Fonterra Edgecumbe’s Journey to World Class Maintenance

1996 – 2009

Figure 1: Bay Milk Products (Fonterra Edgecumbe ) Dairy Plant 1996

SUMMARY:

The Fonterra Dairy Cooperative manufacturing site located in Edgecumbe, New Zealand

has achieved a World Class ranking for its Current Best Practices, (CBP), in

Maintenance. The achievement occurred in October 2009 after a 12 year journey. The

joint trade-union, management and operations partnership surpassed the IDCON Inc.

CBP audit threshold of 75% with a score of 78%. Significant bottom line performance

improvements along with an improved lifestyle have been the result. The site has

demonstrated that improved reliability drives down costs.

BACKGROUND:

The journey to Maintenance Excellence was initiated in typical circumstances for many

organizations that have undertaken pursuit of world class initiatives over the years.

There has been, however, a unique group of people, leadership, desire, and sustained

effort that has resulted in success.

It is helpful to note, at the beginning of this article, that the source of many descriptive

phrases and adjectives are derived from Christer Idhammar and his staff at IDCON Inc,

an international maintenance best practices consulting firm based in Raleigh, North

Carolina USA. IDCON was contracted to support the Edgecumbe maintenance

excellence journey in 2003, and indirectly influenced the process from the beginning in

1996, as will be described.

The dairy site, then known as Bay Milk Products, Ltd, was an independent,

cooperatively-owned, dairy manufacturing facility on the Rangitaki River plains in

Edgecumbe, New Zealand. The site, at the dispensation of the New Zealand Dairy

Board, was responsible for 40% of the research activity within the New Zealand dairy

industry. There were a number of innovative research projects and highly skilled

technical experts employed at the site. The company employees were proud of the

“campus-like” atmosphere and its open-minded, innovative reputation along with the

outdoor-lifestyle afforded by the location. The plant was rebuilt from the ground up

following a destructive earthquake in 1987. The reconstructed plant featured the latest

in state-of-the-art dairy equipment. A new cogeneration electricity/steam plant was under

construction and scheduled for completion in 1997. Improved reliability of supply for

electricity and steam would be the outcome.

The maintenance practices at the Bay Milk Products site were typical of other New

Zealand dairy sites. Tradesmen and maintenance staff prided themselves on their ability

to respond rapidly to breakdowns and get the plant back on line. The pay system

rewarded trades staff for after hours “callouts” where they were paid a minimum of three

hours at double time for each appearance at site, which averaged two hours. 20% of

each trades person‟s income was derived from the wage-based, „callout‟ system. .

The mechanical and control systems, (electrical and instrumentation), technicians were

collectively represented by the Engineering, Printing and Manufacturing Union, (EPMU)

A slightly adversarial relationship existed between management and EPMU members.

The control systems and mechanical tradespersons were physically and socially split into

two separate workshops.

Planning and scheduling was primarily focused on the two-month Winter Shut and not on

daily/weekly work practices. Equipment was over-hauled based on actual and perceived

needs. Daily work for each discipline was allocated after morning meetings by separate

electrical and mechanical supervisors.

Operations management regarded maintenance as a “necessary evil,” and required

maintenance staff to respond quickly to their requirements. Operational managers in

each of the three business units regarded maintenance as a “service‟ organization to their

production units. They set priorities and requirements for maintenance work, but were

not held accountable for the resulting maintenance expenditure or budget performance.

Some operators were regarded disdainfully by tradespersons as “UFO‟s” for incorrectly

operating equipment and causing breakdowns, while some trades persons were regarded

as inept and incompetent by operations staff. There was a lack of partnership in the

approach to problem solving. Finger pointing and accusations were the rule of the day

following a major breakdown.

In 1995 there were 940 recorded „breakdown‟ events at the Bay Milk site. Breakdowns

were defined as equipment failures that stopped or forced a change in the production

process. Many of these breakdowns halted the flow of milk through the entire chain of

business units; cream products, casein, caseinate, and whey protein manufacture. Once

production flow ceased, the raw milk storage silos rapidly filled as they were capable of

holding just a third of the peak daily volume produced at nearly 1000 farms.

Consequently, dairy transport tankers were left standing at the site waiting to unload.

Transport delays resulted, leading to delayed “pickups” of raw milk from the dairy farmer

owners of Bay Milk. A backlog of full trailers in the morning meant that unhappy

farmers would be ringing the Bay Milk Products CEO and a tense day was in store

getting the plant back to a normal state.

There was a lack of confidence from one day to the next about plant availability and

adherence to the transport schedule. Transport schedulers, drivers, farmers and company

executives accepted the uncertainty as inevitable in the world of dairy equipment

performance. Bay Milk managers expected after hours callouts at home, waking them

in the middle of the night for notification or questions regarding the latest production

emergency, which the “on-call” trades persons were already attending. The” tyranny of

urgency” was often the order of the day.

In addition to the pickup delays, a high level of replacement parts usage resulted along

with increased internal and external contract labour costs. Equipment failure also

resulted yield and grade cost losses and reduced financial performance for products. The

“iceberg” effect of equipment failures was not tracked or apparent in 1995. There was

unrealized opportunity for improvement.

