Guide to revisiting maintenance costs

By Michael Huggins*

Maintenance is one of the largest cost areas in a mining operation. It is therefore a natural target when, like now, cost management is at the top of the performance agenda. But how can managers reduce costs without compromising maintenance performance?
Fortunately it is quite possible to deliver a 15 per cent plus reduction in maintenance costs while holding equipment availability steady, and often improving it.
One of the most challenging areas in which to reduce costs is in “necessary” usage - those activities and items without which operations would suffer.  However, necessary usage can also yield some of the largest cost improvements, simply because it is so rarely tackled.
To get to the bottom of necessary usage costs, a rigorous approach beginning with root cause analysis and team problem solving is required. First, determine which cost items to focus on. Value driver trees, breaking maintenance spend into its main categories, and each of these into its volume and cost drivers, are useful in understanding the total value associated with each expenditure category. They also help to determine the potential improvement for each lever by assessing the technical limit on each lever versus its current value.
Assessing how much of the gap can be closed, and how long it will take to close then allows prioritisation of these cost categories: without prioritisation by value and ease to achieve it, your cost reduction program risks wasting time on low-value opportunities.
Next, expand the value driver tree for the priority cost categories to identify root cause drivers of cost. Spend some workshop time with your teams to generate ideas on how to address these root causes, and again prioritise these ideas based on business impact and ease of implementation. Ensure that only the top priority ideas go into the pipeline.
Finally, you will need a structured process to ensure prioritised ideas are driven through to implementation and sustainability. Once stakeholders have given approval for an idea, it needs to be actively managed through implementation, tracking actions and results through regular reviews to make sure that the ideas are generating cash.
A recent example of this approach was at an underground coal mine, where diesel engine failures were identified as a major driver of costs. Engine maintenance costs were seven times greater than budget, leading to a reduction of proactive maintenance in an attempt to meet the budget. This started a vicious cycle of increasing breakdowns in other equipment areas, which decreased production volume.
Initial analysis identified overheating and the bypassing of the engine protection system as the top two contributors to engine failure. Further analysis identified contamination of coolant as the root cause of overheating, whereas a shortage of maintenance personnel was the root cause for operators bypassing the engine protection system.
To address these two cost drivers, several initiatives were developed. The project team implemented closed-loop coolant top-up systems, and standard plugging of coolant hose ends and engine cavities during repair and maintenance. They facilitated hiring of additional maintenance personnel, and redesigned the engine protection system to be tamper-proof. Finally, they conducted weekly audits to ensure these preventative measures were implemented consistently.
These initiatives completely eliminated engine failures, reducing annual maintenance costs by $1.4 million, and enabling the mine to increase its preventative maintenance spend - leading to increased availability, and therefore increased production.
In the current environment, cost efficiency has returned as a key lever for business performance. Reviewing root causes of necessary maintenance usage is a powerful tool to get back on track with costs without compromising production.
* Michael Huggins is a principal at results delivery firm Partners in Performance