Part 2 of 2
ROI remains a key concern for businesses around the world as they navigate the uncertainties of today’s volatile economic conditions. Keeping detailed track of asset maintenance and data is critical for businesses who want to determine exactly what their assets are costing them to maintain, and how their value can be maximized.
In our previous installment, the maintenance experts at ManagerPlus discussed five of the top ten reasons why maintenance software is an excellent investment. For part two, we will round out the list with reasons five through one, providing industry research, data and our expert insights for each.
5. Standardization. According to one definition, standardization is the process whereby businesses work “to reach the optimal technical and economical solution to recurrent problems.” Businesses that implement standard best practices throughout their operations are able to achieve substantial cost savings and improve the quality and consistency of the products and/or services they provide. A study comprising some 680 companies in 10 industries concluded in part that “the businesses surveyed rate the effects of standardization on transaction costs as positive, indicating that transaction costs drop considerably as a result of standards, since they make information available and they are accessible to all interested parties.”
Implementing a robust maintenance software platform will aggregate the data companies need to determine which services, asset categories, procedures, work types, work requirements, workflows, and so forth, should be standardized. Leading software systems, like ManagerPlus, make the process of implementing these standards simple—and also help ensure that they are followed throughout the organization.
Variation in maintenance can result in up to 20% of wasted maintenance expenditures. For example, businesses that manage fleets of vehicles can reduce maintenance and inventory costs by standardizing their fleets to use the same types of parts and use a maintenance software program to keep those levels stocked. Variations in maintenance practices may be the cause of inefficiencies that go largely unseen. Maintenance software is one of the only tools available to determine whether these efficiencies are happening, while providing solid data to back any decisions made as to how standardization might resolve them.
4. Book of record/history. Having a solid book of record for maintenance work is important for more than determining how much time and money has been spent maintaining a company’s assets. For any business operating under increasingly strict government standards and regulations, having a solid book of record can avoid costly fines. A Californian trucking company absorbed a $1 million fine for failing to maintain adequate records for “opacity” tests. In Texas, a fertilizer factory that had just suffered a terrible explosion was fined by the EPA because it did not have a formal maintenance program with corroborating records. The EPA has even published its own top 10 business reasons to maintain records.
For companies working in industries where lawsuits are common, a solid book of record provides invaluable proof of due diligence. Companies that can demonstrate that proper maintenance has been conducted are at substantially lower risk of losing many types of lawsuit. A maintenance software program largely automates the process of compiling a solid book of record--and because it is digital, there is no risk of lost or damaged paper documents.
3. Regulatory/safety compliance. According to a Gartner paper published on Stanford University’s website, “Businesses often respond to regulatory compliance issues in an ad hoc, one-off manner. This approach is less and less viable as regulatory mandates, such as those of the Sarbanes-Oxley (SOX) Act, continue to multiply. Businesses must approach compliance holistically, creating solutions that work together over the long term.” The scattershot approach to maintenance, in other words, is not just passé; it exposes businesses to substantial regulatory risks. Inaccurate reporting, incomplete inspections, and maintenance delays are among the factors that cost a major American airliner nearly $13 million in fines in 2008 and $24 million in 2010.
In some towns, maintenance-related fines are increasing, requiring commercial and private property owners to be extra diligent about the care of their assets. Other industries, such as manufacturing, have seen dramatic increases in regulatory costs over the years, as illustrated by this chart by the Manufacturers Alliance for Productivity and Innovation.
Maintenance software can help systematize these mounting regulations and give companies an accurate sense of their true cumulative cost. Considering their precipitous rise over the years, regulations should be a top priority for any company regardless of the industry.
2. Reduce Downtime. According to research by the International Society of Automation, “Almost every factory loses at least 5% of its productive capacity from downtime, and many lose up to 20%. Downtime consultants estimate 80% of industrial facilities are unable to estimate their downtime accurately, and many of these facilities are underestimating their Total Downtime Cost (TDC) by 200-300%.” Reduced downtime ranks a close second on our top-ten reasons to use maintenance software list because of the real cost it represents to businesses, and because it is a problem that ManagerPlus is specifically designed to help mitigate.
Organizing maintenance labor by streamlining workflow is one of the key ways to ensure that meantime-between-failures is minimized. ManagerPlus makes this simple by centralizing data on equipment condition, ensuring that parts inventory is maintained at optimum levels, and providing clear insight into labor scheduling and the estimated time frames in which work will be completed. According to www.downtimecentral.com, true downtime costs are often up to 10 times greater than the estimates provided by most maintenance managers. Maintenance software with detailed asset tracking and scheduling functionality is one of the only ways to ensure that calculations of downtime costs are not wildly inaccurate.
1. Extend Asset Life. A study by the business research firm Deloitte finds that return on assets (ROA) has declined dramatically in the past several decades, and now hovers around 1965-levels. Reversing this trend requires that, “firms [will] have to shape up and take a hard look at the fundamentals of their operations if they hope to thrive.” There are few factors more essential to the success of any business than ROA. ManagerPlus is specifically designed to streamline the business processes have the greatest impact on ROA.
Another study, conducted by the state of Virginia’s Department of Transportation (VDOT) concluded that, “As the replacement cost of the VDOT equipment fleet is estimated at over half a billion dollars, to improve the return on the equipment budget by just a fraction of a percent would provide meaningful savings for the Commonwealth of Virginia.” The idea that even incremental change can produce significant savings is not unique to the state of Virginia. A look at the balance sheets of companies across a broad range of industries will yield the same conclusion.
Identifying the ideal time to replace assets, however, is virtually impossible without a maintenance software solution like ManagerPlus to provide a solid foundation of data. The Virginia DOT study further concludes, “The life cycle cost of an owned piece of equipment, charted as a function of time, tends to have a U shape; i.e., the cost per unit of service declines during the early years of operation, bottoms out, and then begins to rise.” Finding the sweet spot where replacement cycles will be optimized is a function of the data available on assets.
The authors of the study add, “For this reason, a maintenance regime under which only equipment that has become inoperable receives outlays on labor and parts is theoretically conceivable but is unlikely to minimize the life cycle cost of equipment operations.” Preventive maintenance (PM), in other words, is the key to ensuring that resources are allocated efficiently in order to maximize ROA. Maintenance software like that provided by ManagerPlus, is the best tool to use to implement a PM routine and maximize ROA.
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