For over 35 years, I have been at the heart of reliability, lubrication, and operational excellence. In my experience, siloed decision-making between maintenance, HSE, and procurement often results in inefficiencies, increased risks, and missed opportunities for genuine return on investment (ROI).
While reliability engineers ensure equipment runs smoothly, procurement focuses on cost savings, and HSE manages compliance and safety, true success comes when these teams work together. What if we could change this paradigm?
Siloed decisions waste ROI – true success demands cross-functional collaboration.
In today’s competitive environment, operational excellence is essential for success. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is used to evaluate a company’s financial health. It is also often linked to economic health and directly impacts maintenance, safety (HSE compliance), and procurement efficiency.
Companies use EBITDA internally to assess management performance and profitability without the effects of financing and tax strategies.
This article launches a three-part series that highlights how EBITDA principles can drive reliable maintenance strategies, foster collaboration between HSE and procurement, and deliver cost savings. We will also showcase how our specialized algorithms and templates ease this collaboration, bringing operational success closer than ever.
Let’s Understand EBITDA in the Context of Reliability Maintenance
EBITDA is not just a financial metric—it is a game-changer. It gives investors and business leaders a clear picture of a company’s true profitability by excluding non-operational costs. Unlike net profit, which factors in interest and taxes, EBITDA cuts to the core of an operation’s earnings potential, providing a clear view of the company’s operational profitability.
EBITDA is not just a financial metric—it’s a game-changer.
EBITDA is the key to unlocking long-term success in maintenance and reliability. It demonstrates how effectively a company manages operational expenditures (OPEX) while striking a balance with capital expenditures (CAPEX). Maintenance teams can reduce unnecessary costs, extend asset lifespans, and optimize labor efficiency by improving reliability and maximizing asset use. All these elements work together to boost EBITDA, driving profitability and sustainability.
How EBITDA Differs from Traditional Financial Metrics
Traditional KPIs like MTBF, OEE, and downtime costs track operational performance, but they do not fully capture the financial impact of maintenance decisions.
Integrating EBITDA into maintenance strategies enables companies to shift from a cost-focused approach to a value-driven strategy that directly impacts the bottom line. When maintenance aligns with EBITDA, companies can clearly show how investments in reliability enhance profitability, asset longevity, and efficiency.
Turning Reliability into a Financial Advantage
Reliability improvements lead to:
- Reduced unplanned downtime, ensuring higher asset utilization and revenue generation.
- Lower repair and replacement costs, minimizing unexpected expenditures.
- Extended equipment life, increasing return-on-asset (ROA) while decreasing capital expenditures (CAPEX) required for new asset purchases.
- Improved energy efficiency, reducing operational expenses (OPEX), e.g., fuel costs.
- Reduction in Scope 1 GHG emissions, thus aiding in meeting corporate ESG and Decarbonization goals
These benefits translate directly into higher EBITDA, making it easier to justify long-term investments in predictive maintenance technologies and reliability-centered maintenance (RCM) programs.
Justifying Investment in Predictive Maintenance Technologies
Predictive maintenance tools—such as AI-driven analytics, condition-based monitoring sensors, automated exception-based fluid sampling, and machine learning algorithms—help detect potential failures before they cause costly disruptions. While the initial investment in such technologies may seem high, an EBITDA-focused approach demonstrates the measurable ROI through:
- Fewer unplanned failures – Reduced emergency maintenance costs.
- Optimal spare parts inventory – Eliminating excessive stockpiling and procurement waste.
- Improved labor efficiency – Technicians focus on high-priority maintenance rather than firefighting breakdowns.
- Improved safety and TRIF metrics – Elimination of Live-Work by removing personnel from harm’s way.
- Increased asset utilization – Increased production and revenue generation.
For example, real-time oil condition monitoring (OCM) can detect early signs of wear, contamination, or fuel dilution, allowing companies to take preventive action before catastrophic failures occur. This reduces the total maintenance cost while improving EBITDA performance.
The Case for Reliability-Centered Maintenance (RCM)
RCM is a structured approach that ensures maintenance resources are allocated where they provide the highest value. By aligning RCM strategies with EBITDA objectives, organizations can:
- Prioritize critical assets that have the most significant financial impact.
- Eliminate unnecessary maintenance tasks that don’t contribute to reliability or safety.
- Implement a risk-based approach that balances cost, safety, and performance.
For instance, in industries such as oil and gas, manufacturing, mining, and power generation, failures in critical rotating equipment can result in millions of dollars in losses per hour. An EBITDA-driven RCM approach ensures that maintenance dollars are spent strategically, preventing losses while improving operational resilience.
