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
| Category | Description | Yearly Benefit (per truck) |
| Oil Change – every 2,000 hours | 946L * $10/L | 3 oil changes per year = -$28,380 |
| Total Cost | -$28,380 | |
Scenario 2: Add oil analysis – change oil on condition and at 4,000 hours
| Category | Description | Yearly Benefit (per truck) |
| Oil Analysis – every 500 hours | $50/sample * 12 samples/year | -$600 |
| Oil Change – every 4,000 hours | 946L * $10/L | 1.5 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
| Category | Description | Benefit |
| Replace engine | 1 replacement engine – $200,000 | -$200,000 |
| Lost Production | 1 week downtime * 168 hours/week * 50% utilization * $10/hour | -$840 |
| Total Cost | -$200,840 | |
Scenario 2: Oil analysis detects glycol, engine is drained & flushed
| Category | Description | Benefit |
| Oil Analysis – every 250 hours | $50/sample * 24 samples/year | -$1,200 (per year) |
| Oil Drain & Flush | 401.3L * $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.