Reducing Maintenance and Operation Costs at Industrial and Municipal Facilities

This article will define a business case for achieving significant rotating equipment maintenance and energy cost reduction at industrial and municipal facilities. 

Traditional maintenance methods currently employed achieve some results, but far greater results are possible. Educating the customer is one of the greatest challenges because significant cost reduction cannot be achieved without the customer modifying current maintenance philosophies and investing in the technology necessary to ensure success. The good news is that the investment payback is extremely short, and the overall savings are dramatic.

We live in a global economy. U. S. industrial companies compete globally for market share and profitability. In many cases, net earnings can only be achieved by manufacturing more efficiently and at a lower cost. While labor rates, costs of medical insurance, pension costs, other legacy costs and tougher environmental standards normally place mature U. S. companies at a distinct disadvantage, these same companies must continue to look for other ways to reduce costs and become more competitive.

U.S. municipalities typically have strained budgets but an increased demand for their service. Modernization and upgrading of old, inefficient systems and technology are priorities, but are usually not affordable without political intervention. Maintaining and operating the equipment used to process water, wastewater and sewage is costly, adding to the budget strain.

Whether we concentrate on industrial or municipal facilities, the only difference from an equipment reliability standpoint is the source of the money for maintenance and repair activities. Industrial facilities budget their own money, and municipalities rely on public funding. In both cases, significant savings can be achieved when equipment reliability is increased because the amount of money spent every year on rotating equipment maintenance is staggering. Remember, the cost of maintenance is the sum of many costs, such as actual equipment repair costs, the cost of labor, lost production (revenue) costs and environmental clean-up costs, among others.

Traditionally, industrial and municipal plants (customers) have employed similar tactics to offset maintenance costs. These tactics include:

1. Driving manufacturers to continuously reduce prices on replacement parts
2. Using non-OEM, cheaper priced parts
3. Running damaged equipment until it fails completely before addressing repair (band-aid approach)
4. Organizing reliability teams/departments to address equipment reliability
5. Upgrading materials and equipment specifications to"toughen up" the equipment
6. Integrating process control schemes to better control equipment
7. Using failure prevention technology and predictive maintenance services sporadically

Despite taking these measures and gaining some varying success, plants are rarely satisfied, and customers rarely achieve enough cost reduction. Why?

1. Manufacturers need to stay in business, too. Parts and service business is a necessary revenue source. Prices have decreased significantly in many cases. Since customers rely on manufacturers for newer, more efficient, more reliable and technologically advanced products to meet changing requirements and tougher standards, manufacturers cannot afford to invest in extensive research and development if all profitability is driven out of their products.
2. Use of non-OEM, cheaper parts can reduce some initial cost, but most of these parts have been reverse engineered. Parts that look good on the surface may have significant flaws when it comes to material integrity, efficiency (power consumption) and other engineering variables that directly affect the part's reliability. Is a part really cheaper if it costs less initially but fails more often or consumes more energy when in use? True cost reduction does not come as a result of using cheaper parts, as an example below will show. True cost reduction comes as a result of not needing to purchase the parts in the first place.
3. Running damaged equipment until it fails is not a good idea for two main reasons. First, the magnitude of the repair cost is much greater when equipment is allowed to catastrophically fail. Second, environmental cleanup costs and lost production costs are typically higher because the equipment usually fails at the worst times, and catastrophic failures usually result in the most leakage or exposure to the environment.
4. Many customers have organized reliability departments, hired reliability engineers or maintenance personnel or addressed reliability using cross-functional teams. These teams address "bad actors," using the traditional 80/20 rule. Eighty percent of all failures are typically caused by only 20 percent of the equipment. Customer reliability efforts are often thwarted when they are not properly funded or supported by senior management. Reliability functions are often collateral duties and do not receive the proper attention. If targeted results are not achieved quickly, many reliability personnel are reassigned or let go in an attempt to reduce personnel costs. This happens often, especially when failure prevention or predictive maintenance technology is not being used, making troubleshooting operations more lengthy and netting fewer wins per unit of time.
5. Modifying equipment is necessary sometimes, typically when the equipment was not initially specified correctly or when process parameters change. Not upgrading equipment will result in increased failures. Once the upgrade is completed, other reliability measures are still required to prevent future equipment failure.
6. Some customers are investing in integrated process control systems. These systems integrate many of the critical control equipment in process systems, so they "work together" to provide a specific process result. The systems are a major investment and, in many cases, they may not specifically address equipment reliability. Process control is the future of modern manufacturing, however, and many later recommendations are applicable to process control schemes.
7. Some companies are beginning to use newer, emerging failure prevention technologies or are employing predictive maintenance practices. However, most of these companies only use these technologies sporadically and miss the opportunity for better results.