Figure 2. Maintenance “Iceberg” of Hidden Costs

THE MAINTENANCE BEST PRACTICES JOURNEY:

In 1996, a new maintenance manager, while gathering information about maintenance

systems performance, was inspired by the description of plant reliability and the

financial, cultural and lifestyle improvements at the Buckeye Pulp & Paper Mill in

Florida. Buckeye had won the NAME, (North American Maintenance Excellence),

Award 1994. The description of Buckeye‟s performance was used to challenge the Bay

Milk maintenance performance. The maintenance manager suggested that the

tradespersons and maintenance leadership consider embarking on a project to reduce

126

• Maintenance Budget

• Hidden Costs

Labour, Material, Labour, Material,

OverheadsOverheads

Equipment Downtime(Availability)

Reliability (Stop/Start)

Increased Cost of repairs

Quality

Impact on largerinventories

LongerCustomerLead timesLost Profit

Safety

Waste

breakdowns to zero like Buckeye. He was supported by the maintenance coordinator,

who has suggested that removal of the wage-based “callout” system that was

incentivizing a breakdown culture. Ironically and unbeknown to the Bay Milk

maintenance department, Christer Idhammar and the IDCON organization had played a

key role in the Buckeye Pulp & Paper maintenance systems improvement and subsequent

success. They would learn about that relationship six years later.

Without a definitive maintenance best practices systems knowledge or consultant, Bay

Milk‟s maintenance management, supported by the Site Manager, a proponent of Russell

Ackoff‟s Idealised Design approach to operations systems, encouraged the trades group

to consider what actions and systems changes and goals were required to embark on a

pursuit of maintenance best practices and achievement of a zero breakdowns.

Initially, in the first half of 1996, the trades staff‟s reaction to the proposal was either

guarded or indifferent. Tradespersons regarded the zero breakdown goal as an

impossible target, and presumed that the new maintenance manager was setting them up

for failure. The proposal was also setting them up for a loss in. Several of the trades

persons explained their suspicions and the fact that management „had never done

anything for their benefit” to the new maintenance manager, and there was no reason to

believe things would be any different going forward.

Midway through 1996, the former maintenance manager, (now the Cream Plant

operations manager), and a colleague who was operating a successful private

engineering business, proposed to “contract out” the maintenance services at the Bay

Milk site. The proposal was made to the Bay Milk Board of Trustees for consideration.

Shortly after the contract out proposal, the new maintenance manager made a proposal to

the Bay Milk Products Board of Directors for support of a best practices maintenance

programme including the introduction of TPM (Total Productive Maintenance). He

argued that the proposal would not require contracting out of the maintenance department

to deliver substantial bottom line improvements. It was an example of savings through

reliability improvement. The Bay Milk Board members were incredulous, but

supportive of the concept in principle. They were uncertain how such a substantial

increase could be achieved when they hadn‟t identified the potential.

2

Question to Bay Milk Board of Directors 1996 Introduction of MBP & TPM Program potential benefits

Figure 3: Maintenance Best Practices Improvement Potential

Maintenance management and tradespersons alike realized that the opportunity for self

determination and improvement could be replaced by the specter of contract maintenance

and immediate job loss and cost reductions following the “contract out” proposal to the

Board of Directors.

This possibility motivated the trades group to engage in serious discussion among

themselves, resulting in the completion of their own proposal and vision of a world class

maintenance operation entitled, “Engineering Services Idealised Design Proposal.” The

document defined their expectations for their work environment including determination

of hours of work rosters, training, increased self management, and replacement of the

wage-based callout system with a salarised day/callout remuneration proposal that would

protect their current level of earnings.

.

Management countered with a “no loss / no gain” approach for the that would

incorporate the 20% of their earnings for “callout payments” into a salary figure as long

as they worked whatever hours were required to keep the plant in operation.

The site manager and maintenance management took up the trades‟ offer and pitched the

proposal to the Bay Milk CEO. The deal was ready to sign by August 1996 when the

amalgamation of Bay Milk Products Ltd. with the much larger New Zealand Dairy

Group was announced. The new salarised payment proposal was put on hold as Bay

Milk executives were aware of the need to avoid potential conflict with the NZDG

collective employment philosophy. After several months in limbo, the NZDG General

Manager was persuaded to allow the “trial” for the Edgecumbe tradespersons salarisation

for two years.

1997 proved to be a “breakthrough year, with immediate results flowing from the new

payment system. Tradesmen felt that they were now “getting out of bed for nothing,”

because the callout payment was included in their salary. The attention to daily, informal

preventive maintenance checks increased dramatically. Breakdowns had been reduced

by 15% within six months of the signing of the new salary agreement.

New behaviours became evident. The tradespersons cooperated more openly with each

other to solve problems. Job protection was reduced. Both the control systems and

mechanical trades groups suggested that they cover the callouts and day work of two of

their top problem solvers so they could devote their time to resolution of the Top Ten

Breakdown items which were now being actively tracked. Callouts were further reduced

by 40% in 1998, thereby improving the “lifestyle” of the trade staff as defined in the

Idealised Design document.

One mechanical tradesman decided to leave the company in 1998 as a result of the new

system. When asked for his reason for leaving Bay Milk, he said , “before this new pay

system started, I only had one boss. Now, with this team concept and responsibility for

callouts in our assigned areas, I‟ve got 15 bosses!” It was true. If there was an overnight

call-out in his area, the tradesperson who was “on call” was likely to give him a rev-up if

the reason for the callout was negligence, like a missed preventive maintenance task or

obvious fault that should have been picked up during his or her inspection rounds.

This equated to a “punishment” system that had previously been left to maintenance

management, not the trades persons themselves. In the years to come, this negative

reward behaviour was spontaneously replaced with a positive reward system where the

person “on call” started purchasing morning “chips” for all the trades staff when he went

through his callout roster without having to come into the plant. A recognition and

reward for the support by his colleagues for their attention to preventive maintenance

tasks and his well being.

An abortive attempt to implement a Total Productive Maintenance system was initiated

by maintenance management, with reluctant operational support in 1997. Lacking an

adequately detailed and defined implementation process, while trying to cut costs on

consultant fees, the initial three TPM projects failed to produce results. The TPM

programme was perceived as a “maintenance initiative” and was abandoned.

