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David E. Pierce, Diamond Alkali, Co.
Maintenance Comparisons by Points Ten chemical plants are evaluated on basis of activity, sales, investment, and gross profit
PLANT profiles for maintenance labor were described in this column several months ago, a broad band of indexes being shown on the basis of man-hours per 1000 kw.-hr. of power consumption. T h e charts presented in that column have been useful in comparing improvements of the various operating d e p a r t m e n t s in large plants a n d in comparing the maintenance labor performance of a group of small plants. Sometimes, however, there are reasons for wanting to compare a group of plants in one division of a company or in the whole c o m p a n y on the basis of dollars of total maintenance rather t h a n man-hours, thus including maintenance material a n d labor (with or without overhead). Also, the kilowatt-hour c o m m o n denominator is not the only one t h a t is of interest in connection with the large expenditures for maintenance. T h e method described this m o n t h allows the use of several bases of comparison. T o illustrate the method, ten chemical plants have been evalu-
ated, differing in size from those with as few as 25 employees u p to those with m a n y hundreds, differing in type from organic to inorganic chemicals, and having such other differences in location or types of equipment as to make one doubt the possibility of any fair comparison. T h e four bases of evaluation selected for this example a r e : (1) activity, measured by kilowatt-hours total power consumption; (2) sales; (3) investment in plant, calculated at replacement cost; a n d (4) gross profit for each plant. O t h e r bases have been tried out, but none have had the general acceptance of these four. Plant Activity Most plant engineers probably agree that plant activity is represented well by the a m o u n t of power consumed. T h e use of power for conveyors, grinders, pumps, elevators, mixers, a n d all the other m a chines with moving parts as well as for electrolytic cells a n d electrically heated furnaces spells activity
that encourages corrosion and erosion—followed by the need for maintenance. Therefore, for each of the ten plants in the study, the first column of T a b l e I shows dollars of a n n u a l maintenance per 1000 kw.-hr. of power consumed. T h e plant with the lowest index (dollars of maintenance per 1000 kw.-hr.) is rated No. 1 in the first column of T a b l e I I , the plant with next lowest index is No. 2, and so on until all ten plants have been rated. Sales Another basis for expressing m a n u facturing cost is as a fraction of sales. Therefore, it seems reasonable to express maintenance in this way (dollars of maintenance per S1000 of net sales). D a t a needed are available every month and provide an interesting set of indexes, shown as the second column in T a b l e I. Again, the plant with the lowest index is rated No. 1 in T a b l e I I and the others find their places according to the relation of their maintenance to sales dollars. VOL. 4 9 , NO. 5
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MAY 1957
55 A
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EQUIPMENT AND DESIGN
Table I.
Plant
Dollars Maintenance and Overhead Per $1000 Plant Investment
Per $1000 Gross Profit
74.2 142.4 6.23 3.58 157.7 131.2 242.6 52.0 89.0 169.4
49.3 58.2 168.0 127.7 132.5 98.7 119.6 107.5 86.3 83.2
87.0 80.0 138.0 57.2 153.0 83.0 149.0
250 464 889 550 647 660 241 361 306 242
Table II.
J
108 121
89.0
Relative Standing by Plants Based on Dollars
Per 1000 Kw .-Hr.
Per $1000 Sales and Transfers
Per $1000 Plant Investment
Per $1000 Gross Profit
Points
Ratin
4 7 2 1 8 6 10 3 5 9
1 2 10 8 9 5 7 6 4 3
4 2 8 1 10 3 9 6 7 5
3 6 10 7 8 9 1 5 4 2
12 17 30 17 35 23 27 20 20 19
I II VII II
Investment
Plant investment has been widely used as the common denominator of maintenance indexes. It seems logi cal to refer the cost of maintaining buildings and equipment to the cost of buying new ones. Therefore, the third column in T a b l e I gives for each of the ten plants its index of dollars of maintenance per $1000 of investment. In this case, there has been some discussion as to whether the original investment or the cost of replacement should be used. I n this study, at least, the indexes are based on cost of replac ing the investment rather than what the buildings a n d equipment cost in the first place. Profit
T h e fourth divisor of mainte nance is profit. T h e index (dollars of maintenance per $1000 of gross profit) measures the importance of maintenance in the plant economy, sometimes dramatizing the poten tial value of reducing repair costs and sometimes showing that major changes in profit must be sought in 56 A
Feature
Per $1000 Sales and Transfers
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A Β C D Ε F G H I
A Workbook
Per 1000 Kw.-Hr.
A Β C D Ε F G H I
Plant
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VIII V VI IV IV III
other areas. In each of the ten plants used in this study, the profit was calculated on all products, includ ing at market prices those that were actually transferred within the com pany as well as those sold outside the company. As in the case of the other three columns of T a b l e I, the plant with the lowest index re lating maintenance to profits was rated No. 1, the next, No. 2, and so on in making u p T a b l e I I . Taking the standing of a given plant in each of the four columns of T a b l e I I as the n u m b e r of points acquired by that plant in this contest, the sum of those points is recorded in the fifth column. T h e last step is to rate the plant with the least points as No. 1, the one with the next to the lowest n u m b e r of points as No. 2, a n d so through the list. Using this procedure, Plant A has won first place, Plants Β a n d D are tied for second, and Plant J comes in third. At first glance, it may be con cluded that this method favors one type or size of plant over another, but in actual practice this con tention has not been borne out.
INDUSTRIAL AND ENGINEERING CHEMISTRY
Small plants win out over large ones sometimes; small power users m a y beat the large electrochemical plants. Although the method is new, it seems to have a rather beautiful impartiality. Changes in relative standing of plants can take place easily. Some extra effort to reduce maintenance and overhead may move one plant ahead, while another m a y lose standing by continuing its previous expenditures in the face of reduced sales or profit. Short-term com parisons would not mean too much, so that contests at 6-month or yearly intervals would probably offer the best chances of success. T o use this method for a diversi fied group of plants, it is evidently necessary to have reasonable uni formity in cost accounting methods at the several locations. Compari son studies of several plants making similar products may show that one plant charges a certain activity to maintenance a n d another charges the same thing to overhead. For example, one controller m a y keep dismantling costs incidental to new construction in a separate account, while another may include it in the maintenance cost of the plant where the work is proceeding. O n e plant m a n a g e r prefers to allocate the cost of washing windows a n d keeping the yard clean to the various de partments served, while another charges all such items to " P l a n t G e n e r a l , " an overhead account. O n e accountant differs from another in his interpretation of borderline cases which may be taken as capital or expense. Direct comparison be tween two plants can be unfair unless every effort is m a d e to use the same method of accounting. T h e ten plants reported in these tables have been selected from a much larger group to cover as great a variety as possible. T h e dollars of maintenance and overhead com bined were divided by actual figures for the various standards of reference. T o some extent, therefore, they m a y serve as rough bases for comparison with plants in other parts of the chemical industry. I n any case, this new method of comparing the main tenance costs of chemical plants may stimulate some suggestions for other ratios in the table of point winners.
