Use the total cost concept throughout the life-long management of equipment

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“As a management concept, "total cost" is applied in equipment management work. Its essence is to manage the entire process of equipment, that is, the design, selection, procurement, installation, commissioning, operation, maintenance, modification and scrap disposal of equipment at all stages of the life cycle. Equipment, production, sales and other departments can conduct effective analysis and control based on the overall interests and overall benefits of the enterprise, so that the overall cost invested by the enterprise is the most economical and the benefits obtained are the best. The implementation of "total cost" management not only creates benefits for the enterprise to the greatest extent, but also creates value for users and meets the needs of users, thereby enhancing the competitiveness of Baoshan Iron and Steel Co., Ltd. Therefore, the implementation of "total cost" management has become a concrete manifestation and one of the important measures of Baosteel's strategic goal of "building the world's most competitive steel enterprise". In Baosteel Company, this concept has been proposed for nearly two years. Through its implementation, promotion and application in equipment management practice, initial results have been achieved. 1. Strengthening early-stage management of equipment is the basis for realizing the concept of "total cost". Pre-stage management of equipment is the management before equipment is put into production. The design and selection of equipment play a decisive role in the economic benefits of the enterprise and equipment maintenance costs after it is put into production. Therefore, in order to achieve the most economical "total cost" of equipment lifetime investment or the best output, it is necessary to consider the formation stage of the equipment, that is, from the design, selection, installation and debugging, and scientifically and systematically study the inherent laws of "one-time investment" and "recurring investment". 1. Reasonable design and scientific selection are the breakthroughs of the "total cost" concept in early equipment management. Since Baosteel established the construction project "Equipment Management Preparation Room" in the Equipment Department in 2001, it has integrated the "total cost" concept into early equipment management. The functional departments have broken the boundaries of division of labor. The functional departments responsible for the investment, design and engineering construction of the early stage management of equipment are closely integrated with the equipment maintenance department. In the 11 production units of Baosteel Company in the first, second and third phases, 7 majors including machinery, electricity and instrumentation are fully charged. On the basis of separate surveys, the "Basic Principles and Standards for Equipment Selection for Baosteel Engineering Construction Projects" was promulgated, 574 technical regulations and 601 technical standards were formulated, and the communication equipment and electrical equipment sections of the "Equipment Design Specifications" were compiled. The reliability, availability, maintainability, safety and other aspects of the equipment have been comprehensively considered, laying a good foundation for the economy of subsequent production, operation and maintenance of the equipment. 2. Reasonable investment in the early stage of equipment can help reduce equipment operation and maintenance costs. In traditional equipment management, there is often a disconnect between early stage management and operation management of equipment. Therefore, sometimes improvement and transformation projects will occur just after the equipment is put into operation, resulting in a phenomenon that not only affects production but also increases investment. To this end, Baosteel Company's equipment system actively promotes management that combines operation and maintenance with preliminary design and investment control. It investigates and sorts out cases where more funds are invested in the operation process of some engineering projects in order to save investment, and submits them to the infrastructure department so that the infrastructure department no longer regards reducing project construction investment as the only goal when reducing individual project costs and project construction expenses. In this way, the initial investment may not necessarily be saved, but the overall investment will be reduced. In response to the phenomenon of "unused and unordered" in the ordering of random spare parts for infrastructure construction, the equipment maintenance department proactively provided a consumption list of unstocked spare parts and the actual consumption of random spare parts for each equipment in the past year, and actively participated in the ordering management of random spare parts, ensuring the rationality of the random spare parts ordering plan in the early stage of production and avoiding the backlog of spare parts funds. 2. Controlling investment during equipment operation and pursuing the most economical input-output ratio are the core and key to realizing the "total cost" theory. Baosteel's equipment system has effectively controlled investment in equipment maintenance costs in the past two years by optimizing maintenance cost budget management methods, controlling material (spare parts and non-productive materials) consumption, optimizing maintenance modes, reducing maintenance outsourcing costs and other methods. At the same time, the equipment system has strengthened the analysis of input and output, and increased investment in projects with significant benefits. 