How to improve Maintenance Cost Control?

Are you looking for ways to improve Maintenance Cost Control?

The maintenance budget accounts for a substantial percentage of business revenue but the nitty-gritty that makes up the total maintenance costs are often opaque.  Consequences of poorly planned maintenance budget administration and accounting may result in the business leaders perpetually guessing.  Reasons are many and range from process deficiencies, poor adoption of systems, fragmented data, and lack of user engagement.  

Failure of maintenance budget administration and appropriate cost allocation results in hampering planned efficiencies, sub-optimal spending, over-allocations, and underutilization, all happening concurrently and with little supervisory oversight.  Failing to optimize maintenance cost factors gives you expensive overheads and takes away the competitive edge in asset management. 

Evidence suggests that manufacturing organizations with reduced maintenance costs as a percentage of total revenue, are more efficient and have better equipment reliability. They deliver more asset care for less cost and thus can emerge as “winners” in a competitive market. 

As an asset-intensive organization, it’s prudent to understand, analyze and improve overall maintenance costs, to increase return on investment.  The perfect solution to this is maintenance budget administration and cost management.  It is not very complicated and can be easily implemented and streamlined.  

What is a Maintenance Budget?  What is Maintenance Cost Control?

The maintenance budget refers to the funds that the organization allocates to all maintenance processes and asset care activities enterprise-wide. 

Maintenance cost control is the process of classifying, monitoring, measuring, controlling, and improving the costs associated with the maintenance management activities and services, that the organization uses.  

The goal of maintenance cost management or maintenance cost control is to help the maintenance organizations find the most effective ways to maximize the benefits of asset management and plant maintenance, at the lowest possible cost.  

What is included under Maintenance Costs?

What constitutes maintenance costs or maintenance budget varies across industries and organizations and reflects the scope of services performed by the maintenance organization.   Generally, maintenance costs include people costs, administrative overheads, spares and consumables inventory, annual maintenance contracts, contractors and other outsourced labor, vendor and other bought out services,  etc.   In some organizations, Maintenance Department may manage facilities and utilities, and thus cost of facilities management and utilities maintenance, may also come under the maintenance budget.  Other costs may include the cost of molds and die, tool room maintenance, equipment rentals, insurance and warranty, effluent disposal, etc.

Special initiatives like management of change, Capex investments, and shut down management, also come under the maintenance department, but most often are managed with a separate dedicated budget.

Advantages of Maintenance Cost Control

Lower Costs

It is straightforward.  The most obvious benefit of maintenance cost control is decreased costs.  Maintenance organizations would like to take a lead and proactively manage the costs and allocation 

Return on Investments

Corollary to lower costs is better channeling the available resources and budget to the right areas and getting more business benefits.  Improved asset management leads to a better return on investments.  

Efficient Usage

Optimizing your maintenance programs can assign the right prioritization of maintenance management activities and efforts, reduce waste, optimize spare inventory, scale up the maintenance team’s delivery, and maximize the benefits.  Effective preventive maintenance planning, right skilling of the resources, and condition monitoring of the equipment can help improve the maintenance team’s efficiency.

Visibility

Maintenance cost control gives detailed visibility of spares and labor, preventive and breakdown maintenance costs, expenses by plant/equipment/equipment group, repeat failures, etc.   Visibility of equipment details, usage, breakdown history, and performance can lead to better-planned maintenance activities and quick resolution of equipment failures.  Visibility also helps in other areas such as spares optimization, cost control, better planning and scheduling, and efficiency improvements

Right Allocation

An advantage of maintenance cost control is the right allocation or ensuring the right equipment gets the right maintenance budget.  Overprovisioning is a common habit among maintenance teams, which may lead to underprovisioning elsewhere, leading to unplanned failures or equipment performance deterioration.   With the right allocation, critical equipment gets enough maintenance budget, while the other equipment gets commensurate maintenance budget allocation.  With the right maintenance cost allocation, plant maintenance teams can ensure smooth and optimal equipment performance, without increasing maintenance costs.

Best Practices to implement Maintenance Cost Control

Maintenance cost control is not just about controlling the cost factors or selecting the cheapest option.  It is maximizing the strategic value of overall industrial assets.  Focus is more on strategic planning, value delivery, maximum availability and performance, quality of maintenance, extended asset life/asset life cycle management, safety, and sustainability, than short-term considerations of the cheapest solution and cutting corners.   Best practices to improve maintenance cost control are often deep-rooted and start from the first principles i.e. strategic business objectives, asset management goals, and maintenance strategy.  

