Justifying Preventive Maintenance

Overview

How often do you experience unscheduled downtime?  What are the causes?

Example Recommendations


AR 3504: Institute A Preventive Maintenance Program for CNC Machines   

Annual Savings

Project

Simple

Resource

CO2  (lb)

Dollars

Cost

Payback

Overtime Labor

745 hours

$11,178

Maintenance Cost

621 hours

$9,315

Replacement Parts

$6,000

Inventory

2,800 pieces

$1,470

Net

$27,963

None

Immediate

Analysis

Management estimates that the three CNC machines must be run overtime about 2,070 hours per year and that about 60% of this is due to machine breakdowns. In addition, present inventory levels are inflated 35% to compensate for breakdowns.

Recommendations

In order to reduce lost production time, repair, maintenance and inventory costs due to machine breakdown, we recommend implementing a preventative maintenance (PM) program.

Estimated Savings

Overtime

Management reports that each of the three CNC machines is run during overtime hours for about 10 hours per week plus about 13 hours per weekend for 30 weeks per year.  Thus, the annual overtime is about:

Management reports that the regular hourly wage and benefit package is about $10 per hour and overtime is about $15 per hour. If so, the annual overtime operator labor cost is about:

Management estimates that about 60% of the overtime is related to machine breakdowns and that a preventive maintenance program could reduce machine breakdowns by 60%.  Thus, the annual overtime labor savings due to a PM program would be about:

$31,050 /year x 60% x 60% = $11,178 /year

Replacement Parts

Preventative maintenance would also reduce the cost of replacement parts.  We estimate that the amount spent on replacement parts for the three CNC machines would be reduced by at least $500 per month due to a PM program.  Thus, the replacement part savings would be about:

Maintenance and Repair Labor

As calculated before, the annual overtime was about 2,070 hours per year, and management estimates that about 60% of this overtime is due to machine breakdowns.  Assuming that a machine is put back into production as soon as it is fixed, the time spent repairing broken CNC machines is about:

2,070 hours/year x 60% = 1,242 hours/year

Management estimated that the time required to implement an effective PM program would be about:

However, this is more than the current time spent repairing the machines. Preventative maintenance programs have repeatedly been shown to reduce, not inflate, repair time.  Thus, we estimate that the time required to implement an effective PM program would be about half the current downtime maintenance:

1,242 hours/year x 50% = 621 hours/year

Assuming that a skilled craftsman earns $15 per hour, the labor savings would be about:

(1,242 hours/year – 621 hours/year) x $15 /hour = $9,315 /year

Inventory

In addition, management reports current inventory levels are 35% higher than necessary to compensate for maintenance breakdown.  Current inventory is about 8,000 parts and each part costs about $3.50.  The value of inventory held due to machine breakdown is about:

8,000 pieces x $3.50 /piece x 35% = $9,800

If this amount were invested in the company or elsewhere at a 15% to yield, the additional revenue would be about:

$9,800 x 15%/year = $ 1,470 /year

Total savings would be about:

$11,178 /year + $6,000 /year + $9,315 /year + $1,470 /year = $27,963 /year

Estimated Implementation Cost and Simple Payback

There is no implementation cost; hence the payback is immediate.


AR 3354: Purchase Screenless Extruder Head for Extruder #1

Annual Savings

Project

Simple

Resource

CO2  (lb)

Dollars

Cost

Payback

Net Revenue Gain

120,000 lbs

$27,000

Maintenance Labor

360 hours

$5,400

Net

$32,400

$90,000

33 months

 Analysis

Management estimates that Extruder #1 is down for about ten hours per month to change the screen/filter in the head of the extruder.   This downtime could be eliminated by purchasing and installing a screenless die. According to maintenance personnel, a screenless die costs about $90,000.

Recommendations

To reduce downtime, we recommend purchasing a modified screenless die that would not require periodic cleaning. This would add about 10 hours of production per month and reduce maintenance labor costs.

Estimated Savings

To estimate savings, we seek to estimate the total costs associated with the current operation, in which the extruder is down for 10 hours per month, and the total costs associated with the recommendedoperation, in which the extruder is operational for 10 more hours per month.  The savings would be the difference between costs in the current and recommended operations.

