TCO – Effective concept for the servicing of industrial plant

Individual service concepts are in demand in the market and an all-inclusive care is one of the key factors for success. REMA TIP TOP has therefore included so-called Total Cost of ­Ownership (TCO) models in its service program which ­presents all necessary service components in a structured and clear ­
fashion.

In literature, Total Cost of Ownership (TCO) is mostly described as an accounting procedure that helps companies to record and to reliably estimate all costs associated with capital investments. These not only include procurement costs, but also numerous different expenditures made that have an effect on profitability down the road. The overall goal is to examine known cost drivers more closely and influence their effects on operating or company results in a positive manner. TCO is, however, also a suitable aid in identifying hidden costs – preferably before an investment decision is made. Moreover, TCO permits a further, much more important examination perspective, namely that of increased utilization and effectiveness, in this sense almost identical in its meaning to that of the term ‘added value’. It has been shown that cost savings programs are not very sustainable, if they do not go hand-in-hand with well thought-out concepts for improvement of effectiveness and efficiency. In the areas of maintenance and servicing of industrial plant, many approaches to the improvement of operating results can be found and brought to the operator’s attention by specialized service companies.

There are various opinions about the TCO model origin in terms of time, form and content. Fact is that the basic concept was further developed, extended and modified to fit individual needs, with the result that it can be used today for almost any industrial process and also for the complex area of maintenance and servicing of industrial plants. The fact that up until now no binding regulations, norms or even principles on the subject of TCO exist must not necessarily be seen as a disadvantage, since the expectations regarding these economic processes differ greatly from one another. If the user‘s focus is on effectiveness and efficiency, then he hopes to achieve the desired output with the minimum input (“Do the right thing the right way”). The pure business perspective demands maximum returns within given budgetary restrictions. And finally, taking the cost-oriented perspective into consideration, the desired performance must be realized at the lowest cost.

REMA TIP TOP has adopted the basic principle of Total Cost of Ownership and has developed an underlying concept for the area of maintenance and servicing of industrial plant that can be simply modified to fit the individual needs of each plant operator. It assigns the highest degree of importance to requirements for effectiveness and adherence to budget limits. The reduction of maintenance and servicing costs are, of course, also of great importance within the basic concept. However, the traditional approach of controlling costs during good times and reducing these in bad times through drastic savings programs has been turned away from. It must be kept in mind that cost control or cost reduction possibilities are always limited. If a certain cost level has been achieved, it cannot be pushed further without resulting in negative consequences for the operation. If, in contrast, one interprets maintenance and servicing as a kind of investment, then it takes on a long-term character. If we look at industry sectors such as the processing and extraction of minerals or the manufacturing of chemical products or energy, it becomes obvious that they are maintenance-intensive with a high usage of spare parts. Let us take the case in which a new wear protection lining for a process container is twice as expensive as the one previously used. In a work environment that is strictly cost-oriented, negotiations with the supplier very quickly come to an end. If one regards the expensive lining as an investment, however, and the cost/benefit factor is analyzed more carefully, the discussion with the supplier can carry on considerably longer. An example: The downtime costs are assumed to be USD 50,000 per hour. The less expensive wear protection lining costs USD 10,000 and must be replaced every 12 weeks, requiring six men each of them working 16 hours. The more expensive wear protection lining indeed costs USD 20,000, but can be installed by the same team in only eight hours and must only be replaced every six months. A little bit of arithmetic clearly shows that the investment of USD 10,000 (the price difference) leads to a return on investment that would make any investment funds manager green with envy.

Is this kind of investment-oriented thinking transferrable to the areas of maintenance servicing? Is it possible to no longer regard service as a cost, but as an investment? Is there any chance that the term Return on Maintenance will ever become a part of our day-to-day vocabulary?

REMA TIP TOP has numerous practical examples, where the TCO Maintenance Model has been implemented with great success. In each case, the heterogeneous nature of the machine park, both technically and organizationally, meant that a customized solution was necessary that built on high-quality products and many years of knowhow. Examples are processing plants for nickel, potash and diamond ores, conveyor belt systems for the transport and handling of bulk materials of any kind and quantities or areas in power plants using fossil fuels. To a greater or lesser degree, certain process areas are subject to corrosion and/or wear and tear that demand an above-normal degree of attention in terms of proactive maintenance.

Plant operators contemplate in the meantime with key terms like life cycle, process optimization, availability guarantee, downtime management or key performance indicator.  The old-fashioned “fly by the seat of your pants” mentality is no longer adequate to meet these challenges. For example, the customer is no longer satisfied, if he is offered just a single belt scraper. Instead, he expects an all-in solution that can improve the operation of his conveyor system over the long term. Opposition to proposed solutions is preprogrammed, because core competencies have to be acknowledged. Changes to the operating procedures are in most cases unavoidable. Initial cost efforts must be managed and, quite often, decision-making responsibilities must be relinquished.

