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IntentiaEnterprise Asset Management Benchmark Survey Report 2004 1

Enterprise Asset Management Benchmark Survey Report 2004

Is maintenance worth doing?



Intentia Enterprise Asset Management Benchmark Survey Report 20042

In 2003, Intentia set out to create the first global enterprise asset management

survey. Now in its second year, the survey is continuing to provide mainte-

nance professionals with the only guide to help benchmark and judge their

performance on key maintenance and asset management issues.

In this report, we will consider whether organisations actually regard mainte-

nance as worthwhile, and if so, how they view its effectiveness.

The management of plants, equipment, facilities and other assets to maintain

peak performance is vital to productivity and profit. Organizations continue tostrive for best practice, deploying advanced management software, cutting-edge

management practices and the latest equipment.

As one of the world’s leading enterprise application providers, Intentia takes a

keen interest in helping establish, and assisting our clients in achieving, industry

best practices.

Our second survey was conducted during August–September 2004 and

includes responses from over 400 global manufacturing and operations-related

organizations.

We hope that the results of this, our second Intentia Global Enterprise Asset

Management Survey, constitutes a source of powerful information to help youimprove the way you do business.

Disclaimer: Intentia has compiled the information contained in this document using data which, to thebest knowledge of Intentia was current and accurate as at the date of this report. Intentia disclaimsall responsibility for any harm or loss arising from use or otherwise of the information provided. Allwarranties, express or implied, statutory or otherwise are excluded to the extent permissible under the Trade Practices Act 1974 and any other relevant legislation. The contents of this document areprotected by Copyright ©2004.

Introduction




Is Preventive Maintenance Worth the Effort?

A key question to begin the review of the 2004 Global EAM Survey is to

consider this: Is maintenance actually worth doing in the first place? Preventive

maintenance can take many forms and over the years has gained many

names. Ultimately, it’s a process that provides the business with the right asset

availability at the right time.

Question: Does your preventive maintenance increase

plant production / operations capacity?

For preventive maintenance to be worth the effort, it has to provide clear and

undeniable benefits. For many years, industry has taken for granted the fact thatpreventive maintenance increases operational capacity by improving uptime, thus

allowing the operations team greater confidence in achieving the operations plan

and increasing the equipment’s operational tolerances, therefore producing a

better end product with less scrap. This increases the equipment’s average speed

in producing more product and so on. However, is this view too generic? Could

preventive maintenance actually be ineffective in some industries or types of plants?

Over 85 percent of all survey respondents agree that preventive maintenance

increases their plant production or operations capacity. Nearly half strongly

agree with the notion that they can achieve increased capacity through

preventive works.

Interestingly, power generation and utilities organizations disagree most with

the notion that preventive maintenance increased production/operations

capacity, although they were the most likely to spend the largest percentage

of their maintenance budget on it. Can we therefore conclude from this that

preventive maintenance in asset-intensive industries may not be as effective?

Probably not. Intentia believes that in these types of industries, preventive

maintenance on its own does not increase operational capabilities. Our survey

has shown that power generation and utilities organizations use preventive

maintenance in conjunction with a high level of stand-by systems to provide

an optimum level of equipment availability. This is shown later in the survey by

achieving one of the highest proportions of zero-downtime results.

"Over 85 percent of

all survey respondentsagree that preventative

maintenance increases

their plant production or

operations capacity."




In a more positive light, facilities and infrastructure and food and beverage

organizations were the most likely to agree that preventive maintenance

increases capacity. These are industries that also invested heavily in preventive

maintenance in terms of their overall maintenance budget, telling us that those

who invest in preventive maintenance are doing so because they believe that it

is providing them with an economic advantage.

The analysis of an organization’s size shows a general agreement that

preventive maintenance does increase operation capabilities with the 251–500

size companies leading this view.

European organizations were the most likely to strongly agree that preventive

maintenance increased operational capabilities although, in general, there was

an even view across all geographies that it did make a difference.