One of the positive outcomes from the aborted TPM implementation was the provision of

a template for a maintenance systems “self assessment” with ten elements and five ranges

from Innocence to Excellent, (See Figure 6). The short descriptions for each of the ten

elements of best practices in the TPM along with the information gathered from the

Buckeye Pulp & Paper article and various SMRP (Society of Maintenance & Reliability

Professionals) conference notes provided the basis for an understanding and definition of

the systems and practices requirements for maintenance excellence.

The Edgecumbe site concentrated primarily on root cause analysis and elimination of

items on the annually refreshed Top Ten Breakdown listing. There were also

improvements in the vibration and lubrication analysis programmes at the Edgecumbe

site.

A mission, vision statement was established during a first annual Maintenance Team

Building workshop in 1997. Key performance indicators were established to measure

success rates in reducing breakdowns, callouts, repair & maintenance expenditure as a

percentage of capital equipment replacement, (since the site was undergoing continued

capacity up-grades). There was insufficient understanding of the requirements for

establishing a highly effective planning & scheduling system as well as improved

equipment standards and preventive maintenance systems. The site continued to repair a

great deal of equipment, including expensive centrifuge overhauls, on a time rather than

condition basis. Operations management were fearful of departing from equipment

manufacturer‟s maintenance recommendations, and current maintenance practices and

analysis had not yet provided a reason to do so.

In 1998, two mechanical tradesmen volunteered to conduct a “common sense,” criticality

analysis of all mechanical equipment to improve preventive maintenance. The decision

was made to go down this path rather than hire consultants to conduct what was

perceived as an expensive and time consuming Reliability Centered Maintenance (RCM)

analysis. The common sense approach took six months to define and implement, but led

to further reduction of potential breakdowns and callouts. A new weekly key

performance measure was created and tracked to ensure that critical preventive

maintenance task completion rates were 95% or higher.

In October 1998, New Zealand sunshine, rain. grass and cows produced a record “flush;”

peak flow of milk. All NZDG sites were required to run at full capacity with zero

breakdowns to ensure that “milk wasn‟t spilled.” If a plant suffered a major breakdown,

there was a possibility that raw milk would have to be dumped during the four week

peak period or shipped to a Kiwi Dairy Cooperative, a competitor. At the Edgecumbe

site, the maintenance trade staff were apprised of the situation by maintenance

management and asked for a recommendation. The tradespersons volunteered to

immediately assume a 24/7 roster, with 12 – hour shifts for each of them, to cover the

plant in order to minimize response time to any failure. This was an unprecedented offer

by an EPMU union members at the NZDG. The maintenance trade staff organized

themselves on the roster without management involvement and carried out the 24/7 cover

for six weeks instead of the planned four week period. The Edgecumbe site ran smoothly

through the period and took on extra milk from several other NZDG sites that suffered

major breakdowns.

In November of 1998, the maintenance manager met with the NZDG General Manager

to request a two year extension of the salary contract for the Edgecumbe maintenance

EPMU members. The GM granted the extension of the “Edgecumbe trial” as a result of

the positive impression created during the recent “flush,” and the documented reliability

improvement of the of the Edgecumbe site. The GM stipulated that , “you will join us

(NZDG / EPMU collective wage-based agreement) or we will join your collective in two

years time.” This was a huge boost to the morale of the maintenance staff at the

Edgecumbe site. Proof positive that “performance provides freedom,” one of the

Edgecumbe site mottos in their efforts to retain self determination and independence

from the NZDG culture.

By the end of 1998 most of the Edgecumbe tradespersons had completed a three-month

trial as team maintenance coordinator for their area-based team. . The tradespersons had

collectively organized themselves into three “area-based teams” to cover the entire site

when the process kicked off as part of the Idealised Design. At the end of 1998 they had

re-organised their structure to a two-team approach, with team members alternating from

one team to the other in a staggered, planned approach over three years. This ensured

that they kept their plant knowledge current for callout duty and that they did not become

stagnant. They had also recommended several changes to their weekly rosters in terms

of days on/off and hours of work. The number of callouts had reduced proportionately

by the number of breakdowns and the total amount of overtime, particularly during the

Winter Shuts had also reduced.

Management had accepted most of the trade group‟s recommendations for roster changes

and teams. The trades also took responsibility for scheduling vacation, monitoring

overtime to ensure fair distribution, and inter-team discipline and conformance to

standards of conduct and time-keeping. They were hesitant to take on the role of formal

disciplinarians against their union colleagues, and that role has remained with

maintenance management to present day.

After most of the trades persons trial “stints” as coordinators for their respective teams,

they realized that some were best suited to “work on the tools,‟ and others for leadership

roles. They collectively made the decision to appoint specific leaders to the team

leadership positions. They also played a key role in the selection of new apprentices as

well as participating on the recruitment panels for maintenance management and full-

time trade roles, which seldom became vacant. These practices were initiated and

encouraged by maintenance management. They were a required outcome of the

Idealised Design document.

It should be noted, that when the salarised day/callout system was put in place in late

1996, their was a fair degree of trepidation. Management was worried that the

tradespersons would immediately reduce their overtime to a minimum or zero, argue

about callouts to after hour breakdowns, and fail to provide an adequate amount of

overtime to complete the winter shut work. Trades persons feared that management

would demand additional overtime, reduce contractor cover and generally work them

harder, longer for no additional pay. Both sides took risks, and both sides delivered on

their promises. Trades staff had guaranteed to management that they would provide

whatever coverage was required to keep the plant running. They did not request or

utilize additional contractor hours. They volunteered for additional overtime as in the

case of the 1998 Flush, and even scheduled OT during the Winter Shuts to ensure that

they got all their work completed and minimized callouts for the coming dairy season.

Management continued to provide training support and contractors as they had in the

past. The net result was improved plant performance and more time at home due to

reduced callouts and overtime for the trades staff, increased cooperation and reduced

stress at work for both groups. A win-win situation if there ever was one.

