Asset Maintenance ManagementUnit 3

Executing A Maintenance Policy

Asset Maintenance ManagementUnit 3

Executing A Maintenance Policy

1

Understand the key factors influencing Maintenance Policy Planning

Expressions of Maintenance Standards (functional, conditional, response, financial)

Execution of the Maintenance Policy (staff, budget, schedule, external services)

2

Executing A Maintenance Policy

Factors Influencing the Maintenance Policy

Several factors effect the scope and application of a

policy

Technical factors

Corporate policy considerations

Organizational considerations

Financial considerations

Economic considerations

Environmental considerations

3

1 Age of Component

/ Unit

Strong correlation between age and deterioration

eg. Corrosive environment, rust.

Weathering effect (moisture) on building components

Older buildings need more maintenance

The first factor(Age) to consider when considering

maintenance priorities

2 Cost of

Replacement Parts

/ Whole Unit

o Certain components may be more expensive to replace than others.

o Cheaper to wreck(ruin) than to repair.

o Repair cost vs replacement (more cost effective to replace?)

o Availability of replacement parts. No longer available, cost high to

make.

3 Cost of

Postponing

Maintenance

(Deferred

Maintanence)

Many fail to understand the true cost of failing to carry out

maintenance, deferring maintenance.

Deferred maintenance adversely affect the quality

Possible loss of goodwill and bad publicity

Cost more in the long run vs small amount saved

Technical factors

Relate purely to the performance of the component without any

direct consideration of company policy or directives.

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4 History of

Maintenance

Yesterday’s maintenance will affect today’s

maintenance policy

If previous building owner deferred maintenance and created

back log, new owner will have to spend more to bring building up

to standards.

Record of maintenance is important

5 Programming

Factors

Components can be designed to have lifespan which

compliment programmed joint

replacement of 2 or more elements. (eg. roof and external

rendering)

More economical to replace main buildings

elements with its associated equipment to

minimize downtime, disruption and access cost

Many latest research now focus on Cost

Prediction Models in relation to estimated

lifespan of elements

Technical factors

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6 Materials Types of materials used has a considerable effect on the

Maintenance Policy

Inappropriate selection of materials today will affect tomorrow’s

maintenance, example

Steel windows in housing

Asbestos insulation and fire stopping in offices

Old engine design for new cars

Radical new design in bridge construction

Purpose made defectiveness

Synthetic slate roofing tiles

7 Statutory

Factors

♠ Change in legislation resulting in a change in policy, higher

standards required etc.

♠ In recent years, the Window Retrofitting Orders,

Legionella bacteria control for Cooling Towers,

Fountains etc

8 Discovered

Defects

♥ Newly discovered defects will affect the MP

♥ For example tiles popping, roof leak etc

Technical factors

6

9 New Technology ♦ Emerging new technology will affect how maintenance works

are carried out

♦ New machineries will increase the efficiency and speed of

how work is done, eg. Underwater CCTV, hoist, etc

10 New Working

Practices

√ Changes in working practice can affect corresponding

maintenance requirements eg, automation

√ Business process improvement, emails cut down the needs

for snail mails and dispatch personnel

11 New User

Requirements

New standards of customer or user requirements may form. Eg

car alarms, immobilizers etc.

Technical factors

7

Corporate Policy Considerations

Some organisations may have to maintain a higher

maintenance image than others for policy reasons, Egs

Public Image of Organization

Employee Working Considerations

Consequences of Failure

Past and Current Usage

Future Strategy Consideration

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A. Public Image (Example: transportation)

• Certain organizations have a requirement for high levels of maintenance and

low failure

• The level of maintenance committed to each type of rolling stock is dependent

on: -

a) the image of the company and

b) the cost of failure

• May want to display their buildings in pristine condition always eg. disneyland.

B. Employee Working Consideration

> Strong correlation between level of maintenance, employee satisfaction and productivity

> Attitude of employee is affected by the quality of equipment they used

> Better motivation with better working environment

Corporate Policy Considerations

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C. Consequences of Failure

> Single most important factors influencing Maintenance Policy

> Consequences of failures defers from organization to organization

> The higher the consequences of failure, the more funds will be allocated and more

attention will be given.

D. Past and Current Usage

∆ The level of maintenance required by a unit/component depends on the

past and present usage

∆ Impossible to isolate one component from the other

∆ Standard maintenance schedule may not be sufficient, especially when

equipment is subjected to abusive usage (e.g. 24 hours cooling)

∆ Over utilization or wrongful use may invalidate some/all the manufacturer’s estimated lifespan and recommended service frequencies

∆Policy must recognise and allow for this.

Corporate Policy Considerations

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E. Future Strategy Considerations

≈ Most companies will have a Strategic Plan, with strategic objectives that link to the asset base

≈ The Strategic Plan will state how much the company is willing to

invest in its assets

≈ Invest more in the maintenance of an asset that forms part of the strategic plan.

≈ Strategic Plan may also indicate the assets due for disposal /

demolition / scrapped, then minimum fund should be allocated for

this class of assets (just to satisfy minimum statutory

requirements)

Corporate Policy Considerations

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Organisational Considerations

Maintenance Depts are part of the larger organisation.

