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The role of maintenance in improving companies’ productivity and

profitability

Article  in  International Journal of Production Economics · February 2007

DOI: 10.1016/j.ijpe.2004.06.057

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 ARTICLE IN PRESS

Int. J. Production Economics 105 (2007) 70–78

www.elsevier.com/locate/ijpe

The role of maintenance in improving companies’

productivity and profitability
Imad Alsyouf
Department of Mechanical Engineering, School of Technology and Design, Växjö University, Sweden
Received 7 August 2003; accepted 17 June 2004
Available online 19 May 2006

Abstract

This paper illustrates how an effective maintenance policy could influence the productivity and profitability of a
manufacturing process. It was possible to show how changes in the productivity affect profit, separately from the effects of
changes in the uncontrollable factors, i.e. price recovery. The main results of the case study performed at a Swedish paper-
mill showed that a paper-mill machine could, ideally, generate extra profit of at least 7.8 million Swedish kronor (SEK)
(approximately US$ 0.975 million) per year, i.e. 12.5% of its yearly maintenance budget, if it avoids all unplanned
stoppages and bad quality production due to maintenance-related causes. Thus, maintenance is not a cost centre, but a
profit generating function.
r 2006 Elsevier B.V. All rights reserved.

Keywords: Maintenance; Cost effective maintenance; Efficiency; Effectiveness; Productivity; Profitability; Paper-mills

1. Introduction capital intensive, industry. Many changes in the

Business conditions are changing rapidly and
continuously. Markets are affected by diverse
customer needs, which demand higher quality,
shorter delivery time, higher customer service level
and lower prices. At the same time, product life
cycles are becoming shorter and shorter. Success in
any competitive context depends on having either a
cost advantage or a value advantage, or, ideally,
both (Christopher, 1998). The survival of any
business depends on its ability to compete effec-
tively (Madu, 2000). Therefore, the manufacturing
company structure has changed from a labour-
intensive industry to a technology-intensive, i.e.
Tel.: +46 470 70 8494; fax: +46 470 76 8540.
E-mail address: Imad.Alsyouf@vxu.se.
internal environment of the companies are taking
place: increased use of mechanisation and automa-
tion of operations such as flexible manufacturing
systems (FMS), robots, automatic warehousing,
automatic guided vehicles (AGVs); increased trends
of using just-in-time (JIT) (Yamashina, 1995; Suito,
1998). Companies within process and chemical
industries such as paper mills and refineries are
using extremely expensive and fully automated
production lines. At the same time, the pressure is
increasing to protect the ecological environment
from the danger of harmful industrial waste and
pollution. All these changes tie up much invested
capital, which means that the plant should be used
effectively, efficiently, and provide high quality
products in addition to showing concern for the
environment and safety.

