Lessons Learned from Reliability and Maintenance Benchmarking

What Does World-Class Performance Look Like?

Presented by: Tom Svantesson Senior RAM Consultant

Confidentiality Statement
This presentation is confidential and intended for the sole use of the client to whom it is addressed. The information and methodologies outlined herein are proprietary and their expression in this document is copyrighted, with all rights reserved to HSB Solomon Associates LLC (Solomon). Copying or distributing this material without permission is strictly prohibited. M Measure. Manage. Maximize., Comparative Performance Analysis, CPA, NCM, Q1 Day 1, EII, CEI, CWB, Solomon Profile II, etc. are registered and proprietary trademarks of Solomon. The absence of any indication as such does not constitute a waiver of any and all intellectual property rights that Solomon has established.

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Protecting Intellectual Property (IP)

Mutual Trust and Obligations

Methodology, Metrics & Database Input Data Client IP Aggregated Industry Results Client Results Solomons IP

Company Annual Reports & Websites Investment Community Taxing Authorities Consulting Firms

Non-Disclosure Agreement (NDA)

Potential Third Parties

Written authorization required before sharing IP with a third party

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Comparative Performance Analysis

Solomon began its Comparative Performance Analysis

(CPA) approach to benchmarking in 1980

Comparative Performance Analysis Fuel Study (>85% of global refining) Olefin Study (>67% of global manufacturing) RAM Study (>1,000 process industry plants) Power Study (power generation) Pipeline and Terminal Studies Other Specialty Studies

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International Study of Plant Reliability and Maintenance Effectiveness

Solomon began benchmarking Reliability and

Maintenance (RAM) in 1996

Process industry Chemical/petrochemical Refining

Implemented in the 1996 chemical process industry using 17 process families covering >200 chemicals

Developed Equivalent Maintenance Complexity (EMC) factor to enhance data normalization 2008

RAM Study redesign based on client feedback 2011

1995 RAM Study developed in response to a request from the Chemical Manufacturers Association 2000 Adapted for refining using Solomon Fuels Study process families (e.g., CDU, FCC, etc.)

2010 RAM Study database contains >1,000 sites with >8,000 process units 2012 Re-designed RAM Study launched with increased value and decreased client effort

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RAM Study Indices

Reliability and Maintenance Effectiveness Index (RAM EI)
Lost margin (due to RAM causes) Maintenance cost

Maintenance Cost Index (MCI) cost improvement Mechanical Availability reliability Direct Maintenance Cost (craft labor and material) Indirect Maintenance Cost (supervision and staff) Routine and Turnaround Maintenance Company and Contractor Maintenance Expense and Maintenance Capital
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What is Benchmarking?
The process of comparing performance against others in

the same or similar industry to

Confirm competitive position Gauge the opportunity for improvement Identify practices employed by best performers

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What is Reliability Benchmarking?

The measurement and comparison of downtime

(mechanical unavailability) attributable to RAM causes overlooked while focusing on maintenance costs for the value of lost production

Downtime translates into lost margin that is often Margin loss should be monetized to gain an appreciation

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What is Maintenance Benchmarking?

The measurement and comparison of routine and

turnaround maintenance costs

Includes direct and indirect costs for company and contractors Also includes maintenance capital costs, which are often ignored and can skew performance

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RAM Benchmarking?
Benchmarking is the use of actual operational

performance data to track performance trends, to compare to others, and to identify best practices with opinion

Benchmarks are fact-based and should not be confused Benchmark thresholds are realistic, having already been

achieved by a subset of the total population

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Why is RAM Benchmarking Valuable?

Historically, reliability and maintenance have not been managed well, resulting in HIGH cost and POOR reliability
Maintenance is the largest fixed (non-volume-related) cost in a refinery or chemical/petrochemical plant Maintenance is the third largest overall cost behind raw materials and energy

Every dollar of reduced maintenance spending goes to the bottom line; consider how much sales would be needed! Every hour of increased uptime increases capacity without capital investment free capacity!

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Benchmarking Lessons Learned Myths & Facts!

