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METHODOLOGY AND THEORY

Measuring maintenance performance using a balanced scorecard approach

Imad Alsyouf
Department of Mechanical Engineering, School of Technology and Design, Vaxjo University, Sweden
Abstract
Purpose The purpose of this paper is to develop a strategic maintenance performance measurement system. Design/methodology/approach In response to this purpose, a balanced scorecard framework was adopted to assess the contribution of support functions (such as maintenance) to strategic business objectives. A case study approach was used to test the suggested framework at a Swedish paper mill. Findings It was found that by using the suggested framework it was possible to measure and identify the cause-and-effect relationship of using an effective maintenance strategy, and assess its impact on the companys competitive advantages. For example, it was found that there is potential to, ideally, improve the companys return on investment (ROI) by 9 per cent. This gure represents a projected US$8.4 million in lost prots, which are caused by planned inoperative time and overall equipment effectiveness (OEE) elements. At least 14 per cent of the ROI potential improvements are directly related to the maintenance function as lost prot, which is due to unplanned stoppages and bad quality caused by maintenance-related problems. Practical implications Using the modied BSC provides a framework whereby the contribution of support functions (for example, maintenance) to the strategic business objectives can be assessed. The modied BSC makes it easier for the maintenance and production staff who are technically oriented to communicate with top management in terms that managers understand, i.e. in terms of money. Furthermore, this approach facilitates the making of cost-effective decisions. Originality/value The present study contributes to our knowledge of this process by changing the status of the maintenance function. This is done by showing that maintenance is no longer a cost centre, but should be regarded as a prot generating function. Keywords Maintenance, Performance measures, Balanced scorecard, Sweden, Paper industry Paper type Case study

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Introduction Many changes in the internal environment of certain companies are taking place. These changes include the increased use of mechanisation and automation of operations, such as exible manufacturing systems (FMS); robots; automatic
This article represents one of the results of a project that was nanced by the Swedish National Board for Industrial and Technical Developments, NUTEK, and the following Swedish companies: StoraEnso Hylte AB, Volvo Truck Components AB in Koping, SKF-Condition Monitoring, and ABB Alstom Power AB in Vaxjo. The author would like to thank all who have participated in this project.
Journal of Quality in Maintenance Engineering Vol. 12 No. 2, 2006 pp. 133-149 q Emerald Group Publishing Limited 1355-2511 DOI 10.1108/13552510610667165

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warehousing systems; automatic guided vehicles (AGVs); and the increasing trend of using the just-in-time (JIT) and TQM philosophy, Yamashina (1995), Luxhoj et al. (1997), and Suito (1998). These changes tie up much invested capital. For example, companies within process industries and chemical industries, such as paper mills and reneries, use extremely expensive and fully automated production lines, Swanson (2003). Furthermore, there is increasing pressure to protect the ecological environment from the danger of harmful industrial waste and pollution. This means that the manufacturing plant should be used efciently and effectively. The plant should provide high quality products at a competitive price in addition to showing concern for the environment and safety, Alsyouf (2004). Therefore, the importance of the maintenance function has never been greater, due to its role in maintaining and improving availability, performance efciency, quality products, on-time deliveries, the environment, safety requirements, and overall plant productivity, Ahlmann (1984), Al-Najjar (1997), Riis et al. (1997), Ahlmann (1998), Mckone and Wiess (1998), Bevilacqua and Braglia (2000) and Al-Najjar and Alsyouf (2003). Furthermore, an increasing awareness of maintenance and its inuence on both industrial enterprises and society as a whole can be recognised. Many researchers and practitioners have highlighted the total losses that are caused by maintenance omission or ineffectiveness in maintenance, Ahlmann (1984, 1998), Jardine et al. (1996), Al-Najjar (1997), Davies (1998), Ljungberg (1998), Luce (1999), Vineyard et al. (2000) and Holmberg (2001). Nevertheless, maintenance is still considered as a cost centre. For example, 70 per cent of the respondents of a survey conducted on 118 Swedish manufacturing companies considered maintenance as a cost centre, Alsyouf (2004). Furthermore, little research has been done to highlight the impact of the maintenance function on overall plant performance, i.e. productivity and protability, Ahlmann (1984, 1998), Russell (2001), Kutucuoglu et al. (2001) and Al-Najjar and Alsyouf (2004). A strategic approach to maintenance management has become essential, especially in capital-intensive industries. For example, Kutucuoglu et al. (2001) cite studies that emphasise the lack of linkage between maintenance and quality improvement strategies with an overall neglect of maintenance as a competitive weapon. The inuence of maintenance actions cannot be viewed only by their effect on the maintenance department, since the consequences of maintenance actions may seriously affect other units in the organisation. Looking only at the direct maintenance costs cannot show the complete impact of maintenance. Actually, there is a need for a holistic performance measurement system that can: . Assess the contribution of the maintenance function to the strategic business objectives. . Identify the weaknesses and strengths of the implemented maintenance strategy. . Establish a sound foundation for a comprehensive maintenance improvement strategy using quantitative and qualitative data. . Re-evaluate the criteria that are employed in benchmarking maintenance practice and performance with the best practice within and outside the same branch of industry. Therefore, the purpose of this paper is to develop a strategic maintenance performance measurement model that can be used for tracking maintenance impact and showing