1. Adopting "standard + α" budget management is an effective way to control the "total cost" of maintenance expenses. In 2002, Baosteel's equipment system creatively combined the standard cost management method with the characteristics of equipment maintenance and launched the "standard + α" budget management method, which is a specific measure for refined management of maintenance expenses. “The essence of "Standard + α" is that based on the actual maintenance costs over the years, the basic maintenance costs that must be invested every year are regarded as "fixed costs", and the consumption of materials and other new projects exceeding 100,000 yuan are regarded as the α part, which is the "variable cost". In order to effectively control the investment in the α part, the α part is managed on a project-by-project basis based on the implementation of predictive condition maintenance. The implementation of this method effectively improves the accuracy and controllability of maintenance cost management. In the first half of 2002, equipment maintenance costs dropped by 13.23% compared with the same period last year, of which the "α" project accounted for 55% of the decrease. 2. Adopting no inventory of spare parts, purchasing based on performance-price ratio and centralized management of non-productive materials are the main means to reduce maintenance costs. In 2001, Baosteel's material consumption accounted for 69% of the total maintenance costs. In 2002, the equipment system made effective reduction of material consumption a key task in controlling equipment maintenance costs. As of June 30, 2002, 52 items of out-of-stock spare parts had been completed, reducing consumption by 3 million yuan. 187 items of spare parts (including new products and repairs) were purchased based on performance-price ratio. The equipment system changed the concept that price is the only criterion for purchasing spare parts. Although the purchase price of some spare parts increased slightly, compared with the same period last year, the actual overall consumption of spare parts was significantly reduced, thus saving more than 2 million yuan in purchasing funds. ； When purchasing and repairing new spare parts, a competitive bidding method was adopted. Among them, only the repair of cold-rolled polyurethane rollers reduced the total cost by 24.93 million yuan. ； The original process for receiving non-production materials was that the manufacturer applied, and the purchasing department reviewed and approved the purchase and sent it. Now it is changed to the user application, which is reviewed by the equipment department and then handed over to the purchasing department for purchase. Due to the centralized management of the purchase plan and the elimination of the phenomenon of "the road is blocked and the materials are diverted", Baosteel's non-production material consumption dropped by 69.1755 million yuan year-on-year from January to July 2002. In the first half of 2002, the proportion of total material consumption in maintenance costs dropped to 59%, a decrease of 10 percentage points from the previous year. 3. Reducing equipment downtime is an effective measure to reduce "total cost". In recent years, Baosteel's equipment system has strengthened the application and analysis of "equipment overall efficiency" and achieved obvious results. By optimizing the maintenance model, the company has extended the regular (annual) maintenance cycle for 34 units (units) since 2000. Among them, only the regular maintenance cycle of the 2030 cold rolling CM02 unit has been compressed from once a week 16h in the initial stage of production to once every two weeks 16h, and now it is once a month 20h. This alone has reduced the maintenance time to 528h/a. According to statistics, from January to June 2002, the company's "comprehensive equipment efficiency" increased by an average of 5% compared with the same period last year. Calculated based on the planned output, unit price and cost of the 1550 cold rolling mill unit in 2002, the "comprehensive equipment efficiency" will increase by 5%, the unit product cost will decrease by 1.1% on average, and the pre-tax profit will increase by 33.3% accordingly. 4. Break the "standardism" and establish the service concept of equipment management work to create greater benefits for the enterprise. As long as the output is greater than the input, it can bring greater benefits to the company. Even if it may exceed the budget and face assessment, we must resolutely invest. In 2002, energy-saving coatings were used in the hot rolling heating furnace and blooming soaking furnace, which required an additional unplanned budget of 3.24 million yuan, but the annual benefit could reach 6.2 million yuan, with an input-output ratio of 1:1:9. The equipment department, hot rolling mill, and steel bar mill unanimously supported the implementation of the project. Although the electric furnace tube continuous casting requires an additional 01 water system equipment investment of 350,000 yuan, the annual water consumption reduction reaches 990,000 yuan, with an input-output ratio of 1:2.8. The project has now been completed and put into operation. 3. Revitalizing idle equipment and improving the return rate of disposal of decommissioned equipment are the deepening and development of the "total cost" concept. The purpose of increasing returns in the later stages of equipment life is to increase technological investment. When disposing of a decommissioned air separation equipment, Baosteel provided the buyer with the installation, commissioning, operation software and maintenance technology of the air separation equipment. The income from the disposal of the air separation equipment was more than 5 million yuan higher than the net value of the equipment. By improving the disposal method of idle and scrapped equipment, Baosteel Company achieved a 14.4% increase in revenue from the disposal of 25 idle and scrapped equipment in the first half of 2002 compared with the original disposal price. “The "total cost" management concept is one of today's advanced management ideas, and has achieved initial results through its application in equipment management practice. This ideological concept is conducive to overcoming the shortcomings of "divisionalism," "short-term behavior," and "short-sighted behavior" caused by departmental division of labor and departmental performance evaluation. It is conducive to guiding managers at all levels of the company to proceed from the overall situation and guide current and future work with the goal of maximizing company benefits.