Bridging the Gap Between Finance and Maintenance
One of the biggest hurdles in securing funding for maintenance programs is the disconnect between engineering and financial decision-makers. By framing maintenance investment management in terms of EBITDA impact and reliability, teams can build a persuasive business case that resonates with executive management.
Key steps include:
- Quantifying the financial impact of reliability improvements through these templates (e.g., “Reducing downtime by 5% will increase annual revenue by $2M”).
- Presenting total cost of ownership (TCO) analysis, demonstrating the long-term savings of proactive maintenance.
- Aligning maintenance metrics with company KPI’s, ensuring that reliability efforts contribute to the company’s overall profitability goals, including profitability, safety, and production.
By embedding EBITDA templates into maintenance strategies, organizations can move beyond seeing maintenance as a cost center and instead recognize it as a profit enabler. Predictive maintenance technologies and RCM programs are just operational necessities—they are financial strategies that boost profitability, increase competitiveness, and drive sustainable business growth.
Addressing CAPEX Challenges and Bridging the Gap Between Teams
A major challenge in maintenance and reliability is striking a balance between capital expenditures (CAPEX) and operating expenditures (OPEX). Companies often struggle to secure funding for predictive maintenance because capital expenditure (CAPEX) decisions are driven by short-term financial concerns rather than long-term benefits.
- The CAPEX vs. OPEX Dilemma
- OPEX covers recurring costs like labor, spare parts, and lubricants, impacting immediate financial performance.
- CAPEX involves investments in equipment, reliability programs, and technology upgrades, requiring long-term financial justification, often involving a grueling budget process.
Bridging this gap requires collaboration between maintenance, HSE, and procurement teams, aligning on how reliability investments drive EBITDA growth and long-term success.
- Breaking Silos for Cost Efficiency
For too long, maintenance, procurement, and HSE teams have operated in isolation, each focused on their own objectives, KPIs, and version of success. This siloed approach is costing companies millions of dollars in lost revenue opportunities, which, for publicly traded companies, also means lost shareholder value.
- Inefficient spending on parts and equipment due to disconnected procurement strategies.
- Delayed maintenance because critical components are not sourced in time.
- Increased safety risks from poor planning, rushed repairs, and unanticipated failures.
It is time for a fundamental shift that aligns reliability, safety, and financial performance under a shared vision. When these teams collaborate and use EBITDA as a guiding metric, they can make more innovative investments, prevent unnecessary expenses, and, most importantly, keep people and operations safe.
EXAMPLE: The Vital Maintenance, procurement, and HSE teams have operated in isolation for too long, of Real-Time Fuel Dilution Monitoring in Operational Reliability
Fuel dilution is a hidden yet powerful threat to the operational reliability of internal combustion engine (ICE) powered equipment. When fuel contaminates lubricating oil, it breaks down the engine oil viscosity, increases wear, reduces combustion efficiency, and drives up maintenance costs. A faulty fuel injector resulting from carbon loading, a broken tip, etc., can quickly reduce a SAE 40W engine oil to a much thinner SAE 0W oil. Left unattended, operating the ICE engine with engine oil that has been compromised due to fuel dilution will most certainly reduce the engine’s expected useful life. The amount of damage that can occur during a typical 500-hour oil sampling interval could lead to a catastrophic engine failure.
When reliability, HSE, and procurement work together, companies win.
Why Fuel Dilution Monitoring is Essential for EBITDA Optimization
- Prevents Engine Failures – Early detection of fuel dilution helps avoid catastrophic breakdowns, saving on repair and replacement costs.
Extends Equipment Life – Continuous monitoring ensures optimal lubrication, allowing equipment to run longer.
Maximizes Fuel Efficiency – Contaminated oil hampers performance, leading to increased fuel consumption. Real-time monitoring keeps everything running at peak efficiency. - Increases Utilization – Continuous monitoring of engine oil viscosity ensures greater equipment utilization, leading to increased production and revenue generation.
By implementing real-time fuel dilution monitoring, companies can lower control of their equipment’s health, reduce failures, reduce fuel waste, and lower maintenance costs while increasing production, ultimately driving EBITDA growth.
Aligning Reliability, HSE, and Procurement for Maximum Impact
In today’s competitive landscape, integrating EBITDA-driven strategies into maintenance and procurement is not just important – it is transformative.
- Proactive maintenance powers EBITDA by reducing unplanned downtime and maximizing resources.
- HSE compliance safeguards safety, mitigating financial and legal risks.
- Strong procurement collaboration fuels cost-effective, high-quality parts and lubrication solutions.
When reliability, HSE, and procurement work together, companies unlock the potential for a sustainable, efficient, and financially sound reliability program. This is not just about equipment longevity but also driving profitability and gaining a fierce competitive edge.
