With increased pressure to perform against measurable objectives many bonuses have been linked to cost reductions – does this sound familiar to you? Read on to understand a methodology to achieve your targets!
Test Case – Peter manages 20 large mining dozers with an Undercarriage replacement budget for each undercarriage set of $250,000. His budget life to achieve for each set is 8000 hours.
The Site is remote and undercarriage expertise is lacking on the ground, but he has a trusted undercarriage supplier visiting periodically who is providing excellent inspection reports on each visit.
Peter’s Target KPI for this year is to reduce his annual undercarriage costs. How is he going to achieve this KPI? Lets look at some scenarios!
Scenario 1: Do nothing – Achieve 65% to 70% of useful life – maximum of 5600 hours achieved for each set (70% of 8,000 budget)
– total annual cost $5,357,000 – ($250,000 X 5,600/6,000 X 20 machines)
– average operating hours per year 6,000Hours
In this scenario, the Undercarriage can be left to perform its duty without interference or measurement from one month to the next. The components will wear, and there will be no knowledge about how it is performing or how much it is costing per hour of operation. Generally, the undercarriage will not achieve more than a maximum of 70% of its useful life, but as its not being measured, no-one will be any the wiser. In many instances, this solution is appropriate for how the machine is being used and costed.
Scenario 2: Measure Undercarriage periodically and achieve 85% of budget life – maximum of 6,800 hours achieved per UC set (80% of 8,000 budget)
– cost $4,411,750 – ($250,000 X 6,800/6,000 X 20 machines) + extra skilled resource $220,000/annum – giving a total annual cost of $4,631,750
Savings of $725,250 or 13.5%
In this scenario, the undercarriage installation details are recorded, so that when components are measured, not only is the percent worn of the component indicated, but the remaining residual life is calculated along with the total projected life. Inspections are performed at regular intervals either by onsite personnel or in conjunction with onsite personnel and external UC provider. The extra resource needs to be costed into the overall calculation.
This allows a number of significant events to occur: – identifying components with accelerated wear early so that this can be corrected, scheduling for when replacements will occur, ensuring replacement parts and resources are available for the replacement task.
Scenario 3: Proactively Undercarriage Management Components achieving between 90% and up to 112% of component life
– cost $3,947,368 – ($250,000 X 7,600/6,000 X 20 machines) + extra skilled resource $220,000/annum – giving a total annual cost of $4,167,368
Savings of $1,189,632 or 22%
This scenario is taking the undercarriage Management to the next level. This requires regular inspection. Each inspections results are analysed to determine whether any remedial action is required if components are showing accelerated wear. The components will be worn to between 90% and 112% worn. This can only be done where the undercarriage is being monitored closely.
The performance of each set of components is tracked against previous performance and against other machines in the fleet considering weather patterns, seasons, and operational conditions. Different components can be tested to determine fitness for purpose and to identify improved performance. Cost per hour will be the lowest and given that Undercarriage costs make up greater than 50% of the machine’s maintenance costs, managing the equipment in this manner leads to the greatest ROI. The cost of the monitoring will be far outweighed by the savings achieved.
Target Plan for Pete – work more closely with the undercarriage supplier to capture component detail on installation and then use internal resource to inspect the UC regularly while building skill level with the aim to achieve Scenario 3 level in the not to distant future.
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