CMMS ROI and Best Practices

11 Advantages of Maintenance Management that impact ROI

by ManagerPlus on July 2, 2013
 

ROI is one of the top concerns for businesses as they consider implementing a maintenance management software 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 11 advantages of maintenance management that can help you achieve key ROI drivers.

Here are the list of 11 Advantages of doing of maintenance management

 

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 management 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. This a great advantage of doing maintenance management.

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.

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.

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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.

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.

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.

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.

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.

8. Reporting

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.” This is one of the major advantage of maintenance management. 

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.

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.

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.

11. Save Time

advantages-of-maintenance-management-time-is-money

Another great advantage of maintenance management is it save time, Modern companies looking to use their time more efficiently need accurate, up to date information about all of their costs, and they need to be able to act on that data quickly. This is why computerized maintenance management solutions (CMMS) like ManagerPlus have become a necessity for companies in asset-intensive industries.

Scheduling in Real Time

Finding time to schedule preventive maintenance services and regulatory inspections, while also keeping track of inventory, labor, and other data can be a huge challenge for companies that rely on outdated tools such as spreadsheets and paper systems. Because these tools offer little to no automation, data must be input manually every step of the way, which can cause a major lag in information availability.

For example, if a maintenance shop enters log values for equipment utilization, such as hours and miles into paper log books, this information must usually be re-entered into a spreadsheet so that calculations can be made. In many cases, the task of re-entering the data is performed once a week at most, as it is difficult to consistently enter it on a daily basis--some shops only record these values when a piece of equipment comes in for service.

Because of this, it can be easy to fall behind on tracking this crucial data, which must be accurate in order to perform effective preventive maintenance and increase asset ROI. And even if this data is tracked consistently, it will still be outdated by the time it reaches the maintenance manager’s hands, as much of it was likely entered a week or more previously.

Best in class asset/equipment management solutions like ManagerPlus virtually eliminate this time lag by centralizing all critical data in an easy-to-access database, and by enabling workers to submit log values and other information using their phone or tablet from virtually any location.

With these solutions in place, a maintenance manager doesn’t have to waste time tracking down and consolidating data from far flung sources, and doesn’t have to worry that the information will be outdated by the time it reaches his or her hands. Maintenance and inspections schedules can thus be prioritized using real time data, and managers can see an accurate, up-to-date picture of their operations, which can help them eliminate bottlenecks and delays.

In Franklin’s calculation, companies that use paper or spreadsheet systems are wasting time, and therefore money, by waiting for actionable data on their equipment. Implementing a CMMS solution like ManagerPlus helps companies spend more time working to keep their equipment in optimum condition rather than the administrative burdens of tracking and consolidating their data manually.

Responding Rapidly  

Minimizing downtime is a mission critical objective for every asset-intensive industry. Yet many companies still respond to equipment failure with methods that aren’t all that far-removed from those that were available back in Franklin’s day.

When a piece of equipment goes down, causing work to come to a halt, it is crucial that the entire company be on the same page in order to act quickly and efficiently to get it back up and running. Playing phone/email tag with maintenance staff and workers in the field is not an efficient way to address these issues when they arise.

This is why it is important to have a centralized database to track equipment data. With ManagerPlus, a worker on the job site can submit a work request ticket the instant a machine goes down, which can include a description of the situation, pictures of any damage, and other information that will be helpful to the zero in on the problem and get it fixed fast.

The ManagerPlus system also offer the option to convert emergency requests into work orders, further cutting down on the lag between the discovery of an issue and mobilizing the resources necessary to resolve it. These work orders can automatically be assigned to the proper mechanic, along with information on all the parts and asset details necessary for them to act quickly.

With a system like ManagerPlus in place, companies are therefore able to dramatically reduce the opportunity costs associated with equipment downtime. Critical information can be accessed by everyone who needs it, and that information will be accurate in real time.

Automated tasks within ManagerPlus thus help connect the dots when emergencies crop up, which means that maintenance managers don’t have to scramble to do all of that work themselves. And by scheduling preventive maintenance and inspections in ManagerPlus, they’ll have far fewer emergencies to deal with in the first place.

Ultimately, systems like ManagerPlus help companies bring their maintenance and operational management back to the simple calculus that Franklin set forth over two centuries ago. More and more companies are using ManagerPlus to make better use of their time to save  money.

So, this was the 11 advantages maintenance management that can help impact ROI, hope this article was helpful.

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