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How Does Testing & Maintenance Help Increase
In Profitability? What IS AN Effective Proposal To
Present To Finance/Purchase?
Author: Prasad Gore, May 2016.
(For Video Presentation of This Paper On YouTube Please Click Here )
Who We Are ?
We Are Electrical Science Solutions. A Mumbai Based Electrical Engineering Company.
What Are We Going To Talk?
We are going to talk about Electrical Testing & Maintenance in terms of,
Part 1 ‐ Profitability
Part 2‐ An approach for the same
Profitability
With all our ‘All‐Time Experience’ taken into account, we are in the field of electrical engineering services
for more than 10 yrs now.
Everyone knows and talks about importance of Electrical Testing & Maintenance, And we present
proposal to finance team in terms of ,
1. Reliability
2. Availability
3. Business Continuity Impacts
4. Risk Assessment
5. Plant Management
6. And finally a single liner is written Increase Profitability.
Still we hear that there is no budget for this year or proposal rejected for electrical testing and
maintenance.
We even get these answers that we don’t know about these studies/ is there any direct savings in terms
of money?
What Do You Think? Why do we get these Ans Even We Say Its Profit ?
Management has limited budgets.
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Management has other important liabilities.
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Management has other more profitable assignments to invest.
Management doesn’t see any direct profits.
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Any failure in electrical system impacts nothing to the business operations, i.e. there is no
reliability/availability concerns.
Or Is it a proposal unable to explain the impact and profitability.
Most of the time management wants to see direct profits, or I would say extra profit on same capital
investment.
What kind of proposal a maintenance team provide to management?
It involves,
Cost
Impact, Risk Assessment and Benefits
Payback Time,
(For testing and maintenance there is no payback time, it is added to operating cost, which
directly decrease profits)
Lets Talk About INCREASE PROFITABILITY Due To Maintenance & Testing in numbers.
Lets check NUMBER ANALYSIS
Any business is done for profit. Now there are certain strategies and calculations are involved to decide
whether to accept or reject any business project.
Below is simple and most essential calculation done to accept/reject any project.
A Business Proposal Here units can be taken as per ones
Cost 10% requirements, eg for time it may be in
Of yrs,months, decades & For Investment it is in
Capit rupees but it can be lakhs, crore.
al So this business comes to company and it shows
Cost Toda Toda that today you have to make a capital
Invest ys Profi ys investment of 100 Rs with the cost of
Time Value t Value investment @ 10% and at the end of first yr you
0 100 100 0.00 make 45Rs profit and so on. Now it is obvious
1 0 45 40.91 that you are making 45 Rs at the end of 1st yr
2 0 60 49.59 but today its value is not same but lower. So
3 0 55 41.32 calculation gives todays value as 40.91 Rs. So if
Tota you see profit total for 3 yrs is 160 Rs but we
l Total have to take 131.82 Rs as profit at today’s time
Profi i.e. at the time of investment. Now this figure
t
131.82 is okay to accept the proposal. Company
Inde 131.8
starts the business.
x 132% 100 160 2
Suppose at 3rd yr company made enough sales
to get 55 Rs as profit but , it has to again invest
Fig 1
money in Machine Repairs/Replacement. And it
face situation explain in Fig 2 below.
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Fig2
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10% Even making enough sale now this is turning as
loss due to sudden investment for machine
Time Cost Today Profit Today
repairs.
0 100 100 0.00
1 0 45 40.91 Now here you may say payback is 2 yrs (45+60) .
2 0 60 49.59 No in this case. So even the business has done
3 0 10 7.51 expected sale at third year but due to machine
Total Total failure investment entire 3yrs project converted
Profit 98% 100 115 98.01 in loss.
Fig2
So Lets Understand This
Definitely, there are lot of aspects, strategies and calculations involved to accept/reject any decision.
Every capital investment is done for certain period of time and to get certain returns.
If you are able to increase time between two failures, you increase profitability.
If you reduce maintenance cost of asset, you increase profitability.
If you will be able to utilize complete service life of equipment , you will achieve desire profit set
at the time of investment.
What Can Be An Approach To Make Sure You Help Management To Achieve Desire
Profit?
Till this point its all numbers we have talked about because we think numbers are self explanatory.
So approach also must be number based which can help to ascertain strategies.
Our Part 2 Contains Number Approach Explanation.
If you find our discussion interesting till this point
and if you can give your time for discussion on
‘APPROACH’ which can help you ascertain strategies,
then,
Please email us at
prasad@electricalsciencesolutions.com or contact us
on 9833232602/9833240833.
Connect With Us On https://www.facebook.com/electricalsciencesolutions/
http://electricalsciencesolutions.blogspot.in/
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https://twitter.com/ELECT_SCI_SOLN/
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https://www.youtube.com/channel/UCMTTCqH2rDQ5iyeW5Iudbsg
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