Maintenance Budget Getting Cut? Here’s What to Say.

Ed Ballina: Well, welcome to the manufacturing meet up podcast. This is an opportunity for Alvaro and I and guests to kick back and talk about our experiences on the shop floor and hopefully get you to weigh in on your experiences as well.

Alvaro Cuba: Believe it or not, it’s our episode four in season three.

Ed Ballina: So of course we always have to find something to wear on our heads because that has become a little bit of our trademark. So I have one that’s called Pops. I’ll talk about that in a minute. But Alvaro, what do you got on? That’s very colorful.

Alvaro Cuba: Yeah, very colorful. It’s Puerto Vallarta. We were last week doing some surfing and scuba diving and we met some family and friends and they were waiting for me with this. They are followers of the podcast and they know that we use these hats. So they bought it for me and so now I’m using it. Thanks to them. I love that.

Ed Ballina: So a big shout out to the Cuba family and all of the viewers. Hopefully there’s more where that came from. So mine real quick. I happen to be in the outer banks on vacation. I love Hatteras and one of my favorite places to go eat raw clams and oysters is Pops. It’s like a neighborhood bar full of locals and the ambience is great. I love it so much I bought the hat. So that’s our hat story. I got full. Yes, scarfed them down. So we’ve spent a few episodes this season talking about things that matter, right? Predictive maintenance plans. How do you upskill your workforce, et cetera? How do you break firefighting? And all that is great. But sooner or later, folks, you’re going to have to have the tough conversation.

Alvaro Cuba: That’s delicious.

Ed Ballina: When you’re trying to justify investments, right? Or trying to defend your budget. And those are challenging for us. And boy, those are the conversations we don’t like to have. And unfortunately, they’re necessary if you want to be successful.

Alvaro Cuba: Yeah. As we discussed in the very first episode, we are in a moment where we have huge costs impacts. And I’m sure you are having this sound having guys we need to save, we need to cut. So we thought, yeah, we need to be able to defend the funds that we need to implement the things to make our plants run good. But we need to talk to the CFO, to the CEO and everyone. So we wanted to touch that in this episode and how in our experience you can do it and win it. But before going there, please subscribe, touch the subscribe button and so you don’t miss the conversation. And with that, let’s get started.

Ed Ballina: Let’s do it. Segment one. We start off with people and it’s because when you’re trying to sell an idea, right, you can go in there with the best data and the best information. But if you neglect the people side, you’re probably not going to be as successful as you can be. Number one, know who’s in the room. It’s really important to know your audience. And there’s a number of reasons why maintenance individuals, reliability folks sometimes lose the conversation when they go into that room and we’ll boil it down to three. First is to some senior leadership, maintenance costs appear to be discretionary, right? You know, when things get tough, volume goes down, you know, financially you say, hey, discretionary costs, right? So we start cutting things that are nicer to do versus mission critical. And I’ve spoken before about this, one of my passions is to share with people that maintenance, our end costs are not discretionary. Pay me a little now or pay me a lot later, right? So that’s the first thing you have to understand that you’re walking in with, you know, to a room where some people think your costs are something that are discretionary, even though they aren’t. Secondly, we may not be speaking the same language. You may be in there talking about reliability and minutes and go down to the lubricity of the oil and all this. The folks you’re presenting to, first of all, some may not have a deep technical background. So frankly, you’ll bore them. I know I have. But secondly, they’re talking in share. They’re talking in out-of-stocks. They’re talking in dollars, realized revenue, ROI. So it’s almost like you’re speaking in French and they’re speaking to you, not in another Romance language like Spanish, but they’re speaking to you in Russian, right? Where even the alphabet is different. So understand the language that the room you’re going into speaks of or converses in. And then lastly, many of us are deeply technical and we tend to have a functional focus, right? If you’re maintenance manager, you’re held accountable for reliability, you’re held accountable for costs, but sometimes the investments that you make that reduce waste or drive customer service, reducing out of stocks or enable energy savings, they don’t accrue to your particular P&L. And at the end of the year, when you get rated, somebody is definitely going to ask, where did you deliver on your R&M budget? And maybe they’ll think about, oh, how did you impact waste? It’s important for you to speak holistically to the total business costs.

