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Wednesday, 21 November 2012

Are You Aware Of The Hidden Cost Of Changing Oil?

Few companies understand the hidden cost of oil changes.

When it comes to the the cost of changing oil many companies merely look at material costs and the direct labour component of the lube change. They are ignoring the significant hidden costs that must also be taken into consideration when managing lubrication schedules and maintenance.

Too often, we schedule an oil change to rectify a contamination problem or when excessive wear is detected. In neither case is the oil change a certain correction of the root cause
of the problem, and it wastes good money and further stresses the environment with hazardous waste.

The simplistic approach to the cost of changing oil ignores significant hidden costs such as:
  • Downtime, 
  • Administrative purchasing costs
  • Storage, handling, testing and spillage 
And what about coincidental damage to the machine caused by:
  • Adding the wrong oil. 
  • Over/under-filling the sump or reservoir. 
  • Cross threading a drain plug. 
  • Starting the equipment dry (it happens). 
  • Introducing contaminated oil 
Over the operating life of the plant, there will also be oil spills. The consequences of spills can range from the need for solvents and cleaning agents to remove oil from equipment and walkways, to replacing pavement or digging up soil, to major expenses and adverse publicity if the oil gets off site and into local waterways.

How to reduce the cost of changing oil.

The following activities can, if well thought through, yield tremendous savings to the organization:
  • Test oil so that it is only changed when required. 
  • Use the correct oil for the application. 
  • Filter oil so it is not changed just because of particulate contamination. 
  • Purchase good products, not allowing mixtures or cocktails. 
  • Use extended-life lubricants. 
  • Upgrade seals to reduce leaks and contaminant ingress. 
  • Provide staff with proper training and oil change equipment.

Finding the Hidden cost of oil changes.

Like most activities, changing oil is not as simple as it seems on the surface. There are supply personnel, planners, schedulers, coordinators, health and safety staff and procedures involved in the process.

These behind-the-scenes activities add "hidden" overhead cost to the oil change process that is often difficult to clearly define.

Maintenance activities have to do with preventing or correcting wear of lubricated surfaces: But the behind-the-scenes support often costs multiples of the simple cost to perform the maintenance.

Availability Cost - If the oil is being changed, the equipment is unavailable, not just for the time to change the oil, but from the time it is isolated until the time isolation is removed.

The impact of unavailability is estimated to be approximately 0.3% of the annual usage; mainly because the cost depends upon where in the production cycle the equipment is located.

When a machine cannot be shutdown 'just' for an oil change, this can often still be done in many cases by “bleeding and feeding”. Using this approach, availability costs are lowered, but oil and labor costs are increased. Of course, this type of activity always creates some risk that lubrication will be compromised.

Paperwork and Permit Costs - Generating permits, tracking, verifying and inspecting work all cost money. Even locking out an electrical panel takes time. Multiple trades may also be required to complete the task. This can be estimated as one hour.

Labor and Benefits - The hourly pay is just part of the cost of labour. Benefits and corporate costs to administer human resources functions must be included in the total. These costs can be estimated as 1.5 times the hourly rate, times the number of direct hours to complete the task.

Ancillary Activity Labor - Estimates of the time required to complete the oil analysis task should account for ancillary activities such as wait time, travel time, as well as tool and material collection. Costs can range from two, to as high as eight times actual maintenance time.

Supervision - Supervisory tasks always accompany an oil change. Include time to issue work orders, assign and schedule the work and monitor activities in the estimate. This involves supervisors, maintenance support and maintenance planners. For example, each crew might have a foreman or team leader, and there will be a supervisor for every so many maintainers. Estimate these as 20% over and above direct labour costs.

Oil Disposal Costs - This is the cost to pay an independent trucker and waste disposal company to collect and properly dispose of non-radioactive and non-chlorinated waste oil.

Lab Costs - Laboratory space and equipment, labour and tracking costs associated with sampling all used drums, and the costs for testing such as for radiation, PCB's, chlorine, glycol, water, metals and/or solvents in the waste oil as required. This value may vary depending upon local compliance requirements.

Solid Waste - When oil is changed solid waste will also be generated that should be included in the estimate. This includes gloves, filters, wipes, solid absorbents, plastic bottles and hoses for sampling and the empty oil drums.

Liquid Waste - If the oil has been allowed to degrade too far there will be liquid waste in the form of solvents or flush fluid for which disposal is required. This factor is very relevant to cost benefits associated with proactive maintenance and the use of long-life products.

New Oil – This cost will vary greatly, depending on the oil chosen for the application. This is usually the focus on cost savings, and is usually approached from a cost per litre perspective, which is obviously incorrect. Very often a higher priced Synthetic Lubricant will ultimately end up as a cost saving due to its extended life.

New Oil Overhead - These costs include inventory or carrying charges and the costs of storage areas. These costs can be significant if oil storage and local oil rooms have additional fire protection, venting and grounding. Further, a typical supply crib requires staff.

Purchase Orders - Several costs are incurred during the purchasing process. These include preparation and submission of the request-for-bid, review of available options, selection of successful bidder, running credit checks, making payments, etc.

Equipment Failure and Spills - Changing oil is an intrusive maintenance action and there is some risk, as previously discussed.

Safety - Changing oils involves a number of potential safety hazards, including slipping, skin contact and lifting associated back injury. With regard to back injuries each 210 lt drum of oil weighs about 180 kg so that lifting devices are usually required and are often not included in the cost estimation.

New Oil Testing - A new oil sample should be taken and analyzed to verify that the correct oil was supplied and to baseline for subsequent testing. The cost of this testing and all aspects associated with it (data management, sampling consumables, etc.) should be included in the cost estimate. The total cost might include the cost of the testing, the labour to take the sample, the cost of the sample bottle, the shipping, the interpretation of the results and the record keeping.

The Bottom Line cost of changing oil.

To calculate the real cost of an oil change, one must add up all the direct costs, the overhead costs and the implicit risk-based costs.

By way of example: The actual "real cost" to change the oil in a rather small system at a power plant, is ALMOST 40 TIMES THE COST OF THE NEW OIL!

Given the high actual ticket price for performing an oil change, it might make a lot more sense to try to keep the oil and the equipment for as long as it is serviceable and to upgrade sealing and filtration.

In many cases these upgrades are one-time costs while planning oil changes recur for the life of the equipment. This is not a general recommendation to stop changing oil or to start buying everything in bulk. Rather, it is a statement to evaluate each situation, taking into account all the factors to determine the best course of action for cost-effectively ensuring proper lubrication..

In summary, the "extra" costs of changing oil far exceed the product or material costs. Therefore it makes sense to look at ways of extending oil life; such as in-situ filtration and the use of quality synthetic lubricants.

Without a doubt the easiest  way or reducing the cost of changing oil is to use a quality Synthetic lubricant from Habot Synthetic Lubricants. Our oils are engineered to meet the most difficult applications.