the linkages between operational and nancial measures, holistically. A case study approach will be used to test the suggested model. This paper discusses the general framework of business processes and then introduces an adapted BSC model, which can be used to measure maintenance performance. Following this, the paper discusses the impact of the maintenance function on the elements of business performance according to the BSC approach. Finally, the study ends with the verication of the BSC approach at a Swedish Paper machine, and with a number of conclusions. Business processes The general framework of business processes, its elements and the ow of materials and information within the extended enterprise are illustrated in Figure 1. The upstream organisation consists of various ingredients, such as the internal and external suppliers; designers of products, components, processes, equipment, tools or facilities, and also universities and research centres that provide rms with qualied employees and the latest innovations and developments. The inputs consist of all the resources that are necessary to produce the goods and services. These resources include people, materials, capital, energy, data, information, methods and skills. The value adding processes consist of all the utilities, i.e. the value and the usefulness that the rm creates in its products or services for fullling a want or need (Lambert et al., 1998). There are also various types of utilities such as form, time and place utilities. The form utility is the process of creating the good or service, e.g. product manufacturing. The time utility is the value added by possessing an item or service when it is needed. This applies to both internal customers and end customers. The place utility entails having the item or service available where it is needed (Lambert et al., 1998). The output of the value adding processes are the products and or services that should

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Figure 1. The framework of business processes

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satisfy the customers needs and requirements, i.e. best value and minimum cost. The operations task concerns the transformation process that involves taking inputs and converting them into outputs, together with the various support functions (e.g. logistics, maintenance and quality control) closely associated with this basic task. The quality, efciency and effectiveness of the operations processes affect the elements of downstream organisation, i.e. the shareholders (owners), society and the companys customers. Adapted balanced scorecard (BSC) Kaplan and Norton (1996) suggested the BSC as a new framework by which a strategy can be translated into operational terms, where measures of past performance are enhanced with measures of the drivers of future performance. The objectives and measures of the scorecard are derived from an organisations vision and strategy based on four different perspectives: nancial, customer, internal business processes, and innovation and growth. The different measures across the four perspectives can be linked in a series of cause-effect relationships to illustrate, for example, how investments in employee training, would improve future nancial performance. Although the BSC concept has been adopted by industry as a base for strategic management systems, however, many researchers, including (Neely et al., 1995; Atkinson et al., 1997; Bontis et al., 1999; and Mooraj et al., 1999) have criticised its concept. They have shown that: . It fails to identify performance measurements as a two-way process, since it focuses only on top-down performance measurement. . It is unable to answer the question of what ones competitors are doing. . It is rigid and limited to customers, and ignores other parts of the company, such as the employees, suppliers, alliance partners and the local community, i.e. it does not consider the extended value chain. For example, Atkinson et al. (1997) illustrated that BSC is incomplete because it fails to: . adequately highlight the contributions that employees and suppliers make to help the company achieve its objectives; and . identify the role of the community in dening the environment within which the company works. The BSC concept can, however, be used also to measure, evaluate and guide activities that take place in certain functions of an organisation. Martinsons et al. (1999) developed a BSC for information systems (IS). Kim (2004) used the BSC framework to assess the business performance of information technology (IT) expenditures. Tsang (1998) and Tsang et al. (1999) presented a strategic approach for managing maintenance performance that is based on the four perspectives of the BSC concept as suggested by Kaplan and Norton. Liyanage and Kumar (2003) presented an attempt to develop architecture for effective management of operations and maintenance performance, linking results to performance drivers and further extended them to apply the BSC concept. However, this paper introduces a detailed set performance measures for maintenance based on an adapted BSC concept that suits the maintenance context

