Maintenance is a cost saving Logistics role

Roger OakdenLogistics ManagementLeave a Comment

Lack of maintenance can cost your business.

What do governments and the community do after a disaster? The first response is to rebuild, with little thought given about how the new facilities will be maintained or how the future maintenance will be financed.

This can also happen in companies when new facilities and equipment are purchased to address a need.

Why should this be of interest to Logisticians? Because logistics is the ‘time related positioning of internal and external resources to provide availability of goods and services for customers at the lowest total cost’. Having facilities and equipment (two of your resources) positioned to enable availability of products and services is a necessary requirement for success of your business.

In mid 2014, I wrote a blog about a fuel transport business in Australia that neglected maintenance of its trucks, resulting in a crash that killed people and damaged property. The subsequent government action and loss of customer contracts meant substantial financial losses, retrenchment of about 700 employees and finally, closure of the business.

Maintenance is business, because of the total lifetime costs for a capital item, only 30 percent is the purchase cost; the other 70 percent is maintenance.

Saving money through maintenance planning

Ensuring availability of maintenance support is a critical logistics planning role, whether facilities or equipment used by your business are owned, leased, rented, contracted in a traditional time and materials agreement or paid for through a performance based contract (PBC),

Whether the items will be maintained by internal staff or an external business, logistics should be a part of the initial concept plan and subsequent design and development process. This is to ensure that logistics can meet its goals to:

  1. Evaluate the consequences of design and development decisions on the availability (of the item and its service parts), reliability and supportability of the facility or equipment
  2. Evaluate the development and implementation of the maintenance support plan concerning availability, reliability and supportability
  3. Integrate the logistics planning and scheduling systems with internal or external engineering services to provide visibility of resource requirements
  4. Ensure that support costs are minimised through the item’s operational life cycle.

Minimising support costs should be based on the concept of Life Cycle Costs (LCC), which are an estimate of the total purchase, operations and disposal costs. These are calculated through taking account of performance requirements, risks and trade-offs.

Using LCC as the basis for the logistics performance metric concerning asset availability is important because:

  1. About 50 percent of the support decisions need to be made at the concept stage of a facility or major capital equipment
  2. Only about 20 percent of support decisions can be changed without considerable effort after the design and development stage
  3. Only about 5 percent of support decisions can be changed without considerable effort once the capital item is operational

This approach provides the basis for logistics to actively manage service parts inventory, or liaise with the service provider concerning their inventory management processes. The place to start saving money and improving service is segmenting service parts into managed groups based on criticality and supply risk. Then undertake marginal analysis to determine the cost-optimal mix of rotable repair items and service parts to better insure asset availability.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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