ِ‫الرحيم‬

َ ّ ‫حم ِن‬ َ ّ ‫ِبس ِم الل َّ ِه‬

ٰ ‫الر‬

Maintenance Management

Dr. Mohammed Shamim Uddin Khan

Professor and Ex-Chairman
Department of Finance
University of Chittagong
 INTRODUCTION-1
Maintaining the production capability of an organization is
an important function in any production system.
Maintenance encompasses all those activities that relate
to keeping facilities and equipment in good working
order and making necessary repairs when breakdowns
occur, so that the system can perform as intended.
Maintenance activities are often organized into two categories:
1. Plant Maintenance: Building and ground
2. Equipment Maintenance: Machinery and equipments
Plant maintenance is responsible for the appearance, and
functioning of buildings, parking lots , lawns, fences
and the like.
 INTRODUCTION-2
Equipment maintenance is responsible for maintaining machinery
and equipment in good working condition and making all
necessary repairs. Thus, maintenance means taking care of the
plants and equipments so that a specified level of quality,
reliability, and efficient working may be achieved.

Machine, building and other service facilities are subject to

deterioration due to their use and exposure to environmental
conditions.
Process of deterioration, if unchecked, culminates in rendering
these facilities unserviceable and brings them to a standstill.
Industry, therefore, has no choice but to attend to them from time to
time, to repair and recondition them so as to elongate their life to
the extent it is economically and physically possible to do so.
 INTRODUCTION-3
Newly purchased equipments or machineries will not work
satisfactorily unless these are taken care of properly.
Any breakdown in the operation system increases the cost of
production at the same time decrease the employee
morale, which ultimately results poor productivity.
When production machines breakdown, we must absorb the
cost of downtime, and possible lost sales, idle direct and
indirect labour, delays in dependent processes and
increased scrap as well as the cost of maintenance and
repair.
The goal of maintenance is to keep the production system
in good working order at minimum cost.
 INTRODUCTION-4

When breakdown occurs, the adverse consequences:

1. Production capacity is reduced and orders are
delayed
2. There is no production, but overhead continues,
increasing the cost per unit.
3. There are quality issues, product may be damaged.

4. There are safety issues; employees or customers

may be injured.
 BASIC MAINTENANCE POLICY

1. Breakdown Policy
2. Preventive Policy
 PREVENTIVE POLICY DECISION
1. Time based
2. Work/Load based
3. Condition based
4. Opportunity based
 OBJECTIVES OF MAINTENANCE-1

The objectives of maintenance are as follows:

1. To keep the factory plants, equipments machine
tools, etc. in an optimum working condition.
2. To ensure specified accuracy to products and time
schedule of delivery to customers.
3. To keep the down time of machines to the minimum
thus to have control over the production program.
4. To keep the production cycle within the stipulated
range.
5. To improve productivity of existing machines and
to avoid sinking of additional capital.
 OBJECTIVES OF MAINTENANCE-2
6. To reduce factory overheads by reducing the
maintenance cost.
7. To prolong the useful life of the factory plant and
machinery, while retaining their acceptable level of
accuracy of performance.
8. To ensure quality of manufactured products.
9. To improve safety condition within the plants.
10. To reduce machine down time and costs.
11. To prevent probable breakdown of plant and other
related elements.
 COST OF MAINTENANCE
There are two basic costs involved with maintenance:
1. System failure cost or down time cost: System failure cost is made up
of the following costs:
 Loss of profit for the period that the machine remains stopped for

attention by maintenance.
 Wages paid to the direct workers while the machine remains idle.

 Depreciation of the machine for the same period of time.

 Loss due to scrapping or reworking of materials that may be spoiled due

to machine stoppage.
2. Maintenance Activity Costs
 Costs of spares or other materials used for repairs.
 Cost of maintenance labor and overheads of the maintenance department.
 Losses due to inefficient operations of the machines. These losses arise
because machines can either not turn out the requisite quantity or its
condition creates problems relating to quality of products.
 Capital expenditure is required for replacement of machines.
 FUNCTIONS OF MAINTENANCE

Following are some of the important functions of the maintenance

program:
1. Inspection or check-up

2. Maintenance of existing plant and equipment

3. Alteration of existing equipment and building

4. New installation of equipment and building

5. Store Keeping

6. Plant protection including fire

7. Waste disposal

8. Pollution and noise abatement

9. Scheduling of maintenance program

10. Records and Analysis: Records are generally maintained:

(i) Operational manual; (ii) Maintenance instructional manual; (iii)

Inspection register; (iv) Defects register, etc.
 TYPES OF MAINTENANCE-1

1. Capital Replacement: Capital replacement is undertaken if analysis

reveals that the retention of equipment no more remains an economic
proposition.
2. Stand-by Capacity: Stand-by capacity is often provided for items of
equipment that are critical to production. It is some times an economical
maintenance practice to install such spare capacity to be put into
operation while the original unit is under repair or is over-hauled.
Production in this situation is held up only for the period of time
required to switch over from one machine to the other machine.
3. Break-down Maintenance: Breakdown maintenance practice allows a
machine or any other facility to run without much of routine attention
till it actually breaks down to be then put back into commission. This
practice leads to disruption of production plans. It also makes it
impossible to plan the workload and distribution of maintenance work
force for a balanced attention to all equipments. This practice is an
economic way of maintaining certain non-critical items whose repair
and down time costs are comparatively lower.
 TYPES OF MAINTENANCE-2