Can the use of preventive maintenance do more than increase the operationalcapabilities of the business? Can it go further and actually give us a competitive

edge? Increasing the availability of equipment can clearly have an impact down

the entire supply chain. Reliable equipment enables the operations group to

complete customer orders on time and at the pre-determined unit cost. This,

in turn, delivers what the customer wants, when they want it, at the right price.

This provides a clear competitive advantage over those suppliers with less

reliable plants.

"This provides a clear competitive advantage over

those suppliers with less

reliable plants."




“Obviously, there is a directlink between preventive

maintenance and a

competitive edge”

Question: Do you believe that your preventive

maintenance program gives you a competitive advantage

over others in your industry?

Almost two-thirds of the organizations surveyed reported that their preventive

maintenance program gave them a competitive advantage over others in their

industry. Clearly, there is a direct link between preventive maintenance and a

competitive edge.

In general, there was a consistent view across industries that preventive

maintenance provided a competitive advantage over others in their industry.

Overall, pharmaceutical and chemical companies believed it gave them

more of an advantage, although in practice these industries indicated that

they performed a high level of corrective maintenance. Food and beverage

organizations believed that it gave them the most significant advantage.




Medium-sized (251-500 employees) firms were the most likely to think that

they had a competitive advantage with almost three-quarters expressing

this viewpoint. Small companies were then most likely to think that they

were at a slight disadvantage as a result of their preventive works, while

larger organizations were more likely to be indifferent as to any competitive

advantage acheived as a result of their preventive maintenance program.

From a geographical point of view, Europe had the strongest view that

preventive maintenance gave them an advantage. This may in part be due to

the fierce cross-border competition faced by many European companies.

From these results, preventive maintenance is clearly worth the effort both

in terms of its ability to increase operational output (which could also be

translated by some businesses into a lower cost unit) and also in its providing

a competitive advantage over competitors in their own industry. It is alsoclear that in certain industries, notably the asset-intensive ones, preventive

maintenance on its own cannot deliver optimum results.

"From these results,

preventive maintenance is

clearly worth the effort"




"The majority of survey respondents are spending

less than 10 percent of

total cost of operations on

maintenance."

Is Industry Spending Enough on Preventive

Maintenance?

If maintenance is worth the effort and can provide a competitive advantage, are

companies putting enough effort into getting results? In this section, we wanted

to find out how much organizations were spending on maintenance, and how

much of this was spent on preventive maintenance.

Question: Approximately what percentage of your cost

of operations is attributable to maintenance?

The majority of survey respondents are spending less than 10 percent of total

cost of operations on maintenance.

Power generation and utilities organizations were the most likely to spend 50

percent or more of their cost of operations on maintenance, which is endemic

in asset-intensive industries.

Smaller organizations were the most likely to spend the least on maintenance,

as they may have a lower cost base and achieve higher efficiencies. The survey indicated that almost 60 percent of smaller organizations spend less than 10

percent on maintenance.




European firms were more likely to spend less on maintenance than

Australasian firms. This is surprising because this survey shows that European

firms see preventive maintenance as providing more of a competitive edge and

believe it increases operational capabilities.

From these results, we can see that the majority of organizations spend

relatively small percentages of their operational costs on maintenance. We

wanted to understand how maintenance spending was being allocated.

Industry Spotlight:

Power Generation and Utilities

Power generation and utilities organizations have strong views regarding

maintenance as being an investment, however, in the case of a maintenance

strategy, they are inclined towards the use of redundancy systems to maintain

output. This view is backed up with their attitude towards preventive

maintenance on its own, not increasing operational capacity. Clearly this is an

appropriate strategy when you consider that that they claim very low plant

downtime and have the highest percentage of all industries able to claim zero

downtime. These asset-intensive organizations also outsourced the highest

percentage of their maintenance compared to the other industries. However,

when these organizations have a stoppage, they are typically very protracted

and carry a severe cost penalty. The major issues for the maintenancemanagers within these industries is highlighted as poor management techniques

and a lack of funding, however, unlike most other organizations, maintenance

was seen to be given sufficient weight.




