the majority percentage of
analysis, earliest recognition of current time and resources to data analysis; searching for and identifying
and potential defects / failures, potential problems. This is the activity that has greatest value in terms
developing corrective action. Emergency, of production availability and cost optimization. Everyone must stay
last minute discovery recognized as focused on predictive / proactive activities to avoid the natural reversion
failures of the PdM process and indicative to reactive.
of deeper problems.
Appropriate management feedback to Management direction and feedback are essential to achieve
PdM department to confirm direction and successful results.
compliance to mutual goals.
Program Definition, Organization and Procedures

Program established with a clearly written Clear and complete program definition with detailed procedures are
governing procedure including specific required to provide consistency and quality assurance, retention of
program objectives that are fully defined valuable institutional knowledge, the basis for training and allow another
and connected to business objectives. individual to step in and come up to speed quickly in the event of
Procedure includes definition and personnel transfer or unavailability.
application of predictive and protective
monitoring, concise, detailed and clear
instructions for the application of all
process and technical elements within the
program. Procedure readily available;
understood and followed by all in the
group.
Fully defined organizational structure, RASCI chart developed, published and followed to assure awareness
roles and responsibilities and understanding of responsibilities within the program
Respected program champion / leader Success requires a respected leader / champion actively leading the
designated, actively leading and gaining program, including communicating and publicizing successes and
success. benefits to upper management in financial terms.
PdM department adequately staffed with Full use of current technologies such as automated reports and expert
personnel and equipment. systems speeds the processing of data necessary to maximize program
effectiveness and optimizes the use of resources.
Equipment risk ranking procedure in Risk ranking based on safety, production loss and cost is essential to
place and utilized to establish priority and determine a maintenance strategy, including prioritizing equipment to
type of monitoring. Top priority equipment assure the most effective monitoring process is applied. Limiting the
limited to no more than 20% of the total. percentage in the top priority assures focus.
Reporting requirements defined including Reporting practices must be clearly defined including content and
mandated use of analysis system addressees and convey all information required. Reported information
automated exception, diagnostic and must be easily understood, automated to the maximum degree possible
effectiveness reports. and stored in a readily accessible location with equipment and
component history.
Criteria for assignment of equipment Established as a standardized procedure to call attention to risk and
malfunction severity status. action requirements
Written quality specifications for new and Required to assure that new and repaired equipment begin life in a
repaired equipment: reliable condition.
Balance
Shaft alignment
Soft foot
Piping flange alignment
Procedure for collection and preservation Procedure must include requirements for recording visual observations
of condition data. and repairs.
Guidelines for use of Root Cause RCA is the essential closure to condition monitoring to assure problems
Analysis, RCA. are not simply reported but identified and eliminated. Procedure must
include requirements for recording observations and repairs.
Compliance to Industrial Safety Practices

Best Practice
Proper use of PPE Full use of PPE specified in writing and followed
Appropriate communication of job Route lists should include all safety considerations, entry requirements,
requirements including potential safety inaccessible areas, etc.
hazards. Conveyed in program
procedures and verbally prior to work.
Applicable documents reviewed prior to Assure all safety precautions and requirements are understood
job performance
Optimum Application of Technology

