What is Criticality?

Criticality is the quality or state of being of the highest importance. When it comes to industrial equipment, criticality focuses on the “business financial impact if an equipment failure was to happen”, according to Lifetime Reliability. Lifetime Reliability is an Australian consulting firm specialized in industrial business process optimization, reliability maintenance management and life cycle asset management.

The risk rating indicator can be calculated as followed:

Equipment Criticality = Failure Frequency (per year) x Cost Consequence ($) = Risk (in $ per year).

Cost Consequence usually includes the cost of lost production and what it takes to repair the equipment.

Why Determining the Criticality Level?

Heavy pieces of equipment, such as power transformers or industrial machinery, belong to the “low-risk, high-impact” category. Even though failure risks are low, the consequences on the company’s operations are significant.

Knowing when such a failure would occur and how much it would cost to fix it or replace it greatly helps planning operations.

If equipment is then known for a high-risk profile, the company can set “resources, engineering effort, operations practices, maintenance and training” to reduce the risks. The action plan should be the verso of its product sheet: you know the potential problems, you know what to do.

The criticality assessment should logically be led by an experimented team. For a further detailed assessment of the criticality level of equipment, the model Defect and Failure True (DAFT) Costs can be used. A DAFT database is developed in a spreadsheet database (if you have software better than Excel, use it!).

Assessment Team

Let’s focus on the team who will assess your equipment’s criticality. They should know:

the design, and how to operate and maintain the equipment;
the impact of equipment failure on the production;
the financial loss for the company due to a production interruption, and on the clients;
They should use all information available from the upper level and workers in order to determine an accurate and up-to-date equipment profile.
In the frame of implementing a risk control methodology, they should be familiar with international risk management standards, ISO 31000 being the most common.

One more time, knowledge is power. With a dedicated team and allotted time, assessing the risk profile of your heavy equipment will become a real asset, saving you costs and time in the long-run.

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Risk Matrix

Lifetime Reliability has designed a series of matrices which helps determine the potential consequences, the failure frequency, the risk identification and assessment and the risk treatment schedule and action plan. Clear and easy to use, they can be the basis of risk assessment.

Business-Wide Consequence

The additional factors can help determine the consequences:

Type of industry
Lack of equipment standardization
Service level and required time
Availability of spares and investment
Avoiding “just-in-case” model
Supply chain network
Logistics
Available qualified personnel
Holistic approach, strong communication and cooperation between operations, purchasing and executive teams.

Historical Frequency

Risk Identification and Assessment

Risk Treatment Schedule and Action Plan

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Let’s talk about YOUR equipment. The following questions can be asked:

Do you know the risk profiles?
Does your equipment belong to the low-frequency/high-power category?
What would happen if a failure occurs and requires the replacement of the unit?
How difficult is it to source a replacement?
Do you use a buddy system (numerous phone calls, emails to your colleagues or acquaintances) which proves to be not so effective?
Would you accept the help from a specialized third-party like Veracity Asset Management Group?

We specialize in critical spares management and asset disposition. We help companies like utilities on a daily basis to source or dispose of critical equipment.

Contact us at 866-694-1252 or info@veracityamg.com. We are located in Sault Ste. Marie, Ontario, with solutions available for the North American market.

Learn more about our Critical Spares Management Solution for Utilities: Make electrical equipment procurement easy and efficient. Locate a matching power transformer before a failure occurs!

Stay updated through our social media platforms and our website:

Go further:

6 Tips to Improve Your Spare Parts Management

The Management of Critical Spares in the Electric & Gas Utility Industry

Strategic Asset Management

Veracity Connect: Critical Asset Management Solution

Equipment Criticality Tutorial, by Lifetime Reliability – Solutions

In the recent white paper “Spreadsheet Risk is the Number One Threat to Supply Chain Excellence”, Logility puts spreadsheets in the spotlight and make us think about how they can sabotage your supply chain.

Logility’s Spreadsheet Definition

A spreadsheet is:

an interactive computer application program organizing and analyzing data in tabular form.
no way to run a supply chain!

