17.5 Cost of Reliability and Maintenance
Improving reliability through maintenance inevitably incurs costs. According to fundamental economic principles, these costs must be weighed against the benefits of increased reliability, such as reduced breakdowns, lower repair expenses, and improved operational continuity.
The cost dynamics vary depending on the maintenance strategy employed:
- Reactive maintenance typically results in low prevention costs but high repair costs, as failures occur more frequently and often unexpectedly.
- Preventive maintenance, on the other hand, involves higher upfront prevention costs but significantly reduces repair costs by minimizing the frequency and severity of failures.
The goal is to find an optimal balance between these two cost components to minimize total maintenance cost while achieving desired reliability levels. As illustrated in Figure 17.5.1, this balance is achieved through intelligent maintenance, where the total cost is minimized at the point where repair and prevention costs intersect.
Key Considerations in Cost Balancing
Two important points must be considered when evaluating maintenance cost strategies:
- Variability in Cost Curves: Different preventive measures yield varying levels of failure reduction at different costs. This results in multiple prevention and repair cost curves, each with its own rate of change (ΔCost / ΔBreakdown). Consequently, the balanced maintenance zone may shift, producing multiple total cost curves and different optimal points. For simplicity, the curves shown in Figure 17.5.1 represent average cost behaviour.
- Accounting vs. Opportunity Costs: Traditional cost analysis often focuses on direct (accounting) costs—such as labour, parts, and downtime. However, opportunity costs must also be taken into account. These include:
- Lost production and delivery delays
- Customer dissatisfaction and potential loss of future sales
- Reputational damage
- Safety risks and reduced employee morale
Full-Cost Approach to Maintenance Decision-Making
To determine the appropriate level of maintenance investment, organizations should adopt a full-cost approach, incorporating both direct and opportunity costs. This requires access to historical data on:
- Breakdown frequencies and probabilities
- Repair durations and costs
- Maintenance expenditures
The following example illustrates how this approach can guide decision-making between reactive and preventive maintenance strategies.
Example: Maintenance Decision for a Courier Fleet
Shahab operates a courier service in London using a fleet of 10 trucks. Frequent braking and harsh road conditions cause brake callipers to seize, requiring costly repairs. He has two options:
Option 1: Reactive Maintenance
- Average brake repair cost: $2,000
- Downtime rental cost: $250/day
- Repair time: 0.5 days
Option 2: Preventive Maintenance
- Monthly contract with Bobbie (retired mechanic): $10,000
- Prevents 75% of breakdowns
Historical Data (24 months)
| Brake Breakdowns | Months Observed | Frequency |
| 0 | 4 | 0.165 |
| 1 | 10 | 0.42 |
| 2 | 6 | 0.25 |
| 3 | 4 | 0.165 |
Solution
Step 1: Determining the frequency and expected number of breakdowns based on past data
| Number of brake breakdowns and Repair | Number of months during which the breakdown/repair happened | Frequency of breakdowns |
| 0 | 4 | 4/24 = 0.165 |
| 1 | 10 | 10/24 = 0.42 |
| 2 | 6 | 6/24 = 0.25 |
| 3 | 4 | 4/24 = 0.165 |
Step 2: Determining the expected number of breakdowns based on past data
Expected monthly # = ∑ (# of months) (associated Frequency)
= (4) (0.165) + (10) (0.42) + (6) (0.25) + (4) (0.165)
= 0.66 + 4.2 + 1.5 + 0.66
= 7.02 breakdowns/month
Step 3: Determining the expected breakdown repair cost based on past data
Expected BD cost = (Expected # of months) (breakdown cost + rental cost)
= (7.02) ($2,000 + 250)
= $15,795 per month
Step 4: Determining the expected preventive maintenance cost based on past data
Expected Preventive Cost = Contract cost + expected breakdown cost with contract
= &10,000 + (0.25) ($2000) (7.02)
= $13,510 per month
Decision: Preventive Maintenance based on cost, Reactive Maintenance ($15,795) or Preventive Maintenance ($13,510)