as a support function. The modied BSCs model that is structured into three main parts is illustrated in Figure 2. The rst part of the model, i.e. the downstream organisation elements, includes three perspectives, namely, corporate business (nancial), society, and consumer. The strategic objectives of the enterprise should be set according to the vision and the overall strategy of the organisation. In the corporate business perspective, objectives that please the shareholders, such as improved protability, reduced operating expenses, or higher stock-value can be stated. Therefore, traditional nancial measures such as return on investment (ROI), operating expenses, and market share can be used. With respect to the social perspective, safety, health and environmental questions are emerging as the most important topics of discussion, because of the scarcity of natural resources and the growing concern in the market, for green issues. For example, in some countries (Sweden, Norway, Germany, Denmark, etc.), and in high environmental risk industries (chemicals, plastics, automotive, heavy engineering, etc.) improvements in environmental performance is considered one of the basic competitive priorities, alongside lower costs, production lead-time, and higher quality, Giovanni and Giuliano (1998). Therefore, within this perspective, certain objectives, such as introducing cleaner technologies, i.e. equipment and plants with a reduced impact on the state of

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Figure 2. The suggested perspectives of the modied balanced scorecard BSC

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natural resources, can be stated. Consequently, various measures that are aimed at supporting managers in the assessment of a companys environmental performance can be used. These include: . Indices that highlight a companys environmental efciency in the use of resources, e.g. the impact of the uptake of materials, and energy consumption. . Measures of the amount of waste resulting both from the company plants and the usage of solid products, e.g. air emissions, waste water, solid wastes resulting from scrap in the production cycle. . Indicators dening product durability, e.g. life cycle of different product components. With respect to the consumer perspective, rst class companies rate customer satisfaction as their top priority. For example, the number one objective in the strategic plan for Toyota Motors Sales, USA, is to be number one in customer satisfaction, and not to be protable, expand sales, produce more units, or to increase their market share, Berman and Klefsjo (2003). Customer satisfaction is related to the needs and expectations of the customers that can be measured by several quality dimensions, including reliability (doing what has been promised), responsiveness (willing to help and provide prompt service), assurance (conveying trust and condence), empathy (ability to see through the customers eyes), and tangibles (equipment, physical facilities). Note, however, that the importance of these dimensions can change according to the context (Berman and Klefsjo, 2003). The second part of the modied BSC model (i.e. the operations processes) consists of two main perspectives: the production perspective, and the support activities perspective, including maintenance, quality and logistics. Concerning the production perspective, the main objective is to satisfy and preferably exceed the needs and expectations of the customers efciently and effectively. The key dimensions of of production performance can be dened in terms of quality, delivery speed, delivery reliability, price (cost), exibility and responsiveness, (see Neely et al. (1995), De Toni et al. (1997) and Willis (1998) among others). A review and discussion of a selection of the most important measures relating to quality, time, cost, and exibility can be found in Neely et al. (1995). However, regarding the support activities perspective, usually, there are expected difculties associated with establishing an effective measurement system for such types of service functions. For example, Pintelon and Van Puyvelde (1997) illustrated that maintenance performance reporting is difcult because of the fact that maintenance activity is closely related to production activity and organisation (which in turn are affected by other functions) and both the merits and shortcomings of the service rendered are not immediately apparent. Finally, the upstream organisation elements may include the human resources perspective, and the suppliers perspectives, e.g. designers or education organisations. In each dimension of the BSC, a set of strategic objectives that are derived from the vision and mission of the organisation should be established. Features of the adapted balanced scorecard Unlike the tradition BSC model that is limited to the nancial, customer, internal business process and to innovation and growth, the approach put forward in this paper

