Use this low cost optimal equipment restoration period modelling tool to set sound equipment maintenance overhaul periods and make equipment restoration decisions
This equipment restoration and replacement optimization modelling tool was developed by Howard Witt, a professional reliability engineer with over 25 years hands-on industry experience, including nuclear facilities and industrial process plants.
This equipment replacement decision modelling software uses a Microsoft Excel spreadsheet that permits you to do ‘what-if’ scenarios comparing the cost of continuing to do equipment maintenance to an aging equipment item, verses the cost of restoring the equipment to as-new condition, or replacing it with new equipment. It helps you make decisions such as: If you had an old machine that was costing more to keep, then when during its operating life do you replace it for the least total cost to the business?
Preventive Maintenance vs Overhaul Restoration Optimization Modelling Tool
(MS Excel Spreadsheet for selecting preventive maintenance strategy and overhaul intervals that
minimise operating life maintenance costs and the number of equipment failures)
How to Use the Maintenance Overhaul Frequency Modelling Software
Data is entered into selected fields of the spreadsheet and used to populate the calculation tables, which then return the results shown in the remainder of the table. The curves on the charts are drawn by the model.
With the model your overhaul and refurbishment strategies no longer need to remain static once set, instead they can be optimized based on actual site equipment maintenance costs and failure data. The equipment maintenance overhaul and restoration interval optimisation tool uses site specific information to conduct ‘what-if’ analysis on minimising equipment operating life maintenance costs.
You enter your current equipment maintenance costs and the future expected cost behaviour, like cost increases and inflation effects. You source the equipment rebuild/replacement cost from your supplier and enter it into the model. The spreadsheet creates plots of the scenario and shows you when to refurbish or replace the equipment item for the least cost to the operation under the plan you modelled.
In the example above, to refurbish/replace Unit X82 today will cost $50,000. The company’s discount rate for the cost of using money is 5%. We also know from our maintenance cost history that our direct annual breakdown cost is $20,000. We expect these costs to rise $500 per year and the inflation rate we will use is 2%. We also know that for each $1 of direct breakdown maintenance cost we have a loss ration of 1$ to $5 across the business, i.e. production losses, energy losses, opportunity costs, etc. total $5 for every dollar spent on fixing breakdowns. Our expectation is that when the equipment ages another 5 years the rate of breakdowns will rise and the model allows us to factor-in this effect.
To reduce the breakdown costs we are thinking of introducing a preventive maintenance program for a start-up cost of $1,000, an annual cost of $250 to conduct and that cost is expected to rise $50 per year. The model uses a discounted cash flow method to predict that under this plan Unit X82 should be replaced in 7 years and would have cost the company about $129,700 over that time. It also shows a non-discounted cash flow curve that indicates replacement in 4 years. However, discounted cash flow is the correct approach.
If the preventive maintenance program is able to halve breakdown costs to $10,000 per year, then the image below from the spreadsheet equipment replacement optimization model indicates that replacement has been extended to 22 years for a discounted cost of about $62,400 over that time. Doing the preventive maintenance program is a good decision to make for the business.
View a PDF document explaining the use of the Equipment Restoration Optimization Model
Equipment Overhaul and Restoration Optimization Example
View a PDF document of the first five pages from the User Guide for the Equipment Restoration Optimization Model
Extract of Equipment Overhaul and Restoration Optimization User Guide
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It is recommended that you understand well the theory behind the application you use, so you can confidently judge whether it applies to the situation under investigation and if its output is sufficiently accurate in the circumstances. Remember the warning that applies to all modelling methods — ‘garbage in, garbage out’.
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