The Uptime Blog
A recent post on the Association for Maintenance Professionals blog reports that “U.S. oil refiners are ‘compromising the mechanical integrity’ of their equipment by extending maintenance cycles on their plants, the head of the U.S. Chemical Safety and Hazard Investigation Board said.”
Though the blog focuses on oil refineries, it references the Deepwater Horizon oil rig catastrophe of April 2010 by noting “During April and May there were 13 fires, 19 deaths and 25 injuries in the oil sector, according to the United Steelworkers. Explosions in April on the Deepwater Horizon rig in the Gulf of Mexico operated by BP Plc and at Tesoro Corp.’s Anacortes, Washington, refinery resulted in 18 deaths.”
The reference to Deepwater might be a somewhat unfair (or at least illogical) correlation, since the rig was not a refinery; the article sort of mixes apples and oranges, so to speak. By referencing the Deepwater spill, it implies that the blowout of the rig might be caused by lack of maintenance. I am no expert on the subject but by most accounts, such as this one in the Washington Post, it remains unclear whether the Deepwater explosion occurred because managers failed to carry out scheduled or unscheduled maintenance. (I wrote previously on the costs of downtime in this blog post on the Deepwater Horizon explosion.)
Nonetheless, the AMP blog does raise a valid issue: the importance of performing routine maintenance. It seems short-sighted to skimp on scheduled maintenance, because the cost of equipment failure is typically far greater than the cost of parts and labor associated with routine maintenance execution. Therefore, the driving economic factor is probably downtime. As oil prices continue to rise, the cost of downtime for a refinery must be so high as to make the risk of equipment failure, due to delayed maintenance, worth taking. However the cost of equipment failure can be measured not only in economic terms (downtime), but also in terms of injury/safety and environmental damage.
When it comes to maintenance standards, many industries are highly regulated. In the United States, for example, the commercial aviation sector is highly regulated by the government (Federal Aviation Administration). Every commercial aircraft has scheduled maintenance checks, and every maintenance procedure that is performed gets recorded. (For more info, see one of our blog posts on aircraft maintenance and compliance.) Other industries, such as oil/gas, rail and chemical, are also asset intensive, with strict safety compliance regulations of their own.
Reducing maintenance costs is important to every industry but so is regulatory compliance. What can be done to encourage compliance, besides trying to instill different priorities (a big challenge in a corporate environment)? They can implement technology solutions that support this goal, such as providing access to relevant maintenance information, wherever and whenever it is needed.
Many companies that operate complex machines and equipment have implemented content management systems and maintenance planning systems, but few have tied these together with systems that deliver relevant, accurate service and parts information on-demand to mechanics and technicians in the field. (For more on this topic, see our white paper on “Deriving Greater Value from Enterprise Asset Management Investments.” )
Yet there is a great need; maintenance planners and service technicians grapple with the daunting complexity and diverse configurations of multiple pieces of equipment. Keeping assets operational involves enormous amounts of documentation, often in different formats spread across multiple locations: EAM, ERP and ECM systems. Automating the delivery of that critical content to the mechanic increases the efficiency and consistency of maintenance by streamlining fault isolation, part identification and selection of repair procedures. This boosts first-time fix rates (FTFR), improves mean-time-to-repair (MTTR), reduces manpower requirements and downtime costs and improves safety and compliance.
With this type of asset maintenance technology at their fingertips, more companies could reduce downtime and costs, while adhering to maintenance schedules.
There's not a lot of sympathy for BP's financial troubles right now, given the loss of human life, and the catastrophic environmental and economic costs resulting from the Deepwater Horizon explosion. But it's safe to say that BP is facing some catastrophic financial losses as well. Much of the media will focus on the company's cleanup costs; but even without the cleanup costs, BP is currently losing huge sums of money because the assets the rig was sent to find are literally floating away. There is the opportunity cost, in terms of lost drilling time to find new oil deposits, assuming another rig can't be found to continue operations. Finally there is the replacement cost, which will exceed the original cost of $350M. (It should be noted that BP didn't own Deepwater Horizon but was leasing it from Transocean.)
There's no shortage of finger-pointing right now, and this blog post does not purport to have any solutions or to blame any organization for the tragedy. Whether this tragedy was caused by human error or equipment failure is for the experts to determine. Rather, in this post I want to address the cost of equipment downtime.
For companies that rely on complex, capital equipment to generate revenue, it's critical to keep that equipment up and running. We don't have any definitive data points about the average cost of oil rig downtime, but it is undoubtedly high. Even before labor and maintenance costs, BP was leasing the rig for nearly $500,000 a day according to this source. Given BP's profits, the value of the oil extracted must be higher than that and the loss of this rig has put those assets in jeopardy. According to Bloomberg.com, "Transocean Ltd., the world's largest offshore oil driller, said the sinking of its Deepwater Horizon rig in the Gulf of Mexico will increase 2010 operating costs by $200 million and will cut revenue by $130 million."
Of course oil companies are concerned with rig maintenance and reliability; it makes economic sense to keep rigs running safely and efficiently. To do that, they need to keep comprehensive records of maintenance and repair operations, invest in preventive maintenance, and provide access to maintenance manuals and parts information.