Current

We assuming that the die change requires a three-person maintenance crew.  Management reports that the average cost of labor is about $15 per hour including benefits.  If so, the cost of maintenancelabor for change-outs is about:

10 hours/month x 3 persons x $15 /hour-person x 12 months/year = $5,400 /year

We assume that when the extruder die is being changed, the three regular operators are assigned to other duties in the plant.  Thus, the cost of operator labor is about:

10 hours/month x 3 persons x $15 /hour-person x 12 months/year = $5,400 /year

There are no material costs during the 10 hours per month that the extruder is down.  However, there are depreciation and overhead costs. We estimate that these costs are about $10,800 annually.  (Our rationale for this number, $10,800, will be described in the next section).  The total cost of the present operation (including labor, materials, overhead and depreciation) is about:

$5,400 + $5,400 +$0 + $10,800 = $21,600 /year

Recommended

By changing to a screenless die, maintenance costs would be eliminated.  Operator labor costs, depreciation costs and overhead costs would remain the same. In addtion, running the extruder would now require materials.  According to management, the production rate for this extruder is about 1,000 pounds per hour and the production cost of styrofoam (which includes labor, materials, overhead and depreciation) is about $0.45 per pound.  Management estimates that about 70% of the production cost is for materials.  Thus, the cost of material now that the extruder is operational would be about:

10 hours/month x 1,000 lb/hr x $0.45 /lb x 12 month/year x 70% = $37,800 /year

The total production cost if the extruder were operational for 10 more hours per month would be about:

$5,400 /year + $10,800 /year + $37,800 /year = $54,000 /year

Note that $54,000 per year for an additional 120,000 pounds of material per year equates to the $0.45 per pound that management estimated as the production cost of the material:

$54,000 /year / 120,000 pounds/year = $0.45 /pound

Thus, overhead and depreciation must equal the difference between the total production cost and the cost of labor and materials:

$54,000 /year – [$5,400 /year + $37,800 /year] = $10,800 /year

Assuming a 20% profit margin, the revenue generated from this product would be about:

$54,000 /year x 120% = $64,800 /year

Thus, the net cost if the extruder were operational for 10 more hours per month would be about:

$54,000 /year –  $64,800 /year = -$10,800 /year

Note that a negative net cost is a net increase in revenue.

Savings

The savings are the difference between the costs in the current and recommended scenarios:

$21,600 /year – (-$10,800 /year) = $32,400 /year

Estimated Implementation Cost

According to maintenance personnel, a screenless die costs about $90,000.

Estimated Simple Payback

$90,000 / $32,400 /year x 12 months/year = 33 months


AR 5:  Upgrade Coolant Systems For Machining Tools

Present

Operation

Recommended

Operation

Annual

Savings

Coolant

3,240 gal; $29,970

270 gal; $2,498

2,970 gal; $27,472

Disposal

64,800 gal; $23,040

5,400 gal; $1,920

59,400 gal; $21,120

Labor Cost

$180,000

$105,000

$75,000

Net

$233,010

$109,418

$123,592

Implementation Cost

$180,000

Simple Payback

17 months

Analysis

 Machining coolants are an important component of metal working operations. Coolants improve machinability, increase productivity, and extent tool life by cooling and lubricating the work piece and cutting tool. When performing these functions, the coolant becomes contaminated with tramp oil, chips and fines, dissolved salts, and bacteria, and eventually must be replaced.  The frequency of replacement can be minimized by controlling the amount and resident time of contaminants in the coolant.

The maintenance director felt that the average frequency of coolant replacement could be reduced from about every two weeks to about every six months if the residence time of the contaminants in the coolant could be substantially reduced.  After researching the issue and discussing it with experts in the field, we agree with his assessment.  This recommendation illustrates the savings potential for upgrading the current coolant circulation equipment on each machine.  Further technical assistance for reducing & recycling waste machining and grinding coolants is available through MnTAP at (612)-627-4646 or (800)-247-0015.  In addition, the US Environmental Protection Agency has published “Guides to Pollution Prevention : The Fabricated Metal Products Recovery” (EPA/625/7-90/006) which is also a valuable reference.

