You should decide on the total amount to spend on Preventative Maintenance. This is an aggregate amount and so should be varied when a firm changes its plant capacity.
You should look at the Manufacturing Responsiveness Report (under the Key Reports menu) and if you are losing a significant amount of time to Breakdowns, then consider increasing your spend on Preventative Maintenance.
Effects of Spending in Preventative Maintenance
Expenditure on preventative maintenance has a number of effects. Preventative maintenance reduces the likelihood of plant breakdown and losses in capacity caused by these delays. Adequate maintenance also serves to maintain the resale value of plant. Finally, ensuring the plant is producing within tolerances contributes towards the reduction of defects and improves your internal quality.
Example: Currently your firm has approximately 25,000 SCU of plant. If it were new it would be worth $4 million. However it is a few years old and its book value is only $1.6 million, so about 7% of its potential is lost due to breakdowns.
Investment of about $24 per SCU or $600,000/year in preventative maintenance is sufficient to offset deterioration and will keep its operational level (and hence resale) value constant at its current level. Higher investment than this will increase the level accumulated maintenance and hence decrease machine breakdowns. Remember to adjust the amount you spend on maintenance as you increase or decrease your plant size.
Check out the latest Question of the Week articles here:
- What is Investor Relations?
- How Do We Decrease Our Factory’s Wastage?
- How Do We Increase Our Delivery Rate?