University of Wollongong

Research Online
Coal Operators' Conference Faculty of Engineering and Information Sciences

1998

Mine maintenance - the cost of operation

O. Krellis

T. Singleton

Publication Details
This conference paper was originally published as Krellis, O and Singleton, T, Mine maintenance - the cost of operation, in Aziz, N
(ed), Coal 1998: Coal Operators' Conference, University of Wollongong & the Australasian Institute of Mining and Metallurgy, 1998,
81-90.

Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library:
[email protected]
 2
O Kreilis1 and T Singleton

ABSTRAC~r

Increasing world competition puts pressure on sales volumes and prices. This in turn reduces potential profit margins.
This in turn increases the focus on costs.

Increasing demands on quality and service puts pressure on delivery performance -the right product at the right time.
'[his in turn reduces the scope for errors and delays -and this in turn increases focus on equipment reliability. In the
mining industry, both costs and equipment reliability have one significant thing in common -they are driven
~;ubstantiallyby maintenance.

]~aintenance, once the Cinderella of the boardroom, is a pivotal 'function and demands management attention and, if
Inanaged well, can be a source of competitive advantage. They JlIlade the decision to put maintenance high on their
agendasbecause they realised that good maintenance is a vital factclr in achieving excellence.

lv1aintenance,because of its impact on return on capital, is a key drilver of performance. By reducing maintenance coSts,
(:ompanies can improve their performance. Top managers are increasingly recognising that maintenance is an area in
which they must be involved. As Australian mining and metallw.gical companies look to the year 2000 and beyond,
maintenance will become an increasingly strategic function, capable of delivering sustainable competitive advantage to
those companies that get it right.

INTRODUCn:ON

]n the current economic climate, minimising costs assumes even greater importance, so that equipment reliability must
t>estepped up to reduce delays. Equipment reliability means eff~~tive maintenance. Maintenance costs in the mining
industries are commonly between 30% -50% of minesite totaJ opeJratingcosts. BlIP Minerals spends a]one between $1
~IDd$1.5 billion each year on maintenance (Ellis, 1994).

Maintenance in the mining and metallurgical industries can benefit from successful examples of maintenance practice in
industry generally, and vice versa. Maintenance improvement iDIvolves a vision of future requirements, the changes
necessary and to achieve those improvements, and understanding how to accomplish them. Maintenance suffers by poor
planning, and management that is too occupied by crisis maintf~nance to institute preventive maintenance. In this
stressful atmosphere, production losses are reduced by overl;irge inventories of replacements and spares and
,;onsequently capital costs are inflated.

The solution to these inherited problems lies in a complete rethink of hitherto purely technical maintenance.
Maintenance should be a component of production activities. All participants in the workplace should be involved in the
broader thi!1!i;jng absent in former traditional maintenance by 'involvement of equipment/spares suppliers and by
involvement of efficiency, motivational and business specialists. Thus a new production-oriented maintenance is
incorporated as a business management tool.

1 Director -Mining Services, Soutbem Engineering Services

;! Engineering Manager, Dartbrook Coal Pty Ltd

,COAL98 Conference WoUongong 18- 20 February 1998

 MAINTENANCE: A STRATE(;IC FUNCnON

The ultimate objective of the maintenance function is to provide competitive advantage by increasing the efficiency of
maintenance actions and increasing reliability and availability of equipment through effective strategies, planning and
continuous improvement. High levels of equipment reliability and availability improve product quality and delivery
performance, reduce asset intensity , and also reduce direct operational ~mdmaintenance costs.

To achieve excellence in maintenance requires the following:

1. Maintenance goals and objectives set to suit the business

2. A strategy to achieve those goals and objectives

3. A system to measure and manage the maintenance function

4. The right resources

Goals and Objectives

Application Design

Firstly it is critical that the business objectives of a mining operation are set out correctly so the operating system criteria
can be determined to match the business needs of the future. Given the economic climate, equipment supplied today has
very little performance to spare in excess of the contracted requirement:;.

