Your Lubrication Strategy is Costing You Downtime (And Here’s How to Fix It)

Lubrication Strategy

Manufacturers must contend with rising costs for replacement parts, longer lead times for essential components, and a shortage of consumable goods. This is at the same time that consumers are experiencing higher prices for everyday necessities and unprecedented supply-chain disruptions. In light of these events, many businesses are examining their spending and searching for ways to cut back or eliminate unnecessary expenses. 

This is particularly true for lubrication, where poor performance can cost 10% to 15% of a plant’s overall maintenance expenditure. Additionally, maintenance teams face problems with lubricant availability due to supply-chain instability. In fact, one company recently received a delivery guarantee from their lubricant supplier for only 50% of the lubricants the plant uses in a year.

However, this is not a singular incident! It leaves many businesses asking the most fundamental of questions: How much is lubrication costing me? And, how can I lower lubricant costs?

The Size of the Prize: Tempting Cost Reductions

Examining MRO spending is one straightforward method of estimating the cost of lubrication. Most facilities make the mistake of merely taking lubricant prices into account when considering lubrication expenses. But, you must also calculate the annual cost of replacing lubrication-dependent parts such as bearings, pumps, gears, chains, and hydraulic components.

If you focus solely on lubricant cost, it could be tempting to consider renegotiating the price of the lubricant supply contract or switching to less expensive lubricants. It is also tempting to look for a lower price on bearings or to renegotiate the fluid-power contract for hydraulic components. Each is a false economy. While prices might go down initially, over time, the full effects of using lower-grade lubricants or inferior replacement parts will become much more apparent.

At that point, you will find yourself wondering why bearings are failing. With the exception of a handful of the most expensive failures, there simply won’t be obvious root cause failure analysis (RCFA) data to determine the answer. Yet, the reality is, the quality of your components and lubricants are at the root of the failures.

Where to Focus Your MRO Savings

To address all important issues, a thorough project plan should be created. This plan may include updating an oil analysis program or creating new lubricant standards. Fortunately, reducing MRO, lubricant, and labor expenses are frequently sufficient justifications for better lubrication procedures, with the prevention of production losses serving as a bonus.

An alternative, more practical strategy is to examine both MRO (maintenance, repair, and operations) spending and lubricant purchases. Then, ask a few straightforward “what if” questions:

• What if we could cut down on bearing purchases by 40%?
• Or, what if we used correct lubrication, cleaner hydraulic fluid, and condition-based oil drains to systematically lower lubricant quantities by 15% each of the following three years?

Consider any extra MRO or lubrication expenses as “losses.” When considering cost avoidance, it’s easy to claim to have “saved” $120,000 annually as a result of dirty hydraulic fluid. It makes the call to action more powerful and is more likely to be taken up by senior leadership. It’s time to estimate the expenditures to address the issue when the size of lubricant losses has been determined.

Additionally, you must factor in the costs associated with downtime. Although some businesses maintain thorough downtime logs that include the cause of particular minutes or hours of downtime, very few, if any, businesses can accurately specify how much downtime per year is directly brought on by lubrication.

Getting Management Buy-In

Precision lubrication is obvious to those who work in the maintenance department. Excellence in lubrication makes sense as a wise investment. Simply said, properly greased equipment performs better. Spending money on lubrication upgrades and enhancements, however, is just another overhead expense for people in other parts of the company who don’t grasp the complexities of elastohydrodynamic lubrication, lithium complex grease thickeners, or filtration beta ratios. From this perspective, lubricant costs should be kept as low as possible for the company to thrive in the fiercely competitive global market of today.

How, therefore, can we persuade management that investing money in reliability-based maintenance improvement efforts like lubrication is a smart idea? After all, we in maintenance know that changes like these must be significant. Management ought to be able to see the benefits that better lubrication can provide for machinery and productivity.

The problem isn’t that management doesn’t care; rather, most managers lack the depth of knowledge necessary to make a well-informed choice. They see costs taking away from the bottom line without understanding how lubrication can affect equipment reliability beyond the most recent disaster that stopped production.

That may leave you questioning: Should we send our managers to a lesson on lubrication? For most, it is unrealistic to expect the management team (outside the maintenance group) to become knowledgeable about the specifics of lubrication excellence, even while there is no question that some education is necessary for management.

Instead, personnel on the maintenance team must transform into internal salespeople to persuade management that investing in lubrication is justified. Clearly communicating the benefits of a proper lubrication strategy including the decrease of downtime, increase in production, and potential savings due to less wear on components.

Where to Begin with Your Lubrication Strategy Savings

Imagine a facility where the lubrication division hasn’t undergone much modification in the previous 20 years. The budget for maintenance has decreased by 10% in the last three years. However, the plant has also suffered from considerable unplanned downtime and production losses throughout that time. As a result, management requires increases in equipment reliability.

On the basis of articles in Machinery Lubrication and other publications, we believe that a lubrication best practices program can reduce total maintenance costs and eliminate a considerable proportion of equipment failures.

Evaluation of the existing condition of the lubrication program reveals that few assets have been outfitted with modern lubrication best practices such as appropriate breathers, dedicated filtration for all major hydraulics circulating systems, quick-connects for off-line filtration for all critical wet sump systems, oil sample valves, etc. If we are to have any chance of dramatically lowering downtime costs, upgrading equipment to current best practices will entail a sizable time and financial investment.

Next,  think about the mechanics involved in lubrication. Basic lubrication PMs, regreasing, top-offs, and judgments regarding machine inspections are conducted in addition to the inadequate equipment configuration, but quantity, frequency, and other task specifics are left to the lubrication technicians.