Alvaro Cuba: Yeah. And one other important thing is you need to find allies. You shouldn’t be walking into these discussions with senior leadership alone. You need in the room allies. And of course you cannot go empty handed. And we’ll talk in the second part about that, but going with allies and it’s not that you will make the allies in the room. You need to work that before. We are right now in a great moment because we have this AI fantastic thing that drives data. So you can use that data to check in your own plants. What is the cost when you run without doing maintenance, the proper maintenance? And what are the benefits when you run with your machines a spot and perfectly maintained. Then that delta, you can use it to win allies even before the meeting. You can go and talk to other people in the room, your quality manager, what’s the impact in quality, or even you can involve the customer. You can talk about what the customer says. Every time you have down times, you don’t get enough volume. Then your customer suffers. You need to discontinue products. You need to take out promotions. So when you come to the room, you will have the quality people talking in favor of your idea because they experienced the other. Then you can inform them, look, my numbers will look like this if I cut. My numbers will look like that if I invest. By the way, the customers are going to tell you this or that. Let me tell you just a quick story. We were having a horrible line in a plant in the Midwest. And we had different meetings. And every time we were going into the meetings, we were going empty handed and we were not finding the way. And then in one of these organizational changes, we said, okay, this is our opportunity. You know, when there is new management in the region, you normally take them to a plant that runs well and you want to show them the best and all that. We said, this is our opportunity and we did it the opposite.

Ed Ballina: You dirty dog, you!

Alvaro Cuba: Yeah, to this plant, the machine was stopping, it was dirty, the waste was all there, and they got shocked. And they asked, is everything like this? No, but look what happens when we don’t do the proper maintenance and we don’t have the right budgets. So every time we had discussions after that, they were our main advocates to go after the proper maintenance in the proper time. Awareness all the time, not when the crisis come, but ahead of time, it’s critical.

Ed Ballina: Show me, show and tell really helps.

Alvaro Cuba: Yes, that’s exactly it. With that, I think we can go to the second part. We said we wanted to talk about people first, knowing who you know, with whom you are going to speak. The second part is you cannot come empty-handed. You need to know and be prepared for that. So a couple of things. One is, and Ed alluded to this, is what KPIs, what numbers, I don’t know if it’s the cost of downtime in your line and how much that cost to the company or is a mean time to in failure or is a global efficiency. So you need to know what’s that number for your line. What’s that number impacts the company. And even nowadays, you can know what’s that number for your competitors. You can have the benchmark. The second part is you need to build the business case and here some quick numbers for you. Several studies in different parts and places. If you cut to save, you save for every $1 that you save when you have to really do the maintenance later in emergency or it’s going to cost you four. And why is that? Allow me to give you just very quick examples. The first is it’s called collateral damage. It happened to me and this is not only useful for manufacturing, even for homeowners for logistics. I failed to change some tiles in my roof. I didn’t have the time. I wanted to pay, I delayed it. A few weeks later, my wife showed me a stain in the roof. Then you know what that means. The beams were wet, the mold was starting, the internal finishings I had to change. So the one and four in this case was one in 10. I had to spend much more.

Ed Ballina: Let’s not forget the collateral damage, okay, of now, if it’s in my house, my wife gets to point out how I failed in one of the most basic responsibilities, which is to keep a roof over her head. Which is true.

Alvaro Cuba: Yes, let’s not say that. Yes. Let’s not give arguments. The second, just the second. Emergency repairs. Emergency repairs come with a premium. Overtime, weekends. You have to do it in a peak of use of the machine, then you impact revenue. Three to five times more cost in emergency repairs than when you should do it. The third is asset failure. When you make your line to run in less than perfect conditions, they run harder than the rest efficient. Half the time of the lifespan of the machine because it deteriorates. And then you have obvious waste, more energy, you have more operational costs because you need to reprocess, your downtime costs goes up, you lose revenue, and then you have numerous other things. So put those numbers. $1 versus $4, three to five times the cost half the time. When you put all that, you are going to have the business case that you really need to justify not to defer maintenance, but then you will have the numbers in front of the people. Okay, I cut for you. I’ll save you $300,000. That will cost us four times $1.2 million if we do it at the beginning of next year. So there is no single CFO that is going to tell you cut. But now, because they will understand the implications you have after that.

Ed Ballina: Yeah, I mean, I might have met the occasional leader who figured I’m promoted or out of here in the next six months. So good luck, brother. I’m taking the money home. I’m joking. That doesn’t really happen. But you know, there’s always a push, you know, when it could because everybody will have a story, right? Everybody will have a story why they can’t cut their budget. You know, the marketing person will tell you they’re going to lose product activation. You know, the S&D folks will tell you I won’t be able to merchandise. So you got to build a simple business case. Okay. And I’m not talking about a fancy 40 page deck that you put together in ChatGPT and had Canva pretty it up. I’m talking, you know, three to four pages, hard hitting. And always start with the numbers. Hey, here’s the situation that I have.

Alvaro Cuba: And with your actual numbers, numbers of your line, your plant, this is what happens to us.