considers other parts of the extended enterprise, including suppliers, employees and the local community. It can be used to highlight the contribution that employees and suppliers make to help the company achieve its objectives. Furthermore, it can be used to identify the role of the community in dening the environment within which the company works. In addition to well-chosen key performance indicators (KPIs) that should be identied in a two-way process (top-down and down-up), the KPIs can be used to control the performance of the enterprise and benchmark the business performance practice with best practice within the same sector or other sector. This provides the feedback information, which is necessarily for continuous improvements efforts. However, the user should be aware of the possibility of facing a problem of measurability when enlarging the scope of analysis to take into account society and suppliers. Measuring maintenance performance using the suggested BSC perspectives Performance of the maintenance function depends not only on the efciency and effectiveness of the maintenance organisation, but also on factors such as the designed reliability and maintainability of the production system. In the following discussion, the impact of maintenance on the organisation according to the suggested BSC perspectives are presented and discussed. Next, it is demonstrated, in Figure 3, how productive (i.e. efcient and effective) maintenance can contribute to the overall success of the organisation by illustrating the cause and effect relationships among a set of performance measures based on the suggested balanced scorecards perspectives. Upstream organisation perspective: innovation and growth perspective Blanchard (2004) demonstrates that a large percentage (e.g. 70 per cent for some systems) of the total life cycle cost for a given system is attributed to operating and maintenance activities. A signicant portion of this cost stems from the consequences of decisions made during the early phases of planning and conceptual design of the system. Therefore, the reliability and maintainability of production systems must be inherent within the early system design and development process if the results are to be cost-effective, (see, among others, Husband (1986); Ahlmann (1998); and Blanchard (2004)). However, the reliability and maintainability of systems can be improved, depending on how advantages related to experience from older designs are taken into account. It is also very important that the designers are promptly informed about faults relating to new equipment in use, since this enables them to take suitable measures to increase reliability. Thus, a systematic feedback of reliability information from usage and tests is important for the designer, Berman and Klefsjo (2003). On the other hand, co-operation and mutual research projects with research centres and universities can enhance the implementation of new productive maintenance methods and innovations. This can be of help, too, in developing the employees competence that is described as a combination of knowledge, skills, ability, willingness, interest, and personal characteristics. Therefore, for measuring maintenance performance using the suggested BSC perspectives, we propose a perspective named innovation and growth for the upstream part of the organisation. It involves measures related to equipment suppliers, education rms and human

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Figure 3. The cause-effect of maintenance impact on business performance

resources. These measures aim at providing information that is needed for the development and innovation process. They could include both quantitative and qualitative measures, including: . degree of cooperation and communication with the original equipment manufacturer; . degree of cooperation with research centres and universities; . qualication of maintenance labour force; . level of training and human resources development; . level of new investments in maintenance department. The operations perspectives The operations part of the BSC model includes two perspectives; namely, the production perspective and the support functions perspective. With respect to support functions, in this paper, they are considered from the maintenance perspective.

