January 29, 2016

Importance of Oil Analysis During a Downturn

With falling commodity prices and disappearing profit margins, companies look to cut costs in any way possible. However, failing to cut with a long term view can cost companies millions of dollars in profits and, in severe cases, can lead to bankruptcy.

A lot of companies look at their large expenditures and make a decree of cost cutting some percentage of them to the site managers. This can be catastrophic. Some companies look to cutting reliability programs, such as oil analysis, as “high cost, low value programs”.

That simply isn’t the case.

Predictive and Condition based maintenance

Reliability and maintenance professionals agree that, in most cases, predictive and condition based maintenance (including oil analysis) have significant financial, operational and cultural benefits over other alternatives such as run to failure or preventative maintenance programs. Some of the benefits include:

Allowing sites to plan and schedule jobs in advance:
     • Planned jobs are safer
     • Planned jobs take less time
     • Planned jobs cost less in parts and labor than unplanned work

Less Unscheduled Down Time
     •
Less unplanned disruptions in production

Less Unscheduled Maintenance Hours
Lower overtime cost

Increasing Average Component Life

Optimizing Oil Change Intervals
     •
All of these benefits add up to a significant return on investment.

Seeing a significant ROI

Example 1 – Customer increases oil drain interval on Komatsu 830E hydraulic system

One of our customers had a financially successful maintenance change by increasing their hydraulic oil drain intervals from 2,000 hours to 4,000 hours. How did this save them money?

Assumptions:

  • Haul truck runs 6,000 hours per year
  • Synthetic hydraulic oil costs $10/L
  • Samples are taken during PM or inspections and are not causing additional down time

Scenario 1: Change oil every 2,000 hours – no oil analysis

CategoryDescriptionYearly Benefit (per truck)
Oil Change – every 2,000 hours946L * $10/L3 oil changes per year =
-$28,380
Total Cost-$28,380

Scenario 2: Add oil analysis – change oil on condition and at 4,000 hours

CategoryDescriptionYearly Benefit (per truck)
Oil Analysis – every 500 hours$50/sample * 12 samples/year-$600
Oil Change – every 4,000 hours946L * $10/L1.5 oil changes per year =
-$14,190
Total Cost-$14,790

This change results in an annual cost savings of $13,590 per year or 48% of original cost.

Example 2 – Customer identifies glycol ingression on a CAT 3516 engine

Glycol ingression causes a substantial number of failures on diesel engines and catching them early is extremely important in reducing the failure risk.

Assumptions:

  • Replacing a CAT 3516 engine due to an unplanned failure takes 1 week
  • Replacement engine costs $200,000
  • Downtime lost production costs are $10/hour
  • CAT 793C utilization is 50%
  • Synthetic engine oil costs $10/L
  • CAT 3516 oil capacity is 401.3L
  • Fixing glycol leak costs $25,000 in parts & labor
  • Additional labor cost is negligible

Scenario 1: No oil analysis, glycol causes catastrophic engine failure

CategoryDescriptionBenefit
Replace engine1 replacement engine – $200,000-$200,000
Lost Production1 week downtime * 168 hours/week * 50% utilization * $10/hour-$840
Total Cost-$200,840

Scenario 2: Oil analysis detects glycol, engine is drained & flushed

CategoryDescriptionBenefit
Oil Analysis – every 250 hours$50/sample * 24 samples/year-$1,200 (per year)
Oil Drain & Flush401.3L * $10/L * 2 for drain and flush-$8,026
Glycol leak is fixed$25,000-$25,000
Total Cost-$34,226

In this scenario, oil analysis saved our customer $166,614 or 83% of their costs.

These above scenarios are 2 examples of when oil analysis has a significant impact to the bottom line. In both cases, the short term cost cutting move ends up causing substantial increases in costs over the equipment’s life cycle. With the commodity prices where they are today, your company simply cannot afford to make that mistake.