Optimise equipment maintenance

In boom times, productivity drives equipment availability, and utilisation of the equipment is at maximum.

Thus the maintenance manager is always under pressure to make the equipment perform better.

The most difficult part of their job is the inability to predict how long the mining equipment will last.

Taking a short-term view can lead to interim fixes that accumulate into larger problems. And it’s always difficult to justify major overhauls and upgrades when the pressure to produce more from the mine is constant.

So how can the maintenance manager convince production and finance managers to replace equipment at a specified point in its life cycle?

The answer is to undertake a Life Cycle Costing (LCC) analysis in advance of the equipment replacement decision.

Life Cycle Costing is an analysis process that identifies the costs associated with all stages of the equipment’s life. It identifies the key drivers for these costs and how they vary with time.

The sum of these costs represents the total outlay required to own the equipment. This cost can be expressed as an absolute, or as a rate that varies with time.

When this rate is at a minimum, then the life of the equipment is at its optimum.

When some of these drivers are functions of production parameters themselves that vary with time, the analysis becomes quite complex.

Traditionally, spreadsheets have been used to undertake this analysis.

While highly flexible, spreadsheets can be difficult to interpret, depending on the logic used to create them. Modern spreadsheet products have extremely advanced analysis functions that can be used to assist in the evaluation process; however the complexity of these systems makes the auditing of the process difficult.

An ideal solution is, therefore, to use database tools, such as Runge’s XERAS LCC tool, so that the analysis steps can be broken down into simple stages. It allows for standard formatting and removes the errors associated with copying large areas of formulas and formats. It also allows for the inclusion of auditing tools that trace data from its original entry point to its calculated outcome.

So where do maintenance managers start?

The costs associated with owning equipment can be grouped in the following categories: initial purchase, construction and commissioning; financing; direct operating; maintenance (including overhauls); downtime; decommissioning; cost recovery on disposal.

Depending on the business model used in an organisation, it may be relevant to consider the income generated by the equipment.

When an asset is part of an integrated mining cycle, such as a haul truck, then it’s often difficult to assign a value to this production on an individual unit basis.

For clarity, this article does not account for the income stream and considers only the cost stream.

Initial costs

At the start of the equipment’s life, there is considerable expenditure involved with installing the equipment into the production cycle. It involves the purchase of the equipment, construction, and all associated tasks involved with its commissioning.

While the timeframe involved is usually short (a matter of months) for mobile equipment, it can extend over many years for complex mineral processing plants.

And at this stage, the equipment is yet to add value.

In most mining organisations the value of these costs will be capitalised onto the balance sheet and are generally tightly controlled.

Justification of these costs can be a long and arduous process, so there is a tendency to drive these costs to a minimum.

The cost of finance can varies greatly between organisations and with time.

More importantly, the inclusion of financing costs against a piece of equipment is often a company policy.

Direct costs

The operating cost of the machine is directly linked to the amount of time it is in use, and inefficiencies that accumulate throughout the machine’s life.

As the equipment ages, it’s expected the overall utilisation of it will degrade, thus dampening the increase in costs over time.

Machine maintenance costs also vary considerably over time, with even hourly maintenance cost increasing as a machine ages. This is offset by lower utilisation, as a result of greater maintenance needs. However, the cost of repairs increases with time as components are replaced.

Similarly, regular overhauls result in significant jumps in cost, while providing a higher level of availability immediately after the overhaul.

The end result is a jagged, increasing pattern of costs accumulating across the equipment’s life.

The prediction of these costs is a complex process that varies with time, equipment utilisation and maintenance strategy. Therefore, an integrated database tool is vital to accurately model and predict this.

Downtime

Downtime costs need to be carefully modelled to ensure that the real costs of machine unavailability are captured without doubling up on the maintenance costs.

The downtime costs should only be those real costs that can be attributed to the lack of having the machine.

A true downtime cost would be the cost of hiring a replacement machine.

A backup machine provided by the equipment supplier is an example of this.

The cost of such machine is likely to be always greater than the cost of the operator’s own machine. This higher rate reflects the need to have a machine available for hire, and the hirer’s need to sustain a profitable business.

The demand for the substitute machine will vary with availability of the operator’s machine and thus shows variance with time.

Inevitably, there is also a cost associated with the removal of a piece of equipment which varies greatly according to the type of equipment.

An estimate of this cost is hard to make, but can usually be associated with the initial cost of the machine.

Cost recovery on disposal

The value of equipment at the time of disposal is subject to the vagaries of the market at any given time.

Some operations do not bother to scrap machines as the cost of removing scrap from a site is greater than its value.

In general though, a piece of equipment is inherently worth less than its initial cost from the start of its life. The value of the machine then decays further as its life progresses.

However, overhauls can add value back in to the machine, but this will never restore its full value.

In modelling this cost, it is important to model a true estimate of what a third party would pay for the equipment and not the financial values that are carried on the Asset Register. It’s important to note that this is a negative cost meaning it’s income rather than expenditure. It’s a factor that needs to be carefully considered as individual factors can make the machine worth a significant amount less or more at a different point in time.

Currently the shortage of large earthmover tyres has raised values for old machinery to extraordinary levels if they have good tyres fitted. Similarly, the tax laws in Australia at one stage made it possible to sell a one year old light vehicle for more than its purchase price if you had the right type of operation!

Life Cycle Cost

The use of a Life Cycle Costing approach to equipment replacement is common in industries such as power generation and airline transport.

In these cases, the nature of the equipment and their regulation reduces the variability in costs so that the analysis is simpler.

To date, its use in the mining area has been limited due to the highly variable nature of the costs involved and the factors that drive these costs. However, integrated database tools now allow for the development of time-based models that can analyse a number of scenarios and produce reliable results.

As such, this provides the mine maintenance manager with the opportunity to specify equipment lives at the time of purchase and tailor the maintenance strategy accordingly.

* Ben is principal maintenance consultant at Runge