Comprehensive written procedure in- Required to fully define the optimum application, deployment and
place for the application and use of limitations of monitoring systems, sensors, technology and software. To
monitoring and test equipment; include application details (use, installation / mounting, frequency
transducers and software. Includes range, monitoring type and diagnostics) and calibration requirements
system, measurement and monitoring for:
application, selection, installation,
limitations, calibration requirements and
On-line continuous monitoring and protection
gap voltage specifications for proximity Installed, scanned diagnostic monitoring
probes.
Remote, permanently installed transducers, periodically
monitored
Walkaround program
Detailed procedure for monitoring highest Objective 100%, continuous protection plus continuous or periodic
risk equipment. diagnostic analysis (walkaround).
Detailed procedure for monitoring Objective: 100% of second tier monitored with periodic walkaround
medium and low risk equipment. systems; 50% to 80% of remainder monitored with some form of
predictive methodology.
Guidance for test point selection based Standard method for designating transducer locations, installing
on machine type and configuration, transducers to assure consistency and frequency response meeting
transducer and monitoring application. monitoring requirements (especially for high frequency applications
such as gears).
Procedure for selecting monitored Required for optimum monitoring and earliest fault recognition
variable and frequency, alarm bands,
acceptance and operating alarm levels.
Process in place defining how to assess Formal process necessary to assure consistent quality and provide the
condition, report anomalies and provide basis for training.
decision support.
Effective use of all monitoring software Essential to utilize all capabilities of monitoring software. Automated
screening and automated reporting screening, reporting and diagnostics are necessary to gain greatest
functions. Use of Expert System to gain productivity from PdM personnel.
greater effectiveness and assist in
problem recognition and diagnosis.
Vibration monitoring database defined Definition of monitored frequencies, number of lines resolution,
and secure with logged access and averages, alarm bands, overall and band alarm levels, procedure for
record of changes. periodic review by equipment type and risk as applicable. Security in
effect to limit access for the purpose of changing monitoring
characteristics, alarm parameters and levels.
Guidance for the use of related Integrated multiple technologies such as lubricating oil analysis and
technologies to confirm results. Thermography are often needed to confirm results and solve complex
plant equipment problems.
Ability to perform special diagnostic Additional tests may be required to further localize and diagnose faults.
tests as a follow up to degrading Tests include: phase measurements, ODS, application of
equipment. complementary measures.
Use of PdM technologies in related areas Use of group experience and technologies in related areas Shows
(other than machine testing) desire to be part of the solution.
Ability to perform corrective actions such PdM group needs to be the core of equipment knowledge and problem
as in place balance and alignment. correction. At some point and for some tasks, work needs to be turned
over to specialists.
Records of successes, case histories Successes and case histories are essential to publicize benefits of the
developed and maintained as institutional program and build the continuous learning needed for success.
knowledge, training material.
Effective use of applicable outside Availability and use of outside expertise to provide additional support,
resources to confirm results/provide confirm critical results and get second opinions where warranted.
second opinion.
Written procedure specifying use of Root Use of Root Cause Analysis is essential to fully grasp causes of
Cause Analysis. expense and downtime on critical equipment and components. RCA
provides closure for PdM assuring problem is eliminated.
Process to assure continuous Continuous review of technology, diagnostic processes and new

improvement. applications is essential to keep program producing maximum benefits.
Scope, Application and Frequency of Condition Monitoring

Correct equipment being monitored Review equipment in the PdM monitoring program. A strategy and plan
effectively. must be in effect and used to determine PdM requirements.
Development of testing guides will assist in the application to machines
and frequency of testing.
Scheduled time interval between PdM Scheduled intervals between measurements based on risk,
measurements conforms to criticality / redundancy, etc. Considers equipment criticality, time from recognition
risk, time interval between detection and of a problem and action required, cost and consequences of failure.
failure. Testing interval periodically reviewed and adjusted as required for
optimum effectiveness
Time expended on PdM accurately Formal schedule of all PdM work including data collection maintained
accounted. Testing schedule and time and available. Time expended accounted accurately. All required for
accounting controlled by monitoring accurate cost / benefit.
software or CMMS.
Monitoring schedule adherence. Objective > 90%. Track overdue equipment as performance indicator.
PdM schedule adherence stressed as a priority.
Guidance for reducing the PdM testing Procedure for progressively reducing the interval of diagnostic
interval upon abnormal change and/or monitoring for equipment in degraded condition to assure ample
conditions Schedule altered for degraded warning in the event of further degradation.
equipment.
Procedure established and followed for Establishing baseline performance for new equipment and post repair is
baselining and analyzing condition of new an essential quality check and necessary for subsequent monitoring
and post repair machinery. and analyses.
Out of service equipment tracked and Out of service equipment must be deleted from routes, immediately
monitored as soon as restored to service. checked when returned to service
Application of On-line Monitoring and Remote Transducer Systems