0925-5273/$ - see front matter r 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2004.06.057
 ARTICLE IN PRESS
I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
Maintenance impact on business performance
aspects such as productivity and profitability has
increased. A day’s output lost because of an
unplanned stoppage will never be recovered without
additional costs being incurred, e.g. overtime work-
ing. Customers who go elsewhere are lost business,
sometimes forever. The importance of the main-
tenance function has increased, due to its role in
keeping and improving availability, performance
efficiency, quality products, on-time deliveries,
environment and safety requirements, and total
plant cost effectiveness at high levels (Al-Najjar,
1997, 1998, 2000a, b; Riis et al., 1997; Mckone and
Elliott, 1998). For example, Implementing JIT
requires an effective maintenance, which can ensure
a smooth flow of production and, ideally, 100%
quality cost effectively (Charlene, 1989). While
maintenance is still considered as a cost centre,
research has highlighted the impact of the main-
tenance function on the overall plant performance,
i.e. productivity and profitability (Al-Najjar, 2000a;
Al-Najjar et al., 2001; Carter, 2001; Kutucuoglu
et al., 2001; Al-Najjar and Alsyouf, 2004). Dis-
turbances in production processes due to mainte-
nance and other causes reduce productivity,
increase product cost and thereby reduce profit-
ability. A failure in equipment or facilities not only
results in loss of productivity, but also in a loss of
timely services to customers, and may even lead to
safety and environmental problems which destroy
the company image. There is a need to show how
maintenance could contribute to the overall busi-
ness objective.
Traditionally, maintenance has been considered
as a necessary evil, but in fact it is a profit centre
rather than just unpredictable and unavoidable
expense (Al-Najjar et al., 2001; Al-Najjar and
Alsyouf, 2004). The question of how maintenance
could improve the company productivity and
profitability need to be investigated further. Using
effective maintenance policies, failures can be
reduced to a minimum level. This could result in
great savings. Therefore, maintenance is gaining
more and more significance because of its role in the
corporate long-term profitability. It has an impact
on the production and its operational aspects such
as capacity, quality, costs, environment and safety
(Al-Najjar, 2002). But, because maintenance is
considered a support function for production
(which means that it has indirect effects on other
function) it is difficult to footprint its impacts. The
maintenance performance perceived depends on the
71
perspective applied (Pintelon and Van Puyvelde,
1997): accountants think of maintenance in terms of
costs, top management is only interested in budget
performance, engineers focus on techniques, and
production sees performance in terms of equipment
availability and support responsiveness. Therefore,
we can notice the lack of common language, which
enable the different functions in the organisation
understand each other. For example, top manage-
ment wants to have technical suggestions inter-
preted in economic terms, which are meaningful to
their way of handling company matters (Ahlmann,
1984). For overcoming this obstacle, one should not
only translate the maintenance problem into eco-
nomic measures, but also link it to the capital return
and cost-revenue models of economy. Therefore, it
is important to find the relationship between the
maintenance performance and its impact on the
corporate profitability.
2. Maintenance approaches
Several maintenance approaches, i.e. strategies
and concepts, have been implemented by practi-
tioners or suggested by intellectuals (Mckone and
Elliott, 1998; Moubray, 1991a; Dekker, 1996;
Sherwin, 2000; Swanson, 2001a).
A maintenance strategy involves the identifica-
tion, researching and execution of many repair,
replace and inspect decisions (Kelly, 1997). It is
concerned with formulating the best life plan for
each unit of the plant, and formulating the optimal
maintenance schedule for the plant, in co-ordina-
tion with production and other functions con-
cerned. A maintenance strategy describes what
events (e.g. failure, passing of time, condition)
trigger what type of maintenance action (inspection,
repair, or replacement). A maintenance strategy
consists of a mix of policies and or techniques,
which vary from facility to facility (Dekker, 1996;
Zeng, 1997). It depends on several factors such as
the goals of maintenance, the nature of the facility
or the equipment to be maintained, work flow
patterns (process focus, product focus), and the
work environment (Gallimore and Penlesky, 1988;
Pintelon and Gelders, 1992).
A maintenance concept is defined as the set of
various maintenance interventions (corrective, pre-