Maintenance perspective Performance of the maintenance function is inuenced by various factors. Tsang (2002) identies and discusses four strategic dimensions that are relevant to the maintenance function: (1) the choice between in-house capability and outsourced service; (2) organisation of the maintenance function and the way maintenance tasks are structured; (3) the selection of maintenance policies; (4) design of the infrastructure that supports maintenance. However, maintenance performance indicators are needed to provide management with quantitative information that indicates the use of the maintenance functions inputs (i.e. efciency of maintenance activities), and the extent to which the stated goals are reached (i.e. effectiveness of maintenance actions), Pintelon and Van Puyvelde (1997) and Arts et al. (1998). However, one has to consider a number of different categories that are to be evaluated. These categories include organisation, administration and human resources, craft and skill development, budget and cost control, work management and control, shop level planning and scheduling, maintenance approaches (i.e. strategies, policies, or techniques), and computerised maintenance management systems (CMMS). By looking at the input-output model of the maintenance function as a black box, then the efciency of maintenance can be measured for any input resource as the (theoretical) input divided by the actual input. For example, the labour efciency related to the execution of a specied maintenance job can be measured as (man-hours planned to be used divided by actual man-hours needed to nish the job). On the other hand, the effectiveness of the maintenance function can be measured by dividing the actual output by the theoretical output. For example, the availability of a machine (or a production line) can be measured by dividing the actual production time (i.e. Planned production time minus downtimes) by the planned production time. Thus, to measure the efciency and effectiveness of the maintenance function, one needs to collect parameters such as the number and duration of downtimes (due to failures, planned stoppages and short stoppages) bad quality, number of accidents due to maintenance causes, mean time to repair, and the average spare parts inventory level. Production perspective The efciency and effectiveness of the maintenance function affects the technical performance of the production system. The technical performance of the production function can be assessed by the overall equipment effectiveness (OEE) measure suggested by total productive maintenance, (see Nakajima, 1988). However, two very important factors that are not considered when calculating the OEE are the planned stoppage time and the yearly vacations (De Groote, 1995). Consequently, the total company performance should be measured by multiplying the OEE measure with a new index called planning indicator (De Groote, 1995). The planning indicator can be calculated as the theoretical production time, e.g. one year (8,760 hours) minus the planned downtime, divided by the theoretical production time. We thus call the measure that results from multiplying the planning indicator and OEE the total overall

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equipment effectiveness (TOEE). Using the planning indicator and its economic consequences provides the management with more information about the cost effectiveness of improvement suggestions, e.g. working three shifts instead of only two shifts. On the other hand, the capability of the machine to produce quality products, e.g. products that satisfy the customers requirements, is highly affected by the maintenance effectiveness (Ollila and Malmipuro, 1999). Furthermore, maintenance affects the production cost effectiveness in terms of its effect on the consumption of the various resources used in the companys operations. For example, the labour allocated for a production line might be idle during the stoppage time, and extra overtime hours might be needed to compensate the production lost during the stoppage time. Moreover, labour safety might be affected by accidents that occur due to maintenance issues. The amount of raw materials used in production is inuenced by the number of breakdowns because of bad product quality caused by deterioration in a machines condition, and start-up losses. Hence, the consumption of materials will increase due to scrap and reworking wastages. Note too, that the spare parts inventory and consumption will be affected by the implemented maintenance approach, e.g. a large inventory of spare parts must be held in stores when using failure-based maintenance, because the consumption of spares is then unpredictable. Capital investments in the plant are inuenced through factors such as equipment or the useful life span of components, equipment redundancy, buffer inventory, extra investment in facilities for buffer and equipment redundancy, and damage to equipment due to breakdown. The energy consumed by the plant can be affected by the condition of the plant, e.g. a worn bearing means more friction between the rotating parts and results in more energy consumption. Therefore, efcient and effective maintenance contributes by adding value through better utilisation of resources (higher output), and enhanced product quality, e.g. reduced rework and scrap (lower input production costs). In addition, effective maintenance avoids the need for additional investment in capital and people since the capacity of existing resources can be increased. Downstream organisation The impact of maintenance on the downstream organisation elements can be traced by nding its effects on customers, society, and shareholders. With respect to the perspective of the customer, customer satisfaction is the main point of the TQM philosophy. Dearden et al. (1999) show that rms try to capture new customers, satisfy them and retain existing customers by promising assurance of a timely delivery, which in its turn depends on adequate production capacity with minimum disturbances, and high quality products. Dearden et al. (1999) report that a company runs a 40 per cent risk that a customer will change its supplier following a missed delivery. The base of success in any competitive context is either having a cost advantage, or value advantage such as image or reputation, or a combination of both. With respect to the perspective of society, the impact of maintenance on society can be traced through its effects on safety, health, the environment and ecology. The environment is adversely affected by accidents and pollution, which may occur due to the (improper) use, disposal or bad maintenance of an asset. Rao (1993) indicates that environmental pollution caused by various unnatural causes is very high, but at the