Online monitoring system application and On-line monitoring of high-risk equipment is essential for earliest
optimum use defined; systems installed, warning of potentially high impact events that can occur between
in service and utilized by operations and periodic PdM trending periods. Expand use of online monitoring
maintenance. technologies along with PdM on critical equipment as part of overall
process improvement.
Monitoring equipment current and well Minimum number of channels in alarm and out of service
maintained
Control room alarms utilized and Alarms provide warning of changes in condition. Must be observed and
observed; operators aware of alarm taken seriously. Alarms and levels recorded on DCS and in plant
conditions and cause. Alarms and levels historian
recorded on DCS and in plant historian.
Alarm level setpoints procedurally Alarms established for maximum effectiveness, response to change,
controlled and protected from minimum false alarm, setpoints controlled
unauthorized alteration.
Computer software to allow for data Access to all signals at the monitors, preferably at a remote office
review from remote location (i.e. do not location via LAN required for greatest effectiveness.
have to be at the monitor)
Application and utilization defined for Due to equipment criticality, monitoring may be required at some
remote transducers, periodic monitoring locations that are inaccessible during operation. Permanently installed
sensors, wired to an accessible connection box will permit safe data
collection from inaccessible areas. Remote sensors should be installed
on equipment where safety precludes access during operation (cooling
tower gearboxes, machining centers, paper machines) or where time
savings (equipment requiring climbing) would result.
Diagnostic data collected and stored for Historical data required for diagnostics
review
Application and Effectiveness of Walk-around Program

Program established with a written Procedure defines program and allows for expansion in controlled
procedure. manner. Test practices and testing methodology documented in
procedure and consistent throughout the facility.
Database and routes effectively Testing methodology established for all plant equipment. Logical,
established. efficient routes established for PdM data collection.
Equipment measurement locations; Essential to assure consistent, repeatable measurements
clearly marked and accessible
Sensor type and mounting optimized for Sensor mounting determines accurate frequency response. While
frequency range of interest. magnetic mounting to permanently attached discs are acceptable for
relatively low frequencies, e.g., motors, they should not be used on
gears where it is necessary to identify changes at high gear mesh
frequencies.
Appropriate integrity tests conducted Self check procedures provided and used to check for tightness, leaks,
during routine (walk around) data etc, during walkaround PdM data collection. Adds discipline to
collection. Effective communication with mechanical integrity inspections.
plant departments.
Procedure for defining necessity for Repeat to confirm measurements that have shown significant changes
equipment retest since the last measurement.
Effectiveness of Reporting, Communications and Follow up

Clear and concise reports and Reports targeted to information user. The PdM group should become
communications. the lead in initiating work activities identified by condition monitoring.
The organization must move away from fire fighting.
Reports provide sufficient detail so that Reports and information need to remain at technical level appropriate
person with limited knowledge of the for the targeted audience.
technology will fully understand
information conveyed.
Reports integrated with results from other Multiple technologies; e.g., vibration, lubricating oil analysis,
PdM technologies thermography, utilized to totally define equipment condition.
Responsibility assigned for initial Imperative that condition information is received and fully understood by
communication and follow up to assure all who have responsibility for operation and action. Includes
recommendations are in the facility responsibility for initiating Work Request, Notification, post job briefs
system, received and fully understood by and follow-up. Direct follow-up communication with appropriate
all who need to know / are charged with departments to assure understanding and action.
responsibility for action.
Status and exception reports transmitted Full use of information within the organization is essential for maximum
to and utilized by Operations, return.
Engineering, Maintenance, Planning, etc.
Procedure in place and utilized to assure Follow up of repair results required to assure PdM group learns from
PdM group is informed of actual diagnoses. A report showing before and after results demonstrates the
conditions found when malfunctioning results and develops a better understanding of PdM.
equipment is disassembled including:
components affected, extent of failure and
estimated cause.
Post correction results and savings Documentation detailing results of repair and inspection findings is
communicated to all involved, including essential to maintain support. Communicate before and after results to
finance. departments performing corrective actions based on PdM
recommendations.
Mechanism for feedback and program Incorporate program improvement suggestions from the end users of
improvement to assure full satisfaction. the information. Conduct periodic reviews of PdM group activities with
departments using PdM information to keep program focused.
Quality Assurance of Vibration Test Equipment and Software

