Lifecycle Research Justifies Investing In PM

Sept. 28, 2010


Comparing ownership and operating costs using different component lives will only be effective for guiding lifecycle decisions if all shop overhead - including facilities and tooling costs - is included in each machine's hourly cost.Tables:

Machines are often traded or replaced at some multiple of the engine life, with transmissions, hydraulic pumps, and undercarriage influencing the decision to various degrees depending on the type of machine and working conditions.

Manufacturers forecast component costs based on what engineers call the B20 life — the life at which 20 percent of all components in a particular group have failed. But the quality of maintenance is an important variable. Excellent maintenance reduces the risk of failure if components stretch beyond B20 toward B50 life.

Maintenance excellence is characterized by a high percentage of scheduled maintenance being completed on time, use of high-quality fluids and filters, and consistent oil analysis and machine inspections that help anticipate and prevent component failures.

Few operations manage maintenance at this level. Focusing on expenses, rather than overall cost, leads to shopping for cheaper fluids and filters. Tight labor markets make it hard to find and keep good service people. Maintenance schedules take a back seat to production schedules.

That's why equipment manufacturers emphasize the B20 life as the time to start watching components closely, if not the point at which to schedule preventive repair (in-frame rebuild, rebearing/reseal, or exchange with a remanufactured component).

Some equipment manufacturers measure component life for every machine model in their product lines. The data, containing the B20 and B50 lives, are made available to some customers — usually those who have pursued the information and secured special access.

Construction Equipment strives to offer insight to component life by surveying equipment users to accumulate a broad range of real-world experience. We compile their responses into real-world B20 and B50 numbers for components in key machines. The results are the industry's only independent benchmarks for judging whether or not your experience is "normal." They also offer some interesting numbers to work with when deciding how much to invest in maintenance and repair.

The decision is really about how much risk of component failure you can handle. Once a component ages beyond B20, its chances of failure increase dramatically. For example, 20 percent of all engines in 30-ton articulated dump trucks have failed by about 9,000 hours. Another 30 percent of the population fails within the next 1,000 hours, or less than two-thirds of a typical year's use. Not all components are quite this risky, but the odds of having a machine fail on the job stack up quickly after the B20 age. For example, 20 percent of transmissions in 14-foot backhoe-loaders wear out by 5,000 hours. The next 30 percent wear out (the B50 life, or median age) by 8,000 hours.

Perhaps the most practical application of lifecycle research is in helping estimate what you might expect from an investment in maintaining a fleet. With B20 or B50 life values to plug into ownership and operating cost equations, it's not hard to calculate reasonable cost estimates for the "run-to-destruction" maintenance philosophy and compare that to operations designed to "preserve and protect" the company's equipment capital.

Thanks to a simple Microsoft Excel worksheet created by Case for its dealers called the Ownership and Operating Cost Model, it's easy to simulate the input costs and component lives under various styles of maintenance management.

Case built the model so that dealers can walk through the ownership-and-operating-cost (O&O) calculation with customers, filling in the customer's own numbers for the various inputs. In most cases, for comparison purposes they inserted original-equipment-manufacturer (OEM) prices for machines, fluids, filters and repair parts. They estimated repair costs assuming B20 component lives, a mix of remanufactured component exchanges and standard rebuilds, and $70 per hour for a fully burdened labor rate.

For example a 65,000-pound excavator operated moderately for 1,600 hours per year over five years in dusty conditions could be expected to cost about $66 per hour. That's without operator labor, but the exact number doesn't matter nearly as much as the amount of change that results with variations in maintenance and component life.

What might happen to the overall cost of that 65,000-pound excavator if you put parts people to work cutting parts bills, for example? Suppose they were able to buy all of the fluids and filters needed to maintain that machine for 25 percent less than OEM-part prices, and able to cut repair parts costs by 25 percent.

If everything works perfectly and components reach the same life as Case assumed using OEM parts, repair costs over the 8,000-hour life of that excavator are about $9.70 per hour and the machine's total hourly cost drops 2.4 percent from $66.71 to $65.12.

But what if component reliability slips just a little and you save only 10 percent of the OEM repair-parts costs because you have to repair more failures? Even if repair labor climbs less than 20 percent over the life of the machine, its O&O cost per hour of $66.44 approaches the same as if you were buying OEM parts.

Turn this example on its head, now, and consider the possible results of developing top-notch maintenance. To deal with difficulties finding and keeping good service people, commit to reducing maintenance demand by stretching service intervals by 60 percent. The basic A service — engine-oil and filter change — goes from 250 to 400 hours. This is not out of line. Many equipment manufacturers are recommending oil changes at 500 hours on new excavators and other equipment, and there are contractors all over the country extending oil-change service to 350 and 400 hours on older machines. You buy OEM repair parts and high-quality maintenance supplies — perhaps even overspend — paying 30 percent more than OEM prices for lubes and filters.

Using extended-life coolants, change intervals extend to 12,000 hours or more. Splurge on the hydraulic oil, spending 37 percent more than OEM prices, or $32 per gallon, on some premium stuff. Push hydraulic-oil life more gently, taking it to 4,800 hours (OEMs recommend 5,000-hour changes for most of today's excavator hydraulic systems).