In 1999, several members of the trades staff approached maintenance management with a

request to try a second implementation of the Total Productive Maintenance, (TPM),

programme. They said that they would never get to „Zero Breakdowns” without the

support of the operators. It was agreed that one control systems technician and one

mechanical technician along with an operator from the caseinate protein powder plant

would attend an introductory lecture presented by the Centre for TPM,

Australasia, to determine whether their approach would work. The conclusion was

favourable, and a proposal was made to the Site Manager to embark on a second

implementation of the TPM programme, this time with one of the operations managers as

the leader of the TPM initiative rather than the maintenance manager. All was agreed

and the TPM programme was launched.

The Focused Equipment and Process Improvement pillar of the CTPM programme was

chosen as the first initiative by the Edgecumbe site TPM Steering Committee. This was

in line with the CTPM philosophy of getting some “runs on the board” with cross-

functional improvement teams in structured 12 week cycles. The initial “pilot teams”

made up of maintenance tradespersons, operators and technical support people facilitated

by a CTPM leader were highly successful. Bottom line savings were realized,

troublesome equipment and process issues were resolved and maintenance staff realized

that in many cases the “UFO‟s” couldn‟t avoid problems given the narrow margin for

error with prior process control, incorrectly designed equipment. A sense of teamwork

and respect were developed during each FEPI initiative. More than 40 FEPI team

initiatives were completed at Edgecumbe during the next five years.

Figure 4; Example of one of the Focused Equipment Improvement Teams

As a result of the cooperation between maintenance trades and operators on FEPI and

Work Area Management (WAM) projects, where trades persons assisted operators in

reconfiguring their work areas, operators became more competent and willing to support

maintenance staff with their efforts to reduce callouts and improve plant availability.

Informal and formal training in equipment operation and repair was provided by

maintenance staff to operators. Increasingly, operators volunteered to make simple

repairs to equipment during night shifts so their maintenance “partners” could remain

home. This ensured that a full compliment of maintenance trades persons were available

on a daily basis to complete preventive maintenance and planned work. Operators

realized the advantage of this approach. Maintenance staff responded by volunteering to

help operators solve process problems, make modifications to plant more willingly and

keep lines of communication open. Maintenance staff provided their operational

counterparts with Christmas food hampers, particularly in the business units where

cooperation was the greatest. Another “win-win” result and the basis for increased

cooperation with the planning and scheduling improvements and other aspects of

maintenance best practice that followed in 2003 and ultimately the award of the World

Class Maintenance score in 2009.

The Work Area Management (WAM) pillar of the CTPM programme was initiated in the

maintenance workshops in 2000. The training by the CTPM representatives was well

received and provided the basis for redesigning the layout of equipment, large rotable

equipment items in the forklift accessible storage area, and the system for identification,

shipment, return and inspection of rotable mechanical and electrical equipment. Helter

skelter storage of equipment on shelves and unidentified and un-serviced rotable

equipment was replaced by a system designed by the trades staff themselves that worked

simply and without fault. A sense of pride and a reduction of frustration resulted which

provided the basis for further refinement in the years to come.

Figure 5. Work Area Management Initiative for Rotable Storage

In 2000 the NZDG recruited a New Zealand based company to implement a maintenance

best practices programme at the seven dairy manufacturing sites. The consulting firm

was selected to consolidate the learnings of the seven maintenance managers along with

their own learnings and expertise. While the programme was less than world class, it

provided the Edgecumbe maintenance programme a platform to demonstrate its position

of leadership and share learnings with other NZDG sites as well as gain additional

executive level support for the value of maintenance excellence.

The CTPM “self-assessment” maintenance survey continued to be utilized and

Edgecumbe maintenance staff and management rated themselves in the 80‟s (out of 100

possible points), convinced that they were nearly a world class operations. As a result,

further effort to improve on the elements of maintenance best practice diminished during

the next two years. Significant bottom line results had been achieved, callouts and

breakdowns had been reduced by 80% from the 1996 levels, and Edgecumbe was

recognized as the leading maintenance organization within the small world of NZDG.

Figure 6: CTPM Maintenance Audit (Self Assessment) - Edgecumbe Scores 1996 - 2002

In 2002, the New Zealand dairy industry was “re-engineered.” The three largest

companies NZDG, KIWI and Southland amalgamated into a single cooperative

organization which provided huge opportunities for rationalization and resulted in the

single largest GDP earner for New Zealand. The new company was named Fonterra.

The new General Manager of Fonterra‟s NZ dairy manufacturing operations recognized

that there was a need to improve the plant availability at the 22 manufacturing sites. He

MAINTENANCE SELF ASSESSMENT SURVEY Leadership & Capability Processes

Maintenance

Management

V & Strategy

Performance

Measures

Organisation

Structure Human

Resources

Knowledge

Base

Maintenance

Tactics

Materials

Management

Planning &

Scheduling

Contractor

Management

Reliability

Engineering

Personal action

plans and

appraisals are

clearly tied to the

Maint Mgmt

Strategy.

On-going

benchmarking of

metrics and

processes Full

cost database

Maint structure

supports

training of

operators in

equip

functions,

minor

servicing, and

root cause

failure analysis.

Empowered,

flexible, world

class workers.

Self-managed

team focus.

Expert systems

used. Fully

Integrated Into

CMMS; common

database.

The Prev / Pred

Maint Plan Is

continuously

being optimised

The "right" tactic

is applied based

on analysis.

Stores system

integrated to CMMS

and accounting

system. Bar- Coding

of all stores items.

+90% all maint

jobs planned and

scheduled at least

the week before.

Linked short,

medium, and long

term planning.

Small number of

Contractors used

on long term risk

sharing

partnership

agreements with

high

innovativeness.

Risk and

unplanned

failure reduced

to best in

industry.

