VALUE ORIENTED MAINTENANCE

VALUE ORIENTED MAINTENANCE THE STRATEGIC DIMENSION OF THE SPANNER The Highlights 83 companies and production plants were examined in detail with reference to their maintenance and asset management performance The study shows considerable potential for improvement in all industry sectors analysed Practically proven design elements on the way to ex cellent value oriented maintenance are presented Quick and sustainable implementation results are realisable

PREFACE THE MAINTENANCE STUDY AUTHORS AND CONTACT PERSONS CON MOTO Page 3 PREFACE Page 4- THE MAINTENANCE STUDY Executive summary Significance of maintenance and asset management as a competitive advantage based on the results of the ConMoto ScoreTest Graduated model of Status quo in maintenance and asset management - findings and need for action The most effective variables - results by approaching Appendix Page 3 AUTHORS AND CONTACT PERSONS Page 4 CON MOTO Our consultancy approach Our company

PREFACE Preface Do you know the feeling? You prepare yourself for a demanding mountain hike, a marathon or a transalpine on your mountain bike. You train, train and train without feeling that you're getting anywhere? Good intentions and back-breaking effort alone only lead to the desired level of performance by chance. If you want to reach your best form, however, you initially need a comprehensive performance diagnosis and, building on this, an individually oriented training concept based on specialist knowledge. Top business performances are achieved with the same approach. Deficits have to be recognised and, metaphorically speaking, training methods have to be changed. In this study ConMoto is systematically showing the strengths and weaknesses of European companies' maintenance management and is providing field tested proven design elements on the way to excellent value oriented maintenance. But why is maintenance important at all? If you consider only business assets in production facilities and related machinery out of all investment goods in Europe, you reach a value of around 9.7 trillion euros in 008. In Germany alone the equipment replacement value amounted to about 1.9 trillion euros. If you calculate a cross sector maintenance costs rate of 4.8 % (corresponding to the average value identified in this study), direct maintenance costs in European production locations add up to over 450 billion euros per year! These figures speak for themselves. Yet maintenance is not only of enormous significance for European enterprises. Our experiences show that maintenance and asset management, particularly sustainability issues, are also increasingly moving to the forefront in the BRIC states, in the Middle East and in many emerging countries. First of all, in order to meet the resulting high quality and cost related requirements of maintenance systems, a comprehensive overview of the issue is needed. And this is exactly where the ConMoto study Value oriented maintenance the strategic dimension of the spanner comes in. 83 companies and production plants from various sectors were analysed in detail - with amazing results. Reach your individual targets, develop your maintenance activities into sustainable value drivers to increase your competitiveness and stay motivated and active for your success tomorrow. Yours Nils Blechschmidt 3

The Value oriented maintenance - the strategic dimension of the spanner Executive summary The production of a successful company today has to be not only efficient but also organised flexibly and with adaptability. To meet these requirements the searching gaze of many company managers is increasingly focussing on maintenance activities. Justifiably so, because value oriented maintenance and asset management are decisive for cost effectiveness and flexibility in producing goods. The higher the equipment intensity in a production plant is, the greater the impact of maintenance management. Thus at peak more than 60 % of production costs are directly and indirectly influenced by the efficiency of maintenance activities. In the past few years the ConMoto Consulting Group has thoroughly examined the maintenance activities of 83 companies and production plants in total and has summarised the results in this study. It is clear that many companies are currently a long way from first class maintenance management. If school marks were used, the companies examined would get marks only between "poor" and "satisfactory" for their maintenance management systems. To better classify the conditions characterising maintenance systems (maintenance maturity), ConMoto has developed the graduated model of. If you consider the relationship between the total number of points to the maximum number of points possible (corresponding to ) the industry average is only 46 %. The rear light of the study has considerable potential to catch up with a maintenance maturity of merely 3 %. Even the best company at 60 % has plenty of room for improvement. In an overall comparison, surprisingly it was precisely the most investment intensive and security sensitive process industry that is weakest with an average of 43 %. But also the best-in-class industrial area automotive and mechanical engineering is only in the midfield of the graduated model with an average of 51 %. The analysis of maintenance systems shows considerable potential for improvement within the context of value oriented maintenance. The question remains of what to do to exploit this potential as quickly and sustainably as possible. By combining the current need for action and the respective cost-benefits relation of the implementation areas, five variables could be identified in the study that lead to particularly high gains in efficiency in all the sectors examined. Alongside the maintenance strategy these are in- and outsourcing of services, time management/ capacity planning and scheduling, process organisation and Key Performance Indicators and costing. Con- Moto has developed a methodical approach proven in various industries for each of these design elements. It demonstrates an efficient way how companies can holistically drive forward the optimisation of their maintenance systems. The target is. The results speak for themselves. It was possible to achieve considerable improvement in all Key Performance Indicators (KPIs). One of the central cost effectiveness KPIs, the maintenance cost rate, was reduced by 3 % for all projects. The effectiveness, measured on the basis of the KPIs spare parts months of inventory (-45 %), Overall Equipment Effectiveness (+7 %) and proportion of preventive maintenance (+155 %), was significantly improved. Regarding order processing management it was possible to optimise the Key Performance Indicators planning degree (+40 %) and urgency rate (-63 %), thus achieving considerable gains in efficiency. The figures prove that maintenance processes can be a central value driver for improving efficiency, minimising costs and for reducing capital requirements, thus increasing the Return on Captial. By systematically optimising these factors companies can use a decisive lever to position themselves even more successfully in the global competition. 4