Many companies view maintenance and repair as a necessary evil. It does not have to be this way. If there was a way to prevent equipment from failing, it would dramatically affect maintenance costs.

First, one needs to understand why equipment fails. In a poll of more than 1,200 engineers, operators and maintenance personnel in both industrial and municipal facilities, the causes for rotating equipment failure were simply quantified.

According to the results from this poll, very few pieces of equipment fail because they were improperly applied or constructed with the wrong materials, which leads to corrosion or wear-related premature failures. Very few also fail from misalignment or improper foundations. In addition, few, if any, run without maintenance or repair until the end of their design life (fatigue).

In reality, the major causes of failure are human error, system upsets or component failure upstream or downstream that cause the rotating equipment to run in failure-causing conditions. According to the data, these causes accounted for 70 to 80 percent of all failures. When rotating equipment operates in conditions that will cause them to fail, there is not typically much time to detect this operating condition before the damage is done.

Despite many efforts to reduce maintenance costs, most rotating equipment fails because it is forced to run in a failure-producing condition. This condition is typically undetected or not addressed fast enough, resulting in equipment failure. While some companies may debate the ability to prevent human error, system upsets or component failure upstream or downstream of the rotating equipment, most will reluctantly agree that preventing these conditions is nearly impossible, especially with today's reduced staffs. However, most will also agree it is possible to prevent equipment from failing when subjected to these failure conditions. Today's technology is a reliable solution.

Maximizing Maintenance Cost Reduction

There are four necessary steps to maximizing maintenance cost reduction: training, use of failure prevention technology, implementing a predictive maintenance program and taking advantage of the typical consultative services provided by the normal service provider. These steps are explained below:

1. Training

Training is the foundation of cost reduction. While it may be difficult to directly account for cost reduction dollars after investing in training, intuitively one would agree that training would increase awareness and prompt well thought actions from equipment operators. The training needs to be the correct training and include engineers, maintenance technicians and operators. All of these employees influence equipment reliability in some way.

Training needs to include basic fundamentals of rotating equipment operation, troubleshooting principles and a complete understanding of equipment components and how they work. Students also need to learn how equipment works within a system and how manipulation of components upstream and downstream of the equipment affects its performance and reliability. Focus on vulnerable areas within the equipment such as sealing environments and bearing environments and how to protect these environments more reliably. To train personnel correctly, find a professional training program and use it.

2. Failure Prevention Technology

When a pump runs in a failure-causing condition, the pump is typically running dry, below minimum shut-off head, against a closed suction or discharge valve, in cavitation or way out on the performance curve due to a change in process conditions or human error. There is a short period of time before the pump, mechanical seal, or both will fail if operators do not detect and act upon the unit's condition.

Failure prevention technology reliably detects problems within a pre-set time frame. The electronic components of the technology will almost always last longer than the mechanical components of the equipment it is designed to protect. It does not fail.

Failure prevention technology exists whether equipment operates at variable or fixed speeds. Upon fault detection, this technology will cause the equipment to either shut down completely, slow down into a safe mode or cause alarms that alert operators to take immediate action. The technology will display the fault information quickly, directing troubleshooters to the fault source (rarely the equipment itself). When the cause of the fault is corrected, the equipment can be restarted without further maintenance.

Use of failure prevention technology provides the following results to the customer:

1. Equipment will not fail, which reduces costs
2. The customer is alerted almost immediately when an upset exists, ensuring higher quality production results, less downtime and increased revenues
3. Smaller maintenance staffs are needed to address repair and maintenance of rotating equipment
4. Less failures mean less inventory of replacement parts and increased return on assets (ROA)
5. The technology integrates well with process control schemes or DCS/MCC set-ups

 

3. Predictive Maintenance

Remember, we can prevent 70 to 80 percent of rotating equipment failures by using failure prevention technology. If equipment does not fail prematurely, then when does it fail? When one is trained on the equipment, one understands the limiting components that affect overall equipment life. For example, a piece of rotating equipment might have bearings rated for 100,000 hours, or 11.5 years of 24/7 continuous operation. The mechanical seals used in that same piece of equipment have contacting seal faces, however, and the normal expected life of that seal might be only 5 years. In the best case, the seal would need to be replaced/repaired every 5 years. If the seal was the limiting maintenance item in the pump, then one could set a realistic goal of 5 years for mean time between maintenance (MTBM).

