The real dollar value of planning: How to turn maintenance time into money

We ought to know the value of planning before we create a planning program. We must not simply fill a planning position with some vague idea that “planning is a best practice.” Only then can we imagine how to fill that position. 

Let’s look at the value dollar-wise today. We will consider that a planner helps make an existing workforce more productive in order to do more proactive maintenance tasks. We will look at our existing labor cost, how much planning could increase our labor productivity, and the value of that extra productivity itself.

Let’s look first at our labor cost. ZipRecruiter says that the United States national average annual salary for a journeyman mechanic is $62,671 ($30.13 per hour). And Neo Huang provides a web labor calculator with an example using 50% of the base labor rate to create a “loaded labor rate.” Huang uses 30% for benefits that “typically include health insurance, retirement contributions, paid time off, and other employee perks.” Huang uses 20% for overhead that “includes indirect costs such as administrative expenses, utilities, and rent that support the employee’s work but are not directly tied to their hourly rate.” 

Thus, our loaded rate for the journeyman mechanic would be $94,000 per year ($45 per hour). For a workforce of 20 persons, our annual labor cost would be $1,880,000. We have to use a loaded labor rate to know what we are really paying for an hour of maintenance labor, not just what we pay the mechanic. Your accounting department can tell you what the loaded labor rate is at your company. (A rate of $30 per hour straight, $45 loaded, seems really low compared to some heavy industries I have seen.)

Let’s consider next that planning (with scheduling) boosts wrench time. Wrench time is that portion of available shift time the mechanic spends on “direct work.” Visualize turning a wrench. “Indirect work” includes necessary activities such as travel, receiving assignments, gathering parts and tools, and taking breaks, all part of the workday. Typical average wrench time for a maintenance force is 35%. Proper planning and scheduling boost that wrench time to 55%. Other things aside, moving from 35% to 55% wrench time is a 57% improvement (55/35=1.57) and translates to a 20-person workforce completing as many work orders as a 31-person workforce (20 × 1.57 = 31). The planning program has provided $1 million of extra labor for free (11 persons × $94,000/yr).

And better yet, the economic impact is ten times the extra labor cost. Our financial gain does not stop with the labor – all of the extra 11 persons focus on proactive work to keep things from breaking. Around the world, management generally does not replace attrition until breakdowns get out of control. The resulting 20-person workforce is “just the right size” (visualize Goldilocks and the Three Bears) to keep up with the breakdowns. So, by definition, any extra labor is free to take care of the little drips and activities to head off breakdowns in the first place. 

Such work to head off reactive work is “proactive” work, and the industry 1:10 rule means that every $1 spent on proactive work is worth $10 on our bottom line. Every extra $1 we spend properly lubricating a bearing saves $10 that we would have had to spend replacing the bearing, collateral damage, and loss of product. Thus, the extra $1 million of labor gained by making our 20-person workforce as productive as 31 persons gives us a gain of $10 million on our bottom line from the extra proactive work we complete.

Let’s do a bit of sensitivity analysis for state, wrench time, and industry. ZipRecruiter says average mechanic salary in the top state, Washington, is $70, 981, 13% higher than the national average. And the lowest state, Florida, pays only an average of $46,834, 25% less than the national average. Depending on state, our bottom-line gain might be between $11.3 million and $7.5 million. And instead of 55% wrench time, let’s consider we only get to 45%, which would be a 29% improvement in productivity (45/35 = 1.29). The wrench time bump is halved (29%/57%), so instead of a $10 million boost to our bottom line, we only get $5 million (or $5.6 million in Washington and $3.7 million in Florida). 

Finally note, again, that these state averages are for all industries and work environments. Your accounting department can tell you what the loaded labor rate is at your company for craftspersons. Nonetheless, we see proper planning and scheduling programs typically delivering 55% wrench time, and we easily expect a gain in the neighborhood of $10 million for a 20-person workforce. Let’s say for every ten mechanics, we gain $5 million in bottom line profits. 

What is the proper ratio of planners to crafts? Very generally, we say that one planner can plan for 20 to 30 craftspersons, but it does depend on other factors such as geographical spread and multi-craft crew composition. A planner properly planning helps deliver a company extra profit of $5 million for ten mechanics, $10 million for twenty mechanics, and $15 million for thirty mechanics.

And yet the benefits do not stop with the company profits. Planners tremendously help us achieve better plant safety. Planners facilitate the execution of more proactive work, which reduces the incidence of reactive work. Reactive by its nature is dangerous. The reactive work might not be able to wait until daylight or calm weather. The reactive work is frequently unplanned and involves more guess work and using sub-optimum parts or tools. A proper planning program significantly improves plant safety.

Understand the great value of planning for your workforce. Spend the time to craft a great program with a great planner. Don’t settle for good. Be great!