Maint

improvement

action plans are

linked to the

Maint Mgmt

Strategy.

Statistical

Process Control

applied to Maint

Process

Measures. Equip

specific maint

costs available

Established

teams for key

objectives in the

Maint Mgmt

Strategy.

Multi-skilled

trades with

process capability

analysis and basic

operating skills

Easy access to

Knowledge Base

available to all

employees at all

times.

Prev / Pred Maint

Plan exists for all

maintainable

items. Emphasis

on Predictive

maint. All tactics

understood.

Single source

supplier partnerships

established and

effective. Area

stores with

visual controls.

Long term asset

planning

established.

Critical path

analysis used for

all rebuilds,

shutdowns.

Contracts are

established

based on the

principle of

"risk sharing"

Effective Root

Cause Analysis successfully applied to extend equipment life

A clear Maint

Mgmt Vision &

Strategy is

documented and

communicated to all employees

Input, Process,

Output

measures

reviewed and

displayed.

Downtime by

cause.

Segregated

maint costs

reviewed.

Decentralised

with central

support. Clearly

written

mandates/ roles

for each maint

function and

group.

Trades have

problem

identification &

solving, team

dynamics and

training skills

Document control system established. CIMS installed and used to manage Knowledge Base

Prev / Pred Maint

Plan exists for key

equipment.

Compliance is

more than 95% as

scheduled.

Spares classified with separate strategies. Spares linked to BOMs/Equipment Drgs. Standardisation policies exist

All but unexpected failures planned. All planned jobs specify safety, labour, materials, tools, technical data

All contractors

repairing rotables

are capable of

Original Equip

Manufacturer's

testing

Basic Equip

Conditions

established.

Good failure

database. All

major failures

investigated;

PMs modified.

No clearly

documented

Role of

Maintenance or Maint Mgmt Vision & Stratew exists

Some downtime

records. Maint

costs regularly

available but

not segregated

into area/ line.

Centralised

maint with

alignment to

production.

Team approach

to technical

problem solving.

Trades have

OH&S and maint

support

(inspection,

reporting) skills

Plant register

established and

used for data

collection. All drawings and equipment

information

Identified

System exists to

Identify all

maintainable

items. Emphasis

on time-based

inspections and

overhauls.

Stores catalogue

established.

Inventory accuracy

+95%. AN spares

identified and

protected

Work Request/

Work Order

system

established. Major

rebuilds,

shutdowns fully

planned and

programmed.

Contractors used

for peak loads

and non- core

maint work

Collect the data.

Equipment

histories

occasionally

reviewed for

failure analysis.

Our main role Is to fix it when it breaks / fails

Inaccurate or

no maint

downtime

records. Maint

costs not readily

available.

Centralised

maint with no

alignment to

production.

"Command and

Control"

approach.

Trades have their basic trades skills, however little or no technical or support training given

Ad-hoc records. No plant register or control of drawings.

If it ain't broke,

don't fix It."

Annual shutdown

and inspections

only.

Ad-hoc stores. No

costing or control of

spares.

No planning. Little

scheduling. Short

term focus.

All maint

work carried

out by in-

house

resources

No failure

records.

pROACTIV

E

Competenc

e

„02

Understandin

g

„01

Awarenes

s

„99

„96

„00

0

REACTIV

E

initiated a “joint working party” between the maintenance engineering managers and the

EPMU organisers and delegates. A new position was created to coordinate the Baseline

Maintenance Best Practices (BMBP) project, the outcome of the EPMU/Fonterra Joint

Working Party. The National Maintenance Engineering Manager role was created in

February 2002 and awarded to the Edgecumbe maintenance manager as a result of the

success of the Edgecumbe maintenance improvement programme, and the comments

made by EPMU delegates from Edgecumbe site at the kick-off of the Joint Working

Party initiative.

The first order of business for the Joint Working Party was the establishment of a

Steering Committee for the BMBP project. The goal of the Steering Committee was the

establishment of a definition for MBP (Maintenance Best Practices) and a process to

reach it. The steering committee, consisted of sixteen members from maintenance

management, human resources, operations management and EPMU delegates and

national organizer. They formulated a plan to tour all 22 dairy manufacturing sites and

conduct an audit of maintenance practices using the CTPM “self assessment” and a

questionnaire to gain insight regarding union members age, level of work satisfaction,

management / union relations, training and a host of other issues. This tour was

completed by July 2002.

Figure 7. Fonterra Joint BMBP Working Party Steering Committee 2002

In May, 2002, members of the BMBP JWP Steering Committee, along with 15 other

maintenance management and trade representatives, attended a presentation by Christer

Idhammar on Current Best Practices for maintenance at the annual VANZ conference in

Hamilton, New Zealand. The Steering Committee members immediately recognized

that IDCON had the detailed maintenance best practices definitions, written documents

and consulting resources required to support the BMBP programme implementation.

It was more than surprising to discover that IDCON had been involved in the

maintenance improvement initiative at Buckeye Pulp and Paper Mill, which resulted in

their successful pursuit of the NAME Award as mentioned earlier.

There was some contention about the selection of IDCON Inc. as the preferred provider

for the BMBP Project. The Dairy Workers Union had initiated a manufacturing

excellence programme, TRACC, that contained a maintenance improvement module.

The DWU argued that the addition of another provider was unnecessary. The

implementation of the TRACC programme‟s maintenance module was not scheduled for

several years however, and the General Manager of Fonterra encouraged the BMBP Joint

Working Party Steering Committee to forge ahead with their selection of IDCON and the

subsequent programme as immediate improvements in the maintenance performance

were a requirement. There were no experienced and reputable maintenance consultants

within New Zealand at the time, and there were are a host of other international

maintenance consultants to be considered. The Steering Committee elected to stick with

IDCON because of the “common sense” approach, the quality of the training documents,

the audit materials and the fact that other international consultants would probably be

equally or more expensive. IDCON also supported the Steering Committee‟s intention

to train Fonterra‟s own, internal consultants rather than relying on a host of consultants

for the duration of the project.