Most companies would rather predict when a component is going to fail than wait for it to fail. When components fail during operation, this failure usually means other components get damaged, resulting in the need for more replacement parts, more labor and potential periods of unscheduled downtime and environmental cleanup. All this raises repair costs. Predictive maintenance involves the ability to detect changes in equipment component condition, so maintenance personnel can plan a controlled maintenance event to correct/replace the failing part(s) without catastrophic failure, unscheduled downtime or environmental impact issues. The event becomes a controlled, low cost maintenance event involving minimal parts, time and expense.

Predictive maintenance involves services such as vibration monitoring and analysis, seal leak detection, loss of seal flush detection, temperature trending, thermography, ultrasound and oil analysis. Predictive maintenance is non-invasive and can be conducted on a continual basis or through periodic inspection routes. The key to successful predictive maintenance is competent analysis of the data collected during the monitoring process. Companies should seek the assistance of only board-certified analysts.

Advantages of predictive maintenance are:

1. Non-invasive analysis of equipment component condition-greatly reducing cost when compared to more invasive preventive maintenance practices
2. Prevention of catastrophic failures by scheduling controlled maintenance when analysis indicates the need- greatly reducing maintenance costs
3. Simplification of maintenance planning when equipment is confidently understood
4. Minimized unscheduled downtime, resulting in increased production and revenue
5. Minimized costly catastrophic failures

4. Additional Consultative Services

Making any cost reduction and reliability program a complete success means integrating additional consultative services into the program, which might require partnering with a competent service provider. Consider what is more important to the customer, whether significant cost reduction is co-managed with the help of a competent service provider or whether the plant uses Brand X or Brand Y equipment. Consultative services include, but are not limited to:

1. Inventory reduction/management assistance. As reliability improves, MTBM and the ability to reduce inventory levels improves. As inventory levels decrease, ROA increases. Consider partnering with a competent service provider who might manage or consign remaining inventory.
2. Outsource repair/rebuild activities. If you are repairing/rebuilding less equipment, it makes no sense to continue investing in the overhead of an in-house repair facility. Eliminate this expense and once again increase ROA. Partner with a competent, proven and local repair facility.
3. Power end/back pull out exchange programs. As a further way of reducing in-house inventory, speeding up turnaround times and simplifying maintenance, consider standardizing to the point where repaired complete power ends or back pull out assemblies are inventoried rather than all loose parts that make up these assemblies. This will also reduce the overall investment of spare parts on hand, thus increasing ROA.
4. Engineering services. Consider partnering with a competent service provider who will commit a specified amount of time in the plant each week to assist in application engineering of equipment, troubleshooting and process engineering assistance. Consider this service provider as a free extension of your staff.
5. Laser alignment and field or in-house dynamic balancing services. These are two essential services in any reliability program. The service provider should be able to provide these services, or the customer should have these services in house. Failure to address proper installation and alignment procedures or failure to balance rotating equipment dooms the equipment for certain premature failure. Failure prevention equipment will not prevent equipment from failing when alignment or balance is the cause, but predictive maintenance will detect the cause of failure reliably.
6. Ease of doing business. Choosing service providers who are easy to do work with is a must. Favorable payment terms; fixed, contracted pricing; monthly billing and favorable freight terms are all examples of ways customers can more easily do business with service providers. These negotiated terms also help the customer reduce costs.

Example

Here is an example of how this four-step program can provide the customer significant cost reduction. This example will only cover pump and mechanical seal reliability, but customer total cost reduction is even greater when expanded to other rotating equipment. Assume that an industrial plant has 500 pumps installed. Only 100 use VFDs and the remaining 400 pumps are fixed speed. All the pumps have mechanical seals.

Assume also an average MTBM of 18 months, which is fairly typical. The average cost of each repair is $2,500 (pumps and seals), not factoring in lost production or environmental clean-up costs. This results in an annual maintenance cost of approximately $850,000. The lost production and environmental clean-up costs can easily add up to another $150,000 annually. Therefore, this customer spends almost $1 million annually to replace/repair failed pumps and seals. If this customer makes no changes over the next 5 years, he will spend almost $5 million repairing and maintaining his pumps and seals.

What happens if, in the first year, this customer addresses 20 percent of the installed pumps, assuming 20 pumps are using VFDs and 80 are fixed speed? The average cost for a new VFD failure prevention device is $3,500, and the average cost for a fixed speed failure prevention device is $725. The total investment to purchase the failure prevention technology is $128,000. By considering that 70 to 80 percent (call this 75 percent) of all failures occur as a result of operator error and system upset, this customer prevents a minimum of 75 failures, or saves approximately $187,500 in maintenance costs and another $22,500 in lost production and environmental cleanup costs. During a 5 year period, however, the customer saves $3,150,000 before accounting for his program costs.