Instruments and software of current Instrumentation and software must be in good condition and up to date
technology and revision in terms of calibration and revisions. Automation and expert systems
should be incorporated to assist in data processing.
Software and firmware revisions Awareness of updates and improvements
Calibration of data collectors and Data collectors and transducers should be checked at least annually
transducers and whenever discrepancies are noted.
M&TE equipment storage Secure, air conditioned storage
M&TE equipment usage records Traceability to measurements for quality purposes
Bug list for equipment and software, Essential to track potential errors and create awareness of
disposition for next anticipated upgrade improvements from suppliers
Personnel Qualifications, Training and Certification

Certification per ASNT and/or ISO Certification by ASNT/ISO.
standards. Goal should be to have all
PdM group members certified to at least
ISO Category II in their discipline with
lead in each discipline certified to
Category III.
Written training plan defining training for Training plan driven by new technology and personnel, program
at least a quarter ahead for all PdM group opportunities, weaknesses
personnel.
Training in associated practices such as All PdM group should be trained in Root Cause Analysis (RCA), RCA
RCA. facilitators with detailed training can come from PdM group.
Technical training in related areas The PdM group is a resource for precision maintenance practices. PdM
technicians should receive training in areas related to their discipline.
For vibration specialists these include alignment, balancing, root cause
analysis (RCA), precision maintenance, bearing installation and checks
(sleeve and rolling element), along with equipment specific training in
construction, operation, overhaul and troubleshooting.
Detailed training for Data Collection Instrument and software specific training is required to allow for full
Technicians utilization of PdM instrumentation
Continuing Education Staying abreast PdM group members should participate in public technical conferences
of technology changes: participation in and users meetings to stay current, abreast of changes in technology
public technical conferences and users and aware of best practices. Company only conferences tend to
meetings. become inbred, self congratulatory rather than learning.
Cross discipline training Certification in related disciplines. Goal is to have all group members
trained to at least Category I in all PdM group disciplines. Provides
greater understanding of the relationships between technologies and
flexibility for unanticipated situations.
PdM awareness education for Managers, Essential to establish the awareness necessary to assure
Engineers, Maintenance Crafts understanding and correct decisions. Training to include benefits of
PdM compared to PM, reactive, technology strengths, limitations.
Training and certification records Essential to have up to date records of all training and certification
complete, up to date and covering all
program skills
Proficiency and Use of Precision Alignment and Balancing

Current equipment and software in use. Require latest equipment to assure maximum productivity and
effectiveness.
Awareness and use of appropriate safety Safety in all tasks essential
precautions
Training and certification complete and Sufficient people trained and certified
documented.
Written procedures: Balancing: single/2 Procedures required to assure consistency and quality, preservation of
plane balance trial weight, weight vital records.
placement,
Record retention previous data Balancing and alignment records maintained and accessible.
available and utilized
Alignment - Capability to perform or Alignment fundamentals necessary for PdM analysts.
working knowledge within PdM vibration
group.
Lubrication Program Best Practices

Material provided by Noria Corporation
For a more complete audit process please contact Noria Corporation; noria.com
Best Practice / Results Requirement / Rationale
Program Results
Minimal equipment failures due Few failures due to faulty lubrication demonstrate efficacy of program. Complete
to faulty, contaminated, lack of analysis of all failures with lessons learned and future avoidance action
lubrication. Cause of any implemented is essential.
failures identified and
corrected.
Equipment life maximized Opportunities to proactively extend equipment life by controlling lubrication-
through the application of related root causes (forcing functions) that include abrasion, contact fatigue,
precision machinery lubrication adhesion, cavitation and other wear mechanisms that lead to equipment failure
practices, including are identified and pursued.
contamination monitoring and
control.
Program Definition, Organization
Comprehensive, plant wide Lubrication program must include a comprehensive, written procedure to assure
lubrication program established consistent, high quality standards, including lubricant selection, application,
with a written procedure; fully receipt, storage, issue, replenishment, contamination control, analysis, and
functioning in total compliance handling, etc. All personnel aware of and conforming to best practices in all
with current best practices. aspects of lubrication including knowledge of lubricants, lubrication requirements
and systems, function of various methods of lubrication and necessities for
optimal lubrication.
Procedural documentation and Awareness of lubrication best practices and continuing efforts to improve
institutional awareness of best lubrication quality, delivery and system integrity are essential for optimum
lubrication practices including reliability. Issues include system design, commissioning, integrity and
lubricating systems, system cleanliness; ability to monitor lubricant quality and quantity; operation of the
materials, system operation lubrication system including controlling temperature and assuring full delivery of
and optimum methods of lubricant to component parts.
lubricant delivery.
Management committed to best Management clearly understands and fully supports the necessity of effective
lubrication practices lubrication in optimizing the health and reliability of mechanical equipment.
Facilities
Lubricant storage properly Lubricant storage area must be properly designed, clean and well organized to
designed, clean and well assure incoming quality control; avoid contamination during storage and issue;
organized. minimize the risk of mixing lubricants and enable contamination control. The
process of lubricating is simplified by employing intuitive tagging systems (e.g.
color/shape codes, etc.). The required hardware is available and utilized to
properly store and transfer lubricants (e.g. filtration systems, dedicated storage
devices, non-reactive transfer containers, etc.).
A suitable and well-equipped For larger organizations a dedicated lubrication laboratory should be considered
lubrication laboratory is for the program. The laboratory provides the physical organization of the
available for used oil analysis. program, a space for analysis and training and demonstrates the importance of
lubrication. For smaller organizations, a strategic relationship should be
established with a suitably equipped third-party laboratory. Capabilities of the
laboratory to support oil analysis in a timely fashion is periodically audited.
Lubricant Selection and Integrity

