The Secret to Controlling Your Cost of Maintenance, Pt. 1: A Simple Equation

20th May 2015
20th May 2015

Last week I sat down to talk with a new customer who’s buying his first CMMS software licenses. “Jerry,” I asked him. “What’s your biggest priority after you get your MPulse Software, Inc up and running?”

“My boss—and the bean counters—say I need to control my cost of maintenance,” Jerry replied. “Steve, I know you said I can do that with CMMS. But I need to figure out how. And fast.”

Jerry’s answer cuts the core of modern maintenance management. I believe all maintenance managers want to control maintenance costs, or they should in our data-driven management world. I’m going to share with you a simple fact that’s often overlooked or forgotten in the growing complexity of all we do in the maintenance world.

 

The cost of maintenance equals the cost of labor plus the cost of parts to do the job. (CM = Labor + Parts)

A simple equation for a complicated process right? Bear with me, though, and I’ll explain how remembering it really is that simple and will get you where you need to be. And I’ll share with you why CMMS is the only way to manage all the complex data for that simple equation.

Step 1: Track Work Hours

You need to know how much time each job takes. CMMS excels at tracking this kind of data. Each work order gathers time information on every job. As your team completes more work orders, more data is collected. The value of your database with every work order.

With CMMS, you can quickly pull reports from your database showing the hours on a job or the time spent working on a particular asset. The software calculates labor costs based on time and labor rates.

Now you have half of the picture.

Step 2: Associate Inventory with Jobs

To get a complete picture of your cost of maintenance, you’ll also need to know how much you paid for the parts used for the job. CMMS enables your team to create simple inventory records. Features like MPulse PartLink link those inventory items and their unit costs to work orders and assets.

Let’s say you use one oil filter and one air filter on a job that takes one hour to do. The parts cost about $25. Your maintenance technician makes about $35/hour. So, your CMMS data shows that job costs your company $60. Now multiply that $60 times six because the job is scheduled every other month on your current PM schedule. That’s $360/year.

But let’s say that same asset needs an emergency repair that costs $1200. Suddenly your annual cost of maintenance goes from $360/year to $1560/year. Track work orders and repairs over several years of service, and you’ll soon have solid data on what the asset really costs the company to run—and when it’s more expensive to repair it than to replace it.

Sounds easy, right? It is with CMMS. Next time I’ll dive a little deeper into this subject for those who want to take the next step.

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