Ed Ballina: This is how we get into positions where a year and a half later, somebody turns around and says, how did you let this happen? Well, you told me to cut costs. I didn’t have anywhere else to go. You didn’t give me leeway. So it creates an environment of victims, right? So never be a victim, right? Take control of your own destiny and impact what you can. If I can invest this money on a new refrigeration system that is right now costing me 260 minutes of downtime a week, right? Here’s what that’s going to result in, both financially, right? Here’s how much I’m going to save on parts. Here’s line efficiency, here’s waste. And by the way, it’s going to be energy accretive to sustainability goals, et cetera, and speak to them in things that matter to them, right? Not how many more squirts of oil you’re going to have to put in it or whatever. They want to hear higher level conversations as we’ve had. Secondly, you know, I’ve learned that timing matters in every part of your life and it’s no different with this. Timing is everything in life. If you’re going into a meeting where it’s “burn the furniture,” okay, because you’re hitting fourth quarter and you’re not hitting the numbers, that is probably not the time to pitch a fancy new RO system that is going to incur costs this year and maybe save something next year, right? Pick your battles, right? And going back to the relationship thing, I can’t stress that enough. But you don’t have to accept the direction without any kind of comeback. So I’ll give you an actual case, an actual story. We’re putting in this first line of a kind in a facility I was involved in. And we were really striving to make it kind of a center of excellence, the best that it could be. In the middle of that, we found that the electrical switchgear coming into the plant was aged and we were going to put more stress on it because we’re increasing capacity, et cetera. So a decision was made that they were going to change out the switchgear. The switchgear shows up on my plant. The project starts getting tight on money. And I’m on the phone with the VP of engineering who’s telling his project manager to ship the breakers back because we have to cut costs. And I was like, that may solve your short-term problem of hitting your capex number, right? But that is the wrong business decision to make. Okay. So cause you’re going to incur, I think it was $600,000. It wasn’t cheap on a 20 million dollar project, right. And okay, you’re going to incur some restocking fee, but at the end of the day, what are you really going to save? And you’re going to have this beautiful line that maybe a year, a year and a half from now, it’s gone. You were going to have problems with the electrical system and people are going to say, how would you invest $20 million and not invest $600,000 to make sure that it met its expectation for the life of the line? Right. And the conversation might’ve gotten a little testy, but we ultimately agreed that that was the right decision to make for the business.

Alvaro Cuba: You have your other allies, everyone is going to agree. And it doesn’t become you versus the engineering. No, you can have finance, you can have quality, you have the other functions that will weigh in and bring your friends with you and this becomes a company decision versus a functional decision.

Ed Ballina: Absolutely. And unless, listen, we all play functional games because to some degree, many of us 60 to 70% of our performance review is functionally based, right. But you have to be a good business steward, right? Treat these businesses like it’s your own. I often use a term, hey, if this is the Ballina bottling company, here’s what I would do. Now, I don’t have one yet, but I’m working on it. So hire me. You will be the first one in line. We’re going to move on to segment three technology, but to give you just a real quick image of when Alvaro was talking about bringing leadership into his worst plant, I had a facility where I had trouble getting money to replace a roof.

Alvaro Cuba: Ha ha ha.

Ed Ballina: Okay, any of you in supply chain know that roofs are like, they don’t want to spend money on it because there’s no return, right? You got to convince people that it’s really bad. Anyway, so I couldn’t get money for a roof and I had a senior leadership tour and we had to mitigate. So we put what’s called a diaper on the roof. And it’s unsightly. It’s essentially a funnel of plastic that you tape up to the roof with a hose that comes down to drain. Right. And I made sure that we took them on the tour right past that within 50 feet. People like, what is that? What is that? But four months later, I got a capex to fix the roof. So anyway, sometimes you have to be a little devious. Right. All right. So segment three, technology. And this is the fun part, because now we have so much more data than we used to that you don’t have to work real hard, right? To put together compelling information, especially with AI. So let’s make sure that we’re addressing, right? All the issues that people have with facts. As I was coming up in my career, yes, there was data, especially folks like us were data hounds, but it was hard to get. I mean, we would stand people and we still do today in some places at the end feed of a packer with a clipboard and a pencil writing down every time a can went down to do a study to figure out what down cans were causing us for downtime, right? And have somebody go find a spot where it was happening today. Machines will tell you exactly why they shut down, right? I have a little bit of experience with a system called Zarpack that shows you for every piece of equipment when it’s up, when it’s down, and how it’s its own efficiency and then how it impacts the line itself. That is amazing. We used to run around 50% of our time just to get data. It’s available now and you can make very compelling arguments as to what this particular issue is causing you. Also, when we talk about R&M, R&M is a lagging indicator. Well, fortunately or unfortunately, you could cut R&M spending severely and probably not see the results for six to nine months. Okay. And that’s just how it is. So you have to make sure you’re defending for the future. You’re not just defending your budget for today. You’re defending for the people that are going to have to figure this out when you’re onto your next job. Going back to Alvaro’s comment about speaking the right language and what people want to hear. When you talk to a CFO or you talk to a senior executive leader about something you want to do and you can show how you are utilizing AI for that or higher technology that elevates you, right? As a forward thinker, innovator in your business.