same time losses due to industrial re damage is running to millions of pounds in the UK. These losses could have been avoided or reduced by effective maintenance. Finally, regarding the nancial perspective, the shareholders, usually, are interested in achieving a prot. Therefore, the impact of maintenance on shareholders can be found by analysing the effect of maintenance on the generated prot, which is usually measured by indices such as return on investment (ROI). Case study The case study was conducted at StoraEnso Hylte AB, a paper company in Hyltebruk in southern Sweden. The study was conducted at PM2, one of the companys four machines. This machine was selected for the study because of its valuable database, particularly during the period 1997-2000. Data gathering A special data sheet was designed for manually collecting the relevant technical and economic information parameters from the company database. As the economic data was condential, the data used in the analysis was transformed using several suitable factors that still allowed accurate analysis. To increase data reliability, all of the terms were discussed, explained and agreed upon by the company personnel involved in the case study. Furthermore, the data sheet was adapted to suit the terminology and context of the company. The data that was collected covered all types of stoppages, such as those caused by mechanical, electrical, hydraulic and instrument failures. The technical data included parameters such as planned production time; planned production rate; time and frequency of planned stoppages time, failures, short stoppages, the quantity of poor quality products and percentage of poor quality products and number of accidents resulting from maintenance deciency. The economic data included parameters such as xed and variable operating costs, prot margin, net prot, working capital, maintenance costs, and investments in maintenance and spare parts inventory. Model validation, analysis and results The suggested BSC approach for measuring maintenance performance was validated using the data collected from the case company. A summary of the cause-effect results as calculated for one paper machine is illustrated in Figure 4. It was found that, according to the innovation and growth perspective, the company has reliable relations with the original equipment manufacturers, and a continuous and benecial co-operation with research centres and universities. The company is implementing new maintenance methods and techniques to improve maintenance performance, e.g. vibration-based maintenance (VBM). The average value of the yearly maintenance cost (i.e. yearly maintenance budget) allocated for the PM2 machine is about US$7.8 million. This value constitutes about 14 per cent of the total operating costs for the PM2. On average, about US$57.5 thousand is invested yearly in maintenance. The company has a highly skilled maintenance staff, e.g. more than 50 per cent of the investments in maintenance were spent on training. With regard to the maintenance perspective, as it is usual with such a type of industry, the machine is run continuously, 24 hours per day. However, one main planned stoppage is performed yearly for major maintenance tasks. For the period that

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Figure 4. The cause-effect results for the suggested BSC approach used to measure maintenance performance on one paper machine

was studied, on average, this major stoppage lasted about 116 hours. On the other hand, yearly vacations and holidays were 435 hours. This means that the average yearly-planned working time was 8,209 hours. For about 5.8 per cent (i.e. 474 hours) of the planned working time, the machine was stopped due to several reasons, such as regular planned stoppages (83 hours), failures and unplanned stoppages (160 hours), and short stoppages (231 hours). According to the production schedule, it is planned that the paper machine be stopped every other week for technical production reasons. The causes of the unplanned stoppages and the percentage of each reason with respect to the total unplanned stoppages are illustrated in Figure 5. The bad quality products due to maintenance causes were estimated by the companys team involved in the case study based on analysis of relevant records of the study period to be about 7.5 per cent of the total bad quality produced, i.e. 4,592 tons of paper. No accident was reported during the study period. On the other hand, although the company uses a condition-based maintenance system that may increase the

