Equivalent Annual Cost (EAC)

3/27/2024 -- I repurposed this post to document the formula for Equivalent Annual Cost (or EAC) which is sometimes used by the finance department to make repair/replace decisions.

John, Well written once again. One of the questions I have always asked my customers is, what are the three three things you expected to receive when you purchased your CMMS? The most common answers; 1. We needed a tool to help plan and schedule our work. 2. We needed an accurate list of our assets. 3. We wanted to know where we were spending the most time and money. I would then ask them if they got what they paid for. In 25 years of consulting I had two customers say they were happy with their CMMS. Planning and Scheduling is rarely an issue with the CMMS. The Hierarchy and ability to determine where they are spending time and money are directly related. What the vast majority fail to see however while it’s nice to know where your spending your time and money is nice, unless you know the cause/causes (failure modes) your not likely to ever mitigate or eliminate the failures. If your CMMS hierarchy isn’t complete and doesn’t include the 3 fields of part,problem, and cause, defect identification and elimination will be extremely difficult.

Love this article John. We had 22k failure possibilities within sap which caused confusion and lack of engagement in fault trending across Diageo. We instead took the brave decision to standardise down to Man, Method , Measurement, Materials, Machine and Environment as root causes. Each of these then leads to a practice to address like equipment capability, pm and om instruction, centreline, quality, RCM and 5s. The macro picture globally or regionally also identifies systematic issues to address from central teams and look how neatly it can now be reported.