Recommendation

 Contaminant resident time in the coolant could be substantially and cost-effectively reduced by adding the following equipment to the metal working machines:

    1. Pre-settling tank before the coolant reservoir

    2. Filtration unit between pre-settling tank and coolant reservoir.  The filtration unit could be pressure and vacuum filtration, diatomaceous earth filtration, or magnetic filtration.

    3. Bacteria inhibitant, such as chemical pasteurization and low speed centrifuging or aeration, in the holding tank.

         The current and recommended coolant circulation systems are shown schematically below.  The key idea is to reduce the contact time between coolant and contaminant.  In the system below, this is achieved by a pre-settling tank which catches the heavier chips and filtration before the coolant enters the holding tank.

Estimated Savings

Present

The cost of coolant for the machine shop is about:

270 gal/container x $9.25/gal x 12 containers/yr = $29,970 /yr

A 1,400 gallon spent coolant tank is emptied 7 times a month by Environmental Recovery.  Assuming 1,200 gallons of spent coolant are removed each time, the  annual amount of spent coolant removed is about:

1,200 gal/tank x 7 tanks/month x 12 months/yr = 100,800 gal/yr

Assuming that the final mixture is 19 parts water and 1 part coolant, the total spent coolant from the machine shop is about:

270 gal cool/tank x 12 tanks/yr x 20 gal(water&coolant)/gal coolant = 64,800 gal/yr

Thus, about (64,800 gal/yr / 100,800 gal/yr = ) 64% of the total disposal cost is attributable to the machine shop.

The total disposal cost for spent coolant is about:

$3,000 /month x 12 months/yr = $36,000 /yr

The total cost of coolant disposal for the machining shop is about:

$36,000 x 64% = $23,040 /yr

The labor cost of cleaning and replacing coolant is about:

45 machines x 8 hr/machine x 25 times/yr x $20 /hr = $180,000 /yr

The total cost is thus about:

$29,970 /yr + $23,040 /yr + $180,000 /yr = $233,010 /yr

Recommended

The new system would require replacing the coolant and cleaning the tanks every 6 months instead of every two weeks.  Coolant and cleaning costs would be reduced to about one twelfth of the present costs.

$233,010 /yr  /12 = $19,418 /yr

In addition, we estimate that it would take about 2 hours each week to remove chips from the settling tank and service the new equipment.

45 machines x 2 hr/machine x 50 times/yr x $20 /hr = $90,000 /yr

The total costs associated with the new system would therefore be about:

$19,418 /yr + $90,000 /yr = $109,418 /yr

Savings (Present – Recommended)

Total savings = $233,010 /yr – $109,418 /yr = $123,592 /yr

Implementation Cost

$4,000 /machine x 45 machines = $180,000

Simple Payback

SP = $180,000 / $123,592 /yr x 12 months/yr =  17 months


AR 6:  Consolidate Coolant Systems For Grinders

Present

Operation

Recommended

Operation

Annual

Savings

Coolant

$20,735

$2,592

$18,143

Disposal

$12,960

$1,620

$11,340

Labor

$1,280

$320

$960

Net

$34,975

$4,532

$30,433

Implementation Cost

$20,000

Simple Payback

8 months

Analysis

      In the metal working shop, concentrated coolant is mixed with water in a central location and piped to individual machines.  This ensures that the proper concentration of coolant is being used by each machine.  In the grinding shop, 8 grinders use the same type of coolant.  However, each operator mixes his own coolant.  Although the recommended concentration is 5% coolant to 95% water, operators reportably use imprecise methods of mixing such as adding coolant “till it looks pink”. Overly diluted or concentrated coolant can reduce tool life, adversely affect product quality and increase coolant and coolant disposal costs.  In addition,  in the current arrangement each machine must be individually cleaned when the coolant is replaced.  The maintenance director suggested that a central coolant loop for the 8 grinders using the same coolant would alleviate many of these problems.

Recommendation

      We agree with the maintenance director and recommend establishing a central coolant loop for the 8 grinders using the same coolant.  This will ensure better control of coolant concentration and reduce coolant, disposal, operating and maintenance costs.  The central coolant loop should be equipped with a contaminant control system similar to that described in AR 1.