Question: Of your total maintenance budget per annum,

what percentage is allocated to preventive maintenance

as opposed to corrective maintenance?

Over two-thirds of organizations allocate less than half of their maintenance

budget to prevention, which is consistent with the 2003 results. In our view,

many organizations are either still in a 'fire-fighting' mode—not having changed

to a more preventive approach—or, worse, are unconvinced of the benefits of

preventive maintenance.

Power generation and utilities organizations were the most likely to invest atleast half of their maintenance budget in prevention, reflecting the importance

of continuous operation in these industries, in which unscheduled downtime

has very significant consequences on the bottom line. These organizations

were closely followed in maintenance spending by facilities and infrastructure

organizations.

Only 7.1 percent of pharmaceutical and chemical firms spent half or more of

their total maintenance budget on prevention— the great majority of spending

going to corrective maintenance. Clearly, many of these types of organizations

spend vast amounts of money developing new products. One view is that

in a development environment, where large-scale changes to the equipment

configuration are required regularly, preventive maintenance is less effective.

"Many organizations

are either still in a ‘fire-

fighting’ mode — not

having changed to a more

preventive approach"




Small organizations were the most likely to spend 10 percent or less of their

total maintenance on preventive maintenance. This result confirms other

indications that smaller organizations really are less focused on preventive

maintenance and have a much higher reliance on the 'fix it when broken'

approach.

By region the results were similar, indicating a common view across regions

regarding expenditure on preventive and corrective maintenance.

Intentia believes that organizations are still spending insufficient amounts of

money on preventive maintenance. This is one of the few untapped areas of

real improvement potential for many organizations, offering an opportunity to

significantly improve the bottom line. Budget allocations for maintenance need

to focus more on identifying preventive maintenance opportunities within the

business and reducing the reliance on corrective maintenance.

Industry Spotlight:

Facilities and Infrastructure

This survey has found that facilities and infrastructure organizations are the

leaders in outsourcing their maintenance to third-party organizations. They are

also very likely to believe in the benefits of maintenance as an investment that

can increase operational capacity, which is confirmed by their heavy investmentand reliance on preventive maintenance. On the surface, this maintenance

strategy is supported by their ability to report a high percentage of months

with zero downtime, as well as the smallest downtime cost of all industries.

The maintenance profession within these organizations suffered heavily from

poor comprehension of their problems from other line mangers. This is

supported by a strong 'fix it when broken' attitude.




"Less than 30 percent of all

firms surveyed responded

that their cost for lost

production ranged from zero

to USD 10,000."

What Is the Impact of Poor Maintenance?

The Intentia 2004 Global EAM Survey investigated whether plant and

equipment failures were having a significant impact on the profitability of

organizations in the current economic climate and, if so, to what extent. In this

section, we will examine a number of factors in order to judge the impact of

poor maintenance on organizations.

Question: What is your average annual cost (USD) for

lost production due to plant equipment failure?

Production failure can be an expensive issue for many organizations. Less

than 30 percent of all firms surveyed responded that their cost for lost

production ranged from zero to USD 10,000. In addition, only around half of

the organizations surveyed responded that their average annual cost for lost

production was under USD 50,000. Of all firms surveyed, 6.5 percent reported

that their average annual cost for lost production was more than USD 1 million,

with power generation and utilities organizations leading this group.

We believe that these figures are highly understated, and that many organiza-

tions do not fully consider the true cost of downtime, which can include scrap,

lost customers, higher unit costs, additional labor and utility overheads, and so

on. In reality, the situations faced by many organizations could be much more

costly than they initially believe.




"This clearly demonstrates

the risk of poor preventivemaintenance within asset-

intensive organizations and is

probably best characterized

by the recent major US

power outage"

Facilities and infrastructure organizations generally reported the lowest losses.

By their nature, many of these organizations are least liable to suffer lost

production or operational capacity in the same way as a 'production' facility.

