OF TECHNOLOGY & MANAGEMENT Advanced Diploma in Facilities Management TRENT GLOBAL COLLEGE OF TECHNOLOGY & MANAGEMENT Advanced Diploma in Facilities Management Asset Maintenance Management Lecturer: Daniel wong, mba, m.sc, bbus

Executing A Maintenance Policy Understand the key factors influencing Maintenance Policy Planning Expressions of Maintenance Standards (functional, conditional, response, financial) Execution of the Maintenance Policy (staff, budget, schedule, external services)

Factors Influencing the Maintenance Policy Several factors effect the scope and application of a policy Technical factors Corporate policy considerations Organizational considerations Financial considerations Economic considerations Environmental considerations

Technical factors Relate purely to the performance of the component without any direct consideration of company policy or directives. 1 Age of Component / Unit Strong correlation between age and deterioration eg. Corrosive environment, rust. Weathering effect (moisture) on building components Older buildings need more maintenance The first factor to consider when considering maintenance priorities 2 Cost of Replacement Parts / Whole Unit Certain components may be more expensive to replace than others. Cheaper to wreak than to repair. Repair cost Vs replacement (more cost effective to replace?) Availability of replacement parts. No longer available, cost high to make. 3 Cost of Postponing Maintenance (Deferred Maintanence) Many fail to understand the true cost of failing to carry out maintenance, deferring maintenance. Deferred maintenance adversely affect the quality Possible loss of goodwill and bad publicity Cost more in the long run vs small amount saved

Technical factors Yesterday’s maintenance will affect today’s 4 History of Maintenance Yesterday’s maintenance will affect today’s maintenance policy If previous building owner deferred maintenance and created back log, new owner will have to spend more to bring building up to standards. Record of maintenance is important 5 Programming Factors Components can be designed to have lifespan which compliment programmed joint replacement of 2 or more elements. More economical to replace main buildings elements with its associated equipment to minimize downtime, disruption and access cost Many latest research now focus on Cost Prediction Models in relation to estimated lifespan of elements

Technical factors 6 Materials 7 Statutory Factors 8 Discovered Defects Types of materials used has a considerable effect on the Maintenance Policy Inappropriate election of materials today will affect tomorrow’s maintenance, example Steel windows in housing Asbestos insulation and fire stopping in offices Old engine design for new cars Radical new design in bridge construction Purpose made defectiveness Synthetic slate roofing tiles 7 Statutory Factors Change in legislation resulting in a change in policy, higher standards required etc. In recent years, the Window Retrofitting Orders, Legionella bacteria control for Cooling Towers, Fountains etc 8 Discovered Defects Newly discovered defects will affect the MP For example tiles popping, roof leak etc

Technical factors New Technology New Working Practices 9 New Technology Emerging new technology will affect how maintenance works are carried out New machineries will increase the efficiency and speed of how work is done, eg. Underwater CCTV, hoist 10 New Working Practices Changes in working practice can affect corresponding maintenance requirements eg, automation Business process improvement, emails cut down the needs for snail mails and dispatch personnel 11 New User Requirements New standards of customer or user requirements may form. Eg car alarms,immobilisers etc.

2. Corporate Policy Considerations Some organisations may have to maintain a higher maintenance image than others for policy reasons, Egs Public Image of Organization Employee Working Considerations Consequences of Failure Past and Current Usage Future Strategy Consideration

2. Corporate Policy Considerations ( A. Public Image Certain organizations have a requirement for high levels of maintenance and low failure The level of maintenance committed to each type of rolling stock is dependant on: - the image of the company and the cost of failure May want to display their buildings in pristine condition always eg. disneyland. B. Employee Working Consideration Strong correlation between level of maintenance, employee satisfaction and productivity Attitude of employee is affected by the quality of equipment they used Better motivation with better working environment

2. Corporate Policy Considerations (cont’d) C. Consequences of Failure Single most important factors influencing Maintenance Policy Consequences of failures defers from organization to organization The higher the consequences of failure, the more funds will be allocated and more attention will be given. Eg. Space shuttle D. Past and Current Usage The level of maintenance required by a unit/component depends on the past and present usage Impossible to isolate one component from the other Standard maintenance schedule may not be sufficient, especially when equipment is subjected to abusive usage (e.g. 24 hours cooling) Over utilization or wrongful use may invalidate some/all the manufacturer’s estimated lifespan and recommended service frequencies Policy must recognise and allow for this.

