Komatsu

One area that`s long been recognised as a potential `black hole` for costs is that of machine repair.

Repair and maintenance costs can easily blow out, a victim of the constant battle to keep a lid on workshop costs while maximising machine reliability and uptime.

Machine owners can minimise their production costs by reducing their maintenance costs while increasing the reliability of their fleet.

Increasing fleet reliability (that is, maximising uptime) will also help owners to complete contracts on time, enabling the owner to seek premium rates on future contracts.

This article looks at how owners can determine their true maintenance and repair costs -- although owners should always be aware that a maintenance and repair decision needs to be based on the total cost to the company over the life of the machine.

To account for these whole-of-life costs, you need to consider not only direct repair and maintenance costs, but also indirect costs, and downtime costs.

All equipment distributors offer service packages of varying degrees of sophistication -- from basic hourly repair costs, to long-term service contracts that include machine availability guarantees.

Owners looking at distributors` advertised labour costs, and comparing them with the hourly rate for their own workshop people, may be tempted to continue using their own people to carry out equipment repairs and maintenance.

However, there are a few factors that need to be taken into account.

For a start, owners should ask whether a distributor can offer guaranteed fixed prices for repairs. What are these prices?

Now let`s look at a machine owner`s in-house repair and maintenance labour costs. The accompanying spreadsheet printout (see below for a larger copy) covers most of the variables that need to be taken into account (and you can arrange to get a copy of this from Komatsu Australia).

The base figure is a mechanic`s base wage of $722 for a 38 hour week, which works out to $19.00 an hour.

However, on top of this are the other costs we`re all familiar with. Superannuation, payroll tax, workers compensation insurance, annual leave loading, and bonuses all need to be taken into account.

Thus in the example given, the basic hourly cost is already up to $24.00, compared to $19.00 per hour paid to the mechanic.

Now this basic hourly cost presumes that the mechanic is available for 38 hours per week, 52 weeks per year - or 1976 hours a year.

Again, the example shows how these hours are significantly reduced by non-productive time, relative work efficiencies, leave, holidays, and absences. The direct labour cost per repair hour is now $39.09 -- over twice the baseline hourly cost!

While this number may be surprising, it still seems to compare favourably with equipment distributors` advertised rates. However, other costs not shown are:

-- recruitment

-- long service leave

-- training and OH&S

-- uniforms, tools, and other allowances

-- fringe benefits tax

-- staff amenities

-- administration expenses (processing of payroll, taxation, and personnel records)

-- rework -- work done by distributors should be warranted.

Other cost savings and benefits realised by engaging distributors to share your maintenance work load include:

-- labour force flexibility -- only engage the distributor when maintenance or repairs are needed

-- specialist knowledge -- a distributor`s mechanics and fitters will have a high degree of expertise in their own product, so repairs and maintenance jobs can be car
-- quality repairs - distributors will have all necessary special tools, training, experience, and technical knowledge resources

-- fixed repair and maintenance prices

-- downtime minimised -- particularly with the use of remanufactured components

-- parts and materials costs minimised due to the proper re-use of parts

-- minimal investment in tools, equipment, vehicles, and facilities

-- job parts and labour debt is held by the distributor until the job is completed and invoiced.

How do your costs compare with distributors` guaranteed prices?

Owners should contact their equipment distributor to discuss how you can optimise your repair and maintenance operations by prudent use of your distributor`s repair and service capabilities.

The example cost calculator spreadsheet illustrated in this article is available from Komatsu Australia, in MS Excel format. It allows you to enter your own specific cost variables, based on your knowledge of your own operation and cost structure. For your free copy, please contact Komatsu Australia, at the e-mail address below.