The Steering Committee members agreed, unanimously, to contract Christer Idhammar

for a visit to conduct a “pilot” CBP audit at one of Fonterra‟s largest dairy manufacturing

sites, Te Rapa, and to follow that up with an introduction of Current Best Practices at

five locations throughout New Zealand during the months of August/September 2002.

The presentations would also include a review of audit findings at the Te Rapa site, and

review of the BMPM business case and strategic plan with Fonterra Manufacturing

Executives.

Figure 8 : IDCON CBP Audit Process Summary – Basis for Fonterra MBP Project

The Te Rapa audit indicated that results of the CTPM Self Assessment might have been

over-stated. The IDCON CBP scores was exactly half the score of the CTPM self

assessment. The BMPP Steering Committee recognized the depth and value of the CBP

audit both as a measurement tool as well as a descriptive document that could be used to

chart the required improvements for the maintenance excellence initiative at the Te Rapa

site and at any other Fonterra site.

C. Idhammar confirmed the business case proposal for the BMBP programme to the

Fonterra Manufacturing executive council, but warned that the timeline of 4 years for

reaching best practices was “optimistic.” The introductory presentations by Idhammar at

the five NZ venues were very successful. There were many maintenance and operations

personnel in attendance that recognized the potential for improvement. Following the

tour of the country and the education of the Steering Committee there was an admission

that most of the Fonterra sites were operating in what Idhammar described as the “cycle

of despair,” responding reactively to breakdowns with little formal planned or preventive

maintenance programmes.

Christer Idhammar IDCON,INC. c_idhammar@idcon.comChrister Idhammar IDCON,INC. c_idhammar@idcon.com 88

Market

Production PlanMaintenance

Planning &

Scheduling

Do

Record

Analyze & Improve

Prevention

and Early

Detection

Technical

Database

IDCON’ Maintenance Productivity Circle

React

Repair

Return

Repeat.

Figure 9: IDCON Cycle of Despair Template.

There was a 4.5% shortfall in availability between the 2002 Fonterra plant availability

performance and best practices plant availability of 99%. That shortfall represented an

idle, $350 Million dollar dairy manufacturing facility amongst the 22 operating sites.

There was $22 million per year to be added to the bottom line for an investment of $8

million in systems, training, and practices over the four year project. The size of the

prize was identified and incorporated into the corporate Operational Excellence

improvement projection.

A second key breakthrough for the Fonterra BMBP programme followed in November

2002 when five Fonterra employees visited the Alcoa Mt Holly aluminium smelter in

Charleston, North Carolina. They also visited another NAME award winner, Novozymes

Inc. and attended the Results Oriented Reliability conference sponsored by IDCON in

Raleigh, North Carolina. The opportunity to “see” two best practices maintenance

programmes and meet practitioners of maintenance best practices at the RORM

conference made “believers” out of the three maintenance managers, the EPMU delegate

and the operations manager that attended. They were able to share their stories and

observations from the trip along with their personal belief in the Fonterra BMBP project

for years to come with the rest of the maintenance and operations people at Fonterra.

In 2003 and 2004, the rate of improvement of the BMPM programme faltered as the

organization struggled to get the Fonterra “flywheel” turning. IDCON assisted with

winning over the hearts and minds of non-believers at a number of the major sites with a

“jump – start” support consultant for the planning and scheduling process.

In 2004 the Edgecumbe site realized that it had not achieved best practices as they

believed after scoring 53% on the IDCON CBP, not exactly half of their CTPM self

assessment, but markedly below their perceived level of performance.

Edgecumbe was one of three sites where the CBP was conducted by Christer Idhammar

along with a cross- functional BMBP “Audit” team that was tasked with learning the

audit process and delivering it at all remaining Fonterra sites. The BMBP Steering

Committee agreed to discontinue the CTPM self assessment audit in favour of the

IDCON CBP audit and had recommended the purchase of the license and training of

Fonterra employees to conduct the audit themselves on an annual or semi-annual basis at

each site. The intention was to motivate the pursuit of maintenance best practices

through the pursuit of an annual increase in the CBP audit score.

The Edgecumbe maintenance organization faced their own “fly-wheel” inertia, taking up

the new challenge to re-ignite their maintenance improvement programme with mixed

emotions. The lifestyle improvement and performance results seemed adequate. There

was talk of competition with several other sites that were part of the initial training audit

to be the first to reach world class threshold of 75%. The new maintenance manager and

coordinator at Edgecumbe used the audit results and the IDCON training materials on

planning & scheduling, equipment care and condition monitoring to define their goals for

improvement in the coming years. The focus would be to complete documentation and

measurements for the planning & scheduling system as well as executing a true daily/

weekly planned maintenance programme.

Additionally, the Edgecumbe maintenance trades and management realized that a review

of plant criticality and failure developing periods was required that would lead to

improved preventive maintenance tasks, documentation and measurements.

Improvements in the two most highly weighted elements of the IDCON CBP audit, (See

Figure 8), would improve maintenance effectiveness as well as raise the rating to world

class standards. IDCON consultants would be used to provide direction and coaching

for the improvement activities during the initial stages until internal expertise was

capable of taking over both at the Edgecumbe site and as part of the national

Maintenance Best Practices project team that was formed in 2004 to increase the speed of

systems implementation.