Spreadsheets are a common tool usually set by default on computers. Easy to create and handle, a spreadsheet allows you to store a significant amount of data. Formulas and cross-functions are a big asset with data analysis.

From the retailer to the multimillion company, Excel and the Excel-like software have settled on PCs, and have quickly become the favorite tool of numerous employers/employees, and especially in the supply chain field.

Spreadsheets: The Authority in Supply Chain Software?

As Logility points out, spreadsheets have spread for 3 main reasons:

Excel and Open Office spreadsheets answer supply chain managers’ needs in a better way than Enterprise Resource Planning systems which usually lack of flexibility. Customized modules require a bigger budget. Spreadsheets are the cheapest (if not free) alternative. Moreover it is common for ERPs to use spreadsheets to load data into their system.
Easy to buy and access, spreadsheets software is a must in the PC’s tool box. Unless you go with Linux or build your own computer, chances are that it will be in your default programs.
Supply chain managers need tools that they can customize and adapt to their products. Demand, inventory, transportation and manufacturing planning are some of the aspects covered by managers.

“More than 200 million people worldwide use spreadsheet applications and about one-third of people spend more than half their working days using them” (Robert Kugel, Ventana Research, “Make Spreadsheet Competence a Priority,” June 2012)

We are millions using them… but how many of us have thought about their drawbacks?

Limits: Spreadsheets, a Tangled Octopus

Lack of training. A 2011 study by ClusterSeven, titled “Spreadsheet Risk Management within UK Organisations,” shows that 57% of users have never received proper training…

…Which leads to a significant number of errors: Coopers and Lybrand, in the article “How to Make Spreadsheets Error-Proof” published in the Journal of Accountancy, estimated that 90% of spreadsheets with more than 150 rows contained errors.

Maintenance is key, but time-consuming as well. Proof-reading should be a must, but who will spend another 2 hours checking if the entered data is right?

Spreadsheets become a jungle for a supply chain manager when it comes to deal with different time periods, product life-cycle and forecast models.

Difficulty of sharing spreadsheet information: you may spend a lot of time on Excel and then send the spreadsheets to your colleagues. But contrary to a cloud-based solution, and unless you make sure to send documents after every update, it can be tricky for your colleagues, especially from other departments, to use the right document version. Think about when it comes to merge data… not easy as pie.

Each person has his or her way to edit spreadsheets and may use different guidelines. Formatting may differ, causing errors and misunderstanding.

Excel will not tell you when something is wrong in your inventory or manufacturing planning: contrary to ERPs, you will not see a red flag. Every time data changes graphs do not always follow and you will probably have to recreate them.

Spreadsheets are like a notepad: easy to get, easy to write information on, and can fit in your pocket or work bag. But on the other side, if you need to write a project planning or your quarter schedule, you will need to think about alternatives to handle complex data in an efficient way.

If you are a supply chain manager, do not be afraid of thinking about tools that are really made for you. It may lightly increase your budget, but you will save on time and money by having a tool which allows you to handle complex data, answering your needs in terms of supply and manufacturing planning and letting you know when an alert comes up.

If you are a manager or an engineer for a utility company, you may be interested in Veracity Connect, a cloud-based platform designed to help you manage critical assets such as transformers, switchgear and other heavy equipment. More than inventory software or a spreadsheet-based solution, Veracity Connect allows you to:

Efficiently Organize Information

Store and access data from anywhere through the Internet
Have a clear overview of your assets in no time
Upload all equipment-related documents (product sheet, testing results, PCB counts, etc.)
Ensure a proper audit trail

Ensure Reliability Through Collaboration

Avoid outages caused by out of stock or hard to replace equipment
Find replacements to obsolete items that are no longer manufactured
Locate surplus in corporate wide inventories, send the “bat signal” to fellow utilities and industry partners to source needed critical spares.

Mitigate Risk

Quickly locate critical spares by identifying potential sources
Proactive approach to managing equipment failure

Offset Capital Expenditures

Reduce inventory levels and carrying costs knowing your spares needs are available
Liquid surplus with higher returns
Get full logistics support to shorten the time to source equipment