How to justify the cost of a CMMS

How to justify the cost of a CMMS

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Guest blog by Elizabeth Mazenko from Better Buys

Getting people on board with change isn’t always easy.

This is especially true in the maintenance industry, where many people still rely on paper forms without showing much interest in embracing maintenance management software like computerized maintenance management systems (CMMS).

Many times, maintenance managers stick with paper forms for four reasons:

  1. They don’t want to train employees on new technology and processes.
  2. They’ve had issues working with electronic or mobile forms before.
  3. They need a solution that works in the office and out in the field.
  4. They don’t want to pay for all the features when the facility will only use a few of them.

Figuring out the return on investment (ROI) of a CMMS can help you show the value of the solution and gain buy-in from senior management. Here’s what you need to know about calculating the ROI of a CMMS.

Getting started

No two facilities are the same, which means you must understand your company’s current processes and strategies to get a grasp on the benefits of bringing in a CMMS.

To do this, you should measure key performance indicators (KPIs) of your assets over time. This can include:

  • Revenue and budget loss from asset downtime
  • Inventory tracking and organization
  • An asset’s actual lifespan versus its expectancy

Pro tip: The more data you review, the better you’ll understand your bottom line. If the historical data isn’t available, you should measure these KPIs for at least six months to a year to get an accurate view of your assets’ performance.

Then, you should answer the following four questions to get a good idea of how different CMMS features can improve performance and maintenance processes:

  1. What data/reports would make the job easier?
  2. What information does your supervisor consistently ask for?
  3. Where’s most of your maintenance budget going?
  4. What’s your desired planned maintenance (PM) to corrective maintenance (CM) ratio?

Calculating the ROI

To accurately calculate the ROI of a CMMS, you must determine the total cost of ownership and the value of the maintenance solution.

Total cost of ownership

The total cost of ownership involves adding all the initial costs of implementing the CMMS to the long-term costs of maintaining the solution. When deciding which CMMS to invest in, be sure to ask questions about the following costs:

  • Initial software or license price
  • Additional hardware and software required
  • Solution implementation services and support
  • User and administrator training
  • Long-term support and upgrades
  • License renewal fees

CMMS value

The value of a CMMS is easy to see, and implementing one can lower business costs between 12% and 18%. However, to get a full grasp on the value a CMMS can bring to your company, you should look at the following metrics:

  • Asset lifespan – estimated number of years you expect to extend an asset’s life cycle
  • Overtime – average of hourly labour (including overtime) wasted
  • Inventory – average amount of time lost due to insufficient inventory
  • Utilities – amount of budget spent on utilities versus the expected costs when utilities run at peak efficiency
  • Productivity – amount of time spent on tasks like scheduling and work order management
  • Document management efficiency – how long it takes to create, file, copy, search for and retrieve critical documents

A CMMS offers many beneficial features that can improve your current workflows and efficiency. Using these metrics to determine the potential value a CMMS can bring to your company will help convince a maintenance manager to use one.

The formula

Once you have the costs and value determined, you can put the measurements into this formula:

CMMS ROI = (Value – Costs) / Cost

The positive effect

Calculating the ROI can help you show the value of a CMMS and justify the costs of purchase to gain support from senior management.

Author bio: 
Elizabeth is an editor with Better Buys, a trusted source of maintenance software news and research. Follow her at @ElizMazenko for more on enterprise software and related technology research.

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