Initially, there was some reluctance by the Edgecumbe tradespersons to look at

formalizing the planning and scheduling and preventive maintenance programmes to the

degree required. The challenge to be the first to reach world class at Fonterra was a key

motivator, along with the growing recognition that formalizing, documenting the detailed

practices was also a requirement to survive the test of time. There was a danger that the

„lifestyle” and performance, the freedom itself, could be lost when the “old guard”

retired in the years commencing from 2010 onward, when a number of the staff had

indicated they would be looking to leave the company.

In 2004, as part of the Fonterra organization, the Edgecumbe trades staff perceived a

potential for loss of their salarised collective employment agreement with the EPMU.

Fortunately, after review by the BMBP Steering Committee and Human Resources

collective employment experts, the Edgecumbe collective employment agreement was

adopted as the preferred option for all Fonterra sites, with the recognition that its

implementation would take some time. Several of the former Kiwi Dairy sites had

already made the successful transition to the new standard collective, but a majority of

the former NZDG sites were still operating on the wage-based system. The delegates had

succeeded in convincing tradespersons their that management could not be trusted and

movement to the salarised document was not in their best interests. A failure to perform

or improve at Edgecumbe might result in a loss of favoured collective agreement status

for the salarised day/callout practice that the Edgecumbe trade persons agreed was best

for them.

In 2004, the BMBP Steering Committee convinced Fonterra executive management to

increase the number of apprentice trade trainees in the system from four to forty-four

over a multi-year period. A new apprentice qualification incorporating the IDCON

defined principles for maintenance excellence was initiated by Fonterra, the EPMU and

several other New Zealand manufacturing organizations. This was fortuitous as it would

provide an opportunity to train trade staff from “day one” and also provide the materials

to train the „in service” trades persons in the concepts of maintenance excellence. This

meant that the Edgecumbe site would have at least two apprentices continuously within

their midst going forward to add new energy and support for the pursuit of world class

maintenance. The increase in apprentices was perceived as a very positive result by the

EPMU membership and organizers. Another example of management “walking the talk”

and delivering on something that was in the best interests of the union members and the

company.

The Edgecumbe maintenance department spent 2004 and 2005 working on improvements

to the Planning & Scheduling and Equipment Care and Condition Monitoring (preventive

maintenance) elements. The entire maintenance department continued to conduct

annual, facilitated Business Plan and Strategy reviews annually. It was at these events,

that management and trades leaders re-newed their commitment and adjusted strategy

and resources to achieve the year‟s goals. The importance of these expertly facilitated

annual reviews and affirmations was a key ingredient in the success of the journey.

Nationally, an initiative was put in place by the newly formed Maintenance Best

Practices Project Team to improve the computerized maintenance management system

standardization and to reduce the amount of work during the Winter Shuts. A template

and computer spreadsheet was developed to facilitate the analysis of plant criticality and

preventive maintenance tasks for existing winter shut programmes and for sites where no

formal programme existed. The results of this analysis during 2004 and 2005 was a

reduction of 15% of Winter Shut tasks across all sites, (and associated savings), as well

as a comparable reduction in start-up failures.

In 2007, an IDCON CBP audit conducted by “internal” Fonterra audit team scored the

Edgecumbe site at 65% and the Kauri site close behind at 63%. Competition was fierce

and there was a belief that the audit team was overly critical. The Edgecumbe

maintenance department recognized that additional improvements could and were

required for maintenance systems. Several of the “young gun” tradespersons took on an

increased leadership role from the original initiators of the programme.

In October 2009, Christer Idhammer conducted the Current Best Practices audit at the

Edgecumbe site. The resulting score was 78%, three per cent above the World Class

threshold of 75% !!!

62 WWW.IDCON.COM

Total CBP Scores

0

10

20

30

40

50

60

70

80

2003 2006 2007 2009

CBP Score

World

Class

Figure 10:; World Class CBP Audit Results for Edgecumbe October 2009

RESULTS:

The following graphs and bullet points illustrate the improved plant performance and

lifestyle that have resulted from the maintenance excellence journey at Edgecumbe

Figure 11: Edgecumbe Breakdown Reduction Trend = 78% Reduction with balance of

breakdowns primarily intentional “run to failure” events

F99 F00 F01 F02 F03 F04 F05 F06 F07 F08 F09 F10

Actual/Forecast $4,541,636 $4,396,000 $4,866,785 $4,909,973 $4,604,006 $5,078,321 $5,592,104 $5,775,076 $5,500,000 $5,637,400 $5,921,000 $6,868,000

Equip Replacement Cost$253,478,428 $264,000,000 $273,252,000 $281,636,520 $295,661,050 $380,029,600 $400,750,000 $449,311,553 $463,240,473 $540,000,000 $560,000,000 $581,443,600

ERV Actual % 1.79% 1.67% 1.78% 1.74% 1.56% 1.34% 1.40% 1.29% 1.19% 1.04% 1.06% 1.18%

Figure 12 : R&M Expenditure Savings

Repair & Maintenance Actual Expenditure (R&M) versus Equipment Replacement Value

(ERV) is used to calculate the R&M reduction since the capital value has increased. (e.g.

R&M $ in F10 = $10.3M at 1.79% vs. $6.86M = $3.45M reduction)

Edgecumbe breakdown trends

0

200

400

600

800

1000

F96 F97 F98 F99 F00 F01 F02 F03 F04 F05

Edgecumbe R&M/ERV Ratio

33% Reduction

1.79%1.67%

1.78%1.74%1.56%

1.34%1.40%1.22%1.19%

1.04%1.10%1.19%

0.00%

1.00%

2.00%

3.00%

F99 F00 F01 F02 F03 F04 F05 F06 F07 F08 F09 F10

19

As a result capacity is up 40% @ 4.7%* CAGR, in F03 we were awarded “Fonterra’s most reliable site”

(Compound Annual Growth Rate)

Edgecumbe daily milk capacity

2.50

2.75

3.00

3.25

3.50

3.75

4.00

F96 F97 F98 F99 F00 F01 F02 F03 F04 F05

Mil

lio

n o

f li

tre

s p

er

da

y

Capacity has increased dramatically with minimal capital spend – estimated at 1/10th of that

required for new plant investments

As this gain is reliability and speed based our costs structures have gone down in similar

proportions to the gains

Flow on effects into yield and grade have been significant

*Adjusting for

the product

mix capacity

CAGR is still

4.1%)

Figure 13: Capacity Increase of 40% (Result of Operational Excellence Initiatives

of which Maintenance Best Practices was a key element). G.Gunnell, Edgecumbe Site

Manager, 2005.