Lubricants properly selected for When selecting lubricants manufacturers recommendations; dissimilar machines
the application; sub performing that may be sharing a common lubrication system; operating and ambient
lubricants not substituted as temperatures; loading; machine contact mechanism; service interval and other
part of a standardization operating and environmental conditions are carefully considered. Recommended
initiative. lubricant is not compromised for plant or corporate wide standardization.
Lubricant supplier selected for Selection of a lubricant supplier based on lubricant quality, range of lubricants,
quality and service support technical product support and service; including response time. The hidden
reliability and overhead costs associated with changing suppliers are
recognized.
Lubrication Systems
Oil lubricant selection and Oil application method (e.g. splash, spray, mist, circulating, etc.) selection
application systems optimized decisions carefully consider the influence of the ambient environment, including
for the service and potential contaminants; best practice oiling systems, including ring design and
environment. materials; frequency of start-up and shut-down; temperature control
requirements; contamination control requirements; intervals for lube testing and
service; etc.
Grease selection and Grease application method (e.g. manual, single-point automatic, multi-point
application systems optimized automatic, etc.) selection decisions carefully consider machine access for re-
for use. lubrication, operating and environmental factors that necessitate more or less
frequent lubrication, geographic concentration of like machines and other factors
that will influence the effectiveness of the method and hence the reliability of the
equipment. All personnel performing lubrication fully aware of and observant of
cleanliness standards.
Contaminants excluded from Aggressive efforts are taken to exclude contamination by sealing tanks and
lubrication systems sumps tightly; selecting high quality vent protection (filter breathers, desiccant
breathers, expansion chambers, etc.); proper shaft seal and gasket selection
including use of components such as bearing isolators; proper installation and
maintenance; use of passive deflection devices where appropriate and the
employment of modern methods to insure that the right kind of oil is delivered
clean to the machine (preferably through a filter).
Procedure and components in Appropriate efforts are taken to remove threatening contaminants from the
place to remove contaminants machine by properly selecting, sizing and designing filters and filtration systems
from lubrication systems. (including separators to remove water, varnish and other contaminants where
required). Where appropriate, periodic decontamination methods using portable
devices are employed to supplement other contamination control measures.
Oil Analysis Program

Oil analysis program Machines are properly targeted for oil analysis considering machine criticality;
established, in place and fully the need to closely manage the lubricants chemical health; the need to manage
functioning. lubricant contamination; the effectiveness of oil analysis to detect and diagnose
machine problems, and the effectiveness of other available condition
assessment methods. Effective methods exist for managing oil analysis data and
information.
Oil sampling procedure Oil analysis sampling locations are carefully selected to ensure that a oil
established; optimum sample analysis will reveal a representative picture of the lubricant's health,
points and intervals selected; contamination levels and machine health. Appropriate hardware has been
method of flushing provided installed to enable easy and safe extraction of the sample while the machine is
that assures accurate sample, operating while minimizing contamination of the sample.
avoids spillage.
Oil analysis test slates, targets Oil analysis test slates, target levels and alarm limits are carefully selected to
and alarms established and ensure detection of the lubricant and machine failure mechanisms expected on
followed. the system and to ensure measurement and control of contaminants that the
system is likely to ingest.
Documentation and Training