A recent news article, however, suggests that oil companies might not be investing enough time into understanding or analyzing malfunctions because they are so intent on just getting the equipment back online:
"The 10-page 2003 report, delivered at the Offshore Technology Conference in Houston that year, suggests that the industry was so focused on drilling that it was willing to pay higher maintenance costs to keep rigs operating and avoid downtime rather than address some of the fundamental problems with the blowout preventers...
"Floating drilling rig downtime due to poor BOP (blowout preventer) reliability is a common and very costly issue confronting all offshore drilling contractors," the report said, adding that every major disruption could cost $1 million." ...
"The report said the reliability issues were directly related to the fact that drilling companies didn't have detailed design and functional specifications to give companies that manufactured blowout preventers...
"The preventers were being rushed into the field with limited testing, and if one malfunctioned, the pressure to keep drilling meant it was fixed with little time spent trying to figure out what had caused the malfunction...
"Because of the pressure on getting the equipment back to work, root cause analysis of the failures is generally not performed," the report said. "In many operations, high maintenance is accepted as a necessary evil to prevent downtime."
It just so happens that this week there was a major oil industry conference in Houston, the Offshore Technology Conference. Sponsored by a variety of household oil industry names such as ExxonMobil and BP, this conference is all about the science, nuts and bolts of offshore oil drilling (though its program now also addresses to a smaller degree alternative offshore energy sources such as geothermal and wind energy sources.)
The conference includes hundreds of technical presentations, many of which touch upon maintenance issues, but the vast majority of topics are on exploration and extraction. Here's the agenda. Not surprisingly, BP cancelled a presentation that it was supposed to deliver at the conference, on "The Challenges and Rewards in Operating in the World's Offshore Basins."
There are conferences that are solely dedicated to oil and gas equipment maintenance, and here are two I am aware of:
- Oil and Gas Maintenance Technology North America
- Middle East's Pipeline Rehabilitation & Maintenance Conference & Exhibition
Hopefully these conferences will shed light on methods of preventing future catastrophic rig failures, and improving maintenance. As the Deepwater Horizon shows us, the high-cost of downtime comes in many forms.
Read more here
As I work with companies from many different industries, I’m always surprised by the number of organizations that have separate applications to manage and deliver their parts and service information. The service department often operates very independently from the parts department; the two departments use different applications to handle their (apparently) unique situations, with little or no technology overlap (except perhaps for the company’s ERP system). The reason seems obvious; the parts department sells parts, the service department “sells” service information.
But lately I see more and more companies looking for ways to integrate the two divisions; they want to cross-link the data so that their customers can order parts and make repairs more efficiently. Is this an industry trend or just an anomaly? Why the sudden interest in an integrated approach?
- Time is money, so there’s great value in being able to link a fault (or problem) directly to the correct service part. Technicians spend a substantial amount of time identifying the cause of a problem. Then they must research the service manual and latest service bulletins to figure out how to fix it. Then they go through a similar process to identify the correct part. And sometimes they go to yet another application to order the part! When a dealer parts manager has to assemble a proposal or bid package containing part drawings, part pricing, equipment specifications, marketing materials and training information, the fewer the applications (to interact with), the better. More and more companies want an integrated electronic parts catalog that makes it easy for service technicians at dealers and distributors to do their jobs. Our customers see a direct correlation between an easy to use, integrated parts catalog and increased aftermarket parts sales. Our customers also want to ensure that service is being performed efficiently and consistently. They want a one-stop-shop where dealers/customers can access ALL product information.
- Reducing the administrative costs of developing and updating parts catalogs can dramatically improve your aftermarket operations. Keep in mind that it costs money and time to install and manage separate applications (one for parts and one for service); it is also a logistical headache to keep the two applications in synch whenever parts or service information is updated. The IT footprint of a single integrated application, consisting of both service and parts documentation, is much smaller, and more cost-effective.
Is there true value in integrating and delivering parts and service information as a single application? Yes. By combining parts and service information, OEMs can reduce IT costs, increase revenues and improve the profitability of their aftermarket operations. Bridging the service and parts silos is a trend that’s here to stay.
Can an effective aftermarket strategy affect new product sales? I would argue that yes, indeed it can. In my opinion one of the most overlooked and undervalued aspects of providing a first-class aftermarket environment is the strong relationship and brand recognition it enables companies to build with their customers throughout the service life of a product, which in many industries can be as long as 15-20 years. The aftermarket provides companies with a perfect venue to make a positive impression and build customer loyalty.
All too often the aftermarket is an afterthought; some companies don’t consider the effects a poor aftermarket experience can have on a customer’s opinion of them and their products. Every aftermarket interaction offers a tremendous opportunity for an OEM to quickly and efficiently assist the customer and improve the customer’s perception of the organization. Yet many OEM customers experience the following scenario in trying to identify a part and complete an order:
A mission-critical piece of equipment that a customer purchased from your company goes down. The customer needs to get the equipment running again and reviews the service information included with the equipment at the time of purchase. But the service information is out of date, so the customer reaches out to your company to get the updated service and part information to make the necessary repairs in a timely manner.
