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Sweating the Assets and Maintenance Debt

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Sweating the Assets and Maintenance Debt

  • Posted by: Art Durnan
  • Category: Asset Management, Maintenance Improvement

There is a saying in mining that I haven’t heard in a long time and that is “Good Deposits make poor miners.” What this means is high grade or low strip ratios can make up for a lot of inefficiency. I think a corollary to this statement is that booming super cycles with high margins also make poor miners. For the past decade commodity prices remained high with a few minor corrections, that did not last, fueled in part by China’s expansion. Companies rapidly expanded chasing increasing output and spending capital to get increased capacity. I also observed that the back to back cycle lulled this generation of management into believing that this was the new “Normal” and I heard that statement many times.

Unfortunately, there was a hangover coming at the end of the party and that showed itself as much volatility in demand and prices. I now hear the boards talking about this now being the new “Normal.” To set the stage for how all of this affects equipment reliability I want to introduce a term we used sparingly during boom times and that is Maintenance Debt. In the boom, capital was plentiful and maintenance spend mostly unconstrained. This, unfortunately, led to over capitalization to compensate for low performance all masked by high commodity prices. Underutilization reduces Return on Investment.

For many of my assignments, I inherited plants and fleets that hadn’t been maintained very well. In the era of reactive maintenance not much was done to introduce tactics to prevent failures. Capital was sucked out of the business by deferring overhauls and intentionally degrading the equipment. Those production managers who successfully maneuvered through this oft times were promoted, if their timing was good and they escaped before a catastrophic failure occurred. They had controlled costs by running the equipment into the ground. The next guy that came along got stuck with a rundown operation and was set up to fail. By the way, this is the creation of maintenance debt-one that eventually has to be paid back if a business is to sustain. As industry enters what may be a protracted down turn in commodities prices my prediction is that maintenance debt will again rise. Equipment will be run hard and maintenance interval extended or required tasks will be ignored. This will be particularly felt in buildings and structures that often receive little maintenance attention anyway. The definition of maintenance is to keep in good order, not to fix and repair.

What do you do to survive in this environment? My answer is beef up your inspections and predictive maintenance activity. Push for moving to on condition maintenance. That is maintenance done on need alone. Definitely defer work but understand the risk. Likely among other things you have taken a cut in manpower and staff. There will be too much work to complete anyway so why not do the critical work first? Get off of time directed activities. When I talk about on condition I am not talking about using an age experimentation approach where rebuilds are deferred and a wait and see attitude is used. An understanding of the condition of the equipment allows life extension. Every dollar of maintenance deferred spending goes to the bottom line as profit in that period.

What we have done before is to create an Asset Integrity Index that uses all know information about the equipment to understand the likelihood of failure. Having that list can then prioritize work and allow for component life extension. In future blogs I want to get into some of the real world life extension work that my teams were involved in and the success. I intend to get a bit deeper into the nuts and bolts.

Good luck with your programs and surviving yet another cycle. It is end of summer here in Wyoming. In six weeks we may have our first snow.

Regards,

Art

Author: Art Durnan
With over 45 years of industry experience primarily in Asset Management, Art is an pioneer in Asset Management. Previously Art held positions in project management, engineering design, and process engineering in hydrometallurgical and pyrometallurgical processes.

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