ventive, condition based, etc.) and the general
structure in which these interventions are foreseen.
The maintenance concept forms the frameworks
from which maintenance strategies are developed
 ARTICLE IN PRESS
72 I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
and is the embodiment of the way a company thinks
about the role of maintenance as an operation
function (Waeyenbergh and Pintelon, 2002). In the
literature one can find quite some maintenance
concepts such as reliability centred maintenance
(RCM), total productive maintenance (TPM), busi-
ness centred maintenance (BCM), terotechnology,
capital asset management, and integrated logistic
support (ILS). Review and more description of
some of these maintenance concepts can be found,
for example, in Al-Najjar (1997), Mckone and
Elliott (1998), Moubray (1991a), Dekker (1996),
Sherwin (2000), Kelly (1997) and Waeyenbergh and
Pintelon (2002).
2.1. Development of maintenance approaches
Maintenance has passed through several major
developments. Fig. 1 illustrates the development of
maintenance approaches.
Until World War II, industry was not very highly
mechanised. Most of the equipment was simple and
over-designed. Failure consequences were not vital
and had a neglected effect. Therefore, industrial
equipment was operated until it failed, at which
point it was either repaired or replaced ‘‘fix it when
it breaks’’. Maintenance was considered as a
production task and a necessary evil. The first
maintenance approach could be described as
reactive maintenance where no action is taken to
prevent failures or to detect the onset of failure. The
maintenance related costs are usually high, but this
approach could be considered cost-effective in
certain cases (Al-Najjar, 1997; Kelly, 1997; Pintelon
and Gelders, 1992).
After World War II, the shortage of industrial
manpower and the increase in demand of various
products, among other things, led to increased
mechanisation. The manufacturing plants became
complex. Availability, longevity and cost were
considered important factors for achieving business
objectives. Maintenance became a task of the
Holistic (process oriented)
Predictive
Preventive
Reactive
Fig. 1. Development of maintenance approaches.
maintenance department and was considered as a
technical matter ‘‘I operate- you fix’’ (Sherwin, 2000;
Waeyenbergh and Pintelon, 2002). Thus, the second
maintenance approach could be described as a
preventive approach. Preventive maintenance is
formally defined as ‘‘the maintenance carried out
at predetermined intervals or corresponding to
prescribed criteria and intended to reduce the
probability of failure or performance degradation
of an item’’ (British Standard, 1984). These pre-
determined intervals can be either time-based
(calendar time) or use-based (total operating time,
number of operations, mileage, Waeyenbergh and
Pintelon, 2002; Kumar, 1996). These intervals are
determined using statistical-based models and opti-
misation, which is the case when implementing
preventive maintenance (PM) policies such as age
and block replacements (Sherwin, 2000).
During the 1970s manufacturing plants became
even more automated and complex. Reliability,
availability and maintainability (RAM), safety,
quality, environment, multi-skilling were considered
very important. Maintenance management informa-
tion systems (MMIS), condition monitoring (CM)
and condition based maintenance (CBM) that was
started mainly in the aircraft and defence industry,
began to be used in the industry (Williams et al.,
1994). CBM is defined as ‘‘Maintenance carried out
according to need as indicated by condition
monitoring’’ (British Standard, 1984). Automation
and development in information technologies have
made it easier to use techniques of CBM in industry
(Kumar, 1996). Therefore, more integration efforts
have been done and maintenance became ‘‘Not an
isolated function’’ (Sherwin, 2000; Waeyenbergh
and Pintelon, 2002). Thus, these practices can be
described as a predictive approach, which is
concerned mainly with detecting hidden and poten-
tial failures and predicting the condition of the
equipment. This is the case when using almost all
condition-based maintenance systems, e.g. vibra-
tion-based maintenance.
By the beginning of 1980s many systematic
concepts to maintenance have been proposed such
as terotechnology, RCM, TPM (Sherwin, 2000;
Waeyenbergh and Pintelon, 2002; Kumar, 1996;
Department of industry, 1978; Nakajima, 1988;
Moubray, 1991b). However, nowadays because of
globalisation (crossing boundaries) more efforts
have been done to create internal and external
partnership between maintenance and other ele-
ments in the supply chain. For example, helping in
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I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
improving the production process, helping the
purchasing department in selecting the original