Processes Processes ConMoto To better classify the conditions characterising maintenance systems (maintenance maturity), ConMoto has developed the graduated model of (Figure 7). Efficiency profile process industry Efficiency profile automotive and engineering Efficiency profile other industries of Services In- and outsourcing 1 10 Structure of Services In- and outsourcing 1 10 Structure of Services In- and outsourcing 1 10 Structure Measures to increase O.E.E. 8 6 4 Workplace and workflow Measures to increase O.E.E. 8 6 4 Workplace and workflow Measures to increase O.E.E. 8 6 4 Workplace and workflow IT-Tools scheduling Planning and IT-Tools 0 scheduling Planning and IT-Tools 0 scheduling Planning and Costing Spare part management Costing Spare part management Costing Spare part management Key Performance Indicators strategy Staff development Key Performance Indicators strategy Staff development Key Performance Indicators strategy Staff development 0 1 0 1 0 1 Worst Case Excellence Best process industry Worst process industry Worst Case Excellence Best automotive and engineering industry Worst automotive and engineering industry Worst Case Excellence Best other industries Worst other industries Classification in development levels Bringing up the rear Midtable Leading group Level 6 Level 5 11 1 Level 4 9 10 Level 3 7 8 Integration Innovation Level 5 6 Proactive of all relevant Management Level 1 3 4 processes 1 Reactive Disorganised Wooden spoon Stragglers Lower midtable Upper midtable Leaders Innovators Worst Case Degree of maintenance and asset managment Figure 7: Classification of companies according to graduated model The individual development levels of the model are clearly defined by the 360 status descriptions of the ScoreTest and are outlined briefly below: Level 1 "Wooden spoon" is disorganised processes are not sufficiently defined Level Stragglers Strongly reactive maintenance "Fire-fighting activities" are still predominate Level 3 Lower midtable" Proactive maintenance strategy Lean principles are basically applied (focus on Overall Equipment Effectiveness, minimising waste, first Key Performance Indicators and visualisation, etc.) Level 4 Upper midtable" All maintenance processes are linked and support each other (there are no more system gaps) processes are controlled in a target-oriented manner and optimised effectively Level 5 Leaders The entire plant life cycle is considered Direct and indirect maintenance costs are recorded and evaluated systematically and asset management are improved consistently and continuously Level 6 Innovators Orientation not only towards life cycle costs but also on functionality of plant and machinery The control loop between operators and plant manufacturers is established and preventive maintenance is driven forward innovatively 9

