The Hidden Cost of Erroneous Work Orders: How asset-intensive businesses can save millions and free up 1000s of hours of “wrench time”
At HubHead, we work with customers who run asset-intensive businesses that demand a lot of maintenance activity. Frequently, these customers have invested tens and even hundreds of millions in advanced computerized maintenance management systems (CMMS) and Enterprise Asset Management (EAM) Systems. Regardless of the system they chose (SAP, IBM Maximo, ABB Ventyx or others), one experience is universal: The productivity of maintenance activity drops when an EAM or CMMS is implemented. The organization’s maintenance teams perform fewer work orders and get less work done than before the implementation. HubHead conducted research to understand why maintenance productivity drops when asset systems go into production.
Our field research concludes the following:
The information loaded into the CMMS or EAM system is often 5 or more years old. As a result, the asset information is out of date. Often, asset hierarchies have changed and partial plant rebuilds or upgrades have been completed. Since these systems are transactional, they are not designed to easily evaluate, maintain, and update asset data over time. The maintainable item information drifts over time and never gets corrected or improved.
Work orders that are generated by the CMMS or EAM system that rely on out-dated data can be of two types: 1) Augmented and 2) Erroneous.
Augmented work orders are accurate and frequently have access to additional information about maintainable items. Assets are accurately described, the maintenance task list is available, and work estimates and performance standards for tasks are outlined. Usually, there is a completed maintenance BOM, with supporting pictures, and manufacturer and/or engineering documents associated with the asset are linked to the maintainable item. The maintainable item is also often characterized as requiring safety-critical maintenance or normal reoccurring maintenance.
Erroneous work orders suffer from several information gaps. The asset listed may or may not match the actual asset in the field. Task lists and performance standards are missing. The maintenance BOM is only partially completed or non-existent, and supporting documents are missing.
Our research with customers in a range of asset-intensive industries shows that frequently only 20% of the work orders generated by CMMS and EAM systems have accurate information and could be described as type 1, Augmented work orders. A full 80% of work orders are type 2, Erroneous.
What is the hidden cost of Erroneous work order information?
Erroneous work orders need a lot of research time and homework before maintenance activity can begin. For example, the average Augmented work order, with accurate supporting information, may take 3 – 4 hours to complete and labor and parts costs are often about equal. In contrast, the pre-work and research time for type 2, Erroneous work orders can range from 4 – 20+ hours. The preparation time involves confirming the actual asset in the field, the spare parts and maintenance BOM required, locating the parts needed, and the assembly of appropriate manufacturer and or engineering documents.
So how does Erroneous work order information affect the cost of doing Maintenance?
If a business has 5000 maintainable items that require semi-annual maintenance activity either as a scheduled event or, more realistically, based on condition-based maintenance, 10,000 work orders are generated by the EAM every year. The labor cost of maintenance is estimated at $500/day. Assume that parts costs are equal to labor costs. The 20% or 2,000 work orders per year that are performed with accurate Augmented information would cost the following:
Yearly Augmented work orders, @ 20% of the total work orders:
$1.28 million annually = 2,000 work orders x (4 hours x $80/hr + $320 in parts costs)
$640 per work order
Yearly Erroneous work orders, @ 80% of the total work orders:
$15.26 million = 8,000 work orders x (4 hours x $80/hr + $320 in parts costs + average Prep time of gathering additional needed information of 12 hrs x $80/hr)
$1,907.50 per work order
The servicing cost of an Erroneous work order is 3 times the cost of an Augmented work order. That means hidden costs of $7.68 million annually in preparation time for Erroneous work orders. That is a lot of money and potential “wrench time” tied up in research for work orders that don’t have accurate supporting information. Many companies, and certainly many of our customers, perform more than 10,000 work orders per year, so these hidden costs can grow substantially.
The solution to this problem is better and more complete maintainable item information. If the customer has a centralized information tool where they can easily assess and improve the quality of their asset information on maintainable items, real progress can be made. Also, real money and time can be saved, even without perfect information. For example, in the scenario just described, even if the customer can shift their Augmented to Erroneous work order ratio from 20/80 to just 50/50, they would save $2.88 million in preparation time, and free up 36,000 hours of work order preparation and research time for more productive wrench time and maintenance activity. That is a big cost saving and a substantial improvement in wrench time productivity.
At HubHead, we are committed to bringing you the best practices we learn from our field work with some of the largest and most complex asset-intensive industries world-wide. To learn more about how we can help with the Hidden Cost of Erroneous Work Orders, give us a call or email (email@example.com), or visit us at www.nrx.com. We can also help with an asset data quality assessment for your business and I am always open to feedback about our research findings.
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