Power generation and utilities companies were most likely to average losses

of more than USD 1 million. This clearly demonstrates the risk of poor

preventive maintenance within asset-intensive organizations, a risk probably

best characterized by the recent major US power outage. Pharmaceutical and

chemical businesses reported losses greater than USD 10 million, a finding

supported by the fact that they are also most likely to report substantial

downtime. Clearly, ineffective maintenance in this type of industry can have a

significant effect on profitability, at a time when these types of businesses canleast afford it.

There is a clear trend that smaller organizations have less of a cost for lost

production, however, as a percentage of revenue, the impact may be just as

serious as a large loss for a larger company. More than 10 percent of firms with

more than 250 employees average in excess of USD1 mill ion per year in lost

production—an enormous cost to bear for most organizations.

The findings regarding lost production were not dramatically different between

the European and Australasian regions. Knowing the magnitude in cost of

equipment failures, this survey then investigated the amount of downtime being

experienced.

Industry Spotlight:

General Manufacturing

A mixed picture appeared from the general manufacturing group, with a high

percentage of companies spending relatively small amounts on maintenance

but achieving zero major downtime occurrences—second only to power

generation and utilities companies. Almost one-third of these organizations

relied on repair-based maintenance. Does this therefore indicate some degree

of excess capacity within these businesses, allowing them to rely on repair-

based maintenance while still maintaining operational capacity?




"Over 60 percent of allorganizations reported

that they experienced 5.0

percent or less downtime

per month"

Question: How much downtime would your

production/manufacturing resources experience

monthly?

According to our survey respondents, the typical organization experiencesbetween 0.1 percent and 5.0 percent downtime per month. Nearly 60 percent

of all organizations reported that they experienced 5 percent or less downtime

per month for their production/manufacturing resources.

A high percentage of facilities and infrastructure businesses reported that

they typically had no downtime at all per month, reflecting their practice of preventive maintenance. These impressive claims could also reflect the nature

of some facilities and infrastructure businesses, in which failures can have

less significance on operational downtime. The other industry that strongly

supported preventive maintenance, power generation and utilities, also

reported very low downtime, with 63.9 percent reporting 2.5 percent or less.

Although the levels of downtime are clearly lower in the power generation

and utilities industries, nevertheless, based on the responses from previous

questions, the cost of downtime is substantially higher than in most other

industries.

The pharmaceuticals and chemicals industries were the most likely to report

substantial downtime problems, with 1.6 percent reporting more than

40 percent downtime per month, potentially having a crippling effect on

productivity. These statistics are interesting as these companies, as this survey

shows, have a strong tendency to practice preventive maintenance yet some




still have significant downtime issues. Although this survey does not identify

the exact type of organization within this industry sector, we believe one

explanation of this finding is that mainstream chemical and pharmaceutical

companies are benefiting from preventive maintenance, whereas specialized

research-oriented organizations, with a high number of equipment

configuration changes, find preventive maintenance to be less effective.

Larger organizations were most likely to experience more than 10 percent

downtime per month.

Geographically, comparable results were shown across the board.

A major breakdown that causes production stoppages in more than half of the

plant is clearly a significant event that can have a dramatic effect on the bottom

line. In this section, we analyze the scale of these types of failures.

Industry Spotlight:

Food and Beverage

A clear belief in the investment qualities of maintenance and its ability to both

increase capacity and provide a competitive advantage emerges from the food

and beverage industries. We have to question whether these beliefs are being translated in reality, when we consider the higher-than-average unscheduled

downtime of these industries compared to other industries, as well as when

considering their preference for repair-based maintenance. A key issue

affecting many maintenance professionals in the food and beverage industries

was poor decisions regarding capital purchasing. Could these decisions be

negatively influencing the success of the maintenance strategy?




"In total, over three-

quarters of all firms surveyed

reported two or fewer

major plant shutdowns in

the last year."

Question: How many times in the last year did you have

a breakdown that stopped production in more than half

of your plant?

Over 50 percent of firms surveyed were able to claim that they did not have

a single breakdown that stopped production in more than half of their plant

during the last year. In total, over three-quarters of all firms surveyed reported

two or fewer major plant shutdowns in the last year. These results seem to

add weight to the argument that preventive maintenance can prevent significant

amounts of downtime in most industries.

