Guy Delahay, Owner and Managing Partner at Mainnovation Inc., discusses building a winning maintenance strategy through the use of the Value Driven Maintenance methodology, a state of the art framework that calculates economic added value of maintenance using Net Present Value techniques and industry specific maintenance benchmarks. Organizations that have embraced this practice have been able to achieve impressive results including: 30% Uptime Improvement 50% Cost Reduction 40% lower MRO stock value View the slides to understand the steps invloved in building a winning maintenance strategy, such as understanding your Dominant Value Driver, utilizing KPI's and benchmarking, implementing Maintenance Best Practices, and exploring Value Drive Maintenance.

5. Customer Experience includes: Infrastructure Manufacturing Other Chemicals Life Sciences (Waste) Water Transportation Energy & Utilities Paper & Board Dredging & Offshore Food & Beverages Oil & Gas

6. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy

7. What is your Winning Maintenance Strategy?

11. Definition of Value The sum of all free future cash flows, discounted to today Value = In case of sustainable cash flows, year after year, the following short cut applies: Net Present Value = CF 0 + (NPV) CF r r = Internal Rate of Return (IRR) or ‘ discount rate ’ or ‘ hurdle rate ’ (representing the opportunity costs of capital) CF 0 = Cash Flow at year 0, CF t = Cash Flow at year t Net Present Value = CF 0 + (NPV) ∑ CF t (1 + r) t

12. Value Of Maintenance Value Potential of Maintenance = Sum of all free cash flows (discounted to today), derived from improving (either): A sset U tilization (∆CF AU ) C ost C ontrol (∆CF CC ) SHE Compliance (∆CF SHE ) R esource A llocation (∆CF RA ) = ∆ CF AU + ∆CF CC + ∆CF RA + ∆CF SHE r Assumptions: - sustainable improvements, year after year - no SHE limitations for expanding production volumes Important: - calculate the potential for each driver individually - check the interference (positive/negative) - determine the Dominant Value Driver

13. Value Potential depends on:

14. Value Calculation Example Asset Replacement Value (ARV) = 200 million USD Current Maintenance Spendings = 10 million USD Maintenance Costs vs ARV = 5% (current score) the value of 1% improvement (incremental): 1% of 10 million USD = 0.1 million USD per year NPV ∞ = (0.1 million)/0,10 = 1 million USD Sustainable Improvements Growing Market r = 10% = 0,10 the Performance Gap (Maintenance Cost vs ARV): Current KPI score = 5% Realistically achievable in 2 years = 4% Relative change = | (current - new) / current | = | (5 - 4) / 5 | = 20 % Value potential on Cost Control: = 1 million USD x 20 = 20 million USD (or 2 million per year) say C 0 = 0.5 million USD, then: NPV CC = -0.5 + 20 = 19.5 million USD EBITDA ( ‘ annual profit ’ ) = 90 million USD Current Technical Availability = 90% (technical uptime, ‘ maintenance OEE ’ ) Assumption: growing market the value of 1% improvement (incremental): 90 million USD / 90 = 1 million USD NPV ∞ = (1 million)/0,10 = 10 million USD the Performance Gap (Technical Availability): Current KPI score = 90% Realistically achievable in 2 years = 92% Relative change = | (current - new) / current | = | (90 - 92) / 90 | = 2,2 % Value potential on Asset Utilization: = 10 million USD x 2,2 = 22 million USD (or 2,2 million per year) say C 0 = 5 million USD, then: NPV AU = -5 + 22 = 17 million USD

16. Examples of Maintenance Value Creation Reduction of maintenance costs with 2 mio EUR EBITDA improved by 20 mio EUR Maintenance cost reduced with 50% MRO stock reduced with 50% EBITDA improved with 15% 27% uptime improvement (equals 15.000 trucks) 5% more uptime plus 7 mio EUR cost reduction 5 mio EUR benefits after first wave of VDM audits 45 mio USD improvement potential revealed for 30 sites Bengt Svensson Maintenance Manager at Volvo Cars “ ..Thanks to the VDM concept, our plant in Torslanda Sweden has been able reduce costs by around SEK 340 per car or SEK 70 million per year. ..VDM is based on constantly measuring and report back on anything that affects how assets are utilized . Without VDM, it is unlikely that we would have succeeded in implementing cost controls as successfully and quickly as we did.. ”

17. Maintenance can make the difference! BP almost collapsed after fatal Deep Water Horizon incident... DSM outperforms industry peers after implementing new vision and Operational Excellence program..

19. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy

22. from Maintenance Value Drivers...

23. to Core Competences

24. Measure Performance with VDM KPIs

26. Example www.myVDM.com your scores industry peers

27. Levels of Professionalism Understand where you are today and which step you can realistically achieve

29. Example of a Focused Improvement Plan

32. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy

33. VDM Creation Phase 5. Improve Asset Reliability 6. Design Work Process 7. Optimize IT 8. Align Organisation

34. Create Improved Competence 5. Improve Asset Reliability 6. Design Work Process 7. Optimize IT 8. Align Organisation

36. Improve & Standardize your Way of Working

37. Best Practice Process Description

38. Linked to detailed reference materials

39. Linked to Organizational Roles & Skill Profiles

41. Agenda 1. Understand the Value Of Maintenance 2. Define the Winning Strategy 4. Monitor the Winning Strategy 3. Implement the Winning Strategy

42. Our view on Maintenance Business Intelligence Yearly myVDM.com Set targets Evaluate results and trend Daily / Weekly CMMS KPI Dashboard Plan Act Do Check or or download to Excel use KPI Report Generator in your CMMS use a preconfigured KPI Dashboard solution

44. What is it (4)? Full drill-down analysis capability KPI score YTD is in red and the trend is negative... Cost go up rapidly starting in August/September... Biggest spend is on Production assets, mainly spares for corrective work orders interactive report shows the cost split up per work order

45. Summary

46. Winning Maintenance Strategy Value of Maintenance KPIs & Benchmarking Maintenance Best Practices VDM Inside Understand your Dominant Value Driver Understand how good you are & where to improve Use proven best practices to innovate your organization Measure your performance & improve continuously