equipment manufacturer (OEM), helping designing
the production process, using company wide in-
formation systems, etc. (Swanson, 2001b). Also,
more emphasises are placed on monitoring the
deviations in both the machine condition and
product quality (Al-Najjar, 1997). Thus, these
practices can be described as process oriented
‘‘holistic’’ approach.
It should be noticed that in practice more than one
approach could be used at the same time. Therefore,
it is very important to know which maintenance
approach, from the various applicable maintenance
approaches is the most cost effective and suits the
technical system in its operating context.
3. Firm profitability
Recently much of the strategy research has
emphasised resources internal to the firm as the
principal driver of firm profitability and strategic
advantages. Several studies showed that resources
are specifically said to confer competitive advan-
tages to the extent that the resources must be
difficult to create, buy, substitute, or imitate
(Pehrsson, 2000). Profitability is the result of
interaction of controllable and uncontrollable fac-
tors. Among the uncontrollable factors are the
economic and political environment, market growth
or decline, inflation, etc. These uncontrollable
factors could impose significant positive or negative
impact on profitability (Loggerenberg et al., 1981).
The impact should be measured in a way that allows
knowing if the change in profit is due to the changes
in the uncontrollable factors or the controllable
factors. During the late 1970s and early 1980s the
American Productivity and Quality Centre (APQC)
defined profitability as the product of productivity
and price recovery (Sumanth, 1998). The produc-
tivity could be defined as the ratio of output
quantity produced (in a specific time period) to
the sum of one or all input factors required to
produce the output quantity such as manpower,
materials, and energy. The price recovery measures
the ratio of the price of the output product(s) to the
allocated cost of the consumed inputs units, as
shown in the following equation:
PROFITABILITY ¼ PRODUCTIVITY
PRICE RECOVERY
¼ OUTPUT=INPUTðSÞ
PRICE=COSTðSÞ:
ð1Þ
73
Based on the APQC model a model was developed
to measure changes in profits as a result of changes
in productivity and changes in price recovery
(Loggerenberg et al., 1981). The model is suitable
for analysing the effects of changes in machine
utilisation, changes in product price and input costs
on profitability. The changes in the index value
point out what are the causes of changes in profit-
ability. The price recovery index represents the
effect of the uncontrollable factors, while the pro-
ductivity index represents the effect of the internal
controllable factors, i.e. machine utilisation.
Efficiency is related to the process inputs and it
could be defined as the ratio of the prescribed
resources expected to be used, ideally, over
resources actually used (Sink and Tuttle, 1989). It
measures how economically the firm’s resources are
utilised when providing a given level of objective,
e.g. output requirements. While effectiveness is
concerned with the process output and it could be
defined as the ratio of the actual output over the
expected output. It measures the degree to which the
relevant goals or objectives are achieved. In fact, in
spite of the common use of the productivity,
efficiency, and effectiveness terms, there are misuses
of these terms. For example, production improve-
ment does not necessarily mean productivity im-
provement. The former is concerned with the
activity of producing goods and services, while the
latter is concerned with the efficiency and effective-
ness with which these goods and services are
produced. Also, efficiency improvement does not
guarantee productivity improvements. One can be
very efficient and still not be productive, for
example, assume a job was done in half the
prescribed time but with unaccepted quality. Here,
the efficiency was improved 100% while the effec-
tiveness is zero. Thus, to be productive one must be
effective as well as efficient in that order (Sumanth,
1998).
4. Maintenance impact on firm’s profitability
According to the APQC profitability is defined as
the product of productivity and price recovery.
Since productivity could be defined as the actual
output compared to the actual inputs. This means
that the productivity is function of the production
process efficiency and effectiveness. Also, since it is
possible to analyse the causes of the changes in
profitability, and know how the changes in produc-
tivity affect the profit, separately from the changes
 ARTICLE IN PRESS
74 I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
Changes in profits = Changes in productivity
Production Process Efficiency
Productive Maintenance
Fig. 2. Conceptual model illustrating maintenance impact on firms’ profits.
in the uncontrollable factors, i.e. price recovery.