Power generation and utility firms were the most l ikely to claim zero major

shutdowns. These companies have indicated their reliance on redundancy

systems, which gives them an edge.

Food and beverage firms reported the most breakdowns, with over 14 percent

of respondents indicating that they had more then ten major breakdowns in

their plant in the last year. Although in this survey, food and beverage companies

generally appear to believe in the ability of preventive maintenance to increase

capacity and give them a leading edge, results show that they rely on repair-based

maintenance. We believe that many of these organizations could significantly

reduce downtime by focusing more of their efforts on effective preventive

maintenance techniques.




"It is imperative thatorganizations react quickly to

minimize the impact of the

stoppage."

Smaller firms reported a much higher likelihood to have zero major shutdowns

than 1000+ employee firms. Organizations with 251–500 employees were

significantly more likely to have more than ten major breakdowns per year.

Australasian firms were notably less likely to report zero major shutdowns over

the last 12 months compared to their European counterparts, and were also

more likely to have more than ten.

Intentia believes that when a breakdown occurs, particularly if it impacts more

than 50 percent of the plant, it is imperative that organizations react quickly to

minimize the impact of the stoppage. Organizations can reduce the impact of

failures on critical plant processes by ensuring that key spare parts and tools

are available, and that repair information and documentation are accessible,

although this is, of course, no substitute for effective preventive maintenance.

In the next question, the survey considered the extent of the downtime within

the organizations surveyed. In our experience, we believe that many of these

major stoppages could have been avoided with better preventive maintenance,

or could have had less of an impact with better preparation.




"Unfortunately, over 18

percent of all organizations

surveyed reported some

shutdowns that lasted for

over 90 hours"

Question: Last year, how many hours did your longest

period of downtime last, which was caused by a single

breakdown?

Just under 30 percent of all organizations reported that the longest periodof downtime they experienced last year was one to ten hours in duration.

Unfortunately, 15.0 percent of all organizations surveyed reported some

shutdowns that lasted for over 90 hours.

It was the heavy industries that reported the longest shutdowns, with power

generation and utilities organizations leading the group by some margin.

However, by nature of their asset-intensive industry, it should be expected that

equipment failures could have a dramatic impact on their ability to operate.

Facilities and infrastructure organizations followed a similar pattern. Although it

might be expected that pharmaceutical and chemical companies would report

findings similar to other manufacturing industries, their potential for more

lengthy shutdowns was notably higher.

In 2004 no food and beverage firms were able to report zero downtime. This

result is not surprising due to the nature of food and beverage equipment,

often consisting of high-speed production and packaging machinery.




Smaller organizations generally reported shorter shutdowns, whereas larger

organizations reported much longer shutdowns, some lasting more than 90

hours.

European businesses were more than twice as likely as Australasian firms to

report no hours of stoppages at all. However, in terms of the percentage

of businesses reporting a period of downtime of 20 hours or less, both the

European and Australasian regions ended up with almost identical results.

In some situations, an alternative to preventive maintenance is the use of

redundancy or standby systems that can be brought online in the event of a

failure. In the next section, we consider how widespread this practice is and

whether it is prevalent in particular sizes or types of businesses.

"Smaller organizations

generally reported shorter

shutdown."




"Almost 60 percent of all

organizations surveyedindicated that they relied on

preventive maintenance to

maintain continuous plant

operations."

Question: How strongly do you rely on redundancy

systems as opposed to preventive or repair based

maintenance to maintain continuous plant operations?

Almost 60 percent of all organizations surveyed indicated that they relied onpreventive maintenance to maintain continuous plant operations. Of this group,

over one-quarter of respondents indicated that they had a high reliance on

preventive maintenance.

A reliance on redundancy systems was most common among power generation and utilities organizations, which is not surprising for asset-intensive

industries, where downtime costs can be very large and repairing an asset

online may not be feasible.

