Part 1 of 2
ROI is one of the top concerns for businesses as they consider implementing a maintenance software system to track their assets, inventory and labor.
A wealth of data and research has been compiled on the diverse ways that maintenance software can help businesses achieve mission-critical initiatives and maximize ROI. To organize and clarify this research, and illustrate the implications for different facets of businesses, the experts at ManagerPlus have put together a top ten ranking of key ROI drivers that can be achieved using CMMS.
For the first installment, we will explore initiatives 10-6. A follow-up installment will round out our list with initiatives 5-1.
10. Going Paperless
According to an analysis by INC Magazine, it can cost $20 to file a document, $120 to find a misplaced document, and $250 if the document is lost and must be replaced. According to another study, it costs approximately $25,000 to fill the average four-drawer file cabinet with paper, and a further $2,000 per year to maintain the cabinet once it’s been filled.
In terms of productivity, research suggests that office workers waste between 30 minutes and 2 hours per day searching for documents. Books and filing cabinets used to track assets can add considerably to the mountain of paper that may be crushing margins and erasing efficiencies gained elsewhere. A maintenance software platform can help streamline operations and make companies less dependent on paper systems that are not only costly, but allow documents to get lost.
9. Labor Organization/Management
A study by the University of North Carolina, Pembroke shows that labor productivity and quality are the biggest predictors of profit for a business. Poorly maintained equipment and mismanaged inventory can cause long delays and hamper productivity, resulting in higher costs because more hours are needed to complete a job. The business services experts at Deloitte assert that, in order for firms to gain a competitive edge, they must develop “deeper, yet strategic, restructuring of firm economics to generate maximum possible value from existing resources.”
Moreover, poor labor management can leave companies more vulnerable to fines and legal action. Delays associated with equipment issues, poor scheduling, and inadequate management are likely to be classified as non-excusable, meaning that the costs associated with them must be absorbed by the company performing the work.
CEOs of elite companies know: Detailed data and reports are among the most powerful tools a business has. Barry Beracha, former CEO of Sara Lee Bakery Group, famously kept a sign on his desk that read “In God we trust. All others bring data.” Gary Loveman, CEO of the analytically-driven Harrah’s entertainment company, insists that decisions be based on hard data by constantly asking “Do we think it’s true, or do we know?”
In a paper published by the Harvard Business Review, 32 leading companies that use analytics intensively were studied in order to determine how they use data to stay ahead of the competition. The authors found that a major aspect of what made these companies different was their ability to transform data and technology “from a supporting tool into a strategic weapon.”
As a result of their mastery of data, these elite companies “make the best decisions: big and small, every day, over and over and over.” CMMS software is essential for companies who want to collect and analyze detailed data on their assets in order to make the best decisions about life cycling, inventory levels, labor management, and ROI maximization.
7. Scheduling and Planning
According to the influential book Maintenance Excellence: Optimizing Equipment Life Cycle Decisions, preventive maintenance (PM) has been shown to be three to four times more cost effective than run-to-failure maintenance for most industries. In some industries, preventive maintenance can be up to 20 times more effective.
Yet many companies are either unaware of the benefits of preventive maintenance or lack the resources necessary to properly implement a preventive maintenance routine. As a result, equipment may be functioning poorly and running up invisible costs. For example, a survey of 20 plants revealed that 1,500 pumps were operating below 40% efficiency, and a further 10% of the pumps analyzed were operating below 10% efficiency. Pumps can consume up to 60% of power bills. Yet the most commonly cited causes for these costly inefficiencies included seal leaks and blocked valves—minor problems that can be easily addressed through routine maintenance.
The pumps example serves to illustrate the key lesson of preventive maintenance: small problems can grow big fast, and what you don’t know can hurt you. A thorough preventive maintenance routine is the best way to resolve problems while they’re small and maximize your capital investments.
6. Cost Management and Forecasting
Cost overruns can be disastrous for any company, ruining profit margins, generating negative publicity and angering clients. Inadequate maintenance planning can play a bigger role in cost overruns than most people realize. For example, poorly planned, reactive maintenance has contributed substantially to San Francisco’s $320 million structural deficit. Frequent breakdowns in public transportation caused by poor maintenance cost the local economy an estimated $50 million per year in lost productivity.
A study of infrastructure projects shows that cost overruns are the rule rather than the exception—but no industry is immune to the adverse consequences of maintenance related delay.
Ineffective processes and poor planning at the defense contractor Lockheed Martin resulted in $1 billion cost overruns on production of F-35 fighter jets—a bill picked up by American tax payers. Cost overruns and inefficiencies are not problems reserved for large companies and projects alone: every company faces the same pressures and challenges.
Check back here soon for ROI drivers 5-1.