4. Scheduled Maintenance: Scheduled maintenance

system provides for inspection, overhaul, lubrication, and
servicing of certain machines at predetermined dates.
Overhauling of machines, cleaning of tanks and white
washing of buildings are normally done in this manner.
5. Preventive Maintenance: Preventive maintenance refers
to only a part of a good maintenance program. It consists
of routine actions taken in a planned manner to prevent
breakdowns and to ensure operational accuracy to the
extent it is economically and practically possible to do so.
 FACTORS CONSIDERED IN SELECTING MAINTENANCE
POLICY

1. Type of machine or equipment

2. Nature of Works
3. Nature of product or service
4. Profitability of the organization
5. Corporate Policy
Problem #1: The frequency of breakdown of a machine per month is shown in the table.
The cost of a breakdown is $1,000 and the cost of preventive maintenance is $1,250 per
month. If preventive maintenance is performed, the probability of a machine breakdown
is negligible. Should the manager use preventive maintenance, or would it be cheaper to
repair the machine when it breaks down?
Number of breakdowns: 0 1 2 3
Frequency of occurrence: .20 .30 .40 .10
Solution:
The expected number of breakdowns without preventive maintenance is 1.40.
Number of Frequency of Expected Number of
Breakdowns Occurrence Breakdowns
0 .20 0
1 .30 .30
2 .40 .80
3 .10 .30
1.00 1.40
Expected cost using repair policy is: 1.40 breakdowns/month x $1,000/breakdown = $1,400.
Preventive maintenance would cost $1,250.
Therefore, preventive maintenance would yield a savings of $150/month.
Problem # 2: An equipment which costs Tk 15,000 has
to be replaced with a new equipment. The following
data have been estimated:
Year 1 2 3 4 5 6 7 8
Resale value 12000 9500 7500 5700 4200 3900 2100 2000
Annual maintenance cost 600 800 1050 1400 2100 3500 5000 6800

Determine the optimal replacement period.

Solution:
Taking Mt as the maintenance cost, St as the resale value
for the years t = 1, 2, 3. . . 8; Costs, C = 15,000; we
construct the following table for finding the
replacement time:
 PROBLEM # 2 CONT.
Table: Determination of Optimal Replacement Period
Age of Maintena Cumulative Depreciation Total costs Average costs
replacement nce costs maintenance (Tk) (Tk) per year(Tk)
(Tk) costs (Tk)
n Mt Mt C – St T=Mt +(C–St) T/n
1 600 600 3000 3600 3600
2 800 1400 5500 6900 3450
3 1050 2450 7500 9950 3316.67
4 1400 3850 9300 13150 3287.50*
5 2100 5950 10800 16750 3350
6 3500 9450 11100 20550 3425
7 6000 14450 12100 26550 3792.86
8 6800 21250 13000 34250 4281.25

The above table shows that the average cost per year is the lowest in the 4 th year. The
company should replace the equipment at the end of the 4th year and the annual cost
of replacement is Tk.3287.50.
Problem # 3: A firm is considering replacement of a
machine, whose cost price is $12,200 and the scrap value
is $200. The running (maintenance and operating) costs
are found from experience to be as follows:
Year 1 2 3 4 5 6 7 8
Running cost ($) 200 500 800 1200 1800 2500 3200 4000

When should the machine be replaced?

Solution: We are given the running cost Rn the scrap
value S = $200 and the cost of machine C = $12,200.

we construct the following table for finding the

replacement time:
 PROBLEM # 3 CONT.
Table: Determination of Optimal Replacement Period
Year of Running Cumulative Depreciation Total costs Average costs
Service (n) costs Running Costs Costs (Tk) ($)
(Tk) (Tk) (Tk)
n Mt Mt C – St T=Mt +(C–St) T/n
1 200 200 12,000 12,200 12,200
2 500 700 12,000 12,700 6350
3 800 1500 12,000 13,500 4500
4 1200 2700 12,000 14,700 3675
5 1800 4500 12,000 16,500 3300
6 2500 7000 12,000 19,000 3167
7 3200 10,200 12,000 22,200 3171
8 4000 14,200 12,000 26,200 3275

From the above table, it may be noted that the average cost per year is the minimum in
the 6th year ($3167). The company should replace the machine at the end of the 6 th
year.
Problem # 4: Dragon Airways requires two engine
parts P1 & P2 of a DC–7 to be replaced at each 300
hours and 400 hours respectively. The former part
costs $15 and installation cost is $25. The later part
costs $18 with an identical installation cost. If the two
parts are installed together, the combined installation
cost is $32.
The Dragon Airways has two alternatives:
(i) First, to replace each part at the required time; or
(ii) Second, to replace both parts together whenever any
one has to be replaced.
Required: For a cycle of 3600 hours show the respective
cost of each alternative, indicating which one is
preferred.
 PROBLEM # 4 CONT.
Solution: Number of replacement for P1= 3600/300 = 12;
P2 = 3600/400 = 9
First policy: To replace each part at the time required:
Purchase cost of P1 = 12X15 = 180
Installation cost of P1 = 12X25 = 300
Purchase cost of P2 = 9X18 = 162
Installation cost of P2 = 9X25 = 225
Total maintenance cost of P1 and P2 = 180+300+162+225
= $867
 PROBLEM # 4 CONT.
Second Policy: To replace both parts together if any one fails:
Purchase cost of P1 = 12X15 = 180
Purchase cost of P2 = 12X18 = 216
Combined installation cost of P1 and P2 = 12X32 = $384
Total maintenance cost = 180 + 216 + 384 = $780
From the above calculation we can see that if the firm
replace both parts if any one fails then the total
maintenance cost will be reduced by ($867 - $780)
= $87.
Hence, the second alternative should be selected.