2. Corporate Policy Considerations E. Future Strategy Considerations Most companies will have a Strategic Plan, with strategic objectives that link to the asset base The Strategic Plan will state how much the company is willing to invest in its assets Invest more in the maintenance of an asset that forms part of the strategic plan. Strategic Plan may also indicate the assets due for disposal / demolition / scrapped, then minimum fund should be allocated for this class of assets (just to satisfy minimum statutory requirements)

3. Organisational Considerations Maintenance Depts are part of the larger organisation. Maintenance is subjected to organisational links of communication, contract, accountability etc. Egs, power bases, position, structure, interaction, startegic policy.

3. Organizational Considerations Organizational consideration to note while formulating the Maintenance Policy: - 1 Power Bases Different sections within the organization has different level of relative power Maintenance is often seen as undesirable but essential drain on resources Hence must emphasize the importance of maintenance on productivity and profitability 2 Position of Maintenance Dept Maintenance Dept is part and have to fit into the organization Where it fits in is very important, don’t let it hide behind some unseen corner Location within the system is of great importance.

3. Organizational Considerations Organizational Structure An organization may have several sections responsible for maintenance Each section is making separate contribution to the policy, hence its operational area and scope must limit to its own remit 4 Managerial Interaction Maintenance managers often seen as the poorer relatives within the organizational structure They always seen as keep asking for money but never produce any obvious or tangible results

3. Organizational Considerations 5 Strategic Management Policy Corporate objective will have direct influence on the Maintenance Policy and set its overall operational parameters on its formulation and execution Maintenance Policy has to fit into Corporate Objectives such as acquisition, deposition,taking over etc 6 Nature of the Organization Certain companies may see maintenance as necessary and desirable. Others may see maintenance as something to be minimized All depends on the nature of the company

4. Financial Considerations Financial consideration is one of the main influencing factors on MP Maintenance is part of the life cycle cost, with few immediate benefits Level of maintenance depends on availability of funds Financial Considerations Influencing Maintenance Policy Company Performance & Profitability Cash Flow Size of Direct Labor Force Arrangements with External Contractors Previous Expenditure and Effectiveness Inflation Variations in Property Market Variations in Property Stock

4. Financial Considerations 1. Company Performance & Profitability Maintenance cost money Correct maintenance cost a lot of money How much company willing to spend on mtce depends on whether company is making money Hence, mtce contract must be flexible, with reasonable term and can terminate when required 2. Cash Flow Mtce take place in several forms, planned, responsive, ad hoc Planned maintenance well documented and allowed for in cash flow/budget. Responsive usually require immediate finance and will affect cash flow Sudden and unforeseen req’t can be incompatible with immediate cash flow When cash flow is insufficient, quality is usually compromised by adopting the cheapest but may not be the best solution eg. 2nd hand parts. 3. Size of Direct Labor Force (if any) May have direct worker within the company to carry out maintenance works These represent fixed overhead which is costly Modern companies prefers to keep lean fixed overheads and keep core while outsource the non-core functions.

4. Financial Considerations 4. Arrangements with External Contractors Types of Maintenance Contractor : - Internal Maintenance Contractor Semi-internal Contractor Full External Private Contractor Hence, contracts can take place in several forms E.g. Term contract with schedule of rates (percentage adjustment), fixed price contract etc 5. Previous Expenditure & Effectiveness The perceived value of maintenance is often taken as a function of past performance (i.e. how effectiveness when I last spend the money, the return) To carry out Cost Evaluation to determine effectiveness and value for money Stop gap vs Permanent Solutions (cost??) eg. Roof leak. 6. Inflation Inflation will affect the cost of maintenance, as some maintenance contracts can for 3 to 5 years Hence must factor in the fluctuation and adjustment For yearly contract, adjustment can be made according to the market condition at the time of renewal

4. Financial Considerations 7. Variations in Property Market Real estate is a long term investment, and will cut across a long period Property market varies constantly (ups and downs) How much to spend is affected by the market (which determine the property value) Incentive to maintain operates in direct proportion to changes in asset value More expensive, spend more to maintain 8. Variations in Property Stock No 2 properties are the same! Companies with large property asset bases experience changes in the range of property that they retain as stock (investments) E.g. Property developer launching new tower block for sales, good one taken up and leave behind those with poorer stock, such as facing bin centre Costly to maintain just 1 unit within a development (as compared to maintaining say 20 units within same development). No economy of scales New property sometime needs higher maintenance cost due to inherent (if DLP has expires)

5. Economic Considerations 1 Organizational Perceptions Rooted down to the Organization’s perception and overall attitude towards maintenance Some are maintenance based and willing to spend a bit more, but others are not 2 Contribution From Maintained Assets It is a fact that profit generating departments will get more attention and more money will be spend in maintaining their asset based. Easier to justify expenditure for profit generating center For non-profit generating departments, amount spend on maintenance tends to be lower. A good tool to use will be the effect on long-term corrective maintenance 3 Link between Mtce and Return To establish the link between maintenance and return, eg manufacturing In some cases, such link are readily identifiable. But this is not always the case Always try to link cost of break down and disruption, to cost of maintenance

