Equipment oil testing: revamping to control costs

Renee B. Kringel

Idaho Power Co.

Idaho Power Co. achieved savings of more than $80,000 in its oil testing program over a 16-month period after creating a position responsible for managing the system`s oil testing program as one of its stated job duties.

Idaho Power Co.`s earlier approach to oil testing was very limited in its success. Resource constraints, company restructuring, data integrity problems and a changing business climate contributed to a high resample rate and a low equipment scheduled vs. completion efficiency ratio. The program had no budget, cost or performance measurement system. Idaho Power was spending in excess of $100,000 per year for contracted oil services with only 40 percent of the scheduled equipment being analyzed. Of the equipment that was being analyzed, 41 percent was being resampled for various reasons.

Oil testing deserves a closer look

To achieve better performance at a lower cost, Idaho Power needed to improve the processes that use oil testing services for equipment maintenance and improve availability of information. In the age of lean operating, Idaho Power looked at ways to do more with less. From a well optimized oil program, it expected to reduce oil equipment repair costs 60 percent by taking maintenance action in a detected failure mode earlier on the damage curve (this 60 percent repair cost reduction has already been experienced on load tap changers).

Another way to do more with less was to start capturing hidden value. Non-product-related service outsourcing can cost the equivalent of 20 percent or more of a company`s budget. Yet, it is frequently overlooked as a potential source of significant savings and efficiency gains. Managed rigorously, the hidden value of such service outsourcing can be substantial.

Idaho Power`s substation apparatus department typically spends the equivalent of 20 percent to 25 percent of its budget with third-party suppliers for goods and services not directly related to the end product of delivering electrons. The hidden value of rigorous management of the outsourced oil program is not only in cost reduction for the individual tests; with tighter control of the service, the results may include greatly enhanced capabilities, a more effective organization and stronger strategic maintenance performance.

Many of the elements that contribute to the bottom line within the oil program are difficult to quantify for the following reasons:

– Most upper management would probably consider the oil analysis outsourcing service peripheral and unimportant except for the actual line item expense.

– Oil program expenditures tend to be spread across several cost centers. About 15 percent to 20 percent of outside laboratory expenditures are unrecorded and disappear in the corporate vacuum. They are either hidden from view or simply inaccessible, lost amid the complex array of goods and services that any large organization purchases.

– Maintenance budgets are commonly dispersed and fragmented.

– Performance measurements are not defined or not in place to monitor the process efficiency of an oil program.

What makes a good oil program

A good oil program is simply good life cycle management, a method of identifying and characterizing a process and costs from cradle to grave. It includes not only the initial costs to procure the analysis but also the long-term costs of operation (sample collection costs, information distribution, program accountability), maintenance (report tracking, container procurement, mistake mitigation), and the unreliability of the program (resample rates, false positives, etc.).

The following are general principles for consideration when implementing a smart oil testing program:

Define the most efficient and effective business processes and workflow.

– Don`t make the mistake of simply automating manual processes.

– Eliminate unnecessary steps, forms and extraneous information.

– Identify what to measure and how to measure it. Measurement gives purpose to the oil program.

– Ensure the goals and objectives of the project are understood clearly in the form of performance measures and targets.

– Share information (sample shipment schedules, services needed, supply history) electronically with the service provider to build a partnership.

– Implementation should not be rushed. Planning is essential for ensuring an easy to use automated system. Rushing may frustrate people when they first use the system, and chances are high they will not want to use it again.

The accompanying sidebar highlights specific questions for use in planning an oil testing program.

Idaho Power sees results

Idaho Power believes the expense of training the field personnel on the principles of oil analysis and sampling is the key to the overall success of the program. For example, all field personnel involved with the oil program were flown to the laboratory for training where they were educated on the oil testing process from cradle to grave (sample receiving through test data interpretation). The cost was $6,000 and was recouped within the first eight months of the program by reducing the resample rate associated with sampling error.

Figure 1 shows Idaho Power`s cost savings to date. Other benefits included reduction of the resample rate by 50 percent; application of business principles to operational processes; cost analysis and performance measurements; establishment of an effective data management system; alliances with other utilities; partnerships with laboratories; and an 85 percent scheduled vs. completion efficiency ratio.

The 1999 projected budget for the oil testing program is $34,000. (see Figure 2) Estimates are that 350 man-hours from existing employees will be required for sampling/administration and about 900 pieces of equipment will be analyzed. The estimated cost for sampling/administration is $17,500.

All future oil program costs will be audited by performance measures such as return on investment calculations, resample rates, internal process audits, and equipment scheduled vs. completion efficiency ratios. Idaho Power will also be performing contracted service audits such as data integrity measurements, sample turnaround time comparisons, and consistency and service performance measurements. n

Click here to enlarge image

Click here to enlarge image

Boosting the value of equipment oil testing

– What is to be sampled? (Determined by maintenance practices)

– When should equipment be sampled? (Determined from manufacturers, reliability-centered maintenance, history, operating conditions, type of equipment)

– What tests are to be performed?

– Determine the real need for each test. Will action be taken on all tests?

– What are the causes for resampling and what are the associated costs? What percentages of resampling are due to sampling errors, laboratory error, or labeling error?

– How much time is spent mitigating for mistakes/data inconsistencies?

– What are the sample labeling requirements?

– What are the sampling techniques?

– Where is the data transmitted when the lab is ready to send it?

– Who gets the data?

– Who interprets the data, and what actions then need to be taken?

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