Maintenance is subjected to organisational links of communication, contract, accountability etc.

Egs, power bases, position, structure, interaction, startegic policy.

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1 Power Bases ♠ Different sections within the organization has different

level of relative power

♠ Maintenance is often seen as undesirable but essential

drain on resources

♠ Hence must emphasize the importance of maintenance

on productivity and profitability

2 Position of Maintenance

Dept

♥ Maintenance Dept is part and have to fit into the

organization

♥Where it fits in is very important, don’t let it hide

behind some unseen corner

♥Location within the system is of great importance.

Organizational consideration to note while formulating the Maintenance Policy: -

Organisational Considerations

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3 Organizational Structure ♣ An organization may have several sections responsible

for maintenance (services, fabric, etc)

♣ Each section is making separate contribution to the

policy, hence its operational area and scope must limit

to its own responsibility.

4 Managerial Interaction ♦ Maintenance managers often seen as the poorer

relations within the organizational structure

♦ They always seen as keep asking for money but never

produce any obvious or tangible results

Organisational Considerations

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5 Strategic Management

Policy

∆ Corporate objective will have direct influence on the

Maintenance Policy and set its overall operational

parameters on its formulation and execution.

∆ Maintenance Policy has to fit into Corporate

Objectives such as acquisition, depositng, taking over

etc

6 Nature of the

Organization

Ω Certain companies may see maintenance as

necessary and desirable.(car hire companies)

Ω Others may see maintenance as something to be

minimized

Ω All depends on the nature of the company

Organisational Considerations

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Financial Considerations

Financial consideration is one of the main influencing factors on MP

a) Maintenance is part of the life cycle cost, with few immediate benefits

b) Level of maintenance depends on availability of fundsFinancial Considerations Influencing Maintenance Policy

1) Company Performance & Profitability

2) Cash Flow

3) Size of Direct Labor Force

4) Arrangements with External Contractors

5) Previous Expenditure and Effectiveness

6) Inflation

7) Variations in Property Market

8) Variations in Property Stock16

Financial Considerations1. Company Performance &

Profitability

i. Maintenance cost money

ii. Correct maintenance cost a

lot of money

iii. How much company willing

to spend on mtce depends

on whether company is

making money

iv. Hence, mtce contract must

be flexible, with reasonable

term and can terminate

when required

2. Cash Flow

a. Mtce take place in several

forms, planned, responsive, ad

hoc

b. Planned maintenance well

documented and allowed for in

cash flow/budget.

c. Responsive usually require

immediate finance and will

affect cash flow

d. Sudden and unforeseen

requirements can be

incompatible with immediate

cash flow. (failure of a lift)

e. When cash flow is insufficient,

quality is usually compromised

by adopting the cheapest but

may not be the best solution

eg. 2nd hand parts.

3. Size of Direct Labor Force (if

any)

a) May have direct worker within

the company to carry out

maintenance works

b) These represent fixed

overhead which is costly

c) Modern companies prefers to

keep lean fixed overheads

and keep core while

outsource the non-core

functions.

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4. Arrangements with

External Contractors

Types of Maintenance

Contractor : -

a. Internal Maintenance

Contractor

b. Semi-internal

Contractor

c. Full External Private

Contractor

Hence, contracts can take

place in several forms

E.g. Term contract with

schedule of rates

(percentage adjustment),

fixed price contract etc

5. Previous Expenditure &

Effectiveness

a. The perceived value of

maintenance is often taken

as a function of past

performance (i.e. how

effectiveness when I last

spend the money, the

return)

b. To carry out Cost Evaluation

to determine effectiveness

and value for money

(ex.roof)

c. Stop gap vs Permanent

Solutions (cost??) eg. Roof

leak.

6. Inflation

a. Inflation will affect the cost

of maintenance, as some

maintenance contracts

can for 3 to 5 years

b. Hence must factor in the

fluctuation and adjustment

c. For yearly contract,

adjustment can be made

according to the market

condition at the time of

renewal

Financial Considerations

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7. Variations in Property Market

a. Real estate is a long term

investment, and will cut across a

long period

b. Property market varies constantly

(ups and downs)

c. How much to spend is affected by

the market (which determine the

property value)

8. Variations in Property Stock

i. No 2 properties are the same!

ii. Companies with large property asset bases

experience changes in the range of property

that they retain as stock (investments)

iii. E.g. Property developer launching new

tower block for sales, good one taken up

and leave behind those with poorer stock,

such as facing bin centre

iv. Costly to maintain just 1 unit within a

development (as compared to maintaining

say 20 units within same development). No

economy of scales

Financial Considerations

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Economic Considerations

1 Organizational

Perceptions

> Rooted down to the Organization’s perception and overall

attitude towards maintenance

> Some are maintenance based and willing to spend a bit more,

but others are not

2 Contribution From

Maintained Assets

> It is a fact that profit generating departments will get more

attention and more money will be spend in maintaining their

asset based.

> Easier to justify expenditure for profit generating center

> For non-profit generating departments, amount spend on

maintenance tends to be lower.

