TRENT GLOBAL COLLEGE OF TECHNOLOGY & MANAGEMENT ADVANCED DIPLOMA IN FACILITIES MANAGEMENT

TRENT GLOBAL COLLEGE OF TECHNOLOGY & MANAGEMENT ADVANCED DIPLOMA IN FACILITIES MANAGEMENT ASSET MAINTENANCE MANAGEMENT LECTURER: DANIEL WONG, MBA, M.SC, BBUS

Executing A Maintenance Policy • Understand the key factors influencing Maintenance Policy Planning • Expressions of Maintenance Standards (functional, conditional, response, financial) • Execution of the Maintenance Policy (staff, budget, schedule, external services)

Factors Influencing the Maintenance Policy • Several factors effect the scope and application of a policy • Technical factors • Corporate policy considerations • Organizational considerations • Financial considerations • Economic considerations • Environmental considerations

Technical factors Relate purely to the performance of the component without any direct consideration of company policy or directives.

Technical factors

2. Corporate Policy Considerations • Some organisations may have to maintain a higher maintenance image than others for policy reasons, Egs • Public Image of Organization • Employee Working Considerations • Consequences of Failure • Past and Current Usage • Future Strategy Consideration

2. Corporate Policy Considerations( • A. Public Image • Certain organizations have a requirement for high levels of maintenance and low failure • The level of maintenance committed to each type of rolling stock is dependant on: - • the image of the company and • the cost of failure • May want to display their buildings in pristine condition always eg. disneyland. B. Employee Working Consideration • Strong correlation between level of maintenance, employee satisfaction and productivity • Attitude of employee is affected by the quality of equipment they used • Better motivation with better working environment

2. Corporate Policy Considerations (cont’d) C. Consequences of Failure • Single most important factors influencing Maintenance Policy • Consequences of failures defers from organization to organization • The higher the consequences of failure, the more funds will be allocated and more attention will be given. Eg. Space shuttle D. Past and Current Usage • The level of maintenance required by a unit/component depends on the past and present usage • Impossible to isolate one component from the other • Standard maintenance schedule may not be sufficient, especially when equipment is subjected to abusive usage (e.g. 24 hours cooling) • Over utilization or wrongful use may invalidate some/all the manufacturer’s estimated lifespan and recommended service frequencies • Policy must recognise and allow for this.

2. Corporate PolicyConsiderations E. Future Strategy Considerations • Most companies will have a Strategic Plan, with strategic objectives that link to the asset base • The Strategic Plan will state how much the company is willing to invest in its assets • Invest more in the maintenance of an asset that forms part of the strategic plan. • Strategic Plan may also indicate the assets due for disposal / demolition / scrapped, then minimum fund should be allocated for this class of assets (just to satisfy minimum statutory requirements)

3. Organisational Considerations • Maintenance Depts are part of the larger organisation. • Maintenance is subjected to organisational links of communication, contract, accountability etc. • Egs, power bases, position, structure, interaction, startegic policy.

3. Organizational Considerations Organizational consideration to note while formulating the Maintenance Policy: -

3. Organizational Considerations

4. Financial Considerations • Financial consideration is one of the main influencing factors on MP • Maintenance is part of the life cycle cost, with few immediate benefits • Level of maintenance depends on availability of funds • Financial Considerations Influencing Maintenance Policy • Company Performance & Profitability • Cash Flow • Size of Direct Labor Force • Arrangements with External Contractors • Previous Expenditure and Effectiveness • Inflation • Variations in Property Market • Variations in Property Stock

4. Financial Considerations • 2. Cash Flow • Mtce take place in several forms, planned, responsive, ad hoc • Planned maintenance well documented and allowed for in cash flow/budget. • Responsive usually require immediate finance and will affect cash flow • Sudden and unforeseen req’t can be incompatible with immediate cash flow • When cash flow is insufficient, quality is usually compromised by adopting the cheapest but may not be the best solution eg. 2nd hand parts. • 1. Company Performance & Profitability • Maintenance cost money • Correct maintenance cost a lot of money • How much company willing to spend on mtce depends on whether company is making money • Hence, mtce contract must be flexible, with reasonable term and can terminate when required • 3. Size of Direct Labor Force (if any) • May have direct worker within the company to carry out maintenance works • These represent fixed overhead which is costly • Modern companies prefers to keep lean fixed overheads and keep core while outsource the non-core functions.

