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Change the Mindset from Cost-reduction to Cashflow Generation

Peter Bitter

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Having been in the Reliability arena for many years as well, I directly connect to the feeling that Reliability and Maintenance is mainly perceived as an inconvenient (though possibly necessary) cost centre, and only when things really go wrong the ‘Firefighters’ are rewarded for their quick and temporary solutions; “….and let’s not spend more money on it since the equipment is working again and we need to catch up on Production”.

Those that diligently plod-on with prevention of incidents or failing equipment and enhance staying in control of Availability are often not seen nor acknowledged. After all if they do their job well it costs Money and the results are not apparent, if they do Not do it well it also costs (a lot more) Money and definitely Is noticeable.

One of the things that has really astounded me over the years is the generic obliviousness of those closely involved on the ‘cost of Unavailability’ of a production unit or even a complete site.

In those plants where I experienced a strong awareness of the cost of Unavailability there was a focus on prevention of Margin loss, the commitment to work together to remain reliable in a proactive and preventive way. The atmosphere was very supportive of high Reliability and Availability results and thus supportive of controlled cashflow.

In those plants that had no clue as to their ‘cost of Margin Loss’ per Unit Reliability and Availability figures were considerably lower.


But let us not manoeuvre ourselves into the Victim’s role and make a positive effort to “Turn Mind-sets around” and coach and coach and educate our internal and external clients.   After all we should have a mutual ‘shared profit and loss’ mentality. If the company does well, we all will do well.


I feel as a Reliability community we should start to make an effort to convince that:

  • Availability and Reliability is a result of close collaboration between the Reliability, the Maintenance and the Production teams;
    • it is a team effort and not a Silo’d "throw it over the wall then it is not my problem anymore" attitude.
  • Remaining Reliable by analysing Availability and executing preventive Maintenance will require resources. Losing Availability and reduced Reliability will ‘eat away’ your Margin and run havoc on planned and projected cashflow.
    • Determine the approximate cost of Margin Loss per unit. Order of magnitude is good enough to realise we are focussing on a vast amount of potential ‘money not bagged’ when Unavailable.
  • Maintaining Margin and Cashflow by producing the goods is the ultimate responsibility of the Production team. The Reliability and Maintenance teams have to be fully supportive to their client in this.
  • Substantiate the added value of being in control of Availability in preventing Margin loss and Cashflow and change the Mindset of ‘cutting cost by reducing on Maintenance staff, Operations support staff and Reliability Staff'.

We as a community do not add Money but prevent Loss (thus support required Cashflow).

So let’s all start each time by ‘Calculating’ and projecting the lost Margin due to an unwanted event and Approximate the Added Value (in $$) of each improvement that we make. Start focussing more on generating Cashflow.

(If we are not able to explain ourselves what the Added Value is of the work we do, then how do we expect our clients to see the Added Value of our efforts with their mindset on Cost).

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Well written and very good points! I most certainly have experienced much of what you have articulated and the following is of my own opinion. For a Maintenance and/or Engineering department to be somewhat taken seriously, their efforts are best presented with costs involved. Your "Lost Margin" verses "Added Value" is such a good message to send this community. Whether an affirmation of what is already known or a new portion of information gained, again very good point to present.

Thanks for sharing and I hope to share like minded thoughts and experiences with you over the next few weeks.

Jim Vantyghem

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  • 2 years later...

Words of wisdom from Peter! If you recall the Asset Improvement Program we worked on together in Turkey, I followed the above formula. First achieved a few quick wins, both the production and Leadership then were able to see concretely the "value" that M&R effort can unlock. After that, we utilized the end year Solomon performance report output and advocate to the Leadership that, if they fund our M&R improvement initiatives, then we have a credible case for improving reliability and deliver a significant return on investment. We were able to ask for that, as the quick wins helped us achieve credibility and we could demand for more resources or tools etc.. Pretty much we claimed portion of the profit and asked Leadership to "spend money to make money"! In three years time the refining company achieved top quartile availability performance (reaching 92-95% availability levels), and the rest was history!


Good to catch up in this forum!


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