The customer addresses 100 pumps each of the next 4 years, so all of his pumps are protected after 5 years. His total investment for the failure prevention technology after five years is $640,000. By eventually protecting all 500 pumps, he has now effectively eliminated 75 percent of all the failures he would normally have and has increased his MTBF from 18 months to almost 60 months. A 60-month MTBF is reasonable based on normal bearing and mechanical seal life expectancies. In a 5-year period, instead of paying $5 million for pump and seal maintenance, he would only spend $1,400,000 ((500 pumps X $2,500/repair) + ($150,000 for environmental cleanup and lost production)).

The customer actually saves more than this for two reasons. By investing in predictive maintenance, the customer can now predict pump failures and remove the pump from service before it catastrophically fails, which minimizes repair costs and eliminates environmental cleanup and lost production costs. In terms of pump repair, the cost per year is reduced by $150,000.

Let's review some costs associated with achieving this kind of reliability.

Assume 50 plant personnel are maintenance technicians, engineers or operators of this pumping equipment. Assume, too, that all personnel are trained in five separate training sessions at the plant, and each attendee paid $250 for the training. This costs the customer $12,500.

Assume that a predictive maintenance program is initiated for all 500 pumps during the first year. The program would feature quarterly vibration monitoring and analysis for the pumps and semi-annual monitoring and analysis for the motors. When monitoring pumps and motors, there are typically seven points per pump and seven points per motor to check at a normal charge of $2/point. The annual cost for the vibration monitoring and analysis is $42,000, or $210,000 over a 5-year period.

The customer spends $12,500 for training, $640,000 for failure prevention equipment and $210,000 for predictive maintenance services over the first 5 years. This results in a net savings of $2,787,500 after 5 years. After the failure prevention equipment and training are purchased over the first 5 years, these costs go away and the customer is left with only the cost of predictive maintenance as an annual reliability program cost.

Therefore, if we recall that the customer had a $1 million annual maintenance cost associated with pump and seal repair, his annual cost starting in year 6 is around $192,000. The customer saves $808,000 each year starting with year 6.

It is hard to speculate how much money would be saved by committing to this program; however, consider the following. First, if all pumps are protected with failure prevention technology, the likelihood of pumps and seals failing due to fatigue lessens signficantly. This moves MTBM out closer to 5 years. Second, when components fail in a pump due to fatigue, catastrophic failure can occur if the plant is not aware of the trending toward failure.

When addressing the average maintenance cost of $2,500 per pump, understand that catastrophic failures are typically going to cost a plant much more than this average cost. Implementing predictive maintenance will result in a lower average repair cost. For example, if 100 pumps failed due to fatigue each year (5 year MTBM for 500 pumps) and the average repair cost was reduced to $1,500 per pump, this accounts for an annual savings of $100,000. In addition, most plants spend a great deal annually on preventive maintenance. This will be reduced dramatically by predictive maintenance. Without considering the savings from reduced preventive maintenance, we can still see how predictive maintenance can reduce the cost of repairs.

Other predictive maintenance techniques such as thermography or ultrasound are used in place of older, more invasive preventive maintenance techniques and are used for troubleshooting and problem solving purposes. Thermography and ultrasound are more cost effective and have historically helped the customer reduce maintenance costs while also providing more efficient and accurate information.

Taking full advantage of consultative services yields additional savings. A company with 500 pumps can easily have $500,000 to $1 million tied up in spare parts, pump and mechanical seal inventory. Inventory amounts are typically based on usage, or turns. As MTBM extends from 1.5 years to 5 years, the amount of inventory required, used or turned is significantly less. In addition, customer storerooms typically have dead inventory that no longer directly or indirectly supports equipment in the plant. Customers pay taxes and carrying costs annually for the inventory they carry. This can add up to anything from 10 to 25 percent of the total value of the inventory. By reducing inventory, customers not only free up cash, but they also reduce the amount they pay in these carrying costs and taxes.

With failure prevention and predictive maintenance in place, it would not be at all uncommon to see storeroom inventories reduced by greater than 50 percent. Dead inventory would be either discarded or sold off. Opportunities for optimizing inventory due to standardization and the use of spare power end assemblies or back pull out assemblies can further reduce the investment in inventory and inventory carrying costs. Finally, if a reputable service provider chosen by the customer consigns some or all remaining inventory, inventory costs can be almost completely eliminated.