Figure 5. The causes of unplanned stoppage time on one paper machine

availability of information about when the spare parts are needed, the average value of spare parts inventory on hand was about US$6.4 million. Furthermore, there was an increase of about 19 per cent in the spare parts inventory value during the three years 1998-2000 with respect to the base-year 1997. This increment is equivalent to about US$2.3 million in the form of capital tied up in the spare parts inventory. In relation to the production perspective, the average value of the overall equipment effectiveness OEE is 91.4 per cent. However, this value is expected with such a type of industry as is conrmed by Ahlmann (1998). This means that the company can be classied as a rst class company (Nakajima, 1988). When taking the planning indicator into consideration, the total overall equipment effectiveness (TOEE) is calculated at 85.6 per cent. On the other hand, we found that the company did not face problems with late delivery to its customers, or with injury due to accidents related to maintenance problems. With respect to the downstream organisation elements, it was found that the ability of the company to provide its customers with their orders on time was high. We also found that no environmental penalties were paid, e.g. pollution fees, and the company is able to provide its customers with a competitive price. Finally, when considering the nancial perspective. Since every ton of paper that is produced can be sold. This means that for every minute the machine is stopped, the company will lose the prot associated with the paper quantity that was supposed to be produced during that period. On the other hand, for every minute the machine is idle, the company is not utilising its xed costs, such as facilities costs (e.g. machine depreciation or leasing cost), labour, xed energy, which means that the xed cost during downtime is a lost expense. We estimated the economic losses (potential savings) incurred due to stoppages that are measured by the elements of the TOEE to be about US$12.6 million. We considered these losses as ideal potential savings, which can be recovered if the root causes of the stoppage have been eliminated. These ideal potential savings consist of the prot losses (US$8.4 million), and the cost of unutilised resources (US$4.2 million). Consequently, we found that the average value of the return on investment (ROI) during the years 1997-2000, i.e. net prot divided by the capital invested, was about 16.43 per cent. The calculation of ROI was for the whole company based on their annual report using the prot and loss statement and balance sheet reports. However, we assessed the economic consequences of the calculated TOEE measured only by the prot losses for one machine (i.e. PM2). It was found that, ideally, there is a potential to improve ROI by about 1.4 per cent, which is equivalent to about US$8.4 million extra prots. The planned inoperative time represents the highest contributing factor to the ROI potential improvement with 44 per cent, unavailability (due to failures and planned stoppages) and quality losses are second with 19 per cent each, and nally, short-stoppages with 18 per cent as can be seen in Figure 6. At least 14.2 per cent (US$1.2 million) of the potential improvement of the ROI is related directly to the maintenance function as lost prot due to unplanned stoppages (i.e. failures) and bad quality caused by maintenance related problems. This percentage will increase according to how the maintenance actions are linked to the causes of the unutilised time such as short stoppage time, planned stoppage time, and planned inoperative time. In addition, when the total maintenance costs (maintenance budget and potential savings related to maintenance causes) for the PM2 machine were analysed, it was found that the maintenance budget (direct maintenance costs)

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Figure 6. The causes of unproductive time on one paper-mill machine

represents 75 per cent of the total maintenance-related costs. The potential savings are distributed into lost prot, 11 per cent; unutilised resources, 5 per cent; and interest expense of the capital that is tied up in the spare parts inventory, 9 per cent. More improvements in the value of ROI can be achieved by increasing the maintenance effectiveness. This can be justied from the increase in prot margin and decrease in operating costs, for example, less capital will be tied up in the spare parts inventory, because of the concomitant decrease in the spare parts inventory level, and from the decrease in machines that stand redundant. Conclusions Using the BSC approach that has been suggested provides a framework to translate the company strategy into operational terms and to measure the impact of support functions, e.g. maintenance, on the overall business performance. It makes it easier for maintenance staff and production staff who are technically oriented to communicate with top management in the language that managers understand, i.e. the language of money. Thus, using the right economic factors, they can estimate the savings expected from the productivity improvement suggestions, compare it to the investments needed and make a cost effective decision. Furthermore, by selecting suitable performance measures in each area of the BSC suggested above, it is possible to detect deviations at an early stage, and to identify and trace the root cause of the deviation, and thereby achieve cost effective and continual improvements. Moreover, this model can be used strategically, to compare the support function, e.g. maintenance, performance with best practice, and control the performance of the rm, by identifying the companys strengths, but also opportunities for improvement. The model also establishes a sound foundation of quantitative and qualitative data for a comprehensive maintenance improvement strategy. We note that the application of the suggested model entails a number of pre-requisites, such as the existence of a well-designed IT system at the company, which will provide the required data. Finally, it was shown that maintenance can improve the overall equipment effectiveness of production systems and consequently enhance the competitiveness and protability of the manufacturing company. Thus, it was shown in a case study that maintenance is no longer a cost centre, but it can be a prot generating function, especially in similar types of industry where the downtime cost is high.

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