Particular attention should be made of the key performance criteria which result in production performance. For example,
for a longwall mining system;

• Tonnes per annum = Average tonnes/ week * Number of production weeks

• Average tonnes per week = Average TPH * Operating hours/week

• A verage TPH = % of Process TPH

.Process design TPH = Dependant on longwall nameplate TPH and cutting cycle factors

.Operating hours/week = Process availability * Planned longwall operating time

.Planned longwall operating time = Total manned time/week -J:>lanned maintenance time/week

• Process availability = Function of mechanical, electrical and operational downtime for equipment, systems and
resources affecting longwall production time. (Operating time f Planned operating time )

Assuming a nameplate 3000 TPH longwall with a process design TPH of 2,000 TPH, average TPH of 1,500 TPH (75% of
process TPH) and a process availability of say 55% for 45 weeks per :year, 15 * 8 hr manned shifts and 3 * 8 hr planned
maintenance shifts per week, 3.56 million tonnes per annum would be a:chieved.

However if process availability was improved to 65%, then 4.21 million tonnes per Annum would be achieved, with a
probable increase in revenue of say $18 Million dollars, whilst similarly if the average TPH was increased to 1,770 TPH,
or planned production time increased to 14 shifts per week whilst process availability was maintained, the same result
would occur.
Clearly maintenance strategy takes it's place along side of equipm,ent design, productivity potential and operations
management (see Fig. 1).

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 Fig. 1 -TQM Cycle (Has the works businessplan in a box on top and "Decommission" in the LH box")

By careful evaluation of the production system, a suitable strategy for optimising production and maintenance i!
achievable.

Determine The Preferred State -Goals and Objectives

The best performing companies have a vision, and have a coordinated maintenance strategy in place to implement that
vision. The strategy is fully supported by corporate, plant and departmental management across the company.
Maintenance that is treated as a strategic function has a substantial influence over and impact on profitability , and therefore
deserves top management attention and adequate resources. On the other hand, companies where management treats
maintenance as a cost to be contained rather than as a activity that creates value, will not perform well.

The basis of a winning maintenance strategy is planned preventative maintenance with a focus on continuous
improvement. Maintenance to prevent in-service failures must, by its nature, be planned. The maintenance plan must
identify the equipment components to be maintained to ensure that the maintenance is effective. It must detail how the
component will be maintained to ensure execution is efficient and safe. It mus define when it will be maintained -on
failure, on usage or on condition. It must define who will execute the activities required to implement the plan. It must list
the special tools and spares required. Finally, it must define success -the expected performance of the equipment and the
resulting costs.

To win in the future, top management must understand the strategic nature of maintenance, and have a sufficient
understanding of maintenance to participate in the management of maintenance.

MaintenanceStrategies

A number of key maintenance strategies and elements shall be discussed as follows:-

COAL98 Conference Wollongong 18- 20 February 1998

Total Productive Maintenance

The prime objectives of TPM are to:

• Maximise overall plant and equipment effectiveness through the elimination or minimisation of the six big
machine losses;

• create a sense of ownership by plant and equipment operators through a process of training and involvement;
and

.promote continuous improvement through small group activities involving production, engineering and
maintenance personnel.

Although each enterprise may have its own unique definition and vision for TPM, most approaches recognise the
importance of measuring and improving overall plant and equipment effectiveness, and the need to address the root cause
of failures and output losses through the elimination of chronic losses.

Overall Plant and Equipment Effectiveness

For plant and equipment to be effective, it must be able to run whf:n required, at the right speed, and be capable of
producing output to the specified quality .Overall equipment effectiveness measures these requirements by combining
three key performance indicators availability, performance rate, and quality rate (see Fig. 2).

availability x x quality late

"' which is the same las ,,'

loading time -downtime x ideal cycle x net ~~I~ x

loading time actual cyclc~

Fig. 2 -Overall equipnlent

These three measures can be subdivided into breakdowns and set-up adjustments relating to availability, idling/minor
stoppages and equipment speed relating to performance rate, and process defects and start-up losses relating to quality rate.
These six measures are referred to as the six big losses (see Fig. 3).

COAL98 Conference Wollongong 18- 20 February 1998 84

 Fig. 3 -The 'six big losses"

The six big losses need to be investigated holistically. Attention to only one or two of these losses will produce a sub-
optimal result. For example, if availability is the only measure that is stressed, plant and equipment will often be run at a
slower speed to make the measure look good, whilst the effectiveness of the plant and equipment is downgraded.
Conversely, plant and equipment may be running at the right spe~:dand be available but because of excessive wear is
producing output that is out of specification.

When many organisations fIrst measure overall equipment effectiveness, they find they are achieving in the order of 40 per
cent to 60 per cent. International best practice is recognised to be 85 per cent.

