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Turning Data Into Information, What Data Alone Is Really Costing You

One of the more critical concepts I try to work with our clients on is understanding the need to transform data into information. Alan Weiss @BentleyGTCSpeed, prominent management consultant, in his book Million Dollar Consulting, references the role of the consultant in that of transforming data into information, information developing into knowledge and lastly, the knowledge you have becoming wisdom. Wisdom is where we as consultants are supposed to provide our value added service. Some do this more than others but the concept I'm addressing in this blog post is really not about consulting, it's about the trans-formative power that can be achieved by transferring data into ultimately wisdom about your organization. What I've done is applied this concept to two different preventative maintenance strategies and how being at the appropriate place within this pyramid of wisdom will greatly effect your organizations operating costs. If you're involved in the management of preventative maintenance or deal with facilities maintenance in any capacity, please follow along to see how one example of what bad data or no data at all is really costing your organization.

The Scenario - Reactive Preventative Maintenance

Your role is that of Preventative Maintenance Supervisor. You're responsible for the monthly preventative maintenance tasks of Air Handling Units (among probably 100 other assets). Your goal is to ensure their reliability and preserve their function (another blog post about this later - Shifting the Paradigm From Preserving The Asset to Preserving It's Function) of providing comfort heating and cooling. There are a series of tasks you need to perform but one thing that every PM for these units calls for in the job plan are filters

If you have a general idea of what filter sizes you'll need chances are you'll do the following:

  • Rifle through your file cabinet (physical or virtual) to figure out 'how many we ordered last time'.
  • Order enough filters to get the work done in the building you have scheduled for this month (Estimated cost of $1,000 per building, per month) - So roughly $12,000 a year for filters (you can argue whatever you'd like in terms what this number really should be, just follow along).
  • Chances are your technician will come back with a few units that the filters are the wrong size, you'll make note of this on a piece of paper for 'next time' and order the right size ones to 'get to it next week'. The ones that didn't fit will sit on a shelf or more often, in the box right next to the air handler, once again, 'till next time'.
  • You'll send the technicians to the store room and have them move the filters to the building they are working on, chances are they will take a day to setup the job, most likely with two staff people - after all there are a lot of boxes to move! Chances are the store room is holding thousands of filters on the shelf with carrying costs that I don't even want to get into right now.
  • Let's say you have a rather simple system, 4 air handling units and it should take your staff about 16 man hours to do this one building.
  • The come back, complete their work order and you sign off on another building complete.
  • Next day - new building and a new order for filters and start the process again.

What did this scenario really cost in terms of dollars:

  • Annual filter cost for the building $12,000
  • Annual labor costs factoring in overhead ($50 per hour) to install the filters $9,600
  • Annual labor costs factoring overhead to get the PM job setup by building (let's be nice and say it's only 2 techs at 4 hours each - highly reasonable assumption) $4,800
  • Total cost to replace filters for one building annually $26,400
  • You have 40 buildings in this similar HVAC system configuration so you're expecting to spend a little over $1,000,000 annually with this strategy

Now let's look at how a different strategy is going to save you money, simply by having information to inform your decision making.

The Scenario - Informed Preventative Maintenance

Your Air Handling Units are assets actively maintained in your Computerized Maintenance Management Software (CMMS). You have been capturing their average run time based on meter readings you've had automatically loaded via your building automation system. You are monitoring this scenario for all 40 buildings on your campus and are forecasting a projected 120 AHU's are going to need filter replacements this month. This scenario is commonly referred to as  a 'meter based' PM program - nothing new or earth shattering here with the methodology.

  • Because you're forecasting out the needs for the next three months based on average run time you've determined the order quantities you'll need for the next three months.
  • You contract out to the vendor who supplies your filters and receive a 10% discount based on an economic order quantity (this is standard stuff here and if you're not getting a discount for economic order quantities, you need a new vendor).
  • You've also contracted with the vendor that he needs to 'drop ship' all filters to each location 1 business day prior to your scheduled PM work (at no additional cost) and you will pay net 30 terms.
  • Your technicians arrive on the job site with the materials already delivered and have a work order indicating exactly what air handlers in the building are being PM'ed and are only working on the units necessary. The are able to start work immediately finishing the building in 4 hours and moving onto the next.

Look at the potential savings points here - 10% reduction in materials cost just by having KNOWLEDGE about your systems. Nearly $200,000 in hourly staff expense reduced by not having to be 'delivery men or women'. Rather than eliminating positions, you are able to perform more meaningful work. You're not paying HVAC technicians to be delivery men or women, you're paying for their specialized skill sets.  

If you look at our original proposal for this campus environment, you're spending nearly 30% more of your operating dollars just because you don't have information. Simply knowing how many air handlers you have and how many filters you need to buy is not enough. You need INFORMATION rich data that can be transformed into KNOWLEDGE about your systems with the goal to provide the WISDOM to operate an effective operations and maintenance department. Even if you have a load balanced PM program without meter readings you're already one step ahead of the game - you know what you need to buy and when and you've going to get better order quantities and drop shipping - you've already won!

Obviously, every environment and process to perform this work you come across is going to be different.  This is just one very simple example and one that I've personally addressed with a client (names and dollar amounts have been changed or removed to protect the guilty). Please know that this is just a simple example that you can plug your own math into and see how much money you're wasting every day - extrapolate this out to the various other functions of your maintenance department and you'll start to see where you're leaking operating dollars left and right.

If you look at your maintenance organization and start to think about all the different areas you are wasting money, simply by not having information available to make informed decisions  you will never make the leap to being a best in class maintenance group.