Lubrication Excellence is a catalyst for many things, including remarkable machinery reliability and increased productivity, but it can also benefit employees beyond the day-to-day work in the plant. Retirement is the goal of the vast majority of the workforce, and with the baby boomer generation at that age, retirement plans are being put to a stress test.
The State of Retirement Plans
While many have taken retirement savings into their own hands with 401k plans, IRAs, and other investments, a healthy portion of the industrial workforce still relies on a pension for solid retirement income. The employer funds most pensions, and many are at risk of failing, thus ending the safety net for the folks who have relied on them. Industrial pension plans in the US date back to 1875, when the American Express company established the first one. Just over a century later, more than a quarter of a million plans were in place.
These numbers continue to grow.
The federal government has stepped in multiple times to cover failing pensions. In June 2023, a pension plan that covers workers from manufacturing jobs got an injection of over $800 million to keep it solvent. In August 2023, three different pension funds received over $1 billion to ensure coverage for those currently drawing from it and those who will begin retirement soon. In another example, one of the oldest truck lines, Yellow Corporation, recently filed for bankruptcy and ceased contributing to the retirement fund. Prior to the Chapter 11 filing, the company had failed to make a $50 million contribution to the fund.
It's not just pensions at risk; even many 401k programs have an employer match portion that is discretionary or based upon the organization's profitability. Basic business teaches us that profits increase when revenue increases and costs decrease. While lubrication excellence has a known correlation with cost savings, it isn't often viewed as a way to improve revenue, but it absolutely can. We'll need to understand some basic accounting to understand the multiple ways lubrication can impact a company's financial health.
Optimizing Product and Asset Management
If we were to look at a simple income statement, we would see both revenue and expenses. Revenue, or the money generated by the company, is mostly dictated by sales. In most industries, we have a couple of barriers to how much we can sell, the volume of the market, and the availability of our production time. In many cases, I hear from clients that they are oversold (sold more than they can produce) or capped by what they can produce.
A proper reliability program improves Overall Equipment Effectiveness (OEE) and thus starts to chip away at the hidden plant or the increased capacity to manufacture parts. Some of this is due to reduced equipment downtime, but some can also be tied to reducing scrap or waste products due to improper equipment function.
Take, for example, a plastic injection molding machine. The hydraulic fluid is a critical component of that machine. If it becomes contaminated or the performance of its additive package or base oil becomes impaired, the cycle time, pressure, and, ultimately, the quality of the produced product is impacted negatively. The same is true in many industries. If a bearing fails or grease drips on the final product, scrap is produced, rework is needed, and we reduce the amount of product we can sell.
Financial Implications on Business Health
By focusing on the proactive approach with maintenance and lubrication specifically, we can minimize these issues and create more time for the equipment to run, producing more products that can be sold, thus increasing revenue.
On the expenses side of the income statement, lubrication excellence can impact the cost of goods sold and expenses tied to interest on stored inventory. The math works out to an increased profit by increasing revenue and decreasing expenses. With many retirement plans tied to the direct profitability of the company, this should be viewed as a win for everyone involved in the program. Outside of the retirement incentives, if the company offers stock options, the profitability impacts the earnings per share, so by taking these actions, we have not only kept the retirement plan well-funded but also have improved the individual's investments by paying dividends, increasing value, or having the ability to gain more shares.
Beyond the Income Statement: Balance Sheet Insights
The balance sheet is another tool used in accounting to provide information on financial information related to assets, liabilities, and equity. If we were to look at assets, we would immediately think about fixed assets in the plant. Depending on the industry, this would represent a significant cost as most industrial facilities tend to be asset-heavy in motors, pumps, conveyors, etc. To increase production, many sites simply add assets, which increases the number of machines to maintain and the associated expenses, such as taxes. Suppose we could meet or exceed the production needed with our assets (increased availability, better OEE). In that case, the money doesn't have to be tied up in physical assets on the plant floor. The same is true with spare parts inventory. Instead of putting the money into stocking replacement parts for everything, we could be more precise in what we stock, reducing the risk of new parts going bad in stores and freeing up money for investment elsewhere.
Liabilities are related to the monies you borrowed or debts you owe. If we look at a company's debt, specifically long-term debt, this is an area where lubrication excellence could make an impact. Long-term debt is typically debt that lasts longer than a year. In an industrial facility, this may include money used to increase production, build out different areas of a facility, or acquire assets that aid in the stable operation of the plant. Taking on long-term debt can be a concern; even in your personal life, people can be reluctant to make large purchases (cars, boats, housing, etc.) on a finance plan and often think long and hard before doing so. For industrial plants, if we can fund our own improvements from our profits, it creates a much more financially secure environment. We have already discussed how proper lubrication can make us more profitable; now, we can start to understand that it also can put us in a position to take on less long-term debt. All of this compounds into a company that remains solvent and can invest dependably into our retirement.
Comprehensive Savings Through Lubrication
There are countless other areas where savings can be found through a well-established lubrication program that also adds up to significant dollars. A few of these include:
Reduction of fuel and energy spend.
Reduction of annual lubricant spend.
Reduction of annual contamination control spend.
Fewer work orders
Earlier detection of failures/faults (reducing unplanned downtime and expedited costs of replacements)
Part of ensuring an ongoing contribution to any fund is having people contribute from their paychecks. With the labor market becoming more competitive, how can we attract young talent to backfill people who are leaving after decades of experience? It's well known that industrial jobs have been looked down on, and schools have pushed students to look at careers that exist primarily in offices. While colleges have their struggles currently, industrial facilities are poised to take advantage of some great draws for employment. Benefits aside, a company could set itself apart by utilizing technological advances to attract young talent and showcase that a career in the industry isn't dull, dirty, dangerous, or any other words typically used to describe them.
A trend is to adopt systems that help guide the work utilizing electronic devices. This can be hand-held devices like tablets or phones and wearable devices.
Augmented reality is getting traction to help keep people safe while performing tasks and guiding them through the process. In your lubrication program, software solutions currently exist that can do the same thing. Instead of simply handing someone a grease gun and turning them loose, we can now equip them with the experience of the lube techs that came before them all in a simple-to-use package.
Not only can you leverage the use of technology to gain interest in these jobs, but you can showcase how someone's efforts are genuinely impacting the facility's overall health.
Ensuring a Bright Retirement Future
By using a technology platform to perform lubrication work, inspection results can be viewed in real-time, and abnormal results can trigger corrective action before a catastrophic failure results.
Showing how this position is at the forefront of guarding the company's profits and safe operations and equipping them with the most current tools makes it much more attractive to job seekers. It helps keep the staffing at a level to ensure the reliable operations of the plant.
This also allows the new workers to take advantage of the retirement benefit and pay into the fund, keeping it going for generations.
As the workforce ages and ultimately retires, we can ensure that people's golden years are spent enjoying the time doing the activities they want instead of fretting over the idea that their hard-earned retirement dollars might disappear due to a lack of profitability. Let's do our best to secure retirement for those who are already at that point but also put the foundation in place to ensure that when our time comes to leave the workforce, we can do so with confidence that we will be secure in our twilight years.