Sporadic and Chronic Losses

The driving objective of TPM is to eliminate or minimise, the six big losses not just reduce them. To achieve this TPM is
an ongoing journey to excellence which challenges the paradigms. One such important challenge is the traditional mind-
set that focuses on sporadic or breakdown losses and largely ignores the chronic losses which are the root cause of output
defects and breakdowns.

Sporadic or catastrophic losses are the infrequent or unusual events that cause a sudden breakdown or loss of quality .
They are obvious and the traditional solution is to create systems to react to them quickly and attempt to reduce them.

Chronic losses are subtle and not obvious. They are much more difficult to identify and correct because they are
traditionally accepted as the norm. Chronic losses are caused by hidden defects in machinery , equipment and methods.
They resist traditional remedies because their roots are hidden in the structure of the plant and equipment and the methods
used to operate and maintain it.

Capital versus Repair and Maintenance Expenditure

The total life costs for a piece of equipment need to be analysed as the Repair and Maintenance portion can be significant
as a ratio of the initial purchase price. Financial elements such as Depreciation, Investment and a value on Obsolescence
are added to Maintenance and Operational costs to determine the Total Economic life. Cost drivers for maintenance need
to be identified with the major impact costs being those that are focused on, and from these options for possible lowering
of cost can be assessed. Outsourcing of rebuilds, changing the whole site strategy on maintenance from a repair on failure
to 'On Condition", or determination of the operational influencers will help in the formulation of a work plan for

COAL98 Conference WoUongong 18- 20 February 1998 85

improvement. All of this must be done with a clear link between costs and the productivity of the unit. Higher utilisation
with the same base costs of maintenance will give the greatest return on asset. The key focus always must be the close
management of all maintenance cost drivers.

Reduce Maintenance Activities

To reduce maintenance coSts, maintenance activities need to be reduced. This can only be achieved by extending the life of
equipment components and avoiding in service failures (which can also lead to subsequentdamage to equipment). From a
total cost perspective, the key drivers of maintenance costs are the mean time between repair/changeout (MTBR) or
equipment life; the mean time between failure (MTBF) or equipment reliability; and the mean time of repair (MTrR) or
equipment maintainability .By extending MTBR and MTBF and reducing MTTR, costs will be reduced and product
quality, production availability and yield will be improved.

Three generic approaches can be taken to reduce maintenance costs, improve equipment reliability , and hence increase
profitability; eliminate waste, plan to win and improve equipment (Fig. 4).

Fig. 4- Total cost versus Availability! reliability

Eliminate Waste

This approach increases the efficiency of the resources used to perform maintenance activities -although without
improving equipment availability and reliability .It includes project managing major maintenance activities (such as
shutdowns), reducing shift crews, making the right contracting and sourcing decisions, eliminating restrictive work
practices and standardising work requirements.

In many plants in Europe, the United States and Australia, McKinsey has found that shift crews have been larger than
could be reasonably justified on economic grounds. McKinsey has also noted that substantial savings could be achieved
by moving some tasks to day shift, allowing shift crews to be reduced. In many instances, shift crews have simply been
too big -usually becauseoperations managers are risk averse and have allowed maintenance departments to staff the shift
crews so that they can cope with the worst case scenario, which rarely eventuates. In addition, shift crews are often not
reduced when the breakdown rates has been decreased through a process of continuous improvement.

The trade-off with reducing shift crews is that when a major failure does occur, more time will be taken to carry out a
repair because there are fewer mechanics and electricians in attendance. However, this occurs more rarely than expected,
because operations and maintenance staff respond to small shift crews by improving their diagnostic systems, using
operators on breakdown work, and instituting appropriate call-out arrangements for maintenance personnel.

COAL98 Conference Wollongong 18- 20 February 1998 86

Another major opportunity is to improve approaches to the sourcing of maintenance services. As maintenance becomes
more effective, the urgency of work requirements is reduced and work is better defined. This opens up opportunities to
improve the way products and services that support maintenance activities are procured. In McKinsey's experience, the
costs of resourcing maintenance activities comes down by two to four-fold as maintenance breakdown work is eliminated.

In many companies, the biggest opportunity to capture these savings has been to improve contracting approaches. In
metallurgical and mining companies the contracting and purchasing approaches have been inadequate, and have resulted in
higher costs. Closer cooperation between maintenance, supply and contracting functions, and the use of more rigorous
contracting approachesare often necessary prerequisites to capture the full benefits of controlled equipment performance
that results from improved maintenance management.