Appendix Reference project success by approaching Reference project process industry in three main plants of a well known chemical company Facts and figures Project tasks Project results Industrial sector: process industry Number of staff: approx. 3000 Number of plants: 3 Bringing up the rear Midtable Leading group after 73% before 46% Level 6 Level 5 11 1 Level 4 9 10 Level 3 7 8 Integration Innovation Level 5 6 of all Management Level 1 3 4 Proactive relevant Reactive 1 Disorganised processes Wooden spoon Stragglers Lower midtable Upper midtable Leaders Innovators Degree of maintenance and assetmanagment Worst Case Identification of the main variables to increase efficiency of maintenance activities Developing and implementing a risk and availability driven maintenance strategy Introducing KPIs Setting up an order management system with more efficient schedule and expenditure planning Building up an optimised stock management system Strengthening autonomous maintenance by operations personnel Implementing a systematic contractor management system cost rate Fault related plant down-time Urgency rate Planning degree Turnover frequency of spare parts -1 % -30 to 40 % -0 %-Points +30 %-Points +30 % Reference project automotive and engineering Risk and Reliability Based Strategy at a leading commercial vehicle manufacturer Facts and figures Project tasks Project results Industrial sector: automotive industry Number of staff: approx. 500 Number of plants: 1 Bringing up the rear Midtable Leading group Level 1 1 Disorganised Level 3 4 Reactive before 36% Level 3 5 6 Proactive Level 4 7 8 Integration of all relevant processes after 71% Level 5 9 10 Management Level 6 11 1 Innovation Assessment of maintenance efficiency on the basis of the ConMoto ScoreTest Developing and implementing a risk and availability driven maintenance strategy to systematically reduce faults and optimise maintenance costs in the gearbox assembly and processing centres Highly linked assembly system Technical availability costs Processing centres Overall Equipment Effectiveness (O.E.E.) costs +9 %-Points -15 % +15 % -18 % Wooden spoon Stragglers Lower midtable Upper midtable Leaders Innovators Degree of maintenance and assetmanagment Worst Case 1

Reference project other industries - Lean at a special tool manufacturer Facts and figures Project tasks Project results Industrial sector: high precision technology Number of staff: approx. 600 Real net output ratio: approx. 70 % Bringing up the rear Midtable Leading group after 7% before 36% Level 6 Level 5 11 1 Level 4 9 10 Level 3 7 8 Integration Innovation Level 5 6 Proactive of all Management Level 1 3 4 relevant 1 Reactive Disorganised processes Wooden spoon Stragglers Lower midtable Upper midfield Leaders Innovators Degree of maintenance and assetmanagment Assessment of maintenance efficiency on the basis of the ConMoto ScoreTest Developing and implementing a systematic maintenance KPI system and visualisation Implementing optimal maintenance strategies at component level Capacity planning and organisation adjustment Systematic contractor management Definition of target procurement process and indroducing an efficient spare parts management system Overall Equipment Effectiveness (O.E.E.) Plant productivity cost rate Spare parts inventory +0 % +5 % -15 % -40 % Worst Case The pages 5 to 8 and 10 to 0 are not included in this preview. Should you be interested in the whole study VALUE ORIEN- TED MAINTENANCE - THE STRATEGIC DIMENSION OF THE SPANNER, please contact: Melanie Sauer Communication Manager ConMoto Consulting Group GmbH Boschetsrieder Str. 69 81379 München Deutschland Telefon +49 (0)89 780 66-138 Fax: +49 (0)89 780 66-101 Email: sauer@conmoto.de 011 ConMoto Consulting Group GmbH. All rights reserved. For repeat orders and reprinting authorisation please contact: ConMoto Consulting Group GmbH Boschetsrieder Str. 69 81379 Munich Germany Tel. +49 (0)89 780 66-138 Fax: +49 (0)89 780 66-101 Email: pressestelle@conmoto.de

