Tag Archives: realizing savings

Why does my corporation not give me the funds to improve my plant? Kick your budget requests up a notch

Fishing for capital equipment money every year and going home empty handed is the typical thing happening to maintenance and operation managers every year. Even the support of the plant manager will often not help getting anywhere with your requisition request. Plenty of money will be saved in the long run. Lower energy bills and a much lesser maintenance budget should surely look good to the financial folks.  Well, you are so wrong (usually).

Problem is that in the big scheme of things top level managers and chief financial officers will not give you a Cent because operations are not affected enough and there is not a super short return on investment to entice them giving you the money. Often enough it is actually your ROI (Return on investment) logic and how you structured and formatted it that will make sure that your request will gather dust at HQ (Headquarters).  Then again it can also be the information you did not include. How about the info you included, but jut not in a format top level manager would appreciate?

The list below is just a few ideas how to turn a typical capital investment request into a rocking one with a kick-behind ROI.

  • Let the manufacturer of the equipment help you put an ROI together.  Do not forget speaking with the one whose equipment you want to replace involved too.  For one you never know if they have something better themselves, and on the other hand, they will also be the ones who should give you the latest overhaul and repair prices.
  • Make sure you have you repair and maintenance records straight.  Do you have all the numbers for how much maintenance and operations (lubricant cost, cooling water, and yes, also energy consumption) have cost you?  Do you know what your going energy cost (demand and $/KWh) is?
  • Do you intend to replace heavy oil leaking equipment?  Did you capture how much kitty litter or oil dry you are using now?  How many times does a crew need to walk by the machines checking and topping oil off?
  • How many air filter changes and how much do the filters cost?
  • How much cooling water is needed and how much does it save you getting rid of your old equipment?
  • Can you put an energy audit together?  Get all your own and vendor resources organized collecting data about your air, water, lubricant usages and the required man power that it takes to do all of the above.

Now that you have the basic information gathered you can focus on getting your budget calculated.  The rest is up to the process you use getting your money approved.  The bullet list above deals with the mere mechanics of getting to a basic ROI.  Below is how you can kick your project up a notch and thus you increase your chances to getting financial approval.

  • Replacing a piece of equipment is not a simple tear the old out and put the new in scenario.  Do you have the cost for removal and new installation gathered?  Great.  How about the system integration cost from a controls point?  Did your controls group contribute to your ROI?  Same with operations.  How will operations be affected during the change out?  How easy or tough is will this be to install and start the new equipment?  Hopefully this cost will be low, but did you consider putting this into your ROI?
  • Will the old stuff represent a health or environmental hazard?  How much scrap value is there?  Would sister companies or others want to have this equipment and how much value would this represent?
  • Do not laugh about this one:  How many new or refurbished pieces of equipment do you still have in your company (your own plant and system wide)?  Chances are if you have any left, you will not stand a chance replacing it and the system it is installed in.  It represents a clap trap:  If you do not have any and your production is down it may cost you dearly replacing it in a hurry and the manufacturer of the new stuff may not be able to get you a one to two week delivery.  Planning and risk management is everything with this one.  Look forward too.  Is the current machine still in production?  Does the manufacturer intend to make it obsolete soon?  What have you heard about this from your industry specialists?
  • How much money can be saved with this new piece of equipment if it uses lubricants that you already have in the plant?  Does the new one eliminate routine tasks or stretch out the schedule?
  • Does your equipment run 24/7 or at least 2500 hours per year?  If so, are you using premium efficient motors?  You should!  Calculate the savings with this helpful program called Motor Master.  Note:  Make sure that you have included money for the new motor starter or heaters as the premium efficient motor will have a greater inrush current.
  • Can your new piece of equipment eliminate power demand spikes during starts?  Do they have unloading devices (here is one for blowers)?  Demand charges
    is something few people know about.  Your power bill always has a demand charge and the money per KWh charge.  Did you know that sometimes your demand charge is higher than the other?  Demand comprises the total KW’s (or better the resulting amperage load) that the power company needs to have available for your system not to overload and go off line.  This means that all motors could come on line at the same time.  This means that your charges are based on a much higher demand than what your normal operation load is.  Problem here are the significant spikes at time of equipment start up that are particular bad when you cannot start your motor under no load.  Something to consider and explore with your financial people.
  • Compressed air systems are THE power hog of most plants.  Here is a helpful tool (Air master) in studying your energy consumption and different technologies and manufacturers.  Perhaps why you did not get money in recent requisitions is because you did not fix the more basic problem:  Air leaks.  Do the basics first and then ask for more money for capital improvements.
  • Does the manufacturer offer a remote monitoring system that helps you get off a time based maintenance schedule and instead provides an “as needed” maintenance schedule?  Here is an example for one that alerts you when the machine is in need of attention soon:  Remote.  Experts fix what needs fixing.  Here the machine literally tells you when it needs attention all the way to including vibration and oil level with web based and smart phone accessibility.  It can save you thousands of Dollars annually as such a maintenance system is based on the expert – manufacturer – point of view.
  • The political part is often the trickiest and the most overlooked part of equipment requisitions and ROIs.  Gathering and getting support from your key stake holders is immensely important or you will never get your money into the budget.  That you need to have a solid case made in your ROI goes without saying.  Did you get you plant manager’s support though?  How about your electrical, maintenance, shift, operations, union managers and spokes persons?  How good is your relationship with HQ?  You do not have one?  Well, get to it and get yourself known there for solid work and build your reputation as a cost saver and sustainability improver.

Surely you have realized that this never easy, nor quick to getting your improvements documented and approved.  Some aspects are cut and dry.  The pure mechanics of it all is often what occupies your mind most and yet, the process of getting the stake holder’s support and illuminating the whole system around the piece of equipment is actually almost more important.  Good luck with your journey and make sure to use all the resources that exist around and within you.  Otherwise you will still only be like a lonely angler putting out the line into the big pond of budgets and come home with nothing on your hook.

Ralf Weiser