The customer either cannot find or decides it is too difficult to locate the part and service information as it is offered (or not offered) via the web. So the customer calls your customer support center and is placed on hold for 15-20 minutes, waiting to speak with a customer support representative (that’s if they are calling between the hours of 8am and 5pm, when the customer support center is open.) They then sit through a 45-minute process of having the customer support representative identify and order the correct part, which might reach the customer by the following day, at best.
As you review your current aftermarket strategy ask yourself the following questions, which will give you some insight into your customers’ experience:
- Is updated parts and service information readily available for your customers via the web?
- Can your customers easily identify the parts they need and, via self service, place an order?
- Are customers required to contact a customer service representative to order parts?
- If a customer service representative is required to order parts are they available 24 x 7?
- What is the average wait time to speak with a customer service representative?
If your company’s process is anywhere close to the process I outlined above, how eager will your customer be to purchase a new piece of equipment from your company in the future? My guess is that they won’t be very eager to do so. A bad aftermarket experience will decrease the odds that the customer will buy a new piece of equipment from that OEM; do you agree or disagree? I’d like to hear your thoughts on this, so please feel free to comment.
A recent story on National Public Radio highlights a trend that we’re hearing about a lot lately: manufacturers have drastically reduced their production of new cars (logically, because they are not selling as many), while sales of aftermarket parts are dramatically increasing. Along with that, the average age of the American car is on the rise: it’s now 9.4 years. People are getting their cars fixed, rather than buying new. That reflects what we’re seeing in other manufacturing sectors as well, customers are repairing, rather than replacing, what they already have.
For OEMs, whether they make planes, trains or automobiles, it means that there is money to be made in the aftermarket side of the business. Easy, right? One would think so. However, Carlisle & Company (an independent research and consulting firm) estimates that OEMs usually control only about 40% of the service parts business. The other 60% is controlled by competitors who sell common parts, those components that are not engineered exclusively by the OEM.
Customer satisfaction with service information and parts data is one of the factors that drives market share in the aftermarket. Each percentage increase in customer satisfaction with the OEM’s aftermarket support data equates to a percentage increase in market share for parts and service.
How can OEMs increase customer satisfaction? There are three ways:
1) Make sure customers (usually dealerships and distributors) have the latest service and parts information. If an OEM does not provide accurate, up-to-date support information, the customer will look elsewhere to buy the parts. Quite often, OEM catalogs don’t contain the latest information; either because they’ve outsourced their parts catalog development to a third party or their in-house catalog creation and update processes are too time consuming. Either scenario results in the service and parts information being about 45 days out-of-date.
2) Make it easy for customers to find and order service parts. OEMs that provide a streamlined/automated approach to part identification and ordering capture more business because they are improving their customer’s business as well. This requires powerful searching and filtering tools to identify the right parts and procedures and an integrated, robust shopping cart. Also, customers must be guided to the proper part choices including: part supercession, installation kits and any special tools. This environment must integrate with back-end ERP and e-commerce systems, to streamline customer’s access to part purchasing, pricing and inventory data.
3) Provide a complete product, parts and service environment that incorporates all ancillary information such as technical specifications, troubleshooting, service bulletins, wiring diagrams and part lists, as well as pricing and availability. When customers have a one-stop-shop for all aftermarket information they have no reason to look elsewhere for help.
The bottom line is, to increase your aftermarket parts sales and market share, studies have shown that you have to increase customer satisfaction with your aftermarket parts and support data. Providing easy access to up-to-date parts and service information is the best place to start.
In asset-intensive industries like oil & gas, energy & utilities, mining and transportation, capital equipment downtime can cost hundreds of thousands of dollars per day. One of the primary challenges to keeping assets up and running is the daunting complexity and various configurations of the equipment: maintenance planners and service technicians must reference enormous volumes of documentation, some of which is spread across multiple locations; some in paper form, others in online databases.
Many companies in asset-intensive industries have made substantial investments in Enterprise Asset Management (EAM) systems or Computerized Maintenance Management Systems (CMMS). While these systems can have a wide range of capabilities, broadly speaking they try to improve maintenance planning by indicating what to do and when to do it. This often includes job scheduling and assignment, preventive maintenance (PM), inventory control, and other activities associated with asset availability, reliability and operational safety.
Largely beyond the scope of EAM/CMMS applications is direct support for how to perform maintenance activities—particularly unplanned maintenance activities—in the field. While some EAM systems can generate work orders, and perhaps material lists for various maintenance tasks, the primary purpose of these systems is to support the maintenance planner, not the mechanic.
That’s where Enigma’s technology comes into play, because it delivers the how to content as a fully integrated maintenance solution: fault isolation/troubleshooting manuals (how to diagnose), service manuals (how to repair), service bulletins (how to incorporate the latest procedures), parts catalogs (how to find the proper parts) and collaboration (how to share maintenance history/experience). Improving the efficiency of mechanics has a major impact on reducing asset downtime and thus on bottom-line profitability and competitiveness; it’s common sense to increase the value of EAM by integrating Enigma into the equation. In future blog posts we’ll provide specific examples that show companies how to further leverage EAM/CMMS investments.