When Budget Cuts Threaten Reliability: Avoid Short‑Term Savings That Backfire

Twelve to 48 months ago you launched a reliability and maintenance improvement program, and now a cost crunch has hit your doorstep. Housing and banking downturns have squeezed margins, prompting a company‑wide push to trim expenses as sales and product pricing fall.

While the temptation is strong, cutting costs in the short term often ends up raising overall spending by two to six years. Depending on the nature of the cuts, the hidden cost of a poorly planned shutdown—such as an extra six hours—can amount to $100,000 and usually goes unchallenged, whereas the loss of a book is immediately visible.

Typical cost‑cutting triggers a chain reaction that typically takes 18 to 24 months to appear on the balance sheet and 9 to 21 months to show in reliability metrics, depending on equipment condition. When a new manager inherits the same austerity measures, the cycle can repeat, compounding the problem.

Which Costs Are Usually Cut?

1. Travel – any type of business travel
2. Training programs
3. Unavoidable maintenance jobs – often postponed
4. External resources, such as consultants hired for long‑term gains
5. Overtime
6. Hands‑on external resources
7. Other visible perks (e.g., free lunches, branded apparel)

Notice how a six‑hour shutdown extension, a hidden cost, can be far more expensive than a book purchase, yet the latter is routinely eliminated.

Should You Cut or Keep Cutting?

Cutting costs is inevitable, but the focus should shift from the dollar amount to the underlying drivers. The goal is to preserve, or even improve, reliability while achieving long‑term savings.

Example 1 – Workforce Reduction

Suppose your plant’s baseline workforce should be 95 hourly maintenance personnel, yet you currently have 110. A hasty 15‑person layoff may seem logical, but without first optimizing work processes, preventive maintenance (PM) and corrective maintenance (CM) will suffer. The result? Lower reliability and higher future costs, especially if the backlog is already near zero or the employees slated for release contribute minimally.

Assuming the workforce is correctly sized, cutting staff without reengineering the workflow often backfires because morale drops and remaining employees lack incentive to increase productivity.

Instead, target the root causes of cost—improve reliability to reduce spare parts usage and CM frequency. Over time, you can trim staff through attrition rather than forced layoffs.

Example 2 – Deferring Maintenance

Deferred maintenance is rarely acceptable. Even a valid maintenance job cannot be avoided; it can only be delayed. In 99 percent of cases, executing the task later is almost always more expensive than performing it on schedule.

Management rarely discusses postponing maintenance because any resulting downtime is politically damaging. The narrative instead centers on cutting overtime, contractors, and personnel—treating these expenditures as luxury items.

How to Cut Costs the Right Way

Maintain your reliability initiatives—whether Lean, Six Sigma, TPM, asset management, or TQM. The core principles are timeless: prevent, inspect, prioritize, plan, schedule, execute well, record, analyze, and improve.

Cutting back on external support and training is acceptable only if it doesn’t halt the momentum. Abruptly stopping an initiative signals failure and erodes confidence.

By focusing on the drivers of cost, you create a virtuous cycle: higher reliability reduces spare‑part and CM needs, which in turn supports long‑term workforce optimization.

Torbjörn (Tor) Idhammar is partner and vice president of IDCON Inc., a management‑consulting firm specializing in reliability and maintenance management. He oversees all projects and consultants, including training and implementation support for reliability assessments, preventive maintenance, operator‑based reliability, planning and scheduling, materials management, and root‑cause problem elimination. Tor is the author of Condition Monitoring Standards (volumes 1‑3). Contact Tor at 800‑849‑2041 or info@idcon.com. Also, visit www.idcon.com.