Poor work practices and demarcation between trades, and even between work groups, also reduces the efficiency of
executing maintenance activities. Over the last decade most demarcation problems have been eliminated, and those which
remain are being negotiated away through enterprise bargaining, or through retraining and multi-skilling the work force.

Another major avenue to improve maintenance costs is to standardise and document work requirements and manage the
work done in accordance with defined expectations. This need is not apparent when equipment fails regularly because
maintenance personnel are experienced. They know the job and they know the equipment. Documentation would be
superfluous. This is not, however a winning strategy. If the aim is to reduce the number of breakdowns to an insignificant
level, companies cannot continue to rely on their experienced trades force over the longer term. By documenting and
standardising work orders and managing the work so that it is completed in accordance with the work orders, companies
develop a vehicle for learning how to do tasks in the best way, which enables them to control their costs, not just report
them.

McKinsey has worked with many companies emerging from breakdown maintenance eras that have failed to document the
tasks that they perfonn. They quickly encounter a skills barrier as the breakdown work reduces and the tradesmen' s
familiarity with the tasks declines. A key factor for success is documentation of task requirements; what to do, how to do
it, with what spares and tools, by what labour group and the expected duration.

Improve The Equipment

This strategy invokes the philosophy of maintenance prevention, focussing on improving the equipment to make it more
reliable and easier to maintain. The most cost-effective means of minimising the maintenance requirement is to build or
purchase equipment that requires minimal maintenance, that is, equipment that is very reliable and available. For existing
equipment this is clearly not always possible but, in the long term, management should ensure that all new equipment
acquisitions are evaluated on a total cost of ownership approach. Maintenance personnel should be an integral part of the
equipment acquisition team that is responsible for the specification and evaluation of new equipment.

In most mining and metallurgical situations, the equipment used is relatively unique, either because there are few replicas
of the equipment in other installations and/or because the mine conditions, feedstock or process are unique. As a
consequence, mining and metallurgical equipment should be viewed as being prototype equipment with ample opportunity
to be improved. In addition, as the life of most capital equipment is in excess of 10 to 20 years, there is an opportunity to
design out problems and introduce equipment improvements.

ManageTechnology

The future will be more technologically complex due to demands of capacity increases driven by cost minimisation and
availability of technological improvements to provide such. This complexity , whether it be equipment and system
technological complexity or the management structure and systems of the business has to be satisfactorily managed.

It the case of cquipment and systems, the matrix shown in Fig. 5 applies

COAL98 Conference Wollongong 18 -20 February 1998 R7

 Fig. 5 -Managing Technology

Maintenance Resources -People

The Learning Environment

Learning is, for most, hard work. It takes concentration to succeed. But first, there must be a desire to learn, and a
willingness to make the effort. In order to want to learn, most individuals need to understand what is expected of them,
and why they ought to learn. Answers to these questions serve to place issues in context, and assist in determining whether
to make a commitment to a learning activity, or not.

A noted British author on organisational communication, Francis (1987) notes that:-

"People need to feel part of an overall strategy and feel they have some responsibility and
involvement in decisions which affect them. No amount of table-thumping in the boardroom will
achieve optimum performance from senior executives, middle managers or the shop floor if they
do not understand the reasoning and accept some responsibility."

It is not enough to be told what to do and then be expected to learn how to do it. There is need to understand 'what is
expected of us', how this links in with 'what is expected of others', and how associated activities interact. There is a need
to know 'what the real issues are', 'why things need doing', 'what the consequences might be if they were not done', 'how
our work impacts on the business', 'what standards need to be and why', and so on. For most people, answers to these
questions are needed before commitment can be positively made to a learning process/programme and the demands it will
make.

A leading author and contributor to the field of management thinking Send (1992), makes the point that:

"From a very early age, we are taught to break apart problems, to fragment the world. This
apparently makes complex tasks and subjects more manageable, but we pay a hidden, enormous
price. We can no longer see the consequences of our actions; we lose our intrinsic sense of

COAL98 Conference Wollongong 18- 20 February 1998 88

 connection to a larger whole. When we try to "see the big picture", we try to reassemble the
fragments in our minds, to list and organise all the pieces. But as physicist David Bohm says,
the task is futile -similar to trying to reassemble the fragments of a broken mirror to see a true
reflection. Thus, after a little while we give up trying to see the whole picture altogether."

