By : John Schultz, Allied Service Group, Inc. & 
Dave Friebel, Management Resources Group, Inc.

"It's OK to get Excited about Maintenance" has been the introduction that I have given on every presentation related to maintenance, reliability, and asset management. Those presentations go on to say that the reason for this is the business case associated with doing it right. Asset Management initiatives have been documented to have Returns on Investment (ROI) ranging from 4:1 to 50:1. In fact, many organizations have found that a Total Equipment Asset Management (TEAM) initiative has proven to be the best investment that they have ever made in their facility. 

In this paper we will discuss and explore the "Business Case for Reliability" from several different angles: 

1. What is ROI? 
2. What are the elements of a successful TEAM initiative?
3. What are the typical costs associated with each element?
4. Where are these costs offset with savings? 
5. What areas can expect to see the most significant savings?
6. What types of saving are likely in each area?
7. What is the "typical" Rate of Return (ROR)
8. What elements control ROR?
9. Where do you start?

Readers should leave this paper with a fundamental understanding of whether a Reliability initiative makes sense for their business, what elements are essential for their success, what they can control, and how to start. A mature initiative may gain insight into why they are or are not seeing a ROI in their facilities.

INTRODUCTION:
The definition of insanity was once shared with me as "continuing to do the same thing and expecting a different result". As I travel North America viewing from the outside the practices being employed at our automotive plants, paper mills, steel mills, food processing plants, chemical processing plants, utility generation facilities, etc., I cannot help but wonder if this isn't exactly what I am seeing play it's way through our manufacturing and maintenance organizations.

 In 1988, a benchmark study showed that no less than 55% of maintenance being performed in our plants on average is reactive in nature, 30 % preventive, 10% predictive and 5% proactive. In 1992 CSI published a study that showed across all industries approximately 50% was reactive, 25 % preventative, 15% predictive, and 10% proactive.

A 1997 benchmark study showed once again that reactive was in excess of 50%, Preventive between 25-30%, and Predictive and Proactive represented less than 25% combined. 

In it's most recent winter newsletter, an SMRP survey showed 55% reactive, 31% Preventative, 12% Predictive and 2% as Other. 

Along with each of these surveys, ideal percentages have been disclosed that represent best practice or top quartile plants. These ideal percentages show less than 10% Reactive, 25-35% Preventive, 45-55% Predictive and the balance Proactive. 

Many facilities have invested millions and millions of dollars into a reliability initiative, but they are doing almost exactly the same type of work. I will agree that these are not the same plants, but conclusions can be drawn from any statistical sampling of plants. 

Have these Plants had a ROI for their reliability initiative or have they had spot savings that keep the program going? 

The purpose of this paper is not to support or refute the use of "avoided costs", but if avoided costs do not eventually transfer to bottom line savings or additional product out the door, are we any better off than what we were? There is no question that a TEAM initiative can have a tremendous return if implemented properly, but what if it isn't? Is it possible for a TEAM initiative to have a negative ROI, even though it has generated several finds? In order to answer these questions, we must first discuss: 

What is ROI?