Estimated Savings

      The estimated savings below consider only savings from reduced coolant and cleaning costs.  Other savings from  increased operator productivity and product quality and machine lifetime may also be significant.

Present

According to management, the total cost of trimsol is $33,565 per year.  In AR 1, we estimated that the machine shop uses $29,970 per year worth of trimsol.  Thus, the cost of trimsol used in the grinding shop is about:

$33,565 /yr – $29,970 /yr = $3,595 /yr

According to management, the cost of other the two types of coolant used in the grinding shop is about $17,140 per year.  Thus, the cost of all coolant used in the grinding shop is about:

$3,595 /yr + $17,140 /yr = $20,735 /yr

In AR 1, we estimated that the grinding shop produces about 36% of the spent coolant.  Thus, the disposal cost for the grinding shop coolant is about:

$36,000 /yr x 36% = $12,960 /yr

The labor cost for thoroughly cleaning the grinders and replacing coolant is about:

8 machines x 4 hr/machine x 2 times/yr x $20 /hr = $1,280 /yr

The total annual cost of coolants, disposal and cleaning is about:

$20,735 /yr + $12,960 /yr + $1,280 /yr = $34,975 /yr

Recommended

As in AR 1, we estimate that an upgraded coolant cleaning system would dramatically decrease the frequency that the coolant must be replaced.  Assuming that coolant use could be reduced to one eighth of current use, the cost of coolant and disposal would now be about:

($20,735 /yr + $12,960 /yr) / 8 = $4,212 /yr

We estimate that the cost of cleaning one central coolant loop would be about:

8 hr x 2 times/yr x $20 /hr = $320 /yr

Therefore, the total cost would be about:

$4,212 /yr + $320 /yr = $4,532 /yr

Savings (Present – Recommended)

Total savings = $34,975 /yr – $4,532 /yr =  $30,433 /yr

Estimated Implementation Cost

$20,000

Estimated Simple Payback

SP = $20,000 / $30,433 /yr x 12 months/yr =  8 months


AR  14:  Devise and Implement a Preventive Maintenance System

Present

Recommended

Annual Savings

Downtime

576 hr/yr

288 hr/yr

288 hr; $4,320

Debris Maintenance

1,800 hr/yr

900 hr/yr

900 hr; $13,500

Coolant Maintenance

200 hr/yr

100 hr/yr

100 hr; $1,500

Scrap Remachining

540 hr/yr

270 hr/yr

270 hr; $4,050

Coolant Fluid

15,750 gal/yr

7,875 gal/yr

7,875 gal; $2,764

Net

$26,134

Implementation Cost:

none

Simple Payback:

Immediate

Analysis

This is a productivity driven operation and high production levels must be maintained.  Such optimum production levels are difficult to achieve without a preventative maintenance in place.  The assessment team found a variety of problems related to the lack of a preventative maintenance program.  As a case study, we analyzed the Copelandā machining cell to illustrate some of the savings opportunities frompreventative maintenance. These results may be generalized and applied throughout the facility.

Operators reported that daily cleaning and maintenance of the machines is often neglected. Maintenance is scheduled every Thursday, but other problems often require attention and the maintenance is not performed.  According to operators, most cleaning and maintenance occurs after a machine breaks down. Operators cite a direct correlation between the buildup of debris and machine failure.

Productivity driven facilities, such as yours, should prevent problems rather than just respond to problems as they arise.  Quality Control, maintenance, and the operators all agree a preventative maintenance program and better personnel training would drastically improve productivity and quality.  More importantly, these changes would  decrease downtime and related costs.

Recommendation

We recommend devising and implementing a preventative maintenance program.  This program should define and track specific daily, weekly, and long term maintenance requirements.  We estimate an immediate payback.

Estimated Savings

The estimated costs and savings are based upon figures agreed upon by quality control, maintenance, and the machine operators.