It is difficult to imagine putting a jigsaw puzzle together without having an overa11picture to work from. The confusion,
frustration and disinterest that must result is obvious. Yet the tendency is to expect others to undertake activities without
ensuring that they appreciate how these activities fit into the larger picture. What the larger issues are is not often
explained. Is it any wonder that there is so often difficulty engendering enthusiasm and commitment?

As discussed above, it is not sufficient to focus simply on the proficiency with which one performs a task, no matter how
critically important that task may be. People also need to appreciate the task's wider implications and how their
performance plays a part in a larger picture.

The National Training Board (NTB) (1992) highlights the importance of having -and assessing -'underpinning
knowledge and understanding', but the knowledge and understanding referred to is solely associated with performance of
action-based tasks. It states:-

"...it is not consistent ...with a competency based approach to have a unit or element defined
solely by knowledge, without the context of what the knowledge is required for in its application
to a work situation " , and

". ..Only that knowledge which is related to the required actual workplace performance outcomes
of the particular unit or element should be included in (the standard) "

This is a serious issue. A concert pianist's skills can never be developed by concentrating on the 'training up' of each
hand separately and ensuring proficiency of the hands independently. Integration and appreciation of the larger musical
picture is essential. A champion boxer, likewise, can never be developed by training up each arm and leg in isolation.
Lack of systems and procedures for ensuring full appreciation of context may well be the' Achilles Heel' of the NTB ' s
competency based education and training (CBET) movement. Unless in possession of an adequate contextual framework,
it is difficult to make commitment, take responsibility , communicate effectively, anticipate consequences and persuasively
convince others that one is unlikely ~ -as far as it is in one's control -to carry out one's responsibilities in an unsafe,
incompetent or irresponsible manner. Yet these are the very assurancesthat are increasingly sought, and must increasingly
be provided.

Our ability to succeed in business can only be based on the ability and commitment of our human resources. As leaders of
our industry we must strive to develop the skills of our people. And we must strive to develop an environment in which
they can perform.

Organisations, like organisms, must be able to respond and adapt to changes in their environment. Those that can't
respond fast enough will not survive. If we are standing still, we are effectively going backwards as someone else is
moving forward.

With the continuing development of new technology and the interdependencies of global markets, the only thing that
organisations can be sure of is that change will continue, and that it will continue at an increasing pace?

One of the critical factors in adapting to change is the ability to learn. This is as true for organisations as it is for
organisms. For an organisation to survive in an environment that is constantly changing, it must be constantly learning.
Individuals within the organisation must be able to detect what it is that they need to learn and meet these needs quickly.
Most organisations have recognised that in order to adapt to change, people need to acquire and use new skills and
knowledge. The reaction to this need has been to provide more training. Each time a new requirement is uncovered, more
training is provided. This is equivalent to feeding hungry people fish. One must always keep feeding them or they starve.

A better and more sustainable strategy is to teach them how to fish. That is, provide a learning strategy where people learn
how to learn and become responsible for acquiring and passing on learning.

COAL98 Conference WoIlongong 18- 20 February 1998 89

Sharing The Wisdom

The same problem occurred three times in the last year. No-one bothered to pass on what caused the problem and how to
fix it. We haven't learnt a thing! (Issie Frustrated, Engineering Manager).

Joe knows how to maintain the valves and Fred knows how to maintain the pumps. Why can't they leamfrom each other?
(I.M. Keen, Maintenance Manager).

Both of these comments are symptoms of an organisation where individuals are not sharing their wisdom. This is not an
uncommon situation. Too often, the knowledge and skills possessed by an individual remain the property of the
individual. Individuals may in fact feel motivated to protect their wisdom as this makes them more valuable to the
organisation. If they know something that no-one elsedoes, this increases their job security.

An effective learning strategy motivates individuals to share their wisdom and helps the organisation to learn from past
problems. In this way, the whole organisation continues to learn and is therefore better able to adapt to change.

REFERENCES

Ellis, I., 1994, The global marketplace -implications for maintenance.

Jones, P., and Lowe J., 1994, Maintenance: a strategic function.

Kennedy and Associates, 1994, Plant and equipment effectiveness.

Mills, D.l., 1994, Elements of total life cycle costing.

Sousa,F., 1994,Workplacecentredlearning.

Stewart, v .A., 1994, Integration of equipment development. procurement and manufacturing phases with the
maintenance phase. defence sector experience.

Sams, M. and Johnson, R., 1996, Best practises in assetmanagement.

COAL98 Conference WoUongong 18- 20 February 1998 90