We assume that a number of issues are a direct result of either insufficient or excessive lubrication based on our experience. So, perform a thorough examination of all lubrication PM activities to resolve some of these issues by ensuring that task details like frequency are based on strong lubrication engineering principles rather than just the lube tech’s best guess. Also, you can increase the effectiveness of your operations by rationalizing your new PMs into more effective lubrication routes.

Let’s conclude by examining the oil analysis program. Regardless of the impossibility to collect a proper sample owing to the absence of sample valves, the program may be poorly planned with few, if any, targets and restrictions, as well as an outmoded test slate more suited to diesel engines than modern production equipment. In conclusion, this imaginary plant is in poor condition!

The Opportunities and the Costs

In the hypothetical factory, the first and most obvious option is to reduce unplanned downtime. The premise is that a part of these unplanned occurrences can be attributable to inadequate contamination control or lubrication procedures. By altering equipment to minimize impurities and deploying optimum lubrication practices, lubrication-related failure events can be reduced or eliminated.

The optimal size of lubrication PMs is an additional opportunity. Due to a decreased MRO budget, you must do more with less. If you carefully review all lubrication PMs for frequency and task details, you will not only ensure that your equipment is properly lubricated, but also reduce your workload by eliminating unnecessary maintenance tasks. For example, regreasing a bearing every month, when every six months is more appropriate, or changing oil unnecessarily when a condition-based change is more appropriate.

You can assess your opportunity costs using the abundance of data at your disposal including:

• Financial Data – Maintenance costs and annual downtime costs.
• Substantive Data – Failure history or machine uptime.
• Anecdotal Data – For instance, the belief that the most recent failure was caused by a lack of lubrication.

Start by determining the current annual maintenance cost using round values. In order to bracket the opportunity (give a low and high estimate), you will examine the maintenance budget history to determine the low and high limits. You can now forecast best case (costs are lower than anticipated), likely case (costs are as anticipated), and worst case (costs are greater than anticipated owing to unforeseen expenditures) scenarios based on historical data.

Next, calculate the overall annual downtime expenses. It may become challenging at this point. Obtaining realistic estimations can be difficult due to varied production schedules, market conditions (not all output is sellable), poor record-keeping, and the fact that this statistic is very simple in some factories. It is a good idea to involve production and plant management when getting anticipated downtime costs. By including management early in the process and asking for their best estimate of the costs, you can foster buy-in and ownership.

When it comes time to give the final cost-benefit analysis, it also helps to avoid skepticism. Here, it is useful to consider the “low,” “likely,” and “high” case situations. When the cost of downtime is well known, a fairly small window that is bounded by the low and high-cost estimates can be chosen. When estimating downtime expenses, a rather large window can be chosen.

The next stage is to determine how much of the expenditures associated with maintenance and downtime may be avoided by implementing a well-thought-out lubrication program. It is advantageous to include individuals having a stake in the outcome of this evaluation. After all, it’s challenging to dispute a figure that you contributed to the creation of!

Estimating Improvement Costs

Once the “opportunity” has been discovered, we must calculate the actual cost of the improvement. This estimate will cover the costs of project scoping, design, and management as well as any hardware purchases and installations required to bring production equipment up to contemporary best practice standards. Also, this estimate should take training expenses into account.

People who will be affected by the proposed program can receive training to help them comprehend the urgent need for change. Every person’s training needs to be customized for their specific tasks and responsibilities. To hasten the adoption of new standards and procedures, it is important to include everyone in this training, from managers to supervisors, operators to millwrights.

Depending on the sort of work the employee performs, training programs and modules should be designed to build both foundational knowledge and task-based abilities. While those deeply involved in lubricants may find lubrication management software to be more productive and cost-effective, others may find that more in-depth “live” training is more beneficial.

Closing the “Sale”

The last phase in the “sales” process is to weigh the advantages – the opportunity costs – against the expense of creating the program. Typically, three, five, or seven years are chosen as the planning horizon, and a present value return—which is defined below—as well as the rate of return on the projected investment, are calculated.

For example, annual opportunity costs are projected to be $1,426,000 based on the calculation of opportunity costs and using the most likely case scenario. We can anticipate realizing these savings every year that the new and improved program is in place because this is a result of current ineffective maintenance procedures and present downtime expenses. However, expecting full advantages to begin accruing within the first year is impractical.

It is more practical to estimate these savings at a conservative 50% for the first year, or $713,000. The takeaway is clear: even if the goal is to make the project and cost-benefit analysis look appealing, we must be careful not to overestimate the benefits. For the same reasons, we often estimate the annual savings at 75% in the second year. Due to better lubrication procedures, a net positive cash flow of $1,426,000 (depending on the current value of the dollar) per year results from the full and complete annual savings in years three through five and beyond.

Senior executives frequently request both better reliability and lower maintenance expenses at the same time. Give them what they want instead of swimming against the current, battling for more money while battling flames with meager supplies! Managers are compensated for making wise decisions supported by facts and reasons. Show them a well-organized financial plan to lower costs and boost reliability.

Summing it Up

We must keep in mind that businesses do not have endless capital. The majority of businesses have an internal rate of return (IRR) that decides whether an investment makes sense and a “cost of capital” that establishes the long-term value of an investment in today’s dollars (net present value, or NPV). It might be challenging to request additional funding from senior management in a world where costs are always rising. However, the majority of businesses continue to engage in initiatives that result in either better productivity or lower costs, which is precisely why we need to view lubricant cost avoidance as an investment.