Maintenance Cost Maintenance Cost Total Cost Maintenance cost

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Maintenance Cost

Maintenance Cost

Maintenance Cost Total Cost Maintenance cost (RM) Preventive maintenance cost Breakdown maintenance cost Optimum

Maintenance Cost Total Cost Maintenance cost (RM) Preventive maintenance cost Breakdown maintenance cost Optimum

Cost of Maintenance • • • Spare parts Labor Down time (production loss) Overhead

Cost of Maintenance • • • Spare parts Labor Down time (production loss) Overhead Consumables Hand tools, power tools and equipment

Who will do maintenance? • In-house • Out-source

Who will do maintenance? • In-house • Out-source

Decision to out-source • • • Lack of expertise Too hazardous No experience Bound

Decision to out-source • • • Lack of expertise Too hazardous No experience Bound by contract Top management policy

Example The record of computer breakdown for Company PCK for the past 20 months

Example The record of computer breakdown for Company PCK for the past 20 months is shown below. # of breakdown # of months breakdown occurs 0 1 2 3 4 8 6 2 Total 20

• Each time computer breakdown – estimated loss is RM 300 • Contract

• Each time computer breakdown – estimated loss is RM 300 • Contract preventive maintenance by company DK – RM 200 per month • Should PCK contract out preventive maintenance to DK?

Solution Step 1 • Calculate expected number of breakdown (based on past records) if

Solution Step 1 • Calculate expected number of breakdown (based on past records) if the company continue without service contract. Step 2 • Compute expected breakdown cost per month with no preventive maintenance contract Step 3 • Compute the cost of preventive maintenance

Solution Step 4 • Compare the two options and select the one which cost

Solution Step 4 • Compare the two options and select the one which cost less

Solution # of breakdown Frequency 0 1 2 3 4/20 = 0. 2 8/20

Solution # of breakdown Frequency 0 1 2 3 4/20 = 0. 2 8/20 = 0. 4 6/20 = 0. 3 2/20 = 0. 1 Step 1 Expected # of breakdowns = (# of breakdown) x (frequency) = (0)(0. 2)+(1)(0. 4)+(2)(0. 3)+(3)(0. 1) = 1. 3 breakdown per month

Solution Step 2 Expected breakdown cost = (expected # of breakdown) x (cost per

Solution Step 2 Expected breakdown cost = (expected # of breakdown) x (cost per breakdown) = (1. 3) x (300) = RM 390 per month

Solution Step 3 Calculate Preventive Maintenance Cost = cost of expected breakdown + cost

Solution Step 3 Calculate Preventive Maintenance Cost = cost of expected breakdown + cost of service contract = (1 breakdown per month x 300) + RM 220 per month = RM 520 per month Step 4 Compare Less expensive to suffer breakdown without service contract. Breakdown = RM 390 Service contract = RM 520 Therefore, continue present policy.

Need to consider • • Customer service Loss of production Loss of customer goodwill,

Need to consider • • Customer service Loss of production Loss of customer goodwill, reputation Machine life Availability of spare parts and expertise Safety to the user / customer Environmental problem (pollutant discharge etc. )

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