Efficient Plant May 2018 - 8

column | implementations

MC/RAV
Metric Drives
Improvement
Dr. Klaus M. Blache
Univ. of Tennessee Reliability
& Maintainability Center
(RMC)

Performing an annual analysis of your
plant's Maintenance Cost/Replacement
Asset Value can lead to legitimate
savings and possible improvement in
your Quartile ranking.

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EP1805implementations.indd 8

NE METRIC THAT can
help target improvement
goals is MC/RAV (Maintenance Cost/Replacement Asset Value),
used by all types of industries and scalable to all sizes of facilities. What does
the metric really tell you? The formula
and definitions below are consistent
with the SMRP Body of Knowledge
(used with permission):
Total Maintenance Cost/RAV (%) =
[Total Maintenance Cost ($) × 100]/
Replacement Asset Value ($)
Total Maintenance Cost (TMC) is
the total expenditures for maintenance
labor, including maintenance performed
by operators such as total productive
maintenance (TPM), materials, contractors, services, and resources. It includes
all maintenance expenses for outages,
shutdowns or turnarounds, and normal
operating times, and also capital expenditures directly related to end-of-life
machinery replacement so that excessive
replacement versus proper maintenance
is not masked. It does not include capital
expenditures for plant expansions or
improvements.
Replacement Asset Value (RAV) is
also referred to as estimated replacement
value (ERV), the amount of revenue required to replace the production capability of the existing assets in a plant. RAV
includes production/process equipment,
utilities, facilities, and related assets, and
the replacement value of buildings and
grounds, if these assets are included in
maintenance expenditures. RAV doesn't
include the insured value or depreciated
value of the assets, or the value of real
estate. RAV should be determined even
if the calculation is not exact. It should
be measured consistently each year to
track real improvement.

The MC/RAV shows how well asset
maintenance expenditures are controlled. It measures the annual cost of
maintaining a plant against the value of
the plant. The lower the percentage, the
more valuable an overall maintenance
program is to an organization (but only
if you are getting there by implementing
plant-floor best practices). Are annual
maintenance expenditures such that,
in less than seven years, you could
have used that amount to buy a new
plant (MC/RAV=15%)? Wouldn't you
rather have a value of 2% (Top Quartile),
meaning that it would take 50 years to
accumulate an amount equal to your
RAV? It's also important to look at
industry-specific values to set realistic
goals. High-tech product manufacturers, discrete manufacturing, chemical
processes, steel manufacturing, and
mining have similar, but many different
maintenance needs. If some of these
facilities have the same RAV, it's treated
the same with this metric. Always use a
combination of metrics that force clarity.
An MC/RAV for a Third-Quartile
operation is more than four times the
value for a First-Quartile plant. If you
operate in the Third Quartile, your
spending is a factor of four greater than
your First-Quartile competitor. Costs
need to be reduced by implementing best
practices. Simply cutting costs will make
things worse. Understand and use MC/
RAV to measure your improvement. EP

Based in Knoxville, Klaus M. Blache
is director of the Reliability &
Maintainability Center at the Univ. of
Tennessee, and a research professor
in the College of Engineering.
Contact him at kblache@utk.edu.

MAY 2018

6/20/18 4:01 PM

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