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  • 1.  What benchmark to use to optimize maintenance cost

    Posted 02-01-2023 08:52 PM
    Hello all,

    I work in MRO sourcing and trying to understand what industry benchmark is used to check if the maintenance cost is optimal or not.

    I have seen maintenance cost as a % of RAV (Residual Asset Value) - but calculating RAV is not simple.

    I would like to know what different industries use and if there is a global standard.

    Please provide best-in-class target value as well.

    Many thanks in advance.

    Regards,
    Farukh Navaid
    MRO Sourcing Strategy Leader - Owens COrning

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    Farukh Navaid CPSM, MBA
    MRO Sourcing Strategy Leader
    Owens Corning World Headquarters
    Bloomfield Hills MI
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  • 2.  RE: What benchmark to use to optimize maintenance cost

    Posted 02-03-2023 11:53 AM

    I guess there is not a unique recipe in general terms. In MRO (Maintenance, Repair, and Operations) sourcing, there is no single industry benchmark that is used to determine if maintenance costs are optimal or not. The calculation of the Residual Asset Value (RAV) as a percentage of the maintenance cost can be used as a benchmark, but as you mentioned "this calculation can be complex" and may not provide a comprehensive understanding of the costs.

     

    Different industries may have their own methods and standards for measuring maintenance costs and their optimization. Some industries may use industry-specific benchmarks or guidelines, while others may use their own internal metrics and performance targets. There is currently no global standard for measuring the optimization of maintenance costs in MRO sourcing.

     

    In terms of best-in-class target values, this will depend on the specific industry, the type of assets being maintained, and the cost structure of the MRO operations. It is recommended to consult with industry experts, research best practices in the relevant industry, and analyze internal metrics and performance targets to determine a suitable benchmark and target value for maintenance cost optimization in MRO sourcing. I suggest using the leading and lagging indicators in the SMRP Book according to your industry, Focusing on 20% of the areas or facilities that cause 80% of the income or profitability of the business.



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    Edgar Garcia Parada BEng
    CEO
    Preditek
    Tepecoyo
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    Original Message


  • 3.  RE: What benchmark to use to optimize maintenance cost

    Posted 02-03-2023 12:26 PM
    Edited by Edgar Garcia Parada 02-03-2023 12:27 PM


  • 4.  RE: What benchmark to use to optimize maintenance cost

    Posted 03-19-2023 06:33 PM

    Hi Farukh,

    I don't think you will be able to find a single metric that works across different industries. The maintenance cost as % RAV is popular in manufacturing as far as I can see but in e.g. Oil & Gas it is rarely used and certainly the publicly quoted targets for maintenance cost as a % of RAV are way too high for very capital-intensive plants. Plus there are huge variations around what is deemed a maintenance cost in one organization versus another. In O&G I would say the best method to approach this would be to use one of the global benchmarking solutions (e.g. PTAI) because they apply strict definitions for what is to be included in what cost and then compare different companies across different sectors within O&G e.g. LNG plants, offshore, gas plants etc.



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    Erik Hupje
    http://www.roadtoreliability.com
    https://www.linkedin.com/in/erikhupje/
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    Original Message


  • 5.  RE: What benchmark to use to optimize maintenance cost

    Posted 03-20-2023 07:50 PM
    Edited by RAJEEV SETH 03-20-2023 07:50 PM

    Hi Farukh

    Total maintenance cost different for different industries, since RAV is tough to calculate I am benchmarking it % of conversion cost. You can use this parameter to benchmark with similar type is industry.

    For MRO perspective I am use INTR (Inventory Turnover Ratio) which is a good indicator to check if you have a heathy stock in hand. 

    Inventory Ratio ="MRO  Annual Spend" /"Inventory Value"

    Thanks

    Rajeev


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    RAJEEV SETH
    Director
    Mondelez Global LLC
    Parsippany NJ
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    Original Message


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