Maintenance as a Profit Center in a Fuel Ethanol Plant

By Neil Havran | March 01, 2006
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Is the demand for fuel-grade ethanol increases throughout the country, it is important for ethanol plants to operate at peak efficiency.

Much of the time, a plant's overall success is determined by the effectiveness of its maintenance organization and how well maintenance activity is integrated with the facility's production operation. No longer a cost to be minimized, maintenance must be viewed as a resource for optimization. Successful organizations can combine a full-featured, modern maintenance system, a few critical reports, and some Key Performance Indicators (KPIs) to convert the maintenance operation from a cost center to a true profit center.

Computerized maintenance management system
Turning maintenance into a profit center is contingent on the use of a sound Computerized Maintenance Management System (CMMS), sometimes referred to as Enterprise Asset Management (EAM). These systems are significant improvements over spreadsheets, logbooks or "yellow legal pad" approaches to documenting maintenance activity. While certainly better than nothing at all, these long-standing methods lack the robustness required to truly modernize and optimize a plant's maintenance effort. A good CMMS can keep track of equipment history, preventive maintenance (PM) activity, spare parts inventory, maintenance labor and material cost, equipment failure and analysis, full reporting capability, and many other items.

What gets measured gets done
A CMMS can keep track of a great deal of information; the challenge is in determining where to start and what to do with the information. Accurate reporting is based on good data. Good data comes from the entry of maintenance activity into the system.

Therefore, it becomes mandatory that all technician activity be recorded on valid work orders. At first this may seem like a daunting task, but many modern CMMSs contain features that make this process much easier than most people imagine.

For example, most systems allow for the creation of a "standing" or "blanket" work order. These are work orders that remain open and are simply updated as activity takes place. This eliminates the need to create a new work order whenever the need arises. More sophisticated systems allow the creation of "route"-type PMs. A route PM automatically distributes a technician's time in equal amounts over an unlimited number of tagged assets. This feature is useful in processing operations such as ethanol production, where daily monitoring activity is essential to good performance. Again, the advantage is in the elimination of creating multiple work orders for essentially the same type of activity.

Finally, many CMMSs allow for the creation of an "after-the-fact" work order. This allows for the immediate completion of the work with the recording functions taking place at a later, more convenient time.

The importance of tracking 100 percent of the maintenance activity cannot be overemphasized. Without full documentation, reporting and measurement, maintenance activity loses accuracy and value. Senior management must insist that full documentation takes place all of the time. One technique to ensure compliance is to compare payroll hours and hours charged to work orders. Most often, payroll is recorded in a separate system. For obvious reasons, payroll hours are nearly always precisely recorded by each technician. Therefore, comparing payroll to CMMS hours is a relatively easy method of monitoring compliance.

What should we look at?
Once accurate reporting is achieved, a significant number of improvement possibilities emerge. Since the overriding goal of the maintenance organization is to increase profit and lower cost, any reporting and goal-setting activity should revolve around these two areas. Due to design and construction elements of modern ethanol plants, annual maintenance cost as a percentage of total cost is generally in the 2 percent to 3 percent range. This may not seem significant—and strictly speaking, it's not—when compared to other cost factors such as grain or energy. Nonetheless, maintenance cost remains an important consideration.

Maintenance has a much larger impact on profitability in the area of uptime. The current "cost not to run" a typical 40 MMgy facility exceeds $3,000 per hour. Every hour of downtime that can be eliminated or prevented translates directly to the bottom line. Information from the CMMS can be used to track two KPIs and generate a set of companion reports that can be used to improve both profitability and reduce cost.

Overall equipment effectiveness
It is currently in vogue to talk about a plant's ability for actual production to exceed nameplate capacity. Many new plants are capable of exceeding design specifications by 10 percent to 20 percent or more. When it comes to ethanol production, more is certainly better than less, but at what point does a high production rate result in additional equipment downtime? How do we tell? What is the best measurement of success? Who wins the race: the tortoise or the hare? One newer measurement that addresses these questions is called Overall Equipment Effectiveness (OEE), the first KPI.