Lubrication process fully Lubrication practices are documented into executable work plans and
documented. procedures for lube/re-lube, contamination control, oil analysis, etc. to define
training and certification requirements and to ensure highest quality, consistency
and continuity of excellence.
Lubrication education and Lubrication education and training is a priority. Managers and supervisors have
training conducted and undergone basic awareness training on lubricants/lubrication fundamentals,
documented. contamination control and oil analysis. Others in the organization have received
in-depth training that is appropriate to their job. A plan and system exists for
lubrication skills assessment, proficiency certification and to periodically provide
refresher training.

Physical Asset Management Handbook

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PHYSICAL

ASSET MANAGEMENT HANDBOOK

By: John S. Mitchell

Edited: John E. Hickman

Contributors: Professor J. E. Amadi-Echendu

Acknowledgements and Preface................................................................................................................. v

VII. FINANCIAL RESULTS.......................................................................................................................... 125

XV. FUNDAMENTALS OF FLUID ANALYSIS FOR INDUSTRIAL MACHINERY......................................................249

APPENDIX A. GLOSSARY...................................................................................................................... 381

ACKNOWLEDGEMENTS AND PREFACE

I. DEFINITION, OBJECTIVES, BENEFITS AND OPPORTUNITIES

PHYSICAL ASSET OPTIMIZATION

Asset lifetime is conventionally divided into four stages:

THE ASSET OPTIMIZATION PROGRAM

Improve Production Availability

Meet Increasing Expectations for Quality, Reliability and Technical Integrity

Performing tasks well

Performing the right tasks

Figure 1.1 Effectiveness Requires the Right Tasks Performed Well

II. PROGRAM NECESSITY, EVOLUTION AND CHARACTERISTICS

Innovative practices combined with true empowerment produce phenomenal results.

PHYSICAL ASSET OPTIMIZATION

PHYSICAL ASSET OPTIMIZATION WITHIN A TYPICAL MANUFACTURING PROCESS

Business and Administrative Support

Finished Goods Raw Materials

Supply Chain and Process Control

Creates Value across the Entire Production / Operating Process

Administration, Production Operations Maintenance Finance,

Quality Capital Effectiveness

Purchasing Spare Parts

EVOLUTION TO PHYSICAL ASSET OPTIMIZATION

Cost Containment Cost Reduction Asset Optimization

Cost Center Reduced Resources Maximum Return on Assets

Maximum value delivered by optimizing flow, motion and first-time quality.

III. PHYSICAL ASSET OPTIMIZATION FOUNDATION PRINCIPLES

Improved coordination and communications.

OPTIMIZATION PROGRAM PRINCIPLES

Unifying Partnership between Maintenance and Production

Increase ROCE / RONA

Increase Asset Reduce Total

Market differentiation Increase Capacity: Improve

Figure 3.1 Physical Asset Optimization Focuses on Results

Costs Controlled by Reducing Requirements for Spending

Minimum Sustainable Cost

Figure 3.3 Intervention Improves Asset Effectiveness (129)

STRATEGY BEGINS AT DESIGN

Figure 3.4 Division of Maintenance Costs by Origin (108)

PROCUREMENT DIRECTED TO OPTIMIZING LIFETIME COST

QUALITY INSTALLATION IS ESSENTIAL

CORRECT OPERATION MUST BE ASSURED

OPTIMIZED MAINTENANCE IS A NECESSITY

4. Demand organizational discipline to follow established processes and procedures.

Figure 3.5 Maintenance Hierarchy

Analysis Work Work

Figure 3.6 The Basic Maintenance Process(129)

Maintenance Equipment Production Unscheduled Downtime -- %

Work Order Coverage (Non

Failure analysis complete

FMEA Reliability Improvement Process RCFA Failure Analysis -- Corrective

Figure 3.7 The Maintenance Process within Asset Optimization

The Maintenance Process must be Value Driven

Evolve into an Optimized Preventive and Condition Based Maintenance Program

Predictive / Identify and correct specific problems