3 Link between Mtce

and Return

> To establish the link between maintenance and return, eg

manufacturing

> In some cases, such link are readily identifiable. But this is

not always the case

> Always try to link cost of break down and disruption, to cost

of maintenance20

Environmental Considerations

Environmental factors have the most significant impact on policy, but it is

almost the most difficult factor to predict and evaluate

The factors include: -

1. General Economic Climate

2. Legislation

3. Internal Regulations

4. Tenure and Landlord Agreements

5. Availability of Alternatives

A. General Economic Climate

» Corporate strategy is affected by the Economic Climate, as they are profit-driven and has

to stay competitive.

» The overall Company Policy will determine how the organization behaves and function

» This Policy is affected by operation and the behavior of competitors21

Environmental Considerations

B. Legislation

Legislations can exist in many forms (Acts, Code of Practices, By Laws,

ISO standards etc)

Legislations will set the minimum maintenance and safety standards for all kinds

of assets (i.e. various Code of Practice)

C. Internal Regulations

Organizations usually have internal regulations that set maintenance

standards, or a combination of internal and external regulations on

maintenance

Example Banks often make loans as mortgages, secured against a property asset.

They will set minimum maintenance standards on mortgage holders

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c. Tenure and Landlord Arrangement

Organization own the assets and has a free hand in most appropriate form of

Maintenance Policy. Most company maintain Asset Strategy and prefer to rent

than own.

In UK context, lease usually is for 5 years and tenant will be responsible for all

insurance and maintenance. Landlord will usually engage 3rd party to conduct audit

before renewals or return the asset upon expiry. Tenant will have to make good or

compensate before return the asset to landlord

D. Availability of Alternatives

Alternatives to maintenance are: -

i. Leave to deteriorate

ii. Scrapped

iii. Close down part of the operation (need not maintain) and continue to operate

the rest

All available options must be evaluated to decide what is the best option

Environmental Considerations

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Maintenance Standard

• Essential for the effective formulation and execution of MP.

• Set the quality of maintenance required.

• Relate to finance available and level of performance required

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Maintenance Standard - Main Topics

1 Responsibility or

Authority for Setting

Standards

Standards must be set by Authority who can decide the

acceptable level of maintenance in relation to other objectives

and performance characteristics

Maintenance Mgr often has to set standards based on funds

available, and scale down in time of adversity

2 Quantification of std Maintenance standards is difficult to quantify and isolate

Manufacturing standards can be easily defined eg. 5,000 bottles a

day vs aesthetic considerations for buildings.

3 Maintenance

Performance Criteria

Many ways to measure performance: -

Compliance with minimum statutory requirements

Customer satisfaction

Aesthetics and appearance

Short term Vs Long term appearance

Expansion / contraction / disposal

4 Optimal Costing A process of deciding the combination of mtce types and cost to

get the best value for money

3 main types : - Planned, responsive and cyclic

Factors Influencing Maintenance Standards

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Expressions of Maintenance StandardsFinancial Condition

and Performance

Criteria

Condition Led

Maintenance

Operational Reqm’t

Led Maintenance

Response

Time

Financial Criteria

Measure against how

well operation has

performed against its

financial objectives

Mainly on production

line eg. Breakdown

rate, downtime

-Can also measured in

terms of works done

against original reqm’t,

-No. of complaints

received or responsive

calls

Used to

measure how

important the

maintenance

reqm’t is

Conditions can

be measured in

many ways

But must a

rating system

that measures

the condition

of what is being

measured.

- Identify the most

important

components within

the system

- Concentrate the

resource in

maintaining these

components.

- Move onto the less

important aspects

when finance allows

- Standard is express

in term of basic

minimum standard

- Can be done using

manufacturer’s

recommendation or

performance

specifications

- Standards set

in term of

response time

- In area where

long response

time is not

permitted, e.g.

production

line

- Sometimes

need to stand-

by necessary

team/parts to

give immediate

response to

minimize down

time

- Specify performance

in relation to the

expenditure of

budgets

Common among

bigger companies

-Work based on

a detailed 5 years

maintenance

program, then

establish the

expenditure required.

Monitor actual against

the projected

-Use expenditure to

measure how well

maintenance is done

- Subject to abuse26

Execution of the Maintenance Policy Always think of how to execute while you are planning

Important to demonstrate the ability to execute the policy in the Maintenance Policy (how and

who will do the jobs)

2 Main Considerations on Executing the Maintenance Policy

1. Internal Resources

Sufficient staff within the organization to

execute the policy?

Mtce Mgr needs to produce organization

charts and schedule of internal resources

requirements to identify number of people

required

Staff requirements must be submitted

together with budget plan and schedule for

approval

May need to show in term of daily, weekly

or monthly requirements

2. External Procurement

For companies with limited core resources,

outsourcing is usually the solution to main man

power requirement

This is more the case when high portion of

specialist appointments such as architects,

engineers, surveyors, contractors etc are required

Policy should indicate the internal / external

balance and make adequate provision for fees

To consider in-house vs outsource

Other creative solutions, include flexible hours

staff, part time, contract etc27