6. Environmental Considerations Environmental factors have the most significant impact on policy, but it is almost the most difficult factor to predict and evaluate The factors include: - General Economic Climate Legislation Internal Regulations Tenure and Landlord Agreements Availability of Alternatives A. General Economic Climate Corporate strategy is affected by the Economic Climate, as they are profit-driven and has to stay competitive The overall Company Policy will determine how the organization behaves and function This Policy is affected by operation and the behavior of competitors

6. Environmental Considerations B. Legislation Legislations can exist in many forms (Acts, Code of Practices, By Laws, ISO standards etc) Legislations will set the minimum maintenance and safety standards for all kinds of assets (i.e. various Code of Practice) C. Internal Regulations Organizations usually have internal regulations that set maintenance standards, or a combination of internal and external regulations on maintenance Example Banks often make loans as mortgages, secured against a property asset. They will set minimum maintenance standards on mortgage holders

6. Environmental Considerations c. Tenure and Landlord Arrangement Organization own the assets and has a free hand in most appropriate form of Maintenance Policy. Most company maintain Asset Light Strategy and prefer to rent than own In UK context, lease usually is for 5 years and tenant will be responsible for all insurance and maintenance. Landlord will usually engage 3rd party to conduct audit before renewals or return the asset upon expiry. Tenant will have to make good or compensate before return the asset to landlord D. Availability of Alternatives Alternatives to maintenance are: - Leave to deteriorate Scrapped Close down part of the operation (need not maintain) and continue to operate the rest All available options must be evaluated to decide what is the best option

Maintenance Standard - Main Topics Essential for the effective formulation and execution of MP. Set the quality of maintenance required. Relate to finance available and level of performance required Factors Influencing Maintenance Standards 1 Responsibility or Authority for Setting Standards Standards must be set by Authority who can decide the acceptable level of maintenance in relation to other objectives and performance characteristics Maintenance Mgr often has to set standards based on funds available, and scale down in time of adversity 2 Quantification of std Maintenance standards is difficult to quantify and isolate Manufacturing standards can be easily defined eg. 5,000 bottles a day vs aesthetic considerations for buildings. 3 Maintenance Performance Criteria Many ways to measure performance: - Compliance with minimum statutory requirements Customer satisfaction Aesthetics and appearance Short term Vs Long term appearance Expansion / contraction / disposal 4 Optimal Costing A process of deciding the combination of mtce types and cost to get the best value for money 3 main types : - Planned, responsive and cyclic

2. Expressions of Maintenance Standards Financial Condition and Performance Criteria Condition Led Maintenance Operational Reqm’t Led Maintenance Response Time Financial Criteria Measure against how well operation has performed against its financial objectives Mainly on production line eg. Breakdown rate, downtime Can also measured in terms of works done against original reqm’t, no. of complaints received or responsive calls Used to measure how important the maintenance reqm’t is Conditions can be measured in many ways But must a rating system that measures the condition of what is being measured. Identify the most important components within the system Concentrate the resource in maintaining these components. Move onto the less important aspects when finance allows Standard is express in term of basic minimum standard Can be done using manufacturer’s recommendation or performance specifications Standards set in term of response time In area where long response time is not permitted, e.g. production line Sometimes need to stand-by necessary team/parts to give immediate response to minimize down time Specify performance in relation to the expenditure of budgets Common among bigger companies Work based on a detailed 5 years maintenance program, then establish the expenditure required. Monitor actual against the projected Use expenditure to measure how well maintenance is done - Subject to abuse

Execution of the Maintenance Policy Always think of how to execute while you are planning Important to demonstrate the ability to execute the policy in the Maintenance Policy (how and who will do the jobs) 2 Main Considerations on Executing the Maintenance Policy 1. Internal Resources Sufficient staff within the organization to execute the policy? Mtce Mgr needs to produce organization charts and schedule of internal resources requirements to identify number of people required Staff requirements must be submitted together with budget plan and schedule for approval May need to show in term of daily, weekly or monthly requirements 2. External Procurement For companies with limited core resources, outsourcing is usually the solution to main man power requirement This is more the case when high portion of specialist appointments such as architects, engineers, surveyors, contractors etc are required Policy should indicate the internal / external balance and make adequate provision for fees To consider in-house vs outsource Other creative solutions, include flexible hours staff, part time, contract etc

Question What is cyclical maintenance? How does that affect maintenance planning and execution?