How does such a TCO Maintenance Model look like? The model developed by REMA TIP TOP consists of three activity levels (Fig. 1).

– The core of the model is based on the TCO Maintenance Service, which contains the actual inspection and proactive maintenance for each plant or part thereof.

– Immediately after start of the service activities, a Continuous Improvement Process (CIP) is initiated, in which the plant operator actively participates.

– Long-term business relationships with suppliers permit a wide range of spare parts and consumables to be procured at attractive conditions.

For an existing plant, the TCO Maintenance Service is divided into three steps (Fig. 2).

– Step 1: During the course of an optimization program, a comprehensive system-specific survey is first carried out to record all construction details and technical process parameters that are of importance for the upcoming maintenance service. The information obtained is evaluated using an asset management system and then input into a risk analysis ­application. Based on this, an optimization program is developed whose implementation brings the first improvements. At the same time, a starting point is created that allows measurement of ongoing progress and, in essence, the success of the service activity. For new plants, experience shows that the optimization program is not necessary, but that the risk analysis is.

– Step 2: Plant-specific inspection and maintenance plans for proactive maintenance are generated with the help of the asset management system. The resources required (personnel, material, equipment, etc.) can be easily determined and made available at an early stage. Proactive maintenance means the recognition and identification of possible downtimes before they occur and carrying out of repair work (as far as possible) at a time when the plant is down for other reasons (Fig. 3)  and before the repair work actually becomes necessary (keyword: downtime management). Another important aspect of proactive maintenance is to avoid subsequent damage. For example, exchanging a bearing in time may prevent damage to the drive shaft, which would then lead to an extended downtime, even without taking the unnecessary spare part costs into account.

– Step 3: To support the proactive maintenance and repair work (Fig. 4), the plant status and the most important operating parameters should continually be recorded (condition monitoring). By evaluating these parameters statistically, important conclusions can be drawn regarding expected interruptions to the operation. It has, moreover, been proven profitable to run an ongoing training program for all participating service technicians, both when the operation is running and when the planned service work is being actually carried out (training on the job). These training courses usually include employees of the plant operator.

The second activity level of the TCO Maintenance Model is the Continuous Improvement Process (CIP). It has been fully integrated by REMA TIP TOP into their TCO Maintenance Model as one of the main levels. It is extremely advantageous to establish a CIP team that meets regularly and that consists not only of specialists from the service company, but also includes staff of the plant operator with the necessary knowhow. Within the team, permanent improvement possibilities are sought out and implemented. The addition of the latest product developments on the service company’s side and provision of process optimization information on the plant operator’s side, always benefits both parties. The side effect “we’re in it together” is created, which usually results in a long-term trust relationship between the plant operator and the service company.

The third activity level completes the REMA TIP TOP TCO Maintenance Model: Procurement of Spare Parts and Consumables. The spare parts and consumables needed for the maintenance program are partly self-manufactured or are quickly procured from a broadly distributed network of suppliers and at attractive conditions. Even for services that are only occasionally needed, it is advantageous for the plant operator to involve the service company. Outsourcing parts of the procurement process has a range of advantages for the plant operator. Firstly, he profits from the consistently cheaper purchasing conditions for service-specific goods and the resulting ‘freeing-up’ of his own sales administration resources. The plant operator can also hand over responsibility for warehousing to the service company, if he so desires. Further optimization processes that fall under the category of ongoing improvement can be included; e.g. the standardization of spare parts, assessment of suppliers and a reduction in the number of suppliers. This further creates another foundation for a long business relationship as partners.

Service work needs – independently of the type of work and its scope – to be checked for correct execution, completeness and conformance with applicable standards and norms. When designing work processes, the quality management must ensure that questions of quality are assigned correctly (Fig. 5). Quality refers to both the products and services and the internal processes of the organization and is defined as the degree to which the product or process under consideration meets requirements. Quality is therefore a measure of requirements and expectations. Either the plant operator has its own quality management system installed or it is provided by the service company. Important components of an effective QM system include standards and norms with their guideline characters. Various rules and regulations exist for different applications and the project management must have a profound understanding of them. The service technician must be thoroughly trained in every area. To guarantee all service activities, precisely formulated work instructions must be issued. Finally, carrying out of all work in the necessary quality means that the work must be documented by means of checklists, presented to the plant operator and entered into the plant management system.

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