Thus the following model is suggested, see Fig. 2.
The model illustrates how could a productive, i.e.
effective and efficient, maintenance approach affects
the production process efficiency and effectiveness.
Both the manufacturing process efficiency and
effectiveness impact the profitability equation ele-
ments, i.e. productivity and price recovery. We will
focus only on analysing the impact of maintenance
on the productivity index, since it is hard to trace
the changes in the price recovery index. This is
because the price recovery is affected by the
fluctuation of the external and uncontrollable
factors that have an effect on the products’ prices
or input costs, furthermore, time length of produc-
tion can be improved by prolonged machine life due
to effective maintenance. Based on this model, we
can show how does maintenance affect the profit-
ability of a business by increasing the total
productivity. In general the improvement in pro-
ductivity can occur by one of the following ways
(Sink and Tuttle, 1989; Neely et al., 1995):
1. Output increases with reduced level of input (the
ideal).
2. Output increases with the same level of input
(working smarter).
3. Output increases faster than that of the inputs
(managed growth).
4. Output remains constant while reducing the
input (greater efficiency).
5. Output decreases, but decreasing the level of
input more (managed decline).
5. The role of maintenance in company’s productivity
and profitability improvement
We use the relationship between a manufacturing
system’s capacity and the total manufacturing
costs per unit quality item, to describe and illustrate
how maintenance could affect the manufacturing
+ Changes in price recovery
Production Process Effectiveness
Current Maximum
capacity capacity
1
Total cost per unit
Currency/unit
Unit price
4
2 Profit margin
Fixed cost per unit
3
Variable cost per unit
Quantity
Fig. 3. Quantity of quality product produced and total cost per
unit.
system’s productivity and profitability, as concep-
tually illustrated in Fig. 3.
We argue that for a given period of time, the
variable cost per unit quality item, e.g. the cost of
raw material per item, can be considered constant in
the short run regardless of how many items were
produced. On the other hand, the fixed cost per unit
quality item will decrease based on how many items
were produced in that period. This will result in a
decreasing total cost per unit item. Given a steady
product price and stable input costs, i.e. a constant
price recovery index, which is reasonable assump-
tion for a certain time period. Also, assuming a
trade boom market, i.e. high demand in the market.
We argue that using an effective maintenance policy
will result in increasing the utilisation of the
manufacturing systems as shown in position 1. This
is due to higher quantity produced with good
quality due to maintenance effect on the process
efficiency and effectiveness (e.g., less unplanned
stoppages, better product quality, less short stop-
pages, etc.). This will result in increasing the profit
margin as a result of decreasing the manufacturing
costs, i.e. fixed cost per unit quality item due to
 ARTICLE IN PRESS
I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
increasing the volume of quantity produced with
accepted quality, as shown in position 2. On the
other hand, there is a possibility, in the long run, to
decrease the total manufacturing costs, see position
3, due to factors such as reduction in spare parts
inventory, less buffer and work-in-progress (WIP)
costs, less product liabilities claims, etc. Finally,
there is an opportunity to increase the product
price, as illustrated in positions 4, due to improved
product quality image and company goodwill as a
result of factors such as time product delivery,
higher customer satisfaction, etc. Consequently,
better productivity and profitability could be
achieved.
5.1. Improved productivity and profitability
In general, improvements in maintenance aim to
reduce operating costs and improve product quality;
therefore, the cost effectiveness of each improve-
ment action could be examined by assessing the
relevant cost parameters before and after improve-
ments. In the following we illustrate how could
improvements in maintenance effectiveness increase
the manufacturing company productivity, hence its
profitability. Fig. 4 illustrates the relationship of
quantity of good quality items produced with both
of total cost per unit (TC/unit) curve and product
price.
Here we assume that the product has a constant
price and unchanged input costs. Furthermore, the
market is in a boom condition, i.e. high demand in
the market. The total costs consist of variable costs
and fixed costs. The variable cost per unit quality
item is assumed to be constant on the short run,
while the fixed cost per unit quality item decreases
with quantity produced.
11 22
Product Price (P)
Currency/unit