Preventive maintenance was most heavily relied upon by facilities and

infrastructure organizations as well as by pharmaceutical and chemical

organizations, which reported that they relied strongly on preventive

maintenance to keep their plants operating. However, previous responses also

indicated that chemical and pharmaceutical organizations were likely to spend

the least of their budget on preventive maintenance, although they also suffered

from substantial periods of downtime.




This data indicates a definite split in the attitudes towards preventive

maintenance across different types of industries, with asset-intensive industries

opting for the redundancy approach, regulated industries using preventive

maintenance and manufacturing organizations relying on repair-based

maintenance.

Medium-large firms (500-1000 employees) and large firms (1000+employees)

showed the strongest support for preventive maintenance.

European organizations were the most likely to report a reliance on repair

based maintenance, while Australasian firms were more likely to indicate

a reliance on redundancy systems. Industries in both geographical areas

expressed similar responses regarding the use of preventive maintenance.

Based on our results, what can be learned about the impact of poor

maintenance on global industries? Surprisingly, typical organizations

experienced quite low levels of downtime of their operational resources.

Over 60 percent reported 5 percent or less downtime per month, and over

50 percent reported that no breakdown impaired more than half of the plant

during the last year. However, how did the less fortunate organizations fair?

They saw significant financial penalties from poor maintenance, with over

7 percent of organizations reporting losses of over USD 1 million, a figure

which we believe is understated. Some food and beverage organizations

encountered ten or more significant breakdowns that closed down more than

half of their production operations, while the asset-intensive businesses sawshutdowns of over 90 hours.




"Over the last 12 months

we have seen an increasingpercentage of survey

respondents beginning to

view maintenance as an

investment"

What Are the Key Issues for Improving

Maintenance?

In this section, we consider a number of key issues that may be preventing

organizations from improving their current maintenance situation. In many

cases, funds for improving the maintenance strategy may not be the primary

obstacle for improvements.

In our first question, we look at whether industries actually consider the money

spent on maintenance as a real business investment. Intentia believes that

organizations which see maintenance as an investment are much more likely to

be successful in combating the causes of downtime.

Question: Do you describe money spent on

maintenance as a cost or an investment?

In general, nearly 60 percent of survey respondents view maintenance as an

investment. From this proactive perspective, spending money on maintenance

activities is seen as having a significant impact on equipment reliability, and

therefore availability, which ultimately improves an organization’s bottom line.

Over the last 12 months, we have seen an increasing percentage of survey

respondents reporting maintenance as an investment. In particular, the number

of respondents who strongly agree with the view that maintenance should

be regarded as an investment has increased by over 10 percent. Hopefully,

this indicates a continuing trend of organizations considering maintenance

operations, particularly preventive maintenance, in a more positive light.




"The survey clearly shows

that larger organizations

are more likely to hold the

view that maintenance is an

investment"

The survey clearly shows that larger organizations are more likely to hold the

view that maintenance is an investment, and that, overall, this perspective has

increased slightly since 2003.

In total, Australasian organizations were the most likely to agree that

maintenance was an investment, while European organizations were more than

twice as likely to 'strongly agree' that it was a cost.

Maintenance managers play a pivotal role in supporting higher equipment

efficiencies. Intentia’s Global EAM Survey investigated which key issues these

managers are facing.




"Poor comprehension of

maintenance problems

by other line managers

is a growing problem for

maintenance managers."

Question: What do you believe is the greatest problem

faced by maintenance managers?

Poor comprehension of maintenance problems by other line managers is agrowing problem for maintenance managers—the number of respondents

holding this view increased by almost 10 percent compared with last year’s

results.

Power generation and utilities organizations were the most likely to report

poor management techniques and a lack of funding as the greatest problems

faced by maintenance managers — 20 percent of respondents in each instance

indicated that these were major issues.

Making them the most likely industry to raise this concern, by a significant

margin, 45.8 percent of facilities and infrastructure firms reported that a poor

comprehension of maintenance problems by other line managers was the

greatest problem they faced.

