Economic analysis in PM

As I’ve written before I’m deeply involved in thinking about PM and PdM. This is the lead of my chapter on economic analysis. In it I describe the process of analyzing each level.

Economics of PM has three levels of view. The highest level might be called macro economic analysis. In this kind of view the firm decides if PM approaches make sense at all given the organization’s goals and the needs and requirements of the business or field.

To make that decision an organization would look at the current costs of operation. They would project the costs of the operation with the proposed changes. Since any change costs money the analyst would see how many months or years the savings (assuming there is one) would take to pay off the investment.

If speed of pay-off (which is 1 over the Return on Investment –ROI) were adequate then the decision would be made to change from the status quo to the new approach. Once that decision is made the second level looks more and more closely at groups of machines or processes.

For want of a better term I use semi-micro view for the second level. This semi-micro view decides what strategy is most appropriate for a particular machine or group of machines. Even if a decision has been made at the corporate or plant level to use PM/PdM as the dominant strategy, each machine or machine group has factors that influence how to handle it specifically.

Usually the most important factor is the cost of having the unit out of service. A low or negligible downtime cost can scuttle a PM decision for that asset (substitute machine, truck or even building for asset). As before the cost of your current operation for that asset or asset group is compared to the cost of running in the new mode. Given the investment level to bring the asset to PM standards, is there enough Return on Investment (ROI) to make it justifiable?

Once a decision is made about strategy for an asset or an asset group the third level is what PM tasks do we perform?

In the task view or micro view, the cost and consequence of each task is compared to the cost and consequence of the failure mode the task is trying to avoid. It is critical to choose the fewest tasks, the least often that will achieve your goals.

Does this clarify anything for you? I’d like to hear from you if it does or doesn’t!

This is taken from the book The Complete Guide of Preventive and Predictive Maintenance (available in the shop –signed by the author).

Joel

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