Alvaro Cuba: And you said it, we were discussing this before the show and you’re mentioning AI now has fantastic tools for very little cost, you know, and you can have the data of your own line. How many times it stopped for how long, what was the waste, what is the weight in, the weight out. So you just need to assemble all that data in a way that you can put it and use the technology to do that. A couple other points on technology, adding to what Ed was saying, just three points from my side. One is intelligence these days is becoming a commodity cost. So not an overhead anymore. It is a commodity and everyone is starting to have it. So it depends how you use it. It’s like buying oil or like buying grains. It’s there, you have it. It depends on the R&D that you put it on top of it. So it depends on how you use it. The second is three years ago, you had an uphill battle with your CFO, for instance, because why you want to put this technology? Today, there is so much knowledge on AI that your CFO is probably the one telling you why you are not using AI. So it’s not that you need to convince them anymore. The part that you need to convince is, okay, there are 20 AI projects in the company, why yours makes more sense because it’s the base. If the base fails, all the rest fail. You also need to understand the other part. You need to understand your CFO. He needs the money. He needs to cut costs because the oil is to the roof, sales are not coming, and you are part of the company. The beauty is these days, and specifically talking about maintenance, you don’t need in its time and my time, we had to choose A versus B. Because not cutting and investing was difficult investment and putting a lot of process and a lot of things. These days, with AI, specifically maintenance, in a couple of months, you can have your AI in your line working. And in three months, you can see ROIs of five to eight times. That means that you can do both things at the same time. You are going to be saving and given the CFO the money they need. At the same time, you will be doing your maintenance. And that’s the beauty of the technology these days.

Ed Ballina: Great points.

Alvaro Cuba: Guys, we are getting to the final part and as we always do, we wanted to leave you with two or three just quick takeaways. I’ll do a couple from my side and Ed will add to that. But one is there is a phrase that is the silent budget killer and that is cutting maintenance. And as we said, we don’t need to do it these days if we use the technology. And the second thing we talked a lot about the business and the impacts of cutting maintenance in the top line in revenue, in the bottom line in cost, in inventory, but three areas super important that are also affected when you don’t maintain your lines properly. Safety, which is critical for your people, quality and consumer safety, which is so important for the consumer and your people. Managing a line that is crappy is so hard on the people. Your talent suffers. Your employees, your satisfaction is hard on the people.

Ed Ballina: It is so robbing.

Alvaro Cuba: No, so it’s not only those hard things, top line, bottom line and cash flow. Yeah, those two and you have to do it, but safety, quality, morale and all those are also impacted. So just those two. Ed, you want to close?

Ed Ballina: It all goes together. There’s an ethical, moral responsibility as well here, right? Because there’s, listen, there’s always some level of risk in what we do, but to knowingly not fix a problem that could cause a severe injury, that’s crossing the line. And some of it completely unexpected. There was a location that I knew that I was trying to fix a problem that had been caused by years of neglect. Unfortunately, they wound up releasing ammonia into the surrounding area. It wasn’t huge and it wasn’t a big issue, but it was due to years of neglect. And unfortunately, the people that went to correct the problem, I may know who that was, wound up having to have the conversation about an ammonia release. Anyway, to echo Alvaro’s points about being holistic, right? If you’re ever in a meeting and somebody describes you as deeply functional, trust me, that is not a compliment, depending what room you’re in. So be holistic. Think about the impact you’re going to have in the business and treat it as a general. You’re a general manager. You just happen to be working in maintenance. Okay. And then don’t overcomplicate it. Many of the people that are sitting in the room with you won’t understand nor care about the deepest technical impact of what you’re trying to propose. Because guess what? That’s what they’re paying you to do. They’re paying you to be their technical expert that brings them a solution to their problem. So I think that brings us to the end of another exciting and thrilling episode of Manufacturing Meetup.

Alvaro Cuba: Yeah. And as you see, now we are building a sequence from the first episode to the fourth, and we’ll continue in that way, trying to help to manage the situation and to solve the actual situation. And at the same time, be strategic and prepare your lines for a better future and grow your people. So friends, with this, we finish another episode of the manufacturing meetup. Thank you so much for joining us. And if you liked the episode, please follow or subscribe. And more important, share with your friends and follow us. We are here for you and let us know what you need. We’ll for sure get your feedback and work on it. Thank you very much.

Ed Ballina: Awesome. And you know, we are pretty likable and followable just saying, yeah. So give us a like and a follow. So if you want to keep the conversation going, especially, and look, you get to see different parts of the world every time Alvaro and I are here, especially Alvaro, he’s all over the world. That just happened to me in the Carolinas. So if you like us email us at mmu@augury.com. We also have links in the show notes for this episode. And we had a great time. See you next time. I’m going fishing this afternoon. So wish me luck.

Alvaro Cuba: Good luck and thank you guys.