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Reliability and Maintenance are Inextricably Linked

Reliability Cannot cost-cut your way to improved reliability

Maintenance
Maintenance costs are driven by reliabilityor the lack thereof

A 1% increase in mechanical availability can translate into a 10% reduction in maintenance cost
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Traditional Approach
Pressure Applied Here

Maintenance Costs Reliability (Margin)

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Initial Traditional Result

Pressure Applied Here

Lower Maintenance Costs

Lower Reliability (Margin)

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Long-Term Traditional Result

Higher Maintenance Costs

Lower Reliability (Margin)

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Progressive Approach

Maintenance Costs Reliability (Margin)

Apply Pressure Here

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Progressive Result

Higher Reliability (Margin)

Lower Maintenance Costs

Apply Pressure Here

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Impact of RAM on Replacement Capital

Quartile Performance

Average Maintenance Capital Spent, % of PRV

1 2 3 4

2.1 2.8 3.4 4.6

Conclusion: Better maintenance of existing assets results in lower replacement capital cost requirements. Conversely, poor maintenance of existing assets results in higher replacement capital cost requirements.
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Factors that Influence RAM Performance >90% Confidence Level

Reliability (failure avoidance) Direct costs (craft labor and repair materials)

Maintenance support (e.g., foremen, planners)

Turnarounds (frequency and duration) Unplanned failures

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Factors that Influence RAM Performance >90% Confidence Level

Maintenance planning and scheduling Craft skills and experience

Spare parts availability

Operator engagement

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Factors that Do Not Influence RAM Performance >90% Confidence Level

Plant or refinery age Site footprint (geographic size)

Plant replacement value

Labor rates

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Factors that Do Not Influence RAM Performance >90% Confidence Level

Contract versus in-house maintenance Production rates

Support costs (maintenance/reliability engineers)

Management years of experience Union versus non-union

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Path to First-Quartile (Q1)

RAM Performance
>98 Effectiveness Mechanical Availability, %
Industry Leaders
Sustainable

97
High Mechanical Availability and Low Cost

96
Low Mechanical Availability and High Cost

95 <94 1

Not Sustainable

Facility

1.4

>10

Maintenance Cost, % (US $/PRV) Efficiency

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Do You Need to Benchmark Your Reliability Performance?

Mechanical availability <96.7% Unreliability (characterized by equipment failures) is your largest downtime contributor Equipment failures are driving maintenance behaviors

Total plant maintenance turnaround (shutdown) occurs more frequently than once every 10 years Increased uptime would provide much needed capacity
Breakdown maintenance is your normal mode of operation
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Do You Need to Benchmark Your Maintenance Performance?

Maintenance costs are >1.4% of PRV Maintenance costs are your highest fixed cost Maintenance costs are not effectively controlled

Maintenance activities are predominantly corrective in nature (something broke, now you must repair it)
Corrective maintenance costs exceed preventive and predictive maintenance costs Reactive maintenance is your normal mode of operation
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RAM Effectiveness Index

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Chemicals Quartiles of Performance (Example)

RAM EI, % of PRV

10 8 6 4 2 0 Q1 Q2 Q3 Q4 Site 1 Site 2 Site 3

Quartiles of RAM EI
Value of Lost Production Total Maintenance Cost
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RAM Opportunities, US $M
10 0
Equip Failure Prod Losses RT - FP Matl Cost RT - Indirects RT - Wages RT - IE Work Hours RT - RE Work Hours RT - FP Work Hours RT - IE Matl Cost T/A - Wages T/A - RE Work Hours Rate Reductions RT - RE Matl Cost Ann T/A & Short OHs Prod Losses T/A - RE Matl Cost T/A - FP Work Hours T/A - IE Work Hours
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RAM Study Deliverables

Site Detailed Opportunities Report (Example)

2
Total Opportunities = US $40M

T/A - FP Matl Cost T/A - IE Matl Cost T/A - Indirects

MTBF Pumps
Meantime Between Failures, months

By Quartiles of Pump MTBF (Example)

120 100 80 60 40 20 0 Q1 Q2 Q3 Q4 Site 1 Site 2 Site 3

Quartiles of Pump MTBF

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Summary
You are not a world-class performer if Maintenance costs are not below 1.4% of PRV Mechanical availability is not above 96.7% Best performers continue to get better while poor

performers continue to fall further behind

Regrettably, for some, it is already too late

The path to world-class performance begins with the first

stepwhat are you waiting for?

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Thank You!