4. Financial Considerations • 4. Arrangements with • External Contractors • Types of Maintenance Contractor : - • Internal Maintenance Contractor • Semi-internal Contractor • Full External Private Contractor • Hence, contracts can take place in several forms • E.g. Term contract with schedule of rates (percentage adjustment), fixed price contract etc • 5. Previous Expenditure & • Effectiveness • The perceived value of maintenance is often taken as a function of past performance (i.e. how effectiveness when I last spend the money, the return) • To carry out Cost Evaluation to determine effectiveness and value for money • Stop gap vs Permanent Solutions (cost??) eg. Roof leak. • 6. Inflation • Inflation will affect the cost of maintenance, as some maintenance contracts can for 3 to 5 years • Hence must factor in the fluctuation and adjustment • For yearly contract, adjustment can be made according to the market condition at the time of renewal

4. Financial Considerations • 7. Variations in Property Market • Real estate is a long term investment, and will cut across a long period • Property market varies constantly (ups and downs) • How much to spend is affected by the market (which determine the property value) • Incentive to maintain operates in direct proportion to changes in asset value • More expensive, spend more to maintain • 8. Variations in Property Stock • No 2 properties are the same! • Companies with large property asset bases experience changes in the range of property that they retain as stock (investments) • E.g. Property developer launching new tower block for sales, good one taken up and leave behind those with poorer stock, such as facing bin centre • Costly to maintain just 1 unit within a development (as compared to maintaining say 20 units within same development). No economy of scales • New property sometime needs higher maintenance cost due to inherent (if DLP has expires)

5. Economic Considerations

6. Environmental Considerations Environmental factors have the most significant impact on policy, but it is almost the most difficult factor to predict and evaluate • The factors include: - • General Economic Climate • Legislation • Internal Regulations • Tenure and Landlord Agreements • Availability of Alternatives A. General Economic Climate • Corporate strategy is affected by the Economic Climate, as they are profit-driven and has to stay competitive • The overall Company Policy will determine how the organization behaves and function • This Policy is affected by operation and the behavior of competitors

6. Environmental Considerations B. Legislation • Legislations can exist in many forms (Acts, Code of Practices, By Laws, ISO standards etc) • Legislations will set the minimum maintenance and safety standards for all kinds of assets (i.e. various Code of Practice) C. Internal Regulations • Organizations usually have internal regulations that set maintenance standards, or a combination of internal and external regulations on maintenance • Example Banks often make loans as mortgages, secured against a property asset. They will set minimum maintenance standards on mortgage holders

6. Environmental Considerations c. Tenure and Landlord Arrangement • Organization own the assets and has a free hand in most appropriate form of Maintenance Policy. Most company maintain Asset Light Strategy and prefer to rent than own • In UK context, lease usually is for 5 years and tenant will be responsible for all insurance and maintenance. Landlord will usually engage 3rd party to conduct audit before renewals or return the asset upon expiry. Tenant will have to make good or compensate before return the asset to landlord • D. Availability of Alternatives • Alternatives to maintenance are: - • Leave to deteriorate • Scrapped • Close down part of the operation (need not maintain) and continue to operate the rest • All available options must be evaluated to decide what is the best option

Maintenance Standard - Main Topics • Essential for the effective formulation and execution of MP. • Set the quality of maintenance required. • Relate to finance available and level of performance required Factors Influencing Maintenance Standards

2. Expressions of Maintenance Standards

Execution of the Maintenance Policy • Always think of how to execute while you are planning • Important to demonstrate the ability to execute the policy in the Maintenance Policy (how and who will do the jobs) 2 Main Considerations on Executing the Maintenance Policy 1. Internal Resources • Sufficient staff within the organization to execute the policy? • Mtce Mgr needs to produce organization charts and schedule of internal resources requirements to identify number of people required • Staff requirements must be submitted together with budget plan and schedule for approval • May need to show in term of daily, weekly or monthly requirements 2. External Procurement • For companies with limited core resources, outsourcing is usually the solution to main man power requirement • This is more the case when high portion of specialist appointments such as architects, engineers, surveyors, contractors etc are required • Policy should indicate the internal / external balance and make adequate provision for fees • To consider in-house vs outsource • Other creative solutions, include flexible hours staff, part time, contract etc

Question What is cyclical maintenance? How does that affect maintenance planning and execution?

TRENT GLOBAL COLLEGE OF TECHNOLOGY & MANAGEMENT ADVANCED DIPLOMA IN FACILITIES MANAGEMENT