We can likely never reach a conclusion befitting the complexity of the following question: should we buy new equipment, replacing the “old”, or should we repair what is currently installed and already paid?
Problems from an operating cost quickly arise when from a matter of policy, no “new” expenditure can take place to pay for asset replacement: maintenance falls into a rut, incapable of effectively managing reliability, and the plant becomes overly expensive for such simple matters as aging (and obsolete or “too often repaired”) assets.
The case of the electric motor comes to mind. How often should a motor be repaired or rewound, excluding purely mechanical components such as a bearing replacement? Three repair cycles is generally recognized as the upper limit (some may disagree). What is the principal cost tied to the electric motor? Its purchase price? In fact, the cost of power consumption (and waste if inefficiencies accumulate) far exceeds the purchase price, or the difference in price between a high-efficiency electric motor and a relatively inefficient one.
Failure to evaluate (or reassess in cases where the original evaluation was made years in the past) the true costs of operation tied to electric motors lead to unreliable operation and stupendously superior energy expenditures. The breakpoint of “buy new” versus “operate the inefficient” is reached much sooner than most people intuitively assess. Therefore, the payback period of such a project as buying a new motor must be set at a time-period enabling plant cost viability. Is 3 months too long a payback? Is the plant not going to stay in operation for years to come? Worse is the cumulative effect of spreading the “disease” to a large population of motors and eventually facing huge cost overruns that can then only be addressed by massive injections of capital instead of dealing with this issue progressively and constantly during the plant’s life.
“In this business climate, we know not how long we will continue production!” seems to be a common concern, but since usable assets would likely be shipped to a more viable site, the expense still holds as a reasonable approach.
© 2008 by François Gagnon