Key “Bottom Line” Results (2010 vs. 1996):

.

Past Eight years Zero Lost Time Injuries for Maintenance Department

Breakdowns and Callouts (after hours responses) reduced by 80%

Capacity Increased by 40%

Plant Availability at 98.5% +

R&M expenditure (avoided cost) reduction of 33%

CONCLUSIONS:

Figure 14: World Class Maintenance Team October 2009

Following the October 2009 CBP audit and recognition of World Class status, some of

the comments from the Edgecumbe trade staff were surprising; “ I was surprised that we

reached it, there are so many things we can still improve!?” A comment that could be

expected from a group of people that have realized that the “enemy of better was the

thought you were the best.” Some of the trades staff are currently discussing how they

can now “close the 22% gap to get to 100%!” It is this sort of thinking and recognition

that the “Journey” is never complete that have given Edgecumbe the results so far.

Steadily increasing financial benefits as well as the work and home lifestyle

improvements have been enjoyed by the Fonterra Edgecumbe operations, management

and tradespersons throughout the journey. While it‟s difficult to quantify the intangible

benefits, all would attest to the enjoyment of reduced stress levels, a positive impact on

work relationships and family life. Definitely more time for hunting and fishing and time

with the family.

One could argue that there have been four key elements of success:

1. Creation and acceptance of the salarised collective employment agreement and

the inclusion of the Idealised Design document .

2. The partnership developed between operations and maintenance facilitated by the

CTPM and Operational Excellence cross-functional problem solving and other

initiatives

3. The definitive IDCON CBP documentation & audit tools and consulting support

4. The “constancy of purpose” provided by operations & maintenance management

along with tradespersons and operational staff.

The collective employment agreement developed in partnership between the EPMU and

maintenance management at Edgecumbe and supported by the Idealised Design

document created by the Edgecumbe tradespersons have resulted in the creation of a non-

prescriptive document that defines the aims, goals and practices in general terms and has

replaced the voluminous descriptive, wage-based document. The positive union-

management relationship at Edgecumbe has been based on delivery of promised actions

including the self-managed team approach and the good will from both sides in regard to

work hours reduction and commitment to provide necessary resources. . The incentive

provided by the day/callout salary continues to be regarded as the primary motivator for

breakdown reduction, cross-functional cooperation and continuous improvement actions.

As mentioned earlier, the CTPM Focused Equipment Process Improvement initiative

provided a detailed, defined framework for cross-functional problem solving and the

elimination of annoying, costly, and stressful equipment and processes. The CTPM

approach has been superseded by the Operational Excellence programme at Fonterra.

Both have provided the context for cooperative, continuous improvement activities that

have demonstrated that both the operations and maintenance staff have each other‟s “best

interests” at heart; the foundation for a trusting and mutually respectful relationship, “a

partnership of operations and maintenance that equals production,” as Christer Idhammar

has often said.

The Edgecumbe maintenance department believed it had reached world class

performance in 2002. The maintenance excellence initiative, as a result of the Fonterra

BMBP project provided the introduction to the IDCON CBP audit document, training

materials, and consultant services. These materials and guidance were essential for

further improvements, credible performance and guaranteed sustainability.

During the twelve year journey, the three site managers never wavered in their support of

the pursuit of maintenance excellence. With the initiation of the BMBP programme by

Fonterra at a corporate level in 2002, the executive management provided an important

additional boost, which included recognition in 2003 of the BMBP initiative as one of the

most successful programmes of the new company. A key morale and respect boost for a

discipline that had previously been regarded as a “necessary evil.”

At the maintenance manager level, there were three maintenance managers and

coordinators during the 12 year period and all of them were “internal” appointments,

people who knew the philosophy and systems and had a vested interest in maintaining

and promoting the initiatives. Additionally, the national BMBP manager, (the former

site maintenance manager), was physically based at the Edgecumbe site from 2002 –

2006. He was able to provide support and connectivity to the national programme and

its resources for the Edgecumbe maintenance department. The opinion leaders within

the trade group were present for the entire journey. The only risk at the trades level was

the incorporation of new apprentices and the hiring of several replacement tradespersons.

The tradespersons stipulated that a “fit” with the existing philosophy and maintenance

excellence programme was an absolute pre-requisite. All newcomers to the maintenance

department enhanced the energy and commitment to reach the world class target.

The support and low turnover of managers in the each of the four production units at the

Edgecumbe site was also a key to success. The partnership and “win – win” relationship

established between the maintenance and operations personnel was a key element in the

continuity of the journey.

The Fonterra Edgecumbe site has succeeded in demonstrated that “reliability drives down

costs,” and improves over-all “performance that guarantees freedom.”

24

Reliability Focus –Buckeye Benchmark vs. Edgecumbe

0.8

0.85

0.9

0.95

1

1.05

1.1

1 2 3 4 5

Maintenance costs

Production throughput

0.4

0.6

0.8

1

1.2

1.4

1.6

1 3 5 7 9 11

Maintenance costs

Production throughput

Reliability Focus - Buckeye Reliability Focus - Edgecumbe

Figure 15: Buckeye Benchmark Matched by Edgecumbe Results !

Reliability Reduces Costs & Increases Capacity. Excellence