Additional savings are possible when the service provider commits to engineering services at the facility locations. The evaluation criteria for the service provider will be the total amount of cost reduction realized, so the service provider has a definite interest in becoming more involved in equipment application and selection, process improvement discussions and reliability team activities. It is the co-management of the maintenance cost reduction that is the key driving force for the service provider. If significant cost reduction is achieved, then the customer will less likely care if Brand X or Brand Y equipment is used in the plant. Instead, the customer will focus more on standardization, simplification, inventory reduction and, of course, cost reduction.

Vendor relationships are important, and the service provider must be committed to the facility and trusted by the plant personnel. One cannot completely remove the personal side of the business from the equation, but, with smaller staffs and increasing environmental, quality and operational requirements, plant personnel should be able to manage their time with a single service provider more efficiently than with multiple vendors. This is true only if the service provider:

1. Can competitively provide all necessary products and services
2. Can provide local, intimate service
3. Can implement all parts of the cost reduction plan described above
4. Can measure, with the customer, the value it brings in terms of customer metrics (savings with which the customer agrees)

Reviewing the overall cost savings of the four-step program in the first 5 years:

Training	All engineers, maintenance and operators (50 total)	-$12,500
Failure Prevention Technology	500 Pumps (100 variable speed 400 fixed speed)	+2,510,000 (+3,150,000 - $640,000)
Predictive Maintenance	Minimizing the cost of repairs, after MTBM is extended to 5 years

 

+$290,000

((+$100,000 - $42,000) X 5)

Inventory Reduction/Management

Dead inventory and

inventory reduction (savings in carrying costs based on 20 percent)

 

+$85,000

Inventory Reduction/Management

Reductions from consignment of $100,000 worth of inventory

 

+$20,000

 

Engineering Support

Commitment of 8 hours per week

+$50,000

TOTAL

 

$2,942,500

In conclusion, significant cost reduction can be achieved as shown in the above example, and this example applies only to pumps and mechanical seals. Adding other rotating equipment to the cost reduction program will result in more dramatic savings. In addition to the obvious cost savings, customer benefits include improved overall ROA, measured results, a more reliable facility, managed versus reactionary maintenance and staff reduction opportunities. All of these will help increase the overall competitive position of the customer.

Assumptions

1. Plant with 500 pumps, all with mechanical seals. Pumps can be centrifugal or positive displacement.
2. Starting MTBM is 18 months.
3. 75 percent of all failures occur due to operator error, system upsets and failure of components upstream and downstream of the pumps that cause the pumps to run in a failure causing condition.
4. Average cost of a pump repair is $2,500, not including lost production and environmental cleanup costs.
5. Of the 500 pumps, 100 are driven by variable speed drives (VFDs) and 400 are fixed speed.
6. The average cost for variable speed failure prevention technology (ITT PumpSmart) per pump is $3,500. The average cost for fixed speed failure prevention technology (Emotron M-20 or ITT PS-20)per pump is $725.
7. Customer purchases failure prevention technology (20 VFD/80 fixed speed) for 100 pumps each year for 5 years.
8. Customer purchases training at $250 per person for all engineers, operators and maintenance personnel who affect or touch the pumps.
9. Predictive maintenance in the form of vibration monitoring and analysis is purchased starting in the first year for all 500 pumps. Each pump is addressed quarterly and each motor is addressed semi-annually. There are seven points to monitor and analyze for each pump and for each motor. The nominal cost for monitoring and analysis is $2 per point. The annual cost for this service is $42,000.
10. Use of predictive maintenance will reduce the nominal cost of each repair from $2,500 to $1,500. Based on 100 pumps failing per year, a savings of $100,000 is anticipated.
11. Customer started with $750,000 in pump and seal inventory. Not uncommonly, $100,000 is found to be "dead inventory." Inventory is further reduced to a value of $325,000 as a result of improvements in reliability and inventory management. The normal carry cost and tax levied on inventory value is 20 percent of the total value annually. By eliminating $425,000, this means the customer saves $85,000. It is assumed that these reductions are realized fully by the fifth year, and the example does not account for smaller savings in the previous years as reductions begin to occur. Actual savings would be greater over the entire 5-year period.
12. The service provider agrees to consign $100,000 of the remaining $325,000 in customer inventory, which saves another $20,000 annually. The example only counts these savings in the fifth year.
13.  The customer has turned $425,000 worth of inventory into cash.
14. The service provider promises 8 hours per week of engineering assistance. If a staff engineer would cost the company $50,000 per year (not counting benefits, etc.), then over 5 years the customer would save $50,000 from the free use of the service provider's engineer.

Pumps & Systems, November 2008