How to justify investment in predictive maintenance?

In this post we explain how the maintenance manager can justify the investment in predictive maintenance to show senior managers that it is worth investing in this activity and that investment in technologies for this purpose should not be cut.

Is it worth investing in predictive maintenance? The answer is "Yes", it is not a question of faith as it is possible to quantify the benefits that can be achieved with this type of maintenance. The point is to locate the information that allows you to calculate the economic benefits and ROI that you can achieve by investing in predictive maintenance to optimise your factory.

It is a reality that machines wear out, consume energy and that production systems can be optimised to improve their productivity. These are problems, needs and opportunities for improvement that can be solved with the capabilities offered by a predictive maintenance programme.

When CEOs, controllers and financial managers are unable to see the size of the benefits that can be achieved with predictive maintenance, they do not act to support this initiative.

Many production managers and maintenance managers are well aware of the benefits of implementing a predictive maintenance plan, but are unable to quantify premature machine wear or excess energy consumption due to misalignment. Some are even unaware of the opportunities they have to increase company revenue by increasing plant productivity by 2% or 5%.

When financial managers can see that their investment is transformed into cost savings, cost elimination, increased productivity and increased revenue, they will not hesitate to invest in predictive maintenance. They will be quicker to act on such initiatives the more these benefits are likely to be realised and the faster they can be realised.

How to justify investment in predictive maintenance?

By definition, justification means providing reasons, facts or explanations that justify or defend the actions to be taken. One of the most common mistakes that production managers and maintenance managers make is to leave this important step to good intentions and wishes. Let's be clear, the controller or financial manager does not have the knowledge to know how to justify the benefits to be gained from predictive maintenance. The truth is that many maintenance managers do not have a model to justify this investment.

When you justify the investment in predictive maintenance, for example, by incorporating rotating machine alignment technologiesBy doing so, you are giving the controller a set of reasons for them to act. They will invest money from the budget if they can see that by doing so they will be able to make more money or decrease what they are currently spending on corrective maintenance. Financial managers are only interested in seeing the difference between the total benefits that can be achieved with predictive maintenance minus the total cost or total investment required to achieve them.

Think of financial managers as bankers who keep their money. They don't think about sitting on their money, they want to invest it and get a return on investment. Your job is to demonstrate to them what their ROI will be by incorporating technologies to optimise your industrial plants. You should know that you are fighting for a larger share of the budget for your department and will go with the project within the company that yields the highest value and return on investment.

What you need to measure and quantify to justify investment in predictive maintenance

Some metrics you can use to justify your investment in predictive maintenance are :

• ProfitabilityRemember that this is the main reason why most organisations exist. If you do not include profitability as one of the elements to justify, you will be making a mistake.
• Income: This element is very powerful for businesses as they depend on it for their survival. Cash flow is critical, and revenues must support a good cash flow. Businesses depend on revenue to pay their employees, suppliers and creditors, so revenue must be earned immediately. Measuring the revenue that can be generated from increased productivity and machine availability can create a strong focus by the finance manager on the capabilities of predictive maintenance to achieve this.
• Costs: Whether absolute or relative, we are talking about cost reduction or cost elimination. This is a huge area of opportunity as every part of the organisation is a cost centre. There are two actions you can take with costs:
• Eliminate or reduce costs: If the existing cost can be reduced or eliminated, you need to say how and by how much.
• Cost avoidance: If the predictive maintenance service is able to help the company avoid future expenses, again, you need to tell the financial manager how and by how much.
• Intangible benefits: These benefits, such as employee morale, image, reduction of internal conflicts, etc. are difficult to associate with a dollar amount. However, they are part of the benefits that serve to justify investment in predictive maintenance.

When can this investment pay for itself?

Your justification for investment in predictive maintenance must answer this question. The controller wants to know where his break-even point is. He wants to know when the red numbers start to change to black. The answer is when the total accumulation of benefits, including revenue growth and cost reduction, exceeds the cumulative investment made to implement predictive maintenance and the money needed to run it.
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