Authors Nils Blechschmidt has been a management consultant since 1995 at ConMoto Consulting Group GmbH and since 00 he is a Senior Partner and shareholder of the company. He is responsible for the field of " Excellence". As an expert in this area and with well-founded knowledge of various sectors, such as the aerospace industry, engineering and plant construction, the car and component supplier industry, process industry (chemicals, steel, semi-conductors, pharmaceuticals, food), plastics processing industry and transport technology, he gives numerous lectures. Since 1997 he has been a lecturer at various specialist forums with a focus on Excellence and Lean Production. Before his time at ConMoto, Nils Blechschmidt was employed as the Technical Head of an aircraft maintenance business for seven years. He completed his education as a Dipl.-Ing. (graduate engineer) in aerospace technology at the University of the Bundeswehr in Munich and gained his MBA at Henley Management College (UK). Markus März is the Director Business Development of ConMoto Consulting Group GmbH. Since joining ConMoto in 003 he had worked as a management consultant and lastly as a project manager, dealing with controlling and finance issues, restructuring, value oriented corporate development as well as lean production and maintenance. Before his time at ConMoto, Markus März was employed as an Analyst Private Equity, primarily in due diligence & corporate valuation, at a listed holding and restructuring company. He completed his education as a Dipl.-Kfm. (graduate in business administration) and BSc at the University of Augsburg. Dr. Leonhard Weck is a managing partner of ConMoto Consulting Group GmbH. After a twelve year career as a military officer in various applications he was employed at Bosch Siemens Hausgeräte GmbH in Munich for two years with responsibility for brown goods logistics. In 1990 he was one of the three founders of the ConMoto Consulting Group. He was involved in building up the company as a managing partner for over four years. In 1994 he founded the management consultancy Agamus Consult within the Otto Wolff von Amerongen group of companies and ran the consultancy as managing partner until 001. Subsequently he took over the management of the newly-founded Agamus Holding GmbH as managing partner. Under the roof of this company he founded three further companies in the areas of data transaction and information logistics. These companies include what is Crossgate AG today, which has since become one of the largest data transaction platforms in the BB area. After the death of Otto Wolff von Amerongen, Dr. Weck left the group at the beginning of 009 and since then he has again a leading management position in the ConMoto Consulting Group. 3

WWW.CONMOTO.DE WWW.CONMOTO-CONSULTING.COM Our consultancy approach We create advantage! This is the guiding approach of our consultancy. Implementation decides whether a project is successful. Therefore, speed, pragmatism and implementation strength distinguish ConMoto s work. The decisive basis is formed by an expert and target oriented analysis as well as a solid and realistic concept. To achieve this we combine innovative concepts with the knowledge of what is feasible. Our company The ConMoto Consulting Group has been supporting companies for more than 0 years to secure and improve their competitiveness and sustainability. Around 80 consultants, distributed across our offices in Munich, Stuttgart, Vienna, St. Gallen, Bratislava and Shanghai, work competently and with commitment to realise the best possible benefits for our clients. Our consultants high qualifications, supplemented by many years of professional experience, guarantee the pronounced implementation skill that is necessary to realise the solution concepts we develop together with our clients. Efficient structures and processes, strong innovation skills, effective management systems and the sustainable mobilisation of staff are the project targets in the context of a pioneering strategy. Management Dr.-Ing. Ralf Feierabend Prof. Dr.-Ing. Andreas R. Voegele Dr. rer. pol. Leonhard Weck ConMoto Consulting Group GmbH, Munich Boschetsrieder Str. 69 81379 Munich Germany Tel.: +49 (0)89 780 66-0 Fax: +49 (0)89 780 66-100/-101 ConMoto Consulting Group GmbH, Stuttgart Gerokstr. 11 70184 Stuttgart Germany Tel.: +49 (0)711 767 79-0 Fax: +49 (0)711 767 79-05 ConMoto Consulting Group Ges.m.b.H, Vienna Schottenring 16 1010 Vienna Austria Tel.: +43 (0)1 585 0 74-0 Fax: +43 (0)1 585 0 74-11 ConMoto Consulting Group GmbH, St. Gallen Notkerstr. 10 9000 St. Gallen Switzerland Tel.: +41 (0)71 44 08 71 Fax: +41 (0)71 43 18 81 ConMoto Consulting Group GmbH, Shanghai Unit 1606, Time Square 93 Huai Hai Zhong Rd. 0001 Shanghai People s Republic of China Tel.: +86 (0)1 6141 575 Fax: +86 (0)1 6141 576 ConMoto Consulting Group, Agamus Consult, Bratislava Na vršku 8 811 01 Bratislava Slovakia Tel.: +41 (0) 5441 3304 Fax: +41 (0) 5441 0635 Email: info@conmoto.de Web: www.conmoto.de www.conmoto-consulting.com