Present

The downtime for the Copelandā machining cell for repairing failed machines is about:

2 day/mo x 24 hr/day x 12 mo/yr = 576 hr/yr

Filings and shavings collect in bottom of these machines.  With proper maintenance, these filings are removed by an automated collector.  However when left to accumulate, the machines must be shut down to remove the debris.  The downtime for this cleaning is about:

2 hr/wk x 6 machines x 3 shifts x 50 wk/yr = 1800 hr/yr

The debris accumulation also prevents collectors from sealing properly.  Coolant leaks through these gaps and the time required to clean leaking coolant and add extra coolant is about:

4 hr/wk x 50 wk/yr = 200 hr/yr

Assuming that 25% of the makeup coolant is leaked, the cost of makeup coolant fluid is about:

30 gal/day x 25% leakage x 6 machines x 7 day/wk x 50 wk/yr = 15,750 gal/yr

15,750 gal/yr x 5% coolant concentrate x $7.02/ gal = $5,528 /yr

Quality control estimates 30% of the 50 scrap parts per month result from the excess debris in the machines, while each part requires 30 minutes to rework.  The time required to remachine defective parts is about:

50 parts/mo x 6 machines x 30% x 0.5 hr/part x 12 mo/yr = 540 hr/yr

We estimate a comprehensive preventative maintenance and personnel training program would decrease the current costs by approximately 50%.  Savings from higher moral and a cleaner work environment are intangible, but will also contribute to productivity.  Assuming the average cost of wages and benefits is about $15 per hour, the total savings, including coolant and salary, would be about:

[(576 + 1,800 + 200 + 540) hr/yr x $15 /hr + $5,528 /yr] x 50% =  $26,134 /yr

The payback would be immediate.


AR 15:  Implement a Preventive Maintenance Program

Present

Recommended

Annual Savings

Defect rate

47,040 Cylinders

39,984 Cylinders

7,339 Cylinders; $28,224

Production downtime

1,572 hr/yr

1,336 hr/yr

236 hr; $5,189

Debris maintenance

300 hr/yr

75 hr/yr

225 hr; $4,950

Tracking replacement

5,000 rollers/yr

1,000 rollers/yr

4,000 rollers/yr; $5,200

Tracking downtime

300 hr/yr

100 hr/yr

200 hr/yr; $4,400

Coolant maintenance

200 hr/yr

50 hr/yr

150 hr; $3,300

Coolant replacement

203 gal/yr

0 gal/yr

203 gal; $1,422

Net for cylinder cells

$52,882 /yr

Net for all production lines

$211,528

Implementation Cost:

$50,000

Simple Payback:

3 months

Analysis

On the day of our plant visit, the cylinder and the journal lines were the only two lines available for observation because the bracket line had run out of castings and production on the Mitsubishi line was intermittent.  Because of this, we took a detailed look at the cylinder machining operation to see if we could identify any productivity issues.  We then extrapolated our findings to the entire plant.

High production levels are critical in the cylinder machining operation. Because of the emphasis on production, operators report that daily cleaning and maintenance of the machines is consistently neglected and that no regular maintenance schedule exists.   According to operators, cleaning and maintenance typically occur only after a machine breaks down.  In addition, large quantities of debris are produced.

Based on our observations and discussions with operators, we believe that production could be increased if a preventative maintenance program were implemented.  In this analysis, we attempt to quantify the savings that we believe would result from a successful preventative maintenance program.  In virtually all cases, facility personnel agreed that a preventative maintenance program would help correct the issues we identified.

Recommendation

We recommend devising and implementing a preventative maintenance program.  This program should define and track specific daily, weekly, and long term maintenance requirements and responsibilities.  In addition, you may want to commission a more detailed study of productivity issues in this cell and in the plant.

Estimated Savings

The estimated costs below are based upon figures agreed upon by management, maintenance, and/or the machine operators.

Management reports that the current defect rate for this facility is about 2.4% and the lost cost per cylinder is about $4.00 ($7.00 selling price – $3.00 purchase price).  The major causes of defective pieces are broken tooling 27%, oversized holes 16%, machine damage 8%, surface scratches and misloads 5%, material handling 40% and other 4%. Broken tooling, oversized holes, machine damage, and surface scratches account for 56% of the total scrap rate and are all associated with excessive chips.  For example, excess chips cause tools to wear out ahead of schedule and increase the frequency of broken tools.

