De-Costing For Total Cost Of Ownership

With a laser-like focus on total cost of ownership, facility managers can yield improvements in several areas of machine operations.

Maximize Machinery Life With De-costing

De-Costing For Total Cost Of Ownership

By Bill Moore

As every facility manager (fm) knows, repairs cost money, cause headaches, and make life difficult for their maintenance personnel. Early adopters of de-costing find the practice reduces repair costs and other maintenance-related expenditures while improving productivity.

What is “de-costing”? It is a relatively new term that means just what it says: removing cost, or expenditures, within a defined period of time. De-costing calls for laser-like focus on the total cost of ownership of running a facility. But it goes a step further to drill down to the measurable value delivered by the supply network. The result can be significant energy savings, reduced procurement needs, lower maintenance costs, and extended machine life.logo-web-only-articles

For fms, the best way to start a de-costing program is to focus on “low-hanging fruit,” or areas where costs can most readily be removed. Machine maintenance is one of those areas because it represents a regular, ongoing expense for most facilities. This is particularly true for ancillary equipment, such as machine motors, fans, pumps, and gear boxes.

An important first step is to capture a clear picture of the current components and repair expenditures on a monthly or annual basis, including the cost of replacement parts, labor and maintenance contracts, or service fees. If fms don’t already have the data, it is also worth the effort to calculate the opportunity cost associated with machinery downtime. For instance, how does one hour or one day of lost productivity impact the organization’s output and bottom line?

This exercise will require collaboration with colleagues in other departments, such as finance/accounting, operations, purchasing, and perhaps even human resources. For this reason, buy-in from senior leadership is critical to the success of a de-costing initiative. Everyone needs to understand the value of accurately measuring and driving down facility management costs.

Next, parts distributors and components manufacturers should be involved. By engaging these suppliers, fms can tap into their in-depth understanding of metrics such as mean time before replacement, machinery optimization, and maintenance best practices.

Man works with machinery at a manufacturing plant (Photo courtesy of SKF).
Photo courtesy of SKF

Reducing Components Cost

Components distributors and manufacturers should be able to suggest ways to get more mileage from rotating equipment. Suppliers who are true partners will make it their top priority to help your facility run more competitively.

A new de-costing program presents a great opportunity to request TCO (Total Cost of Ownership) agreements from suppliers. Longer component lifespan equals less downtime and parts purchasing costs. Distributors and manufacturers also should be prepared to promise savings in areas such as energy conservation, equipment uptime, and reduced repair time and expense.

Some distributors and manufacturers will work with fms to devise maintenance schedules and components inventory plans—geared toward reducing the overall cost associated with repairing equipment and replacing parts. For example, one manufacturer of rotating equipment components has helped facilities across multiple industries to reduce spending in an entire components category. The savings, driven by de-costing activities, were five-fold within a three-year period, with at least half of the cost reductions achieved, on average, within one year.

Increasing Output And Productivity

Another benefit of de-costing at the components level is that there is big potential for “sub-suppliers” to squeeze more productivity from mission- critical machinery. Sub-suppliers are makers of the small parts and componentry essential to larger equipment’s proper function. They often possess knowledge about how to enable rotating equipment to run faster and more efficiently. For example, a bearings maker will know the precise amount and frequency of parts lubrication needed for optimal output from a specific type of motor. By sharing this knowledge with facilities managers, they contribute to machinery maintenance plans that directly reduce friction and, in turn, expensive premature wear or worse, machine failure. Reduced energy consumption is an additional benefit.

It’s important to remember that most third-party repair contractors or even machine OEMs have little to gain from making incremental tweaks to boost equipment performance. They usually specialize in ensuring the machinery runs as warranted or is returned to original operation. Yet relatively small improvements can make a big de-costing difference. That is where components distributors and manufacturers can help fms shine.

bill-mooreMoore is senior vice president, sales development, and channel management for SKF Regional Sales and Service NAM, SKF USA Inc., a global supplier of bearings, seals, mechatronics, lubrication systems, and services which include technical support, maintenance and reliability services, engineering consulting and training.


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