TC1
TC2
Quantity
Q1 Q2
Fig. 4. Detailed relation between quantity of quality product
produced and total cost per unit.
75
We assume that Q1 is the quantity of quality
product produced when using a certain maintenance
policy, which resulted in total manufacturing cost
TC1, see position 1 in Fig. 4. If the company
improves the effectiveness of the implemented
maintenance policy, or uses more effective main-
tenance policy that requires a new investment
of (I), this could result in increasing the quantity
produced to Q2. Assuming no other actions were
performed, then, the new total manufacturing
cost (following the same curve) has a value of
TC2. The effect of using more effective maintenance
policy on the productivity can be calculated
using Eq. (1). Consequently, the impact on the
company profitability can be estimated using the
following as:
Profit after improvement F 2 ¼ Q2ðPrice  TC2Þ,
(2)
Profit before improvement F 1 ¼ Q1ðPrice  TC1Þ,
(3)
Net Profit ¼ F 2  F 1. (4)
If the net profit is greater than the cost of
improvement, i.e. I, required for achieving the
increase in output, then the investment is cost
effective. The relation between the costs of invest-
ment needed to improve maintenance effectiveness
and the expected savings is not easy to predict. As
far as the absolute level of maintenance improve-
ment is concerned, there is a finite limit to the
impact that maintenance improvements can have
upon the generated savings. In other words, after
some point diminishing returns will start. Beyond
this point we are in a region where additional
investment on improving maintenance does not
payback. A model that identifies, reclassifies, and
assesses maintenance-related costs was developed
(Al-Najjar and Alsyouf, 2004). Using that model,
one could reveal maintenance-costs, -benefits,
and -profit, analyse the situation, identify problem
areas, help the decision-maker to perform the
continuous improvement process, and assess the
cost effectiveness of the implemented maintenance
approach.
6. Case study
The case study was conducted at StoraEnso Hylte
AB (a paper company in Hyltebruk in southern
Sweden). The study was conducted at PM2, one of
 ARTICLE IN PRESS
76 I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
the company’s four machines, which was selected
because of its valuable database, particularly during
the period studied (1997–2000).
6.1. Data gathering
A special data sheet was designed for manually
collecting the relevant technical and economical
information parameters from the company data-
bases. Technical and economic data were used for
verifying the suggested conceptual model, shown in
Fig. 2. Technical data included parameters such as
planned operating time; planned production rate;
planned stoppage time; unplanned stoppage time,
i.e. failures and unplanned-but-before-failure repla-
cements (UPBFR); short stoppage time; bad quality
products. The collected parameters covered all types
of stoppages such as mechanical, electrical, hydrau-
lic and instruments. Economic data including
parameters such as fixed and variable operating
costs, profit margin, net profit, working capital,
maintenance costs, investments in maintenance and
spare parts inventory were collected.
6.2. Analysis and results
As the economic data were confidential, the data
used in the analysis were transformed using several
suitable factors, which still allowed accurate analy-
sis. It was found that about 5.8% of the planned
working time, the machine was stopped due to
several reasons such as failures and UPBFR,
planned stoppages and short stoppages. The total
stoppage time was distributed as short stoppages
48%, unplanned stoppages 34%, and regular
planned stoppages 18%, see Fig. 5.
The short stoppage constitutes the largest portion
of the stoppage time, on average it resulted from
about 1624 short stoppages. Regular planned
Causes of Stoppage Time
60
50
40
Percent
30
48
20 34
10 18
0 tivity index calculated according to Eq. (1) at point
Short Stoppages Unplaned Planned
Stoppages Stoppages
Fig. 5. Causes of total stoppage time at one paper-mill machine.
stoppages (about 8 h each) were planned, in general,
every other week to perform certain operational
tasks. This planned stoppage time creates a great
opportunity that could be utilised to perform a pre-
planned maintenance tasks if an effective main-
tenance policy is implemented. It was estimated that
at least about 3.6 million Swedish kronor (SEK)
were generated as maintenance profit due to
performing vibration based maintenance tasks
during these planned stoppages (Al-Najjar and
Alsyouf, 2004). The causes of the unplanned
stoppages and the percentage of each reason with
respect to the total unplanned stoppages are
illustrated in Fig. 6. The company estimated the
bad quality production due to maintenance
causes to be about 7.5% of the total bad quality
produced.
6.3. Model verification