We believe that a preventive maintenance program with regular chip collection would reduce the defect rate.  The defect rate associated with excess chips is about:

2.4% total defect rate x 56% associated with excess chips  = 1.34%

The number of cylinders lost to problems associated with defective chips is about:

70,000 cylinders/wk x 50 wk/yr x 1.34% chip related defect rate  = 47,040 cylinders/yr

If this defect rate were reduced by 15% by a preventive maintenance program with better chip removal, the savings would be about:

47,040 cylinders/yr x $4 /cylinder x 15% reduction = $28,224 /yr

Assuming 15 operators work in the cylinder cells for 7,800 hours per year, the labor savings associated with reducing the defect rate would be about:

15 operators x 7,800 hr/yr x 1.34% chip related defect rate x $22 /hr x 15% reduction = $5,189 /yr

Filings and shavings are collected in bottom of these machines.  With proper maintenance, an automated collector removes these filings.  However when left to accumulate, the machines must be shut down to remove this debris.  Assuming that a preventative maintenance program would reduce this downtime by 75%, the labor savings would be about:

2 hr/wk/shift x 3 shifts x 50 wk/yr x $22 /hr x 75% reduction = $4,950 /yr

Excessive debris causes excess chip collection in the cylinders, which in turn causes unnecessary wear and tear on the roller track.  Roller track sections must be replaced at a rate of about 2.5 sections per week, which totals about 5,000 rollers per year. According to maintenance, with proper maintenance the number of sections could reasonably be reduced to one-half section each week.  This would reduce roller replacements by about 80%.  The roller purchase cost savings would be about:

5,000 roller/yr x $1.30 /roller x 80% reduction = $5,200 /yr

Currently, about two hours are required to replace each roller section.  In addition, the machines are down for an additional hour whenever a roller section is being replaced.  The labor savings associated with reduced roller replacements would be about:

(2.5 – 0.5) replacement sections/wk x (2 hr/section + 1 hr related downtime) x 50 wk/yr x $22 /hr = $4,400 /yr

Excess debris accumulation also prevents collectors from sealing properly.  Coolant leaks through these gaps and must be cleaned and replaced.  This takes about 4 hours per week.  Assuming 75% of this time could be eliminated, the savings associated with reducing coolant leaks would be about:

4 hr/wk x 50 wk/yr x $22 /hr x 75% = $3,300 /yr

About 50 gallons per day of coolant solution is leaked.  Coolant costs about $7 per gallon and is mixed with water at a rate of about 20 parts water to 1 part coolant.  Assuming that this leakage would be reduced by about 25%, the coolant purchase cost savings would be about:

50 gal/day x 6.5 day/wk x 50 wk/yr x 5% coolant concentrate x $7 /gal x 25% = $1,421 /yr

The total savings identified above for the cylinder cell operation would be about:

$28,224 /yr + $5,189 /yr + $5,148 /yr + $4,400 /yr + $5,200 /yr + $3,300 /yr + $1,421 /yr =  $52,882 /yr

Other savings from higher moral and a cleaner work environment are intangible, but will also contribute to productivity.

It appears that similar productivity issues also plaque the remaining lines. In particular, the journal line appeared to have more maintenance-related problems than the cylinder cell operation.  We recommend devising and implementing a preventative maintenance program for all production lines in the facility.  If similar problems could be corrected on the other three lines, the total savings resulting from a plant-wide preventive maintenance program would be about:

$52,882 /line/yr x 4 product lines =  $211,528 /yr

Estimated Implementation Cost

The additional cost of implementing a PM program would be minor because most of the actual maintenance work is already being done; it is just being done after rather than before production delays.  A PM program would, however, require some additional effort to develop and manage the program.  Based on our experience, we believe that a single person could manage an effective preventative maintenance program.  A production engineering position is currently unfilled and in the budget.  Perhaps this individual could be responsible for implementing and maintaining the PM program.  We estimate that the total salary and benefits associated with the position would be about $50,000 per year.

