Want Credit for Your Maintenance Successes?: Show Me the Money!

3rd April 2013
3rd April 2013

Many maintenance managers do not use their CMMS to track total cost of maintenance.  They do a good job of tracking and managing the work process, but not tracking and managing the associated cost.  (Remember the adage: you cannot manage what you don’t measure.)

Work orders are opened and closed with dates recorded. Comments are entered on the work order for historical reference. Reports are run on response time, schedule compliance, and various other items like work order types, failure and reason codes, downtime, uptime, etc.

The logic, as explained to me, is the maintenance manager has no control over the cost of labor as it is set by upper management. MRO parts and supplies are tracked by Purchasing. Vendor costs are tracked in the company’s PO management system. Why use the CMMS to duplicate the cost tracking as well? Seems like all the data is there for the viewing.

Wrong!

Dollars are the singular, universal, unit for keeping score. In the United States dollars are used to determine success or failure — believe it. Any other measuring sticks are indicators and/or prognosticators. They may help explain or project, but the final score is always measured in dollars.

True, the aggregated amounts are in the P&L, but the relativity cannot be established or broken out for analysis. For the maintenance manager to be taken seriously, and to be involved in the planning, budgeting and review conversations about cost of maintenance, they need to be able to speak the language. 

Cost must be tracked by the job, or work order. This job cost accounting in the maintenance department is what gives you the granularity to manage by. Total job costs are linked to the asset(s) they are incurred against. The components of job costs are:

  • internal labor (work hours X fully loaded rate)
  • inventory consumed at full replacement value
  • vendor charges for sublet repairs
  • miscellaneous charges (such as rentals).

When the maintenance manager is tracking costs, they can make and explain decisions based on the cost/expense to the organization. A goal for the maintenance manager should be to match up numbers with accounting at the end of the year and see how close they are. Chances are they’ll be right on for those things that went out on a purchase order, but off on the total. This means the value used for loaded, or burdened, labor needs to be adjusted. Use this comparison to tune your rates, so the maintenance books and the accounting books “balance.”

Fundamentally, there are two decisions maintenance managers make on a daily basis:

  • Repair or replace?
  • Outsource a job, or do the work with internal staff?

To make either of these decisions, you need to have the full picture including the real and estimated costs — in dollars.  If the maintenance manager can’t make the decision using costs as the key metric, then he, or she, is in danger of being outsourced themselves!

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