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Reliability excellence continuously reduces manufacturing costs and increases the return on assets of the company, observes Mr Ananth Seshan PhD, Chairman & Managing Director, Fifth Generation Technologies India (P) Ltd, Chennai (http://bit.ly/F4TSeshanA). It is a strategy that a company can use for increasing market share and competitive advantage, he adds, during a brief interaction with Business Line. We continue our conversation over the e-mail. Excerpts from the interview:
How does reliability excellence differ from routine maintenance efficiency improvement?
Maintenance efficiency improvement programmes have the limited objective of reducing the cost of maintenance repair. Reliability excellence elevates this concept of maintenance to a strategic level of importance, wherein all the other stakeholders of the business that depend on, or are impacted by, maintenance are contributors and beneficiaries of this strategy.
In other words, reliability excellence integrates production, maintenance, purchasing, finance, logistics, quality, energy management, sales and corporate executives under a single strategic initiative.
The purpose is not merely to reduce the maintenance cost (which is a given), but also to contribute towards reducing the other manufacturing costs, such as production costs, inventory costs, quality costs, energy costs, opportunity costs, and more importantly, reduce asset replacement costs and increase return on production assets.
For instance, let us take a reasonably large manufacturing company or utility which has an asset base of say $1 billion.
Traditionally, the asset replacement costs of such an enterprise would be in the range of 4-6 per cent, which may amount to $40-$60 million. Even a 1 percentage point decrease in the annual cost of replacement achieved by the reliability excellence strategy would result in a $10-million savings.
Normally, reliability excellence, if properly executed, allows for a decrease of 2-3 per cent in asset replacement costs within 24-36 months, and increases the bottom-line by 15 per cent because of the improved effectiveness of equipment, labour and maintenance.
What are the prerequisites for initiating reliability excellence?
As in the case of any broad initiative, management buy-in and resolve are needed at the start. Even though reliability excellence is a global philosophy that can impact the organisation as a whole, actions need to be “local” in the respective departments to slowly integrate people, process and technologies with this initiative.
Therefore, there is a need for a buy-in from the labour that needs to undergo the transformation.
Then there is the need for a basic IT (information technology) infrastructure that integrates the said departments that participate in this initiative. If the company is organised into “silos”, then that is the first wall to break in order to initiate reliability excellence.
Would you like to talk about the impact on the return on assets?
The traditional view of an asset is one of depreciating value. Reliability excellence takes a different view: It looks at the asset from a performance perspective. Suppose the cash and marketable securities of a manufacturing or utility company amount to $500 million and the asset base of the company is $20 billion.
Reliability excellence is focussed on improving the performance of the assets by increasing this ratio of cash reserves and asset value. In this case, the ratio is 2.5 per cent. An increase of 1 per cent of this ratio would mean additional cash of $200 million.
Can you provide a few tips on implementing reliability excellence successfully?
The implementation has to be phased, based on incremental and evolutionary learning of “what worked” and “what did not work” at each stage.
A collaborative approach needs to be adopted amongst all stakeholders mentioned above (which includes the corporate senior executives) for design, implementation, evaluation (and conflict resolution) to achieve the common goals of every stage.
This emerging strategy abstracts some of the good aspects from lean manufacturing and total productive maintenance while making it easier to implement (as it uses much lower and phased capital investment) and is broader in impact compared with the above mentioned concepts.
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