Estimated Simple Payback

SP = $50,000 / $211,528 /yr x 12 mo/yr = 3 months


AR 3554: Replace Plaster Mixer

Annual Savings

Project

Simple

Resource

CO2  (lb)

Dollars

Cost

Payback

Maintenance

$4,000

Spillage

3,340 lbs

$300

Production Labor

1,200 hours

$23,400

Net

$27,700

$40,000

   17 months

Analysis and Recommendation

The current plaster mixer was installed in 1942.  Management is considering replacing the plaster mixer with a new portable unit to reduce maintenance, repair, labor, spillage and transportation costs.  Based on the following analysis, we believe that it would indeed be cost effective to replace the plaster mixer.

Estimated Savings

Maintenance management reports that they spend about $4,000 on parts and labor to repair the plaster mixer each year. In addition, management estimates that lost product due to spillage from the transportation of mixed plaster is about 2% of each batch mixed.  The plant mixes about 167,000 pounds of plaster each year at a cost of  $0.09 per pound.  The total cost of lost product is about:

2% x 167,000 lb x $0.09 /lb = $300 /yr

Management reports that employees spend about 4 hours per day mixing and/or transporting plaster through the plant.   Management estimates wages and benefits are about $18 per hour.  Straight time labor cost is about:

$18 /hr x 4 hrs/day x 5 days/week x 50 weeks/year = $18,000 /yr

In addition, management states that 4 hours per week of overtime are required to mix and or transport totes of plaster.  Management estimates wages and benefits for overtime are about $27 per hour.  Overtime labor cost is about:

$27 /hr x 4 hrs/week x 50 weeks/year = $5,400 /yr

The total savings would be about:

4,000 /yr + $300 /yr + $18,000 /yr + $5,400 /yr = $27,700 /yr

Estimated Implementation Cost

Management estimates the equipment and installation cost of a new portable plaster mixer would be about $40,000

Estimated Simple Payback

$40,000 / $27,700 /yr x 12 months/yr  =  17 months

AR 3554:  Replace Bulk Sand Delivery System

Annual Savings

Project

Simple

Resource

CO2  (lb)

Dollars

Cost

Payback

Maintenance

$5,700

Downtime

12 hours

$900

Handling

775 hours

$14,400

Net

$21,000

$64,000

37 months

Analysis and Recommendation

Management is considering replacing the current bulk sand delivery system because it requires excessive maintenance and is placed at the opposite end of the plant from the primary processes which it serves.  We estimated the savings associated with replacing the sand delivery system and locating it at the other end of the plant.  Based on the following analysis, we recommend replacing the system to increase productivity and reduce maintenance costs.

Estimated Savings

Maintenance management reports that they spend about $3,700 on parts and labor to repair the bulk delivery system each year.  In addition, maintenance also spends about $2,000 to clean the system each year.  The total annual maintenance cost is about:

$3,700 /yr + $2,000 /yr = $5,700 /yr

Management estimates that lost production due to maintenance downtime of the bulk sand delivery system is 12  hours per year.  Management estimates that overhead, labor and overtime cost to cover this downtime is $75 per hour.  The total cost of lost production is about:

$75 /hr x 12 hrs/year = $900 /yr

Management reports that a lift truck operator spends about 2 hours per day transporting bulk sand across the plant.   Management estimates wages and benefits are about $18 per hour.  The straight time labor cost is about:

$18 /hr x 2 hrs/day x 5 days/week x 50 weeks/year = $9,000 /yr

In addition, management states that one hour of overtime is required to transport bulk sand one day per week.  Management estimates wages and benefits for overtime are about $27 /hour.  The overtime labor cost is about:

$27 /hr x 1 hr/week x 50 weeks/year = $1,350 /yr

In addition, management estimates that it takes about 1.5 hours per day, 3 days per week to mix and unload the bulk delivery system.  The labor cost of mixing and unloading is about:

$18 /hr x 1.5 hrs/day x 3 days/week x 50 weeks/year = $4,050 /yr

All of these costs would be eliminated by purchasing a new bulk sand system and locating it at the other end of the plant.  The total savings would be about:

$5,700 /yr + 900 /yr + 9,000 /yr + $1,350 /yr + $4,050 /yr  = $21,000 /yr

Estimated Implementation Cost

Management estimates the total cost to purchase and install the new bulk system would be about $64,000.

Estimated Simple Payback

$64,000/ $20,600 /yr x 12 months/yr  =  37 months