There is no big savings in maintenance costs. You spend about $2.25 per hour on preventive maintenance (PM), which is about 47 cents per hour less than if you bought PM supplies from the OEM and went by the standard service intervals. It's a little more than the bargain hunter's PM cost.

Now consider the affect of paying closer attention to maintenance scheduling and lubrication quality. Suppose you can stretch engine and hydraulic-pump life from B20 to B50. That would take the engine from 7,500 to 10,000 hours, eliminating a major repair during the time you own the machine, and take hydraulic-pump life up from 4,000 toward 8,400 hours. Pump life does not have to double, though, to have the same affect on the machine's life cost. In fact, if your conservative approach to hydraulic-system maintenance yields even a 25-percent increase in pump life, to 5,000 hours, it eliminates one of two major repairs while you own the machine.

The same thinking applies to undercarriage. Adding half a season's work — 800 hours — to a 4,000-hour undercarriage earns a substantial savings.

Operating cost drops to $36.94/hour, yielding total hourly cost of $62.74. That's nearly $4/hour less than a machine maintained at standard OEM intervals and material costs — $32,000 in savings over the machine's five-year life. It's about $2.40/hour less than a bargain hunter's best-case-scenario costs, or $19,000 better over the machine's five-year life.

Emboldened by the success of the maintenance program, suppose you decide to keep the machine for an additional two years. Field prejudice against older machines may cut into annual hours a bit in those last two years, so assume the machine reaches about 10,850 hours in its seven-year life. An engine rebuild and undercarriage rebuild will be necessary, but spreading ownership and repair costs over an additional 2,900 hours reduces overall cost to $58.17. Compared to the bargain parts buyer's best bet ($65.12/hour), the meticulously maintained machine works 11 percent cheaper — saving $6.95/hour or about $10,800/year.

It's worth belaboring the simple math here. If there are 10 machines in the fleet on which you can consistently save $10,800, preserving the fleet with top-quality maintenance will cut more than $100,000/year from equipment costs.

Of course, the key is consistency, and that will likely cost a little more. But don't forget that this approach reduces PM demand by nearly 60 percent, which alleviates some pressure to find, train and keep good service people. It also cuts machine downtime by a similar amount. It's worth working through these scenarios with your own cost numbers to get a more accurate estimate of the baseline savings before you decide how much these less-tangible benefits might affect your operation.

Excavator Life (>= 20,000 lb.) B20B50B80* Replacing at least the chainSource: Construction Equipment lifecycle researchAverage annual hours increase 20 percent for machines in severe applications to more than 1,480 and B20 engine life (the age at which 20 percent of engines have failed) drops 500 hours, but machines in both types of work are expected to last about 8.5 years.Engine7,50010,00012,000Hydraulic pumps4,0008,00012,000Hydraulic motors4,0008,00012,000Undercarriage*4,0006,0009,000Hours in production6,0009,00012,000Wheel Loader Life (>= 2 cu. yd.) B20B50B80* Does not include tires failed due to punctureSource: Construction Equipment lifecycle researchThe risk of pushing wheel loaders from B20 to B50 life is that only 20 percent of engines fail before 8,000 hours, and another 30 percent of the entire engine population fails within the next 2,000 hours. The reward is another three years of production.Engine8,00010,00015,000Transmission6,00010,00014,000Hydraulic cylinders4,0007,00010,000Tire wear-out*2,0004,0007,500Hours in production6,00010,00018,000Crawler-Dozer Life (>= 75 hp) B20B50B80* Replacing at least the chainSource: Construction Equipment lifecycle researchCrawler dozers achieving B50 component life work at about $3.60 per hour less than those only reaching B20 life (based on OEM maintenance intervals and repair-parts costs). And longer-lived components stretch the machines' endurance for primary production about 2.5 years.Engine6,0009,00012,000Transmission5,5008,00010,000Hydrostatic drive4,0007,00010,000Undercarriage*2,5004,0006,000Hours in production6,0009,00015,000Backhoe-Loader Life (14- to 15-foot models) B20B50B80* Does not include tires failed due to punctureSource: Construction Equipment lifecycle researchEngine, transmission and axle life clustered around the expected hours in primary production suggest that all of the main components in backhoe-loaders are worn out by the time most owners replace them.Engine6,0008,50012,000Transmission5,0008,00012,000Axles5,0009,00010,000Tire wear-out*1,7503,0005,000Hours in production5,5008,00012,000Articulated-Dump-Truck Life (30-ton models) B20B50B80* Does not include tires failed due to punctureSource: Construction Equipment lifecycle researchAs the number of hours separating B20 and B50 lives is reduced, the risk of managing machines to the longer life increases. ADTs are a good example, as 20 percent of all engines fail before 9,000 hours, but another 30 percent of the entire engine population fails within the next 1,000 hours.Engine9,00010,00012,500Transmission7,00010,00012,000Axles9,50010,00020,000Tire wear-out*2,5005,0006,000Hours in production7,50012,00018,000