Reliability Market
Manufacturing Reliability represents a significant outflow of cash for manufacturers. This outflow is also an important component of the US national economy. The costs associated with maintaining reliable plants and equipment include Repair and Maintenance expenses, capitalized replacement equipment and components, and service contract expenses.
The most reliable economic information for reliability related costs is the U.S. Census Bureau's 2002 Economic Census – Manufacturing published in October 2005 (Summarized in Manufacturing Industry Repair and Maintenance Expenses (.pdf file)) . This Census includes information collected from 350,000 US manufacturing establishments by selected NAICS code. We determined the following about the year 2002 from this report:
- Repair and Maintenance (R&M) Service Expenditures of Buildings and Equipment totaled $30.4 Billion. These expenditures are all directly related to maintaining the reliability of plants and equipment.
- Total Capital Expenditures were $125.5 Billion with $78.9 Billion in retirements.
There is no authoritative estimate of the portion of Total Capital Expenditures that represents reliability-related work. We assume capitalized reliability work to include major replacement parts and replacement equipment.
Using historical expenditure data, we conservatively assume that these capital expenditures included 10% for computers and peripheral data processing equipment and 5% for vehicles for fleet use. Consolidated information on new plant tooling was unavailable, but even assuming as much as 15% represented new plant tooling and 15% to retool existing plants for product changes, that leaves 55% of Total Capital Expenditures, or $69 Billion that is reliability related.
- Assumed reliability expenditures (R&M Expenditures + Replacement Parts and Equipment) totals $99.4 Billion.
- The Average Gross Value of Depreciable Assets was $1.7 Trillion.
- Estimated R&M expenditures represented about 2.5% of the manufacturers' Total Value of Shipments ($3.9 Trillion).
- R&M Expenditures represented 5.8% of the Average Gross Value of Depreciable Assets.