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A manager's request for funds to replace big-ticket equipment begs these questions: Could the manager have avoided being forced to replace the asset in the first place? Did the department evaluate all repair options before requesting to purchase a replacement?
If an organization lacks internal resources dedicated to identifying and resolving limiting factors on assets, one likely result is the assets and processes will underperform. Managers can overcome chronic reliability issues by applying the right approach before big-ticket needs arise.
Organizations need to identify the true issues impacting the asset or system requiring replacement to understand the factors undermining its performance. Managers can meet with front-line personnel to better understand the known waste and loss issues before choosing the capital-investment path.
Before moving toward capital investment, managers should:
When finished, managers can compare the cost of eliminating the loss through other measures to the proposed capital-investment cost.
When considering whether it is actually necessary to replace a piece of equipment to achieve the required asset performance, managers can consider other hot buttons for justifying a capital purchase:
Big-Ticket Purchases: Financial Justification
Capital Investments: Review, Evaluate Historical Performance