The dollars-and-cents of a CMMS
April 19, 2012
Installing a good computerized maintenance management system (CMMS) can have a profound impact on your maintenance operations – and your bottom line.
Sure, the software can streamline work order processing, purchase order generation, and the creation of preventive maintenance tasks. But most organizations on the fence about implementing a CMMS solution are really more concerned about the dollars-and-cents.
How much does implementation cost – and how much money can the software save? If the return on investment (ROI) isn’t there, chances are the budget won’t be, either. As nice as it is to have “streamlined” operations or “optimized” maintenance tasks, companies are usually built to generate profit, not convenience.
Which is to say that CMMS solutions exist because they save companies money, not just because they make life easier. The question of what sort of ROI you can expect on a new CMMS implementation depends on your existing maintenance practices, your range of assets, the amount of downtime you encounter, and other considerations unique.
With all the moving parts in your maintenance operations, how can you calculate a realistic CMMS ROI? MicroMain recently published a white paper describing the ROI formula and how to arrive at a tangible dollar amount.
Let’s explore some of the principals behind this CMMS ROI calculation – and discuss whether it makes sense to obtain one for your organization.
Time is money
When it comes to business, time really does translate into money. Labor hours have a calculable cost. So when a CMMS provides functionality of convenience – such as automated purchase orders, or streamlined work order generation –what it’s really providing is a cost savings.
Let’s explore a real world example. One of your technicians has been issued a work order to repair a furnace in a location across town. A comprehensive CMMS solution (such as MicroMain Maintenance Management) can let you attach an inspection to this work order so that your technician can accomplish multiple jobs in one fell swoop. That way, when your technician returns from the off-site location, he’s not only repaired the furnace—he’s replaced the filters and cleaned the blower assembly.
This might have been two (or more) separate trips , but your CMMS keeps you updated on what maintenance needs to occur—and when—so that you can achieve maximum productivity.
Note that reducing labor hours doesn’t necessarily mean a reduced staff. It means having the freedom to reassign your existing staff to other tasks in order to improve production standards, increase customer satisfaction, or ramp up production to start making more money.
Your assets on the line
Chances are, if you showed up to work tomorrow and your fixed assets had magically disappeared—your machinery, your fleets, your equipment—your business would probably be somewhat hindered.
Your assets are critical to your business. They are your business. Keeping them operating at peak efficiency is one of the most basic objectives of your maintenance staff.
CMMS software can help. Effective preventive maintenance scheduling reduces downtime, which directly correlates to a reduction in losses. When your maintenance floor shuts down, oftentimes so does your company’s ability to generate revenue. How much would it cost your company if one of your most important assets broke down because of insufficient preventive maintenance?
A CMMS can also extend your asset’s lifespans. And again, this has an associated cost. If each HVAC unit costs $10,000 (including installation) and the manufacturer estimates a 10 year lifecycle, that assets annual purchase cost is $1,000. So if the HVAC needs to be replaced after 9 years because it hasn’t received proper preventive maintenance, that’s a $1,000 loss for your company. CMMS systems can create real savings by helping to slow down asset depreciation.
Moreover, if HVAC units are no longer operating at peak efficiency, you’re going to be paying higher utility costs.
These sorts of potential savings should all be taken into account when obtaining a projected CMMS ROI. How much unscheduled downtime do you experience? How much potential do you have for extending the lifespans of your assets?
Does a CMMS fit your company?
From a costs perspective, the decision to implement a CMMS—or replace your existing CMMS with a solution better-equipped to meet your company’s needs—can have tremendous implications. Obtaining a CMMS ROI is an excellent way to justify the purchase internally, and is also a good opportunity to take a hard look at your current maintenance inefficiencies.
How much time could you save automatically generating purchase orders with a CMMS? How much productivity gains could a CMMS provide? How well-optimized are your existing inventory management processes?