Pharmaceuticals and chemical firms were the most likely to indicate staff

shortages as their greatest problem, with 18 percent reporting this as their

leading issue. 18.5 percent of food and beverage organizations reported poor decisions regarding capital purchasing as their greatest problem — compared to

a cross-industry average of 8.4 percent.




Poor comprehension of maintenance issues seems to be very prevalent in

larger organizations. This may be a result of the more formal management

systems of larger organizations, which are perhaps more removed from day-

to-day issues than those found in smaller companies. This same prevalence

in larger organizations carried across into the view on poor management

techniques.

Lack of funding was a significantly larger problem in smaller companies than in

larger ones.

From a geographical perspective, poor management techniques in Australasia

stand out by a substantial margin, which raises questions regarding whether the actual quality of the management is at issue, or rather the perception of its

quality within the workforce.

Staff shortages were more an issue for European firms, with 18.6 percent

referring to this as their greatest problem, whereas the same figure for

Australasian firms was only 12 percent. It is not clear from the survey

results whether this shortage is due to skills availability or simply the result of

downsizing.

Continuing on the same theme, the survey delved deeper into the perception

of managers regarding the maintenance process.

"Lack of funding was asignificantly larger problem

in smaller companies than in

larger ones."




Question: Do you believe that a 'fix it when it is broken'

approach is still predominant among managers not

directly responsible for manufacturing?

The 'fix it when it is broken' approach is still predominant in most industries, and is

unfortunately becoming more prevalent, as a comparison with the 2003 survey results

indicates.

Facilities and infrastructure firms were the most likely to agree—72 percent—

that a 'fix it when it is broken' approach is still very common. In contrast,pharmaceutical and chemical companies were the most l ikely to disagree.

Smaller companies are the most likely to strongly agree that the 'fix it when it

is broken' approach is predominant among those not directly responsible for

manufacturing.

European firms were more than three times as likely to strongly agree that

a 'fix it when it is broken' approach still dominates, as compared with their

Australasian counterparts.

"The fix it when it is broken

approach is still predominant in

most industries"




Industry Spotlight:

Pharmaceutical and Chemical

An interesting picture emerges regarding the success of preventive

maintenance within the pharmaceutical and chemical industries. Theseorganizations reported a strong bias towards preventive maintenance and

strongly believed that it gave them a competitive advantage. They also did not

agree with the 'fix it when broken' approach, however, the reality may not

be as clear cut as these findings suggest. Their spending on maintenance was

relatively low compared to other types of industries, and of this spending, few

companies spent more than half on preventive maintenance — the majority

opting for corrective strategies. The results of this strategy are evident in their

indication that substantial downtime issues exist. The maintenance profession

in these industries suffers greatly from a lack of staff. Could this lack of staff

be due to cost-cutting measures, or staff leaving for other industries that have

more stable operating environments?




"The majority of

organizations surveyed

outsourced less than one-

quarter of their maintenance

services."

Question: How much of your total maintenance is

outsourced to third party organizations?

Outsourcing has now long been accepted as an alternative to internalizing

services. Leading analysts such as Gartner have already identified that there

will be a continued increase in the use of outsourced maintenance services.Outsourcing allows organizations to concentrate on their area of competitive

advantage and, at least theoretically, maximize their returns. Of course,

it also means that you can call on specialists — such as with maintenance

and management—who have a higher level of proficiency. The majority of

organizations surveyed outsourced less than one-quarter of their maintenance

services.

Facilities and infrastructure organizations were shown to be the leaders in

opting for maintenance services, with 25 percent of these organizations opting

to outsource 75 percent or more of their maintenance work to third-party

organizations.

81 percent of pharmaceutical and chemical firms outsourced less than half of

their maintenance, however, this may be due to the nature of their businesses.

Other types of organizations are less willing to outsource some or all of their

maintenance work due to the highly secretive or complex nature of their

operations, particularly in the chemical and pharmaceutical fields.




Most likely underscoring the importance of concentrating on competitive

advantage, smaller companies were more than twice as likely as large

companies to outsource more than three-quarters of their maintenance work.

