MAINTENANCE MANAGEMENT
The Emperor's new clothes and benchmarking data

Once upon a time an emperor was offered some fantastic clothes by traveling tailors. They told the emperor that their clothes were the most exclusive in the world-so exclusive that only wise people saw them and stupid people did not. The emperor accepted the tailors' offer, and they took measurements and cut the expensive fabrics. When the emperor tried the clothes on, neither he nor any of his advisers and servants could see the clothes, but no one said anything.

One day, the emperor was to show off his famous clothes in a town parade. When he showed up, all important people agreed that his clothes were the most fantastic they had ever seen. Suddenly, a child shouted, "Why is the emperor naked?" After that, more and more people agreed they had all been tricked, but the tailors had already left with the money, leaving the emperor with no new clothes.

PERCENT OF SALES. So, how does this fairy tale relate to benchmarking data? In my opinion, a lot of useless data is collected in plants by corporate managers, consultants, and the plants themselves. In the last six months, I have heard more comments than usual about some of this questionable data.

For example, a frustrated mill manager recently called for help in clarifying data from a corporate benchmarking exercise his mill had undergone. The data indicated that his mill had a high maintenance cost as percent of sales. It was 12 %, and the mill's consultant said it should be 9%.

"What was the market price of your paper two years ago?" I asked.

"Around $1,100 per ton," he answered.

"How much is it now?" I then asked, and he quickly understood my point.

"I see what you mean now," said the mill manager. "Right now, we only get $705 per ton, so, of course, the maintenance cost as percent of sales has gone up. I guess we can forget that data. I just wonder why corporate and the consultants included that data?"

"Perhaps no one has ever asked them," I said.

RATIO OF MATERIAL COST TO LABOR COST. The mill manager was also confused about other data from the benchmarking exercise. This data involved the ratio of material cost to labor cost.

"We have always kept track of this ratio," said the mill manager. "Last year the average was 1.2 to 1. Would you say that is good or bad?"

"What do you think?" I responded.

"I have had this data since we did a maintenance audit many years ago," he explained. "A consultant proposed that we measure this ratio, but it flies all over the wall-somewhere between 4.8 to 1 and 0.8 to 1-when I compare different mill departments."

"Assume that this ratio is high, what would that tell you?" I asked.

"We have been told by so-called experts that this is good, because it shows that we do much of the maintenance," replied the mill manager. "It means we are replacing a lot of material per labor hour if this ratio is high."

"Is one of your goals to do more maintenance?" I asked.

"No, of course not," responded the mill manager. "One of our goals is to do less maintenance, because less maintenance is needed. You've told us that many times before, so I guess this is another case of the emperor's new clothes. From now on, we are going to stop measuring this."

PERCENT OF ESTIMATED REPLACEMENT VALUE (ERV). Another point of confusion for the mill manager concerned maintenance cost as percent of Estimated Replacement Value (ERV). The data from the benchmark exercise showed his mill's maintenance cost as percent of ERV at 6.9%. Because he had been told that his was about 2% higher than average, he wanted to know what a "good" value was.

"Have you visited a Scandinavian mill?" I asked.

"Yes, I have, and I know what you are going to ask next," the mill manager replied. "I saw that they were built with about five times more stainless steel, paved woodyards, fantastic roll grinding rooms, lots of space around their machines, etc. So, of course, their capital costs must be higher and maintenance costs lower."

"Yes, in addition to the differences in investment strategies, it is difficult to estimate the replacement value," I explained. "Therefore, it is even more difficult to compare, so please do not compare that value-it will only add to your confusion. However, this data can be used for other things internally."

COMMENTS. I do not expect all readers to agree with everything I write in this column, so your comments are welcome!.