See equation

OEE is a product of the Total Productive Maintenance movement that originated in Japan and has been subsequently adopted in other parts of the world. Normally, this measurement is applied to finite production units such as widgets. OEE is a measurement designed to standardize plant performance data in order to facilitate meaningful comparisons of plant performance over time. In the classic sense, it is the product of three measurements: availability, efficiency and rate of quality products

The idea is to move a plant as close to the ideal production level as possible by improving on all three of the individual measurement indices. For example, if a widget plant operated all year and had no downtime, availability would be 100 percent. If the plant had an official capacity of 40 million widgets per year but managed to produce 48 million widgets, efficiency would be 120 percent. Lastly, if no off-standard products were produced, the rate of quality products would be 100 percent. The OEE would be 1.00 (availability) X 1.20 (efficiency) X 1.00 (rate of quality product) = 120 percent. In reality, plants take planned shutdowns or incur unscheduled/unplanned downtime. It is also true that a plant may not be able to run at 120 percent efficiency on a consistent basis. Thus, the plant tracks OEE and improves on it by increasing uptime, running faster or reducing scrap.

This is all well and good for widget production, but how can this concept be applied to ethanol production? The concepts of uptime and efficiency are readily understandable, but ethanol plants don't have "scrap" in the same sense as a widget manufacturer. The key is to understand what OEE is truly telling us. In its most basic form, OEE tracks the quantity of ethanol produced verses the quantity which would have been produced if the plant ran 24 hours a day, seven days a week at nameplate capacity with no stoppages or slowdowns of any type over a given period of time. In an ethanol plant, off-standard product is usually manifested in a slower production rate or decreased yield. OEE ultimately becomes a product of availability multiplied by efficiency.

Suppose a plant had planned/unplanned stoppages during the year totaling 288 hours and produced 45 MMgy of ethanol and had a nameplate capacity of 40 MMgy. What would its OEE look like?

OEE becomes a more accurate measurement of plant performance because it takes both efficiency and utilization into account. Certainly, the ability for a plant to exceed nameplate capacity is beneficial. But to do so without regard for uptime can have a detrimental effect on plant success. Even though OEE is more of a total plant performance metric, it is usually tracked by the maintenance department since equipment downtime and the need for equipment repair or service has the most profound effect on availability. Improvement in availability is where maintenance efforts can positively affect the profitability of the plant. For the maintenance department, the preferred report out of the CMMS to track downtime is the "Top Failure Report."

There is a great deal of day-to-day activities in an ethanol plant. It is easy for management to become preoccupied with the detail. Therefore, the Top Failure Report is used to focus analytical attention on the events that had the greatest impact on OEE. This report comes from the closed work-order file and is sorted by equipment number. The report is further sorted by the most significant incident(s) in terms of downtime per number. In this manner, maintenance personnel analyze each of the top five or 10 events, determine the root cause of each failure, and implement corrective actions to prevent recurrence. The top failures never go away but the plant has a systematic method of continuous improvement and, over time, the overall frequency and severity of negative events will be reduced.

Cost control
The second KPI is in the area of cost. It is possible to get downtime to a level that approaches zero, but few plants could afford the investment. So what is a useful measurement of maintenance cost, and how can the CMMS be used to control cost?
There are many ways of measuring cost, but one of the most constructive measures is to put maintenance cost in terms of units of production. In an ethanol production facility this would be:

A measurement such as this is helpful because efforts can be directed at both sides of the equation. Maintenance can either lower cost in absolute terms or allow cost to remain constant and increase production through less downtime or better efficiency brought about by the installation of improved process equipment. To support this effort, a report can be generated out of the CMMS that is very similar to the Top Failure Report. In this case, the most useful report is the Top Equipment Cost Report. Once again, this report is sorted by equipment number starting with the most costly piece of equipment for the chosen time interval. The total cost of each entity should further be broken out by labor and material in order to give users a better understanding of which element requires the most attention.

As in the Top Failure Report, activity related to each of the top five or 10 most costly pieces of equipment is analyzed and effective measures are put in place to minimize future significant financial impact on the operation.

Entire books have been written on the subject of maintenance and Key Performance Indicators. There are many, additional maintenance-related KPI's that are not mentioned in this article. This does not mean they are not useful in their own right. The trick is to sort through the available information and determine how it is best applied to a given industry, such as the rapidly expanding ethanol production industry. It is beneficial to start with the essentials: implement and use a full-featured CMMS and establish a routine to increase uptime and reduce cost that provides maximum results for the efforts applied. The good news is that maintenance can become a true profit center by combining key indicators, supporting reports, and focusing diligent efforts on continuous improvement and root cause failure analysis.

Neil Havran is a maintenance coordinator for ICM Inc. He can be reached at [email protected].