Some of the most extensively used approaches for optimizing maintenance budget and maintenance performance include:

  •  Adherence to OEM Schedules and Guidelines

The most effective way to control maintenance costs is to reduce the number of unplanned failures and associated reactive maintenance.  Following the Original Equipment Manufacturer’s (OEM) guidelines on proper usage, loading, operating conditions, regular maintenance, approved spares, and consumables (e.g., lubricants) usage, monitoring performance parameters, and other instructions (cleaning/lubrication / tightening and minor adjustments), will ensure the equipment is in good running condition and avoids potential failures.  

  • Root cause Analysis for Unplanned Failures

Despite good preventive maintenance plans in place, unscheduled breakdowns can happen.  Analysis of failures to understand the fundamental reason for the breakdown and facilitating factors can help in preventing their recurrence.  Root cause analysis (why why analysis) can help in identifying defects and implementing permanent solutions to the problem, via the right set of corrective actions and preventive actions (CAPA actions).  Prevention of repeat failures can save the maintenance effort and spare consumption and improve overall equipment efficiency.

  • Preventive Maintenance Planning and Execution

Preventive maintenance is the most effective way to reduce unplanned failures and costly equipment breakdowns.  A proper preventive maintenance schedule for each equipment and comprehensive maintenance checklists for corresponding PM schedules can ensure that the maintenance tasks are carried out as per OEM specifications.  Any unscheduled breakdown implies an opportunity to strengthen the planned preventive maintenance schedules and checklists.  Learning from breakdowns and incorporating necessary improvements can improve the effectiveness of preventive maintenance and ensure the best equipment performance.

  • Early Warning Detection

Listening to symptoms and early warning signs can help identify the potential machinery malfunctions early and much before the catastrophic breakdown.  Early detection of potential failures can save cost, time, and effort, and can ensure better planning of the maintenance tasks.     Monitoring the critical parameters of the equipment and instituting conditional monitoring systems and alert functionalities can improve equipment condition, performance, and reliability.

  • Spares Inventory Optimization

Poor spare parts management and inefficient planning can result in overstocking with increased costs or understocking of parts, delaying maintenance tasks, and equipment restoration.   Best practices in spares inventory to support maintenance cost control include

  • Accurate bill of materials record-keeping, proper classification (vital, essential, desirable), and substitutable spares
  • Tracking spares inventory life, usage, and proper procurement planning
  • Returning unused spare parts to stores
  • balancing inventory levels with analysis of past usage 
  • managing minimum stock levels, reorder points, and economic order quantities for optimizing cost and time
  • Process Improvements – Standardization & Institutionalization

The establishment of a consistent system for attending to maintenance requests, and repeating the maintenance tasks and sequence in which they are executed, by the maintenance team, in the most optimal way is referred to as process standardization.    

Preventive Maintenance procedures including schedules and checklists, troubleshooting breakdowns, cleaning and lubrication schedules, routine inspections, non-conformance classifications, and safety processes are all examples of processes that can be standardized.  Standardized processes help in uniform and consistent execution by any maintenance team member for optimal breakdown response and quick restoration.   It also ensures easier training of maintenance teams, incorporation of best practices, comparison of cycle times, and instituting continuous improvement measures.  

  • Proper Budgeting – clearly outline the fixed and variable costs

Budgeting is an essential part of any business operation. Maintenance budgeting is the process of creating a financial plan for all the maintenance activities, planned for a specific period. It will include all the fixed and variable costs associated with the maintenance department including spares and labor, outlays for in-house and outsourced activities, AMCs and warranties, maintenance audits and inspections, skill development programs and certifications, etc.   Budgets are typically pre-defined at the start of each fiscal period. They serve as a check to ensure that the actual maintenance costs do not outweigh the original maintenance plans. To ensure control and profitability, deviations from the planned maintenance budget must be avoided.

  • Maintenance Software 

A Computerized Maintenance Management System (CMMS Software) that tracks all the spares and labor usage, preventive and corrective maintenance tasks undertaken, repeat failures and fault tree analysis, etc. can provide a goldmine of information about the asset and thus pave way for optimal maintenance and cost control.    

CMMS may also include detailed tools for setting up preventive maintenance schedules, and comprehensive maintenance checklist libraries, analyzing failures and instituting corrective measures, tracking spares, consumables, and other material consumption, reviewing fixed and variable costs, and evaluating annual maintenance contracts (AMCs) and warranties, etc.  In general, technology enablement can help in standardizing processes and procedures, improving asset intelligence, increasing people productivity, and increasing the effectiveness of maintenance delivery.  All of these, directly and indirectly, contribute to improving maintenance cost control, effectiveness, and equipment reliability.

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