Australasian firms were nearly two-and-a-half times more likely than their European counterparts to outsource three-quarters or more of their

maintenance work.

'Maintenance is a cost', 'poor comprehension of maintenance', and 'fix it

when broken' are all views that clearly indicate that fundamental maintenance

issues exist within many global industries. These attitudes form a platform

of key inhibiters that are stopping many companies from making significant

improvements to equipment reliability. Maintenance professionals clearly need

to do more to prove that they can return significant benefits from investing in

maintenance.

"Maintenance professionals

clearly need to do more to

prove that they can return

significant benefits from the

investment in maintenance."




This final section of the 2004 Global EAM Survey considers whether the

investment that organizations make in maintenance software is actually

worthwhile, and whether it has a positive impact on the manufacturing and

operational processes.

Question: Do you believe that maintenance software

has enhanced the capacity of your maintenance program

in preventing downtime?

More than 65 percent of all firms surveyed reported that they agreed with

the view that maintenance software had enhanced the capacity of their

maintenance program in preventing downtime, an increase of 4.6 percent from

2003. This is a clear confirmation that well-implemented systems can provide

significant benefits.

Facilities and infrastructure firms were the most likely to agree that maintenance

software has enhanced the capacity of the maintenance program in preventing

downtime. 80 percent of facilities and infrastructure firms either generally or

strongly agreed with this assertion.

19.0 percent of pharmaceutical and chemical firms were indifferent as to

the value of their maintenance software in preventing downtime, while

11.1 percent of power generation and utilities organizations believed that their maintenance software had not reduced downtime. A surprisingly high

percentage of food and beverage and general manufacturing firms indicated

that they did not have any maintenance software at all.

Does Maintenance Software Work?

"This is a clear confirmation that well-implemented

systems can provide

significant benefits."




Smaller organizations were the least likely to register their agreement,

primarily because 22.6 percent of firms with zero to 250 employees had no

maintenance software at all. This compares with only 6.3 percent of firms with

1,000 employees or more. 78.1 percent of all firms with 1,000 employees or

more agreed with the notion that maintenance software had enhanced their

capacity to reduce downtime.

While 89.4 percent of Australasian firms indicated they had maintenance

software installed, only 80.8 percent of European firms were able to say the

same. In total, 71.3 percent of Australasian firms thought that their maintenance

software had helped them avoid downtime, while 62.4 percent of European

firms reported the same view. Australasian and European organizations were

equally likely to strongly agree with this assertion.

Close cooperation between maintenance and operations during the planning

process can reap significant rewards, ensuring that production plan is fully optimized. If carried out correctly, this process provides a win-win opportunity

for both operations and maintenance. Operations produce what they expect

and when they expect it, without unplanned stoppages due to equipment

failures. Maintenance gets the equipment when they need it, and can ensure

they provide the highest level of availability.

"Close cooperation betweenmaintenance and operations

during the planning process

can reap significant rewards."




Question: How do you integrate your maintenance and

production planning?

Almost 35 percent of all organizations surveyed indicated that they integrate their

maintenance and production planning using IT-based systems. Integrated systems were

most predominantly used in power generation and utilities organizations while paper-

based systems were most popular among the pharmaceutical and chemical sector.

This is surprising, as these types of systems are particularly effective when planning a

wide variety of complex products in short batches, in which the maintenance require-

ments are also compared. It could be expected that food and beverage manufacturers

would be the most prolific users of these types of systems, and that power and utilities

manufacturers would be less likely to use them. Does this then indicate that manufacturers have really not seen the benefits that these types of systems can deliver?

Smaller organizations were the least likely to use integrated systems, and were

also most likely to use informal word of mouth to integrate production and

maintenance planning.

It is clear from the survey that industries do see a benefit in computer systems to support the maintenance process. It seems, however, that asset-intensive

organizations have actually made the move to use them, and it was these industries

which were also most likely to report lower or zero downtime.

"Almost 40 percent of all

organizations surveyedindicated that they integrate

their maintenance and

production planning using IT-

based systems."



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Intentia EAM+Book+2004+Final

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