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IAN JEFFERY LOOKS at how the small players can cut some big costs from their maintenance bills and still make sure they are getting the best of both worlds.

Is your winery struggling to be profitable while some similar wineries in your locality are successful and making money?

What is the difference, are they making better wine, are they better marketers commanding higher prices or are their costs lower?

And if their costs are lower, why are they? More importantly, can you reduce your costs to similar levels?  Do they have a more productive reliable winery with lower maintenance costs (I.E. a strategy of working smarter)?

Below is a 2008 benchmark of Australian Winery Maintenance (The most up to date information I could find.)

Cost of Maintenance per fixed asset cost Australian Wineries 2008

Winery Benchmarker http://www.benchmarker.com.au

ImageAre these figures accurate and reliable, does it strike you there is a great disparity between the figures for small wineries and the figures for very large wineries?

Do you accept there will be relative cost savings in maintenance between small and very large wineries due to disparity in size?

However, are you surprised the maintenance costs for your boutique winery are five times more per dollar of assets than for very large wineries?

What are they doing you’re not, what do they know you don’t?

Would the following graph be more like you would expect, more like you want to achieve (your maintenance costs halving by “smart” maintenance, these savings going directly to profit, while wine quality and productivity are maintained or improved.)

ImageLet’s discuss the thinking behind the graph above (starting with a graph showing the relative costs of the four “common” maintenance strategies).

ImageThese are:

  • Reactive/Breakdown (BM); operate until failure and then repair.
  • Preventive (PM); operate for a set period, overhaul, replace parts, return to operation.
  • Predictive Maintenance and Condition Monitoring (PdM & CON MON); inspect, test, measure at set intervals, determine if failure is imminent, repair only when failure imminent.
  • Proactive Maintenance (PaM); Establish PdM and equipment history, root cause analyse history and design out some maintenance and improve management of remainder of maintenance.

1997 UNIVERSITY RESEARCH

A 1997 Monash University study of 250 small and medium Australian manufacturers showed those who adopted a policy of strategic asset management achieved increased profits of 25 per cent to 60 per cent (by introducing relevant training and adopting maintenance strategy optimisation and whole of life asset management).

While wineries are individual enterprises, can they achieve the same dramatic improvement in profit by adopting similar strategies?

The following graph details the maintenance strategy of the average US enterprise [1].

One of my assumptions is this maintenance strategy is close to the maintenance strategy of most boutique Australian wineries. (i.e. mostly breakdown, significant preventive, a small amount of CON MON and virtually no proactive.)

ImageThe following graph details the maintenance strategy of “best practices” in US enterprises. [2]

ImageBENCHMARK MAINTENANCE PRACTICES

10 per cent REACTIVE and 90 per cent PLANNED MAINTENANCE

My second assumption is maintenance in very large Australian wineries in general tends towards  ‘Benchmark Maintenance Practices’ (i.e. significant CON MON by oil sampling, thermography, vibration monitoring,  reduced preventive maintenance and significantly reduced breakdown maintenance etc.)

My third assumption is the maintenance strategy of medium wineries is ‘part way between’ the two graphs (i.e. largely preventive maintenance, less breakdown than small wineries and the start of a useful CON MON program).

From these assumptions and my interpretation of the preceding graphs my conclusions are:

  • It is possible for small and boutique wineries to halve their maintenance costs by implementing winery maintenance best practices strategies similar to the strategy of the ‘Benchmark Maintenance Practices’ graph.
  • It is possible for medium size wineries to reduce their maintenance costs by 25 per cent by implementing a similar strategy.

IMPLEMENTING MAINTENANCE IMPROVEMENTS AT A BOUTIQUE WINERY

How do you ensure producing iconic wines and profits while reducing maintenance costs?

There is no silver bullet, but while it is not easy, it is achievable, and some wineries have successfully done it.

There are numerous ways of implementing Maintenance Best Practices.

The following suggestions are tailored to suit boutique wineries.

Start by networking and recruiting a group of like-minded wineries (say five or six practical, pragmatic enterprises with the passion to succeed).

Next establish a long-term relationship with the best winery maintenance provider in your area.

Agree on the purchase of a small suite of Condition Monitoring equipment (CON MON) and implementation of CON MON/Predictive Maintenance at all the wineries involved  (total purchase cost less than $10,000).

Using this equipment undertake oil sampling, vibration and thermography surveys at your wineries before vintage.

Use this information to determine what equipment needs overhaul before vintage and what equipment will operate the entire vintage without overhaul.  (Eliminate all unnecessary maintenance which will impact on wine quality and winery productivity.)

Excessive pre vintage preventive maintenance often introduces challenges from errors made during equipment overhaul and re-assembly.

This approach is likely to involve the maintenance provider and your maintenance person/people in some training.

It may be wise to involve more of your enterprise in this training to ensure all parties have complete understanding, are on the same page.

Also you need to select your best winery maintenance provider with great care.

You will be replacing high labour content maintenance with less expensive leading edge maintenance.

Your maintenance provider will be facing an initial reduction in work and profit.  You must balance this by bring to the table a watertight long-term agreement with a significant number of wineries to make it worth the provider’s while.  You must also select a provider with long-term vision and commitment to you.

When you do all this your long- and short-term rewards will be significant.  The experience of enterprises taking this approach and doing it once and doing it right is a 25 per cent to 50 per cent reduction in maintenance costs allied with improved quality and productivity.

CONCLUSION

You are currently being subjected to the triple impact of grape oversupply, a high Australian dollar and the Coles/Woolworth’s factor. This triple impact will be with us for some time. While there is an argument for government support anticipate none.

A work smarter cost reduction strategy will no impact (or positive impact) on wine quality and productivity will assist your survival.

Contact: Ian Jeffery. Phone: 61 8 8562 2869 or 0418 622 865. Email: robjef@picknowl.com.au.

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