MRO Q&A: How To Measure Maintenance in Financial Terms

Q. What is the most reasonable financial ratio for measuring plant maintenance in today’s highly automated plant operation?

A. Most of the financial ratios used today to measure operational outputs are meaningless to plant-level management groups. The reason for this is that most of the ratios used today can only measure what these operational professionals have done in the past and not what they are doing right now, nor what they are going to do next.

At the end of the day, manufacturing is not measured in terms of costs but in terms of variance to standards. Given the level of computerized information within the manufacturing organization today, high-performance organizations are measuring every item in their organization -- whether it is machines, materials or manpower -- against high-performance standards that allow them to understand where the total plant operation is doing well, and where the "hot spots" are that need attention.

When senior management sees "cost impacts," operational management can explain these "impacts" in terms of operational performance and give detailed explanations of the programs being implemented to correct the situation.

As operational professionals, the job is to focus on continuous improvement and not just on the financial data. Since senior management needs to constantly adjust its measurements to changing financial needs, operational management needs to focus on hitting or exceeding its own standards and understand that the numbers will take care of themselves.