The Cost and Cost Benefits of TPM ImplementationArticle by Marshall Institute
experiences at implementing TPM since 1987 and in particular
as a consultant to hundreds of plants since 1991 has
shown that an expected start-up cost can be about 10-20%
increase in training and about 15 % increase in maintenance
costs for the first two years if a 10% plant coverage
is attained by year one (20% by year two). This investment
goes down significantly if only a couple of machine
centers or units are piloted. In fact, if the desire
is slow integration the first year (1-3 pilots only),
maintenance costs and training costs may be slight and
can often be covered with only slight budget overruns.
One of the ways to calculate this is the
impact of taking critical equipment (could be 25-30%
of the process) to 85-90% Overall Equipment Effectiveness
(OEE)--The Availability Rate X The Performance Rate
X The Quality Rate. It is not beneficial to calculate
OEE for an entire facility but for key processes or
equipment (bottle neck or critical). Closing the gap
between a current level of 55% to the desired 85-90%
can be calculated as additional capacity. It may not
be in the best interest to focus TPM on all plant equipment
because the returns may not be there (cost to implement
TPM could be greater than the returns from improvement.
Do you want to rebuild the engine and paint the body
of that 1977 Ford Pinto?
You need to convert the OEE to dollars
(pesos, yen, marks,etc.). One way is to take your existing
OEE and break it into the three category of losses and
show the gap between current and target. For example,
say you have current OEE-Availability at 60% and you
know that the target is 90% (95% if you have a continuous
process). You calculate the units you could run if you
had the extra 30% available (difference between 90%
and 60%). This is, of course, assuming it is capacity
constrained, in other words, you could sell that extra
30% capacity. If not, you have to start factoring (gets
messy-but doable). We also have calculate the increased
volume from reducing the top five-ten minor stoppages
on specific equipment (if your equipment is impacted
by jams, hang-ups, and short stoppages). This can be
significant if you have multiple lines with the same
stoppages (chronic issues).
You go through the speed or Performance
losses as well as the Quality losses to estimate "How
many more units could I produce" if I were at 95%
Performance (Designed Speed) and 99% Quality. This is
best done by equipment--not by plant. However, you could
get real refined and show the estimated cost of quality
if you are showing quality-related losses. What does
how rework, scrap, returns, lost opportunity cost us.
Look at your constraints or bottlenecks
to calculate the value of removing those constraints.
If you could run another 10,000 units per week and each
could generate one dollar of revenue, you would net
an additional 10,000-dollar for that week. Your per
unit cost would be reduced which could allow you to
lower your price and sell more units using the extra
capacity you gained from improving OEE.
Another way is to forgo capital investment.
Let's say you could, with TPM, extend the life cycle
by three years for all 14 widget makers. The capital
replacement per widget maker is 30,000 dollars. You
can calculate the total cost of capital (actual +interest+lost
opportunity) for that 30,000 dollar
Widget maker and show the savings of capital investment
avoidance for those three years for all 14 widget makers.
If I can get more out of my existing assets, my return
per asset has increased. My costs to service capital
We also use Mean Time Between Failure
(MTBF) as a savings point to show
reduced costs from increasing the time between failures.
This is very
equipment and component specific but another way to
calculate the benefits.
There are many other cost saving opportunities
(life cycle cost reduction, unplanned maintenance loss,
reduced staffing cost by eliminating the need for a
third shift, etc.).
The major variables are the current condition
of your equipment (how well maintained it is), your
people (how skilled and knowledgeable they are) and
the persistence your leadership will take in making
this work. History has shown that about 25% of the companies
who start TPM will have major successes. Another 25%
will have fairly good successes but because of competition
from other programs, lack of constancy of effort and
the lack of persistent leadership will only make it
a modest success and may linger or decline after a few
years of effort. The other 50% will fail in the first
18 to 24 months.
It is hard to calculate the value from
improved morale, better relationships between maintenance
and operations, management and hourly as well as the
feeling of pride and sense of accomplishment from making
the equipment and work areas look better and run better.
But this does have value.
Return on Investment can be calculated
over a five year period with an
expected reduction in maintenance costs of 25-30% and
(manufacturing costs) 20-25%. Returns the first year
are low (investment year), if any, but begin to increase
years two-five. We have many documented case studies
validating these returns. I hope this helps a little.