Maintenance Costs Continue To Soar, Here’s How To Regain Control

Executive Summary

Industries experts show maintenance costs are rising 20% annually due to a lack of manpower, available equipment, and skills.?Typical solutions to address this issue are not effective during the current labor shortage in the US, manufacturers are now turning to outside firms to help them regain control through a hybrid problem solving approach.?This article shares details behind the problem, why typical solutions aren’t working, and how MS Companies can help you regain your maintenance cost control.

Soaring Annual Costs

The manufacturing climate in 2022 can be described in one word:?disruptive.?Starting in 2020 with the onset of the COVID pandemic the manufacturing world – long accustomed to rhythm, standardized work, and variation reduction – has been turned upside down.?Whether it be chip shortages, labor shortages, or other factors, the “standard” schedule feels like a distant memory from the past.?Today’s world is about agility, schedule changes, and operating pattern abnormalities.?Finding scheduled downtime to perform preventive maintenance activities is next to impossible, so it should not be surprising that, like FleetNet, companies are seeing maintenance costs rise over 20% annually.

As you may expect, the key drivers behind this rise in costs are related to lack of manpower, lack of available equipment, and lack of skills.?According to Mechatronic Solutions, 82% of companies experience unplanned downtime that causes costly delays in preventive maintenance, production, and deliveries. ?Recent studies also show the problem costs manufacturers a total of $50 billion each year.?The 2022 Annual Plant Engineering Survey provides additional context, in fact 90% of all manufacturers have a preventive maintenance program, yet only 38% of their assets are included in the program.

Driving the lack of manpower is, of course, the labor shortage. ?As shown in Exhibit 1, it is becoming more difficult to recruit skilled trades workers. ?As discussed in our prior article on the topic, manufacturers need a strategy to hire and retain workers at all levels – including skilled trades.?Manufacturers need both short-term and long-term actions to address this risk.?

Exhibit 1:?2022 Annual Plant Engineering Survey – Difficulty of labor recruitment

The lack of available equipment is directly related to the disruption mentioned earlier in this article.?Changing production schedules make planned maintenance nearly impossible, which then drives unplanned downtime.?Maintenance teams are not able to coordinate the availability of critical equipment needed to perform preventive maintenance with the unplanned downtime events when the preventive maintenance could be performed in parallel with the downtime repair.?Meanwhile, manufacturers, already behind schedule due to the unplanned downtime, are not taking the planned downtime to perform the preventive maintenance. ?Instead downtime is being cancelled and efforts are put into catching up the production schedule to eliminate premium freight costs.?This set of actions creates a downward spiral of further straining the aging equipment and increasing the risk of future unplanned downtime.?It is no wonder there is a wide array of challenges to improving maintenance, as shown in Exhibit 2 below.

Exhibit 2:?2022 Annual Plant Engineering Survey – Key Challenges to improving maintenance

The final factor in driving the soaring maintenance costs is the lack of skills.?As shown in Exhibit 3 below, 3 of the top 4 reasons to outsource maintenance (excluding already having an existing outsourcing contract) are related to a skills gap.?These gaps are easily attributed to high turnover, and reduced availability of training time due to increased unplanned downtime.?As you can see, there are no easy answers to reverse course and recover maintenance related manufacturing costs from spiraling out of control.

Exhibit 3:?2022 Annual Plant Engineering Survey – Reasons for Outsourcing Maintenance

?Traditional Solutions Aren’t Effective

Prior to this state of disruption, answers came easy.?Manufacturers would be able to recover their maintenance backlog by working overtime, hiring incremental resources, and/or outsourcing significant projects that were planned for internal resources.?These actions were tried and true to quickly eliminate unplanned downtime.?However, in today’s world these actions are no longer effective.

Working overtime is no longer an option, primarily because schedule changes are driving production activity into the downtime blocks in the schedule.?If the schedule does free up, what is the price to pay through attrition by forcing yet another Sunday shift on an already strained workforce.??As discussed in our prior article on the labor shortage, measures need to be taken to reduce attrition.

Hiring incremental resources is also more difficult.?In addition to the data discussed earlier in this article, it is important to understand the changes in workforce demographics that are driving a shrinking skilled trades workforce.?According to People Ready, 40% of the 12 million people in the skilled trades workforce are over the age of 45, with nearly half of those workers over the age of 55, and less than 9% of workers aged 19-24 entering the trades.

Outsourcing projects is no longer easy either.?With sales down across the industry due to the chip shortage, it is hard to justify the higher costs of an outsourced project versus trying to fit it in with existing resources.?A recent article by the Automotive News suggests this trend will continue into 2023.?If you are successful in justifying the costs to outsource maintenance projects, the ability to find the right talent without an existing service agreement becomes very difficult as well.?Outside contractors face the same hiring and training dilemmas as the manufacturers.

A Hybrid Approach Is The Only Solution

What MS Companies sees in the manufacturing sector today is that a hybrid approach to maintenance is required to truly solve your maintenance cost problems for the long term.?In fact, our data shows that to be successful, a manufacturer needs to have three critical elements in place as part of its recovery plan:?the right maintenance leadership, access to niche service providers, and robust hiring/training plans.

Finding the right maintenance leadership is by far the most critical of the three required elements.?In addition to possessing the leadership skills required to drive a manufacturing team, a maintenance leader has the added responsibility to understand the technical elements of the trades, needs the planning skills of a master scheduler, requires skills in supply chain principles to drive spare parts inventory, and needs added leadership skills to handle the ambiguity associated with the maintenance function.

Assess to the right service providers is also key.?As technology evolves, there are many niche service providers entering and exiting the industry.?Understanding the changes bending the technology curve and how it effects the maintenance landscape are critical.?As the industry moves from time based to condition based preventive maintenance, both the hardware and the software used to evaluate and monitor equipment is changing as rapidly as the move from Internal Combustion Engines to Battery Electric Vehicles.?Falling behind on this technology curve will not allow you to get your maintenance costs back in line with your budget.

Implementing the right hiring and training plans starts with understanding the dynamics related to the labor shortage.?We covered this in our last issue, but it is critical you understand your local labor market to be successful.?You then need experts to develop the right training plans to enable your skilled trades workforce to properly understand your equipment.?Misdiagnosis during reactive maintenance repairs further adds to the soaring maintenance costs.?This is easily avoidable by taking actions such as scheduling lunch and learn sessions with your equipment suppliers to focus on specific details relating to their equipment maintenance and associated usage and/or warranty data.

In short, the decision to proceed with a hybrid approach in solving your maintenance cost issues cannot be taken lightly.?In fact, having experts on board to help you through the process delivers significant return on investment.?MS Companies is positioned to help you in this regard.

How MS Companies Can Help You Regain Control

MS Companies – an industry leader in People, Technology, and Data – is in a unique position in the marketplace. Operating in 14 states with over 1,300 clients and touching more than 30,000 people, MS Companies has manufacturing advisors with expertise in regaining control of maintenance costs through this hybrid approach.?Unlike other firms, our manufacturing advisors are experts in identifying solutions to your problems and they enjoy working with our clients in executing the work needed to implement the solutions. ?Our solutions not only address maintenance related concerns, we also provide consulting and advisory services for all functional manufacturing roles. ?If you would like our help, or would like to learn more, please contact us here.