In January of this year, banks began recalling lines of credit and tightening the requirements for capital loans. The underlying economic factors leading to that have not changed in the interim, which means companies must reduce their overhead.
The entire maintenance function is — in the accounting world — considered overhead. That’s because maintenance, by definition, does not produce revenue. Maintenance does protect revenue, and that’s where you have something you can use to shield the maintenance department from over-eager and ill-conceived budget cutting.
A popular form of budget cutting is to “defer” maintenance. The idea behind this is that if you don’t want something to break down, it just won’t. So (the theory goes) even though maintenance practices are set at financially optimal intervals, if you extend those intervals you will actually save money instead of lose it because deferring maintenance also defers breakdowns. If you were to suggest that the people who come up with this kind of foolishness are insane, you would not get much argument from the operations people.
But that’s taking the easy way out, and it doesn’t solve anything. Since you know this “deferred” maintenance is coming, take the fight to your opponent and stop it before it starts. Here’s a basic outline:
- Identify the top 20% of revenue-making lines or equipment. You should already know this just for general maintenance and repair prioritization. But if you aren’t clear, then get the production department to tell you. Very likely, any production manager can not only give you the list but give you the revenue/hour value for each item on it without needing to look it up.
- Identify the reasonably likely failure modes (there should not be many) for each of the aforementioned items. Identify the lost revenue/hour for each failure mode. Don’t analyze failure modes that are unlikely.
- Identify the maintenance practices for each of the aforementioned failure modes. Identify the cost/maintenance for each.
- Put all of this on a pretty graph that shows the ROI of the maintenance. On another graph, show the loss per deferment (negative ROI). This last item will require some risk analysis, as it’s not a foregone conclusion that skipping a maintenance interval automatically means a failure. Or you could just say if the risk increases by 20% due to failure, these are the costs.
- Repeat the above for critical electrical infrastructure, such as your feeder cables.
- Do a three paragraph write-up as a coversheet, and send it along with the graphs to every decision-maker you can get contact information for. If there’s a staff meeting, do a dog and pony show with the same information but with the stated goal of getting the plant manager to get you a video meeting (e.g., Zoom, etc.) with folks higher up on the food chain.
Another popular form of budget cutting is the universal 10% cut for every department. You can use the same approach as above, but just tweak it to show what happens with a 10% cut.
So, when should you make this effort? Waiting until the decree comes down is not a good option because then you have to convince the managers to admit they were wrong. That’s where the “take the fight to your opponent” part comes in. Credit will likely continue to tighten up for the remainder of this year, which means the risk that you’ll see at least one of these counterproductive measures grows with each passing week. It shouldn’t take more than an hour to produce the graphs and cover page. Having the meetings will add time requirements, but if you send the information out before arranging for meetings, you stand a good chance of deferring the maintenance deferment until upper management can arrange such a meeting among themselves (and maybe even invite you to join).
At one time, all maintenance was reactive. Something broke; you fixed it. We found this didn’t work well, and the transition to proactive maintenance began in earnest. It has been very beneficial to the companies who embraced it. You must also be proactive about maintaining the maintenance function. And remember — maintenance protects revenue. Do senior managers really want their revenue stream to be at risk during a time of constrained capital access? This is the question you need them to consider. And, of course, answer in the negative.
