Spend money to save money? It is not just a cliché. When it comes to the maintenance of large capital assets; including Facilities, Fleet and Production Equipment, the answer may surprise you. It makes even more sense when you consider that today more and more companies are adding a new line item in their financial statements called “Deferred Maintenance Revenue Write Down”.
A lack of preventive maintenance affects the shareholders of all companies due to ageing assets and reactive maintenance practices. A complete preventive maintenance program consisting of better business practices and a simple tool such as a Computerized Maintenance Management Software (CMMS) system can streamline the process and result in immediate savings of both time and money.
So how do you justify the initial investment? Where can the cost savings be seen across the enterprise and what are the workflow benefits?
The benefits to a centralized maintenance program are many. One central data repository of maintenance information means operations and accounting can measure results and plan more effectively in the following areas:
- Increased Productivity – Streamlined business practices and shared knowledge means greater productivity across all levels of the enterprise.
- Reduced Downtime – Track recurring equipment downtime and plan accordingly.
- Extended Equipment life – Getting longer life from all assets means greater shareholder value and increased cash flow.
- Reduced Inventory Costs – Know what parts are available and when to order.
- Proactive Safety Program – Work Orders include safety tasks for improved compliance.
- Increased Warranty Awareness – know it’s under warranty before spending your money.
- Meet Regulatory Requirements – Capture any regulatory information within the CMMS for reporting to government & regulatory bodies.
- Centralized Reporting – You can’t measure what you can’t see, a centralized system enables you to capture and report on data with reduced manpower and paper flow.
- Improved Workflow – An integrated package includes automated data transfer between other software packages such as accounting, fuel card systems, HVAC monitoring and much more.
- Shared Knowledge Base – One centralized system integrated with accounting, purchasing and other legacy systems can streamline the ability to share real time information across the enterprise.
These are just a few of the many benefits a comprehensive maintenance program and a centralized CMMS system can bring to your organization.
Case Study
Let’s look at measuring actual savings with hard evidence. We will provide an example of just a single area where you can realize significant savings. When you consider all areas of your organization, these savings will compound.
Unplanned Downtime is by far the biggest challenge for any organization, no matter what business you’re in. This impacts the bottom line in more ways than one, as it produces both tangible and intangible impacts on profits. If your equipment goes down due to a lack of preventive maintenance, you can’t service your customers, and this will directly result in lost business. Perhaps even loss of future business if the account is lost entirely.
To measure this, we’ll look at a company managing a fleet of 500 vehicles. Each vehicle represents a revenue source of $1200.00 per vehicle per day. Based on an average of 200 operating days per year, the revenue expectations are $240,000.00 per year. If a vehicle out of service for unexpected reasons for eight days of the year, your lost revenue is $9,600.00. If you could reduce this by just 50% through a preventive maintenance program, your revenue generation will increase by $4,800.00. If 30% of the fleet has experienced similar unscheduled maintenance, then the total revenue increase could be as high as $1,440,000.00. ($1,200.00/Day x 8 Lost Days x 30% of 500 vehicles = $1,440,000.00)
Preventative maintenance can and does reduce reactive maintenance significantly. A 50% reduction in unplanned downtime can reduce lost revenue by $720,000.00, while increasing client satisfaction and retention.
Although this is only a simple example, it is a tangible calculation that can be used to build a business case to justify the cost of implementing a CMMS/EAM package. The ROI on a CMMS can often be measured in just months. The number one reason most people delay the implementation of an effective maintenance program is being focused only on cost savings and not as the revenue generating program to truly is.
Call 1-866-818-8376 ext. 407 for a personalized consultation of your maintenance needs or email us at sales@tero.ca . With over 40 years of maintenance best practice experience, we can help you achieve positive results to your bottom line.
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