In the following we illustrate using empirical data
how improvements in maintenance effectiveness
could increase the manufacturing company produc-
tivity, hence its profitability. It was found that the
actual annual quantity produced during the case
study period, i.e. years 1997–2000, was Q1 ¼
176 963 tons. The average selling price was about
3000 SEK per ton. The average total production
cost, i.e. TC1, at Q1 was about 1949 SEK per ton,
and the fixed cost per ton was about 724 SEK. The
average quantity of production lost because of
unavailability due to all types of unplanned
stoppages such as mechanical, electrical and hy-
draulic, were 3775 tons. The average quantity of
bad quality production lost due to causes related to
maintenance problems was about 432 tons. This
figure was estimated according to the company
personnel’s experience, it was about 7.5% of the
total bad quality production. This means that if,
ideally, an effective maintenance policy is used
which can get rid of all the unplanned stoppages
and all the bad quality production related to
maintenance problems, the new output quantity,
i.e. Q2, could become 181 170 tons. Thus the new
fixed cost per ton would become about 707. Thus
total production costs, i.e. TC2, would become
about 1932 SEK per ton.
Based on the above-mentioned data, the produc-
Q1 is about 1.539. Also, the value of productivity
index could be improved to about 1.553 at Q2.
This means that the productivity index of one paper
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I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
Causes of Unplanned Stoppages
50
40
Percent
30
20
10
10 10
0
p
g
l
ca
t-u
in
ni
an
ar
ha
le
St
ec
C
M
Fig. 6. The causes of unplanned stoppage time at one paper-mill machine.
mill machine, i.e. PM2, could be improved by an
increment of about 0.014 if more effective main-
tenance policy is used. Thus, the ideal net impact on
the company profit without the cost of investment
can be calculated using Eqs. (2)–(4) as:
F 2 ¼ 181 170ð3050  1932Þ ¼ 202:6 million SEK,
F 1 ¼ 176 963ð3050  1949Þ ¼ 194:8 million SEK,
F 2  F 1 ¼ 7:8 million SEK.
This means that in this case, ideally, at lease 7.8
million SEK (approximately US$ 0.975 million) per
year, i.e. about 12.5% of the machine yearly
maintenance budget, could be gained as a result of
the productivity improvement of one paper-mill
machine, if more effective maintenance policy has
been used. This value will increase according to how
the maintenance actions are linked to the causes of
other elements of the overall equipment effective-
ness (OEE), i.e. short stoppages and planned
stoppages. Practically, we cannot avoid all un-
planned stoppages. To assess the cost effectiveness
of a new investment in maintenance, the savings
increment due to the output achieved by improving
maintenance effectiveness could be compared to the
investment.
This represents just the economic result of an
effective maintenance due to its impact on the profit
margin value only. In addition, there are other
factors such as the lost expenses due to not utilising
the fixed cost elements such as the idle labour, idle
machine, etc. On the other hand, there is a
possibility in the long run to decrease the total
manufacturing costs (when using more effective
maintenance policy) due to maintenance effect of
element such as less tied capital in raw materials,
77
45
11 11 13
rs
al
ge
e
an
tri
th
ec
O
ch
El
ng
ni
Li
WIP, finished goods, etc. Further more, the price
could be improved due to providing value advan-
tages to the end customer such as on time and
consistent delivery.
7. Conclusions
Using the conceptual model, which was illu-
strated in Fig. 2 and tested empirically in a case
study, enables the decision-maker to trace how an
effective maintenance policy could influence the
productivity and profitability of a manufacturing
process through its direct impact on quality,
efficiency and effectiveness of operation. It was
possible, by analysing the causes of the changes in
profitability, to show how changes in the produc-
tivity affect profit, separately from the effects of
changes in the uncontrollable factors, i.e. price
recovery. It was proved that maintenance is not a
cost centre, but a profit generating function.
Acknowledgements
This paper was one of the results of a project
that was financed by the Swedish National
Board for Industrial and Technical Developments,
NUTEK, and the following Swedish companies:
StoraEnso Hylte AB, Volvo Trucks Components
AB in Köping, SKF Condition Monitoring, and
ABB Alstom Power AB in Växjö. I would like to
thank all who have participated in this project.
Also, I would like to thank the university of Jordan
and the centre of industrial competitiveness (CIC) at
Växjö University for their financial support.
 ARTICLE IN PRESS
78 I. Alsyouf / Int. J. Production Economics 105 (2007) 70–78
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