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Shutdown Risk Management
The highest pressure situation your maintenance department might ever encounter is a planned downtime. A large amount of work is scheduled into a small amount of time, but the deadline for resuming production is just around the corner. There can be great gains to be made by increasing reliability or installing new equipment. However, there are risks. New problems can arise, and costs can mount. How do you make shutdowns a safer bet?
In project management context, the word risk is simply used as shorthand for "deviation from the project plan." Encountering at least some risk is unavoidable. The impact of that risk depends on how a shutdown has been planned. Uncertainty about the magnitude of repairs needed, over-aggressive estimates, lack of experience, and a number of other issues can contribute to delays, cost overruns and lost productivity. Some of these factors can be eliminated, but most risks can only be managed.
Seeing Risk
The critical task here is to accurately project the magnitude of the risks involved in a shutdown and respond accordingly. As the project is outlined, several factors should be examined to develop a better view of the situation. The basic rule is that the complexity of the task is directly related to the likelihood of encountering difficulty. In planning for a shutdown, the following factors may flag a process for being a likely delay.
Critical path - By definition, a critical path task has the potential to cause serious delays. Any delay in activity on the critical path has the potential of delaying the whole project.
Predecessors – A task that depends on multiple tasks being completed first is subject to more possibilities for delay.
Aggressive estimates - Setting high standards for productivity doesn’t mean expecting the impossible. Unrealistic estimates can cause serious bottlenecks when later tasks get delayed by overruns in the initial stages of a shut down.
Unfamiliar tasks – Have workers performed this task before? New equipment and turnover could create a situation where workers would be learning on the fly. Identifying training needs and calling in outside resources may be the difference between on time and behind schedule.
Final work – At the end of a shutdown, your workforce has been under pressure and the finishing work can present a stumbling block. Proper load leveling can minimize this problem.
Rarity – Are the materials or labor needed for a specific task hard to obtain? Delay with supplying these needs can cause major delays. Project management reports should include a filter for specialists and resource availability.
Measuring Risk
Not all problems are created equal. Solving some might be fairly easy, others might bankrupt a company. Determining which need your most urgent attention is the comparison of three values: tolerance level, cost and probability.
Tolerance
Tolerance is evaluating the capability of your company to respond to risk without unacceptable consequences. Cash reserves, overdue orders, production goals, and regulatory requirements can all inform this discussion. What might be an acceptable possible cost for an international operation with multiple plants could be catastrophic to a smaller custom manufacturer. Risk tolerance is not just a fiscal calculation, even if money is a major consideration here. It is a yardstick of the magnitude of various shutdown risks.
Parallel to the financial accounting needs to be an assessment of environmental, health, and safety concerns. Human lives can’t be counted in the same way, but this doesn’t mean that quantifying the potential for problems isn’t important. Assume the worst, brainstorm for possibilities, identify consequences, and plan out scenarios in detail.
Cost
The additional cost of risk can be estimated by comparing the worst possible scenario against the planned outlay. If things begin to go wrong, what will it take to get things back under control?
Costs aren’t just limited to the immediate expenses of fixing a problem, but everything that adds up from the interruption. Will orders go unfulfilled? Contracts or customers lost? Will specialists need to be brought in? New equipment ordered? Broad brainstorming is crucial here. Expertise from all corners helps build a complete picture of possible consequences and tally up the costs.
Precise calculation is not possible for every risk you will have identified, and some may simply need to be estimated. The priority here is to carefully consider the risks that have the greatest potential to cause disruption and delay.
Probability
Likelihood of an event is most accurately predicted based on prior data. Records from previous shutdowns and experienced employees can help guide this kind of analysis. But since shutdowns tend to be rare, not every kind of risk will have hard data associated with it. The key here will be to make the best possible estimate based on experience. A reasoned estimate is more useful than a wild guess or no prediction at all. Thinking through the possible chains of events will help identify likely trouble spots based on the criteria presented above. Remember, the more complex a task, the greater the possibility of failure. Multiple inputs, critical supplies and talents, and time sensitivity all drive risk.
Let’s not overlook PERT and Monte Carlo duration estimate methods – these allow you to enter worst-case, expected, and best-case scenarios (dollars and durations) for each task. Project management software can then extrapolate the likelihood of a task’s starting on a particular date, and Monte Carlo calculations can help give such results more detail and accuracy. Tasks that are not likely to begin on their planned date are, of course, more likely to fall further behind. Think of PERT as a way to quantify the confidence that a planner has in their duration estimates, and Monte Carlo calculations as a way to figure the cumulative effects of these uncertainties throughout the project.
Combine the probability that a risk will occur with the cost of the risk and compare that with your tolerance for acceptable costs and delays. If you feel that the task is involves risk your operation cannot afford, note this in a field in your list or project management software. These risks must be managed.
Risks that are better than acceptable can be left alone. Prioritize your list of risks, separating those that must be managed from those that do not.
Response Development
There are two fronts on which to act in responding to risk. Risks can be avoided or they can be made less costly when they do occur.
Steps to Manage Shutdowns
To summarize the steps in a comprehensive risk management program for shutdowns:
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Determine your tolerance for cost, customer relations, safety, and environmental risks.
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Filter for high-risk tasks.
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Using your shortened list, come up with environmental, health, and safety issues; as well as financial costs for each risk.
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Determine the probability that each risk would occur.
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Prioritize risks based on your tolerance and the combination of each risks’ probability and the magnitude of its consequence.
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Come up with mitigation plans or contingency plans or both.
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For tasks with contingency plans, brainstorm a list of triggers that signify that a risk is turning sour.
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Monitor the project during execution for triggers and unexpected risks.
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Collect data and debrief after the shutdown. A history of previous problems encountered might help locate potential trouble spots in the future.
About the Company
New Standard Institute is a training and consulting firm specializing in industrial maintenance.
More information is available at www.newstandardinstitute.com.
Andrew C Levitt is a consultant with New Standard Institute. He is a seminar instructor and consults on shutdown management.
Ben Wurtmann is the business management coordinator at New Standard. Ben has co-authored several articles on shutdowns and training, and is the author of several training programs.
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